EXHIBIT 10.24.1
FORM OF
LOAN AND SECURITY AGREEMENT
(FIXED RATE #1)
DATED AS OF JUNE __, 2004
BETWEEN
THE BORROWERS LISTED ON SCHEDULE 1 HERETO
AS BORROWERS
AND
MERRILL LYNCH MORTGAGE LENDING, INC.
AS LENDER
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS........................................................................................... 1
SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so
defined. Terms defined in the preamble and recitals to this Loan Agreement are used
in this Loan Agreement as so defined.......................................................... 1
SECTION 1.2 ACCOUNTING TERMS.............................................................................. 23
SECTION 1.3 OTHER DEFINITIONAL PROVISIONS................................................................. 23
ARTICLE II TERMS OF THE LOAN.................................................................................... 24
SECTION 2.1 LOAN.......................................................................................... 24
SECTION 2.2 INTEREST...................................................................................... 24
SECTION 2.3 RESERVED...................................................................................... 25
SECTION 2.4 PAYMENTS...................................................................................... 25
SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance with the Loan
Documents, the then outstanding principal balance of the Loan, all accrued and unpaid
interest thereon, and all other sums then owing to Lender hereunder and under the
Note, the Mortgages and the other Loan Documents, shall be due and payable on the
Maturity Date................................................................................. 26
SECTION 2.6 PREPAYMENT.................................................................................... 26
SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive
evidence (absent manifest error) of the amounts owing to Lender by the Borrowers;
provided that any failure to record any transaction affecting such balance or any
error in so recording shall not limit or otherwise affect the Borrowers' obligation to
pay the Obligations........................................................................... 27
SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall
be made free and clear of and without deduction for any and all taxes, withholding
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto arising out of or in connection with the transactions contemplated by
the Loan Documents (all such taxes, levies, imposts, deductions, charges or
withholdings and all liabilities with respect thereto (excluding taxes imposed on net
income in accordance with the following sentence) herein "TAX LIABILITIES").
Notwithstanding the foregoing, the Borrowers shall not be liable for taxes imposed on
the net income of Lender by the jurisdiction under the laws of which Lender is
organized or doing business or any political subdivision thereof and taxes imposed on
its net income by the jurisdiction of Lender's applicable lending office or any
political subdivision thereof. If the Borrowers shall be required by law to deduct
any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from
or in respect of any sum payable hereunder to Lender, then the sum payable hereunder
shall be increased as may be necessary so that, after making all required
i
deductions, Lender receives an amount equal to the sum it would have received had no such
deductions been made.......................................................................... 27
SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and
damages that Lender would suffer by reason of an Event of Default (exclusive of the
attorneys' fees and other costs incurred in connection with enforcement of Lender's
rights under the Loan Documents) or a prepayment would be difficult and needlessly
expensive to calculate and establish, and (ii) the amounts of the Default Rate, the
late charges, and the Prepayment Consideration are reasonable, taking into
consideration the circumstances known to the parties at this time, and (iii) such
Default Rate and late charges and Lender's reasonable attorneys' fees and other costs
and expenses incurred in connection with enforcement of Lender's rights under the Loan
Documents shall be due and payable as provided herein, and (iv) such interest at the
Default Rate, late charges, Prepayment Consideration, and the obligation to pay
Lender's reasonable attorneys' fees and other enforcement costs do not, individually
or collectively, constitute a penalty......................................................... 27
SECTION 2.10 RESERVED...................................................................................... 28
SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without
the consent of the Borrowers, on prior written notice to the Borrowers. The Borrowers
expressly acknowledge and agree that the Servicer's fees (the "SERVICING FEE"), which
shall in no event exceed five one-hundredths of one percent (.05%) per annum on the
outstanding principal balance of the Loan, payable in monthly installments, and if the
Loan becomes a specially serviced loan, any fees of the special servicer, shall be
payable by the Borrowers and shall constitute a portion of the Obligations; provided,
however, that at no time shall the Borrowers be liable for Servicing Fees or special
servicing fees in excess of those fees charged to Lender by the Servicer or any
special servicer.............................................................................. 28
SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF CROSS-COLLATERALIZATION..................... 28
ARTICLE III CONDITIONS TO LOAN.................................................................................. 33
SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligation of Lender to
fund the Loan are subject to the prior or concurrent satisfaction or waiver of the
conditions set forth below, and to satisfaction of any other conditions specified
herein or elsewhere in the Loan Documents. With respect to facts and circumstances
actually known to Lender at Closing, by funding the Loan Lender shall be deemed to
have acknowledged that each of the conditions set forth below has been satisfied or
waived (except as otherwise set forth in any other agreement in writing between the
Borrowers and Lender). Where in this Section any documents, instruments or
information are to be delivered to Lender, then the condition shall not be satisfied
unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if
so required by Lender, the Borrowers shall deliver to Lender a certificate duly
executed by the
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Borrowers stating that the applicable document, instrument or information is true and
complete and does not omit to state any information without which the same might reasonably
be deemed materially misleading............................................................... 33
ARTICLE IV REPRESENTATIONS AND WARRANTIES....................................................................... 39
SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS................................. 39
SECTION 4.2 AUTHORIZATION OF BORROWING, ETC............................................................... 39
SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the Borrowers, their
Affiliates and the Properties which have been furnished by or on behalf of the
Borrowers to Lender pursuant to this Loan Agreement present fairly the financial
condition of the Persons covered thereby as of the dates thereof and the results of
their operations for the periods then ended, and, to the Borrowers' Knowledge after
due inquiry, have been prepared in accordance with GAAP consistently applied (except
as disclosed therein). Since the date of the financial statements delivered to
Lender, there has been no material adverse change in the financial condition,
operations or business of the Borrower Parties or the Properties from that set forth
in said financial statements.................................................................. 40
SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the Borrowers shall have
no outstanding Indebtedness or Contingent Obligations other than the Obligations or
any other Permitted Indebtedness.............................................................. 40
SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee simple title (or,
in the case of the Ground Leased Properties, leasehold title) to the Properties, free
and clear of all Liens except for the Permitted Encumbrances. The Borrowers own and
will own at all times all FF&E relating to the Properties (other than personal
property which is either owned by tenants of such Property, not used or necessary for
the operation of the applicable Property, or leased by the Borrowers as permitted
hereunder), subject only to the Permitted Encumbrances. The Mortgages, when properly
recorded in the appropriate records, together with any Uniform Commercial Code
financing statements required to be filed in connection therewith, will create (i) a
valid, perfected first lien on each of the Properties, subject only to the Permitted
Encumbrances, and (ii) perfected first priority security interests in and to, and
perfected collateral assignments of, all personalty (including the Rents, the Leases,
and the FF&E), all in accordance with the terms thereof, in each case subject only to
any applicable Permitted Encumbrances. Lender will have a perfected first priority
security interest in and to the FF&E owned by the Borrowers, if any, not located at
the Properties. To the Borrowers' Knowledge, except as set forth on SCHEDULE 4.5,
there are no proceedings in condemnation or eminent domain affecting any of the
Properties, and to the actual Knowledge of the Borrowers, none is threatened. Except
as set forth on SCHEDULE 4.5(A), no Person has any option or other right to purchase
all or any portion of any of the Properties or any interest therein. To the
Borrowers' Knowledge, there are no mechanic's, materialman's or
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other similar liens or claims which have been filed for work, labor or materials affecting
the Properties which are or will be liens prior to, or equal or coordinate with, the lien
of any of the Mortgages. None of the Permitted Encumbrances, individually or in the
aggregate, materially interfere with the benefits of the security intended to be provided
by the Mortgages and this Loan Agreement, materially and adversely affect the value of any of
the Properties, impair the use or operations of the Properties or impair the
Borrowers' ability to pay its obligations in a timely manner.................................. 40
SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as set forth in the
Zoning Reports for the Properties delivered to Lender, the Properties and the use
thereof comply in all material respects with all applicable zoning, subdivision and
land use laws, regulations and ordinances, all applicable health, fire, building
codes, parking laws and all other laws, statutes, codes, ordinances, rules and
regulations applicable to the Properties, or any of them, including without limitation
the Americans with Disabilities Act. To the Borrowers' Knowledge, there are no
illegal activities relating to controlled substances on any of the Properties. To the
Borrower's Knowledge, except as set forth in the Zoning Reports for the Properties
delivered to Lender, all material permits, licenses and certificates for the lawful
use, occupancy and operation of each component of each of the Properties in the manner
in which it is currently being used, occupied and operated, including, but not limited
to liquor licenses and certificates of occupancy, or the equivalent, have been
obtained and are current and in full force and effect. To the Borrower's Knowledge,
except as set forth in the Zoning Reports for the Properties delivered to Lender, in
the event that all or any part of the Improvements located on any Property is
destroyed or damaged, said Improvements can be legally reconstructed to their
condition prior to such damage or destruction, and thereafter exist for the same use
without violating any zoning or other ordinances applicable thereto and without the
necessity of obtaining any variances or special permits, other than customary
demolition, building and other construction related permits. To the Borrowers'
Knowledge, no legal proceedings are pending or threatened with respect to the zoning
of any Property. To the Borrowers' Knowledge, except as set forth in the Title
Policies and/or the Surveys, neither the zoning nor any other right to construct, use
or operate any Property is in any way dependent upon or related to any real estate
other than such Property. No tract map, parcel map, condominium plan, condominium
declaration, or plat of subdivision will be recorded by the Borrowers with respect to
any Property without Lender's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned................................................. 41
SECTION 4.7 LEASES; AGREEMENTS............................................................................ 41
SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as set forth in the
Property Condition Reports for the Properties delivered to
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Lender, all Improvements including, without limitation, the roof and all structural
components, plumbing systems, HVAC systems, fire protection systems, electrical systems,
equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are
in good condition and repair. Except as disclosed in the Property Condition Reports,
(i) the Borrowers are not aware of any latent or patent structural or other material defect
or deficiency in the Properties and, (ii) to the Borrowers' Knowledge, city water supply,
storm and sanitary sewers, and electrical, gas (if applicable) and telephone
facilities are available to each of the Properties within the boundary lines of each
of the Properties (except as may be shown on the applicable Survey), are fully
connected to the Improvements and are fully operational, are sufficient to meet the
reasonable needs of each of the Properties as now used or presently contemplated to be
used, and no other utility facilities are necessary to meet the reasonable needs of
each of the Properties as now used or presently contemplated. Except as may be shown
on the applicable Survey, to the Borrowers' Knowledge no part of any of the Properties
is within a flood plain and none of the Improvements create encroachments over, across
or upon the Properties' boundary lines, rights of way or easements, and no building or
other improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to each of the Properties for the current
and contemplated uses thereof have been completed and are serviceable and are
physically and legally open for use by the public. To the Borrowers' Knowledge after
due inquiry, and except as disclosed in the Property Condition Reports, any septic
system located at any of the Properties is in good and safe condition and repair and
in compliance with all applicable law......................................................... 43
SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9, there are no
judgments outstanding against any Borrower Party, or affecting any of the Properties
or any property of any Borrower, nor is there any action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration now pending or, to the
Borrowers' Knowledge, threatened against any Borrower Party that could reasonably be
expected to result in a Material Adverse Effect. To the Borrowers' Knowledge after
due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions,
investigations and arbitrations set forth on SCHEDULE 4.9 are not reasonably expected
to result, either individually or in the aggregate, in any Material Adverse Effect............ 43
SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of each
Primary Borrower Party required to be filed have been timely filed (or each Borrower
has timely filed for an extension and the applicable extension has not expired), and
all taxes, assessments, fees and other governmental charges (including any payments in
lieu of taxes) upon such Person and upon its properties, assets, income and franchises
which are due and payable have been paid. To the Borrowers' Knowledge, there is
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not presently pending any special assessment against any of the Properties or any part
thereof....................................................................................... 43
SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Primary Borrower
Parties is a party to or bound by, nor is any property of such Person subject to or
bound by, any contract or other agreement which restricts such Person's ability to
conduct its business in the ordinary course as currently conducted that, either
individually or in the aggregate, has a Material Adverse Effect or could reasonably be
expected to have a Material Adverse Effect.................................................... 43
SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions contained
in any Contractual Obligation of any such Person which could reasonably be expected to
have a Material Adverse Effect, and no condition exists that, with the giving of
notice or the lapse of time or both, would constitute such a default which could
reasonably be expected to have a Material Adverse Effect...................................... 44
SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment
Company Act of 1940 or to any federal or state statute or regulation limiting its
ability to incur indebtedness for borrowed money.............................................. 44
SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no Primary Borrower
Party maintains or contributes to, or has any obligation (including a contingent
obligation) under, any Employee Benefit Plans................................................. 44
SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will
be payable by or pursuant to any contract or other obligation of any Primary Borrower
Party with respect to the making of the Loan or any of the other transactions
contemplated hereby or by any of the Loan Documents. The Borrowers shall indemnify,
defend, protect, pay and hold Lender harmless from any and all broker's or finder's
fees claimed to be due in connection with the making of the Loan arising from any
Borrower Parties' actions..................................................................... 44
SECTION 4.16 INTENTIONALLY DELETED......................................................................... 44
SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction or any Loan Document
with the actual intent to hinder, delay, or defraud any creditor and (b) received
reasonably equivalent value in exchange for its obligations under the Loan Documents.
Giving effect to the Loan, the aggregate fair saleable value of the Borrowers' assets
exceed and will, immediately following the making of the Loan, exceed the Borrowers'
total liabilities, including, without limitation, subordinated, unliquidated, disputed
and Contingent Obligations. The aggregate fair saleable value of the Borrowers'
assets is and will, immediately following the making of the Loan, be greater than the
Borrowers' probable total liabilities, including the maximum amount of their
Contingent Obligations on their debts as such debts become absolute and matured. Each
Borrower's assets do not and, immediately following the making of the Loan will not,
constitute
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unreasonably small capital to carry out its business as conducted or as
proposed to be conducted. The Borrowers do not intend to, and do not believe that
they will, incur Indebtedness and liabilities (including Contingent Obligations and
other commitments) beyond their ability to pay such Indebtedness and liabilities as
they mature (taking into account the timing and amounts of cash to be received by the
Borrowers and the amounts to be payable on or in respect of obligations of the
Borrowers).................................................................................... 44
SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any
Borrower Party contains any untrue representation, warranty or statement of a material
fact, or omits to state a material fact necessary in order to make the statements
contained therein not misleading. No Loan Document or any other document, certificate
or written statement for use in connection with the Loan and prepared by any Borrower
Party, or any information provided by any Borrower Party and contained in, or used in
preparation of, any document or certificate for use in connection with the Loan,
contains any untrue representation, warranty or statement of a material fact, or omits
to state a material fact necessary in order to make the statements contained therein
not misleading. There is no material fact actually known to the Borrowers that has had
or could reasonably be expected to have a Material Adverse Effect and that has not
been disclosed in writing to Lender by the Borrowers.......................................... 44
SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the proceeds of the Loan
only for the purposes set forth herein and consistent with all applicable laws,
statutes, rules and regulations. No portion of the proceeds of the Loan shall be used
by the Borrowers or any Person in any manner that might cause the borrowing or the
application of such proceeds to violate Regulation T, Regulation U or Regulation X or
any other regulation of the Board of Governors of the Federal Reserve System.................. 45
SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate description of all
policies of insurance for each Borrower that are in effect as of the Closing Date. No
notice of cancellation has been received with respect to such policies, and, to each
Borrower's Knowledge, the Borrowers are in compliance with all conditions contained in
such policies................................................................................. 45
SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1) or more parcels
which constitute separate tax lots. No part of any of the Properties is included or
assessed under or as part of another tax lot or parcel, and no part of any other
property is included or assessed under or as part of the tax lots or parcels
comprising any of the Properties.............................................................. 45
SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest in, including
without limitation stock, partnership interest or other securities of, any other
Person (other than the Beverage Companies), or (ii) direct or indirect loan, advance
or capital contribution to any other Person, including all indebtedness and accounts
receivable from that other Person............................................................. 45
SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any of them (including
any Property) is property of the estate, in any voluntary or
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involuntary case under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or other similar law now or hereafter in effect. No Borrower Party and no
property of any of them is under the possession or control of a receiver, trustee or other
custodian. No Borrower Party has made any assignment for the benefit of creditors. No such
assignment or bankruptcy or similar case or proceeding is now contemplated.
Notwithstanding the foregoing, Lender acknowledges that case #01-16402 involving Impac
Hotels I, L.L.C. remains pending in the Bankruptcy Court for the Southern District of
New York. Borrower represents that the Plan of Reorganization for this case has been
approved by the bankruptcy court and that the case remains open solely for the
purposes of resolution of certain unsecured claims, which remaining claims are payable
solely out of a disputed claims reserve established by Guarantor pursuant to the Plan
of Reorganization............................................................................. 45
SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to Lender in writing
herein or in any of the Loan Documents, no Default exists..................................... 45
SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an employee benefit plan
as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined
in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii)
an entity whose underlying assets constitute "plan assets" of any such employee
benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC;
provided that, in making such representation, the Borrowers have assumed that (i) no
portion of the Loan shall be funded with plan assets of any employee benefit plan that
is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code
unless the Lender is eligible to apply one or more exemptions such that the Loan will
not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that
could subject a Borrower Party or its Affiliates to an excise tax under Section 4975
of the IRC; and (ii) such assumption in the preceding clause is true and correct with
respect to any party to which Lender transfers or assigns any portion of the Loan............. 45
SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a "governmental plan"
within the meaning of Section 3(32) of ERISA and transactions by or with the Borrowers
are not and will not be subject to state statutes applicable to the Borrowers'
regulating investments of and fiduciary obligations with obligations with respect to
governmental plans............................................................................ 46
SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person" within the
meaning of Section 1445(f)(3) of the IRC...................................................... 46
SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.28 no Primary
Borrower Party is a party to any collective bargaining agreement.............................. 46
SECTION 4.29 RESERVED...................................................................................... 46
SECTION 4.30 GROUND LEASES................................................................................. 46
SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their respective
officers, directors, partners, members, Affiliates or, to the
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knowledge of the Borrowers, shareholders is an entity or person: (i) that is listed in the
Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on
September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury
Department's Office of Foreign Assets Control ("OFAC") most current list of
"Specifically Designated National and Blocked Persons" (which list may be published
from time to time in various mediums including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or
supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise
affiliated with any entity or person listed above (any and all parties or persons
described in clauses (i) through (iv) above are herein referred to as a "PROHIBITED
PERSON")...................................................................................... 47
ARTICLE V COVENANTS OF BORROWER PARTIES......................................................................... 47
SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS........................................................ 47
SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve and keep in full
force and effect their existence as a limited partnership, limited liability company,
or corporation, as the case may be, and all rights and franchises material to its
business, including their qualification to do business in each state where it is
required by law to so qualify. Without limitation of the foregoing, each Borrower
and, to the extent required by applicable law, General Partner and Member, shall at
all times be qualified to do business in each of the states where the Properties are
located....................................................................................... 52
SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS............................................................. 52
SECTION 5.4 MAINTENANCE OF INSURANCE...................................................................... 53
SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY......................................... 57
SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized representatives designated by
Lender to visit and inspect during normal business hours its Property and its
business, including its financial and accounting records, and to make copies and take
extracts therefrom and to discuss its affairs, finances and business with its officers
and independent public accountants (with such Borrower's representative(s) present),
at such reasonable times during normal business hours and as often as may be
reasonably requested. Unless an Event of Default has occurred and is continuing,
Lender shall provide advance written notice of at least three (3) Business Days prior
to visiting or inspecting any Property or such Borrower's offices............................. 60
SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and delivered to Lender
operations and maintenance programs (the "O&M PLANS") with respect to suspected
asbestos, asbestos-containing materials, and/or mold located in certain Properties as
set forth on Schedule 6.6 attached hereto, which conditions were disclosed in the
applicable Environmental Reports for such Properties. Each applicable Borrower shall
at all times implement and carry out the O&M Plan in accordance with its terms.
Lender's requirement that the applicable Borrowers develop and comply with the O&M
Plan shall not be deemed to constitute
ix
a waiver or modification of any covenants or agreements of the Borrowers or Guarantor with
respect to Hazardous Material or Environmental Laws as set forth in the Environmental
Indemnity..................................................................................... 60
SECTION 5.8 RESERVED...................................................................................... 60
SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will (A) comply with
the requirements of all present and future applicable laws, rules, regulations and
orders of any governmental authority in all jurisdictions in which it is now doing
business or may hereafter be doing business, other than those laws, rules, regulations
and orders the noncompliance with which would not reasonably be expected to have,
either individually or in the aggregate, a material adverse effect on the operation or
value of any Property, (B) maintain all licenses and permits now held or hereafter
acquired by any Borrower, the loss, suspension, or revocation of which, or failure to
renew, could have a material adverse effect on the operation or value of any Property
and (C) perform, observe, comply and fulfill all of its material obligations,
covenants and conditions contained in any Contractual Obligation.............................. 60
SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute and/or deliver
such documents, instruments, agreements, financing statements, and perform such acts
as Lender at any time may reasonably request to evidence, preserve and/or protect the
Collateral at any time securing or intended to secure the Obligations and/or to better
and more effectively carry out the purposes of this Loan Agreement and the other Loan
Documents..................................................................................... 61
SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party shall duly and
punctually perform, observe and comply in all material respects with all of the terms,
provisions, conditions, covenants and agreements on its part to be performed, observed
and complied with (i) hereunder and under the other Loan Documents to which it is a
party, (ii) under all Material Agreements and Leases and (iii) all other agreements
entered into or assumed by such Person in connection with the Properties, and will not
suffer or permit any material default or event of default (giving effect to any
applicable notice requirements and cure periods) to exist under any of the foregoing
except where the failure to perform, observe or comply with any agreement referred to
in this clause (iii) would not reasonably be expected to have a material adverse
effect on the operation or value of any Property.............................................. 61
SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be
unreasonably withheld or delayed, the Borrowers shall not, nor shall the Borrowers
authorize Manager or any other Person to, (i) enter into any Material Lease; (ii)
cancel or terminate any Material Lease (except to enforce any such Lease after a
default thereunder); (iii) amend or modify any Material Lease (except for minor
modifications and amendments entered into in the ordinary course of business,
consistent with prudent property management practices, not materially and adversely
affecting the economic terms of the Material Lease); (iv) approve any assignment,
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sublease or underlease of any Material Lease (except as required pursuant to the
express terms of any existing Lease or Lease hereafter approved by Lender); or (v)
cancel or modify any guaranty, or release any security deposit, letter of credit, or
other item constituting security pertaining to any Material Lease (except as required
pursuant to the express terms of any existing Lease or Lease hereafter approved by
Lender)....................................................................................... 61
SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS.............................................................. 62
SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become obligated under any
Material Agreement pertaining to any Property without Lender's prior written approval,
which approval shall not be unreasonably withheld or conditioned; except that the
following Material Agreements shall not require Lender approval: (i) any Lease that
does not require Lender's approval under, and otherwise complies with, the provisions
of Section 5.12 hereof, (ii) any Management Agreement that does not require Lender's
approval under, and otherwise complies with, the provisions of Section 5.13 hereof
(provided, however, that the foregoing shall not affect Borrowers' obligation to
deliver Rating Confirmations with respect to any such Management Agreement if required
under Section 5.13), (iii) the existing Material Agreements described on SCHEDULE 5.14
attached hereto, (iv) any Franchise Agreement that does not require Lender's approval
under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any other
agreement that may be terminated without cause and without payment of a penalty or
premium, on not more than thirty (30) days' prior written notice.............................. 65
SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all Receipts from the
Properties into, and otherwise comply with, the Accounts established from time to time
hereunder. Subject to Article VII hereof and the Cash Management Agreement, each
Borrower shall promptly apply all Receipts to the payment of all current and past due
Operating Expenses, and to the repayment of all sums currently due or past due under
the Loan Documents, including all payments into the Reserves.................................. 65
SECTION 5.16 ESTOPPEL CERTIFICATES......................................................................... 65
SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly create, incur,
assume, guaranty, or otherwise become or remain directly or indirectly liable with
respect to any Indebtedness except for the following (collectively, "PERMITTED
INDEBTEDNESS"):............................................................................... 65
SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are in addition to and
not in limitation of its obligations under Article XI herein. The Borrower shall not
create, incur, assume or permit to exist any Lien on or with respect to the
Properties, any other Collateral or any direct or indirect ownership interest in the
Borrowers, except the Permitted Encumbrances and Liens on the ownership interests in
the Borrowers securing the Mezzanine Loan..................................................... 66
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SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no Primary Borrower Party
shall directly or indirectly create or become or be liable with respect to any
Contingent Obligation......................................................................... 66
SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted in this
Loan Agreement, no Primary Borrower Party shall, or shall permit any other Person to,
(i) amend, modify or waive any term or provision of such Borrower Party's partnership
agreement, certificate of limited partnership, articles of incorporation, by-laws,
articles of organization, operating agreement or other organizational documents so as
to violate or permit the violation of the single-purpose entity provisions set forth
in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve such
Primary Borrower Party........................................................................ 66
SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to the
Manager under the Management Agreement, the Borrowers shall not pay any management,
consulting, director or similar fees to any Related Person of the Borrowers or to any
director, officer or employee of the Borrowers. The Borrowers shall not directly or
indirectly enter into or permit to exist any transaction (including the purchase,
sale, lease or exchange of any property or the rendering of any service) with any
Related Person of any of the Borrowers or with any director, officer or employee of
any Borrower Party, except transactions in the ordinary course of and pursuant to the
reasonable requirements of the business of the Borrowers and upon fair and reasonable
terms and which are no less favorable to any of the Borrowers than would be obtained
in a comparable arm's length transaction with a Person that is not a Related Person of
any Borrower. The Borrowers shall not make any payment or permit any payment to be
made to any Related Person of any of the Borrowers when or as to any time when any
Event of Default shall exist.................................................................. 66
SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS........................................................ 67
SECTION 5.23 ERISA......................................................................................... 67
SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any other Person within
its control to, disclose the name of Lender or terms of this Loan Agreement or the
Loan Documents in any press release without the prior written consent of Lender, which
shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary,
the Borrowers shall be permitted to make such filings and disclosures with respect to
the Loan as are required by law............................................................... 68
SECTION 5.25 Ground Leases................................................................................. 68
SECTION 5.26 RESERVED...................................................................................... 71
SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender, all reasonable
out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees
and expenses) in connection with the negotiation, documentation, closing,
administration, servicing, enforcement interpretation, and collection of the Loan and
the Loan Documents, and in the preservation and protection of Lender's rights
hereunder and thereunder. Without limitation the Borrowers shall pay all
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costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or
proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the
same). At the Closing, Lender is authorized to pay directly from the proceeds of the
Loan any or all of the foregoing expenses then or theretofore incurred and approved by
the Borrowers................................................................................. 71
SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a
Cash Trap Event is in effect, the Borrowers shall not make any distributions of cash
or other property to any Borrower Party, or make any payments in lieu thereof, without
Lender's prior written approval, which may be granted or withheld in Lender's sole
discretion.................................................................................... 71
SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically
provided herein to the contrary, the Borrowers shall not cancel any indebtedness from
any Person owing to any Borrower, or settle any claims without Lender's prior written
consent which shall not be unreasonably withheld.............................................. 71
SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no Borrower Party, nor any
of their respective Affiliates, officers, directors, partners or members will
knowingly: (i) conduct any business, nor engage in any transaction or dealing, with
any Prohibited Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a Prohibited
Person; or (ii) engage in or conspire to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in EO13224. The Borrowers further covenants and agrees to
deliver (from time to time) to Lender any such certification or other evidence as may
be requested by Lender in its sole and absolute discretion, confirming that: (i)
neither any Borrower Party, nor their respective officers, directors, partners,
members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party,
nor their respective officers, directors, partners, members or Affiliates, has to its
Knowledge engaged in any business, transaction or dealings with a Prohibited Person,
including, but not limited to, the making or receiving of any contribution of funds,
goods, or services, to or for the benefit of a Prohibited Person.............................. 71
ARTICLE VI RESERVES............................................................................................. 72
SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES........................... 72
SECTION 6.2 FUNDS DEPOSITED WITH LENDER................................................................... 72
SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the Borrowers shall deposit
with Lock Box Account Bank **[$_________]** and, pursuant to the Cash Management
Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing on the
Payment date in July 2004, 1/12th of the annual charges (as reasonably estimated by
Lender) for all Impositions and all Insurance Premiums (other than for D&O Insurance)
payable with respect to the Properties hereunder (said funds, together with any
interest thereon and additions thereto, the
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"IMPOSITIONS AND INSURANCE RESERVE"). The initial amount of the monthly deposit to be made
to the Impositions and Insurance Reserve from and after the date hereof is **[$__________]**.
The Borrowers shall also deposit with Lock Box Account Bank within ten (10) Business Days
of the written demand by Lender, to be added to and included within such reserve, a sum of
money which Lender reasonably estimates, together with such monthly deposits, will be
sufficient to make the payment of each such charge at least ten (10) Business Days prior
to the date initially due. The Borrowers shall provide Lender with bills and all other
documents necessary for the payment of the foregoing charges at least thirty (30) days
prior to the date on which each payment shall first become subject to penalty or
interest if not paid. So long as (i) no Event of Default has occurred and is
continuing, (ii) the Borrowers have provided Lender with the foregoing bills and other
documents in a timely manner, and (iii) sufficient funds are held by Lender for the
payment of the Impositions and Insurance Premiums relating to each of the Properties,
Lender shall pay said items or disburse to the Borrowers from such Reserve an amount
sufficient to pay said items. Interest shall accrue in favor of the Borrowers on
funds in the Impositions and Insurance Reserve and be added to the balance thereof and
disbursed in accordance with the terms hereof................................................. 73
SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on behalf of Lender
shall establish and maintain with Lock Box Bank an account for the purpose of creating
a reserve for replacements of FF&E at or in, or used in connection with, the
Properties (the "REPLACEMENTS") in accordance with the applicable CapEx/FF&E Budget
approved by Lender (said funds, together with any interest thereon and additions
thereto, the "FF&E RESERVE"). The FF&E Reserve shall be held in an Eligible Account
entitled "FF&E Reserve Account for the benefit of Merrill Lynch Mortgage Lending,
Inc., as secured party" which account shall be under the sole dominion and control of
Lender, subject to the terms of the Cash Management Agreement. Pursuant to the Cash
Management Agreement, the Borrowers shall deposit monthly, on each Payment Date
commencing with the Payment Date in July 2004, an amount equal to 4.0% of the
Operating Revenues generated from the Properties for the prior calendar month (such
amount, the "MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn
by the Borrowers, subject in all instances to the terms of the Cash Management
Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds held
in the FF&E Reserve shall be used in connection with the Required Capital
Improvements. Upon and at all times after the occurrence and during the continuance
of an Event of Default, no draws will be permitted from the FF&E Reserve other than
Replacements subject, in each instance, to Manager's compliance with the FF&E
reporting requirements set forth in Section 5.1(A)(v)(d)...................................... 73
SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At Closing, the Borrowers
shall deposit with Lock Box Account Bank
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**[$___________]** (said funds, together with any interest thereon, the "CAPITAL IMPROVEMENT
RESERVE"), which funds shall be made available to the Borrowers solely for payment of certain
Capital Improvements required to be made to the Properties and designated as "Required
Capital Improvements" on SCHEDULE 6.5 attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS")
and shall not be used by the Borrowers for purposes for which any other Reserve is
established or for any other purpose other than completion of the Required Capital
Improvements. The Borrowers shall promptly commence and diligently prosecute to completion,
subject to Force Majeure, the Required Capital Improvements within the time periods for each
Required Capital Improvement set forth on SCHEDULE 6.5. Funds held in the Capital
Improvement Reserve shall be disbursed in accordance with Section 6.7. Subject to the
foregoing conditions, but also subject to the last paragraph of Section 11.4, the
Borrowers shall be entitled to draw any remaining balance in the Capital Improvement
Reserve when all Required Capital Improvements are complete, and paid for, in
accordance with the terms hereof.............................................................. 74
SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers shall deposit with
Lock Box Account Bank, an amount equal to **[$___________]** (said funds, together
with any interest thereon and additions thereto, the "HAZARDOUS MATERIALS REMEDIATION
RESERVE") for certain work related to Hazardous Materials on the Properties as
indicated in the Environmental Reports for the Properties prepared and delivered prior
to the Closing and as such work is more particularly described on SCHEDULE 6.6 (the
"ENVIRONMENTAL WORK"). Prior to the earlier of (x) the date required by any applicable
Governmental Authority or (y) nine (9) months after the Closing, the Borrowers shall,
subject to Force Majeure, complete such Environmental Work and shall provide to Lender
such closure reports, no-further-action letters, or other evidence of compliance with
law as Lender may reasonably require. The funds contained in the Hazardous Materials
Remediation Reserve shall be utilized by the Borrowers solely for performance of the
Environmental Work in accordance with the Environmental Reports, and shall not be used
by the Borrowers for purposes for which any other Reserve is established. Subject to
the Borrowers' satisfaction of the applicable conditions of Section 6.7, the Borrowers
shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for
costs that have been incurred by the Borrowers for such Environmental Work, provided
that the Borrowers deliver to Lender such evidence as may be reasonably satisfactory
to Lender that, after payment of such draw, the funds remaining in the Hazardous
Materials Remediation Reserve shall be sufficient to pay for the remainder of such
Environmental Work. Subject to the foregoing conditions, but also subject to the last
paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining
balance in the Hazardous Materials Remediation Reserve when all such Environmental
Work is complete, and is paid for, in accordance with the terms hereof........................ 74
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SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL
IMPROVEMENT RESERVE; PERFORMANCE OF WORK...................................................... 75
SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations in
full, a Cash Trap Event shall occur, then for so long as such Cash Trap Event
continues to exist, all Excess Cash Flow (except as otherwise expressly provided
below) shall be deposited with Lender (or its Servicer or agent) and held in the Lock
Box Account in accordance with the terms of the Cash Management Agreement (said funds,
together with any interest thereon, the "CASH TRAP RESERVE"). A "CASH TRAP EVENT"
shall occur as of any Calculation Date when the Debt Yield is less than the Minimum
Debt Yield for the trailing twelve (12) month period ending on such Calculation Date
and shall continue to exist until such time as the Minimum Debt Yield test has been
satisfied for three (3) consecutive Calculation Dates (on a trailing twelve (12) month
basis) following the commencement of the applicable Cash Trap Event. Notwithstanding
that the Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no
Cash Trap Event shall be deemed to have occurred as a result of such event if the
Borrowers make a principal prepayment of the Aggregate Outstanding Principal Balance
(which prepayment amount shall be disbursed on the next Payment Date in accordance
with the terms of the Cash Management Agreement), within three (3) Business Days after
the date of delivery of the financial statements disclosing the existence of such Cash
Trap Event (or the date on which such financial statements are required to be
delivered pursuant to Section 5.1), in an amount equal to the greater of (x) one
percent (1%) of the Aggregate Outstanding Principal Balance, or (y) 120% of the
amount, as determined by Lender in its reasonable discretion, sufficient to cause the
Debt Yield to meet or exceed the Minimum Debt Yield if such calculation was
recalculated as provided above assuming that such amount was applied to reduce the
Aggregate Outstanding Principal Balance as of the first day of the relevant measuring
period. During the continuance of a Cash Trap Event, provided that no Event of
Default shall have occurred and be continuing, any funds on deposit in the Cash Trap
Reserve may, at the Borrowers' election, be retained in the Cash Trap Reserve or may
be applied to (i) prepayment of the Aggregate Outstanding Principal Balance as
provided above, (ii) Capital Expenditures reasonably approved by Lender, or (iii)
scheduled payments (not to exceed $525,000 in the aggregate) of principal and interest
under the Loan and the Allocable Portion of the Mezzanine Loan (to be applied in
accordance with the terms of the Cash Management Agreement). Any funds on deposit in
the Cash Trap Reserve shall continue to be held as additional Collateral in accordance
with this Section 6.8 until the earlier of (a) the date that such funds are applied or
disbursed pursuant to the foregoing sentence or (b) the date that the Minimum Debt
Yield test has been satisfied for three (3) consecutive months (as determined above),
at which time, provided no Event of Default exists, and no Cash Trap Event has
commenced, such funds,
xvi
together with any and all amounts then held in the Minimum Balance Sub-Account (as defined
in the Cash Management Agreement), shall be automatically released to the Borrowers without
any further certification requirements on the part of the Borrowers. The existence of a
Cash Trap Event shall be determined by Lender in its reasonable good faith determination.
If Lender determines that a Cash Trap Event has occurred, Lender shall send the Borrowers
written notice thereof. Notwithstanding any provision herein to the contrary, if an Event of
Default has occurred and is continuing, all funds on deposit in the Cash Trap Reserve and any
subsequent Excess Cash Flow, while such Event of Default is continuing, may be applied
by Lender to payment of the Loan (including payment of any Prepayment Consideration)
or other Obligations (or to the obligations of the Mezzanine Borrowers to Mezzanine
Lender) as Lender may elect................................................................... 79
ARTICLE VII DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT.................................................. 80
SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT......................................... 80
SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be
allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in
accordance with the Cash Management Agreement................................................. 82
SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and
be continuing, then notwithstanding anything to the contrary in this Section or
elsewhere, Lender shall have all rights and remedies available under applicable law
and under the Loan Documents. Without limitation of the foregoing, for so long as an
Event of Default exists, Lender may apply any and all funds in the Deposit Account,
and/or any Sub-Accounts against all or any portion of any of the Obligations, in any
order......................................................................................... 82
ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES....................................................................... 82
SECTION 8.1 EVENT OF DEFAULT.............................................................................. 82
SECTION 8.2 ACCELERATION AND REMEDIES..................................................................... 85
SECTION 8.3 PERFORMANCE BY LENDER......................................................................... 86
SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each Borrower shall
provide such documents and instruments as shall be reasonably satisfactory to Lender
to evidence compliance with any material provision of the Loan Documents applicable to
the Borrowers................................................................................. 87
ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS.......................... 87
SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower Party hereby
represents, warrants and covenants as of the Closing Date and until such time as all
Obligations are paid in full, that absent express
xvii
advance written waiver from Lender, which may be withheld in Lender's sole discretion, that
such Primary Borrower Party:.................................................................. 87
SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to their respective
obligations under Section 9.1, each Borrower, General Partner and Member hereby
represents, warrants and covenants, as of the Closing Date and until such time as all
Obligations are paid and satisfied in full, that absent express advance written waiver
from Lender, which may be withheld in Lender's sole discretion:............................... 89
ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS..................................................... 91
SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one
or more Secondary Market Transactions with respect to the Loan, and to structure and
restructure all or any part of the Loan, including without limitation in multiple
tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization.
Without limitation, Lender shall have the right, at Lender's sole cost (other than
each Borrower's internal costs and expenses and the costs and expenses of the
Borrowers' counsel), to cause the Note and any Mortgage to be split into a first and a
second mortgage loan, or into one or more loans evidenced by multiple notes and
secured by multiple mortgages and/or by ownership interests in any of the Borrowers in
whatever proportion Lender determines, and thereafter to engage in Secondary Market
Transactions with respect to all or any part of the indebtedness and loan
documentation. Each of the Borrower Parties acknowledge that it is the intention of
the parties that all or a portion of the Loan will be securitized and that all or a
portion of the Loan will be rated by one or more Rating Agencies. Each of the
Borrower Parties further acknowledge that additional structural modifications may be
required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY
MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or
any portion of the Obligations or the Loan Documents or any interest therein to one or
more investors, (ii) the sale, assignment, or other transfer of one or more
participation interests in the Obligations or Loan Documents to one or more investors,
(iii) the transfer or deposit of all or any portion of the Obligations or Loan
Documents to or with one or more trusts or other entities which may sell certificates
or other instruments to investors evidencing an ownership interest in the assets of
such trust or the right to receive income or proceeds therefrom or (iv) any other
Securitization backed in whole or in part by the Loan or any interest therein................. 91
SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and
cooperate reasonably and in good faith with Lender in effecting any such restructuring
or Secondary Market Transactions at Lender's sole cost (other than, with respect to
the first successful Securitization and any related Secondary Market Transaction only
(or if the Loan shall be hereafter split into multiple loans, the first successful
Securitization and any related Secondary Market Transaction with respect
xviii
to each of such loans), the Borrowers' internal costs and expenses and the costs and
expenses of the Borrower Parties' counsel). Notwithstanding the foregoing or anything
to the contrary contained in this Article X, it is acknowledged and agreed that in no event
shall Lender be responsible for payment of any Borrower Party's (or its Affiliate's)
internal costs and expenses in connection with any Secondary Market Transaction. Such
cooperation shall include without limitation, executing and delivering such reasonable
amendments to the Loan Documents and the organizational documents of each Borrower as
Lender or any Interested Party (as defined below) may request, provided however that,
no such amendment shall modify (i) the weighted average interest rate payable under
the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization
of the principal amount of the Note, (iv) any other material economic terms of the
Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the
effect of which would increase the Borrowers' obligations or decrease the Borrowers'
rights under the Loan Documents except to a de minimis extent. The Borrower Parties
shall not be required to provide additional collateral to effect any such
restructuring or Secondary Market Transaction after the Closing Date. The Borrower
Parties shall not be required to pay any third party (other than, which respect to the
first successful Securitization and any related Secondary Market Transaction only (or
if the Loan shall be hereafter split into multiple loans, the first successful
Securitization and any related Secondary Market Transaction with respect to each of
such loans), the costs and expenses of the Borrowers' counsel) costs and expenses
incurred by Lender in connection with any such Secondary Market Transaction unless
otherwise expressly payable by the Borrower Parties under this Loan Agreement or the
other Loan Documents.......................................................................... 92
SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than, with
respect to the first successful Securitization and any related Secondary Market
Transaction only (or if the Loan shall be hereafter split into multiple loans, the
first successful Securitization and any related Secondary Market Transaction with
respect to each of such loans), the Borrowers' internal costs and expenses and the
costs and expenses of the Borrower Parties' counsel), shall provide such access to
personnel and such information and documents relating to the Borrower Parties,
Manager, the Properties and Collateral and the business and operations of all of the
foregoing and such opinions of counsel (including nonconsolidation opinions) as any
Rating Agency may request or as Lender or any other Interested Party may reasonably
request in connection with any such Secondary Market Transaction including, without
limitation, updated financial information, appraisals, market studies, environmental
reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property
condition reports and other due diligence investigations together with appropriate
verification of such updated information and reports through letters of auditors and
consultants and, as
xix
of the closing date of the Secondary Market Transaction, updated representations and
warranties made in the Loan Documents and such additional representations and warranties
as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer
or potential investor (the Rating Agencies and all of the foregoing parties, collectively,
"INTERESTED PARTIES") may reasonably request, to the extent such updated representations
and warranties are true. On or prior to the date of closing of any Secondary Market
Transaction, the Borrowers, at Lender's cost and expense (other than with respect to the
first successful Securitization and any related Secondary Market Transaction only (or if
the Loan shall be hereafter split into multiple loans, the first successful Securitization
and any related Secondary Market Transaction with respect to each of such loans), the
Borrowers' internal costs and expenses and the costs and expenses of the Borrowers'
counsel), shall, if required by any Rating Agency or reasonably required by Lender,
provide revisions or "bringdowns" to any opinions delivered at Closing (including
nonconsolidation opinions), or if required by the Rating Agencies, new versions of
such opinions, which opinions shall be consistent in substance with the opinions
covered by the original opinions, addressed to Lender, any trustee under any
Securitization backed in whole or in part by the Loan, any Rating Agency that assigns
a rating to any securities in connection therewith and any investor purchasing
securities therein. Lender shall be permitted to share all such information with the
investment banking firms, Rating Agencies, accounting firms, law firms, other third
party advisory firms, potential investors, servicers and other service providers and
other parties directly involved in any proposed Secondary Market Transaction. The
Borrowers understand that any such information may be incorporated into any offering
circular, prospectus, prospectus supplement, private placement memorandum or other
offering documents for any Secondary Market Transaction. Lender and the Rating
Agencies shall be entitled to rely upon such information. Without limiting the
foregoing, the Borrowers and Guarantor shall provide in connection with each (i)
preliminary and final private placement memorandum or (ii) a preliminary and final
prospectus or prospectus supplement, as applicable, prepared in connection with any
Secondary Market Transaction (the documents referred to in the foregoing clauses (i)
and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably
satisfactory to the Borrowers and Guarantor certifying that the Borrowers and
Guarantor have examined such Disclosure Documents specified by Lender and, that the
sections of such Disclosure Document describing the Borrowers, Guarantor, the
Properties and Manager do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements made, in the light
of the circumstances under which they were made, not materially misleading. The
Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless
Lender, Merrill Lynch, Pierce, Fenner & Smith
xx
Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees,
agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate
within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the
Securities Exchange Act of 1934, and any other placement agent or underwriter with respect
to any Securitization or Secondary Market Transaction from and against any losses, claims,
damages and liabilities that arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Disclosure Document as to the
Borrowers, Guarantor, Manager and the Properties or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated in
such information or necessary in order to make the statements in such information not
materially misleading; provided, however, the Borrowers shall not be required to
indemnify Merrill Lynch for any liabilities arising out of untrue statements or
omissions that were identified to Lender in writing or are set forth in any third
party report not prepared by the Borrowers or their Affiliates unless such reports are
caused to be incorrect or misleading based upon information provided by the Borrowers
or their Affiliates. Lender may publicize the existence of the Obligations in
connection with Lender's Secondary Market Transaction activities or otherwise................. 92
SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its
obligations under this Loan Agreement and under the other Loan Documents (or may
transfer the portion thereof corresponding to the transferred portion of the
Obligations), and thereafter Lender shall be relieved of any obligations hereunder and
under the other Loan Documents arising after the date of said transfer with respect to
the transferred interest. Each transferee investor shall become a "Lender" hereunder......... 94
ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES................................ 94
SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted
Assumption expressly permitted under this Article XI, Leases entered into as permitted
hereunder, and pledges in connection with the Mezzanine Loan, the Borrowers shall not
cause or suffer to occur or exist, directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge,
Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of
any Property or any interest therein, or (ii) any direct or indirect ownership or
beneficial interest in any Borrower (other than to Mezzanine Lender), irrespective of
the number of tiers of ownership, without Lender's consent.................................... 94
SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following voluntary or involuntary
sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a
direct, indirect or beneficial interest in any
xxi
Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST
TRANSFERS"):.................................................................................. 94
SECTION 11.3 ASSUMABILITY.................................................................................. 95
SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may obtain the release
(each, a "RELEASE") of one or more Properties from the Lien of the applicable
Mortgage(s) in connection with a partial or total defeasance of the Loan subject to
the conditions of the Note and subject to the satisfaction of the following conditions:....... 96
SECTION 11.5 RESERVED...................................................................................... 98
SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained
herein, provided no Event of Default exists, the Borrowers may Transfer or dispose of
building equipment which is being replaced or which is no longer necessary in
connection with the operation of the Property free from the lien of the Mortgage,
provided that such transfer or disposal will not have a Material Adverse Effect on the
value of any individual Property or on the Properties taken as a whole, will not
materially impair the utility of any individual Property or the Properties, taken as a
whole, and will not result in a reduction or abatement of, or right of offset against,
the Rents payable under any Lease, in either case as a result thereof, and provided
further that any new building equipment acquired by the Borrowers (and not so disposed
of) shall be subject to the lien of the Mortgage. Lender shall, from time to time,
upon the reasonable request of any Borrower, execute a written instrument in form
reasonably satisfactory to Lender to confirm that such building equipment which is to
be, or has been, sold or disposed of is free from the lien of the Mortgage.................... 98
SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the
Borrowers may, without the consent of Lender, (i) make immaterial Transfers of
portions of the any Property to Governmental Authorities for dedication for public
use, and (ii) grant easements, restrictions, covenants, reservations and rights of way
with respect to any Property in the ordinary course of business for access, water and
sewer lines, telephone and telegraph lines, electric lines or other utilities or for
other similar purposes, provided that no such transfer, conveyance or encumbrance set
forth in the foregoing clauses (i) and (ii) shall materially impair the utility and
operation of such Property or have a Material Adverse Effect on the value of such
Property taken as a whole. In connection with any Transfer permitted pursuant to this
Section 11.7, Lender shall execute and deliver any instrument reasonably necessary or
appropriate, in the case of the Transfers referred to in clause (i) above, to release
the portion of such Property affected by such transfer from the lien of the applicable
Mortgage or to subordinate the applicable Mortgage to any such easement, restriction,
covenant, reservation or right of way within ten (10) days of Lender's receipt of the
following:.................................................................................... 98
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ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE................................................................... 99
SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and
notwithstanding any provision of the Loan Documents other than this Article, the
personal liability of the Borrowers to pay any and all Obligations including but not
limited to the principal of and interest on the debt evidenced by the Note and any
other agreement evidencing the Borrowers' obligations under the Note shall be limited
to (i) the Properties, (ii) the rents, profits, issues, products and income of the
Properties, and (iii) any other Collateral.................................................... 99
SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the Borrowers (but not
their members, partners (other than the General Partners), employees, shareholders
agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be
personally liable to the extent of any liability, loss, damage, cost or expense
(including, without limitation, reasonable attorneys' fees and expenses) suffered or
incurred by Lender resulting from any and all of the following: (i) fraud of any of
the Borrower Parties or their agents or employees; (ii) any material misrepresentation
made by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan
Document; (iii) insurance proceeds, condemnation awards, or other sums or payments
attributable to the Properties which are not applied in accordance with the provisions
of the Loan Documents; (iv) all rents, profits, issues, products and income of the
Properties received or collected by or on behalf of the Borrowers or any Borrower
Party or Manager and not deposited into the Deposit Account in accordance with Article
VII and the Cash Management Agreement; (v) failure to turn over to Lender, after an
Event of Default, or misappropriation of any tenant security deposits or rents
collected in advance (other than by Lender or Servicer); (vi) failure to notify Lender
of any change in the principal place of business address of the Borrowers or of any
change in the name of any of the Borrowers or if any of the Borrowers takes any other
action which could make the information set forth in the Financing Statements relating
to the Loan materially misleading; (vii) failure by the Borrowers, or any indemnitor
or guarantor to comply with the covenants, obligations, liabilities, warranties and
representations contained in the Environmental Indemnity or otherwise pertaining to
environmental matters; (viii) material waste with respect to any of the Properties;
(ix) all liabilities and expenses under the indemnification provisions of Section
10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default
under Article IX; and (xii) any distributions made in violation of Section 5.28 (to
the extent of any such distribution) including amounts improperly paid or distributed,
directly or indirectly, by Manager in circumvention of such restrictions.
Notwithstanding the preceding sentence or Section 12.1, the Loan shall be fully
recourse to the Borrowers and Guarantor upon the happening of any of the following:
(i) any Borrower Party's defense of any efforts by Lender to collect or enforce the
Obligations following maturity of the
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Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A),
or any other defense of any efforts by Lender to collect or enforce the Obligations without
a good faith basis following any other Event of Default, and (ii) any condition or event
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrowers and
Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary
Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented
to or acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or any
Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the exercise by
Mezzanine Lender of its rights under the Mezzanine Loan Documents)............................ 99
SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the
Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in
connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii)
impair the lien of any of the Mortgages or any other security document, (iv) impair
the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit
Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise
against any Borrower Party but not any Exculpated Party to the extent necessary to
obtain any amount for which such Borrower Party may be liable in accordance with this
Article or any other Loan Document............................................................ 100
ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES..................................................... 100
SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article, a "WAIVING PARTY")
is deemed for any reason to be a guarantor or surety of or for any other Borrower
Party or Affiliate or to have rights or obligations in the nature of the rights or
obligations of a guarantor or surety (whether by reason of execution of a guaranty,
provision of security for the obligations of another, or otherwise) then this Article
shall apply. This Article shall not affect the rights of the Waiving Party other than
to waive or limit rights and defenses that Waiving Party would have (i) in its
capacity as a guarantor or surety or (ii) in its capacity as one having rights or
obligations in the nature of a guarantor or surety............................................ 100
ARTICLE XIV MISCELLANEOUS....................................................................................... 102
SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby
shall be consummated, the Borrowers agree to promptly pay all reasonable fees, costs
and expenses incurred by Lender in connection with any matters contemplated by or
arising out of this Loan Agreement, including the following, and all such fees, costs
and expenses shall be part of the Obligations, payable on demand: (A) reasonable
fees, costs and expenses (including reasonable attorneys' fees, and other
professionals retained by Lender) incurred in connection with the examination, review,
due diligence investigation, documentation and
xxiv
closing of the financing arrangements evidenced by the Loan Documents; (B) subject to
Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees
and other professionals retained by Lender) incurred in connection with the administration
of the Loan Documents and the Loan and any amendments, modifications and waivers relating
thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including
reasonable attorneys' fees) incurred in connection with the review, documentation,
negotiation, closing and administration of any subordination or intercreditor agreements;
and (D) reasonable fees, costs and expenses (including reasonable attorneys' fees and fees
of other professionals retained by Lender) incurred in any action to enforce or interpret
this Loan Agreement or the other Loan Documents or to collect any payments due from the
Borrowers under this Loan Agreement, the Note or any other Loan Document or incurred
in connection with any refinancing or restructuring of the credit arrangements
provided under this Loan Agreement, whether in the nature of a "workout" or in
connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and
expenses due and payable to Lender after the Closing Date may be paid to Lender
pursuant to the Cash Management Agreement..................................................... 102
SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein,
whether or not the transactions contemplated hereby shall be consummated, the
Borrowers agree to indemnify, defend, protect, pay and hold Lender, Servicer and their
successors and assigns (including, without limitation, the trustee and/or the trust
under any trust agreement executed in connection with any Securitization backed in
whole or in part by the Loan and any other Person which may hereafter be the holder of
the Note or any interest therein), and the officers, directors, stockholders,
partners, members, employees, agents, Affiliates and attorneys of Lender and such
successors and assigns (collectively called the "INDEMNITEES") harmless from and
against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs,
expenses and disbursements of any kind or nature whatsoever (including the reasonable
fees and disbursements of outside counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened, whether
or not such Indemnitee shall be designated a party thereto) that are imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or arising
out of (A) the negotiation, execution, delivery, performance, administration,
ownership, or enforcement of any of the Loan Documents; (B) any of the transactions
contemplated by the Loan Documents; (C) any breach by the Borrowers of any material
representation, warranty, covenant, or other agreement contained in any of the Loan
Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by
any third party arising out of any condition or occurrence at or pertaining to the
Properties; (F) any design, construction, operation, repair, maintenance, use, non-use
or condition of
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the Properties or Improvements, including claims or penalties arising from violation of
any applicable laws or insurance requirements, as well as any claim based on any patent or
latent defect, whether or not discoverable by Lender; (G) any performance of any labor or
services or the furnishing of any materials or other property in respect of the Properties
or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any
obligation or undertaking relating to the performance or discharge of any of the terms,
covenants and conditions of the landlord contained in the Leases; or (J) the use or intended
use of the proceeds of any of the Loan (the foregoing liabilities herein collectively
referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrowers shall not have
an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising
from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by
a court of competent jurisdiction. The obligations and liabilities of the Borrowers under
this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of
its rights or remedies under the Loan Documents, including the acquisition of the
Properties by foreclosure or a conveyance in lieu of foreclosure.............................. 103
SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment,
modification, termination or waiver of any provision of this Loan Agreement, the Note
or any other Loan Document, or consent to any departure therefrom, shall in any event
be effective unless the same shall be in writing and signed by Lender and any other
party to be charged. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on the Borrowers in any case shall entitle the
Borrowers or other Person to any other or further notice or demand in similar or other
circumstances................................................................................. 103
SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance with Lender's
customary practices, destroy or otherwise dispose of all documents, schedules,
invoices or other papers, delivered by the Borrowers to Lender (other than the Note)
unless the Borrowers request in writing that same be returned. Upon such request and
at the Borrowers' expense, Lender shall return such papers when Lender's actual or
anticipated need for same has terminated...................................................... 104
SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other
communication required or permitted to be given shall be in writing and addressed to
the respective party as set forth below. Notices shall be effective (i) three (3)
days after the date such notice is mailed, (ii) on the next Business Day if sent by a
nationally recognized overnight courier service, (iii) on the date of delivery by
personal delivery and (iv) on the date of transmission if sent by telefax during
business hours on a Business Day (otherwise on the next Business Day)......................... 104
SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and
warranties made herein shall survive the execution and delivery of this Loan
Agreement, the making of the Loan hereunder and
xxvi
the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or
implied by law to the contrary, the agreements of the Borrowers to indemnify or release
Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall
survive the payment of the Loan and the termination of this Loan Agreement.................... 105
SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of Lender in the exercise of any power, right or privilege hereunder or under the
Note or any other Loan Document shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any single
or partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and remedies
existing under this Loan Agreement, the Note and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available............... 105
SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal
any assets in favor of any Person or against or in payment of any or all of the
Obligations. To the extent that any Person makes a payment or payments to Lender, or
Lender enforces its remedies or exercises its rights of set off, and such payment or
payments or the proceeds of such enforcement or set off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any bankruptcy
law, state or federal law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied, and all
Liens, if any, and rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement or set
off had not occurred.......................................................................... 105
SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of
any provision in or obligation under this Loan Agreement, the Note or other Loan
Documents shall not affect or impair the validity, legality or enforceability of the
remaining provisions or obligations under this Loan Agreement, the Note or other Loan
Documents or of such provision or obligation in any other jurisdiction........................ 106
SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein
for convenience of reference only and shall not constitute a part of this Loan
Agreement for any other purpose or be given any substantive effect............................ 106
SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN
THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A
SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED
xxvii
HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND
THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED
PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS
OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE SECURITY
INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER.................................. 106
SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns except that
the Borrowers may not assign their rights or obligations hereunder or under any of the
other Loan Documents except as expressly provided in Article XI............................... 106
SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrowers, on
behalf of themselves and all Borrower Parties, represent, warrant and acknowledge that
(i) they are sophisticated real estate investors, familiar with transactions of this
kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents
after conducting their own assessment of the alternatives available to them in the
market, and after lengthy negotiations in which they have been represented by legal
counsel of their choice. The Borrowers, on behalf of themselves and all Borrower
Parties, also acknowledge and agree that the rights of Lender under this Loan
Agreement and the other Loan Documents are reasonable and appropriate, taking into
consideration all of the facts and circumstances including without limitation the
quantity of the Loan, the nature of the Properties, and the risks incurred by Lender
in this transaction. No provision in this Loan Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create (i)
any partnership or joint venture between Lender and the Borrowers or any other Person,
or (ii) any fiduciary or similar duty by Lender to the Borrowers or any other Person.
The relationship between Lender and the Borrowers is exclusively the relationship of a
creditor and a debtor, and all relationships between Lender and any other Borrower are
ancillary to such creditor/debtor relationship................................................ 106
xxviii
SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval,
determination or other action by Lender is, pursuant to the Loan Documents or
applicable law, required to be done reasonably or required not to be unreasonably
withheld, then Lender's action shall be presumed to be reasonable, and the Borrowers
shall bear the burden of proof of showing that the same was not reasonable. In the
event that a claim or adjudication is made that Lender or its agents have acted
unreasonably or unreasonably delayed acting in any case where, by law or under this
Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be,
has an obligation to act reasonably or promptly, neither Lender nor its agents shall
be liable for any monetary damages, and the Borrowers' sole remedy shall be limited to
commencing an action seeking injunctive relief or declaratory judgment. Any action or
proceeding to determine whether Lender has acted reasonably shall be determined by an
action seeking declaratory judgment........................................................... 107
SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director,
employee, attorney, or agent of Lender, shall have any liability with respect to, and
each of the Borrowers hereby waives, releases, and agrees not to sue any of them upon,
any claim for any special, indirect, incidental, or consequential damages suffered or
incurred by the Borrower Parties in connection with, arising out of, or in any way
related to, this Loan Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Loan Agreement or any of the other Loan Documents,
other than the gross negligence or willful misconduct of Lender. Each of the
Borrowers hereby waives, releases, and agrees not to sue Lender or any of Lender's
Affiliates, officers, directors, employees, attorneys, or agents for punitive damages
in respect of any claim in connection with, arising out of, or in any way related to,
this Loan Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Loan Agreement or any of the transactions contemplated hereby,
except to the extent the same is caused by the gross negligence or willful misconduct
of Lender..................................................................................... 107
SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and
consultants retained by Lender shall have the right to act exclusively in the interest
of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or
other duty or obligation of any type or nature whatsoever to any of the Borrowers or
Affiliates thereof, or any other Person....................................................... 107
SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents
referred to herein embody the final, entire agreement among the parties hereto and
supersede any and all prior commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject matter hereof and may
not be contradicted or varied by evidence of prior, contemporaneous, or subsequent
oral agreements or discussions of the parties hereto. There are no oral agreements
among the parties to the Loan Documents....................................................... 107
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SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and Lender acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Loan Agreement and the other Loan Documents
with its legal counsel and that this Loan Agreement and the other Loan Documents shall
be construed as if jointly drafted by the Borrowers and Lender. If any term,
condition or provision of this Loan Agreement shall be inconsistent with any term,
condition or provision of any other Loan Document, then this Loan Agreement shall
control....................................................................................... 107
SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR
WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED AND IRREVOCABLY AGREES
THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS
FOR ITSELF AND IN CONNECTION WITH THE PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH
OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS
AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.................................. 108
SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER
PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES
AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT
FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE
TO THE SUBJECT MATTER OF THIS TRANSACTION,
xxx
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS
ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE
TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF
LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT......................................................................................... 108
SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any
amendments or supplements thereto may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all of which counterparts together shall
constitute but one and the same instrument. This Loan Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties hereto............ 109
SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a
Servicer and special servicer, and to change or replace any Servicer or special
servicer. Provided that the Borrowers have been notified of such Servicer's role, all
rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and
provided the Borrowers shall not be required to deal with more than one such servicing
entity at any time. Lender shall notify the Borrowers in writing as to the identity
of the Servicer and any special servicer...................................................... 109
SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrowers are
parties to this Loan Agreement only with regard to the representations, warranties,
and covenants specifically applicable to them................................................. 109
SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan
Agreement to the contrary, if for any reason whatsoever Lender suspects that any
conditions exist or may exist at any Property which might have a Material Adverse
Effect, Lender shall have the right, at the
xxxi
Borrowers' sole reasonable cost and expense, to cause such inspections and reports to be
prepared and performed with respect to any Property as Lender shall reasonably determine..........109
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LIST OF EXHIBITS AND SCHEDULES
Exhibit A - Properties
Exhibit B - Environmental Reports
Exhibit C - Franchise Agreements
Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E - Management Agreements
Exhibit F - [Reserved]
Exhibit G - Property Improvement Plans
Exhibit H - [Reserved]
Exhibit I - Acceptable Franchisors
Exhibit J - Property Condition Reports
Exhibit K - Zoning Reports
Exhibit L - Certificate re: Work Reserves
Schedule 1 - Borrowers
Schedule 2.4 - Scheduled Mortgage Principal Payments
Schedule 2.12(G) - Crossed Loans/Crossed Borrowers
Schedule 3.1(A) - List of Loan Documents
Schedule 4.1(C) - Organizational Chart for Borrower Parties
Schedule 4.2 - Consents
Schedule 4.5 - Condemnation Proceedings
Schedule 4.5(A) - Rights to Purchase/Rights of First Offer
Schedule 4.7(B) - Rent Roll
Schedule 4.7(E) - Franchise Defaults
Schedule 4.9 - Litigation
Schedule 4.14 ERISA Plans
Schedule 4.20 - Insurance
Schedule 4.28 - Collective Bargaining Agreements
Schedule 4.30 - Ground Leases
Schedule 5.14 - Material Agreements
Schedule 6.5 - Required Capital Improvements
Schedule 6.6 - Environmental Work/O&M Plans
Schedule 6.7 - Reserve Funding Conditions
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as
of June __, 2004 and entered into by and between the parties listed as Borrowers
on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a
"BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation
(together with its successors and assigns, "LENDER").
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrowers and Lender agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan
Agreement as so defined. Terms defined in the preamble and recitals to this Loan
Agreement are used in this Loan Agreement as so defined.
"ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the
franchisors identified on EXHIBIT I.
"ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate
of the Borrowers and, upon receipt of a Rating Confirmation, another reputable
hotel management company with at least five (5) years experience managing hotel
properties similar to the Properties and which at the time of its engagement is
managing at least 5,000 hotel rooms (exclusive of the Properties).
"ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest
in and to the Accounts, the Reserves, all monies and amounts which may from time
to time be on deposit therein, all monies, checks, notes, instruments,
documents, deposits, and credits from time to time in the possession of Lender
representing or evidencing such Accounts and Reserves and all earnings and
investments held therein and proceeds thereof.
"ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any
Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any
other accounts pledged to Lender pursuant to this Loan Agreement or any other
Loan Document.
"AFFILIATE" means in relation to any Person, any other Person: (i)
directly or indirectly controlling, controlled by, or under common control with,
the first Person; (ii) directly or indirectly owning or holding fifty percent
(50%) or more of any equity interest in the first Person; or (iii) fifty percent
(50%) or more of whose voting stock or other equity interest is directly or
indirectly owned or held by the first Person. In addition, the Affiliates of
each Borrower Party include, without limitation, all other Borrower Parties,
irrespective of whether they now or hereafter satisfy the foregoing criteria.
For purposes of this definition, "CONTROL" (including with correlative meanings,
the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Where expressions such
as "[name of party] or
any Affiliate" are used, the same shall refer to the named party and any
Affiliate of the named party. Further, the Affiliates of any Person that is an
entity shall include all natural persons who are officers, directors, managing
members, or general partners of the entity.
"AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the
Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT
D.
"AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of
determination, the aggregate outstanding principal balance of the Mezzanine Loan
and the Loan.
"ALLOCABLE PORTION" means 24.54%.
"ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each
Property as set forth on EXHIBIT D.
"APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers,
Deloitte & Touche or KPMG Peat Marwick or any successor entity.
"APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in
Section 6.7.
"APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section
6.7.
"APPROVED EXPENDITURES" has the meaning set forth in Section 6.7.
"ARCHITECT" has the meaning set forth in Section 5.5.
"ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and
Rents of even date herewith from each of the Borrowers to Lender, constituting
assignments of each Borrower's right, title and interest in the Leases and
proceeds therefrom for each of their respective Properties as Collateral for the
Loan, as same may be amended or modified from time to time.
"ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain
Conditional Assignments of Hotel Management Agreements of even date herewith
executed by each of the Borrowers and the applicable Manager, constituting an
assignment of each Management Agreement as Collateral for the Loan, as same may
be amended or modified from time to time.
"ASSUMPTION" has the meaning set forth in Section 11.3.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as amended
from time to time, and all rules and regulations promulgated thereunder.
"BEVERAGE COMPANY" means any Person (other than any of the Borrowers)
holding, or entitled to any proceeds from, any liquor license or other beverage
permit for the sale of alcoholic beverages at any Property.
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"BOARD OF MANAGERS" means the board of managers, or similar governing
entity, established for the governance of the condominium association
established pursuant to the terms of the Condominium Property Documents.
"BORROWER" and "BORROWERS" have the meanings set forth in the preamble;
provided that, following a Release, "BORROWERS" means each of the Borrowers
remaining as a party to the Loan Documents, and whose Properties remain
encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any
of such remaining parties.
"BORROWER PARTY" and "BORROWER PARTIES" means, individually or
collectively, the Borrowers, General Partner, Member and Guarantor.
"BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1.
"BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii)
any day which is a legal holiday under the laws of the State of New York, the
state or states where the servicing offices of the Servicer, and, if the Loan
becomes a "specially serviced mortgage loan" pursuant to the terms of any trust
and servicing agreement entered into in connection with any Securitization
backed in whole or in part by the Loan, the special servicer, are located or the
state in which the corporate trust office of the trustee in connection with any
such Securitization is located, and (iv) any day on which banking institutions
located in such state are generally not open for the conduct of regular
business.
"CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event,
the last day of each calendar quarter, and (y) during the continuance of a Cash
Trap Event, the last day of each calendar month.
"CAPEX/FF&E BUDGET" means the expenditures for Replacements and other
expenditures for FF&E and Capital Expenditures set forth in an annual budget
approved by Lender in writing (such approval not to be unreasonably withheld or
delayed as long as the budget is consistent with the form of the CapEx/FF&E
Budget provided to Lender prior to Closing), covering the planned FF&E
expenditures and Capital Expenditures for the period covered by such budget, as
same may be amended pursuant to Section 5.1(D) hereof.
"CAPITAL EXPENDITURES" means expenditures for Capital Improvements.
"CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations
(including any improvements, repairs or alterations required pursuant to a
Property Improvement Plan), FF&E and other capital items (whether paid in cash
or property or accrued as liabilities) made by the Borrowers that, in conformity
with GAAP, would not be included in the Borrowers' annual financial statements
as an Operating Expense of the Properties.
"CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5.
"CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even
date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank.
"CASH TRAP EVENT" has the meaning set forth in Section 6.8.
3
"CASH TRAP RESERVE" has the meaning set forth in Section 6.8.
"CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier
3 Hotel category.
"CLAIMS" has the meaning set forth in Section 5.3.
"CLOSING" means the funding of the Loan.
"CLOSING DATE" means the date on which the Closing occurs.
"COLLATERAL" means rights, interests, and property of every kind, real and
personal, tangible and intangible, which is granted, pledged, liened, or
encumbered as security for the Loan or any of the other Obligations under this
Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan
Documents, including without limitation the Properties and the Account
Collateral.
"COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (A) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; (B) with respect to any
letter of credit issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings; (C) under any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates; or (D) under any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect that Person against fluctuations in currency values. Contingent
Obligations shall include (i) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making (other than the Loan), discounting with recourse or sale with recourse
by such Person of the obligation of another, (ii) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, and (iii) any liability of such Person
for the obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another. The amount of any Contingent Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
and determined amount, the maximum amount so guaranteed.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject, other than the Loan Documents.
4
"CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1.
"CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set
forth in Section 7.1.
"CROSS GUARANTIES" shall mean (i) those certain Guaranties of the Loan,
each dated as of the date hereof, executed by each of the Crossed Borrowers, and
(ii) those certain Guaranties of each of the Crossed Loans, each dated as of the
date hereof, executed by each of the Borrowers.
"CROSS RELEASE NOTICE" has the meaning set forth in Section 2.12(G).
"CROSSED BORROWERS" shall mean the mortgage loan borrowers (other than the
Borrowers) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof,
subject to modification pursuant to Section 2.12(G) hereof.
"CROSSED INDEBTEDNESS" shall mean the Crossed Loans and all other
"Indebtedness" as defined in each Crossed Loan Agreement.
"CROSSED LOANS" shall mean each of the mortgage loans (other than the
Loan) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof with
respect to each Crossed Borrower, subject to modification pursuant to Section
2.12(G) hereof.
"CROSSED LOAN AGREEMENTS" shall mean those certain Loan Agreements, each
dated as of the date hereof, between Lender and the Crossed Borrowers for the
respective Crossed Loans, each as amended, modified, supplemented or restated
from time to time, subject to modification pursuant to Section 2.12(G) hereof.
"CROSSED LOAN DEFAULT" shall mean any "Event of Default" as defined in any
Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G)
hereof.
"CROSSED LOAN DOCUMENTS" shall mean the "Loan Documents" as defined in
each Crossed Loan Agreement for each Crossed Loan, including without limitation
the promissory note(s), Crossed Mortgages and Crossed Loan Agreement evidencing
and/or securing each Crossed Loan, and each of the Crossed Guaranties relating
to the respective Crossed Loans, subject to modification pursuant to Section
2.12(G) hereof.
"CROSSED MORTGAGES" shall mean each of the mortgages, deeds of trust and
deeds to secure debt, each dated as of the date hereof, from each Crossed
Borrower to Lender, constituting a Lien on such Crossed Borrower's Crossed
Property as security for the respective Crossed Loans, each as amended,
modified, supplemented or restated from time to time, subject to modification
pursuant to Section 2.12(G) hereof.
"CROSSED PROPERTIES" shall mean the properties securing each Crossed Loan,
as described in the respective Crossed Loan Agreement, subject to modification
pursuant to Section 2.12(G) hereof.
"D&O INSURANCE" has the meaning set forth in Section 5.4.
5
"DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of
determination, Net Cash Flow for the trailing twelve (12) month period divided
by the amount of interest that will be required to be paid over the succeeding
twelve (12) months on the Loan and the Allocable Portion of the Mezzanine Loan,
plus principal amortization of the Loan and the Allocable Portion of the
Mezzanine Loan that would be required in respect of the then outstanding
principal amount of the Loan and the Allocable Portion of the Mezzanine Loan
over the succeeding twelve (12) months based on a twenty-five (25) year
amortization schedule, calculated using the Interest Rate for the Loan and the
actual interest rate on the Mezzanine Loan.
"DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1.
"DEBT YIELD" means, at any time of determination, Net Cash Flow for the
trailing twelve (12) month period divided by the then outstanding principal
balance of the Loan and the Allocable Portion of the Mezzanine Loan.
"DEFAULT" means any breach or default under any of the Loan Documents,
whether or not the same is an Event of Default, and also any condition or event
that, after notice or lapse of time or both, would constitute an Event of
Default if that condition or event were not cured or removed within any
applicable grace or cure period.
"DEFAULT RATE" has the meaning set forth in Section 2.2.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1.
"DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1.
"DEPOSIT BANK" has the meaning set forth in Section 7.1.
"DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3.
"DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by
Moody's or A-1 or better by S&P or similarly rated by any successor to either of
such rating services, (b) obligations of the United States government or any
agency thereof which are backed by the full faith and credit of the United
States, or (c) deposits, including certificates of deposit, in any commercial
bank or trust company (i) which is registered to do business in any state of the
United States, (ii) which has capital and surplus in excess of $100,000,000 and
(iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or
better by Moody's or is similarly rated by any successor thereof, provided that
each such item of commercial paper, each such obligation, and each such time
deposit has a maturity date not later than thirty days after the date of
purchase thereof.
"DOLLARS" and the sign "$" mean the lawful money of the United States of
America.
"ELIGIBLE ACCOUNT" means a separate and identifiable account from all
other funds held by the holding institution, which account is either (i) an
account maintained with an Eligible Bank or (ii) a segregated trust account
maintained by a corporate trust department of a federal depository institution
or a state chartered depository institution subject to regulations regarding
6
fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations Section 9.10(b), which, in either case, has corporate trust powers
and is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.
"ELIGIBLE BANK" means a bank that satisfies the Rating Criteria.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is
maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii)
which has at any time within the preceding six (6) years been maintained for the
employees of any of the Borrowers or any current or former ERISA Affiliate or
(iii) for which any of the Borrowers or any ERISA Affiliate has any liability,
including contingent liability.
"ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date
herewith from the Borrowers and Guarantor to Lender, as same may be amended or
modified from time to time.
"ENVIRONMENTAL LAWS" means all present and future local, state, federal or
other governmental authority, statutes, ordinances, codes, orders, decrees,
laws, rules or regulations pertaining to or imposing liability or standards of
conduct concerning environmental regulation (including, without limitation,
regulations concerning health and safety), contamination or clean-up or the
handling, generation, release or storage of Hazardous Material affecting the
Properties including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know
Act of 1986, as amended, the Hazardous Substances Transportation Act, as
amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as
amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as
amended, the Safe Drinking Water Act, as amended, the Occupational Safety and
Health Act, as amended, any state superlien and environmental clean-up statutes
and all regulations adopted in respect of the foregoing laws whether now or
hereafter in effect.
"ENVIRONMENTAL REPORTS" means those certain environmental reports and
audits for the Properties as described on EXHIBIT B.
"ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6.
"EO13224" has the meaning set forth in Section 4.31.
"ERISA" means the Employee Retirement Income Security Act of 1974, and all
rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means, in relation to any Person, any other Person under
common control with the first Person, within the meaning of Section 4001(a)(14)
of ERISA.
"EURODOLLAR BUSINESS DAY" means any day on which banks in the City of
London, England are generally open for interbank or foreign exchange
transactions and which is also a Business Day.
7
"EVENT OF DEFAULT" has the meaning set forth in Section 8.1.
"EXCESS CASH FLOW" has the meaning set forth in the Cash Management
Agreement.
"EXCESS INTEREST" has the meaning set forth in Section 2.2.
"EXCLUDED BORROWER" has the meaning set forth in Section 2.12(G) hereof.
"EXCLUDED GUARANTIES" has the meaning set forth in Section 2.12(G) hereof.
"EXCLUDED LOAN" has the meaning set forth in Section 2.12(G) hereof.
"EXCLUDED LOAN AGREEMENT" has the meaning set forth in Section 2.12(G)
hereof.
"EXCLUDED LOAN DOCUMENTS" has the meaning set forth in Section 2.12(G)
hereof.
"EXCLUDED PROPERTY" has the meaning set forth in Section 2.12(G) hereof.
"EXCULPATED PARTIES" has the meaning set forth in Section 12.2.
"EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash
Management Agreement.
"FF&E" means all machinery, furniture, furnishings, equipment, fixtures
(including, without limitation, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures), inventory and articles of
personal property and accessions, renewals and replacements thereof and
substitutions therefor (including, without limitation, beds, bureaus,
chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs,
carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings,
pictures, divans, couches, luggage carts, luggage racks, stools, sofas,
chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry
cleaning facilities, dining room wagons, tools, keys or other entry systems,
bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock
radios, television sets, intercom and paging equipment, electric and electronic
equipment, dictating equipment, private telephone systems, medical equipment,
potted plants, heating, lighting and plumbing fixtures, fire prevention and
extinguishing apparatus, cooling and air-conditioning systems, elevators,
escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry
machines, tools, machinery, engines, dynamos, motors, boilers, incinerators,
switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning,
waxing and polishing equipment, call systems, brackets, electrical signs, bulbs,
bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment,
dishwashers, garbage disposals, washer and dryers), other customary hotel
equipment and other tangible property of every kind and nature whatsoever owned
by the Borrowers, or in which the Borrowers have or shall have an interest, now
or hereafter located at the Properties, or appurtenant thereto, and useable in
connection with the present or future operation and occupancy of the Properties
and all building equipment, material and supplies of any nature whatsoever owned
by the Borrowers, or in which the Borrowers have or shall have an interest, now
or hereafter located at the Properties, or appurtenant thereto, and useable in
connection with the present or future operation, enjoyment and occupancy of the
Properties.
8
"FF&E RESERVE" means the reserve established pursuant to Section 6.4.
"FINANCIAL STATEMENTS" means statements of operations and retained
earnings, statements of cash flow and balance sheets.
"FINANCING STATEMENTS" means the Uniform Commercial Code Financing
Statements naming the applicable Borrower Parties as debtor, and Lender as
secured party, required under applicable state law to perfect the security
interests created hereunder or under the other Loan Documents.
"FITCH" means Fitch, Inc.
"FORCE MAJEURE" means acts of god, governmental restrictions, stays,
judgments, orders, decrees, enemy actions, civil commotion, fire, casualty,
strikes or work stoppages which are industry-wide and not aimed at the Borrowers
or their Affiliates, or other causes beyond the reasonable control of the
Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of
itself shall not be deemed a cause beyond the control of the Borrowers.
"FRANCHISE AGREEMENTS" means, collectively, those certain agreements
described in EXHIBIT C and any replacement franchise agreement which may
hereafter be entered into in accordance with the terms and conditions hereof by
any of the Borrowers, as franchisee, pursuant to which the Borrowers have the
right to operate the Properties under names and hotel systems controlled by the
Franchisor.
"FRANCHISOR" means the current hotel franchisor or licensor with respect
to each Property or any other successor franchisor or licensor permitted
pursuant to Section 5.13.
"FRANCHISOR LETTER" means, with respect to each Property, a comfort
letter(s), and/or similar instrument(s) from the related Franchisor to Lender
acknowledging the Loan and providing certain assurances, reasonably satisfactory
to Lender, with respect thereto.
"FUNDING LOSSES" has the meaning set forth in Section 2.10.
"FUNDING PARTY" means any bank or other entity, if any, which is
indirectly or directly funding Lender with respect to the Loan, in whole or in
part, including, without limitation, any direct or indirect assignee of, or
participant in, the Loan.
"GAAP" means generally accepted accounting principles as set forth in
Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting
Fairly in Conformity with Generally Accepted Accounting Principles in the
Independent Auditor's Report" issued by the Auditing Standards Board of the
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board to the extent such principles are
applicable to the facts and circumstances as of the date of determination.
"GENERAL PARTNER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which
is now or hereafter becomes a general partner of any of the Borrowers under such
Borrower's limited partnership agreement.
9
"GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or
state government or other political subdivision thereof and any entity,
including any regulatory or administrative authority or court, exercising
executive, legislative, judicial, regulatory or administrative or
quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal in each case having jurisdiction over such
applicable Person or such Person's property, and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.
"GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30.
"GROUND LEASED PROPERTIES" means the Properties subject to the Ground
Leases described on SCHEDULE 4.30 attached hereto.
"GROUND LEASES" means the ground leases described on SCHEDULE 4.30
attached hereto.
"GROUND LESSORS" means the lessors under the Ground Leases described on
SCHEDULE 4.30 attached hereto.
"GUARANTOR" means Lodgian, Inc., a Delaware corporation.
"GUARANTY" means the Guaranty of Recourse Obligations and the
Environmental Indemnity.
"GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse
Obligations of even date herewith from Guarantor to Lender, as same may be
amended or modified from time to time.
"HAZARDOUS MATERIAL" means all or any of the following: (A) substances,
materials, compounds, wastes, products, emissions and vapors that are defined or
listed in, regulated by, or otherwise classified pursuant to, any applicable
Environmental Laws, including any so defined, listed, regulated or classified as
"hazardous substances", "hazardous materials", "hazardous wastes", "toxic
substances", "pollutants", "contaminants", or any other formulation intended to
regulate, define, list or classify substances by reason of deleterious, harmful
or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (C)
any flammable substances or explosives or any radioactive materials; (D)
asbestos in any form; (E) electrical or hydraulic equipment which contains any
oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G)
mold; or (H) urea formaldehyde, provided, however, such definition shall not
include cleaning materials and other substances commonly used in the ordinary
course of the Borrowers' business, which materials exist only in reasonable
quantities and are stored, contained, transported, used, released, and disposed
of in accordance with all applicable Environmental Laws.
"HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established
pursuant to Section 6.6.
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"IMPOSITIONS" means (i) all real estate and personal property taxes, and
vault charges and all other taxes, levies, assessments and other similar
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, of every kind and nature whatsoever (including any payments in lieu
of taxes), which at any time prior to, at or after the execution hereof may be
assessed, levied or imposed by, in each case, a governmental authority upon any
of the Properties or the rents relating thereto or upon the ownership, use,
occupancy or enjoyment thereof, and any interest, cost or penalties imposed by
such governmental authority with respect to any of the foregoing and (ii) all
rent and other amounts payable by the Borrowers under each of the Ground Leases
and under the Condominium Property Documents. Impositions shall not include (x)
any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or
guests occupying any portions of the Properties, or (z) taxes or other charges
payable by any Manager or Franchisor unless such taxes are being paid on behalf
of the Borrowers.
"IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant
to Section 6.3.
"IMPROVEMENTS" means all buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
of every kind and nature now or hereafter located on the Properties.
"INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without
duplication: (i) all indebtedness of such Person for borrowed money, for amounts
drawn under a letter of credit, or for the deferred purchase price of property
for which such Person or its assets is liable, (ii) all unfunded amounts under a
loan agreement, letter of credit (unless secured in full by Dollars), or other
credit facility for which such Person would be liable if such amounts were
advanced thereunder, (iii) all amounts required to be paid by such Person as a
guaranteed payment to partners or a preferred or special dividend, including any
mandatory redemption of shares or interests but not any preferred return or
special dividend paid solely from, and to the extent of, excess cash flow after
the payment of all operating expenses, capital improvements and debt service on
all Indebtedness, (iv) all obligations under leases that constitute capital
leases for which such Person is liable, and (v) all obligations of such Person
under interest rate swaps, caps, floors, collars and other interest hedge
agreements, in each case whether such Person is liable contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations such Person otherwise assures a creditor against loss.
"INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2.
"INDEMNITEES" has the meaning set forth in Section 14.2.
"INDEPENDENT DIRECTOR" means an individual who shall not have been at the
time of such individual's appointment or at any time while serving as a director
of General Partner, Member, any of the Borrowers or any of their respective
Affiliates, and may not have been at any time during the preceding five years
(i) a stockholder, director (other than as an independent director/member),
officer, employee, partner, attorney or counsel of General Partner, Member,
Guarantor, any of the Borrowers or any Affiliate of any of them (except that
such individual may be an independent director of any other Affiliate of the
foregoing), (ii) a customer, supplier or other Person who derives any of its
purchases or revenues from its activities with General
11
Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them
(other than a company that provides professional independent directors and which
also may provide other ancillary corporate, partnership, company or trust
services to the Borrowers, Member, General Partner or their Affiliates in the
ordinary course of business (for example, The Corporation Trust Company)), (iii)
a Person or other entity controlling or under common control with any such
stockholder, partner, customer, supplier or other Person, or (iv) a member of
the immediate family of any such stockholder, director, officer, employee,
partner, customer, supplier or other Person. As used in this definition, the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management, policies or activities of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"INITIAL TERM" means the period from the Closing Date to the Scheduled
Maturity Date.
"INSURANCE POLICIES" has the meaning set forth in Section 5.4.
"INSURANCE PREMIUMS" means the annual insurance premiums for the insurance
policies required to be maintained by the Borrowers with respect to the
Properties under Section 5.4.
"INTERESTED PARTIES" has the meaning set forth in Section 10.3.
"INTEREST RATE" has the meaning set forth in Section 2.2.
"INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section
5.22.
"IRC" means the Internal Revenue Code of 1986, and any rule or regulation
promulgated thereunder from time to time, in each case as amended from time to
time.
"IRS" means the Internal Revenue Service or any successor thereto.
"KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents,
or in any document or certificate executed on behalf of any Borrower Party
pursuant to this Loan Agreement or any of the Loan Documents, reference is made
to the knowledge of the Borrowers or any other Borrower Party (whether by use of
the words "knowledge" or "known", or other words of similar meaning, and whether
or not the same are capitalized), such shall be deemed to refer to the knowledge
(without independent investigation or inquiry unless otherwise specified) of (i)
the individuals who have significant responsibility for any policy making, major
decisions or financial affairs of the applicable entity; (ii) the general
manager for the applicable Property; (iii) the regional vice president of
operations for Guarantor, the president of each Borrower and Member, with
respect to operational issues of any Property or any of the Borrowers; (iv) the
chief operating officer of Guarantor, with respect to representations regarding
Guarantor; and (v) the person signing such document or certificate.
"LEASE" means any lease, tenancy, license, assignment and/or other rental
or occupancy agreement or other agreement or arrangement (including, without
limitation, any and all guaranties of any of the foregoing) heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of, or the
conduct of any activity upon or in, the Properties or any portion thereof,
including any extensions, renewals, modifications or amendments thereof.
12
"LENDER" is defined in the preamble.
"LENDER'S CONSULTANT" has the meaning set forth in Section 6.7
"LETTER OF CREDIT" means an irrevocable, unconditional, transferable,
clean sight draft letter of credit (either an evergreen letter of credit or one
which does not expire until at least thirty (30) days after the Maturity Date
(the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw
thereon in New York, New York based solely on a statement executed by an officer
or authorized signatory of Lender, in form and substance reasonably acceptable
to Lender and issued by an Eligible Bank. If at any time (a) the institution
issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if
the Letter of Credit is due to expire prior to the LC Expiration Date, Lender
shall have the right immediately to draw down the same in full and hold the
proceeds thereof in accordance with the provisions of this Loan Agreement,
unless the Borrowers shall deliver a replacement Letter of Credit from an
Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers
written notice to the Borrowers that the institution issuing the Letter of
Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty
(20) days prior to the expiration date of said Letter of Credit.
"LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"LOAN" has the meaning set forth in Section 2.1.
"LOAN AGREEMENT" means this Loan and Security Agreement, as same may be
amended, modified or restated from time to time (including all schedules,
exhibits, annexes and appendices hereto).
"LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the
Assignments of Leases, the Assignments of Management Agreements, the Guaranty,
the Financing Statements, the Cash Management Agreement and any and all other
documents and agreements from any of the Borrowers, General Partner, Member,
Guarantor or Manager and accepted by Lender for the purposes of evidencing
and/or securing the Loan, excluding the Mezzanine Loan Documents.
"LOAN YEAR" means the twelve (12) month period commencing on July 1st of
any calendar year during the term of the Loan and ending on June 30th of the
following calendar year - provided that the first Loan Year shall commence on
the Closing Date and end on June 30, 2005.
"LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1.
"MANAGEMENT AGREEMENTS" means those certain Management Agreements
described in EXHIBIT E, between each Borrower and the applicable Manager
described therein, and any management agreement which may hereafter be entered
into in accordance with the terms and conditions hereof, pursuant to which any
subsequent Manager may hereafter manage one or more of the Properties.
13
"MANAGEMENT FEE" means the fees earned by all Managers pursuant to the
terms of the Management Agreements.
"MANAGERS" means the managers described in EXHIBIT E or an Acceptable
Manager as may hereafter be charged with management of one or more of the
Properties approved by Lender in accordance with the terms and conditions
hereof.
"MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable
discretion, (A) a material adverse effect (which may include economic or
political events) upon the business, operations, properties, assets or condition
(financial or otherwise) of any of the Borrowers or Guarantor, or (B) the
impairment of the ability of any of the Borrowers or Guarantor to perform its
obligations under any Loan Documents, or (C) the impairment of the ability of
Lender to enforce or collect any of the Obligations as such Obligations become
due. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then occurring events and existing
conditions would result in a Material Adverse Effect.
"MATERIAL AGREEMENT" means any contract or agreement relating to the
ownership, management, development, use, operation, leasing, maintenance, repair
or improvement of the Properties under which there is an obligation of the
Borrowers, in the aggregate, to pay, or under which any of the Borrowers
receives in compensation, more than $500,000 per annum, other than (i) the
Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement
under which (x) there is an obligation of the Borrowers, in the aggregate, to
pay, or under which any of the Borrowers (or all the Borrowers in the aggregate)
receives in compensation, not more than $1,000,000 per annum and (y) which is
terminable by the Borrowers on not more than sixty (60) days prior written
notice without any fee or penalty.
"MATERIAL ALTERATION" means any improvement or alteration to a Property
(other than decorative work such as painting, wallpapering and carpeting), the
cost of which exceeds the greater of (x) five percent (5%) of the Aggregate
Allocated Loan Amount with respect to the applicable Property or (y) $250,000,
and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget
then in effect, or as approved Work under Section 6.7 hereof.
"MATERIAL LEASE" means any Lease of space in a Property which (i) is with
an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other
payments in an amount equal to or greater than $100,000, or has a term
(including all extensions and renewals which are unilaterally exercisable by the
tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by
either party thereto on thirty (30) days' notice without payment of a
termination fee, penalty or other cancellation fee, (iii) demises in excess of
2000 square feet of space, or (iv) obligates the Borrowers to make any
improvements to the Properties either directly or through cash allowances
(including, without limitation, free rent, tenant improvement allowances, or
landlord's construction work) to the applicable tenant in excess of $25,000. For
purposes of this definition only, in determining the square footage demised
under any Lease, all space in the applicable Property which may in the future be
demised to the tenant under such Lease by reason of such tenant exercising any
right or option contained in such Lease shall be included in the calculation of
the square footage demised under such Lease.
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"MATURITY DATE" means July 1, 2009, or such other date on which the final
payment of principal of the Note becomes due and payable as herein provided,
whether at such stated maturity date, by acceleration, or otherwise.
"MAXIMUM RATE" has the meaning set forth in Section 2.2.
"MEMBER" means, individually or collectively, those parties identified on
SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the
Borrowers which are limited liability companies) and any other entity which is
now or hereafter becomes the managing or sole member of any of the Borrowers
under such Borrower's limited liability company operating agreement.
"MERRILL LYNCH" has the meaning set forth in Section 10.3.
"MEZZANINE BORROWER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "Mezzanine Borrower".
"MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its
successors and assigns.
"MEZZANINE LOAN" means that certain loan being made on the date hereof
from Mezzanine Lender to Mezzanine Borrower.
"MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the
Mezzanine Loan, as same may be amended, modified or restated from time to time.
"MINIMUM DEBT YIELD" means (i) during the first (1st) Loan Year, 9%, (ii)
during the second (2nd) Loan Year, 10%, (iii) during the third (3rd) Loan Year,
11%, (iv) during the fourth (4th) Loan Year, 12%, and (v) during the fifth (5th)
Loan Year, 13%.
"MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4.
"MOODY'S" means Moody's Investors Service.
"MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments
of Leases and Security Agreements, (ii) those certain Deeds of Trust,
Assignments of Leases and Security Agreements, and (iii) those certain Deeds to
Secure Debt, Assignment of Leases and Security Agreements, each of even date
herewith, from each Borrower to Lender (or deed trustee on behalf of Lender, as
applicable), constituting a Lien on such Borrower's respective Property as
Collateral for the Loan as same may be modified or amended from time to time.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any
Affiliate is making, or is accruing an obligation to make, contributions or has
made, or been obligated to make, contributions within the preceding six (6)
years, or for which any of the Borrowers or any Affiliate has any liability,
including contingent liability.
15
"NET CASH FLOW" means Net Operating Income for any period less (i) a base
management fee equal to the greater of (A) the actual base management fee for
such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve
for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due
to all Franchisors for such period.
"NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which
Operating Revenues exceed Operating Expenses (excluding Management Fees,
interest, income taxes, depreciation, amortization, FF&E reserves, and fees due
to all Franchisors for such period).
"NOTE" has the meaning set forth in Section 2.1.
"OBLIGATIONS" means the Loan and all obligations, liabilities and
indebtedness of every nature to be paid or performed by the Borrowers under the
Loan Documents, including the principal amount of the Loan, interest accrued
thereon and all fees, costs and expenses, and other sums now or hereafter owing,
due or payable and whether before or after the filing of a proceeding under the
Bankruptcy Code by or against any of the Borrowers, and the performance of all
other terms, conditions and covenants under the Loan Documents.
"OFAC" has the meaning set forth in Section 4.31.
"O&M PLANS" has the meaning set forth in Section 5.7.
"OPERATING BUDGET" means, collectively, for any period, the Borrowers'
budgets setting forth the Borrowers' best estimate, after due consideration, of
all Operating Revenues and Operating Expenses and any other revenues, costs and
expenses for each of the Properties for such period, which budgets have been
approved by Lender in accordance herewith, as same may be amended pursuant to
Section 5.1(D) hereof.
"OPERATING EXPENSES" means, for any period, without duplication, all costs
and expenses of operating, maintaining and managing the Properties determined in
accordance with GAAP, including, without limitation, Impositions (due and
payable during the applicable period of determination), Insurance Premiums,
repair and maintenance costs, Management Fees and costs, fees payable to all
Franchisors, utilities, accounting, legal and other professional fees, fees
relating to environmental and financial audits, wages, salaries, payroll taxes
and benefits, business franchise taxes, tips and gratuities paid to employees
and staff and other personnel expenses, costs and expenses related to operating
and maintaining all guest rooms, restaurants (including inventory and supplies),
retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking
and recreational facilities, and all other "costs and expenses" as defined in
the Uniform System; but excluding principal and interest payments on the Loan,
fees and expenses of a non-operating nature and fees and expenses due and
payable to or for the benefit of Lender under this Loan Agreement or any of the
other Loan Documents (including, without limitation, all loan servicing fees and
expenses, and expenses related to a Cap), expenses which, in accordance with
GAAP, should be capitalized, any expense paid by a tenant that would otherwise
be an Operating Expense, capital expenditures, tenant improvement allowances and
leasing commissions, if any, asset management fees, any payment or expense for
which each Borrower was or is to be reimbursed from proceeds of the Loan or
insurance or by any third
16
party, any fees or expenses paid to any partner or member of the Borrowers for
services provided to any of the Borrowers and any non-cash charges such as
depreciation and amortization. Operating Expenses shall not include federal,
state or local income taxes or legal and other professional fees unrelated to
the operation of the Properties.
"OPERATING REVENUES" means, without duplication, all revenues and receipts
of the Borrowers from operation of the Properties or otherwise arising in
respect of the Properties which are properly allocable to the Properties for the
applicable period in accordance with GAAP, including, without limitation, all
hotel receipts, revenues and credit card receipts collected from guest rooms,
restaurants and bars (including without limitation, service charges for
employees and staff), mini-bars, meeting rooms, banquet rooms, apartments,
parking and recreational facilities, health club membership fees, food and
beverage wholesale and retail sales, service charges, convention services,
special events, audio-visual services, boat cruises, travel agency fees,
internet booking fees, telephone charges, laundry services, vending machines and
otherwise, all rents, revenues and receipts now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant of
the right of the possession, use or occupancy of all or any portion of the
Properties or personalty located thereon, or rendering of service by any of the
Borrowers or any operator or manager of the hotel or commercial space
(including, without limitation, from the rental of any office space, retail
space, guest rooms or other space, halls, stores and deposits securing
reservations of such space (only to the extent such deposits are not required to
be returned or refunded to the depositor)), proceeds from rental or business
interruption insurance relating to business interruption or loss of income for
the period in question and any other items of revenue which would be included in
operating revenues under the Uniform System; but excluding proceeds from the
sale of FF&E, abatements, reductions or refunds of real estate or personal
property taxes relating to the Properties, dividends on insurance policies
relating to the Properties, condemnation proceeds arising from a temporary
taking of all or a part of any Properties, security and other deposits until
they are forfeited by the depositor, advance rentals until they are earned,
proceeds from a sale, financing or other disposition of the Properties or any
part thereof or interest therein and other non-recurring revenues as determined
by Lender, insurance proceeds (other than proceeds from rental or business
interruption insurance), other condemnation proceeds, capital contributions or
loans to any of the Borrowers, disbursements to any of the Borrowers from the
Reserves, sales, use and occupancy taxes collected from customers or patrons of
the Properties to be remitted to the applicable taxing authorities, and
gratuities or service charges collected on behalf of and remitted to employees
or contractors of the Properties.
"OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1.
"PAYMENT DATE" means the first day of each calendar month occurring during
the term of the Loan (or if such day is not a Business Day, the immediately
succeeding Business Day).
"PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3.
"PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the
other Liens of the Loan Documents in favor of Lender, (ii) the items shown in
Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not
yet due and payable or Liens arising after the date hereof which are being
contested in good faith by appropriate proceedings promptly
17
instituted and diligently conducted in accordance with Section 5.3(B) hereof;
(iv) in the case of Liens arising after the date hereof, statutory Liens of
carriers, warehousemen, mechanics, materialmen and other similar Liens arising
by operation of law, which are incurred in the ordinary course of business and
discharged by the Borrowers by payment, bonding or otherwise within forty-five
(45) days after the filing thereof or which are being contested in good faith in
accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and
customary purchase money financing of personal property and equipment leasing to
the extent the same are created in the ordinary course of business in accordance
with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and
other similar charges or non-monetary encumbrances against real property which
do not materially adversely affect (A) the ability of the Borrowers to pay any
of their obligations to any Person as and when due, (B) the marketability of
title to the Properties, (C) the fair market value of the Properties, or (D) the
use or operation of the Properties as of the Closing Date and thereafter; (vii)
rights of existing and future tenants, as tenants only, pursuant to the Leases;
(viii) any other Lien to which Lender may expressly consent in writing; and (ix)
Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender.
"PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17.
"PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management
Agreement.
"PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in
Section 11.2.
"PERMITTED TRANSFEREE" means any Person (provided such Person satisfies
the requirements of Article IX hereof) controlled by, and more than 51% of which
is owned by, one of the following:
(i) a pension fund, pension trust or pension account that (a) has total
real estate assets of at least $2.5 Billion and (b) is managed by a Person who
controls real estate equity assets (not including the Properties) having a fair
market value of at least $1.25 Billion; or
(ii) a pension fund advisor who (a) immediately prior to such transfer,
controls at least $1 Billion of real estate equity assets and (b) is acting on
behalf of one or more pension funds that, in the aggregate, satisfy the
requirements of clause (i) of this definition; or
(iii) an insurance company which is subject to supervision by the
insurance commissioner, or a similar official or agency, of a state or territory
of the United States (including the District of Columbia) (a) with a net worth,
as of the date immediately prior to the date of the transfer, of at least $1
Billion and (b) who, immediately prior to such transfer, controls real estate
equity assets (not including the Properties) having a fair market value of at
least $2.5 Billion; or
(iv) a corporation organized under the banking laws of the United States
or any state or territory of the United States (including the District of
Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b)
who, immediately prior to such transfer, controls real estate equity assets (not
including the Properties) having a fair market value of at least $5 Billion; or
18
(v) any other Person (a) with a long-term unsecured debt rating from the
Rating Agencies of at least investment grade and (b) that owns or operates at
least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior
to the date of such transfer, of at least $750 Million and (iii) immediately
prior to such transfer, controls real estate equity assets (not including the
Properties) having a fair market value of at least $1.5 Billion.
"PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental Person, the successor functional equivalent of such Person).
"PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5.
"PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6.
"PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General
Partner and Member.
"PROHIBITED PERSON" has the meaning set forth in Section 4.31.
"PROPERTIES" and "PROPERTY" means, collectively or individually, the
properties (including land and Improvements) described in EXHIBIT A, together
with all Improvements now or hereafter located thereon and all related
facilities, amenities and FF&E owned by the Borrowers and which shall be
encumbered by and are more particularly described in the respective Mortgages:
provided that, following a Release, "PROPERTIES" means each of the Properties
that remain encumbered by the Mortgages as Collateral for the Loan.
"PROPERTY CONDITION REPORT" means those certain property condition reports
for the Properties as described on EXHIBIT J.
"PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property
improvement plans for the Properties described on EXHIBIT G and any future
Property Improvement Plans required to be implemented by the applicable
Franchisor.
"PROPERTY RELEASE" has the meaning set forth in Section 11.4.
"RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and
Fitch or any other nationally-recognized statistical rating organization
designated by Lender in its sole discretion, and, after a Securitization, each
Rating Agency which has rated the Securities that are the subject of the
Securitization.
"RATING CONFIRMATION" with respect to the transaction or matter in
question, means: (i) if all or any portion of the Loan, by itself or together
with other loans, has been the subject of a Securitization, then each applicable
Rating Agency shall have confirmed in writing that such transaction or matter
shall not result in a downgrade, qualification, or withdrawal of any rating then
in effect for any certificate or other securities issued in connection with such
Securitization;
19
and (ii) if all of the Loan has not been the subject of a Securitization, then
Lender shall have determined in its reasonable discretion (taking into
consideration such factors as Lender may in good faith determine, including the
attributes of the loan pool in which the Loan might reasonably be expected to be
securitized) that no rating for any certificate or other securities that would
be issued in connection with a Securitization of such portion of the Loan will
be downgraded, qualified, or withheld by reason of such transaction or matter.
"RATING CRITERIA" with respect to any Person, means that (i) the
short-term unsecured debt obligations of such Person are rated at least "A-1" by
S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person
for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.
"RECEIPTS" means all revenues, receipts and other payments of every kind
arising from ownership or operation of the Properties, including without
limitation, all warrants, stock options, or equity interests in any tenant,
licensee or other Person occupying space at, or providing services related to or
for the benefit of, the Properties received by the Borrowers or any Related
Person of the Borrowers in lieu of rent or other payment.
"RELATED PERSON" means any Person in which any of the Borrowers or the
Guarantor holds greater than a ten percent (10%) equity interest.
"RELEASE" has the meaning set forth in Section 11.4.
"RELEASE DATE" has the meaning set forth in Section 11.4.
"RELEASE PRICE" means an amount equal to one hundred twenty-five percent
(125%) of the Allocated Loan Amount of the applicable Property.
"RENT ROLL" has the meaning set forth in Section 3.1.
"RENTS" has the meaning set forth in the Mortgages.
"REPLACEMENTS" has the meaning set forth in Section 6.4.
"REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5.
"RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1.
"RESERVES" means the reserves held by or on behalf of Lender pursuant to
this Loan Agreement or the other Loan Document, including without limitation,
the reserves established pursuant to Article VI.
"RESTORATION" has the meaning set forth in Section 5.5.
20
"RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five
percent (5%) of the Aggregate Allocated Loan amount of the applicable Property,
not to exceed $500,000, per Property per occurrence.
"REVPAR" means average room revenues per available room per day.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of
principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto;
which payment amounts were calculated based upon a twenty-five (25) year
amortization schedule at the Interest Rate. In the event that the amount of
principal prepayments on the Loan from application of casualty insurance
proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in
the aggregate, from the Closing Date or from the date of the last
re-amortization of the Loan under this sentence, Lender shall recalculate the
Scheduled Mortgage Principal Payments based upon the then remaining principal
amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE
2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto
in its entirety.
"SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1.
"SECURITIES" (whether or not capitalized) means any stock, shares, voting
trust certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"SECURITIZATION" means a rated offering of securities representing direct
or indirect interests in the Loan or the right to receive income therefrom.
"SERVICER" means a servicer selected by Lender from time to time in its
sole discretion to service the Loan.
"SERVICING FEE" has the meaning set forth in Section 2.11.
"SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the
date of formation of the applicable Person in its respective jurisdiction of
formation.
"SUB-ACCOUNTS" has the meaning set forth in Section 7.1.
"SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the
budgeted income and expenses and the actual income and expenses for the prior
calendar year or corresponding calendar quarter for such prior year, (ii) a
calculation of the average daily rate, RevPAR and average occupancy statistics
for the Properties for the applicable period, (iii) a calculation of the Debt
Service Coverage Ratio and the Debt Yield for the applicable period (which shall
not be
21
binding on Lender), and (iv) such other financial reports as the subject entity
shall routinely and regularly prepare.
"SURVEY" has the meaning set forth in Section 3.1.
"TAX LIABILITIES" has the meaning set forth in Section 2.9.
"TIER 1 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, as
applicable, identified in the "Tier 1" category on EXHIBIT I.
"TIER 2 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 2" category on EXHIBIT I.
"TIER 3 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 3" category on EXHIBIT I.
"TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart
Title Insurance Company, as co-insurers, and/or such other national title
insurance company as may be acceptable to Lender.
"TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title
insurance pertaining to the Mortgages issued by the Title Companies to Lender in
connection with the Closing.
"TRANSFER" has the meaning set forth in Section 11.2.
"TRANSFEREE BORROWER" has the meaning set forth in Section 11.3.
"UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary
termination of any Franchise Agreement, (y) the failure to pay to any Franchisor
any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT")
and the continuance thereof beyond any applicable notice and grace period under
such Franchise Agreement or the occurrence of one or more breaches or defaults
(other than Franchise Payment Defaults) and the continuance thereof beyond all
applicable notice and grace periods, if any, under such Franchise Agreements (or
such other cure periods as may be provided by the applicable Franchisors in
writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or
more of the outstanding principal balance of the Loan; provided, however, no
Uncured Franchise Default shall be deemed to have occurred under clause (x)
above with respect to any Property following the voluntary or involuntary
termination of the applicable Franchise Agreement if (a) within ten (10)
Business Days of the termination of such Franchise Agreement (and at the time of
delivery of each report pursuant to Section 5.1(A)(v)), the applicable Borrower
delivers to Lender evidence reasonably satisfactory to Lender that such Borrower
is diligently pursuing efforts to enter into a new Franchise Agreement with an
Acceptable Franchisor for the applicable Property and such Borrower shall
thereafter diligently and continuously pursue such efforts to enter into a new
Franchise Agreement, (b) at the time of such termination no other Property shall
be in
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operation without being subject to a Franchise Agreement, (c) the Allocated Loan
Amount of the Property covered by such Franchise Agreement is not more than five
percent (5%) of the outstanding principal balance of the Loan or such Property
shall not be in operation for more than five (5) consecutive days without being
subject to a Franchise Agreement, and (d) no Property shall be without a
Franchise Agreement in place for a period in excess of six (6) months from the
termination of the applicable Franchise Agreement.
"UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging
Industry promulgated by the American Hotel and Motel Association, as in effect
from time to time.
"WAIVING PARTY" has the meaning set forth in Section 13.1.
"WORK" has the meaning set forth in Section 6.7.
"WORK RESERVES" has the meaning set forth in Section 6.7.
"ZONING REPORTS" means those certain zoning and site requirements
summaries for the Properties as described on EXHIBIT K.
SECTION 1.2 ACCOUNTING TERMS.
For purposes of this Loan Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to such terms in conformity with
GAAP or the Uniform System, as the case may be.
SECTION 1.3 OTHER DEFINITIONAL PROVISIONS.
References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and
"SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules,
respectively, of this Loan Agreement unless otherwise specifically provided. Any
of the terms defined in Section 1.1 may, unless the context otherwise requires,
be used in the singular or the plural depending on the reference. In this Loan
Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer
to this Loan Agreement as a whole and not merely to the specific article,
section, subsection, paragraph or clause in which the respective word appears;
words importing any gender include the other genders; references to "WRITING"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be
deemed to be followed by the words "without limitation"; and any reference to
any statute or regulation may include any amendments of same and any successor
statutes and regulations. Further, (i) any reference to any agreement or other
document may include subsequent amendments, assignments, and other modifications
thereto, and (ii) any reference to any Person may include such Person's
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons.
23
ARTICLE II
TERMS OF THE LOAN
SECTION 2.1 LOAN.
(A) LOAN. Subject to the terms and conditions of this Loan Agreement and
in reliance upon the representations and warranties of the Borrowers contained
herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to
borrow from Lender, a loan in the original principal amount of $___________ (the
"LOAN").
(B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to
Lender a Promissory Note, dated of even date herewith (as amended, modified or
restated, and any replacement or substitute notes therefor, by means of multiple
notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the
order of Lender, in the original principal amount of $____________.
(C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be
used to (i) refinance existing indebtedness; (ii) pay all recording fees and
taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses
incurred by Lender, including reasonable legal fees and expenses of counsel to
Lender, and other costs and expenses approved by Lender (which approval will not
be unreasonably withheld) related to the Loan; (iii) establish the Reserves
required hereunder; and (iv) provide for general corporate purposes, including,
without limitation, payment of transaction costs and expenses incurred by the
Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or
as otherwise directed by the Borrowers.
SECTION 2.2 INTEREST.
(A) RATE OF INTEREST. The outstanding principal balance of the Loan shall
bear interest at a rate per annum equal to _____ percent (__%) (the "INTEREST
RATE").
(B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and
during the continuance of an Event of Default and in any event from and after
the Maturity Date of the Loan and until the Loan and all other Obligations are
satisfied in full, the outstanding principal balance of the Loan and all other
Obligations shall bear interest until paid in full at a rate per annum that is
four percent (4%) in excess of the Interest Rate otherwise applicable under this
Loan Agreement and the Note (the "DEFAULT RATE").
(C) COMPUTATION OF INTEREST. Interest on the Loan and all other
Obligations owing to Lender shall be computed on the basis of a 360-day year,
and shall be charged for the actual number of days elapsed during any month or
other accrual period. Interest shall be payable in arrears.
(D) INTEREST LAWS. Notwithstanding any provision to the contrary contained
in this Loan Agreement or the other Loan Documents, the Borrowers shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("EXCESS
INTEREST"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Loan Agreement or in
any of the other Loan Documents, then in such event: (1) the provisions of this
24
subsection shall govern and control; (2) the Borrowers shall not be obligated to
pay any Excess Interest; (3) any Excess Interest that Lender may have received
hereunder shall be, at Lender's option, (a) applied as a credit against either
or both of the outstanding principal balance of the Loan or accrued and unpaid
interest thereunder (not to exceed the maximum amount permitted by law), (b)
refunded to the payor thereof, or (c) any combination of the foregoing; (4) the
interest rate(s) provided for herein shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM
RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to
have been and shall be, reformed and modified to reflect such reduction; and (5)
the Borrowers shall not have any action against Lender for any damages arising
out of the payment or collection of any Excess Interest. Notwithstanding the
foregoing, if for any period of time interest on any Obligation is calculated at
the Maximum Rate rather than the applicable rate under this Loan Agreement, and
thereafter such applicable rate becomes less than the Maximum Rate, the rate of
interest payable on such Obligations shall, to the extent permitted by law,
remain at the Maximum Rate until Lender shall have received or accrued the
amount of interest which Lender would have received or accrued during such
period on Obligations had the rate of interest not been limited to the Maximum
Rate during such period. If the Default Rate shall be finally determined to be
unlawful, then the Interest Rate shall be applicable during any time when the
Default Rate would have been applicable hereunder, provided however that if the
Maximum Rate is greater or lesser than the Interest Rate, then the foregoing
provisions of this paragraph shall apply.
(E) LATE CHARGES. If an Event of Default regarding non-payment of
principal, interest or other sums due hereunder or under any of the other Loan
Documents shall occur, then the Borrowers shall pay to Lender, in addition to
all sums otherwise due and payable, a late fee in an amount equal to five
percent (5.0%) of such principal, interest or other sums due hereunder or under
any other Loan Document, such late charge to be immediately due and payable
without demand by Lender.
SECTION 2.3 RESERVED.
SECTION 2.4 PAYMENTS.
(A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments
of interest and principal on the Note as follows:
(i) The Borrowers shall make a payment to Lender of interest only on
the Closing Date for the period from and including the Closing Date through and
including the last day of the calendar month in which the Closing occurs; and
(ii) Commencing on August 1, 2004 and on each Payment Date
thereafter through but not including the Maturity Date, the Borrowers shall make
a payment of interest on the Loan for the prior calendar month, and in addition
shall make a payment of principal on the Loan in an amount equal to the
Scheduled Mortgage Principal Payment for such Payment Date.
(B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for
payments on the Loan which are transferred to the account of Lender as provided
below (i) on the day that such funds are received by Lender if such receipt
occurs by 2:00 p.m. (New York time) on such
25
day, or (ii) on the next succeeding Business Day after such funds are received
by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any
payment to be made hereunder shall be stated to be due on a day that is not a
Business Day, the payment may be made on the next succeeding Business Day.
(C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to
pay all of the Obligations relating to the Loan as such amounts become due or
are declared due pursuant to the terms of this Loan Agreement. All payments by
the Borrowers on the Loan shall be made without deduction, defense, set off or
counterclaim and in immediately available funds delivered to Lender by wire
transfer to such accounts at such banks as Lender may from time to time
designate. Prior to an Event of Default, each payment shall be applied first to
pay late charges and the charges and expenses of Lender, Servicer and any
special servicer as provided hereunder, second to accrued and unpaid interest,
and the balance to principal. Prior to an Event of Default, to the extent
sufficient funds are contained in the Lock Box Account, or an Account or
Sub-Account thereof, to make the required monthly payments to the applicable
Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to
have satisfied their obligations to make such payments. Upon the occurrence and
during the continuance of an Event of Default, payments shall be applied to the
Obligations in such order as Lender shall determine in its sole and absolute
discretion.
SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance
with the Loan Documents, the then outstanding principal balance of the Loan, all
accrued and unpaid interest thereon, and all other sums then owing to Lender
hereunder and under the Note, the Mortgages and the other Loan Documents, shall
be due and payable on the Maturity Date.
SECTION 2.6 PREPAYMENT.
(A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON
ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or
in part at any time, except as expressly set forth in this provision. On and
after May 1, 2009, the Borrowers may prepay the Loan in whole, but not in part,
without payment of Prepayment Consideration, provided that (i) the Borrowers
shall provide to Lender not less than fifteen (15) days prior written notice of
such prepayment, (ii) together with such prepayment the Borrowers also shall pay
all accrued and unpaid interest and all other Obligations then due and owing,
(iii) if such prepayment occurs on any day other than a Payment Date, then
together therewith the Borrowers also shall pay to Lender the amount of interest
that would have accrued on the amount being prepaid from and including the date
of such prepayment to the end of such calendar month.
(B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion
of the Loan shall occur prior to May 1 2009, on account of acceleration of the
Loan (whether or not due to an Event of Default), or otherwise, then except only
as expressly provided in this Loan Agreement or the other Loan Documents to the
contrary, the Borrowers shall pay the Prepayment Consideration on the amount
prepaid to Lender together with such prepayment, as liquidated damages and
compensation for costs incurred, and in addition to all other amounts due and
owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will
be due as to a prepayment of the Loan in connection with (i) application of
insurance or condemnation proceeds required by Lender pursuant to this Loan
Agreement or the Mortgages in the absence of
26
an Event of Default, (ii) Scheduled Mortgage Principal Payments. The foregoing
designation of any amount of Prepayment Consideration in this Agreement shall
not create a right to prepay at any time or in any circumstances where this
Agreement does not expressly state that such a right exists.
(C) DEFINITIONS. The following terms shall have the meanings indicated:
"PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater
of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii)
the Yield Maintenance Amount.
"YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if
any, between (i) the present value on the date of prepayment (by acceleration or
otherwise) of all future installments of principal and interest which the
Borrowers would otherwise be required to pay under the Note from the date of
such prepayment until the Maturity Date absent such prepayment, including the
unpaid principal amount which might otherwise be due upon the Maturity Date
absent such prepayment, with such present value being determined by the use of a
discount rate equal to the yield to maturity (adjusted to a "Mortgage Equivalent
Basis" pursuant to the standards and practices of the Securities Industry
Association), on the date of such prepayment of the United States Treasury
Security having the term to maturity closest to what otherwise would have been
the remaining term hereof absent such prepayment and (ii) the principal balance
of the Loan on the date of such prepayment.
SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall
be presumptive evidence (absent manifest error) of the amounts owing to Lender
by the Borrowers; provided that any failure to record any transaction affecting
such balance or any error in so recording shall not limit or otherwise affect
the Borrowers' obligation to pay the Obligations.
SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or
under the Note shall be made free and clear of and without deduction for any and
all taxes, withholding taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto arising out of or in
connection with the transactions contemplated by the Loan Documents (all such
taxes, levies, imposts, deductions, charges or withholdings and all liabilities
with respect thereto (excluding taxes imposed on net income in accordance with
the following sentence) herein "TAX LIABILITIES"). Notwithstanding the
foregoing, the Borrowers shall not be liable for taxes imposed on the net income
of Lender by the jurisdiction under the laws of which Lender is organized or
doing business or any political subdivision thereof and taxes imposed on its net
income by the jurisdiction of Lender's applicable lending office or any
political subdivision thereof. If the Borrowers shall be required by law to
deduct any such Tax Liabilities (or amounts in estimation or reimbursement for
the same) from or in respect of any sum payable hereunder to Lender, then the
sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, Lender receives an amount equal to the sum it
would have received had no such deductions been made.
SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the
actual costs and damages that Lender would suffer by reason of an Event of
Default (exclusive of the attorneys' fees and other costs incurred in connection
with enforcement of Lender's rights under
27
the Loan Documents) or a prepayment would be difficult and needlessly expensive
to calculate and establish, and (ii) the amounts of the Default Rate, the late
charges, and the Prepayment Consideration are reasonable, taking into
consideration the circumstances known to the parties at this time, and (iii)
such Default Rate and late charges and Lender's reasonable attorneys' fees and
other costs and expenses incurred in connection with enforcement of Lender's
rights under the Loan Documents shall be due and payable as provided herein, and
(iv) such interest at the Default Rate, late charges, Prepayment Consideration,
and the obligation to pay Lender's reasonable attorneys' fees and other
enforcement costs do not, individually or collectively, constitute a penalty.
SECTION 2.10 RESERVED.
SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from
time to time without the consent of the Borrowers, on prior written notice to
the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's
fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths
of one percent (.05%) per annum on the outstanding principal balance of the
Loan, payable in monthly installments, and if the Loan becomes a specially
serviced loan, any fees of the special servicer, shall be payable by the
Borrowers and shall constitute a portion of the Obligations; provided, however,
that at no time shall the Borrowers be liable for Servicing Fees or special
servicing fees in excess of those fees charged to Lender by the Servicer or any
special servicer.
SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF
CROSS-COLLATERALIZATION.
(A) Until repayment of the Indebtedness and the Crossed Indebtedness and
satisfaction of all obligations under this Agreement and the Crossed Loan
Agreement, each Borrower acknowledges and agrees (subject to Lender's
election(s) at Lender's sole discretion from time to time pursuant to Section
2.12(G) below): (i) that the Properties shall secure not only the Loan but also
the Crossed Loans, and that the Liens of the Loan Documents shall constitute
Liens securing not only the Loan but also the Crossed Loans; (ii) that the
Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured
by such Crossed Properties; and (iii) that Lender would not make the Loan to the
Borrowers or the loans constituting the Crossed Loans unless the Borrowers and
the Crossed Borrowers granted liens on the Properties and, in addition, the
Crossed Properties of the Crossed Borrowers to secure the payment of the Loan
and the Crossed Loans.
(B) Until the date that all of the Loan and the Crossed Loans shall have
been paid and satisfied in full, the Borrowers (i) shall have no right of
subrogation with respect to the Crossed Loans and (ii) waive any right to
enforce any remedy which Lender now has or may hereafter have against the
Crossed Borrowers, any endorser or any guarantor of all or any part of the
Crossed Loans or any other individual or entity, and the Borrowers waive any
benefit of, and any right to participate in, any security or collateral given to
Lender to secure the payment or performance of all or any part of the Crossed
Loans or any other liability of any of the Crossed Borrowers to Lender. Should
any Borrower have the right, notwithstanding the foregoing, to exercise its
subrogation rights, each Borrower hereby expressly and irrevocably (1)
subordinates any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off that such
Borrower may have to the payment in full in cash of the Loan
28
and the Crossed Loans and (2) waives any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Loan and the Crossed Loans are
paid in full in cash. Each Borrower acknowledges and agrees that this
subordination is intended to benefit Lender and shall not limit or otherwise
affect any Borrower's liability hereunder or the enforceability of this Loan
Agreement or the Crossed Loan Documents.
(C) Each Borrower agrees that any and all claims of such Borrower against
any of the Crossed Borrowers or any endorser or any guarantor of all or any part
of the Crossed Loans (collectively, the "CROSSED OBLIGORS") with respect to any
obligations, liabilities or indebtedness now or hereafter owing by the Crossed
Obligors, or any of them, to such Borrower, or otherwise existing or claimed to
be owed or to exist on the part of any of the Crossed Obligors, or against any
of their respective properties (collectively, the "CROSSED PARTY OBLIGATIONS")
shall be subordinate and subject in right of payment to the prior payment, in
full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any
right of any Borrower to ask, demand, sue for, take or receive any payment from
any of the Crossed Obligors, all rights, liens and security interests of each
Borrower, whether now or hereafter arising and howsoever existing, in and to any
assets of any of the Crossed Obligors shall be and are subordinated to the
rights of Lender in those assets under the Loan Documents, the Crossed Loan
Documents or otherwise, and no Borrower shall, until the date that all of the
Loan and the Crossed Loans shall have been paid and satisfied in full, (i)
assert, collect, sue upon, or enforce all or any part of the Crossed Party
Obligations; (ii) commence or join with any other creditors of any of the
Crossed Obligors in commencing any bankruptcy, reorganization, receivership or
insolvency proceeding against any of the Crossed Obligors; (iii) take, accept,
ask for, sue for, receive, set off or demand any payments upon the Crossed Party
Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to
be created liens, security interests, mortgages, deeds of trust or pledges of or
with respect to any of the assets of any of the Crossed Obligors in favor of or
for the benefit of such Borrower.
(D) If all or any part of the assets of any of the Crossed Obligors, or
the proceeds thereof, are subject to any distribution, division or application
to the creditors of such Crossed Obligor, whether partial or complete, voluntary
or involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, or if the business of any such Crossed Obligor is dissolved or if
substantially all of the assets of any such Crossed Obligor are sold, then, and
in any such event (such events being herein referred to as an "CROSSED OBLIGOR
INSOLVENCY EVENT"), any payment or distribution of any kind or character, either
in cash, securities or other property, which shall be payable or deliverable to
any Borrower upon or with respect to any Crossed Party Obligations shall be paid
or delivered directly to the Lender for application on the Loan and the Crossed
Loans, due or to become due, until such Loan and Crossed Loans shall have first
been fully paid and satisfied (in cash). Should any payment, distribution,
security or instrument or proceeds thereof be received by any Borrower upon or
with respect to the Crossed Party Obligations after any Crossed Obligor
Insolvency Event and prior to the payment in full and satisfaction of all of the
Loan and Crossed Loans, such Borrower shall receive and hold the same in trust,
as trustee, for the benefit of Lender and shall forthwith deliver the same to
Lender in precisely the form received (except for the endorsement or assignment
of such Borrower where necessary), for application to any of the Loan or Crossed
Loans, due or not due, and, until so delivered, the same shall be held in trust
by such Borrower as the property of Lender. If such Borrower fails to make
29
any such endorsement or assignment to Lender, Lender or any of its officers or
employees is irrevocably authorized to make the same. Each Borrower agrees that
until the Loan and Crossed Loans have been paid in full (in cash) and satisfied,
no Borrower will assign or transfer to any individual or entity (other than
Lender) any claim such Borrower has or may have against any Crossed Obligor.
(E) Subject to the provisions of Section 2.12(G), to the extent that any
collection upon any of the Loan or the Crossed Loans is made by Lender from one
of the Crossed Borrowers or the Crossed Properties or other assets of the
Crossed Borrowers (a "CROSSED LOANS COLLECTION") which, taking into account all
other Crossed Loans Collections then previously or concurrently made by such
Crossed Borrower, exceeds the amount which otherwise would have been collected
from such Crossed Borrower if each Borrower and each Crossed Borrower had paid
the portion of the Loan and Crossed Loans satisfied by such Crossed Loans
Collection in the same proportion as such Crossed Borrower's Allocable Amount
(as defined below) (as determined immediately prior to such Crossed Loans
Collection) bore to the aggregate Allocable Amounts of each Borrower and each
Crossed Borrower as determined immediately prior to the making of such Crossed
Loans Collection, then, following payment in full in cash of the entire Loan and
Crossed Loans, such Crossed Borrower shall be entitled to receive contribution
and indemnification payments from, and be reimbursed by, each Borrower and each
of the other Crossed Borrowers for the amount of such excess, pro rata based
upon their respective Allocable Amounts in effect immediately prior to such
Crossed Loans Collection. As of any date of determination, the "ALLOCABLE
AMOUNT" of any Borrower or any Crossed Borrower shall be equal to the maximum
amount of the claim which could then be recovered from such Borrower or Crossed
Borrower under the Loan Documents and Crossed Loan Documents without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law. The
foregoing provision shall be for the benefit of each of the Crossed Borrowers
and Lender, but shall be subject to modification as provided in Section 2.12(G)
below and to amendment by agreement of the Borrowers and Lender, in each case
without necessity of any agreement, acknowledgment or approval of any Crossed
Borrower or any notice to any Crossed Borrower. Section 2.12(E) of each of the
Crossed Loan Agreements contains provisions similar to this Section 2.12(E) for
the benefit of Lender and (subject to the terms thereof) the Crossed Borrowers.
This Section 2.12(E) and Section 2.12(E) of each of the Crossed Loan Agreements
are intended only to define the relative rights of the Borrowers and Crossed
Borrowers, and nothing set forth in this Section 2.12(E) or in Section 2.12(E)
of each of the Crossed Loan Agreements is intended to or shall impair the liens
and security interests of the Loan Documents and the Crossed Loan Documents or
the obligations of the Borrowers and the Crossed Borrowers thereunder. Each
Borrower acknowledges that the rights of contribution and indemnification under
this Section 2.12(E) and under Section 2.12(E) of the Crossed Loan Agreements
constitute assets of the Borrowers or Crossed Borrowers to which such
contribution and indemnification is owing, and any such right of contribution
and indemnification owing to any Borrower under Section 2.12(E) of any of the
Crossed Loan Agreements shall constitute additional Crossed Party Obligations
for all purposes under this Section 2.12.
(F) Each Borrower hereby consents and agrees to each of the following, and
agrees that such Borrower's obligations under this Loan Agreement and the other
Loan Documents and
30
the Liens created under this Loan Agreement and the other Loan Documents
securing the Loan and the Crossed Loans shall not be released, diminished,
impaired, reduced or adversely affected by any of the following, and waives any
common law, equitable, statutory or other rights (including without limitation
rights to notice) that such Borrower might otherwise have as a result of or in
connection with any of the following:
(i) Any renewal, extension, increase, modification, alteration or
rearrangement of all or any part of the Crossed Loans, the Crossed Loan
Documents, or other document, instrument, contract or understanding between the
Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed
Loans or any failure of Lender to notify such Borrower of any such action.
(ii) Any adjustment, indulgence, forbearance or compromise that
might be granted or given by Lender to the Crossed Borrowers.
(iii) The insolvency, bankruptcy, arrangement, adjustment,
composition, liquidation, disability, dissolution or lack of power of any of the
Crossed Borrowers or any other party at any time liable for the payment of all
or part of the Crossed Loans; or any dissolution of any of the Crossed
Borrowers, or any sale, lease or transfer of any or all of the assets of any of
the Crossed Borrowers, or any changes in the shareholders, partners or members
of any of the Crossed Borrowers; or any reorganization of any of the Crossed
Borrowers.
(iv) The invalidity, illegality or unenforceability of all or any
part of the Crossed Loans, or any document or agreement executed in connection
therewith, for any reason whatsoever, including without limitation the fact that
(A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law,
(B) the act of creating the Crossed Loans or any part thereof is ultra vires,
(C) the officers or representatives executing the Crossed Loan Documents or
otherwise creating the Crossed Loans acted in excess of their authority, (D) the
Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have
valid defenses, claims or offsets (whether at law, in equity or by agreement)
which render the Crossed Loans wholly or partially uncollectible from the
Crossed Borrowers, (F) the creation, performance or repayment of the Crossed
Loans (or the execution, delivery and performance of any document or instrument
representing part of the Crossed Loans or executed in connection with the
Crossed Loans, or given to secure the repayment of the Crossed Loans) is
illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan
Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that each Borrower shall remain liable hereon
regardless of whether the Crossed Borrowers or any other person be found not
liable on the Crossed Loans or any part thereof for any reason.
(v) Any full or partial release of the liability of the Crossed
Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or
any other person or entity now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee or assure the payment of the Crossed Loans, or any part thereof, it
being recognized, acknowledged and agreed by each Borrower that such Borrower
has not been induced to enter into this Loan Agreement or the other Loan
Documents on the basis of a contemplation, belief, understanding or agreement
that other parties will be liable to pay or
31
perform the Loan or such Borrower's obligations under the Loan Agreement or the
other Loan Documents, or that Lender will look to other parties to pay or
perform the Crossed Loans.
(vi) The taking or accepting of any other security, collateral or
guaranty, or other assurance of payment, for all or any part of the Crossed
Loans.
(vii) Any release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation
negligent, willful, unreasonable or unjustifiable impairment) of any collateral,
property or security, at any time existing in connection with, or assuring or
securing payment of, all or any part of the Crossed Loans.
(viii) The failure of or refusal of Lender or any other party acting
on behalf of Lender to exercise diligence or reasonable care in the
preservation, protection, enforcement, sale or other handling or treatment of
all or any part of such collateral, property or security, including but not
limited to any neglect, delay, omission, failure or refusal of Lender (A) to
take or prosecute any action for the collection of any of the Crossed Loans, (B)
to foreclose, or initiate any action to foreclose, or, once commenced, prosecute
to completion any action to foreclose upon any security therefor, or (C) to take
or prosecute any action in connection with any instrument or agreement
evidencing or securing all or any part of the Crossed Loans.
(ix) The fact that any collateral, security, security interest or
lien contemplated or intended to be given, created or granted as security for
the repayment of the Crossed Loans, or any part thereof, shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by each Borrower
that it is not entering into this Loan Agreement in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectibility
or value of any of the collateral for the Crossed Loans.
(x) Any payment by any of the Crossed Borrowers to Lender is held to
constitute a preference under bankruptcy laws, or for any reason Lender is
required to refund such payment or pay such amount to any of the Crossed
Borrowers or someone else.
(xi) Any other action taken or omitted to be taken with respect to
the Crossed Loan Documents, the Crossed Loans, or the security and collateral
therefor.
(G) Notwithstanding anything to the contrary set forth in this Loan
Agreement, Lender may, at its sole option and in its sole discretion, from time
to time (one or more times) deliver written notice to the Borrowers stating that
this Loan Agreement, the Mortgages and the other Loan Documents shall no longer
secure one or more (at Lender's sole election) of the Crossed Loans (each a
"CROSS RELEASE NOTICE"), whereupon (i) this Loan Agreement and the other Loan
Documents shall no longer secure any of the Crossed Loans for which a Cross
Release Notice is given (any such Crossed Loan, an "EXCLUDED LOAN", and,
collectively, the "EXCLUDED LOAN(S)"; each Crossed Borrower which is the
borrower with respect to an Excluded Loan is herein referred to as an "EXCLUDED
BORROWER", and the Crossed Loan Agreement, Crossed Mortgages, Cross Side
Agreement and other Crossed Loan Documents executed and delivered by the
Excluded Borrowers with respect to any Excluded Loan are herein referred to as
the "EXCLUDED LOAN AGREEMENT", "EXCLUDED MORTGAGES", "EXCLUDED SIDE AGREEMENT"
and
32
"EXCLUDED LOAN DOCUMENTS", respectively, and each Crossed Property encumbered by
the Excluded Loan Documents is herein referred to as an "EXCLUDED PROPERTY"),
(ii) each Cross Guaranty of the Loan executed by each Excluded Borrower,
together with each Cross Guaranty of an Excluded Loan executed by the Borrowers
(herein collectively referred to as the "EXCLUDED GUARANTIES") shall be deemed
automatically terminated and of no further force or effect, (iii) each reference
herein and in the other Loan Documents to the "Crossed Loans" shall be deemed to
exclude the Excluded Loans, (iv) each reference herein and in the other Loan
Documents to the "Crossed Loan Agreements", "Crossed Mortgages", "Crossed Loan
Documents", "Crossed Properties", "Cross Side Agreements" and "Cross Guaranties"
shall be deemed to exclude the Excluded Loan Agreement, the Excluded Mortgages,
the Excluded Loan Documents, the Excluded Property, the Excluded Side Agreements
and the Excluded Guaranties, respectively, (v) each reference herein and in the
other Loan Documents to the "Crossed Borrowers" and the "Crossed Obligors" shall
be deemed to exclude each Excluded Borrower, (vi) the provisions of Section
2.12(E) of this Loan Agreement shall not apply to any Crossed Loans Collection
from any Excluded Borrower or its Excluded Property and the Borrowers shall have
no obligation or liability on account thereof; and (vii) Borrowers shall no
longer be beneficiaries of the covenants and agreements set forth in Section
2.12(E) of any Excluded Loan Agreement, and the Borrowers shall have no rights
or claims on account of any contribution or indemnification obligations of any
Excluded Borrower under Section 2.12(E) of any Excluded Loan Agreement. In
addition to and without limiting the foregoing, the Borrowers hereby agree to
fully cooperate with Lender, if Lender is considering the termination of the
cross collateralization and cross default of the Loan and Loan Documents with
any of the Crossed Loans, including, but not limited to (x) amending this Loan
Agreement and the other Loan Documents as may be required by Lender to
effectuate such termination of the cross collateralization and cross default
provisions thereof, and (y) updating and/or endorsing the title insurance
policies (at Lender's cost as to additional premium charges, if any) to reflect
the continuation of the first priority lien of this Loan Agreement.
(H) In the event the Loan is repaid or defeased in full in accordance with
the provisions of this Loan Agreement and the other Loan Documents, then
provided no Event of Default then exists hereunder, and no "Event of Default"
(as defined in any of the Other Crossed Loan Agreements) exists under any of the
Other Crossed Loan Documents, the cross collateralization and cross default of
the Loan and Loan Documents with the Other Crossed Loans shall terminate and all
the Other Crossed Loans shall be deemed Excluded Loans with respect to the Loan
and the provisions of Section 2.12(G) above shall become automatically
applicable with respect thereto.
ARTICLE III
CONDITIONS TO LOAN
SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The
obligation of Lender to fund the Loan are subject to the prior or concurrent
satisfaction or waiver of the conditions set forth below, and to satisfaction of
any other conditions specified herein or elsewhere in the Loan Documents. With
respect to facts and circumstances actually known to Lender at Closing, by
funding the Loan Lender shall be deemed to have acknowledged that each of the
conditions set forth below has been satisfied or waived (except as otherwise set
forth in any other agreement in writing between the Borrowers and Lender). Where
in this Section any
33
documents, instruments or information are to be delivered to Lender, then the
condition shall not be satisfied unless (i) the same shall be in form and
substance satisfactory to Lender, and (ii) if so required by Lender, the
Borrowers shall deliver to Lender a certificate duly executed by the Borrowers
stating that the applicable document, instrument or information is true and
complete and does not omit to state any information without which the same might
reasonably be deemed materially misleading.
(A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall
execute and deliver and cause to be executed and delivered to Lender all of the
Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan
Documents as may be reasonably required by Lender, each, unless otherwise noted,
of even date herewith, duly executed, in form and substance satisfactory to
Lender and in quantities designated by Lender (except for the Note, of which
only one shall be signed), which Loan Documents shall become effective upon the
Closing.
(B) DEPOSITS. The deposits required herein, including without limitation,
the initial deposits into the Reserves and Accounts, shall have been made (and
at the Borrowers' option, the same may be made from the proceeds of the Loan).
(C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES.
Each Borrower Party and all other Persons executing any agreement on behalf of
any Borrower Party shall have performed in all material respects all agreements
which this Loan Agreement provides shall be performed on or before the Closing
Date. The representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete in all material respects on and as
of the Closing Date.
(D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have
received certificates of even date herewith executed on behalf of each Borrower
by the chief financial officer (or similar officer of the Borrowers) stating
that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no
material adverse change in the financial condition or operations of the business
of the Borrowers or the projected cash flow of the Borrowers or the Properties,
in each case taken as a whole, has occurred since the delivery to Lender of any
financial statements, budgets, proformas, or similar materials (or if there has
been any change, specifying such change in detail), and that, to the Borrowers'
Knowledge after due inquiry, such financial materials fairly present the
financial condition and results of operations of the Borrowers and the
Properties, in each case taken as a whole, and all other materials delivered to
Lender are complete and accurate in all material respects; and (iii) the
representations and warranties set forth in this Loan Agreement are true and
correct in all material respects on and as of such date with the same effect as
though made on and as of such date (or if any such representations or warranties
require qualification, specifying such qualification in detail) and (iv) to the
Borrowers' Knowledge, there are no material facts or conditions concerning the
Properties or any Borrower Party that have not been disclosed to Lender which
could have a Material Adverse Effect.
(E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have
received from Morris, Manning & Martin, LLP or other legal counsel for the
Borrowers satisfactory to Lender, written legal opinions, each in form and
substance acceptable to Lender, as to such
34
matters as Lender shall request, including opinions to the effect that (i) each
of the Borrower Parties is duly formed, validly existing, and in good standing
in its state of organization and, in the case of each Borrower, in each state
where its Property is located, (ii) this Loan Agreement and the Loan Documents
have been duly authorized, executed and delivered and are enforceable in
accordance with their terms subject to customary qualifications for bankruptcy,
general equitable principles, and other customary assumptions and
qualifications; (iii) the Deposit Account Agreement and Cash Management
Agreement have been duly authorized, executed and delivered by Borrower and
Manager and are enforceable in accordance with their terms and the security
interests in favor of Lender in the Account Collateral have been validly created
and perfected; and (iv) no Borrower, Member or General Partner would be
consolidated in any bankruptcy proceeding affecting Guarantor or certain other
Affiliates of the Borrower Parties specified by Lender. Also on or before the
Closing Date, Lender shall have received the following legal opinions, each in
form and substance acceptable to Lender: (a) an opinion of the Borrowers' local
counsel in each state where the Properties are located as to the enforceability
of, and the creation and perfection of Liens under, the Mortgages and the
Assignments of Leases and such other matters as Lender may reasonably request;
(b) [intentionally omitted]; (c) opinions of Richards, Layton & Finger or other
Delaware legal counsel, acceptable to Lender, for each Borrower that is a single
member limited liability company formed under the laws of the State of Delaware
that, among other matters, (1) under Delaware law (x) the prior unanimous
written consent of Member (and the unanimous written consent of the board of
directors of Member including the Independent Directors, or the unanimous prior
written consent of the board of managers' of each Borrower, including the
Independent Directors') would be required for a voluntary bankruptcy filing by
each such Borrower, (y) the prior unanimous written consent of the board of
directors of Member (including the Independent Directors) would be required for
a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements
are enforceable against Member in accordance with their terms; (2) under
Delaware law the bankruptcy or dissolution of Member would not cause the
dissolution of any of the Borrowers and the bankruptcy or dissolution of the
sole shareholder or member would not cause the dissolution of Member; (3) under
Delaware law, creditors of Member shall have no legal or equitable remedies with
respect to the assets of any of the Borrowers and creditors of Guarantor shall
have no legal or equitable remedies with respect to the assets of Member; and
(4) a federal bankruptcy court would hold that Delaware law governs the
determination of what Persons have authority to file a voluntary bankruptcy
petition on behalf of each Borrower and Member; and (d) such other legal
opinions as Lender may reasonably request.
(F) TITLE POLICIES. On or before the Closing Date, Lender shall have
received and approved pro forma Title Policies for the Mortgages, and as of the
Closing, each Title Company shall be irrevocably committed and prepared
immediately to issue the Title Policies or binding commitments. The Title
Policies shall be in form and substance satisfactory to Lender. Without
limitation, each Title Policy shall be issued on an ALTA form acceptable to
Lender by each Title Company or if an ALTA form is not available in the
applicable jurisdiction, another form acceptable to Lender, together with such
reinsurance and direct access agreements as Lender may require, insuring that
the Mortgages are valid first and prior enforceable liens on each Borrower's fee
simple interest or ground leasehold interest, as the case may be, in the
applicable Property (including any easements appurtenant thereto) subject only
to such exceptions to coverage as are acceptable to Lender, including the
Permitted Exceptions. Each Title Policy shall contain such endorsements as
Lender may require (to the extent available in the state where
35
the Properties is located) in form acceptable to Lender, including deletion of
the creditors' rights exception and affirmative endorsement coverage for
creditors' rights risks.
(G) SURVEY. Lender shall have received a survey of each of the Properties,
certified to Lender and its successors, assigns and designees and to each Title
Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"), or
Lender shall have received both (x) a "no change" affidavit from each Borrower
with respect to such Borrower's most recent Survey sufficient to cause the Title
Company to provide current survey coverage to Lender in the applicable Title
Policy without exception for matters that would be revealed by a current and
accurate survey of the applicable Property, except for matters specifically
shown on such most recent Survey, and (y) a reliance letter (to the extent any
such surveys are not currently addressed to Lender) in form and substance
satisfactory to Lender, permitting Lender to rely on the Survey (and any
certification thereof) as if originally addressed and certified to Lender. Each
Survey shall contain the minimum detail for land surveys as most recently
adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall
contain Lender's standard form certification, and shall show no state of facts
or conditions reasonably objectionable to Lender.
(H) ZONING. On or before the Closing Date, Lender shall have received
evidence reasonably satisfactory to Lender as to the zoning and subdivision
compliance of each of the Properties.
(I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing
Date, Lender shall have received copies of the organizational documents and
filings of each Borrower Party, together with good standing certificates (or
similar documentation) (including verification of tax status) from the state of
its formation and from all states in which the laws thereof require such Person
to be qualified and/or licensed to do business (including without limitation,
each state in which the Properties are located for the applicable Borrower(s)
and, to the extent required by law, Member and General Partner). Each such
certificate shall be dated not more than 30 days prior to the Closing Date, as
applicable, and certified by the applicable Secretary of State or other
authorized governmental entity. In addition, on or before the Closing Date the
secretary or corresponding officer of each Borrower Party, or the secretary or
corresponding officer of the partner, trustee, or other Person as required by
such Borrower Party's organizational documents (as the case may be, the
"BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating
that the copies of the organizational documents as delivered to Lender are true
and complete and are in full force and effect, and that the same have not been
amended except by such amendments as have been so delivered to Lender.
(J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing
Date, Lender shall have received certificates of incumbency and resolutions of
each Borrower Party and its constituents as requested by Lender, approving and
authorizing the Loan and the execution, delivery and performance of the Loan
Documents, certified as of the Closing Date by the Borrower Party Secretary as
being in full force and effect without modification or amendment.
(K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have
received such financial statements and other financial information as shall be
satisfactory to Lender for each Borrower Party (including for Guarantor) and for
the Properties. If any such
36
statements are not available for the Properties, then the Borrowers shall
provide such financial reports as are available. All such financial statements
shall be certified to Lender by the applicable Borrower Party (through its chief
financial officer or other officer charged with similar duties), which
certification shall be in form and substance reasonably satisfactory to Lender.
(L) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date,
Lender shall have received and approved the Operating Budget and CapEx/FF&E
Budget for the Properties for the remainder of the current calendar year.
(M) AGREEMENTS. On or before the Closing Date, Lender shall have received
a list of all Material Agreements and, to the extent requested by Lender, copies
thereof.
(N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing
Date, Lender shall have received copies of the Management Agreements and any
leasing brokerage agreements pertaining to the Properties and the Assignments of
Management Agreements, duly executed by each Manager and the applicable
Borrower. On or before the Closing Date, Lender shall have received copies of
the existing Franchise Agreements (including any Property Improvement Plan) and
Franchisor Letters for each of the Properties duly executed by the applicable
Franchisors.
(O) RENT ROLL. Prior to the Closing, Lender shall have received from the
Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL")
in form and substance satisfactory to Lender. The Rent Roll shall constitute a
true, correct, and complete list of each and every Material Lease, together with
all extensions and amendments thereof, and shall accurately and completely
disclose all annual and monthly rents payable by all tenants, including all
percentage rents, if any, and expiration dates of such Material Leases, and the
amount of security deposit being held by the Borrowers under each Material
Lease, if any.
(P) MATERIAL LEASES. Prior to the Closing, Lender shall have received
true, correct and complete copies of the Material Leases, as amended.
(Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender
shall have received copies of the final, unconditional certificates of occupancy
issued with respect to each of the Properties, together with all other
applicable licenses (including, without limitation, each liquor license and beer
permit), permits and approvals required for each Borrower to own, use, occupy,
operate and maintain each of the Properties as a hotel.
(R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date,
Lender shall have received copies of certificates of insurance (dated not more
than twenty (20) days prior to the Closing Date) regarding insurance required to
be maintained under this Loan Agreement and the other Loan Documents, together
with endorsements satisfactory to Lender naming Lender as an additional insured
and loss payee, as required by this Loan Agreement, under such policies. In
addition, as to any insurance matters arising under Environmental Laws or
pertaining to any environmental insurance that any of the Borrowers has with
respect to any Property, the same shall be endorsed to Lender as required by
this Loan Agreement and shall name Lender as an insured, additional insured
and/or loss payee, as applicable.
37
(S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental
Reports relating to each of the Properties, together with a letter from each
preparer thereof entitling Lender and its successors and assigns to rely upon
said Environmental Report.
(T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender
shall have received a property condition report for each of the Properties,
which shall be prepared by an engineer or other consultant satisfactory to
Lender and otherwise shall be in form and substance satisfactory to Lender in
its sole discretion. Each such report shall set forth any items of deferred
maintenance at the applicable Property.
(U) APPRAISAL. On or before the Closing Date, Lender shall have received
an independent appraisal of each of the Properties from a state certified
appraiser engaged by Lender. Each such appraisal shall conform in all respects
to the criteria for appraisals set forth in the Financial Institutions Reform
and Recovery Act of 1989 and the regulations promulgated thereunder (as if
Lender were an institution under the jurisdiction thereof) and the Uniform
Standards of Professional Appraisal Practices of the Appraisal Foundation.
(V) SEARCHES. Prior to the Closing Date, Lender shall have received copies
of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search
reports with respect to the Borrowers, Guarantor, Managers, General Partner and
Member, all dated not more than thirty (30) days prior to the Closing Date.
(W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days
prior to the Closing Date, Lender shall have received payoff demand letters and
wiring instructions from each lender or other obligee of any existing
indebtedness which is required to be repaid pursuant to this Loan Agreement.
(X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and
all reasonable legal fees and expenses of counsel to Lender, together with all
recording fees and taxes, title insurance premiums, and other reasonable costs
and expenses related to the Closing.
(Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement
shall have been issued by Lender for the Loan, such additional conditions as
shall be specified in such commitment shall have been satisfied.
(Z) OTHER REVIEW. Lender shall have completed all other review of the
Borrower Parties, the Properties, and such other items as it reasonably
determines relevant, and shall have determined based upon such review to fund
the Loan. The Borrower Parties shall have satisfied such other reasonable
criteria as Lender may reasonably specify.
(AA) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing
Date, Lender shall have received (i) true and complete copies of each of the
Ground Leases, certified by the Borrowers, and (ii) estoppels and agreements
acceptable to Lender, duly executed by each Ground Lessor.
38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Loan Agreement and to make
the Loan, each Borrower represents and warrants to Lender that the statements
set forth in this Article IV, after giving effect to the Closing, will be, true,
correct and complete in all material respects as of the Closing Date.
SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS.
(A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized,
validly existing and in good standing under the laws of the state of its
formation. Each Borrower Party has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted, and to enter into each Loan Document to which it is a party and
to perform the terms thereof.
(B) QUALIFICATION. Each Borrower Party is duly qualified and in good
standing in the state of its formation. In addition, each Borrower Party is duly
qualified and in good standing in each state where necessary to carry on its
present business and operations, except in jurisdictions in which the failure to
be qualified and in good standing could not reasonably be expected to have a
Material Adverse Effect.
(C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C)
accurately sets forth the direct and indirect ownership structure of the
Borrowers, General Partners and Members.
SECTION 4.2 AUTHORIZATION OF BORROWING, ETC.
(A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority
to incur the Indebtedness evidenced by the Note. The execution, delivery and
performance by each Borrower Party of each of the Loan Documents to which it is
a party and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary limited liability company, partnership,
trustee, corporate or other action, as the case may be.
(B) NO CONFLICT. The execution, delivery and performance by each Borrower
Party of the Loan Documents to which it is a party and the consummation of the
transactions contemplated thereby do not and will not: (1) violate (x) any
provision of law applicable to any Borrower Party; (y) the partnership
agreement, certificate of limited partnership, certificate of incorporation,
bylaws, declaration of trust, operating agreement or other organizational
documents, as the case may be, of each Borrower Party; or (z) any order,
judgment or decree of any Governmental Authority binding on any Borrower Party
or any of its Affiliates; (2) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any Contractual
Obligation of any Borrower Party or any of its Affiliates (except where such
breach will not cause a Material Adverse Effect); (3) result in or require the
creation or imposition of any material Lien (other than the Lien of the Loan
Documents) upon the Properties or assets of any Borrower Party; or (4) except as
set forth on SCHEDULE 4.2, require any approval or consent of any Person under
any material Contractual Obligation of any Borrower Party, which approvals or
consents as set forth on SCHEDULE 4.2 have been obtained on or before the
39
dates required under such material Contractual Obligation, but in no event later
than the Closing Date.
(C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower
Party of the Loan Documents to which it is a party, and the consummation of the
transactions contemplated thereby do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
Governmental Authority.
(D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents,
including the Note, when executed and delivered will be, the legally valid and
binding obligations of each Borrower Party that is a party thereto, enforceable
against each of the Borrower Parties, as applicable, in accordance with their
respective terms, subject to bankruptcy, insolvency, moratorium, reorganization
and other similar laws affecting creditor's rights. No Borrower Party has any
defense or offset to any of its obligations under the Loan Documents to which it
is a party. No Borrower Party has any claim against Lender or any Affiliate of
Lender.
SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the
Borrowers, their Affiliates and the Properties which have been furnished by or
on behalf of the Borrowers to Lender pursuant to this Loan Agreement present
fairly the financial condition of the Persons covered thereby as of the dates
thereof and the results of their operations for the periods then ended, and, to
the Borrowers' Knowledge after due inquiry, have been prepared in accordance
with GAAP consistently applied (except as disclosed therein). Since the date of
the financial statements delivered to Lender, there has been no material adverse
change in the financial condition, operations or business of the Borrower
Parties or the Properties from that set forth in said financial statements.
SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the
Borrowers shall have no outstanding Indebtedness or Contingent Obligations other
than the Obligations or any other Permitted Indebtedness.
SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee
simple title (or, in the case of the Ground Leased Properties, leasehold title)
to the Properties, free and clear of all Liens except for the Permitted
Encumbrances. The Borrowers own and will own at all times all FF&E relating to
the Properties (other than personal property which is either owned by tenants of
such Property, not used or necessary for the operation of the applicable
Property, or leased by the Borrowers as permitted hereunder), subject only to
the Permitted Encumbrances. The Mortgages, when properly recorded in the
appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (i) a
valid, perfected first lien on each of the Properties, subject only to the
Permitted Encumbrances, and (ii) perfected first priority security interests in
and to, and perfected collateral assignments of, all personalty (including the
Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances. Lender will
have a perfected first priority security interest in and to the FF&E owned by
the Borrowers, if any, not located at the Properties. To the Borrowers'
Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in
condemnation or eminent domain affecting any of the Properties, and to the
actual Knowledge of the Borrowers, none is threatened. Except as set forth on
SCHEDULE 4.5(A), no Person has any option or other right to
40
purchase all or any portion of any of the Properties or any interest therein. To
the Borrowers' Knowledge, there are no mechanic's, materialman's or other
similar liens or claims which have been filed for work, labor or materials
affecting the Properties which are or will be liens prior to, or equal or
coordinate with, the lien of any of the Mortgages. None of the Permitted
Encumbrances, individually or in the aggregate, materially interfere with the
benefits of the security intended to be provided by the Mortgages and this Loan
Agreement, materially and adversely affect the value of any of the Properties,
impair the use or operations of the Properties or impair the Borrowers' ability
to pay its obligations in a timely manner.
SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as
set forth in the Zoning Reports for the Properties delivered to Lender, the
Properties and the use thereof comply in all material respects with all
applicable zoning, subdivision and land use laws, regulations and ordinances,
all applicable health, fire, building codes, parking laws and all other laws,
statutes, codes, ordinances, rules and regulations applicable to the Properties,
or any of them, including without limitation the Americans with Disabilities
Act. To the Borrowers' Knowledge, there are no illegal activities relating to
controlled substances on any of the Properties. To the Borrower's Knowledge,
except as set forth in the Zoning Reports for the Properties delivered to
Lender, all material permits, licenses and certificates for the lawful use,
occupancy and operation of each component of each of the Properties in the
manner in which it is currently being used, occupied and operated, including,
but not limited to liquor licenses and certificates of occupancy, or the
equivalent, have been obtained and are current and in full force and effect. To
the Borrower's Knowledge, except as set forth in the Zoning Reports for the
Properties delivered to Lender, in the event that all or any part of the
Improvements located on any Property is destroyed or damaged, said Improvements
can be legally reconstructed to their condition prior to such damage or
destruction, and thereafter exist for the same use without violating any zoning
or other ordinances applicable thereto and without the necessity of obtaining
any variances or special permits, other than customary demolition, building and
other construction related permits. To the Borrowers' Knowledge, no legal
proceedings are pending or threatened with respect to the zoning of any
Property. To the Borrowers' Knowledge, except as set forth in the Title Policies
and/or the Surveys, neither the zoning nor any other right to construct, use or
operate any Property is in any way dependent upon or related to any real estate
other than such Property. No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded by the
Borrowers with respect to any Property without Lender's prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.
SECTION 4.7 LEASES; AGREEMENTS.
(A) LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and
complete copies (in all material respects) of all (i) Leases for more than five
hundred (500) square feet of space at any Property and (ii) Material Agreements
affecting the operation and management of the Properties, and such Leases and
Material Agreements have not been modified or amended except pursuant to
amendments or modifications delivered to Lender. Except for the rights of each
of the current Managers pursuant to the existing Management Agreements, no
Person has any right or obligation to manage any of the Properties or to receive
compensation in connection with such management. Except for the parties to any
leasing brokerage agreement that has been delivered to Lender, no Person has any
right or obligation to lease or solicit tenants for the
41
Properties, or (except for cooperating outside brokers) to receive compensation
in connection with such leasing.
(B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is
attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described
in the Rent Roll, none of the Properties are subject to any Material Leases.
Except only as specified in the Rent Roll, or as otherwise disclosed to Lender
in the estoppel certificates delivered to Lender at Closing, to the Borrowers'
Knowledge, (i) the Material Leases are in full force and effect; (ii) the
Borrowers have not given any notice of default to any tenant under any Material
Lease which remains uncured; (iii) no tenant has any set off, claim or defense
to the enforcement of any Material Lease; (iv) no tenant is in arrears in the
payment of rent, additional rent or any other charges whatsoever due under any
Material Lease, or is materially in default in the performance of any other
obligations under such Material Lease; (v) the Borrowers have completed all work
or alterations required of the landlord or lessor under each Material Lease, and
all of the other obligations of landlord or lessor under the Material Leases
have been performed; and (vi) there are no rent concessions (whether in form of
cash contributions, work agreements, assumption of an existing tenant's other
obligations, or otherwise) or extensions of time whatsoever not reflected in
such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge
of the Borrowers, threatened) against the Borrowers by any tenant or former
tenant. No rental in excess of one month's rent has been prepaid under any of
the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is
valid and binding on the parties thereto in accordance with its terms.
(C) NO RESIDENTIAL UNITS. There are no residential units in any of the
Properties and, to each Borrower's Knowledge, no person (other than a site
manager employed by Manager) occupies any part of the Properties for dwelling
purposes other than on a transient basis.
(D) MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true
and complete copy of each of the Management Agreements to which they are a party
that will be in effect on the Closing Date, and such Management Agreements have
not been modified or amended except pursuant to amendments or modifications
delivered to Lender. The Management Agreements are in full force and effect and
no default by any of the Borrowers or Manager exists thereunder.
(E) FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have
delivered to Lender a true and complete copy of each of the Franchise Agreements
to which they are a party, and such Franchise Agreements have not been modified
or amended except pursuant to amendments or modifications delivered to Lender.
To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full
force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material
default by the Borrowers, Manager or the applicable Franchisor exists
thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the
aggregate, do not and will not have a Material Adverse Effect. Except for the
Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no
other property improvement plans or similar capital improvement plans or
obligations required by any Franchisor pursuant to any Franchise Agreement, in
effect for any of the Properties.
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SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as
set forth in the Property Condition Reports for the Properties delivered to
Lender, all Improvements including, without limitation, the roof and all
structural components, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior doors, parking facilities,
sidewalks and landscaping are in good condition and repair. Except as disclosed
in the Property Condition Reports, (i) the Borrowers are not aware of any latent
or patent structural or other material defect or deficiency in the Properties
and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary
sewers, and electrical, gas (if applicable) and telephone facilities are
available to each of the Properties within the boundary lines of each of the
Properties (except as may be shown on the applicable Survey), are fully
connected to the Improvements and are fully operational, are sufficient to meet
the reasonable needs of each of the Properties as now used or presently
contemplated to be used, and no other utility facilities are necessary to meet
the reasonable needs of each of the Properties as now used or presently
contemplated. Except as may be shown on the applicable Survey, to the Borrowers'
Knowledge no part of any of the Properties is within a flood plain and none of
the Improvements create encroachments over, across or upon the Properties'
boundary lines, rights of way or easements, and no building or other
improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to each of the Properties for the
current and contemplated uses thereof have been completed and are serviceable
and are physically and legally open for use by the public. To the Borrowers'
Knowledge after due inquiry, and except as disclosed in the Property Condition
Reports, any septic system located at any of the Properties is in good and safe
condition and repair and in compliance with all applicable law.
SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9,
there are no judgments outstanding against any Borrower Party, or affecting any
of the Properties or any property of any Borrower, nor is there any action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to the Borrowers' Knowledge, threatened against any
Borrower Party that could reasonably be expected to result in a Material Adverse
Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges,
claims, demand, suits, proceedings, petitions, investigations and arbitrations
set forth on SCHEDULE 4.9 are not reasonably expected to result, either
individually or in the aggregate, in any Material Adverse Effect.
SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and
reports of each Primary Borrower Party required to be filed have been timely
filed (or each Borrower has timely filed for an extension and the applicable
extension has not expired), and all taxes, assessments, fees and other
governmental charges (including any payments in lieu of taxes) upon such Person
and upon its properties, assets, income and franchises which are due and payable
have been paid. To the Borrowers' Knowledge, there is not presently pending any
special assessment against any of the Properties or any part thereof.
SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the
Primary Borrower Parties is a party to or bound by, nor is any property of such
Person subject to or bound by, any contract or other agreement which restricts
such Person's ability to conduct its business in the ordinary course as
currently conducted that, either individually or in the aggregate, has a
Material Adverse Effect or could reasonably be expected to have a Material
Adverse Effect.
43
SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation of any such Person which
could reasonably be expected to have a Material Adverse Effect, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default which could reasonably be expected to have a Material
Adverse Effect.
SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.
SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no
Primary Borrower Party maintains or contributes to, or has any obligation
(including a contingent obligation) under, any Employee Benefit Plans.
SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar
compensation will be payable by or pursuant to any contract or other obligation
of any Primary Borrower Party with respect to the making of the Loan or any of
the other transactions contemplated hereby or by any of the Loan Documents. The
Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from
any and all broker's or finder's fees claimed to be due in connection with the
making of the Loan arising from any Borrower Parties' actions.
SECTION 4.16 INTENTIONALLY DELETED.
SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (b) received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan, the aggregate
fair saleable value of the Borrowers' assets exceed and will, immediately
following the making of the Loan, exceed the Borrowers' total liabilities,
including, without limitation, subordinated, unliquidated, disputed and
Contingent Obligations. The aggregate fair saleable value of the Borrowers'
assets is and will, immediately following the making of the Loan, be greater
than the Borrowers' probable total liabilities, including the maximum amount of
their Contingent Obligations on their debts as such debts become absolute and
matured. Each Borrower's assets do not and, immediately following the making of
the Loan will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. The Borrowers do not
intend to, and do not believe that they will, incur Indebtedness and liabilities
(including Contingent Obligations and other commitments) beyond their ability to
pay such Indebtedness and liabilities as they mature (taking into account the
timing and amounts of cash to be received by the Borrowers and the amounts to be
payable on or in respect of obligations of the Borrowers).
SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on
behalf of any Borrower Party contains any untrue representation, warranty or
statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained therein not misleading. No Loan Document
or any other document, certificate or written statement for use in connection
with the Loan and prepared by any Borrower Party, or any information provided
44
by any Borrower Party and contained in, or used in preparation of, any document
or certificate for use in connection with the Loan, contains any untrue
representation, warranty or statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained therein not
misleading. There is no material fact actually known to the Borrowers that has
had or could reasonably be expected to have a Material Adverse Effect and that
has not been disclosed in writing to Lender by the Borrowers.
SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the
proceeds of the Loan only for the purposes set forth herein and consistent with
all applicable laws, statutes, rules and regulations. No portion of the proceeds
of the Loan shall be used by the Borrowers or any Person in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation T, Regulation U or Regulation X or any other regulation of the Board
of Governors of the Federal Reserve System.
SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate
description of all policies of insurance for each Borrower that are in effect as
of the Closing Date. No notice of cancellation has been received with respect to
such policies, and, to each Borrower's Knowledge, the Borrowers are in
compliance with all conditions contained in such policies.
SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1)
or more parcels which constitute separate tax lots. No part of any of the
Properties is included or assessed under or as part of another tax lot or
parcel, and no part of any other property is included or assessed under or as
part of the tax lots or parcels comprising any of the Properties.
SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest
in, including without limitation stock, partnership interest or other securities
of, any other Person (other than the Beverage Companies), or (ii) direct or
indirect loan, advance or capital contribution to any other Person, including
all indebtedness and accounts receivable from that other Person.
SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any
of them (including any Property) is property of the estate, in any voluntary or
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or other similar law now or hereafter in effect. No
Borrower Party and no property of any of them is under the possession or control
of a receiver, trustee or other custodian. No Borrower Party has made any
assignment for the benefit of creditors. No such assignment or bankruptcy or
similar case or proceeding is now contemplated. Notwithstanding the foregoing,
Lender acknowledges that case #01-16402 involving Impac Hotels I, L.L.C. remains
pending in the Bankruptcy Court for the Southern District of New York. Borrower
represents that the Plan of Reorganization for this case has been approved by
the bankruptcy court and that the case remains open solely for the purposes of
resolution of certain unsecured claims, which remaining claims are payable
solely out of a disputed claims reserve established by Guarantor pursuant to the
Plan of Reorganization.
SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to
Lender in writing herein or in any of the Loan Documents, no Default exists.
SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an
employee benefit plan as defined in Section 3(3) of ERISA which is subject to
ERISA, (ii) a plan as defined in
45
Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or
(iii) an entity whose underlying assets constitute "plan assets" of any such
employee benefit plan or plan for purposes of Title I of ERISA of Section 4975
of the IRC; provided that, in making such representation, the Borrowers have
assumed that (i) no portion of the Loan shall be funded with plan assets of any
employee benefit plan that is subject to Title I of ERISA or any plan that is
covered by Section 4975 of the Code unless the Lender is eligible to apply one
or more exemptions such that the Loan will not constitute a nonexempt prohibited
transaction under Section 406 of ERISA or that could subject a Borrower Party or
its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such
assumption in the preceding clause is true and correct with respect to any party
to which Lender transfers or assigns any portion of the Loan.
SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with the Borrowers are not and will not be subject to state
statutes applicable to the Borrowers' regulating investments of and fiduciary
obligations with obligations with respect to governmental plans.
SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person"
within the meaning of Section 1445(f)(3) of the IRC.
SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on
SCHEDULE 4.28 no Primary Borrower Party is a party to any collective bargaining
agreement.
SECTION 4.29 RESERVED.
SECTION 4.30 GROUND LEASES.
(A) Each Ground Lease contains the entire agreement of the Ground Lessor
and the applicable Borrower pertaining to each Ground Leased Property covered
thereby. The Borrowers have no estate, right, title or interest in or to the
Ground Leased Properties except under and pursuant to the Ground Leases. The
Borrowers have delivered true and correct copies of each of the Ground Leases to
Lender and the Ground Leases have not been modified, amended or assigned except
as set forth on SCHEDULE 4.30.
(B) To the Knowledge of the Borrowers, each Ground Lessor is the exclusive
fee simple owner of its Ground Leased Property, subject only to the Ground Lease
and the Permitted Encumbrances, and each Ground Lessor is the sole owner of the
lessor's interest in the applicable Ground Lease.
(C) There are no rights to terminate any Ground Lease other than any
Ground Lessor's right to terminate by reason of default, casualty, condemnation
or other reasons, in each case as expressly set forth in the applicable Ground
Lease.
(D) Each Ground Lease is in full force and effect and to the Borrowers'
Knowledge, no breach or default or event that with the giving of notice or
passage of time would constitute a breach or default under any Ground Lease (a
"GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or
on the part of any Ground Lessor under any Ground Lease. All base rent and
additional rent due and payable under the Ground Leases has been paid through
the date hereof and the Borrowers are not required to pay any deferred or
accrued rent after the date
46
hereof under any of the Ground Leases. The Borrowers have not received any
written notice that a Ground Lease Default has occurred or exists, or that any
Ground Lessor or any third party alleges the same to have occurred or exist.
(E) The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive
owner of the lessee's interest under and pursuant to the applicable Ground Lease
and has not assigned, transferred, or encumbered its interest in, to, or under
any Ground Lease (other than assignments that will terminate on or prior to
Closing), except in favor of Lender pursuant to this Loan Agreement and the
other Loan Documents.
SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their
respective officers, directors, partners, members, Affiliates or, to the
knowledge of the Borrowers, shareholders is an entity or person: (i) that is
listed in the Annex to, or is otherwise subject to the provisions of Executive
Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on
the United States Treasury Department's Office of Foreign Assets Control
("OFAC") most current list of "Specifically Designated National and Blocked
Persons" (which list may be published from time to time in various mediums
including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or
supports "terrorism", as that term is defined in EO 13224; or (iv) who is
otherwise affiliated with any entity or person listed above (any and all parties
or persons described in clauses (i) through (iv) above are herein referred to as
a "PROHIBITED PERSON").
ARTICLE V
COVENANTS OF BORROWER PARTIES
The Borrowers covenant and agree that until payment in full of the Loan,
all accrued and unpaid interest and all other Obligations, the Borrowers shall
perform and comply with all covenants in this Article V applicable to such
Person.
SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
(A) FINANCIAL STATEMENTS.
(i) ANNUAL REPORTING. Within one hundred twenty (120) days after the
end of each calendar year, the Borrowers (on a consolidated basis), and within
ninety (90) days after the end of each calendar year, Guarantor shall provide
true and complete copies of their Financial Statements for such year to Lender.
All such Financial Statements shall be audited by an Approved Accounting Firm or
by other independent certified public accountants reasonably acceptable to
Lender, and shall bear the unqualified certification of such accountants that
such Financial Statements present fairly in all material respects the financial
position of the subject company. The annual Financial Statements shall be
accompanied by Supplemental Financial Information for such calendar year. The
annual Financial Statements for the Borrowers (on a consolidated basis) and
Guarantor shall also be accompanied by a certification executed by the entity's
chief executive officer or chief financial officer (or other officer with
similar duties), satisfying the criteria set forth in Section 5.1(A)(viii)
below, and a Compliance Certificate (as defined below).
47
(ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days
after the end of each calendar quarter, the Borrowers on a consolidated basis
(other than with respect to income statements, which shall be on an individual
property basis) shall provide copies of their Financial Statements for such
quarter to Lender, together with a certification executed on behalf of each of
the Borrowers by their respective chief executive officers or chief financial
officers (or other officer with similar duties) in accordance with the criteria
set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements
shall be accompanied by Supplemental Financial Information and a Compliance
Certificate for such quarter.
(iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days
after the end of each calendar quarter, Guarantor shall provide copies of its
Financial Statements for such quarter to Lender, together with a certification
executed on behalf of Guarantor by its chief executive officer or chief
financial officer (or other officer with similar duties) in accordance with the
criteria set forth in Section 5.1(A)(viii) below.
(iv) LEASING REPORTS. Within forty-five (45) days after the end of
each calendar year, each Borrower shall provide to Lender a certified Rent Roll
and a schedule of security deposits held under Material Leases, each in form and
substance reasonably acceptable to Lender. Within forty-five (45) days after the
end of each calendar year, each Borrower shall also provide to Lender (a) a
schedule of any retail Material Leases that expired during such calendar year
and a schedule of retail Material Leases scheduled to expire within the next
calendar year and (b) to the extent the Borrowers received notice thereof, a
list of any retail tenants under Material Leases that filed bankruptcy,
insolvency or reorganization proceedings during such calendar year. Within
ninety (90) days after the end of each calendar year, each Borrower shall
provide to Lender a statement of income and expenses for all retail space at
each of the Properties owned and operated by the Borrowers and, to the extent
provided to the Borrowers and not subject to confidentiality restrictions, sales
reports for retail tenants for such year.
(v) MONTHLY REPORTING. Within thirty (30) days after the end of each
calendar month, each Borrower shall provide, or cause Manager to provide, to
Lender the following items determined on an accrual basis: (a) a calculation of
the average daily rate, RevPAR and occupancy calculations and statistics for
each of the Properties for the subject month; (b) Smith Travel Research "STAR"
reports then available; (c) monthly, and year to date operating statements
prepared for such calendar month and for the trailing twelve (12) month period
then ended, noting Net Operating Income, Net Cash Flow and including budgeted
and last year results for the same year-to-date period and other information
necessary and sufficient under GAAP to fairly represent the results of operation
of each of the Properties during such calendar month, all in form reasonably
satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects
completed during such calendar month (including a detailed explanation for any
material deviations from budget) and setting forth that all disbursements and/or
withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E
Reserve have been made with respect to items of Capital Improvement only (as
opposed to items that, in accordance with GAAP, would be included as an
Operating Expense); (e) monthly and year to date detailed reports of Operating
Expenses for each of the Properties, including supporting documentation
satisfactory to Lender in its sole discretion for each item of Extraordinary
Expense (as such term is defined in the Cash Management Agreement) for which
Lender has approved a disbursement
48
from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(v) of the
Cash Management Agreement; (f) most recently available "OSI", or similar quality
index, scores (including detailed information regarding criteria and
thresholds); (g) prior to Securitization of the Loan, market segmentation
reports for the trailing twelve (12) month period for each of the Properties;
and (h) a report setting forth (i) the date of termination by Property for each
Franchise Agreement that has been terminated after the Closing Date and not
replaced with an Approved Franchisor, (ii) the number of Properties for which a
default has occurred and has continued beyond applicable notice and grace
periods under the applicable Franchise Agreement (including the percentage of
the original Aggregate Allocated Loan Amount represented by such Properties),
(iii) a summary report establishing that the Borrowers are diligently continuing
to pursue reflagging efforts with respect to each such Property, and (iv) a
summary report including (a) the aggregate number of Properties for which the
Borrowers have entered into new Franchise Agreements as permitted by Sections
5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such
Property, and (b) the aggregate number of Properties for which any replacement
(and, if more than one replacement has occurred to a single Property, the number
of replacements with respect to such Property) of the applicable Franchise
Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and
5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal
Balance represented by such Properties and including the resulting Category of
each such Property. All of the above statements, reports and information shall
be provided to Lender by email in Microsoft Excel format or other spreadsheet
format reasonably acceptable to Lender (in the case of any statements, reports
or information provided by third parties that are not Affiliates of the
Borrowers, to the extent same are available in such format). Along with such
operating statements, each Borrower shall deliver to Lender a Compliance
Certificate of such Borrower's chief executive officer or chief financial
officer (or other officer with similar duties) satisfying the criteria set forth
in Section 5.1(A)(viii) below.
(vi) ADDITIONAL REPORTING. In addition to the foregoing, the
Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to
Lender such further documents and information concerning its operations,
properties, ownership, and finances as Lender shall from time to time reasonably
request upon prior written notice to the Borrowers.
(vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause
Guarantor and Manager to, maintain systems of accounting established and
administered in accordance with sound business practices and sufficient in all
respects to permit preparation of Financial Statements in conformity with GAAP
and the Uniform System. All Financial Statements shall be prepared in accordance
with GAAP and the Uniform System, consistently applied; provided, however, in
the event of a conflict between the Uniform System and GAAP, GAAP will be
followed.
(viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS,
COMPLIANCE CERTIFICATE. Together with the Financial Statements and other
documents and information provided to Lender by or on behalf of the Borrowers or
Guarantor under this Section, the Borrowers or Guarantor also shall deliver to
Lender a certification to Lender, executed on behalf of the Borrowers or
Guarantor by their respective chief executive officer or chief financial officer
(or other officer with similar duties), stating that to their Knowledge after
due inquiry such quarterly and annual Financial Statements and information
fairly present the financial condition and results of operations of the
Borrowers, Guarantor and/or the Properties
49
for the period(s) covered thereby, and do not omit to state any material
information without which the same might reasonably be misleading, and all other
non-financial documents submitted to Lender (whether monthly, quarterly or
annually) are true, correct, accurate and complete in all material respects. In
addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the
Person required to submit the same shall deliver a certificate duly executed on
behalf of such Person by its chief executive officer or chief financial officer
(or other officer with similar duties) stating (a) that, to their Knowledge
after due inquiry, there does not exist any Default or Event of Default under
the Loan Documents (or if any exists, specifying the same in detail), and (b)
the Borrowers and Guarantor have complied with the applicable reporting
requirements of this Section 5.1.
(ix) FISCAL YEAR. Each Borrower represents that its fiscal year and
that of the Guarantor ends on December 31, and agrees that no change shall be
made to each such fiscal year, without Lender's prior written consent.
(B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower
will deliver copies of all material reports submitted by independent public
accountants in connection with each annual, interim or special audit of the
Financial Statements or other business operations of such Borrower made by such
accountants, including the comment letter submitted by such accountants to
management in connection with the annual audit.
(C) TAX RETURNS. Within thirty (30) days after filing the same, each
Borrower shall deliver to Lender a copy of its Federal income tax returns (or
the return of the applicable Person into which such Borrower's Federal income
tax return is consolidated) certified on its behalf by its chief financial
officer (or similar position) to be true and correct.
(D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of
each calendar year, each Borrower shall deliver to Lender for its review for its
Property a proposed Operating Budget and CapEx/FF&E Budget (in each case
presented on a monthly and annual basis) for such calendar year. Each Operating
Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall
not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap
Event or Event of Default exists, the Borrowers may make changes to the
Operating Budget and the CapEx/FF&E Budget from time to time as deemed
reasonably necessary by the Borrower, provided no such modification (together
with all prior modifications taken as a whole) shall alter any single line item
(or the applicable Budget as a whole) by more than ten percent (10%) without
Lender's prior written approval, which approval shall not be unreasonably
withheld; provided, however, notwithstanding the foregoing during a Cash Trap
Event, increases to the Operating Budget for any Property (not to exceed ten
percent (10%) of the Operating Budget for such Property as a whole) will be
permitted without Lender's consent for actual verifiable increases in utilities,
water and sewer assessments and charges and real property taxes for the
applicable Property over the amounts therefor set forth in the Operating Budget
for such Property for the prior period. Notice of any modifications to the
Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the
time of delivery of the next financial reporting required pursuant to Section
5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget
and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating
Budget shall identify and set forth each Borrower's reasonable estimate, after
due consideration, of all revenue, costs, and expenses, and shall specify
Operating
50
Revenues and Operating Expenses on a line-item basis consistent with the form of
Operating Budget delivered to Lender prior to Closing. If any of said budgets or
plans requiring Lender's approval is not in form and substance reasonably
satisfactory to Lender, Lender may disapprove the same and specify the reasons
therefor in writing, and the Borrowers shall promptly amend and resubmit for
approval revised budgets or plans, as applicable, making such changes as are
necessary to comply with the reasonable requirements of Lender. Until any such
budget or plan for any year requiring Lender's approval has been approved or
deemed approved, the applicable budget or plan for the previous year shall
remain in effect until the new budget or plan is approved or deemed approved.
Lender's consent to any budget, plan or amendments thereto shall be deemed
given, if the first correspondence from the Borrowers to Lender requesting such
approval is in an envelope marked "PRIORITY" and contains a bold-faced,
conspicuous legend at the top of the first page thereof stating that "IF YOU
FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING
WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied
by the information and documents required above and any other information
reasonably requested by Lender in writing prior to the expiration of such
fifteen (15) day period in order to adequately review the same has been
delivered and, if Lender fails to respond or to expressly deny such request for
approval in writing within the fifteen (15) day period, a second notice is
delivered to Lender from the Borrowers in an envelope marked "PRIORITY"
requesting approval containing a bold-faced, conspicuous legend at the top of
the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY
THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL
BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request
for approval within the ten (10) day period.
(E) MATERIAL NOTICES.
(i) The Borrowers shall promptly deliver, or cause to be delivered,
copies of all notices given or received with respect to a default under any term
or condition related to any Permitted Indebtedness of any Borrower, and shall
notify Lender within five (5) Business Days of any potential or actual event of
default with respect to any such Permitted Indebtedness.
(ii) The Borrowers shall promptly deliver to Lender copies of any
and all material notices (including without limitation any notice alleging any
default or breach which is reasonably expected to result in a termination)
received with respect to any Material Agreement or any Lease, including, without
limitation, any inspection report and any progress reports related to any
Property Improvement Plan received from a Franchisor related to such Borrower's
Property.
(F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining
knowledge of any of the following events or conditions, such Borrower shall
deliver a certificate executed on its behalf by its chief financial officer or
similar officer specifying the nature and period of existence of such condition
or event and what action such Borrower or any Affiliate thereof has taken, is
taking and proposes to take with respect thereto: (i) any condition or event
that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii)
any actual or alleged breach or default or assertion of (or written threat to
assert) remedies under any Management Agreement, Franchise Agreement or Ground
Lease.
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(G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of
(1) the institution of any action, suit, proceeding, governmental investigation
or arbitration against the Borrowers or any of the Properties not previously
disclosed in writing by the Borrowers to Lender which would be reasonably likely
to have a Material Adverse Effect or is not covered by insurance or (2) any
material development in any action, suit, proceeding, governmental investigation
or arbitration at any time pending against or affecting the Borrowers or the
Properties which, in each case, if adversely determined would reasonably be
expected to have a Material Adverse Effect, the Borrowers will give notice
thereof to Lender and, upon request from Lender, provide such other information
as may be reasonably available to them to enable Lender and its counsel to
evaluate such matter.
(H) INSURANCE. At least five (5) Business Days prior to the end of each
insurance policy period of the Borrowers, the Borrowers will deliver
certificates, reports, and/or other information (all in form and substance
reasonably satisfactory to Lender), (i) outlining all material insurance
coverage maintained as of the date thereof by the Borrowers and all material
insurance coverage planned to be maintained by the Borrowers in the subsequent
insurance policy period and (ii) evidencing payment in full of the premiums for
such insurance policies.
(I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver
such other information and data with respect to such Person and its Affiliates
or the Properties as from time to time may be reasonably requested by Lender.
SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve
and keep in full force and effect their existence as a limited partnership,
limited liability company, or corporation, as the case may be, and all rights
and franchises material to its business, including their qualification to do
business in each state where it is required by law to so qualify. Without
limitation of the foregoing, each Borrower and, to the extent required by
applicable law, General Partner and Member, shall at all times be qualified to
do business in each of the states where the Properties are located.
SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS.
(A) Except for those matters being contested pursuant to clause (B) below,
the Borrowers will pay (i) all Impositions; (ii) all claims (including claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state
and local income taxes, sales taxes, excise taxes and all other taxes and
assessments of the Borrowers on their business, income or assets; in each
instance before any penalty or fine is incurred with respect thereto.
(B) The Borrowers shall not be required to pay, discharge or remove any
Imposition or Claim relating to a Property so long as the Borrowers contest in
good faith such Imposition, Claim or the validity, applicability or amount
thereof by an appropriate legal proceeding which operates to prevent the
collection of such amounts and the sale of the applicable Property or any
portion thereof, and so long as: (i) no Event of Default shall have occurred and
be continuing, (ii) prior to the date on which such Imposition or Claim would
otherwise have become delinquent, the Borrowers shall have given Lender prior
written notice of their intent to contest
52
said Imposition or Claim; (iii) prior to the date on which such Imposition or
Claim would otherwise have become delinquent, the Borrowers shall have deposited
with Lender (or with a court of competent jurisdiction or other appropriate body
reasonably approved by Lender) such additional amounts as are necessary to keep
on deposit at all times, an amount by way of cash, Dollar Equivalents, or a
Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or
such higher amount as may be required by applicable law) of the total of (x) the
balance of such Imposition or Claim then remaining unpaid, and (y) all interest,
penalties, costs and charges accrued or accumulated thereon; (iv) no risk of
sale, forfeiture or loss of any interest in the applicable Property or any part
thereof arises, in Lender's reasonable judgment, during the pendency of such
contest; (v) such contest does not, in Lender's reasonable determination, have a
Material Adverse Effect; and (vi) such contest is based on bona fide, material,
and reasonable claims or defenses. Any such contest shall be prosecuted with due
diligence, and the Borrowers shall promptly pay the amount of such Imposition or
Claim as finally determined, together with all interest and penalties payable in
connection therewith. Lender shall have full power and authority, but no
obligation, to apply any amount deposited with Lender under this subsection to
the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture
of the applicable Property for non-payment thereof, if Lender reasonably
believes that such sale or forfeiture is threatened. Any surplus retained by
Lender after payment of the Imposition or Claim for which a deposit was made
shall be promptly repaid to the Borrowers unless an Event of Default shall have
occurred, in which case said surplus may be retained by Lender to be applied to
the Obligations. Notwithstanding any provision of this Section to the contrary,
the Borrowers shall pay any Imposition or Claim which they might otherwise be
entitled to contest if an Event of Default shall occur and be continuing, or if,
in the reasonable determination of Lender, the applicable Property is in danger
of being forfeited or foreclosed. If the Borrowers refuse to pay any such
Imposition or Claim, Lender may (but shall not be obligated to) make such
payment and the Borrowers shall reimburse Lender on demand for all such
advances.
SECTION 5.4 MAINTENANCE OF INSURANCE.
The Borrowers will continuously maintain the following described policies
of insurance on each of the respective Properties without cost to Lender (the
"INSURANCE POLICIES"):
(i) Property insurance against loss and damage by all risks of
physical loss or damage, including fire, sprinkler leakage, windstorm,
hurricane, terrorism, and other risks covered by the so-called extended coverage
endorsement covering the Improvements and personal property in amounts not less
than the full insurable replacement value of all Improvements (less building
foundations and footings) and personal property from time to time on the
Properties and without sublimits, and bearing a replacement cost agreed-amount
endorsement;
(ii) Commercial general liability insurance, including death, bodily
injury, innkeeper legal liability and broad form property damage coverage with a
combined single limit in an amount not less than One Million Dollars
($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the
aggregate for any policy year;
(iii) If any of the Properties are in an area prone to geological
phenomena, including, but not limited to, sinkholes, mine subsidence or
earthquakes, insurance covering such
53
risks in an amount equal to 100% of the full replacement cost of all
improvements (without any deductions for depreciation) and with a maximum
permissible deductible equal to the lesser of $25,000 or 10% of the face value
of the policy;
(iv) For each Property located in whole or in part in a federally
designated "special flood hazard area", flood insurance in the maximum available
amount;
(v) An umbrella excess liability policy with a limit of not less
than Twenty Million Dollars ($20,000,000) over primary insurance, which policy
shall include coverage for so-called assumed and contractual liability coverage
and automobile liability coverage, and coverage for safeguarding of personalty
and shall also include such additional coverages and insured risks which are
acceptable to Lender;
(vi) Business interruption and/or rent loss insurance with an
aggregate limit equal to at least the gross income from the Properties for an
indemnity period commencing on the date of such casualty and ending at least six
(6) months after completion of the Restoration (such amount being adjusted
annually);
(vii) Crime protection insurance covering all employees with access
to funds and located in Guarantor's corporate offices with a limit of not less
than One Million Dollars ($1,000,000) and with the same coverages and
deductibles as currently in place at the Properties;
(viii) Steam boiler, machinery and pressurized vessel insurance
insuring against breakdown or explosion of such equipment on a replacement cost
value basis, which shall not contain any exclusions for testing procedures;
(ix) Worker's Compensation Insurance in statutory amounts, if any,
at all times;
(x) Insurance against loss or damage from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning equipment, high
pressure piping, machinery and equipment, pressure vessels or similar apparatus
now or hereafter installed in the Improvements (without exclusion for
explosions), in an amount at least equal to the Aggregate Allocated Loan Amount;
(xi) During any period of construction, repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the full
insurable value of the Properties (excluding building foundations and footings)
against such risks (including, without limitation, fire and extended coverage
and collapse of the Improvements to agreed limits) as Lender may reasonably
request;
(xii) If the Properties are or become a "non-conforming use" under
applicable zoning and building ordinances, or other requirements of the
applicable Governmental Authority, law or ordinance coverage to compensate for
the cost of demolition and the increased cost of construction, if available;
(xiii) If the Borrowers, Manager or any of their respective
Affiliates holds a liquor license for the Properties, liquor liability insurance
(including "dram shop" liability) in an
54
amount not less than $1,000,000 for each common cause and $3,000,000 in the
aggregate; provided that if such liquor license is held by any tenant under a
Lease, the Borrowers shall cause such tenant to cause liquor liability insurance
in an amount not less than the limits set forth above to be carried in such
tenant's name, and shall include the Borrowers and Lender as additional insureds
thereunder;
(xiv) If reasonably required by Lender as a result of the release,
disposal or existence of any Hazardous Materials on or about any Property after
the date hereof (or as to which Lender obtains knowledge after the date hereof)
or if such insurance is then customarily required by institutional lenders for
securitized loans, environmental insurance, including mold coverage, in form and
with coverages (including business interruption coverage) reasonably
satisfactory to Lender; provided, however, without limiting or affecting
Lender's right to require such environmental insurance with respect to any other
Properties after the date hereof, Lender acknowledges that, as of the date
hereof, environmental insurance shall only be required with respect to the
Property known as the Holiday Inn, located at 363 Roberts Street, East Hartford,
Connecticut;
(xv) Fiduciary liability insurance and directors and officers
liability insurance ("D&O INSURANCE") with coverages at levels in effect as of
the Closing Date;
(xvi) Insurance against acts of terrorism, or insurance policies
without an exclusion for damages resulting from acts of terrorism on terms
consistent with the commercial property insurance policies required under
subsection (i), (ii), (v) and (vi) above;
(xvii) Such other insurance as may from time to time be reasonably
required by Lender and which is then customarily required by institutional
lenders for securitized loans secured by similar properties similarly situated,
against other insurable hazards, including, but not limited to, malicious
mischief, vandalism, windstorm and or earthquake, due regard to be given to the
size and type of the Properties, Improvements, fixtures and equipment and their
location, construction and use. Additionally, the Borrowers shall carry such
insurance coverage as Lender may from time to time require if the failure to
carry such insurance would result in a downgrade, qualification or withdrawal of
any class of securities issued in connection with a Securitization.
All Insurance Policies shall be in content (including, without limitation,
endorsements or exclusions, if any), form, and amounts, and issued by companies,
satisfactory to Lender from time to time and shall name Lender and its
successors and assignees as their interests may appear as (x) an "additional
insured" for each of the liability policies under this Section 5.4 hereof, and
(y) a "mortgagee" for each of the property and casualty policies under this
Section hereof, and shall (except for Worker's Compensation Insurance) contain a
waiver of subrogation clause reasonably acceptable to Lender. Other than with
respect to D&O Insurance, an insurance company shall not be satisfactory unless
such insurance company (a) is licensed or authorized to issue insurance in the
State where the applicable Property is located and (b) has a claims paying
ability rating by the Rating Agencies of AA- (or its equivalent).
Notwithstanding the foregoing, a carrier which does not meet the foregoing
ratings requirement shall nevertheless be deemed acceptable hereunder provided
that such carrier is reasonably acceptable to Lender and the Borrowers shall
obtain and deliver to Lender a Rating Confirmation with respect to such carrier
55
from each of the Rating Agencies, provided, however, that: (a) if any insurance
coverage required under this Section 5.4 is maintained by a syndicate of
insurers, the preceding ratings requirements shall be deemed satisfied (without
any required Rating Confirmation) as long as at least seventy five percent (75%)
of the coverage (if there are four or fewer members of the syndicate) or at
least sixty percent (60%) of the coverage (if there are five or more members of
the syndicate) is maintained with carriers meeting the claims-paying ability
ratings requirements by S&P and Moody's (if applicable) set forth above and all
carriers in such syndicate have a claims-paying ability rating by S&P of not
less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by
Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier
providing the insurance described in clause (ii) above, so long as such carrier
maintains a claims paying ability of not less than A- by S&P (and the equivalent
from each of the other Rating Agencies to the extent rated thereby) and (c)
until the expiration of the current term of the applicable policies, Lender
hereby approves Landmark American as the carrier providing the insurance
described in clauses (i), (iv) and (vi) above (covering losses over the first
$25,000,000 of coverage), so long as thereafter such carrier or any other
carrier providing the above coverages maintains a claims paying ability of not
less than A by S&P (and the equivalent from each of the other Rating Agencies to
the extent rated thereby). All Insurance Policies under Sections 5.4 (i), (iv),
(vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory
Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438
BFU NS), or their equivalents (such endorsements shall entitle Lender to collect
any and all proceeds payable under all such insurance, with the insurance
company waiving any claim or defense against Lender for premium payment,
deductible, self-insured retention or claims reporting provisions). All
Insurance Policies shall provide that the coverage shall not be modified without
(30) days' advance written notice to Lender and shall provide that no claims
shall be paid thereunder to a Person other than Lender without ten (10) days'
advance written notice to Lender. The Borrowers may obtain any insurance
required by this Section through blanket policies; provided, however, that such
blanket policies shall separately set forth the amount of insurance in force
with respect to the Properties (which shall not be reduced by reason of events
occurring on property other than the Properties) and shall afford all the
protections to Lender as are required under this Section. Except as may be
expressly provided above, all policies of insurance required hereunder shall
contain no annual aggregate limit of liability, other than with respect to
liability insurance. If a blanket policy is issued, a certified copy of said
policy shall be furnished, together with a certificate indicating that Lender is
an additional insured (and, if applicable, loss payee) under such policy in the
designated amount. The Borrowers will deliver duplicate originals of all
Insurance Policies, premium prepaid through the current expiration dates of such
Insurance Policies, to Lender and, in case of Insurance Policies about to
expire, the Borrowers will deliver duplicate originals of replacement policies
satisfying the requirements hereof to Lender not less than ten (10) days prior
to the date of expiration; provided, however, if such replacement policy is not
yet available, the Borrowers shall provide Lender with an insurance certificate
executed by the insurer or its authorized agent evidencing that the insurance
required hereunder is being maintained under such policy, which certificate
shall be acceptable to Lender on an interim basis until the duplicate original
of the policy is available. The Borrowers shall furnish Lender receipts for the
payment of premiums on such insurance policies or other evidence of such payment
reasonably satisfactory to Lender in the event that such premiums have not been
paid by Lender pursuant to the Loan Agreement. The requirements of this Section
5.4 shall apply to any separate policies of insurance taken out by the Borrowers
56
concurrent in form or contributing in the event of loss with the Insurance
Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure
to act or negligence of the Borrowers or their agents or employees, Lender or
any other insured party which might, absent such agreement, result in a
forfeiture or all or part of such insurance payment, other than the willful
misconduct of Lender knowingly in violation of the conditions of such policy,
(2) the occupation or use of the Properties or any part thereof for purposes
more hazardous than permitted by the terms of such policy, (3) any foreclosure
or other action or proceeding taken pursuant to this Loan Agreement or (4) any
change in title to or ownership of the Properties or any part thereof. The
property insurance and the boiler and machinery insurance described in Sections
5.4(i) and (x) hereof shall include "underground hazards" coverage; "time
element" coverage by which Lender shall be assured payment of all amounts due
under the Note, this Loan Agreement and the other Loan Documents; "extra
expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage;
and "expediting expense" coverage to facilitate rapid repair or restoration of
the Properties. The Insurance Policies shall not contain any deductible in
excess of $250,000.
SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY.
(A) The Borrowers will operate and maintain the Properties as is necessary
to maintain hotel standards at least as high as those that currently apply to
each Property, subject to ordinary wear and tear, as reasonably determined by
the Borrowers, and otherwise in compliance with the standards under the
applicable Franchise Agreement and shall maintain or cause to be maintained in
good repair, working order and condition all material property used in the
business of each Borrower, including the applicable Property, and will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Without limitation of the foregoing, each Borrower will operate and maintain its
Property substantially in accordance with the applicable Operating Budget and
the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement
shall be performed in a workmanlike manner and in compliance with all applicable
laws.
So long as no Event of Default has occurred and is continuing, the
Borrowers may, without Lender's consent, perform alterations to the Properties
which do not constitute a Material Alteration. The Borrowers shall not perform
any Material Alteration without Lender's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, however,
that Lender may, in its sole and absolute discretion, withhold consent to any
Material Alteration which is likely to result in a decrease of Net Operating
Income (taking into consideration all Material Alterations being undertaken at
the Properties at such time) by 5% or more below that which was in effect prior
to the commencement of the first such Material Alteration being undertaken at
the time of determination for a period of sixty (60) days or longer; provided,
further, however, the Borrowers may perform a Material Alteration without
Lender's consent if (i) the delay caused by obtaining Lender's prior consent may
result in injury or death at, or further destruction or deterioration of, the
applicable Property, (ii) such Material Alteration is necessary to prevent the
likelihood of injury or death at, or further destruction or deterioration of,
the applicable Property, and (iii) the Borrowers deliver notice to Lender within
two (2) Business Days of commencement of such Material Alteration together with
such supporting documentation as Lender may require with respect to such
Material Alteration. Lender may, as a condition to giving its consent to a
Material Alteration, require that the Borrowers deliver to Lender evidence
reasonably satisfactory to Lender that the Borrowers have cash available for
57
payment of the cost of such Material Alteration or, if the Borrowers fail to
deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an
amount equal to 125% of the cost of such Material Alteration as reasonably
estimated by Lender. Cash deposited by the Borrowers with Lender in connection
with any Material Alteration pursuant to the foregoing sentence shall be held by
Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers
to pay for the cost of such Material Alteration as such work progresses subject
to satisfaction of the conditions for disbursement of amounts from the Capital
Improvement Reserve under Section 6.5 (including the requirements set forth
under Section 6.7). Upon completion of the Material Alteration, the Borrowers
shall provide evidence reasonably satisfactory to Lender that (i) the Material
Alteration was constructed in accordance with all material applicable laws and
substantially in accordance with plans and specifications approved by Lender
(which approval shall not be unreasonably withheld or delayed), (ii) all
contractors, subcontractors, materialmen and professionals who provided work,
materials or services in connection with the Material Alteration have been paid
in full and have delivered unconditional releases of lien and (iii) all material
licenses necessary for the use, operation and occupancy of the Material
Alteration (other than those which depend on the performance of tenant
improvement work) have been issued. The Borrowers shall reimburse Lender upon
demand for all reasonable out-of-pocket costs and expenses (including the
reasonable fees of any architect, engineer or other professional engaged by
Lender) incurred by Lender in reviewing plans and specifications or in making
any determinations necessary to implement the provisions of this Section 5.5(A).
(B) In the event of casualty or loss at any of the Properties, the
Borrowers shall give immediate written notice of the same to the insurance
carrier and to Lender and shall promptly commence and diligently prosecute to
completion, in accordance with the terms hereof, the repair and restoration of
the Property as nearly as possible to the Pre-Existing Condition (a
"RESTORATION"). The Borrowers hereby authorize and empower Lender as
attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event
of Default has occurred and is continuing), or any of them, to make proof of
loss, to adjust and compromise any claim under insurance policies, to appear in
and prosecute any action arising from such insurance policies, to collect and
receive insurance proceeds, and to deduct therefrom Lender's expenses incurred
in the collection of such proceeds; provided however, that nothing contained in
this Section shall require Lender to incur any expense or take any action
hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to
hold the balance of such proceeds to be used to reimburse the Borrowers for the
cost of Restoration of any of the Properties or (ii) subject to Subsection
5.5(C), to apply such proceeds to payment of the Obligations whether or not then
due, in any order. Notwithstanding the foregoing, in the event of a casualty
where the loss does not exceed the Restoration Threshold, the Borrowers may
settle and adjust such claim; provided that (a) no Event of Default has occurred
and is continuing and (b) such adjustment is carried out in a commercially
reasonable and timely manner.
(C) Lender shall not exercise Lender's option to apply insurance proceeds
to payment of the Obligations if all of the following conditions are met: (i) no
Event of Default then exists; (ii) Lender reasonably determines that there will
be sufficient funds to complete the Restoration of the Property to at least
substantially the Pre-Existing Condition and to timely make all payments due
under the Loan Documents during the Restoration of the affected Property; (iii)
Lender reasonably determines that the Net Operating Income of the Properties
(including rental income or business interruption insurance) will be sufficient
to pay principal and interest
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on the Loan and the Mezzanine Loan and Operating Revenues of the Properties,
after the Restoration thereof to the Pre-Existing Condition, will be sufficient
to meet all Operating Expenses, payments for Reserves and payments of principal
and interest under the Note and the Mezzanine Loan; (iv) Lender determines that
the Restoration of the affected Property to the Pre-Existing Condition will be
completed not later than five (5) months prior to the expiration of any business
interruption insurance, but in no event later than six (6) months prior to the
Maturity Date; (v) less than fifty percent (50%) of the total floor area of the
Improvements has been damaged, destroyed or rendered unusable as a result of
such fire or other casualty; and (vi) such Property can be restored and repaired
substantially to the condition it was in immediately prior to such casualty and
in compliance with all applicable zoning, building and other laws and codes (the
"PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to
payment of the Obligations, such application shall be made on the Payment Date
immediately following such election in accordance with the terms of the Cash
Management Agreement.
(D) If Lender elects or is obligated to make the insurance proceeds
available for the Restoration of any Property and Lender is holding such
proceeds, the Borrowers agree that, if at any time during the Restoration, the
cost of completing such Restoration, as reasonably determined by Lender, exceeds
the undisbursed insurance proceeds, the Borrowers shall, within ten (10)
Business Days following the written demand by Lender, deposit the amount of such
excess with Lender, and Lender shall first disburse such deposit to pay for the
costs of such Restoration on the same terms and conditions as the insurance
proceeds are disbursed. If the Borrowers deposit such excess with Lender and if,
after completion of the Restoration, any funds remain from the combination of
insurance proceeds and the funds so deposited with Lender by the Borrowers, and
if no Event of Default shall have occurred and be continuing, then Lender shall
promptly disburse to the Borrowers such remaining funds.
(E) Lender may, at Lender's option, condition disbursement of any
insurance proceeds on Lender's approval (which approval shall not be
unreasonably withheld) of plans and specifications of an independent architect
licensed in the state where the Property is located and reasonably satisfactory
to Lender (the "ARCHITECT"), any and all contractors, subcontractors and
materialmen engaged in the Restoration and the contracts under which they have
been engaged, contractor's cost estimates, architect's certificates, waivers of
liens, sworn statements of mechanics and materialmen and such other evidence of
costs, percentage completion of construction, application of payments, and
satisfaction of liens as Lender may reasonably require. Lender shall not be
obligated to disburse insurance proceeds more frequently than once every
calendar month. If insurance proceeds are applied to the payment of the
Obligations and provided no Event of Default exists, any such application of
proceeds to principal shall be without any Prepayment Consideration and shall
not extend or postpone the due dates of the monthly payments due under the Note
or otherwise under the Loan Documents, or change the amounts of such payments.
If Lender elects to apply all of such insurance proceeds toward the repayment of
the Obligations, the Borrowers shall (subject to compliance with clauses (A),
(B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property
Release (without representation or warranty) of the applicable Property from the
Lien of the Mortgage relating to such Property (in which event the Borrowers
shall not be obligated to restore the applicable Property pursuant to Section
5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by
which the Release Price for such Property exceeds the insurance proceeds
received by Lender and applied to repayment of the Obligations. If any proceeds
are applied to
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reduce the Obligations under this Section 5.5, provided that no Event of Default
has occurred and is continuing, no Prepayment Consideration shall be due and
payable in connection with such application. Any amount of insurance proceeds
remaining in Lender's possession after full and final payment and discharge of
all Obligations shall be refunded to, or as directed by, the Borrowers or
otherwise paid in accordance with applicable law. If the Property is sold at
foreclosure or if Lender acquires title to the Property, Lender shall have all
of the right, title and interest of the applicable Borrower in and to any
insurance policies and unearned premiums thereon and in and to the proceeds
resulting from any damage to such Property prior to such sale or acquisition.
(F) In no event shall Lender be obligated to make disbursements of
insurance proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as certified by
the Architect, less a retainage equal to the lesser of (x) the actual retainage
required pursuant to the permitted contract, or (y) ten percent (10%) of such
costs incurred until the Restoration has been completed. The retainage shall in
no event be less than the amount actually held back by the Borrowers from
contractors, subcontractors and materialmen engaged in the Restoration. The
retainage shall not be released until the Architect certifies to Lender, or, if
no Architect has been retained by Lender, Lender is reasonably satisfied, that
the Restoration has been completed in accordance with the provisions of this
Section 5.5 and that all approvals necessary for the re-occupancy and use of the
Property have been obtained from all appropriate governmental authorities, and
Lender receives final lien waivers and such other evidence reasonably
satisfactory to Lender that the costs of the Restoration have been paid in full
or will be paid in full out of the retainage.
SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized
representatives designated by Lender to visit and inspect during normal business
hours its Property and its business, including its financial and accounting
records, and to make copies and take extracts therefrom and to discuss its
affairs, finances and business with its officers and independent public
accountants (with such Borrower's representative(s) present), at such reasonable
times during normal business hours and as often as may be reasonably requested.
Unless an Event of Default has occurred and is continuing, Lender shall provide
advance written notice of at least three (3) Business Days prior to visiting or
inspecting any Property or such Borrower's offices.
SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and
delivered to Lender operations and maintenance programs (the "O&M PLANS") with
respect to suspected asbestos, asbestos-containing materials, and/or mold
located in certain Properties as set forth on Schedule 6.6 attached hereto,
which conditions were disclosed in the applicable Environmental Reports for such
Properties. Each applicable Borrower shall at all times implement and carry out
the O&M Plan in accordance with its terms. Lender's requirement that the
applicable Borrowers develop and comply with the O&M Plan shall not be deemed to
constitute a waiver or modification of any covenants or agreements of the
Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws
as set forth in the Environmental Indemnity.
SECTION 5.8 RESERVED.
SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will
(A) comply with the requirements of all present and future applicable laws,
rules, regulations and
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orders of any governmental authority in all jurisdictions in which it is now
doing business or may hereafter be doing business, other than those laws, rules,
regulations and orders the noncompliance with which would not reasonably be
expected to have, either individually or in the aggregate, a material adverse
effect on the operation or value of any Property, (B) maintain all licenses and
permits now held or hereafter acquired by any Borrower, the loss, suspension, or
revocation of which, or failure to renew, could have a material adverse effect
on the operation or value of any Property and (C) perform, observe, comply and
fulfill all of its material obligations, covenants and conditions contained in
any Contractual Obligation.
SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute
and/or deliver such documents, instruments, agreements, financing statements,
and perform such acts as Lender at any time may reasonably request to evidence,
preserve and/or protect the Collateral at any time securing or intended to
secure the Obligations and/or to better and more effectively carry out the
purposes of this Loan Agreement and the other Loan Documents.
SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party
shall duly and punctually perform, observe and comply in all material respects
with all of the terms, provisions, conditions, covenants and agreements on its
part to be performed, observed and complied with (i) hereunder and under the
other Loan Documents to which it is a party, (ii) under all Material Agreements
and Leases and (iii) all other agreements entered into or assumed by such Person
in connection with the Properties, and will not suffer or permit any material
default or event of default (giving effect to any applicable notice requirements
and cure periods) to exist under any of the foregoing except where the failure
to perform, observe or comply with any agreement referred to in this clause
(iii) would not reasonably be expected to have a material adverse effect on the
operation or value of any Property.
SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which
shall not be unreasonably withheld or delayed, the Borrowers shall not, nor
shall the Borrowers authorize Manager or any other Person to, (i) enter into any
Material Lease; (ii) cancel or terminate any Material Lease (except to enforce
any such Lease after a default thereunder); (iii) amend or modify any Material
Lease (except for minor modifications and amendments entered into in the
ordinary course of business, consistent with prudent property management
practices, not materially and adversely affecting the economic terms of the
Material Lease); (iv) approve any assignment, sublease or underlease of any
Material Lease (except as required pursuant to the express terms of any existing
Lease or Lease hereafter approved by Lender); or (v) cancel or modify any
guaranty, or release any security deposit, letter of credit, or other item
constituting security pertaining to any Material Lease (except as required
pursuant to the express terms of any existing Lease or Lease hereafter approved
by Lender).
(B) Any request for approval of any Material Lease or assignment,
termination, amendment or modification of any Material Lease shall be made to
Lender in writing and together with such request the Borrowers shall furnish to
Lender: (i) such biographical and financial information about the proposed
tenant as Lender may reasonably require in conjunction with its review, (ii) a
copy of the proposed form of Lease (or amendment or modification), and (iii) a
summary of the material terms of such proposed Lease (or amendment or
modification) including, without limitation, rental terms and the term of the
proposed Lease and any options. Lender's approval of any Material Lease or
assignment, termination, amendment or modification
61
of any Material Lease, shall be deemed given, if the first correspondence from
the Borrowers to Lender requesting such approval is in an envelope marked
"PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first
page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS
REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE
DEEMED GIVEN", and is accompanied by the information and documents required
above and any other information reasonably requested by Lender in writing prior
to the expiration of such fifteen (15) day period in order to adequately review
the same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.
Except for security deposits, no Material Lease executed after the Closing
Date shall provide for payment of rent more than one month in advance, and the
Borrowers shall not under any circumstances collect any such rent more than one
month in advance. The Borrowers, at Lender's request, shall furnish Lender with
executed copies of all Material Leases hereafter made. Each new Material Lease
or a separate agreement with the tenant of such Material Lease shall be in
recordable form and shall specifically provide that such Material Lease (i) is
subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such
attornment to be effective upon Lender's acquisition of title to the Property;
(iii) that the tenant agrees to execute such further evidences of attornment as
Lender may from time to time request; (iv) that the attornment of the tenant
shall not be terminated by foreclosure; (v) that in no event shall Lender, as
holder of the Mortgages or as successor landlord, be liable to the tenant for
any act or omission of any prior landlord or for any liability or obligation of
any prior landlord occurring prior to the date that Lender or any subsequent
owner acquire title to the Property; and (vi) that Lender may, at Lender's
option, accept or reject such attornment.
SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS.
(A) The Borrowers shall cause each Manager to manage the Properties in
accordance with the Management Agreements including, without limitation,
maintaining inventory in amounts and types customary for hotels comparable to
each Property. The Borrowers shall (i) perform and observe all of the material
terms, covenants and conditions of the Management Agreement on the part of each
Borrower to be performed and observed, and (ii) promptly notify Lender of any
notice to any of the Borrowers of any material default under the Management
Agreement of which it is aware. If any of the Borrowers shall default in the
performance or observance of any material term, covenant or condition of the
applicable Management Agreement on the part of the Borrowers to be performed or
observed, then, without limiting Lender's other rights or remedies under this
Agreement or the other Loan Documents, and without waiving or releasing the
Borrowers from any of their obligations hereunder or under the applicable
Management Agreement, Lender shall have the right, upon prior written notice to
the Borrower, but shall be under no obligation, to pay any sums and to perform
any act as may be
62
reasonably appropriate to cause such material conditions of the applicable
Management Agreement on the part of the Borrowers to be performed or observed.
(B) The Borrowers shall not surrender, terminate, cancel, modify (other
than non-material changes), renew or extend the Management Agreement, or enter
into any other Management Agreement with Manager or any new Manager, or consent
to the assignment by the Manager of its interest under the Management Agreement,
in each case without (i) prior to a Securitization, the express consent of
Lender, which consent shall not be unreasonably withheld, or (ii) after a
Securitization, delivery of Rating Confirmations from each of the Rating
Agencies. The Borrowers shall cause any new Manager with respect to any Property
to execute and deliver a subordination of management agreement in substantially
the form delivered in connection with the closing of the Loan.
(C) Lender shall have the right to require any of the Borrowers to replace
any Manager with a Person chosen by the Borrowers and reasonably acceptable to
Lender (unless such proposed Manager is an Acceptable Manager) and the
applicable Franchisor (to the extent the applicable Franchisor has consent
rights), upon the earliest to occur of any one or more of the following events:
(i) upon the occurrence and during the continuance of an Event of Default; (ii)
thirty (30) days after notice from Lender to the Borrowers if Manager has
engaged in fraud, gross negligence or willful misconduct arising from or in
connection with its performance under the applicable Management Agreement; or
(iii) upon a change of control of the current Manager.
(D) The Borrowers shall not terminate or enter into any Franchise
Agreement without Lender's prior written consent, which may be granted or
withheld in Lender's sole discretion. Notwithstanding the foregoing, the
following changes to Franchise Agreements shall be permitted without Lender's
prior written consent:
(i) Replacement of any Franchise Agreement with a new Franchise
Agreement in form substantially similar to a form previously
approved by Lender with any Franchisor that would cause a Tier
3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or
that would cause a Tier 2 Hotel to become a Tier 1 Hotel;
(ii) Replacement of any Franchise Agreement with a new Franchise
Agreement in form substantially similar to a form previously
approved by Lender with another Franchisor within the same
Category, provided that the Borrowers shall not replace
Franchise Agreements (in the aggregate) pursuant to this
Section 5.13(D)(ii) with respect to more than the lesser of
(x) two (2) Properties, or (y) Properties with Aggregate
Allocated Loan Amounts (in the aggregate) of ten percent (10%)
of the Aggregate Outstanding Principal Balance;
(iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with
a new Franchise Agreement in form substantially similar to a
form previously approved by Lender for Tier 3 Hotels, provided
that the Borrowers shall not replace Franchise Agreements for
more than one (1) Property, or for any Property with an
Allocated Loan Amount of more than five percent
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(5%) of the outstanding principal balance of the Loan pursuant
to this Section 5.13(D)(iii); and
(iv) Entering into new Franchise Agreements (or amendments or
addenda to existing Franchise Agreements) with the existing
Franchisors for the applicable Properties for the same
franchise brand, each in form substantially similar to the
forms previously approved for the respective Properties by
Lender, as required by the existing Franchisors under the
respective Franchise Agreements in connection with the
transfers of the applicable Properties and the direct and
indirect ownership interests in the Borrowers made by the
Borrower Parties and their Affiliates in connection with the
Closing of the Loan.
In connection with the replacement of any Franchisors permitted hereunder,
the applicable Borrower shall, within ten (10) Business Days of the execution of
such Franchise Agreement, deliver to Lender a Franchisor Letter from any
replacement Franchisor in form and substance reasonably acceptable to Lender. In
all cases, each Borrower shall (a) cause the hotel located on the applicable
Property to be operated pursuant to the applicable Franchise Agreement; (b)
promptly perform and observe in all material respects all of the covenants
required to be performed and observed by it under the applicable Franchise
Agreement (including the requirements of any Property Improvement Plan); (c)
promptly notify Lender of any material default under the applicable Franchise
Agreement of which it is aware; and (d) promptly enforce in a commercially
reasonable manner the performance and observance of all of the material
covenants required to be performed and observed by the Franchisor under the
Franchise Agreement. In addition, the Borrowers shall not, without Lender's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed: (x) increase or consent to the increase of the aggregate
amount of any fees under any Franchise Agreement; or (y) otherwise materially
modify, change, supplement, alter or amend, or waive or release any of its
material rights and remedies under, any Franchise Agreement.
Lender's consent to any replacement of any Franchise Agreement, or the
termination, renewal, extension or modification of an existing Franchise
Agreement, shall be deemed given, if the first correspondence from the Borrowers
to Lender requesting such consent is in an envelope marked "PRIORITY" and
contains a bold-faced, conspicuous legend at the top of the first page thereof
stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR
APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED
GIVEN", and is accompanied by the information and documents required above and
any other information reasonably requested by Lender in writing prior to the
expiration of such fifteen (15) day period in order to adequately review the
same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.
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SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become
obligated under any Material Agreement pertaining to any Property without
Lender's prior written approval, which approval shall not be unreasonably
withheld or conditioned; except that the following Material Agreements shall not
require Lender approval: (i) any Lease that does not require Lender's approval
under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii)
any Management Agreement that does not require Lender's approval under, and
otherwise complies with, the provisions of Section 5.13 hereof (provided,
however, that the foregoing shall not affect Borrowers' obligation to deliver
Rating Confirmations with respect to any such Management Agreement if required
under Section 5.13), (iii) the existing Material Agreements described on
SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not
require Lender's approval under, and otherwise complies with, the provisions of
Section 5.13(E) or (v) any other agreement that may be terminated without cause
and without payment of a penalty or premium, on not more than thirty (30) days'
prior written notice.
SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all
Receipts from the Properties into, and otherwise comply with, the Accounts
established from time to time hereunder. Subject to Article VII hereof and the
Cash Management Agreement, each Borrower shall promptly apply all Receipts to
the payment of all current and past due Operating Expenses, and to the repayment
of all sums currently due or past due under the Loan Documents, including all
payments into the Reserves.
SECTION 5.16 ESTOPPEL CERTIFICATES.
(A) Within ten (10) Business Days following a request by Lender, the
Borrowers shall provide to Lender a duly acknowledged written statement
confirming (i) the amount of the outstanding principal balance of the Loan, (ii)
the terms of payment and maturity date of the Note, (iii) the date to which
interest has been paid, (iv) whether any offsets or defenses exist against the
Obligations, and if any such offsets or defenses are alleged to exist, the
nature thereof shall be set forth in detail and (v) that this Loan Agreement,
the Note, the Mortgages and the other Loan Documents are legal, valid and
binding obligations of the Borrowers and have not been modified or amended, or
if modified or amended, describing such modification or amendments.
(B) Within ten (10) Business Days following a written request by the
Borrowers, Lender shall provide to the Borrowers a duly acknowledged written
statement setting forth the amount of the outstanding principal balance of the
Loan, the date to which interest has been paid, and whether Lender has provided
the Borrowers with written notice of any Event of Default. Compliance by Lender
with the requirements of this Section shall be for informational purposes only
and shall not be deemed to be a waiver of any rights or remedies of Lender
hereunder or under any other Loan Document.
SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly
create, incur, assume, guaranty, or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness except for the following
(collectively, "PERMITTED INDEBTEDNESS"):
(A) the Obligations and Crossed Indebtedness;
65
(B) (i) unsecured trade payables not evidenced by a note and arising out
of purchases of goods or services in the ordinary course of business and (ii)
Indebtedness incurred in the financing of equipment or other personal property
used at any Property in the ordinary course of business, provided that (a) each
such trade payable is payable not later than ninety (90) days after the original
invoice date and is not overdue by more than thirty (30) days, and (b) the
aggregate amount of such trade payables and Indebtedness relating to financing
of equipment and personal property or otherwise referred to in clauses (i) and
(ii) above (excluding therefrom utility expenses of the Properties and fees
payable to the Franchisors pursuant to the terms of the Franchise Agreements)
outstanding does not, at any time, exceed five percent (5%) of the outstanding
principal balance of the Loan; and
(C) the Mezzanine Loan.
In no event shall any Indebtedness other than the Loan be secured, in whole or
in part, by the Properties or any portion thereof or interest therein.
SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are
in addition to and not in limitation of its obligations under Article XI herein.
The Borrower shall not create, incur, assume or permit to exist any Lien on or
with respect to the Properties, any other Collateral or any direct or indirect
ownership interest in the Borrowers, except the Permitted Encumbrances and Liens
on the ownership interests in the Borrowers securing the Mezzanine Loan.
SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no
Primary Borrower Party shall directly or indirectly create or become or be
liable with respect to any Contingent Obligation.
SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly
permitted in this Loan Agreement, no Primary Borrower Party shall, or shall
permit any other Person to, (i) amend, modify or waive any term or provision of
such Borrower Party's partnership agreement, certificate of limited partnership,
articles of incorporation, by-laws, articles of organization, operating
agreement or other organizational documents so as to violate or permit the
violation of the single-purpose entity provisions set forth in Article IX,
unless required by law; or (ii) liquidate, wind-up or dissolve such Primary
Borrower Party.
SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses
payable to the Manager under the Management Agreement, the Borrowers shall not
pay any management, consulting, director or similar fees to any Related Person
of the Borrowers or to any director, officer or employee of the Borrowers. The
Borrowers shall not directly or indirectly enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Related Person of any of the Borrowers or
with any director, officer or employee of any Borrower Party, except
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of the Borrowers and upon fair and reasonable terms
and which are no less favorable to any of the Borrowers than would be obtained
in a comparable arm's length transaction with a Person that is not a Related
Person of any Borrower. The Borrowers shall not make any payment or permit any
payment to be made to any
66
Related Person of any of the Borrowers when or as to any time when any Event of
Default shall exist.
SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS.
(A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary
case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect.
(B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not
apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or
collude to cause the appointment of or taking possession by, a receiver, trustee
or other custodian for all or a substantial part of the assets of any Borrower.
As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, in which any of the
Borrowers is a debtor or any portion of the Properties is property of the estate
therein. The Borrowers shall not file a petition for, consent to the filing of a
petition for, or aid, solicit, support, or otherwise act, cooperate or collude
to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any
Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior
written consent of Lender, consent to the entry of any order, file any motion,
or support any motion (irrespective of the subject of the motion), and the
Borrowers shall not file or support any plan of reorganization. The Borrowers
having any interest in any Involuntary Borrower Bankruptcy shall do all things
reasonably requested by Lender to assist Lender in obtaining such relief as
Lender shall seek, and shall in all events vote as directed by Lender. Without
limitation of the foregoing, each such Borrower shall do all things reasonably
requested by Lender to support any motion for relief from stay or plan of
reorganization proposed or supported by Lender.
SECTION 5.23 ERISA.
(A) NO ERISA PLANS. None of the Primary Borrower Parties will establish
any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence
making contributions to (or become obligated to make contributions to) any
Employee Benefit Plan, Pension Plan or Multiemployer Plan.
(B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the IRC; or (ii) except as may be necessary to comply with applicable laws,
establish or amend any Employee Benefit Plan which establishment or amendment
could result in liability to the Borrowers or any ERISA Affiliate or increase
the obligation of the Borrowers, provided that the Borrower shall not be in
default of this covenant if, in either case, any portion of the Loan has been,
or will be, funded with plan assets of any employee benefit plan that either (x)
is subject to Title I of ERISA or any plan that is covered by Section 4975 of
the Code (unless the Lender is eligible to apply for one or more exemptions such
that the Loan will not constitute a nonexempt prohibited transaction under
Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to
an excise tax under Section 4975 of the IRC.
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(C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of
this Loan Agreement become (1) an employee benefit plan defined in Section 3(3)
of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1)
of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental
plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose
underlying assets constitute "plan assets" of any such employee benefit plan,
plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the
IRC or any state statutes applicable to the Borrowers regulating investments of
governmental plans.
SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any
other Person within its control to, disclose the name of Lender or terms of this
Loan Agreement or the Loan Documents in any press release without the prior
written consent of Lender, which shall not be unreasonably withheld.
Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted
to make such filings and disclosures with respect to the Loan as are required by
law.
SECTION 5.25 Ground Leases.
(A) NO MODIFICATION. The Borrowers shall not modify or amend, or terminate
or surrender any Ground Lease, in each case without the prior written consent of
Lender, which consent may be withheld by Lender in its sole and absolute
discretion. Any attempted or purported modification, amendment, or any surrender
or termination of any Ground Lease without Lender's prior written consent shall
be null and void and of no force or effect.
(B) PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as and
when due each and all of its obligations under each Ground Lease in accordance
with the terms of such Ground Lease, and shall not cause or suffer to occur any
material breach or default in any of such obligations. The Borrowers shall keep
and maintain each Ground Lease in full force and effect. The Borrowers shall
exercise any option to renew or extend any Ground Lease and give written
confirmation thereof to Lender within thirty (30) days after such option is
exercised. Notwithstanding that certain of the obligations of the Borrowers
under this Loan Agreement may be similar or identical to certain of the
obligations of the Borrowers under the Ground Leases, all of the obligations of
the Borrowers under this Loan Agreement are and shall be separate from and in
addition to its obligations under the Ground Leases.
(C) NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any
written notice that any Ground Lease Default has occurred, then the Borrowers
immediately shall notify Lender in writing of the same and immediately deliver
to Lender a true and complete copy of each such notice. Further, the Borrowers
shall provide such documents and information as Lender shall reasonably request
concerning the Ground Lease Default.
(D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be
continuing, or if any Ground Lessor asserts that a Ground Lease Default has
occurred (whether or not the Borrowers question or deny such assertion), then,
subject to the terms and conditions of the applicable Ground Lease, Lender, upon
five (5) Business Days' prior written notice to the Borrowers, unless Lender
reasonably determines that a shorter period (or no period) of notice is
necessary to protect Lender's interest in the Ground Lease, may (but shall not
be obligated to) take any action that Lender deems reasonably necessary,
including, without limitation,
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(i) performance or attempted performance of the applicable Borrower's
obligations under the applicable Ground Lease, (ii) curing or attempting to cure
any actual or purported Ground Lease Default, (iii) mitigating or attempting to
mitigate any damages or consequences of the same and (iv) entry upon the
applicable Ground Leased Property for any or all of such purposes. Upon Lender's
request, each Borrower shall submit satisfactory evidence of payment or
performance of any of its obligations under each Ground Lease. Lender may pay
and expend such sums of money as Lender in its sole discretion deems necessary
or desirable for any such purpose, and the Borrowers shall pay to Lender within
five (5) Business Days of the written demand of Lender all such sums so paid or
expended by Lender, together with interest thereon from the date of expenditure
at the Default Rate.
(E) LEGAL ACTION. The Borrowers shall not commence any action or
proceeding against any Ground Lessor or affecting or potentially affecting any
Ground Lease or the Borrowers' or Lender's interest therein, the effect of which
could cause an event of default or termination of any such Ground Lease, without
the prior written consent of Lender, which consent shall not be unreasonably
withheld, conditioned or delayed. The Borrowers shall notify Lender immediately
if any action or proceeding shall be commenced between any Ground Lessor and
either Borrower, or affecting or potentially affecting any Ground Lease or
either Borrower's or Lender's interest therein (including, without limitation,
any case commenced by or against any Ground Lessor under the Bankruptcy Code).
Lender shall have the option, exercisable upon notice from Lender to the
Borrowers, to participate in any such action or proceeding with counsel of
Lender's choice. The Borrowers shall cooperate with Lender, comply with the
reasonable instructions of Lender, execute any and all powers, authorizations,
consents or other documents reasonably required by Lender in connection
therewith, and shall not settle any such action or proceeding without the prior
written consent of Lender, which consent shall not be unreasonably withheld,
conditioned or delayed.
(F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the
applicable Ground Lease, from time to time, at Lender's request, the Borrowers
shall use commercially reasonable efforts to obtain and deliver to Lender within
the time period required under the applicable Ground Lease, an estoppel
certificate from each Ground Lessor setting forth (A) (i) the identities of the
original lessor and lessee under the applicable Ground Lease and each of their
respective successors, (ii) that the Ground Lease has not been modified or, if
it has been modified, the date of each modification (together with copies of
each such modification), (iii) the rent payable under the Ground Lease, (iv) the
dates to which all rent and other charges have been paid, (v) whether there are
any alleged Ground Lease Defaults and, if so, setting forth the nature thereof
in reasonable detail, and (vi) such other matters as Lender may reasonably
request or (B) the matters required to be certified by the Ground Lessor under
the applicable Ground Lease. The Borrowers shall not be required to request an
estoppel from any Ground Lessor more than two (2) times in any calendar year.
(G) BANKRUPTCY.
(i) If any Ground Lessor shall reject any Ground Lease under or
pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall
not elect to treat the Ground Lease as terminated but shall elect to remain in
possession of the applicable Ground Leased Property and the leasehold estate
under such Ground Lease. The lien of the Mortgage covering
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such Property does and shall encumber and attach to all of the Borrowers' rights
and remedies at any time arising under or pursuant to Section 365 of the
Bankruptcy Code, including without limitation, all of such Borrower's rights to
remain in possession of such Property and the leasehold estate.
(ii) The Borrowers acknowledge and agree that in any case commenced
by or against the Borrowers under the Bankruptcy Code, Lender by reason of the
liens and rights granted under the Mortgage covering such Property and the Loan
Documents shall have a substantial and material interest in the treatment and
preservation of such Borrower's rights and obligations under such Ground Lease,
and that such Borrower shall, in any such bankruptcy case, provide to Lender
immediate and continuous reasonably adequate protection of such interests. Each
Borrower and Lender agree that such adequate protection shall include but shall
not necessarily be limited to the following:
(a) Lender shall be deemed a party to the Ground Lease (but
shall not have any obligations thereunder) for purposes of Section 365 of the
Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such
action by Lender would adversely and materially affect the Borrowers' ability to
prosecute, or defend, any such claims asserted therein, have standing to appear
and act as a party in interest in relation to any matter arising out of or
related to the Ground Lease or such Property.
(b) The Borrowers shall serve Lender with copies of all
notices, pleadings and other documents relating to or affecting the Ground Lease
or the applicable Property. Any notice, pleading or document served by the
Borrowers on any other party in the bankruptcy case shall be contemporaneously
served by such Borrower on Lender, and any notice, pleading or document served
upon or received by such Borrower from any other party in the bankruptcy case
shall be served by such Borrower on Lender promptly upon receipt by such
Borrower.
(c) Upon written request of Lender, the Borrowers shall assume
the Ground Lease, and shall take such steps as are necessary to preserve such
Borrower's right to assume the Ground Lease, including without limitation using
commercially reasonable efforts to obtain extensions of time to assume or reject
the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it
is applicable.
(H) ASSUMPTION AND ASSIGNMENT. If the Borrowers or the applicable Ground
Lessor seeks to reject any Ground Lease or have the Ground Lease deemed
rejected, then prior to the hearing on such rejection Lender shall, subject to
applicable law, be given no less than twenty (20) days' notice and opportunity
to elect in lieu of rejection to have the Ground Lease assumed and assigned to a
nominee of Lender. If Lender shall so elect to assume and assign the Ground
Lease, then the Borrowers shall, subject to applicable law, continue any request
to reject the Ground Lease until after the motion to assume and assign has been
heard. If Lender shall not elect to assume and assign the Ground Lease, then
Lender may, subject to applicable law, obtain in connection with the rejection
of the Ground Lease a determination that the applicable Ground Lessor, at
Lender's option, shall (1) agree to terminate the Ground Lease and enter into a
new lease with Lender on the same terms and conditions as the Ground Lease, for
the remaining term of the Ground Lease, or (2) treat the Ground Lease as
breached and provide Lender with the
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rights to cure defaults under the Ground Lease and to assume the rights and
benefits of the Ground Lease.
Each Borrower shall join with and support any request by Lender to
grant and approve the foregoing as necessary for adequate protection of Lender's
interests. Notwithstanding the foregoing, Lender may seek additional terms and
conditions, including such economic and monetary protections as it deems
reasonably appropriate to adequately protect its interests, and any request for
such additional terms or conditions shall not delay or limit Lender's right to
receive the specific elements of adequate protection set forth herein.
Each Borrower hereby appoints Lender as its attorney in fact to act
on behalf of Lender in connection with all matters relating to or arising out of
the assumption or rejection of any Ground Lease, in which the other party to the
lease is a debtor in a case under the Bankruptcy Code. This grant of power of
attorney is present, unconditional, irrevocable, durable and coupled with an
interest.
SECTION 5.26 RESERVED.
SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender,
all reasonable out-of-pocket expenses, charges, costs and fees (including
reasonable attorneys' fees and expenses) in connection with the negotiation,
documentation, closing, administration, servicing, enforcement interpretation,
and collection of the Loan and the Loan Documents, and in the preservation and
protection of Lender's rights hereunder and thereunder. Without limitation the
Borrowers shall pay all costs and expenses, including reasonable attorneys'
fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or
any law succeeding or replacing any of the same). At the Closing, Lender is
authorized to pay directly from the proceeds of the Loan any or all of the
foregoing expenses then or theretofore incurred and approved by the Borrowers.
SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and
at any time that a Cash Trap Event is in effect, the Borrowers shall not make
any distributions of cash or other property to any Borrower Party, or make any
payments in lieu thereof, without Lender's prior written approval, which may be
granted or withheld in Lender's sole discretion.
SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless
otherwise specifically provided herein to the contrary, the Borrowers shall not
cancel any indebtedness from any Person owing to any Borrower, or settle any
claims without Lender's prior written consent which shall not be unreasonably
withheld.
SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no
Borrower Party, nor any of their respective Affiliates, officers, directors,
partners or members will knowingly: (i) conduct any business, nor engage in any
transaction or dealing, with any Prohibited Person, including, but not limited
to, the making or receiving of any contribution of funds, goods, or services, to
or for the benefit of a Prohibited Person; or (ii) engage in or conspire to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in
EO13224. The Borrowers further covenants and agrees to deliver (from time to
time) to Lender any such certification or other evidence as may be
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requested by Lender in its sole and absolute discretion, confirming that: (i)
neither any Borrower Party, nor their respective officers, directors, partners,
members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower
Party, nor their respective officers, directors, partners, members or
Affiliates, has to its Knowledge engaged in any business, transaction or
dealings with a Prohibited Person, including, but not limited to, the making or
receiving of any contribution of funds, goods, or services, to or for the
benefit of a Prohibited Person.
ARTICLE VI
RESERVES
SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES.
(A) The Borrowers hereby pledge, assign and grant to Lender a security
interest in and to all of the Borrowers' right, title and interest in and to the
Account Collateral, including the Reserves, as security for payment and
performance of all of the Obligations hereunder and under the Note and the other
Loan Documents. The Reserves constitute Account Collateral and are subject to
the security interest in favor of Lender created herein and all provisions of
this Loan Agreement and the other Loan Documents pertaining to Account
Collateral.
(B) In addition to the rights and remedies provided in Article VII and
elsewhere herein, upon the occurrence and during the continuance of any Event of
Default, Lender shall have all rights and remedies pertaining to the Reserves as
are provided for in any of the Loan Documents or under any applicable law.
Without limiting the foregoing, upon and at all times after the occurrence and
during the continuance of an Event of Default, Lender in its sole and absolute
discretion, may use the Reserves (or any portion thereof) for any purpose,
including but not limited to any combination of the following: (i) payment of
any of the Obligations including the Prepayment Consideration (if any)
applicable upon such payment in such order as Lender may determine in its sole
discretion; provided, however, that such application of funds shall not cure or
be deemed to cure any Default; (ii) reimbursement of Lender for any actual
losses or expenses (including, without limitation, reasonable legal fees)
suffered or incurred as a result of such Event of Default; (iii) payment for the
work or obligation for which such Reserves were reserved or were required to be
reserved; and (iv) application of the Reserves in connection with the exercise
of any and all rights and remedies available to Lender at law or in equity or
under this Loan Agreement or pursuant to any of the other Loan Documents.
Nothing contained in this Loan Agreement shall obligate Lender to apply all or
any portion of the funds contained in the Reserves during the continuance of an
Event of Default to payment of the Loan or in any specific order of priority.
SECTION 6.2 FUNDS DEPOSITED WITH LENDER.
(A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein,
all funds of the Borrowers which are deposited with Lock Box Account Bank as
Reserves hereunder shall be held by Lock Box Account Bank in one or more
Permitted Investments, such Permitted Investments, prior to an Event of Default,
to be as directed by Borrower. All interest which accrues on the Reserves shall
be taxable to the Borrowers and shall be added to and disbursed in the same
manner and under the same conditions as the principal sum on which said interest
accrued. Additional provisions pertaining to investments are set forth in
Article VII. After
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repayment of all of the Obligations, all funds held as Reserves will be promptly
returned to, or as directed by, the Borrowers.
(B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the
amounts necessary to fund each of the Reserves as set forth below. Deposits into
the Reserves at Closing may occur by deduction from the amount of the Loan that
otherwise would be disbursed to the Borrowers, followed by deposit of the same
into the applicable Sub-Account or Account of the Lock Box Account in accordance
with the Cash Management Agreement on the Closing Date. Notwithstanding such
deductions, the Loan shall be deemed for all purposes to be fully disbursed at
Closing.
SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the
Borrowers shall deposit with Lock Box Account Bank **[$_________]** and,
pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly,
on each Payment Date commencing on the Payment date in July 2004, 1/12th of the
annual charges (as reasonably estimated by Lender) for all Impositions and all
Insurance Premiums (other than for D&O Insurance) payable with respect to the
Properties hereunder (said funds, together with any interest thereon and
additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount
of the monthly deposit to be made to the Impositions and Insurance Reserve from
and after the date hereof is **[$__________]**. The Borrowers shall also deposit
with Lock Box Account Bank within ten (10) Business Days of the written demand
by Lender, to be added to and included within such reserve, a sum of money which
Lender reasonably estimates, together with such monthly deposits, will be
sufficient to make the payment of each such charge at least ten (10) Business
Days prior to the date initially due. The Borrowers shall provide Lender with
bills and all other documents necessary for the payment of the foregoing charges
at least thirty (30) days prior to the date on which each payment shall first
become subject to penalty or interest if not paid. So long as (i) no Event of
Default has occurred and is continuing, (ii) the Borrowers have provided Lender
with the foregoing bills and other documents in a timely manner, and (iii)
sufficient funds are held by Lender for the payment of the Impositions and
Insurance Premiums relating to each of the Properties, Lender shall pay said
items or disburse to the Borrowers from such Reserve an amount sufficient to pay
said items. Interest shall accrue in favor of the Borrowers on funds in the
Impositions and Insurance Reserve and be added to the balance thereof and
disbursed in accordance with the terms hereof.
SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on
behalf of Lender shall establish and maintain with Lock Box Bank an account for
the purpose of creating a reserve for replacements of FF&E at or in, or used in
connection with, the Properties (the "REPLACEMENTS") in accordance with the
applicable CapEx/FF&E Budget approved by Lender (said funds, together with any
interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve
shall be held in an Eligible Account entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account
shall be under the sole dominion and control of Lender, subject to the terms of
the Cash Management Agreement. Pursuant to the Cash Management Agreement, the
Borrowers shall deposit monthly, on each Payment Date commencing with the
Payment Date in July 2004, an amount equal to 4.0% of the Operating Revenues
generated from the Properties for the prior calendar month (such amount, the
"MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the
Borrowers, subject in all instances to the terms of the Cash Management
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Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds
held in the FF&E Reserve shall be used in connection with the Required Capital
Improvements. Upon and at all times after the occurrence and during the
continuance of an Event of Default, no draws will be permitted from the FF&E
Reserve other than Replacements subject, in each instance, to Manager's
compliance with the FF&E reporting requirements set forth in Section
5.1(A)(v)(d).
SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At
Closing, the Borrowers shall deposit with Lock Box Account Bank
**[$___________]** (said funds, together with any interest thereon, the "CAPITAL
IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers
solely for payment of certain Capital Improvements required to be made to the
Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5
attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by
the Borrowers for purposes for which any other Reserve is established or for any
other purpose other than completion of the Required Capital Improvements. The
Borrowers shall promptly commence and diligently prosecute to completion,
subject to Force Majeure, the Required Capital Improvements within the time
periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds
held in the Capital Improvement Reserve shall be disbursed in accordance with
Section 6.7. Subject to the foregoing conditions, but also subject to the last
paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining
balance in the Capital Improvement Reserve when all Required Capital
Improvements are complete, and paid for, in accordance with the terms hereof.
SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers
shall deposit with Lock Box Account Bank, an amount equal to **[$___________]**
(said funds, together with any interest thereon and additions thereto, the
"HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous
Materials on the Properties as indicated in the Environmental Reports for the
Properties prepared and delivered prior to the Closing and as such work is more
particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the
earlier of (x) the date required by any applicable Governmental Authority or (y)
nine (9) months after the Closing, the Borrowers shall, subject to Force
Majeure, complete such Environmental Work and shall provide to Lender such
closure reports, no-further-action letters, or other evidence of compliance with
law as Lender may reasonably require. The funds contained in the Hazardous
Materials Remediation Reserve shall be utilized by the Borrowers solely for
performance of the Environmental Work in accordance with the Environmental
Reports, and shall not be used by the Borrowers for purposes for which any other
Reserve is established. Subject to the Borrowers' satisfaction of the applicable
conditions of Section 6.7, the Borrowers shall be entitled to draw upon the
Hazardous Materials Remediation Reserve to pay for costs that have been incurred
by the Borrowers for such Environmental Work, provided that the Borrowers
deliver to Lender such evidence as may be reasonably satisfactory to Lender
that, after payment of such draw, the funds remaining in the Hazardous Materials
Remediation Reserve shall be sufficient to pay for the remainder of such
Environmental Work. Subject to the foregoing conditions, but also subject to the
last paragraph of Section 11.4, the Borrowers shall be entitled to draw any
remaining balance in the Hazardous Materials Remediation Reserve when all such
Environmental Work is complete, and is paid for, in accordance with the terms
hereof.
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SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION
RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK.
(A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND
CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for
disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to
or for the account of the Borrowers (x) from the Hazardous Materials Remediation
Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the
Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for
Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the
Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for
the amount of the Borrowers' actual bona fide out-of-pocket expenditures or
costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT
EXPENDITURES"; and together with the Approved Environmental Expenditures,
collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or
Required Capital Improvements to which any such request for disbursement relates
shall be referred to as the "WORK"), upon satisfaction of each of the conditions
listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's
reasonable discretion:
(i) Except as provided in this Section 6.7, each request for
disbursement from the Hazardous Materials Remediation Reserve or the Capital
Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for
completion of the Approved Expenditures for which disbursement is requested.
(ii) A request for disbursement from the Work Reserves may be made
after completion of a portion of the Work under such contract, or for payment of
deposits required in connection with the Work under such Contract, provided (1)
all other conditions in this Loan Agreement for disbursement have been
satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve
are, in Lender's reasonable judgment, sufficient to complete the Environmental
Work when required and/or funds remaining in the Capital Improvement Reserve
are, in Lender's reasonable judgment, sufficient to complete such item of
Required Capital Improvements and any other Required Capital Improvements
remaining to be performed, as the case may be, and (3) if reasonably required by
Lender, each contractor or subcontractor receiving payments in excess of
$100,000 under such contract shall provide a waiver of lien with respect to
amounts which have been paid to that contractor or subcontractor.
(iii) To the extent the contract with the relevant contractor or
supplier provides for a retainage, each disbursement from a Work Reserve, except
for a final disbursement, shall be in the amount of actual costs incurred less
the percentage of such costs that the contract with the relevant contractor or
supplier specifies to be retained and advanced as part of the final
disbursement. No funds will be advanced for materials stored at any Property
unless such materials are properly stored and secured at the applicable Property
in accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. No funds will be advanced for
materials stored at any location other than at the Properties unless Lender
determines in its reasonable discretion that Lender has a perfected first
priority security interest in any such materials.
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(iv) The amount of all invoices in connection with the Work with
respect to which a disbursement is requested and which has been approved by
Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers
(in which event, the Borrowers covenant and agree to promptly pay such invoices)
or, if an Event of Default has occurred and is continuing, at Lender's option
and in Lender's sole and absolute discretion, directly to the contractor,
supplier, materialman, mechanic or subcontractor indicated on said invoices
unless already paid by the Borrowers and Lender has received satisfactory
evidence of such payment in which case Lender shall reimburse the Borrowers. All
invoices in connection with disbursements from the Capital Improvement Reserve
shall be classified as requests for payment for items of Capital Improvement (as
opposed to items that, in conformity with GAAP, would be included as Operating
Expenses). If the Borrowers request that any amounts be disbursed directly to
the Borrowers pursuant to the foregoing sentence, the Borrowers shall be
required to deliver evidence reasonably acceptable to Lender of payment of all
invoices for which disbursements were previously made to the Borrowers as a
condition to such requested disbursement.
(v) No more than two (2) disbursements will be made by Lender from
the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve
in any calendar month, and, if made in accordance herewith or otherwise approved
by Lender, requested disbursements will be made within five (5) Business Days
after the request therefor. Lender shall not be required to make any
disbursement from a Work Reserve with respect to the Property unless such
requested disbursement is in an amount equal to or greater than $25,000 (other
than the final disbursement).
(vi) Lender reserves the right, at its option and as a condition to
any disbursement from a Work Reserve, to approve (which shall not be
unreasonably withheld, delayed or conditioned) (i) all drawings and plans and
specifications, if any, for any Work which require aggregate payments in amounts
exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan
Amount with respect to the applicable Property or (y) $250,000, and (ii) all
contracts and work orders with materialmen, mechanics, suppliers,
subcontractors, contractors and other parties providing labor or materials in
connection with any Work which require aggregate payments in amounts exceeding
the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with
respect to the applicable Property or (y) $250,000. Upon Lender's reasonable
request, the Borrowers shall assign (to the extent assignable) any drawings,
plans and specifications, contracts or subcontracts to Lender. Drawings, plans
and specifications, contracts and work orders approved by Lender shall not be
changed in any material respect without Lender's prior written consent, which
shall not be unreasonably withheld, delayed or conditioned.
(vii) The Borrowers shall have delivered a certificate to Lender
from an Architect certifying that the Work has been completed in a good and
workmanlike manner in accordance with all applicable laws for any item in excess
of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount
with respect to the applicable Property or (y) $250,000. Lender may retain its
own architect or engineer ("LENDER'S CONSULTANT") to review any plans and
specifications for any item in excess of the greater of (x) five percent (5%) of
the Aggregate Allocated Loan Amount with respect to the applicable Property or
(y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost
and expense.
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(viii) The Borrowers shall have delivered to Lender a certificate of
the Borrowers substantially in the form of Exhibit L attached hereto certifying
as to the actual costs which were incurred by the Borrowers to complete such
Work, which costs shall not materially exceed the amount budgeted for such Work
under the CapEx/FF&E Budget then in effect unless approved by Lender, which
shall not be unreasonably withheld, delayed or conditioned (together with
supporting documentation reasonably acceptable to Lender).
(ix) The Borrowers shall have delivered to Lender all necessary
material certificates, authorizations, permits and licenses which are required
to permit the construction and completion of the Work, as issued by the
appropriate Governmental Authority. The Borrowers, to the full extent permitted
by applicable law, hereby assigns to Lender as additional security for the
payment of the Obligations and the observance and performance by the Borrowers
of the terms, covenants and provisions of the Loan Documents all right, title
and interest which the Borrowers may now have or may hereafter acquire in and to
such certificates, authorizations, permits and licenses.
(x) Lender may require an inspection of the Property prior to making
a monthly disbursement from the applicable Work Reserve in order to verify
completion of the Work for which disbursement is sought in excess of the greater
of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to
the applicable Property or (y) $250,000. Lender may require that such inspection
be conducted by Lender's Consultant and/or may require a copy of a certificate
of completion by an independent qualified architect or engineer acceptable to
Lender prior to the disbursement of any amounts from the applicable Work
Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such
inspections as reasonably required hereunder, whether such inspections are
conducted by Lender, Servicer, Lender's Consultant or by an independent
qualified professional.
(B) PERFORMANCE OF WORK.
(i) The Borrowers shall complete all Work in a good and workmanlike
manner as soon as practicable following the commencement thereof substantially
in accordance with the applicable budget approved by Lender in accordance with
the terms of this Loan Agreement. The insufficiency of the balance in the
applicable Work Reserve shall not relieve the Borrowers from their obligations
to perform and complete the related Work as herein provided or to fulfill all
other preservation and maintenance covenants in the Loan Documents.
(ii) If Lender determines in its reasonable discretion that any Work
is not being performed in a workmanlike or timely manner or that any Work has
not been completed in a workmanlike manner, Lender shall have the option to
withhold disbursement for such unsatisfactory work and so notify the Borrowers
with reasonable detail regarding the basis for Lender's dissatisfaction and,
after the expiration of forty-five (45) days from the giving of such notice by
Lender to the Borrowers of such unsatisfactory work without the cure thereof
(or, if such unsatisfactory work is susceptible of a cure but cannot reasonably
be cured within said forty-five (45) day period and provided that the Borrowers
shall have commenced to cure such unsatisfactory work within said forty-five
(45) day period and thereafter diligently and expeditiously proceeds to cure the
same, after the expiration of such longer period as is reasonably necessary for
the Borrowers in the exercise of due diligence to cure such
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unsatisfactory work, up to a maximum of an additional sixty (60) days, subject
to Force Majeure, without the cure thereof), Lender may proceed under existing
contracts or contract with third parties to complete such Work, as the case may
be, and apply amounts contained in the applicable Work Reserve toward the labor
and materials necessary to complete the same, without providing any additional
prior notice to the Borrowers, and exercise any and all other remedies available
to Lender upon and during the continuance of an Event of Default hereunder.
(iii) In order to facilitate Lender's completion or making of any
Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right
to enter onto each Property during normal business hours after the expiration of
the notice specified above and perform, subject to the rights of tenants, any
and all work and labor necessary to complete the applicable Work and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender
shall be deemed to have been advanced under the Loan to the Borrowers and
secured by the applicable Mortgage. For this purpose, the Borrowers constitute
and appoint Lender their true and lawful attorney-in-fact with full power of
substitution to complete or undertake the applicable Work in the name of the
Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked. Upon the
occurrence and during the continuance of an Event of Default, the Borrowers
empower said attorney-in-fact as follows: (i) to use any funds in the applicable
Work Reserve for the purpose of making or completing any Work; (ii) to make such
additions, changes and corrections to any Work as shall be reasonably necessary
or desirable to complete the same; (iii) to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for such
purposes; (iv) to pay, settle or compromise all existing bills and claims which
are or may become Liens against any Property, or as may be necessary or
desirable for the completion of any Work, or for clearance of title; (v) to
execute all applications and certificates in the name of the Borrowers which may
be required by any of the contract documents; (vi) in its reasonable discretion,
to prosecute and defend all actions or proceedings in connection with any
Property or the rehabilitation and repair of such Property; and (vii) to do any
and every act which the Borrowers might do in their own behalf to fulfill the
terms of this Loan Agreement.
(iv) Nothing in this Section shall: (i) make Lender responsible for
making or completing any Work; (ii) require Lender to expend funds in addition
to the amounts on deposit in the applicable Work Reserve to make or complete any
Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to
demand from the Borrowers additional sums to make or complete any Work.
(v) The Borrowers shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect or
inspector) or third parties performing any Work pursuant to this Section 6.7 to
enter onto any Property during normal business hours upon reasonable notice
(subject to the rights of tenants under their Leases) to inspect the progress of
any Work and all materials being used in connection therewith, to examine all
plans and shop drawings relating thereto which are or may be kept at any
Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The
Borrowers shall use commercially reasonable efforts to cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or such
other persons described above in connection with inspections described in this
Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B).
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(vi) All Work and all materials, equipment, fixtures and any other
item comprising a part thereof shall be constructed, installed or completed, as
applicable, free and clear of all mechanic's, materialman's or other liens
(except for the Permitted Encumbrances).
(vii) All Work shall comply with all applicable legal requirements
of all Governmental Authorities having jurisdiction over the Properties and
applicable insurance requirements, including, without limitation, applicable
building codes, special use permits, environmental regulations and requirements
of insurance underwriters.
(C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations, out-of-pocket costs and expenses
(including, without limitation, litigation costs and reasonable attorneys' fees
and expenses) arising from or in any way connected with the performance of the
Work, except to the extent caused by the bad faith, willful misconduct or gross
negligence of Lender. The Borrowers shall assign to Lender all rights and claims
the Borrowers may have against all Persons supplying labor or materials in
connection with the Work; provided, however, that Lender may not pursue any such
right or claim or pursue any other action with respect to such rights and claims
unless an Event of Default has occurred and remains uncured.
SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the
Obligations in full, a Cash Trap Event shall occur, then for so long as such
Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise
expressly provided below) shall be deposited with Lender (or its Servicer or
agent) and held in the Lock Box Account in accordance with the terms of the Cash
Management Agreement (said funds, together with any interest thereon, the "CASH
TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when
the Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12)
month period ending on such Calculation Date and shall continue to exist until
such time as the Minimum Debt Yield test has been satisfied for three (3)
consecutive Calculation Dates (on a trailing twelve (12) month basis) following
the commencement of the applicable Cash Trap Event. Notwithstanding that the
Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no
Cash Trap Event shall be deemed to have occurred as a result of such event if
the Borrowers make a principal prepayment of the Aggregate Outstanding Principal
Balance (which prepayment amount shall be disbursed on the next Payment Date in
accordance with the terms of the Cash Management Agreement), within three (3)
Business Days after the date of delivery of the financial statements disclosing
the existence of such Cash Trap Event (or the date on which such financial
statements are required to be delivered pursuant to Section 5.1), in an amount
equal to the greater of (x) one percent (1%) of the Aggregate Outstanding
Principal Balance, or (y) 120% of the amount, as determined by Lender in its
reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the
Minimum Debt Yield if such calculation was recalculated as provided above
assuming that such amount was applied to reduce the Aggregate Outstanding
Principal Balance as of the first day of the relevant measuring period. During
the continuance of a Cash Trap Event, provided that no Event of Default shall
have occurred and be continuing, any funds on deposit in the Cash Trap Reserve
may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be
applied to (i) prepayment of the Aggregate Outstanding Principal Balance as
provided above, (ii) Capital Expenditures reasonably approved by Lender, or
(iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal
and interest
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under the Loan and the Allocable Portion of the Mezzanine Loan (to be applied in
accordance with the terms of the Cash Management Agreement). Any funds on
deposit in the Cash Trap Reserve shall continue to be held as additional
Collateral in accordance with this Section 6.8 until the earlier of (a) the date
that such funds are applied or disbursed pursuant to the foregoing sentence or
(b) the date that the Minimum Debt Yield test has been satisfied for three (3)
consecutive months (as determined above), at which time, provided no Event of
Default exists, and no Cash Trap Event has commenced, such funds, together with
any and all amounts then held in the Minimum Balance Sub-Account (as defined in
the Cash Management Agreement), shall be automatically released to the Borrowers
without any further certification requirements on the part of the Borrowers. The
existence of a Cash Trap Event shall be determined by Lender in its reasonable
good faith determination. If Lender determines that a Cash Trap Event has
occurred, Lender shall send the Borrowers written notice thereof.
Notwithstanding any provision herein to the contrary, if an Event of Default has
occurred and is continuing, all funds on deposit in the Cash Trap Reserve and
any subsequent Excess Cash Flow, while such Event of Default is continuing, may
be applied by Lender to payment of the Loan (including payment of any Prepayment
Consideration) or other Obligations (or to the obligations of the Mezzanine
Borrowers to Mezzanine Lender) as Lender may elect.
ARTICLE VII
DEPOSIT ACCOUNT; LOCK BOX ACCOUNT;
CASH MANAGEMENT
SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT.
(A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts shall be established at the Borrowers' sole cost and expense in
the name of Lender, as secured party hereunder (said accounts, and any accounts
replacing same in accordance with this Loan Agreement and the Deposit Account
Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial
institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"),
pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT
AGREEMENT") substantially similar to Lender's form or otherwise in form and
substance reasonably acceptable to Lender, executed and delivered by the
Borrowers and the Deposit Bank. The Deposit Account shall be under the sole
dominion and control of Lender (which dominion and control may be exercised by
Servicer). Among other things, the Deposit Account Agreement shall provide that
the Borrowers shall have no access to or control over the Deposit Account, that
all available funds on deposit in the Deposit Account shall be transferred by
wire transfer (or transfer via the ACH System) on each Business Day by the
Deposit Bank into the Lock Box Account, for application in accordance with the
Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall
be directed to deliver to the Borrowers copies of bank statements and other
information made available by the Deposit Bank and the Lock Box Account Bank
concerning the Deposit Account and the Lock Box Account.
(ii) Upon establishing the Deposit Account, (1) the Borrowers shall
cause any and all Operating Revenues, including distributions or other payments
made directly or indirectly to the Borrowers, Manager, or any of their
respective Affiliates, from any Beverage Company, to be deposited promptly into
the Deposit Account and in no event later than two (2) Business Days after the
same are paid to or for the benefit of the Borrowers, and (2) the Borrowers
shall obtain
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agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from
each of the Persons paying or disbursing credit card receivables (the "CREDIT
CARD COMPANIES"), substantially similar to Lender's form or otherwise in form
and substance reasonably acceptable to Lender, pursuant to which the Credit Card
Companies agree to pay all credit card receivables into the Lock Box Account,
and acknowledge and agree that Lender shall have a first priority perfected
security interest in such credit card receivables. To the extent that the
Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in
accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed
to hold the same in trust for Lender for the protection of the interests of
Lender hereunder and under the Loan Documents. The Borrowers represent and
warrant that, as of the date hereof, the only Credit Card Companies paying or
disbursing credit card receivables with respect to the Property are Chase
Merchant Services, American Express, Discover Financial Service, Diners Club,
JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter
into an agreement with any other Credit Card Company pursuant to which such
Credit Card Company shall pay credit card receivables with respect to the
Properties, such Borrower shall promptly obtain a Credit Card Receivables
Payment Direction Letter in form and substance reasonably acceptable to Lender
from such Credit Card Company.
(iii) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses incurred by Lender in connection with the transactions and other
matters contemplated by this Section 7.1, including but not limited to, Lender's
reasonable attorneys' fees and expenses, and all reasonable fees and expenses of
the Deposit Bank and the Lock Box Account Bank, including without limitation
their reasonable attorneys' fees and expenses.
(B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms
of the Cash Management Agreement, an Eligible Account shall be established in
the name of Lender, as secured party hereunder, to serve as the "Lock Box
Account" (said account, and any account replacing the same in accordance with
this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT";
and the depositary institution in which the Lock Box Account is maintained, the
"LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion
and control of Lender (which dominion and control may be exercised by Servicer);
and except as expressly provided hereunder and/or in the Cash Management
Agreement, the Borrowers shall not have the right to control or direct the
investment or payment of funds therein during the continuance of an Event of
Default. Lender may elect to change any financial institution in which the Lock
Box Account shall be maintained if such institution is no longer an Eligible
Bank, upon not less than five (5) Business Days' notice to the Borrower. The
Lock Box Account shall be deemed to contain such sub-accounts as Lender may
designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts
and need not be separate Eligible Accounts. The Sub-Accounts shall include the
following as more particularly described in the Cash Management Agreement:
(i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box
Account established for the purposes of reserving for payments of principal and
interest and other amounts due under the Loan Documents (but without duplication
of amounts covered under item (ii) below); and
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(ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box
Account established for the purpose of holding funds in the Reserves including:
(a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital
Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation
Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the
"Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance
Sub-Account"; and (g) "Cash Trap Reserve Sub-Account".
SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box
Account shall be allocated to the Sub-Accounts or the other Accounts (or paid,
as the case may be) in accordance with the Cash Management Agreement.
SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default
shall occur and be continuing, then notwithstanding anything to the contrary in
this Section or elsewhere, Lender shall have all rights and remedies available
under applicable law and under the Loan Documents. Without limitation of the
foregoing, for so long as an Event of Default exists, Lender may apply any and
all funds in the Deposit Account, and/or any Sub-Accounts against all or any
portion of any of the Obligations, in any order.
ARTICLE VIII
DEFAULT, RIGHTS AND REMEDIES
SECTION 8.1 EVENT OF DEFAULT.
"EVENT OF DEFAULT" means the occurrence or existence of any one or more of
the following:
(A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled
payment amount when the same is due under this Loan Agreement, the Note, or any
other Loan Documents (whether such amount is interest, principal, Reserves, or
otherwise), or to pay for any Insurance Policies required pursuant to Section
5.4 hereof; or
(B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time
to time owing under this Loan Agreement, the Note, or any other Loan Documents
(other than amounts subject to the preceding paragraph) within ten (10) days
after written notice to the Borrowers; or
(C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to
perform or comply with any term or condition contained in Section 5.1 which
continues for a period of ten (10) days after written notice to the Borrowers
(except that no notice or grace period shall be granted for any breach under
Section 5.1(H)); or
(D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE
PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19,
5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary
Lien under Section 5.18 or 11.1, the same shall not constitute an Event of
Default if (i) within forty-five (45) days after the filing thereof, the
Borrowers shall either cause the same to be removed of record by payment,
bonding or otherwise, or (ii) same is being contested in good faith in
accordance with Section 5.3(B) hereof); or
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(E) BREACH OF WARRANTY. Any representation, warranty, certification or
other statement made by any Borrower, Guarantor or Manager in any Loan Document
or in any statement or certificate at any time given in writing pursuant to or
in connection with any Loan Document is false in any material respect as of the
date made; or
(F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the
performance of or compliance with any term contained in this Loan Agreement or
the other Loan Documents and such default is not fully cured within thirty (30)
days after receipt by the Borrowers of written notice from Lender of such
default (other than occurrences described in other provisions of this Section
8.1 for which a different grace or cure period is specified or which constitute
immediate Events of Default); provided however that if (i) the default is
capable of cure but with diligence cannot be cured within such period of thirty
(30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced
the cure within such thirty (30) day period and has pursued such cure
diligently, and (iii) each Borrower delivers to Lender promptly following
written demand (which demand may be made from time to time by Lender) evidence
reasonably satisfactory to Lender of the foregoing, then such period shall be
extended for so long as is reasonably necessary for the Borrowers in the
exercise of due diligence to cure such default, but in no event beyond one
hundred and twenty (120) days after the original notice of default; or
(G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court
enters a decree or order for relief with respect to any Borrower Party, in an
Involuntary Borrower Bankruptcy, which decree or order is not stayed or other
similar relief is not granted under any applicable federal or state law unless
dismissed within ninety (90) days; (ii) the occurrence and continuance of any of
the following events for ninety (90) days unless dismissed or discharged within
such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over any Borrower
Party or over all or a substantial part of its property, is entered, or (z) an
interim receiver, trustee or other custodian is appointed without the consent of
any Borrower Party, for all or a substantial part of the property of such
Person; or
(H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for
relief is entered with respect to any Borrower Party, or any Borrower Party
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for any Borrower Party or for all or a substantial part of the
property of any Borrower Party; (ii) any Borrower Party makes any assignment for
the benefit of creditors; or (iii) the Board of Directors or other governing
body of any Borrower Party adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(H); or
(I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as
described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the
Collateral becomes property of the estate or subject to the automatic stay in
any case or proceeding under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect (provided that if the
same occurs in the context of an involuntary proceeding, it shall not
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constitute an Event of Default if it is dismissed or discharged within ninety
(90) days following its occurrence); or
(J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing
its present or prospective inability to pay its debts as they become due; or
(K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of
attachment, or similar process is entered or filed against any Borrower Party or
any of its assets, which claim is not fully covered by insurance (other than
with respect to the amount of commercially reasonable deductibles permitted
hereunder), would have a Material Adverse Effect and remains undischarged,
unvacated, unbonded or unstayed for a period of forty-five (45) days; or
(L) INJUNCTION. The Borrowers are enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of their business and such order
continues for more than thirty (30) days; or
(M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any
of the Loan Documents for any reason ceases to be in full force and effect or
ceases to be a legally valid, binding and enforceable obligation of the
Borrowers or any Lien securing the Obligations shall, in whole or in part, cease
to be a perfected first priority Lien, subject to the Permitted Encumbrances
(except in any of the foregoing cases in accordance with the terms hereof or
under any other Loan Document) and the Borrowers do not take all actions
requested by Lender to correct such defect within ten (10) days after the
written request by Lender to take such action, or any Person under the control
of the Borrowers or Guarantor who is a party thereto, other than Lender, denies
that it has any further liability (as distinguished from denial of the existence
of a Default or Event of Default) under any Loan Documents to which it is party,
or gives notice to such effect; or
(N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any
applicable grace periods shall occur under any of the other Loan Documents; or
(O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An
Uncured Franchise Default occurs; (ii) or any breach or default shall occur in
the material obligations of the Borrowers under any of the Management
Agreements, and such breach or default either is of such a nature or continues
for such a period of time beyond applicable notice and cure periods, if any,
that Manager shall have the right to exercise material remedies as a consequence
thereof; or
(P) GROUND LEASE DEFAULT. Any default by any of the Borrowers beyond any
applicable grace period shall occur under any Ground Lease or any actual or
attempted surrender, termination, modification or amendment of any Ground Lease
without Lender's prior written consent.
If more than one of the foregoing paragraphs shall describe the same
condition or event, then Lender shall have the right to select which paragraph
or paragraphs shall apply. In any such case, Lender shall have the right (but
not the obligation) to designate the paragraph or
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paragraphs which provide for non-written notice (or for no notice) or for a
shorter time to cure (or for no time to cure).
SECTION 8.2 ACCELERATION AND REMEDIES.
(A) Upon the occurrence and during the continuance of any Event of Default
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal
amount of and accrued interest and fees on the Loan and all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
requirements of any kind, all of which are hereby expressly waived by the
Borrowers. Upon and at any time after the occurrence of any other Event of
Default, at the option of Lender, which may be exercised without notice or
demand to anyone, all or any portion of the Loan and other Obligations shall
immediately become due and payable.
(B) Upon the occurrence and during the continuance of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Lender against the Borrowers under this Loan Agreement or any of
the other Loan Documents, or at law or in equity, may be exercised by Lender at
any time and from time to time, whether or not all or any of the Obligations
shall be declared due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents with respect to the
Properties. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singly, successively, together or otherwise,
at such time and in such order as Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents. Without limiting the
generality of the foregoing, if an Event of Default is continuing (i) to the
fullest extent permitted by law, Lender shall not be subject to any "one action"
or "election of remedies" law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect
until Lender has exhausted all of its remedies against each Property and the
Mortgages have been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Obligations or the Obligations have been paid in full.
(C) Lender shall have the right from time to time to partially foreclose
the Mortgages in any manner and for any amounts secured by the Mortgages then
due and payable as determined by Lender in its sole discretion including,
without limitation, the following circumstances: (i) in the event the Borrowers
default beyond any applicable grace period in the payment of one or more
scheduled payments of principal and interest, Lender may foreclose the Mortgage
to recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose the Mortgage or any of them to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by the Mortgage as Lender may elect. Notwithstanding one or more partial
foreclosures, the Property shall remain subject to the Mortgage to secure
payment of sums secured by the Mortgage and not previously recovered.
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(D) During the continuance of an Event of Default, Lender shall have the
right from time to time to sever the Note and the other Loan Documents into one
or more separate notes, mortgages and other security documents in such
denominations as Lender shall determine in its sole discretion for purposes of
evidencing and enforcing its rights and remedies provided hereunder. The
Borrowers shall execute and deliver to Lender from time to time, within ten (10)
days after the request of Lender, a severance agreement and such other documents
as Lender shall reasonably request in order to effect the severance described in
the preceding sentence, all in form and substance reasonably satisfactory to
Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their
true and lawful attorney, coupled with an interest, in their name and stead to
make and execute all documents reasonably necessary to effect the aforesaid
severance if the Borrowers fail to do so within ten (10) days of Lender's
written request, the Borrowers ratifying all that their said attorney shall do
by virtue thereof.
(E) Any amounts recovered from the Properties or any other collateral for
the Loan after an Event of Default may be applied by Lender toward the payment
of any interest and/or principal of the Loan and/or any other amounts due under
the Loan Documents in such order, priority and proportions as Lender in its sole
discretion shall determine.
(F) The rights, powers and remedies of Lender under this Loan Agreement
shall be cumulative and not exclusive of any other right, power or remedy which
Lender may have against the Borrowers pursuant to this Loan Agreement or the
other Loan Documents, or existing at law or in equity or otherwise. Lender's
rights, powers and remedies may be pursued singly, concurrently or otherwise, at
such time and in such order as Lender may determine in Lender's sole discretion.
No delay or omission to exercise any remedy, right or power accruing upon an
Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as may be deemed expedient. A waiver of
one Default or Event of Default with respect to the Borrowers shall not be
construed to be a waiver of any subsequent Default or Event of Default by the
Borrowers or to impair any remedy, right or power consequent thereon.
SECTION 8.3 PERFORMANCE BY LENDER.
(A) Upon the occurrence and during the continuance of an Event of Default,
if any of the Borrowers shall fail to perform, or cause to be performed, any
material covenant, duty or agreement contained in any of the Loan Documents
(subject to applicable notice and cure periods), Lender may perform or attempt
to perform such covenant, duty or agreement on behalf of the Borrowers including
making protective advances on behalf of any Borrower, or, in its sole
discretion, causing the obligations of any of the Borrowers to be satisfied with
the proceeds of any Reserve. In such event, the Borrowers shall, at the request
of Lender, promptly pay to Lender, or reimburse, as applicable, any of the
Reserves, any actual amount reasonably expended or disbursed by Lender in such
performance or attempted performance, together with interest thereon at the
Default Rate (including reimbursement of any applicable Reserves), from the date
of such expenditure or disbursement, until paid. Any amounts advanced or
expended by Lender to perform or attempt to perform any such matter shall be
added to and included within the indebtedness evidenced by the applicable Note
and shall be secured by all of the Collateral securing the applicable Loan.
Notwithstanding the foregoing, it is expressly agreed that Lender shall not have
any liability or responsibility for the performance of any obligation of the
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Borrowers under this Loan Agreement or any other Loan Document, and it is
further expressly agreed that no such performance by Lender shall cure any Event
of Default hereunder.
(B) Lender may cease or suspend any and all performance required of Lender
under the Loan Documents upon and at any time after the occurrence and during
the continuance of any Event of Default.
SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each
Borrower shall provide such documents and instruments as shall be reasonably
satisfactory to Lender to evidence compliance with any material provision of the
Loan Documents applicable to the Borrowers.
ARTICLE IX
SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,
WARRANTIES AND COVENANTS
SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower
Party hereby represents, warrants and covenants as of the Closing Date and until
such time as all Obligations are paid in full, that absent express advance
written waiver from Lender, which may be withheld in Lender's sole discretion,
that such Primary Borrower Party:
(A) does not own and will not own any assets other than the Properties
(including incidental personal property necessary for the operation thereof and
proceeds therefrom) or direct or indirect ownership interests in the Borrowers,
and other wholly owned subsidiaries of the Primary Borrower Parties established
solely for the purpose of holding liquor licenses with respect to one or more of
the Properties, and with respect to Member, direct or indirect ownership
interests in the Crossed Borrowers as of the date of this Agreement (all of the
foregoing ownership interests being referred to herein, collectively, as the
"OWNERSHIP INTERESTS") or, with respect to each of the Primary Borrower Parties,
such incidental assets as are necessary to enable it to discharge its
obligations with respect to the Borrowers;
(B) is not engaged and will not engage in any business, directly or
indirectly, other than the ownership, management and operation of the
Properties, the Crossed Properties as of the date of this Agreement, or the
Ownership Interests;
(C) has not at any time since the SPE Effective Date entered into and will
not enter into any contract or agreement with any partner, member, shareholder,
trustee, beneficiary, principal or Affiliate of any Primary Borrower Party
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with third
parties other than such Affiliate (including the Management Agreements);
(D) has not incurred any debt that remains outstanding as of Closing and
will not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted
Indebtedness, and (iii) the Mezzanine Loan;
(E) has not made any loans or advances to any Person that remains
outstanding as of Closing and will not make any loan or advances to any Person
(including any of its Affiliates),
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and has not acquired and will not acquire obligations or securities (other than
the Ownership Interests) of any of its Affiliates other than the other Borrower
Parties;
(F) is and reasonably expects to remain solvent and pay its own
liabilities, indebtedness, and obligations of any kind from its own separate
assets as the same shall become due;
(G) has at all times since the SPE Effective Date done or caused to be
done and will do all things necessary to preserve its existence, and will not,
and no partner, member, shareholder, trustee, beneficiary, or principal will,
further amend, modify or otherwise change, its partnership certificate,
partnership agreement, articles of incorporation, by-laws, articles of
organization, operating agreement, or other organizational documents, as
modified, amended, restated or supplemented as of the date hereof, in any manner
with respect to the matters set forth in this Article IX;
(H) has at all times since the SPE Effective Date continuously maintained
its existence and has at all times since the SPE Effective Date been qualified
to do business, and shall continue to maintain its existence and be qualified to
do, business in all states necessary to carry on its business, specifically
including in the case of each Borrower, the state where its Property is located;
(I) has at all times since the SPE Effective Date conducted and operated,
and will conduct and operate its business as presently conducted and operated
and otherwise contemplated with respect to the ownership of its Property, or the
ownership of the Ownership Interests, as applicable;
(J) has at all times since the SPE Effective Date maintained, and will
maintain books and records and bank accounts (other than bank accounts
established hereunder, or established by Manager with respect to the operations
of the Properties pursuant to the Management Agreement) separate from those of
its partners, members, shareholders, trustees, beneficiaries, principals,
Affiliates, and any other Person and has at all times since the SPE Effective
Date maintained and will maintain separate financial statements except that it
may also be included in consolidated financial statements of its Affiliates;
(K) has at all times since the SPE Effective Date been and held itself out
to the public as, and will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other Person (including
any of its partners, members, shareholders, trustees, beneficiaries, principals
and Affiliates, and any Affiliates of any of the same), and not as a department
or division of any Person and has at all times since the SPE Effective Date
corrected and will correct any known misunderstandings regarding its existence
as a separate legal entity;
(L) has at all times since the SPE Effective Date paid, and will pay the
salaries of its own employees, if any;
(M) has at all times since the SPE Effective Date allocated, and will
allocate fairly and reasonably any overhead for shared office space;
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(N) has at all times since the SPE Effective Date used, and will use its
own stationery, invoices and checks;
(O) has at all times since the SPE Effective Date filed, and will file its
own tax returns with respect to itself (or consolidated tax returns, if
applicable) as may be required under applicable law;
(P) has at all times since the SPE Effective Date maintained, and
reasonably expects to maintain adequate capital (taken as a whole with all of
the other Borrowers) for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;
(Q) will not seek, acquiesce in, or suffer or permit its liquidation,
dissolution or winding up, in whole or in part;
(R) will not enter into any transaction of merger or consolidation, and
will not acquire by purchase or otherwise all or substantially all of the
business or assets of, or any stock or beneficial ownership (other than the
Ownership Interests) of, any Person;
(S) has not at any time since the SPE Effective Date commingled or
permitted to be commingled, and will not commingle or permit to be commingled,
its funds or other assets with those of any other Person (other than, with
respect to the Borrowers, each other Borrower, or as may be held by Manager, as
agent, for each Borrower pursuant to the terms of the Management Agreement, and
except for funds deposited in the Accounts in accordance with the Loan
Documents);
(T) has at all times since the SPE Effective Date maintained, and will
maintain its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;
(U) does not and will not hold itself out to be responsible for the debts
or obligations (other than the Obligations and the Crossed Indebtedness as of
the date of this Agreement) of any other Person;
(V) has not guaranteed or otherwise become liable in connection with any
obligation of any other Person that remains outstanding, and will not guarantee
or otherwise become liable on or in connection with any obligation (other than
the Obligations and the Crossed Indebtedness as of the date of this Agreement)
of any other Person that remains outstanding;
(W) except for funds deposited into the Accounts in accordance with the
Loan Documents, shall not hold title to its assets other than in its name; and
(X) shall comply with all of the assumptions, statements, certifications,
representations, warranties and covenants regarding or made by it contained in
or appended to the nonconsolidation opinion delivered pursuant hereto.
SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to
their respective obligations under Section 9.1, each Borrower, General Partner
and Member hereby
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represents, warrants and covenants, as of the Closing Date and until such time
as all Obligations are paid and satisfied in full, that absent express advance
written waiver from Lender, which may be withheld in Lender's sole discretion:
(A) each General Partner shall at all times act as the sole general
partner of each Borrower that is a limited partnership, with all of the rights,
powers, obligations and liabilities thereof under the limited partnership
agreement of such Borrower and shall take any and all actions and do any and all
things necessary or appropriate to the accomplishment of the same and will not
engage in any other business;
(B) Member shall at all times act as the sole member of each Borrower and
Crossed Borrower as of the date of this Agreement that is a limited liability
company with all of the rights, powers, obligations and liabilities thereof
under the limited liability company operating agreement of such Borrower or
Crossed Borrower and shall take any and all actions and will do any and all
things necessary or appropriate to the accomplishment of the same and will not
engage in any other business;
(C) each Borrower that is a limited liability company shall not, without
the prior written consent of its Member (including the unanimous written consent
of its Member's board of directors including the Independent Directors or the
unanimous written consent of each of the Borrowers' board of managers including
the Independent Directors), and each Borrower that is a limited partnership
shall not, without the prior written consent of its General Partner (including
the unanimous written consent of General Partner's Independent Directors),
institute proceedings for itself to be adjudicated bankrupt or insolvent;
consent to the institution of bankruptcy or insolvency proceedings against
itself; file a petition seeking, or consent to, reorganization or relief under
any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;
(D) each Borrower that is a corporation shall not, without the prior
unanimous written consent of its board of directors, including its Independent
Directors, institute proceedings for itself to be adjudicated bankrupt or
insolvent; consent to the institution of bankruptcy or insolvency proceedings
against it; file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;
(E) no Member or any General Partner shall, without the unanimous vote of
its board of directors or board of managers, as the case may be, including, in
each case, its Independent Directors, institute proceedings for itself or any
Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of
a bankruptcy or insolvency proceeding against it or any Borrower; file a
petition seeking, or consent to, reorganization or relief under any applicable
federal or state law relating to bankruptcy; consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) for itself or any Borrower; or a
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substantial part of its or any Borrower's property; make any assignment for the
benefit of creditors; or admit in writing its inability to pay its debts
generally as they become due;
(F) except as otherwise permitted hereunder, no Member or any General
Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve,
in whole or in part; (ii) consolidate, merge or enter into any form of
consolidation with or into any other Person, nor convey, transfer or lease its
or any Borrower's assets substantially as an entirety to any Person nor permit
any Person to consolidate, merge or enter into any form of consolidation with or
into itself or any Borrower, nor convey, transfer or lease its or any Borrower's
assets substantially as an entirety to any Person; or (iii) amend any provisions
of its or any Borrower's organizational documents containing provisions similar
to those contained in this Article IX; and
(G) each Member, General Partner and Borrower that is a corporation shall
each promptly elect and at all times maintain at least two (2) Independent
Directors on its board of directors, who shall be selected by such Member,
General Partner or Borrower, as applicable, and be reasonably acceptable to
Lender. Each Borrower that is a single member limited liability company shall
promptly appoint and at all times maintain at least two (2) Independent
Directors on its board of managers, who shall be selected by such Borrower, and
be reasonably acceptable to Lender.
ARTICLE X
RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS
SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the
right to engage in one or more Secondary Market Transactions with respect to the
Loan, and to structure and restructure all or any part of the Loan, including
without limitation in multiple tranches, as a wraparound loan, or for inclusion
in a REMIC or other Securitization. Without limitation, Lender shall have the
right, at Lender's sole cost (other than each Borrower's internal costs and
expenses and the costs and expenses of the Borrowers' counsel), to cause the
Note and any Mortgage to be split into a first and a second mortgage loan, or
into one or more loans evidenced by multiple notes and secured by multiple
mortgages and/or by ownership interests in any of the Borrowers in whatever
proportion Lender determines, and thereafter to engage in Secondary Market
Transactions with respect to all or any part of the indebtedness and loan
documentation. Each of the Borrower Parties acknowledge that it is the intention
of the parties that all or a portion of the Loan will be securitized and that
all or a portion of the Loan will be rated by one or more Rating Agencies. Each
of the Borrower Parties further acknowledge that additional structural
modifications may be required to satisfy issues raised by any Rating Agencies.
As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale,
assignment, or other transfer of all or any portion of the Obligations or the
Loan Documents or any interest therein to one or more investors, (ii) the sale,
assignment, or other transfer of one or more participation interests in the
Obligations or Loan Documents to one or more investors, (iii) the transfer or
deposit of all or any portion of the Obligations or Loan Documents to or with
one or more trusts or other entities which may sell certificates or other
instruments to investors evidencing an ownership interest in the assets of such
trust or the right to receive income or proceeds therefrom or (iv) any other
Securitization backed in whole or in part by the Loan or any interest therein.
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SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all
reasonable efforts and cooperate reasonably and in good faith with Lender in
effecting any such restructuring or Secondary Market Transactions at Lender's
sole cost (other than, with respect to the first successful Securitization and
any related Secondary Market Transaction only (or if the Loan shall be hereafter
split into multiple loans, the first successful Securitization and any related
Secondary Market Transaction with respect to each of such loans), the Borrowers'
internal costs and expenses and the costs and expenses of the Borrower Parties'
counsel). Notwithstanding the foregoing or anything to the contrary contained in
this Article X, it is acknowledged and agreed that in no event shall Lender be
responsible for payment of any Borrower Party's (or its Affiliate's) internal
costs and expenses in connection with any Secondary Market Transaction. Such
cooperation shall include without limitation, executing and delivering such
reasonable amendments to the Loan Documents and the organizational documents of
each Borrower as Lender or any Interested Party (as defined below) may request,
provided however that, no such amendment shall modify (i) the weighted average
interest rate payable under the Note (or notes); (ii) the stated maturity date
of the Note, (iii) the amortization of the principal amount of the Note, (iv)
any other material economic terms of the Obligations, (v) the non-recourse
provisions of the Loan or (vi) any provision, the effect of which would increase
the Borrowers' obligations or decrease the Borrowers' rights under the Loan
Documents except to a de minimis extent. The Borrower Parties shall not be
required to provide additional collateral to effect any such restructuring or
Secondary Market Transaction after the Closing Date. The Borrower Parties shall
not be required to pay any third party (other than, which respect to the first
successful Securitization and any related Secondary Market Transaction only (or
if the Loan shall be hereafter split into multiple loans, the first successful
Securitization and any related Secondary Market Transaction with respect to each
of such loans), the costs and expenses of the Borrowers' counsel) costs and
expenses incurred by Lender in connection with any such Secondary Market
Transaction unless otherwise expressly payable by the Borrower Parties under
this Loan Agreement or the other Loan Documents.
SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense
(other than, with respect to the first successful Securitization and any related
Secondary Market Transaction only (or if the Loan shall be hereafter split into
multiple loans, the first successful Securitization and any related Secondary
Market Transaction with respect to each of such loans), the Borrowers' internal
costs and expenses and the costs and expenses of the Borrower Parties' counsel),
shall provide such access to personnel and such information and documents
relating to the Borrower Parties, Manager, the Properties and Collateral and the
business and operations of all of the foregoing and such opinions of counsel
(including nonconsolidation opinions) as any Rating Agency may request or as
Lender or any other Interested Party may reasonably request in connection with
any such Secondary Market Transaction including, without limitation, updated
financial information, appraisals, market studies, environmental reviews (Phase
I's and, if appropriate, Phase II's), mold inspection, property condition
reports and other due diligence investigations together with appropriate
verification of such updated information and reports through letters of auditors
and consultants and, as of the closing date of the Secondary Market Transaction,
updated representations and warranties made in the Loan Documents and such
additional representations and warranties as any Rating Agency may request or
any purchaser, transferee, assignee, trustee, servicer or potential investor
(the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED
PARTIES") may reasonably request, to the extent such updated representations and
warranties are true. On or prior to the date of closing of any
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Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other
than with respect to the first successful Securitization and any related
Secondary Market Transaction only (or if the Loan shall be hereafter split into
multiple loans, the first successful Securitization and any related Secondary
Market Transaction with respect to each of such loans), the Borrowers' internal
costs and expenses and the costs and expenses of the Borrowers' counsel), shall,
if required by any Rating Agency or reasonably required by Lender, provide
revisions or "bringdowns" to any opinions delivered at Closing (including
nonconsolidation opinions), or if required by the Rating Agencies, new versions
of such opinions, which opinions shall be consistent in substance with the
opinions covered by the original opinions, addressed to Lender, any trustee
under any Securitization backed in whole or in part by the Loan, any Rating
Agency that assigns a rating to any securities in connection therewith and any
investor purchasing securities therein. Lender shall be permitted to share all
such information with the investment banking firms, Rating Agencies, accounting
firms, law firms, other third party advisory firms, potential investors,
servicers and other service providers and other parties directly involved in any
proposed Secondary Market Transaction. The Borrowers understand that any such
information may be incorporated into any offering circular, prospectus,
prospectus supplement, private placement memorandum or other offering documents
for any Secondary Market Transaction. Lender and the Rating Agencies shall be
entitled to rely upon such information. Without limiting the foregoing, the
Borrowers and Guarantor shall provide in connection with each (i) preliminary
and final private placement memorandum or (ii) a preliminary and final
prospectus or prospectus supplement, as applicable, prepared in connection with
any Secondary Market Transaction (the documents referred to in the foregoing
clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement
reasonably satisfactory to the Borrowers and Guarantor certifying that the
Borrowers and Guarantor have examined such Disclosure Documents specified by
Lender and, that the sections of such Disclosure Document describing the
Borrowers, Guarantor, the Properties and Manager do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they
were made, not materially misleading. The Borrowers and Guarantor shall each
indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates,
directors, employees, agents and each Person, if any, who controls Lender,
Merrill Lynch or any such Affiliate within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and
any other placement agent or underwriter with respect to any Securitization or
Secondary Market Transaction from and against any losses, claims, damages and
liabilities that arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Disclosure Document as to
the Borrowers, Guarantor, Manager and the Properties or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated in such information or necessary in order to make the
statements in such information not materially misleading; provided, however, the
Borrowers shall not be required to indemnify Merrill Lynch for any liabilities
arising out of untrue statements or omissions that were identified to Lender in
writing or are set forth in any third party report not prepared by the Borrowers
or their Affiliates unless such reports are caused to be incorrect or misleading
based upon information provided by the Borrowers or their Affiliates. Lender may
publicize the existence of the Obligations in connection with Lender's Secondary
Market Transaction activities or otherwise.
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SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender
may transfer its obligations under this Loan Agreement and under the other Loan
Documents (or may transfer the portion thereof corresponding to the transferred
portion of the Obligations), and thereafter Lender shall be relieved of any
obligations hereunder and under the other Loan Documents arising after the date
of said transfer with respect to the transferred interest. Each transferee
investor shall become a "Lender" hereunder.
ARTICLE XI
RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES
SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or
a Permitted Assumption expressly permitted under this Article XI, Leases entered
into as permitted hereunder, and pledges in connection with the Mezzanine Loan,
the Borrowers shall not cause or suffer to occur or exist, directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, any
sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted
Encumbrances) of (i) all or any part of any Property or any interest therein, or
(ii) any direct or indirect ownership or beneficial interest in any Borrower
(other than to Mezzanine Lender), irrespective of the number of tiers of
ownership, without Lender's consent.
SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following
voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges
(each, a "TRANSFER") of a direct, indirect or beneficial interest in any
Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP
INTEREST TRANSFERS"):
(A) A Transfer of no more than forty-nine percent (49%) of the direct or
indirect ownership interests in such Borrower (in the aggregate), provided that,
following such Transfer, Guarantor maintains control of such Borrower.
(B) A Transfer or a series of Transfers that result in the proposed
transferee, together with Affiliates of such transferee, owning in the aggregate
(directly or indirectly) more than forty-nine percent (49%) of the economic and
beneficial interests in such Borrower (where, prior to such Transfer, such
proposed transferee and its Affiliates owned in the aggregate (directly or
indirectly) forty-nine percent (49%) or less of such interests in that
Borrower); and, provided that such Transfer shall not be a Permitted Ownership
Interest Transfer unless Lender receives, prior to such Transfer, both (x)
evidence reasonably satisfactory to Lender (which shall include a legal
non-consolidation opinion reasonably acceptable to Lender and the Rating
Agencies) that the single purpose nature and bankruptcy remoteness of such
Borrower (and its members and general partners, as applicable) following such
Transfer or Transfers will be the same as prior to such Transfer or Transfers
and (y) a Rating Agency Confirmation.
(C) For so long as Guarantor's (or its successor's) stock is traded
through the "over-the-counter market" or through any recognized stock exchange,
any Transfer of all or any portion of the issued and outstanding capital stock
of Guarantor, or the issuance of additional capital stock of Guarantor
(including common or preferred shares) through the "over-the-counter market" or
through any recognized stock exchange.
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(D) The pledge of ownership interests granted by the Mezzanine Borrowers
pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan
Agreement).
For purposes of this Section 11.2, "control" shall have the meaning given
thereto in the definition of "Affiliate" in Section 1.1 and a "change of
control" of any Person shall include the Transfer of legal or equitable
ownership interests in such Person which after giving effect to such Transfer
results in any transferee or pledgee of such interests holding more than a 49%
legal or equitable ownership interest or security interest in such Person.
SECTION 11.3 ASSUMABILITY.
(A) The Borrowers shall have the right to request that Lender consent to
(i) a transfer of all of the Properties to another Person (the "TRANSFEREE
BORROWER") and the assumption by the Transferee Borrower of all of the
Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor
with new guarantors and indemnitors who shall assume all of the obligations of
the Guarantors arising from and after such date and release of the Borrowers and
Guarantor from obligations arising from and after such date and (iii) the
replacement of the Mezzanine Borrowers with pledgors of the ownership interests
in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the
conditions set forth in paragraphs (B) and (C) of this Section. Together with
such written application, the Borrowers will pay to Lender a review fee of
$10,000. The Borrowers also shall pay on demand all of the reasonable
out-of-pocket costs and expenses incurred by Lender, including reasonable
attorneys' fees and expenses, and the fees and expenses of the Rating Agencies,
if any, and other outside entities, in connection with considering any proposed
Assumption, whether or not the same is permitted or occurs.
(B) Lender shall not withhold its consent to an Assumption (any such
Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon
the conditions that:
(i) No Event of Default shall have occurred and be continuing at the
time of such Assumption;
(ii) The Borrowers shall have submitted to Lender true, correct and
complete copies of any and all information and documents reasonably requested by
Lender concerning the Transferee Borrower, replacement guarantors and
indemnitors and all of such information and documents shall be reasonably
acceptable to Lender;
(iii) Evidence reasonably satisfactory to Lender shall have been
provided showing that the Transferee Borrower and such of its Affiliates as
shall reasonably be designated by Lender comply and will comply with Article IX,
as those provisions may be modified by Lender taking into account the ownership
structure of Transferee Borrower and its Affiliates;
(iv) The Borrowers shall have obtained (and delivered to Lender) a
Rating Confirmation with respect to the Assumption, the Transferee Borrower, the
new guarantors and indemnitors and all related transactions;
(v) The Borrowers shall have paid all of Lender's reasonable
out-of-pocket costs and expenses in connection with considering the Assumption,
and shall have paid the
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amount reasonably requested by Lender as a deposit against Lender's reasonable
costs and expenses in connection with effecting the Assumption;
(vi) The Borrowers, the Transferee Borrower, and the replacement
guarantors and indemnitors shall have indicated in writing in form and substance
reasonably satisfactory to Lender their readiness and ability to satisfy the
conditions set forth in Subsection (C) below;
(vii) (a) The Transferee Borrower shall be a Permitted Transferee or
(b) the identity, experience and financial condition of the Transferee Borrower
shall otherwise be satisfactory to Lender in its reasonable discretion; and
(viii) The identity and financial condition of the replacement
guarantors and indemnitors shall be satisfactory to Lender.
(C) If Lender consents to the proposed Assumption, the Transferee Borrower
and/or Borrowers, as the case may be, shall promptly and as a condition to the
Assumption deliver the following to Lender:
(i) The Borrowers, the Transferee Borrower, the original and
replacement guarantors and indemnitors shall execute and deliver any and all
documents reasonably required by Lender to evidence the Transfer and Assumption
of the Loan, in form and substance reasonably required by Lender and similar to
those received at Closing;
(ii) Counsel to the Transferee Borrower and replacement guarantors
and indemnitors shall deliver to Lender opinions in form and substance
reasonably satisfactory to Lender as to such matters as Lender shall reasonably
require in connection with such Assumption, which may include opinions as to
substantially the same matters as were required in connection with the
origination of the Loan including, without limitation, a bankruptcy
non-consolidation opinion;
(iii) The Borrowers shall cause to be delivered to Lender, an
endorsement (relating to the change in the identity of the Borrowers and
execution and delivery of the Assumption documents) to Lender's policy of title
insurance in form and substance acceptable to Lender, in Lender's reasonable
discretion; and
(iv) The Borrowers shall deliver to Lender a payment in the amount
of all remaining unpaid reasonable costs incurred by Lender in connection with
the Transfer and Assumption, including but not limited to Lender's reasonable
attorneys' fees and expenses, all recording fees, and all fees payable to the
title company in connection with the Transfer and Assumption.
SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may
obtain the release (each, a "RELEASE") of one or more Properties from the Lien
of the applicable Mortgage(s) in connection with a partial or total defeasance
of the Loan subject to the conditions of the Note and subject to the
satisfaction of the following conditions:
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(A) Lender shall have received from the Borrowers at least fifteen (15)
days prior written notice of the date proposed for such release (the "RELEASE
DATE") which notice is revocable;
(B) No Event of Default shall have occurred and be continuing as of the
date of such notice and the Release Date;
(C) On the date proposed for such Release, the Borrowers shall defease all
or a portion of the Loan by delivering a Defeasance Deposit (as defined in the
Note) in an amount necessary to pay all Scheduled Defeasance Payments (as
defined in the Note) for the entire principal amount of the Loan in the case of
a total defeasance, or in the case of a partial defeasance, relating to the
Release Price of each Property being released (together with all accrued and
unpaid interest on the principal amount being so defeased), and such defeasance
shall be undertaken in accordance with the terms and conditions of the Note, and
Mezzanine Lender shall have received all amounts required to be paid to it in
connection with such Release under the Mezzanine Loan Documents;
(D) If required by any Rating Agency, the Borrowers at their sole cost and
expense, in connection with any partial defeasance, shall have delivered to
Lender, one or more endorsements to the Title Policies delivered to Lender on
the date hereof in connection with the Mortgages insuring that, after giving
effect to such Release, (i) the Liens created hereby and thereby and insured
under the Title Policies are first priority Liens on the respective remaining
Properties subject only to the Permitted Encumbrances applicable to the
remaining Properties and (ii) that the Title Policies remain in full force and
effect and unaffected by such Release;
(E) Immediately following any Release in connection with any partial
defeasance, both the Debt Service Coverage Ratio and the Debt Yield (based upon
a trailing twelve (12) month period) shall be equal to or greater than the Debt
Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12)
month period) in effect at Closing, or immediately prior to the Release,
whichever is greater;
(F) Notwithstanding the foregoing, the Borrowers may not obtain the
Release under this Section 11.4 of any Property or Properties which
individually, or in the aggregate (with all Releases since the Closing Date),
have an aggregate Allocated Loan Amount of more than thirty percent (30%) of the
original principal balance of the Loan except pursuant to a total defeasance;
(G) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses (including, without limitation, title search costs and endorsement
premiums and reasonable attorney's fees and disbursements) incurred by Lender,
Servicer, and any custodian employed by Lender or Servicer, in connection with
the Release; and
(H) Immediately following such Property Release, each released Property
will be owned by a Person other than the Borrowers, except as otherwise
permitted in connection with any full or partial defeasance of the Loan in
accordance with the terms and conditions of the Note.
Upon satisfaction of the above conditions, Lender shall effectuate the following
(hereinafter referred to as a "PROPERTY RELEASE"): the security interest of
Lender under the Mortgage and
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other Loan Documents relating to each released Property shall be released and
Lender will execute and deliver any agreements reasonably requested by the
Borrowers to release and terminate or reassign, at the Borrowers' option, the
Mortgage, the applicable Assignment of Leases, and financing statements as to
each released Property; provided, that such release and termination or
reassignment shall be without recourse to Lender and without any representation
or warranty except that Lender shall be deemed to have represented that such
release and termination or reassignment has been duly authorized and that it has
not assigned or encumbered the Mortgage or the other Loan Documents relating to
any released Property (except as contemplated hereby) and Lender shall return
the originals of any Loan Documents that relate solely to each released Property
to the Borrowers; provided, further, that upon the release and termination or
reassignment of Lender's security interest in the Mortgage relating to a
released Property all references herein to the Mortgage relating to such
released Property shall be deemed deleted, except as otherwise provided herein
with respect to indemnities. In addition, promptly after consummation of any
such Property Release and Lender's receipt of the Defeasance Collateral, any and
all Reserves designated as applicable to each released Property held by or on
behalf of Lender shall be returned to the Borrowers.
SECTION 11.5 RESERVED.
SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the
contrary contained herein, provided no Event of Default exists, the Borrowers
may Transfer or dispose of building equipment which is being replaced or which
is no longer necessary in connection with the operation of the Property free
from the lien of the Mortgage, provided that such transfer or disposal will not
have a Material Adverse Effect on the value of any individual Property or on the
Properties taken as a whole, will not materially impair the utility of any
individual Property or the Properties, taken as a whole, and will not result in
a reduction or abatement of, or right of offset against, the Rents payable under
any Lease, in either case as a result thereof, and provided further that any new
building equipment acquired by the Borrowers (and not so disposed of) shall be
subject to the lien of the Mortgage. Lender shall, from time to time, upon the
reasonable request of any Borrower, execute a written instrument in form
reasonably satisfactory to Lender to confirm that such building equipment which
is to be, or has been, sold or disposed of is free from the lien of the
Mortgage.
SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of
Default exists, the Borrowers may, without the consent of Lender, (i) make
immaterial Transfers of portions of the any Property to Governmental Authorities
for dedication for public use, and (ii) grant easements, restrictions,
covenants, reservations and rights of way with respect to any Property in the
ordinary course of business for access, water and sewer lines, telephone and
telegraph lines, electric lines or other utilities or for other similar
purposes, provided that no such transfer, conveyance or encumbrance set forth in
the foregoing clauses (i) and (ii) shall materially impair the utility and
operation of such Property or have a Material Adverse Effect on the value of
such Property taken as a whole. In connection with any Transfer permitted
pursuant to this Section 11.7, Lender shall execute and deliver any instrument
reasonably necessary or appropriate, in the case of the Transfers referred to in
clause (i) above, to release the portion of such Property affected by such
transfer from the lien of the applicable Mortgage or to subordinate the
applicable Mortgage to any such easement, restriction, covenant, reservation or
right of way within ten (10) days of Lender's receipt of the following:
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(A) Ten (10) days prior written notice thereof.
(B) A copy of the instrument or instruments of transfer.
(C) An officer's certificate given by the Borrowers stating that such
transfer does not materially impair the utility and operation of the Property,
materially reduce the value of the Property or have a Material Adverse Effect.
(D) Reimbursement of all of Lender's reasonable, out-of-pocket costs and
expenses incurred in connection with such Transfer.
ARTICLE XII
RECOURSE; LIMITATIONS ON RECOURSE
SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article,
and notwithstanding any provision of the Loan Documents other than this Article,
the personal liability of the Borrowers to pay any and all Obligations including
but not limited to the principal of and interest on the debt evidenced by the
Note and any other agreement evidencing the Borrowers' obligations under the
Note shall be limited to (i) the Properties, (ii) the rents, profits, issues,
products and income of the Properties, and (iii) any other Collateral.
Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages
or any of the Loan Documents, Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Obligations secured by the Mortgages or to require that all collateral shall
continue to secure all of the Obligations owing to Lender in accordance with the
Loan Documents.
SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the
Borrowers (but not their members, partners (other than the General Partners),
employees, shareholders agents, directors or officers (the "EXCULPATED
PARTIES")) and Guarantor shall be personally liable to the extent of any
liability, loss, damage, cost or expense (including, without limitation,
reasonable attorneys' fees and expenses) suffered or incurred by Lender
resulting from any and all of the following: (i) fraud of any of the Borrower
Parties or their agents or employees; (ii) any material misrepresentation made
by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan
Document; (iii) insurance proceeds, condemnation awards, or other sums or
payments attributable to the Properties which are not applied in accordance with
the provisions of the Loan Documents; (iv) all rents, profits, issues, products
and income of the Properties received or collected by or on behalf of the
Borrowers or any Borrower Party or Manager and not deposited into the Deposit
Account in accordance with Article VII and the Cash Management Agreement; (v)
failure to turn over to Lender, after an Event of Default, or misappropriation
of any tenant security deposits or rents collected in advance (other than by
Lender or Servicer); (vi) failure to notify Lender of any change in the
principal place of business address of the Borrowers or of any change in the
name of any of the Borrowers or if any of the Borrowers takes any other action
which could make the information set forth in the Financing Statements relating
to the Loan materially misleading; (vii) failure by the Borrowers, or any
indemnitor or guarantor to comply with the covenants, obligations, liabilities,
warranties and
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representations contained in the Environmental Indemnity or otherwise pertaining
to environmental matters; (viii) material waste with respect to any of the
Properties; (ix) all liabilities and expenses under the indemnification
provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any
material uncured default under Article IX; and (xii) any distributions made in
violation of Section 5.28 (to the extent of any such distribution) including
amounts improperly paid or distributed, directly or indirectly, by Manager in
circumvention of such restrictions. Notwithstanding the preceding sentence or
Section 12.1, the Loan shall be fully recourse to the Borrowers and Guarantor
upon the happening of any of the following: (i) any Borrower Party's defense of
any efforts by Lender to collect or enforce the Obligations following maturity
of the Loan or acceleration of the Loan on account of an Event of Default under
Section 8.1(A), or any other defense of any efforts by Lender to collect or
enforce the Obligations without a good faith basis following any other Event of
Default, and (ii) any condition or event described in any of Subsections 8.1(G),
8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable
under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy
unless such involuntary proceeding is solicited, procured, consented to or
acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or
any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the
exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents).
SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the
enforcement of the Environmental Indemnity, the Guaranty or any guaranty or
similar agreement executed in connection with the Loan, (ii) release or reduce
the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or
any other security document, (iv) impair the rights of Lender to enforce any
provisions of the Loan Documents, or (v) limit Lender's ability to obtain a
deficiency judgment or judgment on the Note or otherwise against any Borrower
Party but not any Exculpated Party to the extent necessary to obtain any amount
for which such Borrower Party may be liable in accordance with this Article or
any other Loan Document.
ARTICLE XIII
WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES
SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article,
a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or
for any other Borrower Party or Affiliate or to have rights or obligations in
the nature of the rights or obligations of a guarantor or surety (whether by
reason of execution of a guaranty, provision of security for the obligations of
another, or otherwise) then this Article shall apply. This Article shall not
affect the rights of the Waiving Party other than to waive or limit rights and
defenses that Waiving Party would have (i) in its capacity as a guarantor or
surety or (ii) in its capacity as one having rights or obligations in the nature
of a guarantor or surety.
Waiving Party hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of receivership or bankruptcy of any
of the other Borrower Parties, protest or notice with respect to any of the
obligations of any of the other Borrower Parties, setoffs and counterclaims and
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance, the benefits
of all statutes of limitation, and all other demands whatsoever (and shall not
require that the same be made on any of the other Borrower Parties as a
condition precedent to the
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obligations of Waiving Party), and covenants that the Loan Documents will not be
discharged, except by complete payment and performance of the obligations
evidenced and secured thereby, except only as limited by the express contractual
provisions of the Loan Documents. Waiving Party further waives all notices that
the principal amount, or any portion thereof, and/or any interest on any
instrument or document evidencing all or any part of the obligations of any of
the other Borrower Parties to Lender is due, notices of any and all proceedings
to collect from any of the other Borrower Parties or any endorser or any other
guarantor of all or any part of their obligations, or from any other person or
entity, and, to the extent permitted by law, notices of exchange, sale,
surrender or other handling of any security or collateral given to Lender to
secure payment of all or any part of the obligations of any of the other
Borrower Parties.
Except only to the extent provided otherwise in the express contractual
provisions of the Loan Documents, Waiving Party hereby agrees that all of its
obligations under the Loan Documents shall remain in full force and effect,
without defense, offset or counterclaim of any kind, notwithstanding that any
right of Waiving Party against any of the other Borrower Parties or defense of
Waiving Party against Lender may be impaired, destroyed, or otherwise affected
by reason of any action or inaction on the part of Lender. Waiving Party waives
all rights and defenses arising out of an election of remedies by the Lender,
even though that election of remedies, may have destroyed the Waiving Party's
rights of subrogation and reimbursement against the other Borrower Parties.
Lender is hereby authorized, without notice or demand, from time to time,
(a) to renew, extend, accelerate or otherwise change the time for payment of, or
other terms relating to, all or any part of the obligations of any of the other
Borrower Parties; (b) to accept partial payments on all or any part of the
obligations of any of the other Borrower Parties; (c) to take and hold security
or collateral for the payment of all or any part of the obligations of any of
the other Borrower Parties; (d) to exchange, enforce, waive and release any such
security or collateral for such obligations; (e) to apply such security or
collateral and direct the order or manner of sale thereof as in its discretion
it may determine; (f) to settle, release, exchange, enforce, waive, compromise
or collect or otherwise liquidate all or any part of such obligations and any
security or collateral for such obligations. Any of the foregoing may be done in
any manner, and Waiving Party agrees that the same shall not affect or impair
the obligations of Waiving Party under the Loan Documents.
Waiving Party hereby assumes responsibility for keeping itself informed of
the financial condition of all of the other Borrower Parties and any and all
endorsers and/or other guarantors of all or any part of the obligations of the
other Borrower Parties, and of all other circumstances bearing upon the risk of
nonpayment of such obligations, and Waiving Party hereby agrees that Lender
shall have no duty to advise Waiving Party of information known to it regarding
such condition or any such circumstances.
Waiving Party agrees that neither Lender nor any person or entity acting
for or on behalf of Lender shall be under any obligation to marshal any assets
in favor of Waiving Party or against or in payment of any or all of the
obligations secured hereby. Waiving Party further agrees that, to the extent
that any of the other Borrower Parties or any other guarantor of all or any part
of the obligations of the other Borrower Parties makes a payment or payments to
Lender, or Lender receives any proceeds of collateral for any of the obligations
of the other
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Borrower Parties, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid or refunded, then, to the extent of such payment or
repayment, the part of such obligations which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.
Waiving Party (i) shall have no right of subrogation with respect to the
obligations of the other Borrower Parties; (ii) waives any right to enforce any
remedy that Lender now has or may hereafter have against any of the other
Borrower Parties any endorser or any guarantor of all or any part of such
obligations or any other person; and (iii) waives any benefit of, and any right
to participate in, any security or collateral given to Lender to secure the
payment or performance of all or any part of such obligations or any other
liability of the other parties to Lender.
Waiving Party agrees that any and all claims that it may have against any
of the other Borrower Parties, any endorser or any other guarantor of all or any
part of the obligations of the other Borrower Parties, or against any of their
respective properties, shall be subordinate and subject in right of payment to
the prior payment in full of all obligations secured hereby. Notwithstanding any
right of any of the Waiving Party to ask, demand, sue for, take or receive any
payment from the other Borrower Parties, all rights, liens and security
interests of Waiving Party, whether now or hereafter arising and howsoever
existing, in any assets of any of the other Borrower Parties (whether
constituting part of the security or collateral given to Lender to secure
payment of all or any part of the obligations of the other Borrower Parties or
otherwise) shall be and hereby are subordinated to the rights of Lender in those
assets.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions
contemplated hereby shall be consummated, the Borrowers agree to promptly pay
all reasonable fees, costs and expenses incurred by Lender in connection with
any matters contemplated by or arising out of this Loan Agreement, including the
following, and all such fees, costs and expenses shall be part of the
Obligations, payable on demand: (A) reasonable fees, costs and expenses
(including reasonable attorneys' fees, and other professionals retained by
Lender) incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements evidenced
by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and
expenses (including reasonable attorneys' fees and other professionals retained
by Lender) incurred in connection with the administration of the Loan Documents
and the Loan and any amendments, modifications and waivers relating thereto; (C)
subject to Section 10.2, reasonable fees, costs and expenses (including
reasonable attorneys' fees) incurred in connection with the review,
documentation, negotiation, closing and administration of any subordination or
intercreditor agreements; and (D) reasonable fees, costs and expenses (including
reasonable attorneys' fees and fees of other professionals retained by Lender)
incurred in any action to enforce or interpret this Loan Agreement or the other
Loan Documents or to collect any payments due from the Borrowers under this Loan
Agreement, the Note or any other Loan Document or incurred in connection with
any refinancing or restructuring of the credit arrangements provided under this
Loan Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceedings or otherwise. Any costs and
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expenses due and payable to Lender after the Closing Date may be paid to Lender
pursuant to the Cash Management Agreement.
SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required
elsewhere herein, whether or not the transactions contemplated hereby shall be
consummated, the Borrowers agree to indemnify, defend, protect, pay and hold
Lender, Servicer and their successors and assigns (including, without
limitation, the trustee and/or the trust under any trust agreement executed in
connection with any Securitization backed in whole or in part by the Loan and
any other Person which may hereafter be the holder of the Note or any interest
therein), and the officers, directors, stockholders, partners, members,
employees, agents, Affiliates and attorneys of Lender and such successors and
assigns (collectively called the "INDEMNITEES") harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable
costs, expenses and disbursements of any kind or nature whatsoever (including
the reasonable fees and disbursements of outside counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that are imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of (A) the negotiation,
execution, delivery, performance, administration, ownership, or enforcement of
any of the Loan Documents; (B) any of the transactions contemplated by the Loan
Documents; (C) any breach by the Borrowers of any material representation,
warranty, covenant, or other agreement contained in any of the Loan Documents;
(D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any
third party arising out of any condition or occurrence at or pertaining to the
Properties; (F) any design, construction, operation, repair, maintenance, use,
non-use or condition of the Properties or Improvements, including claims or
penalties arising from violation of any applicable laws or insurance
requirements, as well as any claim based on any patent or latent defect, whether
or not discoverable by Lender; (G) any performance of any labor or services or
the furnishing of any materials or other property in respect of the Properties
or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I)
any obligation or undertaking relating to the performance or discharge of any of
the terms, covenants and conditions of the landlord contained in the Leases; or
(J) the use or intended use of the proceeds of any of the Loan (the foregoing
liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES");
provided that the Borrowers shall not have an obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities arising from the fraud, gross
negligence or willful misconduct of such Indemnitee as determined by a court of
competent jurisdiction. The obligations and liabilities of the Borrowers under
this Section 14.2 shall survive the term of the Loan and the exercise by Lender
of any of its rights or remedies under the Loan Documents, including the
acquisition of the Properties by foreclosure or a conveyance in lieu of
foreclosure.
SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this Loan
Agreement, the Note or any other Loan Document, or consent to any departure
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender and any other party to be charged. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers or other Person
to any other or further notice or demand in similar or other circumstances.
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SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance
with Lender's customary practices, destroy or otherwise dispose of all
documents, schedules, invoices or other papers, delivered by the Borrowers to
Lender (other than the Note) unless the Borrowers request in writing that same
be returned. Upon such request and at the Borrowers' expense, Lender shall
return such papers when Lender's actual or anticipated need for same has
terminated.
SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice
or other communication required or permitted to be given shall be in writing and
addressed to the respective party as set forth below. Notices shall be effective
(i) three (3) days after the date such notice is mailed, (ii) on the next
Business Day if sent by a nationally recognized overnight courier service, (iii)
on the date of delivery by personal delivery and (iv) on the date of
transmission if sent by telefax during business hours on a Business Day
(otherwise on the next Business Day).
Notices shall be addressed as follows:
If to the Borrowers or any Borrower Party:
c/o Lodgian
3445 Peachtree Road NE
Suite 700
Atlanta, Georgia 30326
Attention: General Counsel
Facsimile: (404) 364-0088
With a copy to:
Morris, Manning & Martin, LLP
3343 Peachtree Rd., NE
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attention: Thomas Gryboski, Esq.
Facsimile: (404) 365-9532
If to Lender:
Merrill Lynch Mortgage Lending, Inc.
Four World Financial Center
New York, New York 10080
Attention: Robert Spinna
Facsimile: (212) 449-7684
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With a copy to:
Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, New York 10019
Attn: Robert L. Boyd, Esq.
Facsimile: (212) 839-5599
Any party may change the address at which it is to receive notices to another
address in the United States at which business is conducted (and not a
post-office box or other similar receptacle), by giving notice of such change of
address in accordance with the foregoing. This provision shall not invalidate or
impose additional requirements for the delivery or effectiveness of any notice
(i) given in accordance with applicable statutes or rules of court, or (ii) by
service of process in accordance with applicable law. If there is any assignment
or transfer of Lender's interest in the Loan, then the new Lenders may give
notice to the parties in accordance with this Section, specifying the addresses
at which the new Lenders shall receive notice, and they shall be entitled to
notice at such address in accordance with this Section.
SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Loan Agreement, the making of the Loan hereunder and the
execution and delivery of the Note. Notwithstanding anything in this Loan
Agreement or implied by law to the contrary, the agreements of the Borrowers to
indemnify or release Lender or Persons related to Lender, or to pay Lender's
costs, expenses, or taxes shall survive the payment of the Loan and the
termination of this Loan Agreement.
SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of Lender in the exercise of any power, right or privilege
hereunder or under the Note or any other Loan Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Loan Agreement,
the Note and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any
obligation to marshal any assets in favor of any Person or against or in payment
of any or all of the Obligations. To the extent that any Person makes a payment
or payments to Lender, or Lender enforces its remedies or exercises its rights
of set off, and such payment or payments or the proceeds of such enforcement or
set off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
if any, and rights and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or set
off had not occurred.
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SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Loan Agreement, the
Note or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this Loan
Agreement, the Note or other Loan Documents or of such provision or obligation
in any other jurisdiction.
SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Loan Agreement for any other purpose or be given any substantive
effect.
SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE
STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED
PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE
LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE
SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER.
SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that the Borrowers may not assign their rights or obligations
hereunder or under any of the other Loan Documents except as expressly provided
in Article XI.
SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY
RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties,
represent, warrant and acknowledge that (i) they are sophisticated real estate
investors, familiar with transactions of this kind, and (ii) they have entered
into this Loan Agreement and the other Loan Documents after conducting their own
assessment of the alternatives available to them in the market, and after
lengthy negotiations in which they have been represented by legal counsel of
their choice. The Borrowers, on behalf of themselves and all Borrower Parties,
also acknowledge and agree that the rights of Lender under this Loan Agreement
and the other Loan Documents are reasonable and appropriate, taking into
consideration all of the facts and circumstances including without limitation
the quantity of the Loan, the nature of the Properties, and the risks incurred
by Lender in this transaction. No provision in this Loan Agreement or in any of
the other Loan Documents
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and no course of dealing between the parties shall be deemed to create (i) any
partnership or joint venture between Lender and the Borrowers or any other
Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any
other Person. The relationship between Lender and the Borrowers is exclusively
the relationship of a creditor and a debtor, and all relationships between
Lender and any other Borrower are ancillary to such creditor/debtor
relationship.
SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any
consent, approval, determination or other action by Lender is, pursuant to the
Loan Documents or applicable law, required to be done reasonably or required not
to be unreasonably withheld, then Lender's action shall be presumed to be
reasonable, and the Borrowers shall bear the burden of proof of showing that the
same was not reasonable. In the event that a claim or adjudication is made that
Lender or its agents have acted unreasonably or unreasonably delayed acting in
any case where, by law or under this Loan Agreement or the other Loan Documents,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, neither Lender nor its agents shall be liable for any monetary
damages, and the Borrowers' sole remedy shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. Any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.
SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate,
officer, director, employee, attorney, or agent of Lender, shall have any
liability with respect to, and each of the Borrowers hereby waives, releases,
and agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower
Parties in connection with, arising out of, or in any way related to, this Loan
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Loan Agreement or any of the other Loan Documents, other
than the gross negligence or willful misconduct of Lender. Each of the Borrowers
hereby waives, releases, and agrees not to sue Lender or any of Lender's
Affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Loan Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Loan Agreement or any of the
transactions contemplated hereby, except to the extent the same is caused by the
gross negligence or willful misconduct of Lender.
SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to any of the Borrowers or Affiliates thereof, or any other Person.
SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other
Loan Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties to the Loan
Documents.
SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and
Lender acknowledge that each of them has had the benefit of legal counsel of its
own choice and has
107
been afforded an opportunity to review this Loan Agreement and the other Loan
Documents with its legal counsel and that this Loan Agreement and the other Loan
Documents shall be construed as if jointly drafted by the Borrowers and Lender.
If any term, condition or provision of this Loan Agreement shall be inconsistent
with any term, condition or provision of any other Loan Document, then this Loan
Agreement shall control.
SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS
LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT
MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS
BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS
ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND
LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE
108
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN
AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan
Documents and any amendments or supplements thereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which counterparts together shall constitute but one and the same
instrument. This Loan Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.
SECTION 14.22 SERVICER. Lender shall have the right from time to time to
designate and appoint a Servicer and special servicer, and to change or replace
any Servicer or special servicer. Provided that the Borrowers have been notified
of such Servicer's role, all rights of the Lender hereunder may be exercised by
Servicer on behalf of Lender and provided the Borrowers shall not be required to
deal with more than one such servicing entity at any time. Lender shall notify
the Borrowers in writing as to the identity of the Servicer and any special
servicer.
SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than
the Borrowers are parties to this Loan Agreement only with regard to the
representations, warranties, and covenants specifically applicable to them.
SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything
contained in this Loan Agreement to the contrary, if for any reason whatsoever
Lender suspects that any conditions exist or may exist at any Property which
might have a Material Adverse Effect, Lender shall have the right, at the
Borrowers' sole reasonable cost and expense, to cause such inspections and
reports to be prepared and performed with respect to any Property as Lender
shall reasonably determine.
[signatures follow on next page]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Loan Agreement as of the date first written above.
BORROWERS:
[LODGIAN ENTITIES]
By:____________________________________
Name: Daniel E. Ellis
Title: Vice President and Secretary, or
Authorized Signatory for each of
the entities listed above
LENDER:
MERRILL LYNCH MORTGAGE LENDING, INC.
By:____________________________________
Name:
Title:
LIST OF EXHIBITS AND SCHEDULES
Exhibit A - Properties
Exhibit B - Environmental Reports
Exhibit C - Franchise Agreements
Exhibit D - Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E - Management Agreements
Exhibit F - [Reserved]
Exhibit G - Property Improvement Plans
Exhibit H - [Reserved]
Exhibit I - Acceptable Franchisors
Exhibit J - Property Condition Reports
Exhibit K - Zoning Reports
Exhibit L - Certificate Re: Work Reserves
Schedule 1 - Borrowers
Schedule 2.4 - Scheduled Mortgage Principal Payments
Schedule 2.12(G) - Crossed Loans/Crossed Borrowers
Schedule 3.1(A) - List of Loan Documents
Schedule 4.1(C) - Organizational Chart for Borrower Parties
Schedule 4.2 - Consents
Schedule 4.5 - Condemnation Proceedings
Schedule 4.5(A) - Rights to Purchase/Rights of First Offer
Schedule 4.7(B) - Rent Roll
Schedule 4.7(E) - Franchise Defaults
Schedule 4.9 - Litigation
Schedule 4.14 ERISA Plans
Schedule 4.20 - Insurance
Schedule 4.28 - Collective Bargaining Agreements
Schedule 4.30 - Ground Leases
Schedule 5.14 - Material Agreements
Schedule 6.5 - Required Capital Improvements
Schedule 6.6 - Environmental Work/O&M Plans
Schedule 6.7 - Reserve Funding Condition
EXHIBIT A
PROPERTIES
EXHIBIT B
ENVIRONMENTAL REPORTS
EXHIBIT C
FRANCHISE AGREEMENTS
EXHIBIT D
ALLOCATED LOAN AMOUNTS/AGGREGATE ALLOCATED LOAN AMOUNTS
EXHIBIT E
MANAGEMENT AGREEMENTS
EXHIBIT F
[RESERVED]
EXHIBIT G
PROPERTY IMPROVEMENT PLANS
None.
EXHIBIT H
[RESERVED]
EXHIBIT I
ACCEPTABLE FRANCHISORS
EXHIBIT J
PROPERTY CONDITION REPORTS
EXHIBIT K
ZONING REPORTS
EXHIBIT L
CERTIFICATE RE: WORK RESERVES
SCHEDULE 1
BORROWERS
SCHEDULE 2.4
SCHEDULED MORTGAGE PRINCIPAL PAYMENTS
SCHEDULE 2.12(G)
CROSSED LOANS/CROSSED BORROWERS
SCHEDULE 3.1(A)
LIST OF LOAN DOCUMENTS
1. Loan and Security Agreement
2. Note
3. Mortgages
4. Assignments of Leases
5. Assignments of Agreements, Licenses, Permits and Contracts
6. Assignments of Hotel Management Agreements
7. Guaranty of Recourse Obligations
8. Environmental Indemnity
9. Deposit Account Agreements
10. Financing Statements
11. Cash Management Agreement
12. Borrower's Closing Certificate under Section 3.1(D)
13. Closing Certificate of Lodgian, Inc.
14. Cooperation Agreement
15. Agreement Regarding Right of First Offer
16. Contribution Agreement
17. Cross-Guaranty
18. Post Closing Agreement
SCHEDULE 4.1(C)
ORGANIZATIONAL CHART FOR BORROWER PARTIES
SCHEDULE 4.2
CONSENTS
None
SCHEDULE 4.5
CONDEMNATION PROCEEDINGS
None.
SCHEDULE 4.5(A)
RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER
SCHEDULE 4.7(B)
RENT ROLL
SCHEDULE 4.7(E)
FRANCHISE DEFAULTS
SCHEDULE 4.9
LITIGATION
None.
SCHEDULE 4.14
ERISA PLANS
1. Lodgian, Inc. 401(k) Plan.
2. Lodgian, Inc. Employee Health & Welfare Plan.
3. Multiemployer Plans covering employees of the following unions:
Hotel Employees & Restaurant Employees Local 274 (Philadelphia, PA)
(pension, welfare)
SCHEDULE 4.20
INSURANCE
SCHEDULE 4.28
COLLECTIVE BARGAINING AGREEMENTS
DATE
HOTEL BORROWER UNION OF AGREEMENT
- ------------------ ---------------------- ---------------------------------------- ------------
Doubletree Hotel - Impac Hotels I, L.L.C. Hotel Employees and Restaurant Employees 10/1/03
Philadelphia, PA Union, Local 274
SCHEDULE 4.30
GROUND LEASES
SCHEDULE 5.14
MATERIAL AGREEMENTS
Agreement between PFG Broadline and Lodgian, Inc. dated July 1, 2003.
Agreement between Harbor Linen and Lodgian, Inc. dated March 1, 2002.
Various agreements between the Borrowers and On Command Video Corporation.
Group booking contract between Albany Hotels, Inc, and Southwest Airlines dated
SCHEDULE 6.5
REQUIRED CAPITAL IMPROVEMENTS
SCHEDULE 6.6
ENVIRONMENTAL WORK/ O&M PLANS
SCHEDULE 6.7
RESERVE FUNDING CONDITIONS
1. The Borrowers shall have submitted to Lender a written request for
disbursement at least five (5) days prior to the date on which the Borrowers
request such disbursement be made, specifying the specific Work or for which the
disbursement is requested and such other information (such as the price of
materials and the cost of contracted labor or other services) as Lender may
reasonably require, which request must be on a form specified or approved by
Lender;
2. On the date such request is received by Lender and on the date such
payment is to be made, no Event of Default shall exist and remain uncured;
3. Lender shall have received a certificate from the Borrowers stating
that all Work at the Property to be funded by the requested disbursement have
been completed in a good and workmanlike manner and in accordance with any plans
and specifications approved by Lender and all legal requirements of any
Governmental Authority having jurisdiction over the Property, such certificate
to be accompanied, in either case, by a copy of any license, permit or other
approval by any Governmental Authority required to commence (only for the first
advance with respect to each distinct item of work) and/or complete (only for
the final advance with respect to each distinct item of work) such Work;
4. Lender shall have received a certificate from the Borrowers stating
that each Person that supplied materials or labor in connection with the Work to
be funded by the requested disbursement has been paid in full or will be paid in
full upon such disbursement, such certificate to be accompanied by copies of
invoices for all items or materials purchased and all contracted labor or
services provided, and, with respect to Work relating to mold, a certificate of
a Certified Industrial Hygienist that the such Work has been completed in
conformity with applicable mold clean-up procedures promulgated by the
applicable Governmental Authority within the state in which the applicable
Property is located, or, if no such procedures exist, in conformity with the New
York City Department of Health or the United States Environmental Protection
guidelines for mold related clean-up work;
5. Lender shall have received appropriate lien waivers (including final
lien waivers) from each contractor, supplier, materialman, mechanic or
subcontractor who receives payment in an amount equal to or greater than $10,000
for completion of its work or delivery of its materials, which lien waivers
shall conform to the requirements of applicable law and shall cover all work
performed and materials supplied (including equipment and fixtures) for a
Property by that contractor, supplier, subcontractor, mechanic or materialman
through the date covered by the current disbursement request; and
6. At Lender's option, Lender shall have received a title search for the
Property effective to the date of the disbursement, which search shows that no
mechanic's or materialmen's liens or other Liens of any nature have been placed
against the Property since the date of recordation of the applicable Mortgage
and that title to the Property is free and clear of all Liens (other than the
Permitted Encumbrances).