Exhibit 10.4.1
LOAN AGREEMENT
IN THE AMOUNT OF $4,199,869
Dated December 8, 1998
BETWEEN
ISLAND MOTEL ENTERPRISES, INC.
AND
PENMOCO, INC.
BORROWER
AND
BANC ONE CAPITAL FUNDING CORPORATION
LENDER
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS 1
Defined Terms 1
ARTICLE 2 BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS 8
Representations, Warranties and Covenants 8
Representations Remade 14
ARTICLE 3 GENERAL CONDITIONS OF LOAN 14
Loan Documents 14
Additional Requirements 14
ARTICLE 4 FURTHER COVENANTS OF BORROWER 17
Covenants. 17
ARTICLE 5 AGREEMENT TO LEND 27
Agreement to Lend 27
ARTICLE 6 INSURANCE AND CASUALTY 27
Insurance Provisions 27
ARTICLE 6A RENOVATION WORK 33
6A.1 Construction 33
6A.2 Completion 33
6A.3 Compliance with Laws 33
6A.4 Other Remedies of Lender 33
ARTICLE 7 BORROWER'S DEFAULT 34
7.1. Events of Default 34
7.2. Remedies 35
ARTICLE 8 MISCELLANEOUS 37
8.1 Indemnification 37
8.2 Defense of Claims 37
8.3 Performance by Lender 37
8.4 Transfer or Assignment 38
8.5 Lender's Actions 38
8.6 Time is of the Essence 38
8.7 Waivers 38
8.8 Notices 39
8.9 Successors and Assigns 39
8.10 No Partnership 40
8.11. Brokerage Claims 40
8.12 Publicity 40
8.13 Documents Satisfactory to Lender 40
8.14 Additional Assurances 40
8.15 Entire Agreement 40
8.16 Severability 40
8.17 No Third Party Beneficiary 40
8.18 CHOICE OF LAW 41
8.19 Limitation on Liability 41
8.20 WRITTEN AGREEMENT 43
8.21 Intentionally Omitted 43
8.22 Intentionally Omitted 43
8.23 Intentionally Omitted 43
8.24 WAIVER OF JURY TRIAL 43
8.25 Consent to Jurisdiction 44
Exhibit A Legal Description
Exhibit B-1 Additional Note
Exhibit B-2 Primary Note
Exhibit C Permitted Encumbrances
Exhibit D Insurance Requirements
Exhibit E Renovation Work
Schedule 1 Description of Ground Lease
THIS LOAN AGREEMENT (this "Agreement") is dated effective as of December
8, 1998 between ISLAND MOTEL ENTERPRISES, INC., a Georgia corporation ("IME"),
and PENMOCO, INC., a Michigan corporation ("PI"), each with an office and
principal place of business at Two Live Oak Center, 3445 Peachtree Road, NE,
Suite 700, Atlanta, Georgia 30326 and BANC ONE CAPITAL FUNDING CORPORATION, an
Ohio corporation having a principal place of business at 150 East Gay Street,
24th Floor, Columbus, Ohio 43215 ("Lender"). IME and PI are sometimes
hereinafter referred to collectively as "Borrower."
R E C I T A L S
The Borrower desires to borrow from Lender up to $4,199,869 for the
financing and renovation of that certain piece or parcel of real property
located at 200 South Beachview Drive, Jekyll Island, Georgia 31527 (the "Land"),
known as the Holiday Inn Jekyll Island (the "Hotel") consisting of a 199-room
hotel and all other improvements located thereon and together with all
furniture, equipment and other personal property now or hereafter used in the
management and operation of the Hotel (the "Personal Property"). The Land and
the Improvements (as defined below) are hereinafter collectively referred to as
the "Premises." The Premises and the Personal Property are hereinafter
collectively referred to as the "Property." Lender has agreed to make the loan
to Borrower pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the covenants,
conditions and agreements contained herein, Borrower and Lender agree as
follows:
ARTICLE 1
DEFINITIONS
Defined Terms. In this Agreement, the following terms shall have the
following meanings:
"Accounting Period" -- shall mean each of the four (4) week periods
designated by Borrower as a fiscal period of the Hotel, except that an
Accounting Period may occasionally contain five (5) weeks when necessary to
conform Borrower's accounting system to the calendar.
"Additional Note" -- the Promissory Note from Borrower to Lender of even
date herewith in the stated principal amount of Five Hundred Three Thousand Nine
Hundred Eighty Four Dollars ($503,984). A copy of the Additional Note is
attached hereto as Exhibit B-1.
"Advance" -- an advance by Lender to Borrower in accordance with the Note
or this Agreement.
"Affiliate" -- of any person or entity shall mean any other person or
entity directly or indirectly controlling, under common control with, or
controlled by such person or entity. For purposes of the definition of
Affiliate, "control" when used with respect to any person or entity means the
power to direct the management and policies of such person or entity, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
relative to the foregoing.
"Assignment of Accounts" -- the Assignment of Accounts and Security
Agreement of even date herewith from Borrower to Lender.
"Assignment of Permits and Contracts" -- the Assignment of Licenses,
Permits and Contracts, (specifically including the management agreement relating
to the Property) of even date herewith from Borrower to Lender.
"Assignment of Leases" -- the Assignment of Leases and Rents of even date
herewith from Borrower to Lender.
"Bankruptcy Code" -- the United States Bankruptcy Code and any similar
state or federal law now or hereafter in effect relating to bankruptcy,
reorganization or insolvency, or the arrangement or adjustment of debts.
"Business Day" -- any day other than a Saturday, Sunday or legal holiday
on which commercial banks are authorized or required to be closed in Columbus,
Ohio.
"Calculation Date" -- January 20, 2000, and the twentieth day of every
third Loan Month thereafter prior to the Maturity Date.
"Calculation Period" -- the period of twelve (12) full calendar months
immediately preceding the calendar month which includes the Calculation Date.
"Capital Reserve" -- the furniture, fixtures and equipment reserve to be
held by Lender pursuant to the terms and conditions of Section 4.1.T.
"Cash Management Agreement" -- that certain Cash Management Agreement
dated January 31, 1995 among Servico, Inc., Servico Management Corporation and
certain of their subsidiaries and affiliates, including Borrower, as amended
November 24, 1998.
"Closing" -- the closing of the Loan contemplated by this Agreement.
"Cross-Guaranty" -- the Guaranty Agreement of even date herewith from the
Related Parties to Lender in connection with the Loan.
"Code" -- the Internal Revenue Code of 1986, as amended, and the
Regulations promulgated thereunder.
"Costs" -- costs and expenses incurred directly relating to the
Renovation Work.
"Deferred Origination Fee" -- a deferred origination fee in the amount of
$73,917.70 payable to Lender in accordance with Section 4.Y.
"DSCR" -- the debt service coverage ratio as determined by Lender on each
Calculation Date by calculating the ratio of (x) the Net Operating Income from
the Property for the immediately preceding thirteen (13) Accounting Periods, to
(y) the sum of the payments of interest which are due and payable under the
Primary Note for the immediately following twelve (12) Loan Months.
"Default Rate" -- see Section 1 of the Primary Note.
"Environmental Indemnity" -- the Hazardous Substances Indemnity Agreement
of even date herewith from Borrower and Guarantors to Lender.
"Environmental Site Assessment Report" -- the Phase I Environmental
Site Assessment Report dated September 8, 1998, prepared by Building Evaluation
Services & Technology, Inc.
"Estoppel Agreement" -- an Estoppel Agreement with respect to the Ground
Lease executed by the Ground Lessor in form and substance acceptable to the
Lender.
"Event of Default" -- the occurrence of any one or more of the events
set forth in Section 7.1.
"Financing Statements" -- the UCC-1 Financing Statements naming Borrower
as debtor and Lender as secured party and filed with the office of the Glynn
County Clerk of Superior Court, Georgia in connection with the Mortgage, the
Security Agreement, the Assignment of Leases, the Assignment of Permits and
Contracts, and the Assignment of Accounts.
"Franchise Agreement" -- that certain Franchise Agreement dated November
26, 1991, between Borrower and Franchisor relating to the Property.
"Franchisor" -- Holiday Hospitality Franchising, Inc.
"Governmental Authority" -- the United States of America, the state in
which the Property is located, the state under the laws of which Borrower is
organized, any state in which (or to residents of which) Borrower offers to sell
or lease any portion of the Property or Improvements have been or will be made
by or on behalf of Borrower, any political subdivision of any of them, and any
court, agency, department, commission, board, bureau or instrumentality of any
of them.
"Gross Revenues" -- for each Accounting Period shall mean all rents,
revenues and other payments earned by Borrower in cash or current funds or other
consideration from any source whatsoever in connection with its ownership,
operation and management of the Property, including all amounts earned by
Borrower from all tenants or other occupants of the Property. Gross Revenues
shall be determined on an accrual basis and in accordance with generally
accepted accounting principles consistently applied.
"Ground Lease" -- that certain lease more particularly described in
Schedule 1.
"Ground Lessor" -- Jekyll Island-State Park Authority.
"Guarantor" -- Lodgian, Inc., a Delaware corporation.
"Impac Loan" -- collectively, all outstanding indebtedness owing to
Banc One Capital Partners III, Ltd. or its Affiliates by Impac Hotel Group,
L.L.C.
"Impositions" -- all taxes of every kind and nature, sewer rents, charges
for water, for setting or repairing meters and for all other utilities serving
the Premises, and assessments, levies, inspection and license fees and all other
charges imposed upon or assessed against the Premises or any portion thereof
(including the income derived from the Premises), and any stamp or other taxes
which might be required to be paid with respect to any of the Loan Documents,
any of which might, if unpaid, result in a lien on the Premises or any portion
thereof, regardless of to whom assessed.
"Improvements" -- the improvements existing upon the Land.
"Incipient Default" -- the existence of any condition or state of facts
which with the giving of notice by Lender or the passage of time, or both, would
constitute an Event of Default.
"Indebtedness" -- all indebtedness, obligations, liabilities, amounts,
sums and expenses payable by Borrower under the Note, this Agreement and every
other Loan Document, together with interest thereon in accordance with the terms
and conditions of the Loan Documents.
"Interest Rate" -- shall mean the Interest Rate as defined in the Primary
Note.
"Knowledge of Borrower" -- any matter actually known or, with the exercise
of reasonable care or diligence, should have been known, to the Borrower or the
Guarantor.
"Lease" -- any lease (including any equipment lease) or other rental or
occupancy agreement, demising a portion of the Property, other than those with
hotel guests and the Ground Lease.
"Lender's Consultant" -- the architect or engineer retained by Lender to
inspect the Improvements or the Renovation Work on behalf of Lender; in the
event all or a portion of such functions are performed by Lender, references in
this Agreement to Lender's Consultant shall be deemed to such extent to be
references to Lender.
"Limited Guaranty" -- the Limited Guaranty and Indemnity Agreement of even
date herewith from Guarantor to Lender in connection with the Loan.
"Liquor License Agreement" -- the Liquor License Agreement of even date
herewith between Lender and Borrower.
"Loan" -- the loan evidenced by the Note and this Agreement.
"Loan Amount" -- Four Million One Hundred Ninety Nine Thousand Eight
Hundred and Sixty Nine Dollars ($4,199,869).
"Loan Documents" -- this Agreement, the Note, the Environmental Indemnity,
the Liquor License Agreement, the Cross Guaranty, the Stock Pledge, the Limited
Guaranty, the Mortgage, the Security Agreement, the Assignment of Leases, the
Assignment of Permits and Contracts, the Assignment of Accounts, the Financing
Statements and such other documents and agreements as Lender may require in
connection with the Loan.
"Loan Month" -- See Section 1 of the Primary Note.
"Loan Party" -- Borrower or the Guarantor.
"Management Agreement" -- the Consulting Agreement effective October 5,
1993, and amended November 24, 1998, by and between Borrower and Manager.
"Manager" -- Servico Management Corp., a Florida corporation.
"Maturity Date" -- See Section 1 of the Additional Note and the Primary
Note, as applicable.
"Mortgage" -- the Leasehold Deed to Secure Debt and Security Agreement of
even date herewith from Borrower to Lender on the Premises, securing the Note
and Borrower's obligations under the other Loan Documents.
"Net Cash Flow" -- for each Accounting Period shall mean Net Operating
Income reduced by all monthly payments of interest under the Note and all other
payments under the Note and the other Loan Documents actually paid by Borrower
and received by Lender during such Accounting Period.
"Net Operating Income" -- for each Accounting Period shall be calculated
by Lender based upon Lender's review of Borrower's monthly financial statements
provided to Lender pursuant to Section 4.1.K, together with such other
information as Lender may reasonably request, and shall mean the difference
between:
(1) the Gross Revenues for said Accounting Period; and
(2) all the Operating Expenses for said Accounting Period.
"Note" -- collectively, the Primary Note and the Additional Note.
"Operating Expenses" -- the reasonably necessary and customary costs and
expenses incurred, whether or not actually paid, by Borrower in connection with
its ownership, operation and management of the Property, determined on an
accrual basis and in accordance with generally accepted accounting principles
consistently applied and specifically including in Operating Expenses all
required payments made by Borrower into the Capital Reserve pursuant to Section
4.l.T of this Agreement, any payments made pursuant to Section 4.l.B of the
Agreement and any other reserve established pursuant to this Agreement;
specifically excluding from Operating Expenses, however (w) all capital
expenditures incurred by Borrower (x) principal, interest and all other payments
made under the Loan Documents, and costs and expenses incurred by Borrower in
connection with the closing of the Loan, and (y) depreciation and all other
non-cash expenses of the Property. For purposes of calculating DSCR, Lender
shall include Operating Expenses which were budgeted for the applicable
Accounting Period(s) and were incurred but not paid. Operating Expenses which
are paid less frequently than each Accounting Period and which are allocable
evenly to each Accounting Period may be prorated to reflect such allocation.
"Organizational Documents" -- the articles of incorporation, bylaws and
other organizational documents, and any amendments or modifications thereto, of
IME and PI.
"Permitted Encumbrances" -- the liens, claims, assessments, encumbrances
and rights of others encumbering title to the Premises and the Personal Property
which are set forth on Exhibit C.
"Permitted Transfers" -- any transfer, sale or issuance of stock in
Lodgian, Inc., a Delaware corporation.
"Primary Note" -- the Promissory Note from Borrower to Lender of even date
herewith in the stated principal amount of Three Million Six Hundred Ninety Five
Thousand Eight Hundred and Eighty Five Dollars ($3,695,885). A copy of the
Primary Note is attached hereto as Exhibit B-2.
"Principal Amortization Reserve" -- the reserve of funds which may be held
and disbursed by Lender pursuant to Section 4.l.R.
"Proceeds" -- all proceeds, judgments, claims, compensation, awards or
damages and settlements with respect to the Property as a result of or in lieu
of any condemnation or taking of the Property or any portion thereof by eminent
domain or any casualty loss or damage to any of the Property or any portion
thereof.
"Related Parties" -- Lodgian AMI, Inc., a Maryland corporation, and
Servico Concord, Inc., a California corporation.
"Related Party Loan Documents" -- all documents, instruments or agreements
securing or evidencing the Related Party Loans from the Lender to the Related
Parties.
"Related Party Loans" -- that (i) certain loan to Lodgian AMI, Inc. of
even date herewith in the original aggregate principal amount of $35,073,117 and
secured by the Holiday Inn - Inner Harbor, (ii) certain loan to Lodgian AMI,
Inc. of even date herewith in the original aggregate principal amount of
$15,740,722 and secured by the Holiday Inn International Airport, (iii) certain
loan to Lodgian AMI, Inc. of even date herewith in the original aggregate
principal amount of $3,322,817 and secured by the Holiday Inn Glen Burnie North,
(iv) certain loan to Lodgian AMI, Inc. of even date herewith in the original
aggregate principal amount of $5,214,292 and secured by the Holiday Inn Visitors
Center/Lancaster East, and (v) certain loan to Servico Concord, Inc. of even
date herewith in the original aggregate principal amount of $8,449,183 and
secured by the Sheraton Hotel Concord.
"Related Party Properties" -- the Holiday Inn - Inner Harbor in Baltimore,
Maryland, the Holiday Inn International Airport in Linthicum Heights, Maryland,
the Holiday Inn - Glen Burnie North in Glen Burnie, Maryland, the Holiday Inn
Visitors Center/Lancaster East in Lancaster, Pennsylvania, and the Sheraton
Hotel Concord in Concord, California.
"Renovation Budget" -- the budget for the Renovation Work to be prepared
by the Borrower and delivered to Lender for its review and approval prior to the
Closing.
"Renovation Completion" -- the completion of the Renovation Work in
accordance with the requirements of Article 6A.
"Renovation Completion Date" -- September 30, 1999, the date on which all
of the Renovation Work is required to be completed in accordance with Article 6A
hereof.
"Renovation Plans" -- the plans and specifications for the Renovation Work
to be prepared by the Borrower and delivered to the Lender for its review and
approval prior to the Closing.
"Renovation Work" -- the work and projects described in Exhibit E.
"Required Coverage Standard" -- shall mean 1.25:1 for all Calculation
Dates on or before January 20, 2000 and 1.40:1 for all Calculation Dates
subsequent to January 20, 2000.
"Reserved Funds" -- all Net Cash Flow held by Lender pursuant to the terms
and conditions of Section 4.1.R.
"Security Agreement" -- the Security Agreement of even date herewith from
Borrower, as debtor, to Lender, as secured party.
"Stock Pledge" -- the Pledge of Stock executed by Servico Operations
Corporation pursuant to which Servico Operations Corporation pledges the Stock
of the Borrower and each Related Party to secure the obligations of Borrower
with respect to the Loan and the Related Party Loans.
"Title Company" -- Lawyers Title Insurance Corporation.
"Title Policy" -- a mortgagee's policy of title insurance issued on the
1992 ALTA form by the Title Company in the aggregate face amount of $4,199,869,
guaranteeing as of the date of the Closing, the Mortgage to be a valid first and
prior lien on Borrower's leasehold interest in the
Premises (including any easements appurtenant thereto) subject only to the
Permitted Encumbrances. The Title Policy shall contain such endorsements as
Lender may reasonably require.
In this Agreement, the word "including" shall mean "including without
limitation."
ARTICLE 2
BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Representations, Warranties and Covenants. Borrower hereby represents,
covenants and warrants as follows:
Accuracy of Recitals. Each of the recitals to this Agreement is true and
correct.
Organization of Borrower. IME is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia. PI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Michigan. Each Borrower is and at all times prior to the
repayment of the Loan shall remain a single purpose entity, so called, whose
sole asset is the Property and whose sole business interest is the ownership of
a leasehold interest in, and operation of, the Property. Borrower has provided
Lender with a true and accurate copy of the Organizational Documents. The status
of IME as a duly organized and validly existing corporation under Georgia law
will not be terminated. The status of PI as a duly organized and validly
existing corporation under Michigan law will not be terminated. Borrower shall
not amend the Organizational Documents in any material respect, without the
Lender's prior written consent.
Authority and Enforceability. Borrower has full right, power and authority
to execute, deliver and carry out the terms and provisions of this Agreement and
the other Loan Documents and every other document and instrument to be executed
and delivered by Borrower pursuant to this Agreement. The person executing and
delivering this Agreement and the Loan Documents on behalf of Borrower is duly
authorized to so act on behalf of Borrower. This Agreement, each other Loan
Document and every other document and instrument to be executed and delivered by
any Loan Party, when executed and delivered shall constitute the duly
authorized, valid and legally binding obligation of the party or parties
executing the same, enforceable in accordance with their respective terms,
subject only to applicable bankruptcy, reorganization, moratorium and similar
laws affecting the enforceability of creditors' rights generally.
Maintenance of Existence. Each Borrower shall do all things necessary to
preserve and keep in full force and effect its existence and all franchises,
licenses, authorizations, registrations, permits and approvals under the laws of
the state of its incorporation and the State of Georgia, and shall comply with
all regulations, rules, ordinances, statutes, orders and decrees of any
governmental authority or court applicable to Borrower and to the Property or
any portion thereof.
No Default. Neither Borrower nor any other Loan Party is in default under
any material contract, agreement or commitment to which it is a party or by
which it is bound. The execution and delivery of this Agreement and the other
Loan Documents and any other documents or instruments to be executed and
delivered by Borrower or any other Loan Party pursuant hereto or thereto, the
consummation of the transactions herein or therein contemplated and compliance
with the terms and provisions hereof or thereof, will not (i) violate any law or
any regulation, order, writ or injunction of any court or governmental or
administrative department, commission, board, bureau, agency or instrumentality,
or (ii) conflict or be inconsistent with, or result in a breach of any of the
provisions of, or constitute a default under, any instrument, document,
agreement, or contract of any kind to which Borrower or any other Loan Party is
a party or by which Borrower or any other Loan Party or any of their respective
property is bound.
No Litigation. There are no petitions, actions, suits, or proceedings
pending or, to the Knowledge of Borrower, threatened against or affecting
Borrower or any other Loan Party or the Property, by or before any court or any
governmental, administrative, regulatory, adjudicatory or arbitrational body or
agency (including any such petition, action, suit or proceeding to alter or
declare invalid any laws, regulations, permits, certificates, restrictions or
agreements relating to the Property) which, if determined against the Property,
the Borrower or the Loan Party, would reasonably likely have a material adverse
effect on the condition (financial or otherwise) or business of the Borrower or
the Loan Party or the condition or ownership of the Property.
Compliance with Laws. To the Knowledge of Borrower and except as may be
otherwise disclosed to the Lender in the Environmental Site Assessment Report,
the Title Policy, the survey or the zoning letter with respect to the Premises,
the use of the Property as a hotel with restaurant and bar does not violate (i)
any applicable law, regulation, ordinance or order of any kind whatsoever
(including any such relating to zoning, building and environmental protection),
(ii) any permit or license issued with respect to the Property, or (iii) any
condition, easement, right-of-way, covenant or restriction affecting the
Property.
Permits. To the Knowledge of Borrower, all necessary material and required
franchises, licenses, authorizations, registrations, permits and approvals for
the use and occupancy of the Premises have been obtained from all Governmental
Authorities having jurisdiction over the Premises so as to permit the operation
of the Property as herein contemplated. Borrower has provided Lender with true
and correct copies of all of the certificates of occupancy (to the extent
available) and the hotel operating license and liquor license respecting the
Property.
Title. Effective as of the Closing, Borrower will have good and
indefeasible leasehold interest in the Premises and good and indefeasible title
to all existing Personal Property, free and clear of all liens, claims,
assessments, encumbrances and rights of others other than the Permitted
Encumbrances. Borrower shall preserve such title to the Premises and the
Personal Property and will forever warrant and defend the same and the validity
and priority of the Mortgage to Lender against all claims whatsoever other than
the Permitted Encumbrances.
Easements. In addition to the Permitted Encumbrances, all proposed
easements, permits, licenses, and other instruments which would or might affect
the title to the Property have been submitted to Lender for Lender's approval
together with a survey showing the exact or, if applicable, proposed location
thereof. Borrower shall not subject the Property or any part thereof to any
restrictive covenant (including any restriction or exclusive use provision in
any lease or other occupancy agreement) without the prior written consent of
Lender.
Zoning. To the Knowledge of Borrower, and subject to any disclosures in
the zoning letters delivered to the Lender, (i) the Premises are zoned for hotel
use, which zoning is final, unconditional and in full force and effect, (ii) the
Premises are in compliance with all applicable zoning and land use laws,
regulations and ordinances, (iii) in the event that all or any part of the
Improvements are 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, (iv) the Property contains enough permanent
parking spaces to satisfy all requirements imposed by applicable laws with
respect to parking, (v) no legal proceedings are pending or threatened with
respect to the zoning of the Premises, and (vi) neither the zoning nor any other
right to construct, use or operate the Premises is in any way dependent upon or
related to any real estate other than the Premises. No tract map, parcel map,
condominium plan, condominium declaration, or plat of subdivision will be
recorded by Borrower with respect to the Premises without Lender's prior written
consent.
Complete Disclosure. Neither this Agreement nor any document, financial
statement, credit information, certificate or statement provided to Lender by
Borrower contains any untrue statement of material fact or omits to state a fact
necessary to make any statements made herein not misleading.
Agreements Affecting the Property. Borrower has provided Lender with true
and complete copies of all material contracts and agreements affecting the
Property, including, (i) the Management Agreement, (ii) all lease financings or
purchase money financings for equipment incurred as of the date hereof, and
(iii) all other contracts or agreements relating to the maintenance,
development, operation or management of the Property which either involve space
in excess of 1,000 square feet or payment obligations on the part of Borrower in
excess of $25,000 in any twelve (12) month period.
Brokerage Commissions. No brokerage fees or commissions are payable in
connection with the Loan.
Condemnation. Borrower has not received any notice from any Governmental
Authority or quasi-governmental body or agency or from any person or entity with
respect to (and Borrower does not know of) any actual or threatened taking of
the Premises, or any portion thereof, for any public or quasi-public purpose or
of any moratorium which may affect the use or operation of the Property.
Year 2000 Compliance. All devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive technology
(jointly and severally the "Systems") necessary for Borrower to carry on its
business as presently conducted and as contemplated to be conducted in the
future are Year 2000 Compliant or will be Year 2000 Compliant within a period of
time calculated to result in no material disruption of any of Borrower's
business operations. For purposes of these provisions, "Year 2000 Compliant"
means that such Systems are designed to be used prior to, during and after the
Gregorian calendar year 2000 A.D. and will operate during each such time period
without error relating to date data, specifically including any error relating
to, or the product of, date data which represents or references different
centuries or more than one century. Borrower: (1) has taken and continues to
undertake a detailed inventory, review, and assessment of all areas within its
business and operations that could be adversely affected by the failure of
Borrower to be Year 2000 Compliant on a timely basis; (2) is developing a
detailed plan and time line for becoming Year 2000 Compliant on a timely basis;
and (3) to date, has implemented that plan in accordance with timetable in all
material respects. The fair market value of all real and personal property, if
any, pledged to Lender as collateral to secure the Loan Agreement is not and
shall not be less than currently anticipated or subject to substantial
deterioration in value because of the failure of such collateral to be Year 2000
Compliant.
Access. Except as otherwise shown on the survey delivered to the Lender,
the Property has access to and full utilization of completed public roads
necessary for access to and full utilization of the Property for its intended
purposes.
Tax Division. A tax division has been effected with respect to the
Premises so that it is taxed for ad valorem taxation without regard to or
inclusion of any other property. No subdivision or other approval is necessary
with respect to the Premises in order for Borrower to mortgage, convey and
otherwise deal with the Premises as a separate lot or parcel.
Non-Foreign Status of Borrower. Borrower is not a non-resident alien for
purposes of U.S. income taxation and is not a foreign corporation, partnership,
foreign trust or foreign estate (as said terms are defined in the Code).
ERISA. Neither Borrower nor any Loan Party is a party to any plan defined
and regulated under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 4975 of the Code. None of the assets of Borrower or
any Loan Party are "plan assets"" as defined in 29 C.F.R. ss.2509.75-2 or
ss.2510.3-101.
Mortgage. The Mortgage constitutes a valid and enforceable first lien on
Borrower's leasehold interest in the Premises, subject only to the Permitted
Encumbrances.
Security Interest. The Security Agreement and the Mortgage, together with
the Financing Statements filed in connection therewith, create a valid,
enforceable and perfected first priority security interest in the Collateral (as
defined therein) including the Personal Property, subject to no other interests,
liens or encumbrances other than the Permitted Encumbrances.
Intentionally Omitted.
Intentionally Omitted.
Bankruptcy. No petition in bankruptcy, whether voluntary or involuntary,
or assignment for the benefit of creditors, or any other action involving
debtors' and creditors' rights has been filed or threatened under the laws of
the United States of America or any state thereof, against the Borrower or any
other Loan Party or against any other entity in which the Borrower or any other
Loan Party is a shareholder, principal, managing member or general partner.
Leases. There are no Leases affecting the Property. Borrower has not
executed any prior assignment of the Leases, nor has it performed any act or
executed any other instrument which might prevent Lender from operating under
any of the terms and conditions of the Assignment of Leases or which would limit
Lender in such operation; and Borrower further covenants and warrants to Lender
that Borrower has not executed or granted any modification whatsoever of the
Leases, except as herein indicated, and that the Leases are in full force and
effect, and that, except as otherwise disclosed to Lender in writing, there are
no defaults now existing under the Leases with respect to which Borrower has
notified the tenant under the Leases.
Physical Condition of Property. Subject to the Renovation Work, all of the
Improvements are in good condition and repair except as otherwise expressly
provided in the Property Condition Report dated as of September 8, 1998,
prepared by Building Evaluation Services & Technology, Inc. (the "Property
Condition Report"). Since the date of the Property Condition Report, there have
been no material adverse changes to the physical condition of the Improvements.
Borrower is aware of no latent or patent structural or other significant defect
or deficiency in such Improvements except as may be disclosed in the Property
Condition Report. Water supply, storm and sanitary sewers, and electrical, gas
and telephone facilities are available to the Property within the boundary lines
of the Property, are sufficient to meet the reasonable needs of the Property as
now used or contemplated to be used, no other utility facilities are necessary
to meet the reasonable needs of the Property as now used, and design and
as-built conditions of the Property are such that surface and storm water does
not accumulate on the Property and, except as disclosed in writing to Lender,
does not drain from the Property across land of adjacent property owners. Except
as otherwise disclosed in writing to Lender, no part of the Property is within a
flood plain and none of the Improvements create an encroachment over, across or
upon any of the Property's boundary lines, rights of way or easements, and no
building or other improvement on adjoining land create such an encroachment.
Mechanics' Liens. There are no mechanics' or materialmen's liens,
alienable bills or other claims constituting or that may constitute a lien on
the Property or any part thereof, and no work for which any such lien could be
asserted has been performed within the last 90 days, except as otherwise
disclosed in writing to Lender.
Payment of Liens. Borrower shall pay when due all payments and charges due
under or in connection with any liens and encumbrances on and security interests
in the Property or any portion thereof, all rents and charges under any ground
leases and other leases forming a part of the Property, and all claims and
demands of mechanics, materialmen, laborers and others which, if unpaid, might
result in or permit the creation of a lien on the Property or any portion
thereof, and shall cause the prompt (but in no event later than 30 days after
imposition), full and unconditional discharge of all liens imposed on or against
the Property or any portion thereof. Borrower shall do or cause to be done, at
the sole cost of Borrower, everything necessary to fully preserve the initial
priority of the Mortgage. If Borrower fails to make any such payment or if a
lien (other than a Permitted Encumbrance) attaches to the Property or any
portion thereof, Lender may (but shall not be obligated to) make such payment or
discharge such lien and Borrower shall reimburse Lender on demand for all such
Advances.
Commercial Purpose. Borrower holds its interests in the Property for
commercial or investment purposes.
Franchise Agreement. Borrower has provided Lender with a true and complete
copy of the Franchise Agreement and any other agreements with the Franchisor
related to the Property. The Franchise Agreement is in full force and effect and
free from default on the part of the Borrower. The Franchise Agreement embodies
the entire transaction between Borrower and the Franchisor with respect to the
operation of the Property. Borrower shall not modify, amend or waive any
provisions of the Franchise Agreement without Lender's prior written consent.
Borrower will promptly furnish Lender with copies of all notices furnished to
Borrower under the Franchise Agreement. The term of the existing Franchise
Agreement expires on January 10, 2000. Borrower agrees to cause such term to be
extended for a period not less than ten (10) years from the date hereof, unless
otherwise agreed in writing by Lender.
Management Agreement. Borrower has provided Lender with a true and
complete copy of the Management Agreement. The Management Agreement is in full
force and effect and free from default on the part of the Borrower and Manager.
The Management Agreement embodies the entire transaction between Borrower and
Manager with respect to the operation of the Property. Borrower shall not
terminate, modify, amend or waive any provisions of the Management Agreement
without Lender's prior written consent. Borrower will promptly furnish Lender
with copies of all notices furnished to Borrower under the Management Agreement.
Ground Lease. Borrower has provided Lender with a true and complete copy
of the Ground Lease, and there are no documents, agreements, or other
modifications to the Ground Lease other than those listed under the definition
of Ground Lease contained in this Agreement. The Ground Lease is in full force
and effect and free from default on the part of Borrower and the Ground Lessor,
and, to the Knowledge of Borrower, no events have occurred which, with the
passage of time, would constitute a default under the Ground Lease. The Borrower
shall provide to the Lender copies of all notices (including, without
limitation, notices of defaults by Borrower) received with respect to the Ground
Lease within five (5) Business Days of Borrower's receipt of the same. The
Ground Lease embodies the entire transaction between Borrower and the Ground
Lessor with respect to the Property. The amount of rental payable under the
Ground Lease and the terms of the Ground Lease, are as set forth under the
definition of Ground Lease. Borrower shall not modify, amend or waive any
provisions of the Ground Lease without the Lender's prior written consent.
Liquor License. Borrower has provided Lender with a true and complete copy
of the liquor license with respect to the Property. Said liquor license is in
full force and effect and free of all liens and encumbrances. To the Knowledge
of Borrower, Borrower is in compliance with all terms and conditions of said
liquor license.
Representations Remade. Borrower warrants and covenants that the foregoing
representations and warranties will be true and shall be deemed remade as of the
date of the Closing. All representations, warranties and covenants made herein
or in any other Loan Document or in any certificate or other document delivered
to Lender by or on behalf of Borrower pursuant to or in connection with this
Agreement or any other Loan Document shall be deemed to have been relied upon by
Lender, notwithstanding any investigation heretofore or hereafter made by or on
behalf of Lender. All such representations, warranties and covenants shall
survive the making of the Loan and any or all of the Advances contemplated
hereby and shall continue in full force and effect until such time as the Loan
has been paid in full.
ARTICLE 3
GENERAL CONDITIONS OF LOAN
Loan Documents. It shall be a condition precedent to Lender's obligation
to make the Loan that at or before the Closing, Borrower shall execute and
deliver or cause to be duly executed and delivered to Lender all of the Loan
Documents and that all of the Loan Documents shall be in form and substance
satisfactory to Lender.
Additional Requirements. In addition to the Loan Documents, prior to the
Closing, Borrower shall deliver or cause to be delivered to Lender each of the
following, all of which shall be in form and substance satisfactory to Lender:
Title Policy. The Title Policy or a pro-forma policy evidencing the same
and satisfactory to the Lender in its sole discretion.
Survey. A current, as built survey of the Premises, certified to Lender
and the Title Company by a surveyor reasonably satisfactory to Lender, which
survey shall contain the minimum detail for land surveys as most recently
adopted by ALTA/ASCM, and which survey shall comply with Lender's survey
requirements and shall contain Lender's standard form certification. Said survey
shall show no state of facts or conditions reasonably objectionable to Lender.
Opinion. An opinion of Borrower's and Guarantor's counsel dated the date
of the Closing and relating to such matters with respect to this Agreement and
the transaction contemplated hereby (including usury and choice of laws) as
Lender may reasonably require. By its execution and delivery of this Agreement,
Borrower authorizes and directs such counsel to render such opinion.
Insurance. The insurance policies described on Exhibit D or certificates
of insurance evidencing the same, including without limitation, evidence of
insurance protection against the risks of hurricanes, satisfactory to Lender in
its sole discretion.
UCC Searches. Uniform Commercial Code searches made in the States of
Georgia and Michigan showing no filings relating to (i) the Personal Property,
(ii) any fixtures on the Premises, or (iii) the Collateral (as such term is
defined in the Security Agreement), other than those made pursuant to this
Agreement or otherwise approved by Lender in its sole discretion.
Organizational Documents. A certified copy of the Organizational
Documents, together with such other documents as Lender may require, including
evidence of PI's good standing in the State of Michigan and IME's good standing
in the State of Georgia, and resolutions authorizing the Loan transaction
contemplated by this Agreement.
Ground Lease. A copy of the Ground Lease certified by the Borrower to be
true, complete and accurate.
Appraisal and Engineer's Report. An independent appraisal of the Property
from a state certified appraiser engaged by Lender which indicates the fair
market value of the Property and is satisfactory to Lender in all respects, and
an engineer's report satisfactory to the Lender.
Environmental Assessment. The Environmental Site Assessment Report, a
letter from the consultant preparing the environmental site assessment stating
that Lender is authorized to rely on the information contained therein, and
evidence satisfactory to Lender of said environmental consultant's errors and
omissions insurance coverage.
Subordination of Management Agreement. A copy of the Management Agreement
(certified by the Borrower to be true, complete and accurate), together with a
subordination of the Management Agreement whereby the Management Agreement is
subordinated to the Mortgage and Lender is given the right to terminate the
Management Agreement or any replacement thereof upon the occurrence of an Event
of Default, without payment of any termination or other fee or other liability
on the part of Lender.
Leases/Subordination Agreements and Estoppels. Copies of all Leases, which
shall be satisfactory to Lender and certified by Borrower to be true, complete
and accurate, together with (i) an estoppel certificate executed by the tenant
under each Lease in form and substance reasonably satisfactory to Lender, and
(ii) a subordination, nondisturbance and attornment agreement executed by each
such tenant in form and substance reasonably satisfactory to Lender.
Licenses, Permits and Approvals. A final, unconditional certificate of
occupancy (if available) issued with respect to the Premises, together with the
hotel operating license and liquor license respecting the Property.
Agreements. Copies of all agreements described in Section 2.1M certified
by the Borrower to be true, complete and accurate.
Zoning. Evidence reasonably satisfactory to Lender as to the zoning
compliance of the Premises.
Lender's Inspection. A satisfactory inspection report of the Premises
prepared by an architect/engineer or other consultant reasonably satisfactory to
Lender.
Equity Contribution. Evidence satisfactory to Lender that the Borrower or
its Affiliate originally acquired the Property for not less than $5,900,000.
Financial Statements. Current financial statements satisfactory to the
Lender for the Borrower, and the Guarantor.
Renovation Budget and Plans. A copy of the Renovation Budget and the
Renovation Plans satisfactory to the Lender.
Franchise Agreement. A copy of the Franchise Agreement certified by the
Borrower to be true, complete and accurate.
Compliance with Laws. Evidence that the Property is in compliance with all
applicable laws, zoning and land use requirements, regulations and ordinances,
including all applicable environmental protection laws and the Americans with
Disabilities Act of 1990 (except as stated in the Environmental Site Assessment
Report).
Flood Hazards. Evidence as to whether or not the Property is or is to be
located in an area having special flood hazards as such term is used in the
federal Flood Disaster Protection Act of 1973. If any part of the Property is or
is to be located in an area having "special flood hazards," a flood insurance
policy or certificate thereof naming the Lender as mortgagee must be submitted
to the Lender.
Fees and Expenses. Payment by Borrower of all applicable mortgage and
recording taxes and all fees and charges in connection with the Loan, including
all fees and charges of Lender's legal counsel.
Ground Lease Estoppel. The originally executed Estoppel Agreement.
Intentionally Omitted.
Intentionally Omitted.
Payment of Impac Loan. Evidence of payment in full of the Impac Loan and
all fees associated therewith in accordance with the requirements of the
intercreditor agreement(s) executed in connection therewith.
Other Items. Such other documents and instruments as Lender may reasonably
require.
ARTICLE 4
FURTHER COVENANTS OF BORROWER
Covenants. Borrower hereby further covenants and agrees with Lender as
follows:
Taxes and Impositions.
Borrower shall pay and discharge all Impositions prior to
delinquency. Borrower shall provide to Lender validated receipts or other
evidence satisfactory to Lender showing the payment of all real estate and
personal property taxes within 15 days after the same would otherwise have
become delinquent. Borrower's obligation to pay Impositions pursuant to this
Agreement shall include, to the extent permitted by applicable law, taxes
resulting from future changes in law which impose upon Lender an obligation to
pay any property taxes or other Impositions. Should Borrower default in the
payment of any Impositions, Lender may (but shall not be obligated to) pay such
Impositions or any portion thereof and Borrower shall reimburse Lender on demand
for all such Advances.
Borrower shall not be required to pay, discharge or remove any
Imposition so long as Borrower contests in good faith such Imposition 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
Property or any portion thereof; provided, however, that prior to the date on
which such Imposition would otherwise have become delinquent Borrower shall have
(i) given Lender prior written notice of such contest, and (ii) provided
reasonable evidence to Lender that Borrower has available funds to pay the
balance of such Imposition then remaining unpaid, and all interest, penalties,
costs and charges accrued or accumulated thereon. Any such contest shall be
prosecuted with due diligence, and Borrower shall promptly pay the amount of
such Imposition as finally determined, together with all interest and penalties
payable in connection therewith. Notwithstanding any provision of this Section
4.1.A to the contrary, Borrower shall pay any Imposition which it might
otherwise be entitled to contest if, in the reasonable discretion of Lender, the
Property is in jeopardy or in danger of being forfeited or foreclosed. If
Borrower refuses to pay any such Imposition, Lender may (but shall not be
obligated to) make such payment and Borrower shall reimburse Lender on demand
for all such Advances.
Deposits.
Borrower shall provide Lender with evidence of the timely payment of
all insurance premiums. For so long as Borrower's insurance coverages are part
of blanket coverages with other properties, Borrower shall not be required to
deposit in escrow any insurance premiums. Initially, so long as (i) Borrower
provides Lender with evidence of the timely payment of all real estate and
personal property taxes and (ii) Borrower is not required to make payments of
Reserve Funds pursuant to Section 4.1.R as of the most recent Calculation Date,
Borrower shall not be required to deposit in escrow any funds for real estate
and personal property taxes as hereinafter provided; provided, however, Lender,
in its sole discretion, may at any time require Borrower to do the following:
Deposit with Lender (or such agent of Lender as Lender may designate
in writing to Borrower from time to time), monthly, on the due date
of each monthly installment under the Note, 1/12th of the annual
charges (as estimated by Lender) for all real estate and personal
property taxes; and
Deposit with Lender, simultaneously with such above-referenced
monthly deposits, a sum of money which together with such monthly
deposits will be sufficient to make the payment of each such charge
at least 30 days prior to the date initially due. Should such
charges not be ascertainable at the time any deposit is required to
be made, the deposit shall be made on the basis of the charges for
the prior year or payment period, as reasonably estimated by Lender.
When the charges are fixed for the then current year or period,
Borrower shall deposit any deficiency on demand.
Any interest earned on the sums held by Lender pursuant to this
Section 4.1.B shall be added to said sums and shall be taxable to Borrower, and
shall, so long as no Event of Default shall have occurred, be disbursed by
Lender for the payment of the applicable real estate and personal property
taxes. Should an Event of Default occur, the funds so deposited may be applied
in payment of the charges for which such funds shall have been deposited or to
the payment of the Indebtedness or any other charges affecting the Property, as
Lender in its sole and absolute discretion may determine, but no such
application shall be deemed to have been made by operation of law or otherwise
until actually made by Lender as herein provided. Borrower shall provide Lender
with bills and all other documents necessary for the payment of the foregoing
charges at least 30 days prior to the date on which each payment thereof shall
first become due or promptly upon receipt of such bill.
Mortgage Taxes. Borrower shall pay any and all taxes, charges, filing,
registration and recording fees, excises and levies imposed upon Lender by
reason of their respective interests in, or measured by amounts payable under,
the Note, this Agreement, the Mortgage or any other Loan Document (other than
income, franchise and doing business taxes), and shall pay all stamp taxes and
other taxes required to be paid on the Note, this Agreement, the Mortgage or the
other Loan Documents. If Borrower fails to make such payment within five days
after notice thereof from Lender, Lender may (but shall not be obligated to) pay
the amount due, and Borrower shall reimburse Lender on demand for all such
Advances. If applicable law prohibits Borrower from paying such taxes, charges,
filing, registration and recording fees, excises, levies, stamp taxes or other
taxes, then Lender may declare the Indebtedness then unpaid to be due and
payable upon one hundred twenty (120) days prior written notice. In such event,
no prepayment fee shall be charged.
No Liens. Except for Permitted Encumbrances, and except as provided in
Section 4.1.F and Section 4.1.O, the Property shall be kept free and clear of
all liens, security interests and encumbrances of every nature or description
(whether for taxes or assessments, or charges for labor, materials, supplies or
services or any other thing). Other than the Permitted Encumbrances, Borrower
will not cause or permit any instrument or document affecting the Property to be
recorded without Lender's prior written consent thereto.
Condition of Premises. Consistent with current practice and industry
standards, Borrower shall keep and maintain the Property in good order,
condition and repair and shall make, as and when the same shall become
necessary, all structural and non-structural, exterior and interior, ordinary
and extraordinary, foreseen and unforeseen, repairs and maintenance necessary or
appropriate. Borrower shall suffer or commit no waste upon the Premises or any
portion thereof. Borrower shall, at its expense, promptly repair, restore,
replace or rebuild any part of the Property which may be damaged or destroyed by
any casualty (provided that, to the extent Borrower is entitled to receive
insurance Proceeds in accordance with the provisions of Article 6, such proceeds
are made available to Borrower) or as the result of any taking under the power
of eminent domain to the extent permitted given the size, scope and extent of
the taking. Borrower shall cause all repairs, maintenance, rebuilding,
replacement or restoration to be (in the reasonable opinion of Lender) of
substantially equivalent quality and to be performed in compliance with all
applicable requirements of any Governmental Authorities having jurisdiction,
including without limitation all federal, state, and local environmental laws.
Borrower shall not cause, suffer or permit the construction of any material
buildings, structures, or improvements on the Premises without the prior written
consent of Lender to the proposed construction as well as the plans and
specifications relating thereto. None of the buildings, structures, or
improvements erected or located on the Premises shall be removed, demolished or
substantially or structurally altered in any material respect without the prior
written consent of Lender. Lender's consents hereunder shall not be unreasonably
withheld or delayed.
Personal Property. Effective as of the Closing, all of the Personal
Property will be owned by Borrower in Borrower's name except for those items
identified on Schedule 4.1.F attached hereto, which are leased by Borrower.
Compliance. Borrower shall comply with all (i) building, zoning, fire,
health, environmental, disability and use laws, and all other laws, codes,
ordinances, rules and regulations applicable to the Premises, the Improvements
or any part thereof or the construction of any improvements thereon, or the use
or enjoyment thereof, (ii) covenants and restrictions of record, and (iii)
easements which are in any way applicable to the Premises, the Improvements or
any part thereof or to the construction of any improvements thereon and the use
or enjoyment thereof. Without limiting the generality of the foregoing, any
asbestos or lead-based paint (or any other hazardous substance) located at the
Premises shall be handled and managed in compliance with all applicable federal,
state, and local laws and requirements.
Performance of Agreements. Borrower shall duly and punctually perform,
observe and comply with all of the terms, provisions, conditions, covenants and
agreements on its part to be performed, observed and complied with hereunder and
under (i) the other Loan Documents, (ii) the Permitted Encumbrances, (iii) the
Management Agreement, (iv) the Franchise Agreement, (v) the Ground Lease and
(vi) all agreements entered into or assumed by Borrower in connection with the
Property, and Borrower will not suffer or permit any default or Event of Default
(giving effect to any applicable notice requirements and cure periods) to exist
under any of the foregoing.
Lender's Expenses. Borrower shall, or shall cause the Guarantor to, pay,
on demand by Lender, all reasonable expenses, charges, costs and fees in
connection with the negotiation and documentation of the Loan, including all
registration and recording fees, insurance consultant fees, if any,
environmental consultant fees, costs of appraisals, costs or fees incurred in
connection with market studies, costs of engineering reports, cost of credit
reports, cost of audits, fees and disbursements of all counsel (both local and
special) for Lender, escrow fees, cost of surveys, fees and expenses of Lender's
Consultant or others employed by Lender to inspect the Premises from time to
time, and travel expenses incurred by Lender and Lender's agents and employees
in connection with the Loan. Notwithstanding the foregoing, so long as no Event
of Default exists, Borrower shall have no obligation to pay or reimburse Lender
for travel expenses in excess of $1,500 in any twelve month period. At Closing,
Lender may pay directly from the proceeds of the Loan each of the foregoing
expenses.
Intentionally Omitted.
Financial Statements.
Borrower shall provide to Lender (i) annual financial statements of
Borrower and Guarantor and all such financial statements shall be prepared in
accordance with generally accepted accounting principles, consistently applied
and shall be prepared by a certified public accountant reasonably satisfactory
to Lender, (ii) Loan Month (or, if applicable, Accounting Period) and quarterly
cash flow and operating statements for the Property prepared by and certified by
Borrower (which quarterly statements shall include the calculation of DSCR),
(iii) such other financial information as Lender may from time to time
reasonably request, and (iv) copies of all Federal income tax returns for
Borrower and Guarantor certified by Borrower and Guarantor, respectively, to be
true and correct. All such financial statements, cash flow statements and
operating statements shall be delivered to Lender as soon as possible but not
later than thirty (30) days after the close of each Loan Month (or, if
applicable, Accounting Period), and in the case of annual financial statements,
not later than one hundred twenty (120) days after the close of each fiscal
year. Said copies of Borrower's and Guarantor's federal income tax returns shall
be provided to Lender within thirty (30) days following their filing with the
Internal Revenue Service.
Lender may, at Borrower's sole cost and expense and following
written notice to Borrower, require that any or all of the foregoing annual
financial statements be prepared on an "audited" basis, so called.
Management and Cash Management. Borrower shall provide competent and
responsible management for the Property by a management company, and pursuant to
a written management agreement, reasonably satisfactory to Lender. The existing
Manager and Management Agreement are satisfactory to Lender. Borrower shall not
enter into any other management agreement or arrangement with any other party
with respect to the management of the Property without Lender's prior written
consent. Borrower shall not modify, amend or terminate the Management Agreement
without Lender's prior written consent. Borrower shall provide Lender with
written notice of the occurrence of any event of default or condition which with
the giving of notice or passage of time, or both, would constitute an event of
default under the Management Agreement or any subsequent management agreement
which Lender may have approved. The Management Fee(s) shall not exceed a base
fee(s) in an amount equal to 5% of Gross Revenues. The payment of any Management
Fees over and above an amount equal to 3% of Gross Revenues shall be subordinate
to all payments to be made to Lender as provided in the Management,
Subordination and Estoppel Agreement among Lender, Borrower and Manager of even
date herewith. Borrower shall not modify, amend or terminate the Cash Management
Agreement in any material respect without Lender's prior written consent.
Due on Sale or Encumbrance. Except as otherwise expressly provided in
Section 8.4, Borrower shall not and shall not permit others to convey, assign,
sell, mortgage, encumber, pledge, hypothecate, grant a security interest in,
grant options with respect to, or otherwise dispose of (directly or indirectly,
voluntarily or involuntarily, by operation of law or otherwise, and whether or
not for consideration or of record) all or any portion of any legal or
beneficial interest in all or any portion of the Property or the Leases. Any
such transfer or encumbrance, as aforesaid, shall be deemed to be an Event of
Default hereunder, and shall entitle Lender to declare the Loan immediately due
and payable.
Estoppel Certificates. Within ten (10) Business Days following a request
by Lender, Borrower shall provide to Lender a duly acknowledged written
statement confirming the amount of the outstanding Indebtedness, the terms of
payment and maturity date of the Note, the date to which interest has been paid,
and whether any offsets or defenses exist against the Indebtedness. If any such
offsets or defenses are alleged to exist, the nature thereof shall be set forth
in detail. The Lender agrees to provide the Borrower, within ten (10) Business
Days following a request by Borrower, a payoff letter affirming the amount of
the Loan then outstanding.
Space Leases, Service Agreements and Equipment Leases. Borrower shall not,
without the prior written consent of Lender, enter into or modify, amend or
terminate (except upon a default by tenant) any lease of space (including
restaurants) with respect to the Premises or any portion thereof in excess of
1,000 square feet. Any lease of space entered into by Borrower with respect to
the Premises or any portion thereof shall (a) be subordinate to the lien of the
Mortgage, (b) be pursuant to an arms' length transaction and (c) not contain any
term which would materially affect Lender's rights under the Loan Documents.
Borrower shall not, without the prior written consent of Lender, enter into any
operating agreements or service contracts with respect to the Property ("Service
Agreements") other than (i) agreements or contracts to provide customary guest
services such as laundry, gift shop, or television cable services, or (ii) other
agreements the aggregate annual payments for which do not exceed $50,000. All
Service Agreements shall (a) be subordinate to the lien of the Mortgage and (b)
be pursuant to an arms' length transaction. Borrower shall not, without the
prior written consent of Lender, enter into any equipment lease which would
cause the aggregate annual payments by Borrower for all equipment leases to
exceed $25,000. All equipment leases shall be pursuant to an arms' length
transaction.
Leasing. Borrower shall not, without the prior written consent of Lender,
enter into any Lease with respect to the Property or any portion thereof in
excess of 1,000 square feet. Any Lease entered into by Borrower shall (a) be
subordinate to the lien of the Mortgage, (b) be terminable by Lender or its
successor upon not more than thirty (30) days notice, and (c) be pursuant to an
arms' length transaction. Borrower shall not modify, amend or terminate (except
upon a default by a tenant) any Leases affecting any part of the Property,
without Lender's prior written approval, which approval shall not be
unreasonably withheld or delayed, other than Leases which involve an area of
1,000 square feet or less. The Borrower shall not, without the prior written
consent of Lender, enter into any operating agreements or service contracts with
respect to the Property other than agreements or contracts to provide customary
guest services such as laundry, gift shop, restaurant or television cable
services ("Service Agreements"). Without the prior written consent of the
Lender, the aggregate annual payments by Borrower for all Service Agreements for
the Property shall not exceed $50,000. All Service Agreements shall (a) be
subordinate to the lien of the Mortgage and (b) be pursuant to an arms' length
transaction.
Within ten (10) days following the execution by Borrower of any new Lease,
Borrower shall deliver to Lender a Subordination, Non-Disturbance and Attornment
Agreement executed by the tenant under such Lease which is in form satisfactory
to Lender unless the Lease contains subordination, non-disturbance and
attornment provisions otherwise satisfactory to the Lender.
Borrower shall perform and comply with all of the landlord's obligations
under each Lease and shall not suffer or permit any breach or default on the
part of the landlord to occur thereunder.
Condemnation. Borrower shall not enter into any agreement for the taking
of the Premises or any part thereof with anyone authorized to acquire the same
in or by condemnation proceedings, or by the exercise of any power of eminent
domain, unless and until Lender shall have consented thereto in writing.
Litigation. Borrower shall promptly provide Lender with written notice of
any material litigation in which Borrower, any other Loan Party or the Property
is named as defendant which is not fully covered by insurance for which the
insurer has assumed the defense and acknowledged coverage, and Borrower shall
provide Lender with copies of all pleadings or orders filed or entered therein
or with respect thereto.
Principal Amortization Reserve.
The DSCR shall be calculated by Lender on each Calculation Date for
the most recent Calculation Period. At all times prior to the Maturity Date, if
the DSCR on the most recent Calculation Date is less than the Required Coverage
Standard, Borrower shall, in addition to the regularly scheduled monthly
payments of interest due under the Note, deposit with Lender on or before the
twenty-fifth (25th) day of each month 100% of the Net Cash Flow for the
immediately preceding Accounting Period.
Borrower shall make and Lender shall hold all such payments of
Reserved Funds in accordance with the following terms and conditions:
All Reserved Funds held by Lender upon the Maturity Date or upon the
occurrence of an Event of Default may be applied by Lender to the
repayment of the Loan in accordance with the terms and conditions of
the Note.
Provided that no Event of Default or Incipient Default exists, if,
on the next Calculation Date, the DSCR is greater than or equal to
the Required Coverage Standard, Lender shall return to Borrower the
Reserved Funds then held by Lender, and Borrower's obligation to
deposit the Reserved Funds with Lender shall be suspended until any
subsequent Calculation Date when the DSCR is less than the Required
Coverage Standard.
If Borrower is required to make payments of Reserved Funds pursuant
to this Section 4.1.R for four (4) consecutive Calculation Dates, so
long as no Event of Default or Incipient Default exists, Lender may,
on such fourth consecutive Calculation Date, apply all Reserved
Funds to the repayment of the Loan. No such repayment shall be
subject to any prepayment fee or premium. Thereafter, all Reserved
Funds may be applied by Lender, upon receipt, to the repayment of
the Loan, as aforesaid; provided, however, if on any subsequent
Calculation Date the DSCR shall be equal to or greater than the
Required Coverage Standard, Borrower's obligation to deposit the
Reserved Funds with Lender shall be suspended until any Calculation
Date thereafter when the DSCR is less than the Required Coverage
Standard.
All interest accrued on the Reserved Funds shall be added to the
Reserved Funds and shall be disbursed in accordance with the
foregoing terms and conditions. All interest earned on the Reserved
Funds shall be taxable to Borrower.
Application of Gross Revenues; Distributions. Borrower shall promptly
apply all Gross Revenues to the payment of all current and past due Operating
Expenses and to the repayment of all sums currently due or past due under this
Loan, including all payments of Capital Reserve pursuant to Section 4.1T and
real estate tax escrow payments pursuant to Section 4.1.B of this Agreement, if
any. After the Renovation Completion and so long as no Event of Default or
Incipient Default exists, and subject to the provisions of Section 4.1.R,
Borrower may make dividends to its shareholders of Net Cash Flow after the
payment of all current and past due Operating Expenses, debt service on the
Loan, Capital Reserve payments, real estate tax escrow payments pursuant to
Section 4.1.B, if any, and all sums due and payable to Lender (for its own
account or to be held by it) at or prior to the time of said dividend.
Capital Reserve. Beginning on January 25, 1999, and continuing on the
twenty-fifth (25th) day of each Loan Month thereafter, Borrower shall deposit
with Lender on a monthly basis a reserve of not less than four percent (4%) of
Gross Revenues for the preceding Accounting Period. So long as no Event of
Default or Incipient Default (other than an Incipient Default which is
susceptible to cure and as to which Borrower is diligently pursuing such cure)
shall exist, Lender shall make said funds available to Borrower on the following
terms and conditions: (i) all Capital Reserve funds released by Lender to
Borrower shall be used to pay Borrower for the reasonable expenses actually
incurred by Borrower for the acquisition, repair, or replacement of furniture,
fixtures or equipment necessary for the management and operation of the Property
(based on invoices furnished by Borrower) under an annual budget approved by
Lender for said acquisitions, repairs and replacements; (ii) all requests by
Borrower for a disbursement of Capital Reserve funds shall be in writing and
shall not be made more frequently than once per Loan Month; (iii) each such
request for a disbursement shall be in an amount of not less than $10,000.00;
and (iv) Borrower shall provide Lender with invoices, contracts providing for
progress payments or paid receipts covering the expenses for which Borrower
seeks payment or reimbursement from the Capital Reserve funds. Prior to the
disbursement of any Capital Reserve funds, Borrower shall also provide Lender
with (i) evidence satisfactory to Lender that Borrower has accepted possession
of said items and commenced using the same in the management and operation of
the Property, or the applicable contract requires an advance payment prior to
manufacture or delivery and (ii) paid receipts covering the expenses for which
Capital Reserve funds were previously disbursed.
Funds Deposited with Lender. All funds of Borrower which are deposited
with Lender pursuant to this Agreement or any other Loan Document shall be held
in a separate account and invested in an interest-bearing account (at not less
than money market rates). Any interest which accrues on said funds shall, at
Lender's sole option, be paid to Borrower or be held as part of the applicable
funds being held by Lender for the same purpose for which the principal sum of
said funds is being held by Lender. The Capital Reserve fund shall be reviewed
by the Lender annually on the anniversary of the Loan to determine if sufficient
sums are being funded for the expenses provided for herein. If the Lender
determines, in its reasonable discretion, that the Capital Reserve fund is
insufficient, Borrower shall pay all funding shortages within thirty (30) days
after notice by Lender. To secure all of Borrower's obligations to Lender under
the Loan Documents, Borrower hereby grants to Lender a security interest in all
funds now or hereafter deposited with Lender or otherwise in Lender's
possession, custody or control pursuant to the provisions of this Agreement or
any other Loan Document, including all funds deposited pursuant to Sections
4.1.B, 4.1.R, and 4.1.T of this Agreement. So long as any Event of Default
exists, Lender shall have such rights with respect to such funds and any
interest accrued thereon as are provided by applicable law and may apply such
funds towards the satisfaction of Borrower's obligations hereunder or under any
other Loan Documents. Without limiting any of the foregoing provisions, at the
request of Lender, Borrower shall execute and deliver from time to time such
documents as may be necessary or appropriate, in Lender's sole judgment, to
assure Lender that it has a first priority perfected security interest in and
lien on all funds deposited pursuant to Sections 4.1.B, 4.1.R, and 4.1.T of this
Agreement, including the creation of a deposit account in the name of Borrower
in a banking institution approved by Lender either within or outside of the
State of Ohio, as directed by Lender, into which any or all of such funds will
be deposited and maintained, subject to the rights of Lender with respect to
such funds as provided herein. Lender reserves the right to inspect such repairs
or replacements prior to the release of funds at Borrower's expense provided
that such inspection expenses shall not exceed $1,500 in any twelve (12) month
period.
Audit and Inspection by Lender. Lender shall have the right, upon
reasonable prior notice, and Borrower shall permit and shall cooperate with
Lender in arranging for, at any reasonable time and from time to time, Lender
and its representatives (i) to inspect the Property, and (ii) to review and
audit all books, records and financial statements of Borrower (including all
supporting data and any other records from which the Net Cash Flow may be
determined); and Borrower shall make all such books of account and records
available for such examination at the office where the same are regularly
maintained. Lender shall have the right to copy, duplicate and make abstracts
from such books and records as Lender may require. If any audit by Lender
discloses that payments of Net Cash Flow which should have been made by Borrower
exceeds the sums which were actually made by Borrower, then Borrower shall,
within ten (10) days following written notice from Lender, pay to Lender the
difference between said amounts, together with interest on such amount at the
Default Rate from the date such amounts should have been paid to the date of
post-audit payment. Borrower shall pay Lender's costs and expenses incurred in
connection with no more than one (1) such audit per year. Borrower acknowledges
and agrees that (i) all of such audits, inspections and reports shall be made
for the sole benefit of Lender, and not for the benefit of Borrower or any third
party, and neither Lender nor Lender's auditors or inspectors or any of Lender's
representatives, agents or contractors assumes any responsibility or liability
(except to Lender) by reason of such audits, inspections or reports, (ii)
Borrower will not rely upon any of such audits, inspections or reports for any
purpose whatsoever, and (iii) the performance of such audits, inspections and
reports will not constitute a waiver of any of the provisions of this Agreement
or any other Loan Document or any of the obligations of Borrower hereunder or
thereunder. Borrower further acknowledges and agrees that neither Lender nor
Lender's inspectors, representatives, agents or contractors shall be deemed to
be in any way responsible for any matters related to design or construction of
the Improvements.
Appraisal. At any time during the term of the Loan, Borrower shall
cooperate with Lender and use reasonable efforts to assist Lender in obtaining
an appraisal of the Property. Such cooperation and assistance from Borrower
shall include but not be limited to the obligation to provide Lender or Lender's
appraiser with the following: (i) reasonable access to the Property, (ii) a
current certified rent roll for the Property in form and substance satisfactory
to Lender, current asking rents and a history of change in asking rents and
historical vacancy for the past three years, (iii) current and budgeted income
and expense statements for the prior three years, (iv) a site plan and survey of
Property (to the extent available and at no cost to Borrower), (v) the building
plans and specifications, including typical elevation and floor plans (to the
extent available and at no cost to Borrower), (vi) a photocopy of the deed
conveying the Property to Borrower, together with the legal description of the
Property, (vii) the current and prior year real estate tax bills, (viii) a
detailed list of past and scheduled capital improvements made during Borrower's
period of ownership and the costs thereof, (ix) a summary of the then current
ownership entity, (x) all environmental reports and other applicable information
relating to the Property, and (xi) copies of all recent appraisals/property
description information or brochures, including descriptions of amenities and
services relating to the Property. The appraiser performing any such appraisal
shall be engaged by Lender, and Lender shall be responsible for any fees payable
to said appraiser in connection with an appraisal of the Property.
Accounts. Borrower agrees that, at any time requested by Lender in writing
after an Incipient Default or Event of Default has occurred, Borrower will do
all acts requested by Lender to perfect or confirm the continued perfection of
Lender's security interest in all of Borrower's bank accounts, including,
without limitation, appointing a collateral agent satisfactory to Lender and
segregating all of Borrower's funds from those of Manager or any Affiliates.
Deferred Origination Fee. Borrower acknowledges that the Lender has earned
the Deferred Origination Fee as of the date hereof although the Lender has
agreed to defer its payment as hereinafter provided. Borrower agrees that it
shall pay the Deferred Origination Fee to the Lender when the Loan is paid or
becomes payable in full whether at the Maturity Date or upon earlier prepayment
or acceleration.
Limitation on Indebtedness. Borrower shall not, without the prior written
consent of Lender, create, assume, incur or guaranty, directly or indirectly,
any indebtedness or obligation, except for lease financing or purchase money
financing for equipment, incurred after the date hereof, which is secured by the
equipment so leased or purchased and which lease or purchase money financings do
not contain payment obligations, in the aggregate, in excess of $25,000 per
year.
ARTICLE 5
AGREEMENT TO LEND
Agreement to Lend. On the basis of the covenants, agreements and
representations of Borrower contained in, and subject to the terms and
conditions set forth in, this Agreement and the other Loan Documents, Lender
agrees to lend to Borrower the principal sum of up to $4,199,869. The entire
proceeds of the Loan shall be disbursed by Lender at Closing. Borrower shall use
the Loan proceeds for the purpose for which they were advanced and for no other
purpose.
ARTICLE 6
INSURANCE AND CASUALTY
Insurance Provisions.
Insurance. Borrower, at its sole cost and expense, shall insure and keep
insured the Property against such perils and hazards, and in such amounts and
with such limits, as Lender may from time to time reasonably require. At the
time of the Closing, Lender's requirements for said insurance are set forth in
Exhibit D, which requirements Borrower acknowledges are reasonable and
customary. Borrower shall also carry such other insurance, and in such amounts,
as Lender may from time to time reasonably require, against insurable risks
which at the time are commonly insured against in the case of premises similarly
situated, due regard being given to the availability of insurance and to the
type of construction, location, utilities, use and occupancy of the Premises or
any replacements or substitutions therefor ("Additional Insurance"). Such
Additional Insurance may include flood, hurricane, earthquake, war risk, nuclear
explosion, demolition and contingent liability from the operation of
"nonconforming improvements" on the Premises, and shall be obtained within 30
days after demand by Lender. Otherwise, Borrower shall not obtain any separate
or additional insurance which is contributing in the event of loss, unless it is
properly endorsed and otherwise reasonably satisfactory to Lender in all
respects. The Proceeds (as defined in the Mortgage) of insurance paid on account
of any damage to or destruction of the Premises or any portion thereof shall be
paid over to Lender to be applied as hereinafter provided.
Evidence of Coverage. The insurance shall be evidenced by the original
policy or a true and certified copy of the original policy, or by certificates
of insurance. Said certified copies, original policies or certificates shall be
delivered to Lender at or prior to Closing. On or before the Closing and each
stated due date thereafter, Borrower shall pay all premiums and fees for the
insurance policies required hereunder. Borrower shall deliver certified copies
of all policies and renewals (or certificates evidencing the same) to Lender at
least thirty (30) days before the expiration of existing policies. Each such
policy shall provide that such policy may not be canceled or materially changed
except upon 30 days prior written notice of intention of non-renewal,
cancellation or material change to Lender, and that no act or thing done by
Borrower shall invalidate the policy as against Lender. Notwithstanding anything
to the contrary contained herein or in any provision of law, the Proceeds of
insurance policies coming into the possession of Lender and which are not to be
used for the Work (as hereinafter defined) shall not be deemed trust funds and
Lender shall be entitled to dispose of such Proceeds as hereinafter provided. If
Lender has not received satisfactory evidence of such renewal or substitute
insurance in the time frame herein specified, Lender shall have the right, but
not the obligation, to purchase such insurance for Lender's interest only. Any
amounts so disbursed by Lender pursuant to this Section 6.1.B shall be deemed to
be a part of the Loan and shall bear interest at the Default Rate. Nothing
contained in this Article 6 shall require Lender to incur any expense or take
any action hereunder, and inaction by Lender shall never be deemed a waiver of
any rights accruing to Lender on account of this Article 6.
Separate Insurance. Borrower shall not carry any separate insurance on the
Property concurrent in kind or form with any insurance required hereunder or
contributing in the event of loss without Lender's prior written consent, and
any such policy shall have attached a standard non-contributing mortgagee
clause, with loss payable to Lender, and shall meet all other requirements set
forth herein.
Damage to or Destruction of Premises. In the event of any damage to or
destruction of the Premises, Borrower shall give prompt written notice to Lender
and, provided Lender makes the Proceeds available for the costs of repair,
restoration and rebuilding, Borrower shall promptly commence and diligently
continue to completion the repair, restoration and rebuilding of the Premises so
damaged or destroyed in full compliance with all legal requirements and with the
provisions of Section 6.1.F below, and free and clear from any and all liens and
claims. Such repair, restoration and rebuilding of the Premises are sometimes
hereinafter collectively referred to as the "Work." Borrower shall not adjust,
compromise or settle any claim(s) for insurance Proceeds without the prior
written consent of Lender unless such claim(s) does not exceed $100,000 in the
aggregate in which case no consent of Lender is required. Subject to Sections
6.1E and F, below, Lender shall have the option in its sole discretion to apply
any insurance Proceeds it may receive pursuant to the Mortgage (less any cost to
Lender of recovering and paying out such Proceeds, including reasonable
attorneys' fees) to the payment of the Indebtedness or to allow all or a portion
of such Proceeds to be used for the Work. If any insurance Proceeds are applied
to reduce the Indebtedness, Lender shall apply the same in the following order:
first, to the payment of interest due on any Advances;
next, to the principal amount of any Advances;
next, to any Late Charges (as provided in the Note);
next, to accrued interest then due under the Note; and
finally, to the unpaid principal balance of the Note.
If Lender applies insurance Proceeds to reduce the Indebtedness, no
prepayment fee shall be due with respect to any prepayment effected thereby.
Restoration. Notwithstanding the provisions of Section 6.1.D above, if, in
Lender's reasonable judgment, the Work can be completed within 18 months of the
occurrence of said damage or destruction, then Lender shall, upon request by
Borrower, permit Borrower to use the insurance Proceeds for the Work (subject to
the provisions of, and less Lender's costs described in, Section 6.1.F below),
so long as Lender, in its reasonable judgment, is satisfied that as of each date
on which such insurance Proceeds are to be applied to payment thereof:
The insurance Proceeds held by Lender in respect of the applicable
casualty equal or exceed such estimated cost of effecting such
repair and restoration, or such portion thereof as then remains to
be completed and paid for or Borrower provides evidence satisfactory
to Lender that Borrower has funds available to pay any shortfall,
and, if required by Lender, escrows such funds with Lender for
disbursement in accordance with the requirements of Section 6.1.F;
The Management Agreement shall remain in full force and effect and
all material Leases, if any, shall remain in full force and effect,
and no tenant thereunder shall be entitled to cancel or terminate
its Lease as a consequence of such casualty;
Upon completion of the Work, the monthly revenues from the Property
shall, in Lender's reasonable judgment, be sufficient to pay all
interest and other sums due and payable under the Note, this
Agreement and the other Loan Documents;
The Work will, in Lender's reasonable judgment, be completed on or
prior to May 31, 2000;
There is in force and effect for the benefit of Borrower and Lender
rental or business interruption insurance sufficient to provide
coverage for one hundred percent (100%) of all income lost as a
consequence of such casualty for not less than the projected period
for the completion of the Work or Borrower provides evidence
satisfactory to Lender that Borrower has funds available to pay all
interest and other sums due and payable under the Note, this
Agreement and the other Loan Documents, as well as all other
expenses of the Property during such period and, if required by
Lender, escrows such funds with Lender for application to the
payment of such obligations as they come due;
The Work will be effected pursuant to plans and specifications
reasonably approved in writing by Lender, and by a general
contractor and major subcontractors, and pursuant to contracts,
reasonably approved in writing by Lender; and
The Work can be effected in compliance with all applicable laws and
Borrower has obtained all licenses, permits, consents and approvals
from all applicable governmental authorities or private parties
required to permit Borrower to effect such restoration and repair
and to use, operate and occupy the repaired and restored premises
upon completion thereof (other than those which will issue in the
ordinary course upon completion) and that the same are in full force
and effect.
Lender shall have no obligation to make such insurance Proceeds available to pay
for the Work if (A) the Loan shall have been accelerated and the principal and
accrued interest owing on the Loan have become due and payable, or (B) there
shall exist an Event of Default or Incipient Default other than an Incipient
Default which is susceptible to cure and as to which Borrower is diligently
pursuing such cure.
Distribution of Proceeds. If any insurance Proceeds are used for the Work,
then such Proceeds shall be held by Lender and shall be paid out from time to
time to Borrower as the Work progresses (less any cost to Lender of recovering
and paying out such Proceeds, including reasonable attorneys' fees and costs
allocable to inspecting the Work and the plans and specifications therefor),
subject to each of the following conditions:
If the Work is structural or if the cost of the Work is reasonably
estimated by Lender to exceed $250,000, the Work shall be conducted
under the supervision of a certified and registered architect or
engineer unless otherwise waived in writing by the Lender. Before
Borrower commences any Work, other than temporary work to protect
property or prevent interference with business, Lender shall have
approved in writing the plans and specifications for the Work, which
approval shall not be unreasonably withheld or delayed, it being
nevertheless understood that such plans and specifications shall
provide for Work so that, upon completion thereof, the Premises
shall be at least equal in value and general utility to the Premises
prior to the damage or destruction.
Each request for payment shall be made on not less than ten (10)
Business Days prior notice to Lender and shall be accompanied by a
certificate of the architect or engineer in (i) above (or a
certificate given by Borrower if no architect or engineer is so
required) stating (A) that all of the Work completed has been done
in substantial compliance with the approved plans and
specifications, if required under (i) above, (B) that the sum
requested is justly required to reimburse the Borrower for payments
by Borrower, or is justly due to the contractor, subcontractors,
materialmen, laborers, engineers, architects or other persons
rendering services or materials for the Work (giving a brief
description of such services and materials), and that when added to
all sums previously paid out by Lender does not exceed the value of
the Work done to the date of such certificate, (C) if the sum
requested is to cover payment relating to repair and restoration of
personal property required or relating to the Premises, that title
to the personal property items covered by the request for payment is
vested in Borrower, and (D) that the amount of such Proceeds
remaining in the hands of Lender will be sufficient on completion of
the Work to pay for the same in full (giving in such reasonable
detail as Lender may require an estimate of the cost of such
completion). Additionally, each request for payment shall contain a
statement signed by Borrower approving both the Work done to date
and the Work covered by the request for payment in question. Each
request for payment shall be accompanied by waivers of lien
satisfactory to Lender covering that part of the Work for which
payment or reimbursement is being requested and, if required by
Lender, a search prepared by a title company or an attorney
authorized to practice law in the State, or by other evidence
satisfactory to Lender that there has not been filed with respect to
the Premises any mechanics' or other lien or instrument for the
retention of title relating to any part of the Work not discharged
of record. Additionally, as to any personal property covered by the
request for payment, Lender shall be furnished with evidence of
payment therefor and such further evidence satisfactory to assure
Lender of its valid first lien on the personal property.
Lender or its designee shall have the right to inspect the Work at
all reasonable times and may condition any disbursement of Proceeds
upon the satisfactory completion, as determined in Lender's
reasonable discretion, of any portion of the Work for which payment
or reimbursement is being requested. The cost of any such inspection
of the Work shall be paid by Borrower prior to or simultaneously
with the next disbursement of any portion of the Proceeds. Neither
the approval by Lender of the plans and specifications for the Work
nor the inspection by Lender of the Work shall make Lender
responsible for the preparation of such plans and specifications or
the compliance of such plans and specifications, or of the Work,
with any applicable law, regulation, ordinance, covenant or
agreement.
Proceeds shall not be disbursed more frequently than every 30 days.
Any request for payment made after the Work has been completed shall
be accompanied by a copy or copies of any certificate or
certificates required by law to render occupancy and full operation
of the Premises legal.
Upon completion of the Work and payment in full therefor, or upon
any failure on the part of Borrower to promptly commence the Work,
or upon the failure on the part of Borrower to proceed diligently
and continuously to completion of the Work (subject to allowance for
reasonable delays and interruptions in the supply of materials and
labor not caused by any act or omission of Borrower), Lender may
apply any such proceeds it then or thereafter holds to the payment
of the Indebtedness; provided, however, that Lender shall be
entitled to apply at any time all or any portion of insurance
Proceeds it then holds to the curing of any Event of Default. Upon
completion of the Work, so long as no Event of Default exists, any
remaining insurance Proceeds held by Lender shall be paid to
Borrower.
Miscellaneous Insurance Provisions.
Notwithstanding any other provision of this Section 6.1, if in
Lender's reasonable judgment the cost of the Work is less than
$250,000 and such Work can be completed in less than 60 days and
provided no Event of Default has occurred and is continuing, then
Lender shall, upon request by Borrower, permit Borrower to apply for
and receive the insurance Proceeds directly from the insurer (and
Lender shall advise the insurer to pay over such Proceeds directly
to Borrower), provided that Borrower shall apply such insurance
Proceeds solely to the prompt and diligent commencement and
completion of such Work.
In the event of the foreclosure of the Mortgage or other transfer of
title to or assignment of the Property in extinguishment of the
Indebtedness in whole or in part, all right, title and interest of
Borrower in and to any insurance Proceeds shall inure to the benefit
of and pass to Lender or any purchaser or transferee of the
Property.
Borrower hereby authorizes Lender, during all periods in which an
Event of Default has occurred and remains uncured, to settle any
insurance claims, to obtain insurance Proceeds, and to endorse any
checks, drafts or other instruments representing any insurance
Proceeds whether payable by reason of loss thereunder or otherwise.
ARTICLE 6A
RENOVATION WORK
6A.1 Construction. During the pendency of the Renovation Work, Borrower
shall provide Lender with monthly reports which include, as applicable, (i)
evidence reasonably satisfactory to Lender that the Renovation Work complies
with all building, zoning and other laws and governmental codes, rules and
regulations, (ii) copies of all necessary licenses, permits, approvals and
consents required for the use, occupancy and operation of the Premises, as
altered by the Renovation Work, (iii) evidence satisfactory to Lender that all
Renovation Work completed as of the date of such report has been inspected and
approved by each required Governmental Authority and by each other person or
entity (including any tenants) having the right to inspect and approve the
Renovation Work and (iv) all contractors and subcontractors have been paid
current. Borrower shall provide Lender with such other information and material
relating to the Renovation Work as Lender reasonably requests.
6A.2 Completion. Borrower shall: (i) cause the Renovation Work to be
completed in a good and workmanlike manner in accordance with the reasonable
requirements of Lender's Consultant, and the requirements of this Agreement, the
Renovation Budget and the Renovation Plans; (ii) cause the Renovation Work to be
completed so that the Premises remain free and clear of all liens and
encumbrances other than Permitted Exceptions; (iii) cause Renovation Completion
to be achieved on or before the Renovation Completion Date; and (iv) commence
the Renovation Work within 90 days following the Closing and pursue the
Renovation Work diligently to completion.
6A.3 Compliance with Laws. Borrower shall cause the Renovation Work to be
constructed in accordance with all applicable requirements of any Governmental
Authority having jurisdiction with respect thereto including, without
limitation, obtaining all licenses, permits, approvals and consents for the use,
occupancy and operation of the Premises, as altered by the Renovation Work.
6A.4 Other Remedies of Lender. Upon the occurrence of an Event of Default,
in addition to any other remedies available to Lender by the terms of this
Agreement or any other Loan Document or by law, Lender may at its sole
discretion: (a) complete the Renovation Work (with such changes as Lender shall
deem appropriate), all at the risk, cost and expense of Borrower; (b)
discontinue at any time the Renovation Work; (c) engage builders, contractors,
engineers, architects and others for the purpose of furnishing labor, material
and equipment in connection with the Renovation Work, which personnel may, but
need not, be the same as those engaged by Borrower; (d) pay, compromise or
settle all bills or claims incurred in connection with the Renovation Work; and
(e) take or refrain from taking such action with respect to the Renovation Work
as Lender may from time to time reasonably determine. All such action shall be
at Borrower's sole cost and expense, such sums being secured by the Mortgage.
ARTICLE 7
BORROWER'S DEFAULT
7.1. Events of Default. Each of the following shall constitute an "Event
of Default" under this Agreement:
A. Borrower fails (i) to pay any installment of interest on the Note when
due and continuing for more than five (5) days after written notice thereof from
Lender or (ii) to pay the Note in full on or before the Maturity Date;
B. Borrower or the Guarantor fails to pay within ten (10) days following
written notice from Lender any amounts due hereunder or under any of the other
Loan Documents, other than installments of interest on the Note; or
C. Any representation or warranty made by Borrower or any other Loan Party
in or pursuant to this Agreement or otherwise made in writing in connection with
or as contemplated by this Agreement shall be incorrect or false or misleading
in any material respect as to the period of time to which it relates; or
D. An Event of Default exists under any other Loan Document; or
E. Any representation to Lender by Borrower or any other Loan Party as to
the financial condition or credit standing of Borrower or any other Loan Party,
or any financial statement provided to Lender pursuant to any Loan Document, is
or proves to be false or misleading in any material respect; or
F. Except for Permitted Transfers, any interest in Borrower or the
Property (or any part thereof) is sold, conveyed, transferred, assigned,
disposed of or further encumbered, either directly or indirectly, or any
agreement for any of the foregoing is entered into; or
G. The Premises or any portion thereof is rezoned either voluntarily or
involuntarily, so as to no longer permit the Premises or any portion thereof to
be used as a hotel; or
Any order or decree is entered by any court of competent jurisdiction
directly or indirectly enjoining or prohibiting Lender or Borrower from
performing any of their obligations under this Agreement; or
Borrower or any other Loan Party makes an assignment for the benefit of
creditors; or petitions or applies to any court for the appointment of a trustee
or receiver for itself or for any part of its assets or for the Property or any
portion thereof, or commences any proceedings under any bankruptcy, insolvency,
readjustment of debt or reorganization statute or law of any jurisdiction,
whether now or hereafter in effect; or if any such petition or application is
filed or any such proceedings are commenced, and Borrower or any other Loan
Party by any act indicates any approval thereof, consent thereto, or
acquiescence therein; or an order is entered appointing any such trustee or
receiver, or adjudicating Borrower or any other Loan Party bankrupt or
insolvent, or approving the petition in any such proceeding; or if any petition
or application for any such proceeding or for the appointment of a trustee or
receiver is filed by any third party against Borrower or any other Loan Party or
their respective assets or the Property, or any portion thereof, and any of the
aforesaid proceedings is not dismissed within ninety (90) days of its filing; or
Any representation or warranty made by the Ground Lessor in the Estoppel
Agreement shall be incorrect or false or misleading in any material respect; or
A default or event of default occurs under the Franchise Agreement and
Franchisor has taken affirmative action to enforce its rights under the
Franchise Agreement, or has affirmatively declared a default under the Franchise
Agreement, or has otherwise expressly indicated that it deems such default
material, or the Franchise Agreement or any related arrangement with Franchisor
is terminated without the prior written consent of Lender, in its sole
discretion; or
A final non-appealable judgment or judgments for the payment of money in
excess of an aggregate of $50,000 shall be rendered against Borrower and such
judgment or judgments shall remain undischarged or unbonded (to Lender's
satisfaction) for a period of 60 consecutive days during which the execution
shall not be effectively stayed; or
The Management Agreement is amended or terminated for any reason without
the prior written consent of Lender; or
Borrower or any other Loan Party fails to comply with, keep or perform any
of its other obligations, agreements, undertakings, covenants, conditions or
warranties under (i) this Agreement, (ii) any other Loan Document, or (iii) any
other document or instrument executed and delivered to Lender by Borrower or any
other Loan Party pursuant to this Agreement, and such failure continues for a
period of thirty (30) days after written notice thereof by Lender to Borrower,
provided, however, if such failure is susceptible to cure by Borrower but cannot
be cured within such thirty (30) day period, but Borrower commences to cure the
same within such thirty (30) day period and thereafter diligently proceeds to
cure the same, Borrower shall have an additional reasonable period of time in
which to cure such failure (but in no event longer than ninety (90) days after
the date of notice thereof); or
An event of default occurs under the Related Party Loan Documents and is
not cured by the Related Party within any applicable grace or cure period.
7.2. Remedies. Upon the happening of an Event of Default, Lender shall
have the right, in addition to all the remedies conferred upon Lender by law or
equity or the terms of any Loan Document, to do any or all of the following,
concurrently or successively, without notice to Borrower:
A. Declare the Note to be, and such Note shall thereupon become,
immediately due and payable, together with the Prepayment Fees (as defined in
the Primary Note), if applicable, without presentment, demand, protest, notice
of intention to accelerate, notice of acceleration or notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Note to
the contrary notwithstanding, and exercise any one or more of its rights and
remedies under the Loan Documents.
B. Enter upon and take possession of the Property and all material,
equipment and supplies thereon and do anything necessary or desirable to fulfill
the obligations of Borrower hereunder and to sell, manage, maintain, repair and
protect the Property. Without limiting the generality of the foregoing and for
the purposes aforesaid, Borrower hereby appoints and constitutes Lender its
lawful attorney-in-fact with full power of substitution to (i) pay, settle or
compromise all existing bills and claims which may be liens upon or security
interests in the Property, or to avoid such bills and claims becoming liens or
security interests, against the Property or any fixtures or equipment thereon,
or as may be necessary or desirable for the clearance of title or otherwise,
(ii) use any funds of Borrower for purpose of completing the Renovation Work,
(iii) execute all applications and certificates in the name of Borrower which
may be required to carry out the intent and purpose hereof, (iv) employ such
contractors, subcontractors, architects and others as Lender may deem reasonably
appropriate, (v) do any and every act which Borrower might do on its own behalf,
including to enter into Leases of any portion of the Property, and (vi)
prosecute or defend any and all actions or proceedings involving the Property or
any fixtures, equipment or other installations thereon, it being understood and
agreed that this power of attorney shall be a power coupled with an interest and
cannot be revoked. Lender and its designees, representatives, agents, licensees
and contractors shall be entitled to the entry, possession and use contemplated
herein without the consent of any party and without any legal process or other
condition precedent whatsoever. Borrower acknowledges that any denial of such
entry, possession and use by Lender will cause irreparable injury and damage to
Lender and agrees that Lender may forthwith sue for any remedy to enforce the
immediate enjoyment of such right. Borrower hereby waives the posting of any
bond as a condition for exercising such remedy.
C. Apply the sum of any Reserved Funds and Capital Reserve payments then
being held by Lender to the repayment of the Loan in any order or priority.
D. Declare any or all of the Related Party Loans to be in default and to
pursue all of its rights and remedies with respect thereto.
Anything in this Agreement to the contrary notwithstanding, all funds
advanced or disbursed by Lender pursuant to the provisions of this Article 7
shall be deemed advanced by Lender under an obligation to do so regardless of
the identity of the person or persons to whom such funds are owed and shall bear
interest at the Default Rate. Funds advanced or disbursed by Lender in the
exercise of its judgment that the same are needed to protect its security or to
otherwise perform any obligations of Borrower hereunder are to be deemed
obligatory advances hereunder and are to be added to the total indebtedness
evidenced by the Note and secured by the Mortgage and the other Loan Documents
and said indebtedness shall, if necessary, be increased accordingly.
In case of any Event of Default hereunder, Borrower will pay Lender's
attorneys' fees and disbursements and court costs (including those relating to
appeals) and all related expenses in connection with the enforcement of this
Agreement or any of the other Loan Documents.
ARTICLE 8
MISCELLANEOUS
8.1 Indemnification. Except for Losses (as hereinafter defined) which are
finally adjudicated by a court of competent jurisdiction to have arisen directly
and proximately from the gross negligence or willful misconduct of Lender or
have arisen solely and exclusively from acts or events occurring after the
Borrower has relinquished all possession, direction or control over the
Property, Borrower shall protect, defend, indemnify and hold Lender, and its
officers, directors, employees and agents (each, an "Indemnified Party")
harmless from and against any and all harm, loss, liability, damage, suit,
claim, demand, expense, fees, costs, judgments and penalties (including
reasonable attorneys' fees but excluding consequential damages) (each a "Loss")
suffered or incurred by an Indemnified Party in connection with (i) any claim,
demand, suit or proceeding brought or asserted by any person against an
Indemnified Party arising out of or relating to Lender's entering into or
carrying out the terms of this Agreement or any of the other Loan Documents or
being the holder of the Note, (ii) any default by Borrower or any other Loan
Party hereunder or under any other Loan Document, (iii) any bodily injury,
death, other personal injury or property damage occurring in or upon the
Property through any cause whatsoever, and (iv) any transaction otherwise
arising out of or in any way connected with the Property, this Agreement, any
other Loan Document or the Indebtedness, excluding a Loss arising out of
Lender's gross negligence or willful misconduct.
8.2 Defense of Claims. Lender may, at Borrower's sole cost and expense,
retain separate counsel to defend Lender against any claim relating to any Loss
or potential Loss. If Lender retains separate counsel in such an action,
Borrower will cooperate with Lender and provide Lender with copies of all
existing pleadings, discovery materials and other materials relating to said
claim. In any event, Borrower shall defend any such claim and shall provide
Lender with copies of all pleadings, filings and correspondence relating
thereto.
8.3 Performance by Lender. In the event that Borrower shall at any time
fail to duly and punctually pay, perform, observe or comply with any of its
covenants and agreements hereunder or under the other Loan Documents, or if any
Event of Default hereunder shall exist, then Lender may (but shall in no event
be required to) make any such payment or perform any such term, provision,
condition, covenant or agreement or cure any such Event of Default. Lender shall
not take action under this Section 8.3 prior to the occurrence of an Event of
Default unless in Lender's reasonable judgment, such action is necessary or
appropriate in order to preserve the value of the collateral, to protect persons
or property, or Borrower has abandoned the Property or any portion thereof.
Lender shall not be obligated to continue any such action having commenced the
same and may cease the same without notice to Borrower. Any amounts expended by
Lender in connection with such action shall constitute additional advances
hereunder, the payment of which is additional indebtedness, secured by the Loan
Documents and shall become due and payable upon demand by Lender, with interest
at the Default Rate from the date of disbursement thereof until fully paid. No
further direction or authorization from Borrower shall be necessary for such
disbursements. The execution of this Agreement by Borrower shall and hereby does
constitute an irrevocable direction and authorization to Lender to so disburse
such funds.
8.4 Transfer or Assignment. Lender may assign, negotiate, pledge or
otherwise hypothecate all or any portion of the Loan or grant participation
therein, or in any of its rights and security hereunder and under the other Loan
Documents, and Borrower shall accord full recognition thereto provided that if
the Loan is assigned to any party other than Nationwide Life Insurance Company
or any other life insurance company, financial institution or other commercial
or institutional lender, or affiliate thereof, then Borrower must consent to
such assignment which consent shall not be unreasonably withheld or delayed.
Lender agrees to provide Borrower with written notice of any assignment of the
Loan other than to Nationwide Life Insurance Company. Lender may deliver copies
to any potential participant or assignee or transferee of financial statements
and other information from time to time furnished to Lender pursuant hereto or
in connection therewith provided that Lender shall take such steps as may be
reasonably necessary to assure that such information remains confidential.
Borrower shall not assign or attempt to assign its rights or obligations under
this Agreement or any other Loan Document other than Permitted Transfers.
8.5 Lender's Actions. The authority herein conferred upon Lender and any
action taken by Lender hereunder or in any other Loan Document will be taken by
Lender for its own protection only, and Lender does not and shall not be deemed
to have assumed any responsibility to Borrower or to any other person or persons
with respect to any such action herein authorized or taken by Lender. No person
shall be entitled to rely upon, or claim to have relied upon, any action taken
or failed to have been taken by Lender or any of its representatives.
8.6 Time is of the Essence. TIME IS OF THE ESSENCE OF THIS AGREEMENT.
8.7 Waivers. No waiver of any term, provision, condition, covenant or
agreement contained herein or in any other Loan Document shall be effective
unless set forth in a writing signed by Lender, and any such waiver shall be
effective only to the extent set forth in such writing. No failure by Lender to
exercise, or delay by Lender in exercising, any right, power or privilege
hereunder or in any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof, or the exercise of any other
right or remedy provided by law. No notice to or demand on Borrower in any case
shall, in itself, entitle Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of Lender to
any other or further action in any circumstances without notice or demand.
8.8 Notices. Any notice which any party hereto may be required or may
desire to give hereunder shall be delivered personally, or by overnight express
courier, addressed in the case of Borrower to:
Island Motel Enterprises, Inc.
and Penmoco, Inc.
Two Live Oak Center
3445 Peachtree Road, NE
Suite 700
Atlanta, Georgia 30326
with a copy to:
Stearns, Weaver, Miller, Weissler,
Alhadeff & Sitterson, P.A.
Museum Tower
150 West Flagler Street
Miami, Florida 33130
Attention: Robert Weissler, Esq.
in the case of Lender to:
Banc One Capital Funding Corporation
150 East Gay Street
Columbus, Ohio 43215
Attention: Loan Servicing
with a copy to:
Banc One Capital Markets, Inc.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attn: Legal Department and Real Estate Investment Group
or at such other addresses or to the attention of such other persons as may from
time to time be designated by the party to be addressed by written notice to the
other in the manner herein provided. Notices, demands and requests given in the
manner aforesaid shall be deemed sufficiently served or given for all purposes
hereunder when received or when delivery is refused or when the same are
returned to sender for failure to be called for.
8.9 Successors and Assigns. This Agreement shall inure to the benefit of
the parties and their respective successors and permitted assigns. No assignment
made by Borrower in violation of this Agreement shall confer any rights on any
assignee of Borrower.
8.10 No Partnership. Nothing contained herein, or in any other Loan
Document, and no action or inaction whatsoever on the part of Lender, shall be
deemed to make Lender a partner or joint venturer with Borrower.
8.11. Brokerage Claims. Borrower shall, and shall cause the Guarantor, to
protect, defend, indemnify and hold Lender harmless from and against all loss,
cost, liability and expense incurred as a result of any claim for a broker's or
finder's fee against Lender or any person or entity in connection with the
transaction herein contemplated, provided such claim is made by or arises
through or under Borrower or the Guarantor or is based in whole or in part upon
alleged acts or omissions of Borrower or the Guarantor. Lender shall protect,
defend, indemnify and hold Borrower harmless from and against all loss, cost,
liability and expense incurred as a result of any claim for a broker's or
finder's fee against Borrower provided such claim is based upon alleged acts or
omissions of Lender.
8.12 Publicity. Lender and Borrower may each reasonably publicize the Loan
if it so elects. Borrower agrees to consult with Lender prior to any press
release concerning the Loan.
8.13 Documents Satisfactory to Lender. All documents and other matters
required by any of the provisions of this Agreement to be submitted or provided
to Lender shall be in form and substance reasonably satisfactory to Lender.
8.14 Additional Assurances. At any time or from time to time, upon the
written request of Lender, Borrower shall execute, and, if required, record,
file (and pay all fees, taxes or other expenses relating thereto) all such
further documents and do all such other acts and things as Lender may reasonably
request to effectuate the transaction contemplated herein in accordance with the
terms hereof.
8.15 Entire Agreement. This Agreement, the Exhibits hereto and the other
Loan Documents and other documents referred to herein constitute the entire
agreement between the Lender and Borrower with respect to the subject matter
hereof and may not be modified or amended in any manner other than by
supplemental written agreement executed by the parties hereto.
8.16 Severability. If any provision of this Agreement or any other Loan
Document or the application thereof to any person or situation shall, to any
extent, be held invalid or unenforceable, the remainder of this Agreement or any
other Loan Document, and the application of such provision to persons or
situations other than those to which it shall have been held invalid or
unenforceable, shall not be affected thereby, but shall continue valid and
enforceable to the fullest extent permitted by applicable law.
8.17 No Third Party Beneficiary. Except as hereinafter expressly provided,
this Agreement is made for the sole benefit of Borrower and Lender, and no other
person shall be deemed to have any privity of contract hereunder nor any right
to rely hereon to any extent or for any purpose whatsoever, nor shall any other
person have any right of action of any kind hereon or be deemed to be a third
party beneficiary hereunder. Notwithstanding the foregoing, Banc One Capital
Partners VII, Ltd., its successors and assigns, shall be a third party
beneficiary of the representations, warranties, covenants and agreements of
Borrower and Guarantor under the Loan Documents for so long as it may own a
participation interest in the Loan.
8.18 CHOICE OF LAW. THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF OHIO,
ACCEPTED BY LENDER IN THE STATE OF OHIO, AND THE PROCEEDS OF THE LOAN EVIDENCED
HEREBY WERE OR ARE TO BE DISBURSED BY LENDER FROM THE STATE OF OHIO. BORROWER
AND LENDER AGREE THAT THE STATE OF OHIO HAS A SUBSTANTIAL RELATIONSHIP TO THE
TRANSACTION EVIDENCED HEREBY AND AGREE THAT THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO (WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW).
8.19 Limitation on Liability.
Subject to the limitations and exceptions contained in subsections
(b), (c), (d) and (e) below, Borrower shall not have any personal recourse
liability for amounts owing under the Note or any of the other Loan Documents
and no deficiency judgment therefor shall be enforced against Borrower. Lender's
recourse for such amounts shall, subject to the limitations and exceptions
contained in subsections (b), (c), (d) and (e) below, be limited to the
collateral and security provided under the Loan Documents. Anything herein to
the contrary notwithstanding, the Borrower acknowledges and agrees that the
collateral provided under the Pledge of Stock is intended to secure and
cross-collateralize both the Loan and the Related Party Loans.
A judgment may be sought, obtained, entered and enforced against
Borrower to the extent necessary to preserve or enforce the rights and remedies
of Lender in, to or against the collateral and security provided under the Loan
Documents, and nothing contained in this Section 8.19 shall be construed to
limit, prejudice or impair the rights of Lender to enforce its rights and
remedies against any real and personal property mortgaged, pledged, encumbered,
assigned or granted to secure payment or performance under this Agreement, the
Note, and the other Loan Documents. Notwithstanding anything to the contrary
herein or elsewhere Lender shall, to the fullest extent permitted by law, be
entitled to injunctive relief and to specific performance.
Anything contained herein or elsewhere to the contrary
notwithstanding, Borrower and Guarantor shall be liable to Lender, without
limitation, for Lender's harm, loss (including lost interest and principal on
the Loan), damage, costs and expenses (including Lender's reasonable attorneys'
fees and court and collection costs) arising out of or in connection with any of
the following circumstances:
any misapplication or misappropriation of any insurance or
condemnation proceeds;
revenues collected after an Event of Default or Incipient Default
and not properly applied to the Loan or normal operating expenses of
the Premises;
any waste respecting all or any part of the Property or any other
collateral;
real estate taxes, personal property taxes or Impositions, if any,
and insurance premiums with respect to the Property (except to the
extent resulting from the failure by Lender to disburse any deposits
received from Borrower with respect to such real estate or personal
property taxes in accordance with the provisions of Section 4.1(B));
fraud in connection with the Loan or any Loan Document;
any material breach of any representation or warranty made in
connection with the Loan (expressly excluding any representations or
warranties made by the Ground Lessor) known by Borrower or Guarantor
to have been false when made, or deemed made specifically including
any material misrepresentation or inaccuracy contained in any
financial statement or other document provided to Lender pursuant to
Section 4.1.K of this Agreement known by Borrower or Guarantor to
have been false or inaccurate when provided;
any destruction of the Property or any part thereof in or from an
uninsured or underinsured casualty for which Borrower was required
to obtain insurance under this Agreement;
any breach of any of the terms and provisions of Section 2.10
(Environmental Matters) of the Mortgage; or
any lien arising from the failure of the Borrower to pay or perform
any obligation with respect to taxes or employee benefits which lien
is superior in priority to the lien created by the Mortgage and the
Security Agreement upon the property encumbered thereby.
In the event of any filing by Borrower of any voluntary petition
under the Bankruptcy Code, or the taking by Borrower of any comparable action
under any federal or state law; or the filing of any involuntary petition under
the Bankruptcy Code against Borrower or the taking of comparable action under
any federal or state law against Borrower by any Affiliate of any of them, the
Loan shall become fully recourse against Borrower.
Nothing contained in this Section 8.19 shall be construed to release
Borrower or any Loan Party from liability under (i) the indemnifications
contained in Section 2.10 (Environmental Matters) of the Mortgage, (ii) the
Limited Guaranty, or (iii) the Environmental Indemnity.
8.20 WRITTEN AGREEMENT.
(a) THE RIGHTS AND OBLIGATIONS OF BORROWER AND LENDER SHALL BE
DETERMINED SOLELY FROM THIS WRITTEN LOAN AGREEMENT AND THE
OTHER LOAN DOCUMENTS, AND ANY PRIOR ORAL OR WRITTEN AGREEMENTS
BETWEEN LENDER AND BORROWER CONCERNING THE SUBJECT MATTER
HEREOF AND OF THE OTHER LOAN DOCUMENTS ARE SUPERSEDED BY AND
MERGED INTO THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(b) THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY NOT BE
VARIED BY ANY ORAL AGREEMENTS OR DISCUSSIONS THAT OCCUR
BEFORE, CONTEMPORANEOUSLY WITH, OR SUBSEQUENT TO THE EXECUTION
OF THIS LOAN AGREEMENT OR THE LOAN DOCUMENTS.
(c) THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.21 Intentionally Omitted.
8.22 Intentionally Omitted.
8.23 Intentionally Omitted.
8.24 WAIVER OF JURY TRIAL. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT
MATTER OF THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY LENDER AND BORROWER, AND LENDER AND BORROWER ACKNOWLEDGE
THAT NO PERSON ACTING ON BEHALF OF ANOTHER PARTY TO THIS AGREEMENT HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. LENDER AND BORROWER FURTHER ACKNOWLEDGE THAT THEY
HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE
SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY
TO DISCUSS THIS WAIVER WITH COUNSEL.
8.25 Consent to Jurisdiction. The parties hereto submit to personal
jurisdiction in the State of Ohio for the enforcement of the provisions of this
Agreement and the other Loan Documents and irrevocably waive any and all rights
to object to such jurisdiction for the purposes of litigation to enforce any
provision of this Agreement and the other Loan Documents. Lender and Borrower
hereby consent to the jurisdiction of and agree that any action, suit or
proceeding to enforce this Agreement may be brought in any state or federal
court in the State of Ohio. Lender and Borrower hereby irrevocably waive any
objection which they may have to the laying of the venue of any such action,
suit, or proceeding in any such court and hereby further irrevocably waive any
claim that any such action, suit or proceeding brought in such a court has been
brought in an inconvenient forum. Borrower and Lender hereby consent that
service of process in any action, suit or proceeding may be made by service upon
the Borrower's agent for service of process (in the case of service to be made
upon Borrower), by personal service upon the party being served, or by delivery
in accordance with the notice requirements of Section 8.8 of this Agreement.
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
executed by their duly authorized representatives as of the day, month and year
first above written.
BORROWER:
ISLAND MOTEL ENTERPRISES, INC.,
a Georgia corporation
By: /s/ Toni Jones
--------------
Name: Toni Jones
Title: Vice President
PENMOCO, INC.,
a Michigan corporation
By: /s/ Toni Jones
--------------
Name: Toni Jones
Title: Vice President
LENDER:
BANC ONE CAPITAL FUNDING
CORPORATION, an Ohio corporation
By: /s/ Ronald L. Callentine
------------------------
Name: Ronald L. Callentine
Title: Vice President
EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B-1
ADDITIONAL NOTE
EXHIBIT B-2
PRIMARY NOTE
EXHIBIT C
PERMITTED ENCUMBRANCES
EXHIBIT D
INSURANCE REQUIREMENTS
(i) Insurance against loss to the Property on an "All Risk" policy form,
covering insurance risks no less broad than those covered under a Standard Multi
Peril (SMP) policy form, which contains a 1987 Commercial 150 "Causes of Loss
Special Format and such other risks as Lender may reasonably require, including
risk of hurricane, insurance covering the cost of demolition of undamaged
portions of any portion of the Property when required by code or ordinance and
the increased cost of reconstruction to conform with current code or ordinance
requirements, in amounts equal to the full replacement cost of the Property
(other than the Land), including fixtures and equipment, Borrower's interest in
leasehold improvements, and the cost of debris removal, with 1008 co-insurance
with an agreed amount endorsement and deductibles of not more than $10,000.00;
(ii) Business interruption/extra expense insurance in amounts sufficient
to pay during any period in which the Property may be damaged or destroyed, on a
gross income basis for a period of twelve (12) months (i) all business income
derived from the Property and (ii) all amounts (including all impositions,
utility charges and insurance premiums) required to be paid by Borrower;
(iii) During the performance of the Renovation Work and the making of any
other alterations or improvements to the Property insurance covering claims
based on the owner's or employer's contingent liability not covered by the
insurance provided in subsection (f) below.
(iv) Insurance against loss or damage by flood or mud slide in compliance
with the Flood Disaster Protection Act of 1973, as amended from time to time, if
the Property or any portion thereof is now, or at any time while the Loan
remains outstanding shall be, situated in any area which an appropriate
Governmental Authority designates as a special flood hazard area, Zone A or Zone
V, in amounts equal to the full replacement value of all above grade structures
on the Property;
(v) Insurance against loss or damage by earthquake, if the Premises are
now, or at any time while the Loan remains outstanding shall be, situated in any
area which is classified as a Major Damage Zone, Zones 3 and 4, by the
International Conference of Building Officials in an amount equal to the
probable maximum loss for the Premises, fixtures and equipment, plus the cost of
debris removal;
(vi) Commercial general public liability insurance, with the location of
the Property designated thereon, against death, bodily injury and property
damage arising in connection with the Property with Borrower listed as the named
insured with such limits as Lender may reasonably require, but in no event less
than $1,000,000, and written on a 1986 Standard ISO occurrence basis form or
equivalent form, and excess umbrella liability insurance with such limits as
Lender may reasonably require, but in no event less than $10,000,000; and
(vii) Such other insurance relating to the Property and the use and
operation thereof, as Lender may, from time to time, reasonably require,
including dramshop, products liability and workers' compensation insurance.
All insurance shall: (i) be carried by companies qualified to do business
in the State with a Best's rating of A-6 or better; (ii) be in form and content
reasonably acceptable to Lender; (iii) provide thirty (30) days' advance written
notice to Lender before any cancellation, material modification or notice of
non-renewal.
All physical damage policies and renewals shall contain a standard
mortgagee clause naming Lender as mortgagee, which clause shall expressly state
that any breach of any condition or warranty by Borrower shall not prejudice the
rights of Lender under such insurance, and a loss payable clause in favor of
Lender for personal property, contents, inventory, equipment and business
interruption. All liability policies and renewals shall name Lender as an
additional insured with respect to policies in which Lender has an interest. No
additional parties shall appear in the mortgage or loss payable clause without
Lender's prior written consent. All deductibles shall be in amounts reasonably
acceptable to Lender. In the event of the foreclosure of the Mortgage or any
other transfer of title to the Property in full or partial satisfaction of the
Loan, all right, title and interest of Borrower in and to all insurance policies
and renewals thereof then in force shall pass to the purchaser or grantee.
During any period during which construction is conducted on the Premises
and during which period the construction and materials are not covered by the
existing policies, Borrower shall cause to be provided to Lender, premium
prepaid insurance policies covering the Property (which during construction
shall be on an "All-Risk" perils, including theft, "Builder's Risk", "Completed
Value" form) in companies and forms satisfactory to Lender, and in amounts equal
to the replacement costs of the Improvements (including construction materials
and personal property on or off site) covering insurance risks no less broad
than those covered under a Standard Multi Peril (SMP) policy form, which
contains a 1987 Commercial ISO "Causes of Loss Special Form", with coverage for
such other expenses as Lender may reasonably require, including: debris removal;
cost of demolition of the undamaged portion of a building when required by code
or ordinance; increased cost of reconstruction to conform with current code or
ordinance requirements; real estate property taxes; architect, engineering, and
consulting fees; legal and accounting fees, including the cost of in-house
attorneys and paralegals; advertising and promotional expenses; interest on
money borrowed; additional commissions incurred upon renegotiating leases and
any and all other expenses which may be incurred as a result of any property
loss or destruction by an insured peril. Such insurance shall contain an agreed
amount endorsement (such amount to include foundation and underground pipes) and
bear a 100% co-insurance clause. The deductible shall be not more than $10,000.
Said policies shall contain a standard mortgagee clause naming Lender as
mortgagee, and a permission to occupy endorsement.
In addition, Borrower shall cause to be furnished to Lender certificates
from the insurance carrier for each general contractor evidencing workers'
compensation, employers' liability, commercial auto liability, and commercial
general liability insurance (including contractual liability and completed
operations coverage) written on a 1986 standard "ISO" occurrence basis form or
equivalent and excess umbrella coverage, carried during the course of
construction, with general liability insurance limits as Lender may reasonably
require, but in no event less than $1,000,000. Lender shall be named as an
additional insured under such liability policies. Borrower shall cause each
subcontractor to maintain commercial general liability, commercial automobile
liability, workers' compensation, employers' liability, and excess umbrella
liability coverage in form and amount reasonably satisfactory to Lender.
The additional insurance provisions for construction periods do not
obviate or otherwise affect requirements of the Loan Agreement or the previous
portions of this Exhibit, which requirements remain a part of this Agreement in
their entirety.
EXHIBIT E
RENOVATION WORK