UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR (15)d OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2003
_____________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period ________________ to ________________
Commission file number 001-13957
_________
WESTCOAST HOSPITALITY CORPORATION
_______________________________________________________________________
(Exact name of registrant as specified in its charter)
Washington
_______________________________________________________________________
(State or other jurisdiction of incorporation or organization)
91-1032187
_______________________________________________________________________
(I.R.S. Employer Identification No.)
201 W. North River Drive, Suite 100, Spokane, Washington 99201
_______________________________________________________________________
(Address of principal executive offices) (Zip Code)
(509) 459-6100
_______________________________________________________________________
(Registrant's telephone number, including area code)
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No
______ ______
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No |X|
______ ______
As of August 8, 2003 there were 13,004,657 shares of the Registrant's common
stock outstanding.
1
WESTCOAST HOSPITALITY CORPORATION
Form 10-Q
For the Quarter Ended June 30, 2003
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements: (unaudited)
Consolidated Balance Sheets
June 30, 2003 and December 31, 2002 3
Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 2003 and 2002 4
Consolidated Statements of Cash Flows
Six months Ended June 30, 2003 and 2002 5-6
Condensed Notes to Consolidated Financial Statements 7-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings (a)
Item 2. Changes in Securities and Use of Proceeds (a)
Item 3. Defaults Upon Senior Securities (a)
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other Information (a)
Item 6. Exhibits and Reports on Form 8-K 26
Signatures 27
(a) Item is omitted as it is not applicable for the period covered by this
report.
2
PART I -FINANCIAL INFORMATION
Item 1. Financial Statements
WestCoast Hospitality Corporation
Consolidated Balance Sheets (unaudited)
June 30, 2003 and December 31, 2002
($ in thousands, except share data)
June 30, December 31,
2003 2002
Assets:
Current assets:
Cash and cash equivalents $ 3,518 $ 752
Restricted cash 3,310 1,949
Accounts receivable, net 10,701 9,559
Inventories 1,919 2,040
Assets held for sale 21,705 34,408
Prepaid expenses and other 4,758 2,693
------------------ ------------------
Total current assets 45,911 51,401
------------------ ------------------
Property and equipment, net 250,008 241,255
Goodwill 28,042 28,042
Other intangible assets, net 14,804 15,188
Other assets, net 19,916 20,824
------------------ ------------------
Total assets $ 358,681 $ 356,710
================== ==================
Liabilities:
Current liabilities:
Accounts payable $ 7,865 $ 6,773
Accrued payroll and related benefits 4,788 6,173
Accrued interest payable 640 695
Advanced deposits 408 198
Other accrued expenses 10,515 8,494
Notes payable to bank - 52,100
Long-term debt, due within one year 5,804 4,889
Capital lease obligations, due within one year 84 268
------------------ ------------------
Total current liabilities 30,104 79,590
------------------ ------------------
Long-term debt, due after one year 153,708 101,206
Deferred revenue 2,483 2,626
Deferred income taxes 16,961 16,261
Minority interest in partnerships 2,780 2,911
------------------ ------------------
Total liabilities 206,036 202,594
------------------ ------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock - 5,000,000 shares authorized; $0.01 par value;
$50 per share liquidation value:
Series A - 298,569 and 301,315 shares issued and outstanding 3 3
Series B - 298,569 and 301,315 shares issued and outstanding 3 3
Additional paid-in capital, preferred stock 29,851 30,125
Common stock - 50,000,000 shares authorized; $0.01 par value;
12,994,163 and 12,981,878 shares issued and outstanding 130 130
Additional paid-in capital, common stock 84,142 84,083
Retained earnings 38,516 39,772
------------------ ------------------
Total stockholders' equity 152,645 154,116
------------------ ------------------
Total liabilities and stockholders' equity $ 358,681 $ 356,710
================== ==================
The accompanying notes are an integral part of the consolidated financial statements.
3
WestCoast Hospitality Corporation
Consolidated Statements of Operations (unaudited)
For the Three Months and Six Months Ended June 30, 2003 and 2002
(in thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
Revenues:
Hotels and restaurants $ 43,346 $ 46,736 $ 77,442 $ 83,941
Franchise, central services and development 888 1,183 1,978 1,934
Entertainment 1,384 1,493 3,985 3,472
Real estate 2,363 2,139 4,665 4,611
Corporate services 87 72 174 134
--------------- -------------- --------------- --------------
Total revenues 48,068 51,623 88,244 94,092
--------------- -------------- --------------- --------------
Operating expenses:
Hotels and restaurants 35,124 37,174 67,755 71,694
Franchise, central services and development 413 568 892 1,019
Entertainment 1,291 1,467 3,481 2,911
Real estate 1,216 1,030 2,434 2,242
Corporate services 83 53 160 101
Depreciation and amortization 3,157 2,659 5,764 5,376
(Gain) loss on asset dispositions including recoveries 364 (83) 696 (3,097)
Conversion expenses 79 6 367 7
--------------- -------------- --------------- -------------
Total direct expenses 41,727 42,874 81,549 80,253
Undistributed corporate expenses 587 332 1,327 905
--------------- -------------- --------------- -------------
Total expenses 42,314 43,206 82,876 81,158
--------------- -------------- --------------- -------------
Operating income 5,754 8,417 5,368 12,934
Other income (expense):
Interest expense, net of amounts capitalized (2,713) (2,655) (5,355) (5,522)
Interest income 103 116 207 158
Other income (expense) (312) 9 (293) 4
Equity income (loss) in investments 21 16 80 (12)
Minority interest in partnerships 18 (61) 131 (66)
--------------- -------------- --------------- -------------
Income before income taxes 2,871 5,842 138 7,496
Income tax expense 1,078 2,062 113 2,646
--------------- -------------- --------------- -------------
Net income 1,793 3,780 25 4,850
Preferred stock dividend (640) (645) (1,281) (1,291)
--------------- -------------- --------------- -------------
Net income (loss) to common stockholders $ 1,153 $ 3,135 $ (1,256) $ 3,559
=============== ============== =============== =============
Net earnings (loss) per share:
Basic $ 0.09 $ 0.24 $ (0.10) $ 0.27
Diluted $ 0.09 $ 0.24 $ (0.10) $ 0.27
Weighted average shares outstanding - basic 12,994 12,970 12,993 12,970
=============== ============== =============== =============
Weighted average shares outstanding - diluted 13,280 13,315 12,993 13,319
=============== ============== =============== =============
The accompanying notes are an integral part of the consolidated financial statements.
4
WestCoast Hospitality Corporation
Consolidated Statements of Cash Flows (unaudited)
For the Six Months Ended June 30, 2003 and 2002
($ in thousands)
Six Months Ended June 30,
2003 2002
Operating activities:
Net income $ 25 $ 4,850
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,764 5,376
(Gain) loss on disposition of property, equipment
and other assets 696 (3,097)
Non-cash reduction of preferred stock resulting in gain (230) -
Write-off of deferred loan fees 790 -
Deferred income tax provision 700 200
Minority interest in partnerships (131) 66
Equity in investments (80) 12
Compensation expense related to stock issuance 5 7
Provision for doubtful accounts 189 111
Change in current assets and liabilities:
Restricted cash (1,361) (594)
Accounts receivable (1,209) (1,112)
Inventories 121 (81)
Prepaid expenses and other (2,070) (1,676)
Accounts payable 1,068 3,972
Accrued payroll and related benefits (1,385) 875
Accrued interest payable (55) (36)
Other accrued expenses and advance deposits 1,596 1,495
-------------- --------------
Net cash provided by operating activities 4,433 10,368
-------------- --------------
Investing activities:
Purchases of property and equipment (4,117) (2,468)
Proceeds from disposition of property and equipment 17 1,828
Proceeds from disposition of investment 350 -
Other, net 69 142
-------------- --------------
Net cash used in investing activities (3,681) (498)
-------------- --------------
The accompanying notes are an integral part of the consolidated financial statements.
5
WestCoast Hospitality Corporation
Consolidated Statements of Cash Flows (unaudited), continued
For the Six Months Ended June 30, 2003 and 2002
($ in thousands)
Six Months Ended June 30,
2003 2002
Financing activities:
Proceeds from note payable to bank 35,300 -
Repayment of note payable to bank (87,400) (7,650)
Proceeds from long-term debt 55,200 -
Proceeds from short-term debt 2,658 -
Repayment of long-term debt (1,783) (1,563)
Proceeds from issuance of common stock under employee
stock purchase plan 54 49
Preferred stock dividend payments (646) (645)
Principal payments on capital lease obligations (184) (187)
Additions to deferred financing costs (1,185) (19)
-------------- --------------
Net cash provided by (used in) financing activities 2,014 (10,015)
-------------- --------------
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents 2,766 (145)
Cash and cash equivalents at beginning of period 752 4,613
-------------- --------------
Cash and cash equivalents at end of period $ 3,518 $ 4,468
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 5,410 $ 5,558
Income taxes $ 93 $ 801
Non-cash investing and financing activities:
Preferred stock dividends accrued $ 1,281 $ 1,291
Sale-operating leaseback of equipment $ 2,658 $ -
Non-cash reduction of working capital for
preferred stock $ 44 $ -
Reclassification of assets held for sale to property
and equipment $ 12,978 $ -
Addition of note receivable on sale of building $ - $ 2,607
Investment in real estate venture $ - $ 1,194
Assignment of debt to purchaser of building $ - $ 7,198
The accompanying notes are an integral part of the consolidated financial statements.
6
WestCoast Hospitality Corporation
Condensed Notes to Consolidated Financial Statements
1. NATURE OF BUSINESS AND ORGANIZATION
WestCoast Hospitality Corporation ("the Company" or "WestCoast") is primarily
engaged in the ownership, management, development, and franchising of mid-scale,
full service hotels. As of June 30, 2003, the system contained 73 properties in
12 states and one Canandian province, totaling over 12,700 rooms and over
583,700 square feet of meeting space. At June 30, 2003, the Company owned an
interest in and operated 28 hotels, leased 14 hotels, managed six hotels owned
by others and franchised 25 hotels owned and operated by third parties. The
Company's hotel brands include WestCoast(R) and RedLion(R).
The Company is also engaged in activities related or supplementary to the
operation of hotels. These activities include computerized ticketing services
and presenting entertainment productions through its entertainment division and
owning, leasing, developing and managing commercial and residential properties
through its real estate services division.
The Company was incorporated in the State of Washington on April 25, 1978. A
substantial portion of the Company's assets are held in WestCoast Hospitality
Limited Partnership ("WHLP"). WHLP was formed in the State of Delaware on
October 23, 1997. The Company is the sole general partner and approximately 98%
owner of WHLP and manages its operations.
The consolidated financial statements include the accounts of WestCoast
Hospitality Corporation, its wholly owned subsidiaries, its general and limited
partnership interests in WHLP, a 50% interest in a limited partnership and its
equity basis investment in other limited partnerships. All significant
inter-company transactions and accounts have been eliminated in the consolidated
financial statements.
2. BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by WestCoast pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as permitted by
such rules and regulations. The balance sheet as of December 31, 2002 has been
compiled from the audited balance sheet as of such date. The Company believes
that the disclosures included herein are adequate; however, these consolidated
statements should be read in conjunction with the financial statements and the
notes thereto for the year ended December 31, 2002 previously filed with the SEC
on Form 10-K.
In the opinion of management, these unaudited consolidated financial statements
contain all of the adjustments of a normal and recurring nature necessary to
present fairly the consolidated financial position of the Company at June 30,
2003 and the consolidated results of operations and cash flows for the periods
ended June 30, 2003 and 2002. The results of operations for the periods
presented may not be indicative of those which may be expected for a full year.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements, the reported amounts of
revenues and expenses during the reporting period and the disclosures of
contingent liabilities. Accordingly, ultimate results could differ materially
from those estimates.
7
3. DEBT REFINANCE
On June 27, 2003, the Company completed the refinance of its revolving credit
facility by securing term debt of $55.2 million from a finance company under ten
separate promissory notes. The notes are collateralized by certain hotel
properties. The notes bear interest at 6.7% and utilize a 25-year amortization
period, but are due in full on July 11, 2013. In connection with securing this
term debt, the Company incurred loan fees and other costs totaling $1.1 million
which have been capitalized and will be amortized using the effective interest
method over the ten year period of the underlying promissory notes. Proceeds of
$1.7 million have been set aside in reserve accounts for taxes, insurance,
repairs and other reserves.
A portion of the proceeds from the new borrowings were used to pay down the
$51.5 million outstanding balance on the Company's primary revolving credit
facility. The credit facility agreement was then amended effective June 27,
2003, reducing the maximum borrowing amount to $4.0 million. The credit facility
is collateralized by certain property and equipment and interest is computed
based upon either the bank's prime rate or certain LIBOR rates at the Company's
option. At June 30, 2003, the Company had no outstanding balance under the
credit facility. The agreement contains certain restrictions and covenants, the
most restrictive of which require the Company to maintain a minimum fixed charge
ratio and a maximum debt to equity ratio. At June 30, 2003, the Company was in
compliance with all covenants under the agreement. The amended credit facility
does not require any principal payments until its maturity date of June 30,
2005. As a result, any possible future borrowings in 2003 would be reflected as
a long-term liability.
As of the date of the amendment to the credit facility, the balance of
unamortized deferred finance costs associated with the existing revolving credit
facility was $848 thousand. The amendment resulted in a 92% reduction of
borrowing capacity under the revolving credit facility. As such, in June 2003
the Company recorded a proportionate write-off of the existing deferred loan
costs of $790 thousand.
4. SALE AND SUBSEQUENT LEASEBACK OF EQUIPMENT
In June 2003, WestCoast completed the sale to a finance company of certain
capitalized software and equipment previously included in construction
in-process. The proceeds of approximately $2.7 million were used to repay the
outstanding balance on an interim note payable to the finance company in the
same amount. Certain other costs directly related to the software and equipment
were paid for directly by the finance company, totaling $451 thousand. WestCoast
then entered into an operating lease agreement with the finance company which
expires in June 2005 and requires monthly payments of approximately $52
thousand. At the option of WestCoast, the lease term is renewable for three
one-year terms. No gain or loss was recorded on this sale-leaseback transaction.
5. BUSINESS SEGMENTS
The Company has four operating segments: (1) hotels and restaurants; (2)
franchise, central services and development; (3) entertainment; and (4) real
estate. In addition, corporate services consists primarily of miscellaneous
revenues and expenses, cash and cash equivalents, certain receivables and
certain property and equipment, which are not specifically associated with an
operating segment. Management reviews and evaluates the operating segments
exclusive of interest expense, income tax expense, and other income (expense)
items. Therefore, these items are not allocated to the segments.
8
Selected information with respect to the segments is as follows
($ in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
Revenues:
Hotels and restaurants $ 43,346 $ 46,736 $ 77,442 $ 83,941
Franchise, central services and development 888 1,183 1,978 1,934
Entertainment 1,384 1,493 3,985 3,472
Real estate 2,363 2,139 4,665 4,611
Corporate services 87 72 174 134
-------------- --------------- ------------- ------------
$ 48,068 $ 51,623 $ 88,244 $ 94,092
============== =============== ============= ============
Operating income (loss):
Hotels and restaurants $ 4,960 $ 7,386 $ 3,539 $ 7,899
Franchise, central services and development 399 534 935 742
Entertainment 10 (54) 345 405
Real estate 1,195 1,016 2,327 2,119
Corporate services (810) (465) (1,778) 1,769
-------------- --------------- ------------- ------------
$ 5,754 $ 8,417 $ 5,368 $ 12,934
============== =============== ============= ============
6. EARNINGS (LOSS) PER SHARE
The following table presents a reconciliation of the numerators and denominators
used in the basic and diluted earnings per share computations ($ in thousands,
except per share amounts):
Three Months Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
Numerator:
Net income $ 1,793 $ 3,780 $ 25 $ 4,850
Preferred stock dividend (640) (645) (1,281) (1,291)
-------------- --------------- ------------- ------------
Net income (loss) to common stockholders - basic 1,153 3,135 (1,256) 3,559
Effect of dilutive OP units (a) 7 31 - 56
-------------- --------------- ------------- ------------
Net income (loss) to common stockholders - diluted $ 1,160 $ 3,166 $(1,256) $ 3,615
============== =============== ============= ============
Denominator:
Weighted average shares outstanding - basic 12,994 12,970 12,993 12,970
Effect of dilutive OP units 286 286 - 286
Effect of dilutive common stock options and
convertible notes (a) - 59 - 63
-------------- --------------- ------------- ------------
Weighted average shares outstanding - diluted 13,280 13,315 12,993 13,319
============== =============== ============= ============
Net earnings (loss) per share - basic and diluted $ 0.09 $ 0.24 $ (0.10) $ 0.27
============== =============== ============= ============
(a) At June 30, 2003, 827,604 stock options were outstanding. The effects of the shares which would be issuable upon exercise of
these options have been excluded from the calculation of diluted earnings per share for the three month and six month periods
ending June 30, 2003 because they are anti-dilutive. At June 30, 2002, 1,232,341 stock options were outstanding, of which
872,568 were excluded from the calculation of diluted earnings per share for the three month and six month periods ending
June 30, 2002 because they are anti-dilutive. The operating partnership ("OP") units are excluded from the weighted-average
share calculation for the six month period ending June 30, 2003 because they are anti-dilutive. Convertible notes are
excluded from the weighted-average share calculation for all periods presented as they are anti-dilutive.
9
7. DISPOSITION OF INVESMENT
Effective April 2003, the Company sold its ownership investment in a hotel
venture to an unrelated party for $350 thousand. In addition, the Company
assigned its interest in the management agreement to the same party in exchange
for a structured payment arrangement totaling approximately $141 thousand with
payments through January 2004. The carrying value of the Company's investment at
the date of sale was $934 thousand, resulting in a loss on the transaction of
$443 thousand, which is included as a loss on asset dispositions in the
accompanying statement of operations.
8. ASSETS HELD FOR SALE
At June 30, 2003, assets held for sale consists of two office buildings with a
net carrying value of $21.7 million. One additional property was held for sale
at December 31, 2002, making the balance $34.4 million at that date.
As previously disclosed, the Company had entered into a purchase and sale
agreement with a potential buyer for the WestCoast Kalispell Center Hotel and
Mall. The Company and the buyer subsequently terminated this agreement, at which
time the Company determined that it was no longer in its best interest to
continue to market the property for sale. As a result of this decision, the net
book value of the related assets of approximately $13.0 million has been
reclassified from assets held for sale to property and equipment. A depreciation
adjustment of $520 thousand was recorded in June 2003, reflecting non-cash
expenses that would have been recognized had the assets been classified as held
and used since July 2002.
Depreciation of the other two assets remains suspended. Management is committed
to the sale of the assets and is actively marketing the properties. Both of the
properties are available for sale in their present condition at prices
management believes reasonable compared to their respective estimated fair
values. Management believes it is unlikely that significant changes to its plans
for sale of these properties will be made.
9. STOCK BASED COMPENSATION
In June 2003, the Company granted 60,468 options to purchase its common stock to
certain employees at an exercise price of $5.98 under the Company's 1998 stock
incentive plan. The market value of the Company's common stock on the date of
grant was $4.41 per share. The options vest 50% in June 2007 and 50% in June
2008, subject to accelerated vesting in the event of certain target market
prices for the Company's common stock are reached. The options expire in June
2013.
In July 2002, the Company offered eligible common stock option holders the
opportunity to exchange certain common stock options for new common stock
options. The new common stock options offered were to be issued at the fair
market value of the stock on or after the first business day that is six months
and one day after the date the original options were cancelled in the exchange.
On July 31, 2002, 571,661 options were cancelled pursuant to the terms of the
offer. The Company granted 261,251 new options in February 2003. The terms of
the transaction are disclosed in a Schedule TO and amendments thereto filed in
July and August 2002.
As permitted by Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" ("SFAS No. 123"), the Company has chosen to
measure compensation cost for stock-based employee compensation plans using the
intrinsic value method of accounting prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and to provide the
disclosure only requirements of SFAS No. 123. On December 31, 2002, the
Financial Accounting Standards Board ("FASB") amended the transition and
disclosure requirements of SFAS No. 123 through the issuance of Statement of
Financial Accounting Standards No. 148 "Accounting for Stock-Based Compensation
- - Transition and Disclosure" ("SFAS No. 148"). SFAS No. 148 amends the existing
disclosures to make more frequent and prominent disclosure of stock-based
compensation expense beginning with financial statements for fiscal periods
ending after December 15, 2002.
10
The Company has chosen not to record compensation expense using fair value
measurement provisions in the statement of operations. Had compensation cost for
plan been determined based on the fair value at the grant dates for awards under
the plans, reported net income or loss and earnings (loss) per share would have
been changed to the pro forma amounts indicated below
($ in thousands, except per share amounts):
Three Months Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
Reported net income (loss) applicable to common stockholders $ 1,153 $ 3,135 $ (1,256) $ 3,559
Add back: stock based employee compensation
expense, net of related tax effects - - 3 10
Deduct: Total stock-based employee compensation
expense determined under fair valued based
method for all awards, net of related tax effects (128) - (465) (202)
------------- ------------- ------------- ------------
Pro forma net income (loss) applicable to common stockholders $ 1,025 $ 3,135 $ (1,718) $ 3,367
============= ============= ============= ============
Basic and diluted net earnings (loss) per share:
Reported net earnings (loss) per share $ 0.09 $ 0.24 $ (0.10) $ 0.27
Stock-based employee compensation, fair value (0.01) - (0.03) (0.02)
------------- ------------- ------------- ------------
Pro forma basic and diluted net earnings (loss) per share $ 0.08 $ 0.24 $ (0.13) $ 0.25
============= ============= ============= ============
10. PREFERRED STOCK
In June 2003, the Company entered into a termination agreement with one of its
franchised properties. As consideration for the early termination of the
franchise agreement totaling $274 thousand, the Company received 2,746 shares
each of its own Series A and Series B preferred stock with a stated value of $50
per share. A termination gain of $230 thousand was recorded by the Company and
is included in revenues for franchise, central services, and development.
The Company is no longer restricted from the payment of dividends. On July 3,
2003, the Company paid a dividend to the shareholders of record as of June 30,
2003 of its Series A and Series B preferred stock totaling approximately $1.3
million, which represented all current dividends and dividends that were
previously accrued under the preferred stock agreement.
11
11. RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements" ("FIN No. 46"). FIN No. 46 clarifies
the application of Accounting Research Bulletin No. 51 to certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN No. 46 is effective for WestCoast starting July 1, 2003 and
is not expected to have a material effect on the Company's consolidated
financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities
under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 149 is effective for all contracts created or modified
after June 30, 2003 except for hedging relationships designated after June 30,
2003. In addition, except as stated below, all provisions of SFAS No. 149 should
be applied prospectively. The provisions of SFAS No. 149 that relate to SFAS No.
133 Implementation Issues that have been effective for fiscal quarters that
began prior to June 15, 2003, should continue to be applied in accordance with
their respective effective dates. In addition, paragraphs 7(a) and 23(a), which
relate to forward purchases or sales of when-issued securities or other
securities that do not yet exist, should be applied to both existing contracts
and new contracts entered into after June 30, 2003. The Company does not believe
that the adoption of this standard will have a material effect on the Company's
consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS No.
150"). SFAS No. 150 establishes standards on the classification and measurement
of certain financial instruments with characteristics of both liabilities and
equity. The provisions of SFAS No. 150 are effective for financial instruments
entered into or modified after May 31, 2003 and to all other instruments that
exist as of the beginning of the first interim financial reporting period
beginning after June 15, 2003. The Company does not believe that the adoption of
SFAS No. 150 will have a material impact on the Company's consolidated financial
statements.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Safe Harbor for Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934. The Company
is including the following cautionary statement to make applicable, and to take
advantage of, the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for any forward-looking statements made by, or on behalf of,
the Company. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, projections of future events or performance, and
underlying assumptions (many of which are based, in turn, upon further
assumptions). Forward-looking statements are all statements other than
statements of historical fact, including without limitation those that are
identified by the use of words such as, but not limited to, "will,"
"anticipates," "seeks to," "estimates," "expects," "intends," "plans,"
"predicts," and similar expressions, but the absence of these words does not
mean a statement is not forward-looking. From time to time, the Company may
publish or otherwise make available forward-looking statements of this nature.
All such subsequent forward-looking statements, whether written or oral and
whether made by or on behalf of the Company, are also expressly qualified by
these cautionary statements.
Such statements are inherently subject to a variety of risks and uncertainties
that could cause actual results to differ materially from those expressed. Such
risks and uncertainties include, among others:
o magnitude and duration of international conflicts, economic cycles, including
fluctuations in regional economic conditions and seasonality of lodging industry
o actual and threatened terrorist attacks and international conflicts, and their
impacts on travel
o changes in future demand and supply for hotel rooms
o competitive conditions in the lodging industry
o relationships with franchisees and properties
o changes in energy, healthcare, insurance and other operating expenses
o impact of government regulations
o ability to obtain financing through debt and/or equity issuance
o ability to sell non-core assets held for sale and the related effect of
potential depreciation recapture
o ability to locate lessees for rental property and managing and leasing
properties owned by third parties
o dependency upon the ability and experience of executive officers and ability
to retain or replace such officers
The Company's expectations, beliefs and projections are expressed in good faith
and are believed by the Company to have a reasonable basis, including without
limitation management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that the Company's expectations, beliefs or
projections will be achieved or accomplished. Furthermore, any forward-looking
statement speaks only as of the date on which such statement is made, and the
Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances that occur after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for management to
predict all of such factors, nor can it assess the impact of each such factor on
the Company's business or the extent to which any such factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statement.
13
GENERAL
_______
The following discussion and analysis addresses the results of operations for
the Company for the three month and six month periods ended June 30, 2003. The
following should be read in conjunction with the unaudited Consolidated
Financial Statements and the Notes thereto. In addition to historical
information, the following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
significantly from those anticipated in these forward-looking statements as a
result of certain factors, including those discussed above in "Safe Harbor for
Forward Looking Statements".
The Company's revenues are derived primarily from hotels and restaurants and
reflect revenue from rooms, food and beverage, third party management and other
sources, including telephone, guest services, banquet room rentals, gift shops
and other amenities. Hotel and restaurants revenue accounted for 90.2% of total
revenues in the three months ended June 30, 2003 and decreased 7.3% to $43.3
million in 2003 from $46.7 million in 2002. The balance of the Company's
revenues is derived from its franchise, central services and development,
entertainment, real estate, and corporate services segments. These revenues are
generated from franchise fees, ticket distribution handling fees, internet
services, real estate management fees, sales commissions, development fees and
rents. Franchise, central services and development accounted for 1.8% of the
Company's revenue for the three months ended June 30, 2003. Entertainment
accounted for 2.9% and real estate division accounted for 4.9% of total revenues
for the same period.
As is typical in the hospitality industry, revenue per available room
("RevPAR"), average daily rate ("ADR") and occupancy levels are important
performance measures. The Company's operating strategy is focused on enhancing
revenue and operating margins by increasing RevPAR, ADR, occupancy and operating
efficiencies of the hotels. These performance measures are impacted by a variety
of factors including national, regional and local economic conditions, degree of
competition with other hotels in their respective market areas and, in the case
of occupancy levels, changes in travel patterns.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
__________________________________________
A critical accounting policy is one which is both important to the portrayal of
the Company's financial condition and results of operations and requires
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. All of the Company's significant accounting policies are described in
Note 2 to the 2002 consolidated financial statements included in the Form 10-K.
The more critical accounting policies and estimates used relate to:
Revenue is generally recognized as services are performed. Hotel and restaurant
revenues primarily represent room rental and food and beverage sales from owned,
leased and other consolidated hotels and are recognized at the time of the hotel
stay or sale of the restaurant services. Hotel and restaurant revenues also
include management fees the Company earns from managing third party owned
hotels. Franchise, central services and development fees represent fees received
in connection with the franchise of the Company's brand name as well as central
purchasing, development and other fees. Franchise fees are recognized as earned
in accordance with the contractual terms of the franchise agreements. Other fees
are recognized when the services are provided and collection is reasonably
assured.
Real estate division revenue represents leasing income on owned commercial and
retail properties as well as property management income, development fees and
leasing and sales commissions from residential and commercial properties managed
by the Company, typically under long-term contracts with the property owner.
Lease revenues are recognized over the period of the leases. The Company records
rental income from operating leases which contain fixed escalation clauses on
the straight-line method. The difference between income earned and lease
payments received from the tenants is included in other assets on the
consolidated balance sheets. Rental income from retail leases which is
contingent upon the lessees' revenues is recorded as income in the period
earned. Management fees and leasing and sales commissions are recognized as
these services are performed.
14
Entertainment derives revenue primarily from computerized event ticketing
services and promotion of Broadway shows and other special events. Where the
Company acts as an agent and receives a net fee or commission, it is recognized
as revenue in the period the services are performed. When the Company is the
promoter of an event and is at risk for the production, revenues and expenses
are recorded in the period of the event performance.
Property and equipment are stated at cost less accumulated depreciation. The
Company also has investments in partnerships that own and operate hotel
properties. The assessment of long-lived assets for possible impairment requires
the Company to make judgments, regarding real estate values, estimated future
cash flow from the respective properties and other matters. The Company reviews
the recoverability of its long-lived assets when events or circumstances
indicate that the carrying amount of an asset may not be recoverable.
The Company accounts for assets held for sale in accordance with Statement of
Financial Accounting Standards No. 144 ("SFAS No. 144"). The Company's assets
held for sale are recorded at the lower of their historical carrying value (cost
less accumulated depreciation) or market value. Depreciation is terminated when
the asset is determined to be held for sale. If the assets are ultimately not
sold within the guidelines of SFAS No. 144, depreciation would be recaptured for
the period they were classified on the balance sheet as held for sale.
The Company's intangible assets include brands and goodwill. The Company
accounts for its brands and goodwill in accordance with Statement of Financial
Accounting Standards No. 142 ("SFAS No. 142"). The Company expects to receive
future benefits from previously acquired brands and goodwill over an indefinite
period of time and therefore, effective January 1, 2002, no longer amortizes its
brands and goodwill in accordance with SFAS No. 142. The annual impairment
review requires the Company to make certain judgments, including estimates of
future cash flow with respect to brands and estimates of the Company's fair
value and its components with respect to goodwill and other intangible assets.
The Company's other intangible assets include management, marketing and lease
contracts. The value of these contracts is amortized on a straight-line basis
over the weighted average life of the agreements. The assessment of these
contracts requires the Company to make certain judgments, including estimated
future cash flow from the applicable properties.
The Company reviews the ability to collect individual accounts receivable on a
routine basis. The Company records an allowance for doubtful accounts based on
specifically identified amounts that it believes to be uncollectible and amounts
that are past due beyond a certain date. The receivable is written off against
the allowance for doubtful accounts if collection attempts fail. The Company's
estimate for its allowance for doubtful accounts is impacted by, among other
things, national and regional economic conditions, including the magnitude and
duration of the economic downturn of the United States.
Effective January 1, 2002, the Company established the WestCoast Central Program
Fund ("CPF"), organized in accordance with various franchise agreements. The CPF
is responsible for certain advertising services, frequent guest program
administration, reservation services, national sales promotions and brand and
revenue management services intended to increase sales and enhance the
reputation of the Company and its franchise owners including the WestCoast and
Red Lion branded properties. Contributions by the Company to the CPF for owned
and managed hotels and contributions by the franchisees, through the individual
franchise agreements, total up to 5% of room revenue or can be based on
reservation fees, frequent guest program dues and other services. While the
Company administers the functions of the CPF, the net assets and transactions of
the CPF are not commingled with the working capital of the Company. The net
assets and transactions of the CPF are, therefore, not included in the
accompanying consolidated financial statements in accordance with FASB No. 45,
"Accounting for Franchise Fee Revenue".
15
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ materially from those
estimates.
(The remainder of this page is left intentionally blank)
16
OPERATING RESULTS AND STATISTICS
________________________________
The following table sets forth selected items from the consolidated statements
of operations as a percent of total revenues and certain other selected data:
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Revenues:
Hotels and restaurants 90.2 % 90.6 % 87.8 % 89.2 %
Franchise, central services and development 1.8 2.3 2.2 2.1
Entertainment 2.9 2.9 4.5 3.7
Real estate 4.9 4.1 5.3 4.9
Corporate services 0.2 0.1 0.2 0.1
---------- ----------- ---------- ----------
Total revenues 100.0 % 100.0 % 100.0 % 100.0 %
========== =========== ========== ==========
Direct expenses 86.8 % 83.1 % 92.4 % 85.3 %
Undistributed corporate expenses 1.2 0.6 1.5 1.0
Operating income 12.0 16.4 6.1 13.8
Interest expense 5.6 5.0 6.1 5.9
Income tax expense 2.2 4.1 0.1 2.8
Net income 3.7 % 7.3 % 0.0 % 5.2 %
Hotel Statistics: (1)
Hotels open at end of period 73 90 73 90
Available rooms 12,760 15,855 12,760 15,855
RevPAR (2) (5) $ 41.83 $ 44.05 $ 37.28 $ 39.38
ADR (3) $ 71.14 $ 73.17 $ 69.24 $ 72.57
Average Occupancy (4) (5) 58.8 % 60.2 % 53.8 % 54.3 %
EBITDA ($ in thousands)(6) $ 9,275 $ 10,993 $ 11,828 $ 15,213
(1) "Hotels open at end of period" and "Available rooms" represents statistics for actual hotels owned, managed or franchised at
June 30, 2003 and 2002. However, RevPAR, ADR, and average occupancy statistics are calculated using statistics for
comparable hotels (owned, managed or franchised for greater than one year by Westcoast Hospitality Corporation).
(2) Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms, net of rooms
out of service due to significant renovations.
(3) Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests.
(4) Average occupancy represents total paid rooms occupied divided by total available rooms. Total available rooms represents the
number of rooms available multiplied by the number of days in the reported period.
(5) Rooms under renovation were excluded from RevPAR and average occupancy percentage. Due to the short duration of renovation,
in the opinion of management, excluding these rooms did not have a material impact on RevPAR and average occupancy.
(6) EBITDA represents income before income taxes, interest expense, interest income, depreciation, amortization, gain/loss on asset
dispositions, equity in investments, minority interest, and other income/expenses. EBITDA is not intended to represent cash
flow from operations as defined by generally accepted accounting principles and such information should not be considered as an
alternative to net income, cash flow from operations or any other measure of performance prescribed by generally accepted
accounting principles. While not all companies calculate EBITDA in the same fashion and therefore EBITDA as presented may not
be comparable to similarly titled measures of other companies, EBITDA is included herein because management believes that
certain investors find it to be a useful tool for measuring the Company's ability to service debt and invest in property and
equipment. EBITDA is not necessarily available for management's discretionary use due to restrictions included in the Company's
various borrowing agreements and other considerations. For additional details refer to the EBITDA reconciliation to cash flow
from operations.
17
The following is a reconciliation of EBITDA to its comparable measurement in
accordance with generally accepted accounting principles for each of the periods
presented ($ in thousands):
Three Months ended June 30, Six Months ended June 30,
2003 2002 2003 2002
EBITDA $ 9,275 $ 10,993 $ 11,828 $ 15,213
Income tax provision (1,078) (2,062) (113) (2,646)
Deferred income tax provision 350 100 700 200
Interest expense (2,713) (2,655) (5,355) (5,522)
Interest and other income, net (209) 125 (86) 162
Other non-cash operating activities 632 95 754 118
Change in working capital accounts (3,399) (2,009) (3,295) 2,843
--------------- ---------------- -------------- ---------------
Net cash provided by operating activities $ 2,858 $ 4,587 $ 4,433 $ 10,368
=============== ================ ============== ===============
RESULTS OF OPERATIONS
_____________________
Comparison of the Three Months Ended June 30, 2003 to the Three Months Ended
June 30, 2002
Revenues
Hotel and restaurant revenue for the three months ended June 30, 2003 was lower
than the prior year comparative period by $3.4 million or 7.3%. This is
primarily due to decreases in room revenue of $1.8 million, food revenue of $1.0
million and beverage revenue of $300 thousand. ADR at owned and leased hotels
for the second quarter of 2003 was $70.35, lower than the prior year comparitive
period by $0.43. Average occupancy for the three months ended June 30, 2003 for
owned and leased hotels was 58.4% versus 61.7% for the same period in 2002. The
resulting RevPAR finished $2.54 below prior year for owned and leased. These
results are indicative of the national trends of a decline in business travel
and excursion travel between comparative periods resulting in part from the
perception of a weak national economy, personal spending cut-backs, and certain
national security threats. It is also indicative of a higher percentage of
internet channel reservations which generally result in a lower room rate for
the Company. Also, management fee revenue for the three months ended June 30,
2003 is down $300 thousand from the comparative prior period. This decrease is
the result of both a decline in the number of hotels managed during the
comparative periods, from 11 down to six, and a general decline in the room
revenues for the managed properties, on which management fees are primarily
based.
Franchise, central services and development revenue for the three months ended
June 30, 2003 of $888 thousand was lower than the prior year comparative period
by $295 thousand or 24.9%. This is primarily due to the lost franchise revenue
from 14 franchise hotels that left the system in 2003, partially offset by
revenues from three new franchises that entered the system in 2003. It also is
the result of lower room revenues at the franchise hotels, on which most
franchise fees are based, partially offset by a $230 thousand gain related to
the termination of a franchise agreement during the period.
Entertainment revenue for the three months ended June 30, 2003 of $1.4 million
was lower than the prior year comparative period by $109 thousand or 7.3%.
During April 2002 two Broadway presentations took place, whereas no such
presentations took place in April 2003. This drop for the second quarter of 2003
was partially offset by increased ticket demand for TicketsWest Eastern
Washington and Colorado.
Real estate division revenue for the three months ended June 30, 2003 of $2.4
million increased from the prior year comparative period by $224 thousand or
10.5%. This is primarily due to rental income from new tenants at owned real
estate properties and commissions received on the sales and leasing of certain
real estate space on behalf of third parties.
18
Direct Expenses
Direct expenses decreased $1.1 million, or 2.7%, to $41.7 million in the second
quarter of 2003 from $42.9 million in 2002. The decline is principally due to
savings on labor resulting from the adjustments of our scalable workforce in
both the hotels and restaurants division and the entertainmnet division. This
includes utilization of part-time employees and reducing reliance on overtime
hours worked by non-exempt full time employees. The Company is also seeing the
realization from purposeful cost cutting measures enacted early in the year.
These gains were offset by commission expense incurred by the real estate
division, recapture of non-cash depreciation on the WestCoast Kalispell Hotel
and Mall described below, and a loss on the disposition of the Company's
ownership interest in a hotel property of $443 thousand.
Undistributed Corporate Expenses
Total undistributed corporate expenses for the three months ended June 30, 2003
increased $255 thousand to $587 thousand from $332 thousand for the same period
in 2002. This change is due to higher employee benefit costs and increases in
both insurance and professional services expenses experienced in 2003.
Interest Expense
Interest expense for the second quarter of 2003 increased 2.2% compared to the
same period in 2002 due to a slightly higher average balance outstanding on the
Company's primary revolving credit facility between periods, and the existence
of the note payable to a finance company related to the sale-operating leaseback
transaction which did not exist in 2002, partially offset by generally lower
rates on other variable rate borrowings.
Income Taxes
Income tax expense for the three months ended June 30, 2003 of $1.1 million is
lower than the comparative period in 2002 by $984 thousand due to a lower
taxable income based upon the results of operations.
Other Income (Expense)
Other income (expense) for the quarter decreased from 2002 by $321 thousand. The
balance for the second quarter of 2002 was de minimis. For the second quarter of
2003 the balance is comprised of a $790 thousand loan fee write-off, no longer
considered extraordinary under generally accepted accounting principles, offset
by a contract termination fee of $350 thousand and other net gains of $128
thousand.
Net Income
Net income for the three months ended June 30, 2003 compared to the same period
in 2002 is down $2.0 million or 52.6% due primarily to a $1.3 million drop in
direct operating profit for hotels and restaurants, and $700 thousand of other
changes related to depreciation, termination fees, loan fee write-offs and other
costs based on the reasons previously discussed.
Earnings Per Share
Earnings per share, after the effect of preferred stock dividends, decreased
$0.15 to earnings per share of $0.09 for the second quarter of 2003 from $0.24
per share for the same quarter of 2002. This is the result of the lower
operating results based on the reasons previously discussed.
19
Comparison of the Six Months Ended June 30, 2003 to the Six Months Ended June
30, 2002
Revenues
Hotel and restaurant revenues for the six months ended June 30, 2003 are down
compared to the prior year by $6.5 million or 7.7%. The decrease is primarily
due to declines of about $4.0 million in room revenue, $1.5 million in food
revenue and $300 thousand in beverage revenue. ADR at owned and leased hotels
for the first six months of 2003 was $67.88, lower than the comparative period
in the prior year by $2.31. Average occupancy for the six months ended June 30,
2003 at owned and leased hotels was 52.6% versus 54.9% for the same period in
2002. The resulting RevPAR finished $2.87 below the prior year for owned and
leased hotels. These trends are indicative of the decline in business travel and
excursion travel between comparative periods resulting from the perception of a
weak national economy, personal spending cut-backs, and certain national
security threats. It is also indicative of a higher percentage of internet
channel reservations which generally result in a lower room rate for the
Company. Additionally, in the first quarter of 2002, the Company's hotel in Salt
Lake City was positively impacted by the Winter Olympics. The lack of similar
activity during the first quarter of 2003 contributed to $1.3 million of the
decrease in revenues. Also, management fee revenue for the six months ended June
30, 2003 is down $400 thousand from the comparative prior period. This drop is
the result of both a decline in the number of hotels managed during the
comparative periods, from 11 down to six, and a general decline in the room
revenues for the managed properties, on which our management fees are primarily
based. Franchise, central services and development revenue for the six months
ended June 30, 2003 of $2.0 million decreased from the prior year comparative
period by $44 thousand or 2.3%. This is primarily due to the lost franchise
revenue from 14 franchise hotels that left the system in 2003, partially offset
by revenues from three new franchises that entered the system in 2003. It also
is the result of lower room revenues at the franchise hotels, on which most
franchise fees are based, partially offset by a $230 thousand gain related to
the termination of a franchise agreement during the period and project
development commissions during the first quarter.
Entertainment revenue for the six months ended June 30, 2003 increased from the
prior year comparative period by $513 thousand, or 14.8%. These increases are
due to increased ticket demand for TicketsWest Eastern Washington and Colorado,
especially during the ski lift ticket season in January and February.
Real estate revenue for the six months ended June 30, 2003 increased from the
prior year comparative period by $54 thousand or 1.2%. This is primarily due to
rental income from new tenants at owned real estate properties and commissions
received on the sales and leasing of certain real estate space on behalf of
third parties. These increases are offset by reduced lease revenue because of
the sale of an office building which closed in March 2002.
Direct Expenses
Direct expenses increased $1.3 million or 1.6% to $81.5 million in the first six
months of 2003 from $80.3 million in 2002. Direct expenses for the first quarter
of 2002 include a gain of $3.0 million on the sale of an office building.
Without the effect of that gain in 2002, direct expenses are down $1.7 million
for the first six months of 2003 including $443 thousand of loss on the
disposition of the Company's ownership interest in a hotel property, and $520
thousand of depreciation related to the WestCoast Kalispell Hotel and Mall
described below. The drop is principally due to savings on labor resulting from
the adjustments of our scalable workforce in both the hotels and restaurants
division and the entertainment division. This includes utilization of part-time
employees and reducing reliance on overtime hours worked by non-exempt full time
employees. The Company is also seeing the realization from purposeful cost
cutting measures early in the year. These gains were offset by certain
commissions paid from the real estate division and the completion of the
transition of its Red Lion brand into the system by rebranding 22 of its owned,
leased and managed hotels to Red Lion hotels, for which the Company incurred
$367 thousand for various conversion activities and for the costs of new branded
amenities.
20
Undistributed Corporate Expenses
Undistributed corporate expenses for the six months ended June 30, 2003
increased about $422 thousand to approximately $1.3 million from approximately
$900 thousand for the same period in 2002. This change is due to higher employee
benefit costs and increases in both insurance and professional services expenses
experienced in 2003.
Interest Expense
Interest expense for the first six months of 2003 decreased 3.0% compared to the
same period in 2002 due to generally lower rates on variable rate borrowings,
offset by the existence of the note payable to a finance company related to the
sale-operating leaseback transaction which did not exist in 2002 and a slightly
higher average balance outstanding on the Company's primary revolving credit
facility between periods.
Income Taxes
Income tax expense for the six months ended June 30, 2003 of $113 thousand is
lower than the comparative period in 2002 by $2.6 million due to a lower taxable
income based upon the results of operations.
Other Income (Expense)
Other income (expense) for the year to date period decreased from 2002 by $297
thousand. The balance for the first six months of 2002 was de minimis. For year
to date of 2003 the balance is comprised of a $790 thousand loan fee write-off,
no longer considered extraordinary under generally accepted accounting
principles, offset by a contract termination fee of $350 thousand and other net
gains of $147 thousand.
Net Income
Net income for the six months ended June 30, 2003 compared to the same period in
2002 is down $4.8 million due primarily to a $2.6 million decline in direct
operating profit for hotels and restaurants, $3.8 million due to the change in
asset dispositions between periods, and $1.5 million of other changes related to
depreciation, termination fees, loan fee write-offs, taxes and other costs based
on the reasons previously discussed.
Earnings (Loss) Per Share
Earnings per share, after the effect of preferred stock dividends, decreased
$0.37 to a loss per share of $0.10 for the six months ended June 30, 2003
compared to $0.27 earnings per share for the same period of 2002. This is the
result of the lower operating results based on the reasons previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
_______________________________
Overview
Net cash provided by operating activities totaled approximately $4.4 million for
the six months ended June 30, 2003 compared to $10.4 million for the same period
in 2002. The decrease in 2003 compared to 2002 was primarily the result of
working capital variances.
Net cash used in investing activities was $3.7 million for the first six months
of 2003 compared to $498 thousand of net cash used in investing activities
during the same period in 2002. Additions to property and equipment totaled $4.1
million in 2003 compared to $2.5 million in 2002. Capital additions included an
investment in signage related to rebranding and various other projects in the
operating divisions. It also included additions to the certain software and
equipment which was sold and then leased back as described below. The other
major variances between the two periods was the $1.8 million of proceeds from
asset dispositions received in the first quarter of 2002 compared to $350
thousand received in connection with the disposition of the Company's ownership
interest in a hotel property.
Net cash provided by financing activities totaled $2.0 million in 2003 which
generally relates to the short-term borrowing for the payment of the certain
software and equipment, the effects of the refinancing of the line of credit and
the payment of preferred stock dividends. Net cash used in financing activities
totaled $10.0 million in the first six months of 2002 which consists primarily
of revolving debt repayments.
21
At June 30, 2003, the Company had $6.8 million in cash and cash equivalents
including $3.3 million of cash restricted under certain borrowing arrangements.
The Company believes that its operating cash flow, revolving line-of-credit, and
proceeds from the sale of its non-core assets will be sufficient to meet its
liquidity needs. However, projections of working capital sources and future
financial needs are subject to uncertainty. Refer to "Safe Harbor" for
additional information of conditions that could affect future financial needs
and sources of working capital.
Financing
On June 27, 2003, the Company completed the refinance of its revolving credit
facility by securing term debt of $55.2 million from a finance company under ten
separate promissory notes. The notes are collateralized by certain hotel
properties. The notes bear interest at 6.7% and utilize a 25-year amortization
period, but are due in full on July 11, 2013. In connection with securing this
term debt, the Company incurred loan fees and other costs totaling $1.1 million
which have been capitalized and will be amortized using the effective interest
method over the ten year period of the underlying promissory notes. Proceeds of
$1.7 million have been set aside in reserve accounts for taxes, insurance,
repairs and other reserves.
A portion of the proceeds from the new borrowings were used to pay down the
approximate $51.5 million outstanding balance on the Company's primary revolving
credit facility. The credit facility agreement was then amended effective June
27, 2003, reducing the maximum borrowing amount to $4.0 million. The credit
facility is collateralized by certain property and equipment and interest is
computed based upon either the bank's prime rate or certain LIBOR rates at the
Company's option. At June 30, 2003, the Company had no outstanding balance under
the credit facility. The agreement contains certain restrictions and covenants,
the most restrictive of which require the Company to maintain a minimum fixed
charge ratio and a maximum debt to equity ratio. At June 30, 2003, the Company
was in compliance with all covenants under the agreement. The amended credit
facility does not require any principal payments until its maturity date of June
30, 2005. As such, any possible future borrowings in 2003 would be reflected as
a long-term liability.
In June 2003, WestCoast completed the sale to a finance company of certain
capitalized software and equipment previously included in construction
in-process. The proceeds of approximately $2.7 million were used to repay the
outstanding balance on the interim note payable to the finance company in the
same amount. Certain other costs directly related to the software and equipment
were paid for directly by the finance company, totaling $451 thousand. WestCoast
then entered into an operating lease agreement with the finance company which
expires in June 2005 requiring monthly payments of approximately $52 thousand.
At the option of WestCoast, the lease term is renewable for three one-year
terms.
In addition to the indebtedness noted above, the Company has debt and capital
lease obligations of approximately $104.4 million as of June 30, 2003 primarily
consisting of fixed rate and variable rate debt secured by individual
properties.
Having completed the refinance of its credit facility, management believes that
an adequate borrowing base exists to sustain the operations of the Company. The
Company is also pursuing the sale of certain non-core real estate assets
included in assets held for sale discussed below. Management has implemented
certain operational efficiencies and cost reduction plans that are expected to
improve operating performance. These actions are intended to reduce the
Company's dependence on its credit facility.
22
Assets Held for Sale
The Company continues to seek opportunities to divest its interest in its
non-core assets. At June 30, 2003, assets held for sale consists of two office
buildings with a net carrying value of $21.7 million. Depreciation of these two
assets remains suspended. Management is committed to the sale of the assets and
is actively marketing the properties. Both of the properties are available for
sale in their present condition at prices management believes reasonable
compared to their respective fair values. Management believes it is unlikely
that significant changes to its plans for sale of these properties will be made.
There can be no assurance that the Company will be able to successfully sell
these properties.
One additional property was held for sale at December 31, 2002. As previously
disclosed, the Company had entered into a purchase and sale agreement with a
potential buyer for the WestCoast Kalispell Center Hotel and Mall. The Company
and the buyer subsequently terminated this agreement, at which time the Company
determined that it was no longer in its best interest to continue to market the
property for sale. As a result of this decision, the net book value of the
related assets of approximately $13.0 million has been reclassified from assets
held for sale to property and equipment. A depreciation adjustment of $520
thousand was recorded in June 2003, reflecting non-cash expenses that would have
been recognized had the assets been classified as held and used since July 2002.
Preferred Stock Dividends
The Company is no longer restricted from the payment of dividends. On July 3,
2003 the Company paid a dividend to the shareholders of record as of June 30,
2003 of its Series A and Series B preferred stock, totaling approximately $1.3
million, which represented all current dividends and dividends that were
previously acrrued under the preferred stock agreement.
SEASONALITY
___________
The Company's business is subject to seasonal fluctuations. Significant portions
of the Company's revenues and profits are realized from May through October. The
Company's results for any quarter may not be indicative of the results that may
be achieved for the full fiscal year.
INFLATION
_________
The effect of inflation, as measured by fluctuations in the Consumer Price
Index, has not had a material impact on the Company's revenues or net income
during the periods under review.
OTHER MATTERS
_____________
Recent Accounting Pronouncements
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements" ("FIN No. 46"). FIN No. 46 clarifies
the application of Accounting Research Bulletin No. 51 to certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN No. 46 is effective for WestCoast starting July 1, 2003 and
is not expected to have a material effect on the Company's consolidated
financial statements.
23
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities
under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 149 is effective for all contracts created or modified
after June 30, 2003 except for hedging relationships designated after June 30,
2003. In addition, except as stated below, all provisions of SFAS No. 149 should
be applied prospectively. The provisions of SFAS No. 149 that relate to SFAS No.
133 Implementation Issues that have been effective for fiscal quarters that
began prior to June 15, 2003, should continue to be applied in accordance with
their respective effective dates. In addition, paragraphs 7(a) and 23(a), which
relate to forward purchases or sales of when-issued securities or other
securities that do not yet exist, should be applied to both existing contracts
and new contracts entered into after June 30, 2003. The Company does not believe
that the adoption of this standard will have a material effect on the Company's
consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS No.
150"). SFAS No. 150 establishes standards on the classification and measurement
of certain financial instruments with characteristics of both liabilities and
equity. The provisions of SFAS No. 150 are effective for financial instruments
entered into or modified after May 31, 2003 and to all other instruments that
exist as of the beginning of the first interim financial reporting period
beginning after June 15, 2003. The Company does not believe that the adoption of
SFAS No. 150 will have a material impact on the Company's consolidated financial
statements.
(The remainder of this page is intentionally left blank)
24
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk has not changed significantly for the six months ended
June 30, 2003. See Item 7A of the Company's Form 10-K for the year ended
December 31, 2002.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
________________________________________________
An evaluation was performed under the supervision and with the participation of
the Company's management, including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the CEO and CFO, concluded that
the Company's disclosure controls and procedures were effective as of June 30,
2003.
Changes in Internal Controls
____________________________
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
June 30, 2003.
PART II - OTHER INFORMATION
(Items 1, 2, 3 and 5 of PART II are omitted as they are not applicable for the
period covered by this report.)
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders on May 16, 2003, the following actions
were taken with the noted results:
Total Outstanding Common Stock: 12,994,163 Shares
1. Election of Directors
Name Votes For Pct. Votes Withhold
_________________ _________ _____ ________________
Peter F. Stanton 12,094,420 93.1% 9,047
Stephen R. Blank 12,094,420 93.1% 9,047
2. Ratification of Auditors for the Year Ended December 31, 2003
Name Votes For Pct. Votes Against Votes Abstained
_________________ ___________ ______ ______________ _______________
BDO Seidman, LLP 12,099,126 93.1% 2,582 1,759
25
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Executive Employment Agreement dated April 13, 2003 between the
Registrant and Arthur Coffey.
10.2 Second Amended and Restated Credit Agreement, Dated as of June 27,
2003, Among WestCoast Hospitality Limited Partnership, U.S. Bank National
Association as Administrative Agent and the Other Financial Institutions
Party Thereto
10.3 Promissory Note dated effective as of June 27, 2003, in the original
principal amount of $5,100,000 issued by WHC807, LLC, a Delaware limited
liability company indirectly controlled by the Registrant ("WHC807"), to
Column Financial, Inc. ("Column") (the "WHC807 Promissory Note"). Nine
other Delaware limited liability companies indirectly controlled by the
Registrant (the "Other LLCs") simultaneously issued nine separate
Promissory Notes to Column in an aggregate original principal amount of
$50,100,000 and otherwise on terms and conditions substantially similar to
those of the WHC807 Promissory Note (these Promissory Notes and their
respective issuers and principal amounts are identified in Exhibit D to the
Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing filed as Exhibit 10.4).
10.4 Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing dated effective as of June 27, 2003, with WHC807 as grantor
and Column as beneficiary (the "WHC807 Deed of Trust"). Each of the Other
LLCs simultaneously executed a separate Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture Filing as grantor with Column as
beneficiary and otherwise on terms and conditions substantially similar to
those of the WHC807 Deed of Trust (these nine other documents and their
respective grantors and the respective parcels of real property encumbered
thereby are identified in Exhibit E to the WHC807 Deed of Trust).
10.5 Indemnity and Guaranty Agreement dated effective as of June 27, 2003,
between the Registrant and Column with respect to the WHC807 Promissory
Note and the WHC807 Deed of Trust. The Registrant and Column have entered
into nine separate Indemnity and Guaranty Agreements on substantially
similar terms and conditions with respect to the Other LLCs' Promissory
Notes and Deeds of Trust, Assignments of Leases and Rents, Security
Agreements and Fixture Filings referred to in Exhibits 10.3 and 10.4,
respectively.
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
26
(b) Reports on Form 8-K
April 8, 2003
Item 7: WestCoast Hospitality Corporation Names New CEO and CFO
May 8, 2003
Item 9: WestCoast Hospitality Corporation Announces First Quarter Financial
Results
June 30, 2003
Item 9: WestCoast Hospitality Corporation Announces Completion of $55.2
Million Mortgage Refinance
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacities stated and on the date indicated.
WESTCOAST HOSPITALITY CORPORATION
(Registrant)
Date: August 14, 2003
By: /s/ Peter P. Hausback
______________________________________________________
Peter P. Hausback
Vice President and Chief Financial Officer
Date: August 14, 2003
By: /s/ Anthony F. Dombrowik
______________________________________________________
Anthony F. Dombrowik
Corporate Controller and Principal Accounting Officer
27
Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT, is executed effective on April 3, 2003
("Effective Date") by and between WestCoast Hospitality Corporation, a
Washington corporation (the "Company"), and Arthur Coffey (the "Executive").
The Company desires to employ the Executive in the capacities of President,
Chief Executive Officer, and, for a temporary period of time, Chief Financial
Officer, and the Executive desires to be so employed, on the terms and subject
to the conditions set forth in this agreement (the "Agreement");
Now, therefore, in consideration of the mutual covenants set forth herein and
other good and valuable consideration the parties hereto hereby agree as
follows:
1. Employment; Term.
The Company employs the Executive, and the Executive agrees to be employed by
the Company, upon the terms and subject to the conditions set forth herein, for
a term commencing on the Effective Date and terminating on December 31, 2004
unless terminated earlier in accordance with Section 5 of this Agreement;
provided, that such term shall automatically be extended from time to time for
additional periods of one calendar year from the date on which it would
otherwise expire unless the Executive, on one hand, or the Company, on the
other, gives notice to the other party or parties not less than 120 days prior
to such date that it elects to permit the term of this Agreement to expire
without extension on such date. (The initial term of this Agreement as the same
may be extended in accordance with the terms of this Agreement is hereinafter
referred to as the "Term").
2. Positions; Conduct.
(a) During the Term, the Executive will hold the titles and offices of, and
serve in the positions of, President and/or Chief Executive Officer of the
Company. Until such time as a replacement is designated by the Board of
Directors as Chief Financial Officer, the Executive will continue to serve in
his former position as Chief Financial Officer of the Company. The Executive
shall report to the Board of Directors of the Company and shall perform such
specific duties and services (including service as an officer, director or
equivalent position of any direct or indirect subsidiary without additional
compensation) as the Board of Directors shall reasonably request consistent with
the Executive's positions.
(b) During the Term, the Executive agrees to devote his full business time and
attention to the business and affairs of the Company and to faithfully and
diligently perform, to the best of his ability, all of his duties and
responsibilities hereunder. Nothing in this Agreement shall preclude the
Executive from devoting reasonable time and attention to the following (the
"Exempted Activities"): (i) serving, with the approval of the Board of Directors
of the Company, as an officer, director, trustee or member of any organization,
(ii) engaging in charitable and community activities and (iii) managing his
personal investments and affairs. In no event shall the Exempted Activities
involve any material conflict of interest with the interests of the Company or,
individually or collectively, interfere materially with the performance by the
Executive of his duties and responsibilities under this Agreement. The Board of
Directors of the Company have approved as an Exempted Activity the Executive's
employment as a director and officer of Inland Northwest Corporation, previously
a wholly-owned subsidiary of the Company, for which the Company provides certain
management and administrative services.
(c) The Executive's office and place of rendering his services under this
Agreement shall be in the principal executive offices of the Company. During the
Term, the Company shall provide the Executive with executive office space, and
administrative and secretarial assistance and other support services consistent
with his positions and with his duties and responsibilities hereunder.
3. Board of Directors; Committees.
It is understood that the right to elect directors of the Company is by law
vested in the stockholders and directors of the Company, and it is mutually
contemplated that service on the Board of Directors or on any committee of the
Board of Directors is not a condition of this Agreement.
4. Salary; Additional Compensation; Perquisites and Benefits.
(a) During the Term, the Company and the Subsidiary will pay the Executive a
base salary at an annual rate of not less than $ 285,000 per annum, subject to
annual review by the Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee") and in the discretion of such Committee,
increased from time to time. Once increased, such base salary may not be
decreased. Such salary shall be paid in periodic installments in accordance with
the Company's standard practice, but not less frequently than semi-monthly.
(b) For each fiscal year during the Term, the Executive will be eligible to
receive a bonus on such terms as may from time to time be established by the
Compensation Committee.
(c) During the Term, the Executive will participate in all plans now existing or
hereafter adopted by the Company for the management employees or the general
benefit of the their employees, such as stock option or other incentive
compensation plans, life and health insurance plans, or other insurance plans
and benefits on the same basis and subject to the same qualifications as other
senior executive officers. To the extent permitted by law, the Executive shall
be given credit for his years of service to any predecessor entity of the
Company in determining all waiting periods and vesting periods under such plans.
(d) The Company will reimburse the Executive, in accordance with its standard
policies from time to time in effect, for all out-of-pocket business expenses as
may be incurred by the Executive in the performance of his duties under this
Agreement.
(e) The Executive shall be entitled to vacation time to be credited and taken in
accordance with the Company's policy from time to time in effect for senior
executives, which in any event shall not be less than a total of four weeks per
calendar year.
(f) The Company shall indemnify the Executive to the fullest extent permitted
under the law of the State of Washington.
5. Termination
(a) The Term will terminate upon the Executive's death or, upon notice by the
Company or the Executive to the other, in the case of a determination of the
Executive's Disability. As used herein the term "Disability" means the
Executive's inability to perform his duties and responsibilities under this
Agreement for a period of more than 120 consecutive days, or for more than 180
days, whether or not continuous, during any 365-day period, due to physical or
mental incapacity or impairment. A determination of Disability will be made by a
physician satisfactory to both the Executive and the Company; provided that if
they cannot agree as to a physician, then each shall select a physician and
these two together shall select a third physician whose determination of
Disability shall be binding on the Executive and the Company. Should the
Executive become incapacitated, his employment shall continue and all base and
other compensation due the Executive hereunder shall continue to be paid through
the date upon which the Executive's employment is terminated for Disability in
accordance with this section.
( b) The Term may be terminated by the Company upon notice to the Executive upon
the occurrence of any event constituting "Cause" as defined herein.
(c) The Term may be terminated by the Executive upon notice to the Company (i)
within six months of the occurrence of any event constituting "Good Reason" as
defined herein or (ii) within six months of a "Change of Control" as defined
herein.
6. Severance.
(a) If the Term is terminated by the Company for Cause, the Company will pay to
the Executive an aggregate amount equal to the Executive's accrued and unpaid
base salary through the date of such termination, additional salary payments in
lieu of the Executive's accrued and unused vacation time, unreimbursed business
expenses, unreimbursed medical, dental and other employee benefit expenses in
accordance with the applicable plans, and any and all other benefits provided
under the terms of applicable employee plans to terminated employees (the
"Standard Termination Payments").
(b) If the Term is terminated upon the Executive's death or Disability, the
Company and the Subsidiary will pay to the Executive's estate or the Executive,
as the case may be, the Standard Termination Payments and all death or
disability payments or other employee benefits under their employee benefit
plans.
(c) Subject to Section 6(d), if the Company terminates the Executive's
employment under this Agreement without Cause other than by reason of his death
or Disability or if the Executive terminates his employment hereunder for Good
Reason, the Company shall (i) pay the Executive the Standard Termination
Payments, (ii) pay the Executive a lump sum payment equal to the twice the
Executive's total compensation for the previous fiscal year (but not less than
twice $285,000) and (iii) continue in effect the Executive's benefits with
respect to life, health and insurance plans or their equivalent for two years.
(d) If, following a Change in Control: the Executive terminates his employment
hereunder within 6 months following such Change in Control; the Company shall
(i) pay the Executive the Standard Termination Payments, (ii) pay the Executive
a lump sum payment equal to twice the Executive's total cash compensation for
the previous fiscal year (but in no event less than twice $285,000) and (iii)
continue in effect the Executive's benefits with respect to life, health and
insurance plans or their equivalent for two years.
(e) If the initial Term is not extended pursuant to the proviso to Section 1 as
a result of the Company giving notice thereunder that it elects to permit the
term of this Agreement to expire without extension, the Company shall (i) pay
the Executive the Standard Termination Payments, (ii) pay the Executive a lump
sum payment equal to twice the Executive's total compensation for the previous
fiscal year (but not less than twice $285,000) and (iii) continue in effect the
Executive's benefits with respect to life, health and insurance plans or their
equivalent for two years.
(f) If the Company terminates the Executive's employment under this Agreement
without Cause other than by reason of his death or Disability, or if the initial
Term is not extended as a result of the Company giving notice that it elects to
permit the term of this Agreement to expire without extension, or if the
Executive terminates his employment hereunder pursuant to Section 5 (c.): all
stock options granted to the Executive shall immediately vest and be exercisable
and any stock grant to the Executive shall immediately vest and all Company
imposed restrictions on restricted stock issued to the Executive shall be
terminated.
(g) As used herein, the term "Cause" means: (i)the Executive's willful and
intentional failure or refusal to perform or observe any of his material duties,
responsibilities or obligations set forth in this Agreement, if such breach is
not cured within 30 days after notice thereof to the Executive by the Company,
which notice shall state that such conduct shall, without cure, constitute Cause
and makes specific reference to this Section 6(g); (ii) any willful and
intentional act of the Executive involving fraud, theft, embezzlement or
dishonesty affecting the Company; or (iii) the Executive's conviction of (or a
plea of nolo contendere to) an offense which is a felony in the jurisdiction
involved.
(h) As used herein, the term "Good Reason" means: (i.) assignment of the
Executive of duties materially inconsistent with the Executive's positions as
described in Section 2(a), provided, however, it shall not be Good Reason if the
Company appoints a replacement for the Executive as Chief Financial Officer or,
at the discretion of the Board, separates the positions of Chief Executive
Officer and President so long as Executive continues to hold the position and
duties of Chief Executive Officer).; (ii) the removal of the Executive from the
positions as described in Section 2(a), provided, however, it shall not be Good
Reason if the Company appoints a replacement for the Executive as Chief
Financial Officer or, at the discretion of the Board, separates the positions of
Chief Executive Officer and President so long as Executive continues to hold the
position and duties of Chief Executive Officer).; (iii) the change in the
location of the Company's principal executive offices to a location outside the
Spokane, Washington metropolitan area without the Executive's consent which may
be withheld at his sole discretion; or (iv) any material breach of this
Agreement by the Company which is continuing.
(i) As used herein, the term "Change in Control" means the occurrence of any one
of the following events: (i.) the majority of the Board of Directors of the
Company consists of individuals other than Incumbent Members, which shall mean
the members of such Boards on the Effective Date; provided that any person
becoming a director subsequent to the Effective Date whose election or
nomination for election was supported by the Executive or a majority of the
directors who then comprised the Incumbent Directors shall be considered an
Incumbent Director; (ii) the Company adopts a plan of liquidation providing for
the distribution of all or substantially all of the assets of the Company on a
consolidated basis; (iii) the Company ceases to act as the general partner of
WestCoast Hospitality Limited Partnership, provided, however, the foregoing
shall not apply if substantially all of the assets of the partnership are
transferred to and owned by the Company or its Affiliates. As used herein, an
Affiliate of a person or other entity means a person or other entity that
directly or indirectly controls, is controlled by or is under common control
with the person or other entity specified (including without limitation any
investment entity managed by the person or other entity specified or a person or
entity that directly or indirectly controls, is controlled by or under common
control with the person or other entity specified).
(j) The amounts required to be paid and the benefits required to be made
available to the Executive under this Section 6 are absolute. Under no
circumstances shall the Executive, upon the termination of his employment
hereunder, be required to seek alternative employment and, in the event that the
Executive does secure other employment, no compensation or other benefits
received in respect of such employment shall be set-off or in any other way
limit or reduce the obligations of the Company and the Subsidiary under this
Section 6.
7. Confidential Information.
(a) The Executive acknowledges that the Company and its subsidiaries or
affiliated ventures ("Company Affiliates") own and have developed and compile,
and will in the future own, develop and compile certain Confidential Information
and that during the course of his rendering services to the Company Confidential
Information has and will be disclosed to the Executive by the Company and its
Affiliates. The Executive hereby agrees that, during the Term (except as
required to conduct the business of the Company) and for a period of three years
thereafter, he will not use or disclose, furnish or make accessible to anyone,
directly or indirectly, any Confidential Information of the Company or its
Affiliates.
(b) As used herein, the term "Confidential Information" means any trade secrets,
confidential or proprietary information, or other knowledge, know-how,
information, documents or materials, owned, developed or possessed by a Company
Affiliate pertaining to its businesses the confidentiality of which such company
takes reasonable measures to protect, including, but not limited to, trade
secrets, techniques, know-how (including designs, plans, procedures, processes
and research records), software, computer programs, innovations, discoveries,
improvements, research, developments, test results, reports, specifications,
data, formats, marketing data and business plans and strategies, agreements and
other forms of documents, expansion plans, budgets, projections, and salary,
staffing and employment information. Notwithstanding the foregoing, Confidential
Information shall not in any event include information which (i) was generally
known or generally available to the public prior to its disclosure to the
Executive, (ii) becomes generally known or generally available to the public
subsequent to its disclosure to the Executive through no wrongful act of the
Executive, (iii) is or becomes available to the Executive from sources other
than the Company Affiliates which sources are not known to the Executive to be
under any duty of confidentiality with respect thereto or (iv) the Executive is
required to disclose by applicable law or regulation or by order of any court or
federal, state or local regulatory or administrative body (provided that the
Executive provides the Company with prior notice of the contemplated disclosure
and reasonably cooperates with the Company, at the Company's sole expense, in
seeking a protective order or other appropriate protection of such information).
8. Restrictive Covenants.
(a) The Executive agrees that during his employment hereunder and for a period
of twelve months thereafter the Executive will not, directly or indirectly,
engage or participate or make any financial investments in (other than ownership
of up to 5% of the aggregate of any class of securities of any corporation if
such securities are listed on a national stock exchange or under section 12(g)
of the Securities Exchange Act of 1934) or become employed by, or act as an
agent or principal of, or render advisory or other management services to or
for, any Competing Business in the Territory. As used herein the term "Competing
Business" means any business then conducted by the Company which produces over
10% of the Company's revenue and the term "Territory" means any state of the
United States or province of Canada or Mexico in which the Company conducts its
business. Notwithstanding the foregoing, nothing in this Agreement shall limit
or prohibit the Executive from engaging in the Exempted Activities.
(b) The Executive agrees that during his employment hereunder and for a period
of twenty-four months thereafter he will not solicit, raid, entice or induce any
person that then is or at any time during the twelve-month period prior to the
end of the Term was an employee of the Company or a Company Affiliate (other
than a person whose employment with such Company Affiliate has been terminated
by such Company Affiliate), to become employed by any person, firm or
corporation.
9. Specific Performance.
(a) The Executive acknowledges that the services to be rendered by him hereunder
are of a special, unique, extraordinary and personal character and that the
Company Affiliates would sustain irreparable harm in the event of a violation by
the Executive of Section 7 or 8 hereof. Therefore, in addition to any other
remedies available, the Company shall be entitled to specific enforcement and/or
an injunction from any court of competent jurisdiction restraining the Executive
from committing or continuing any such violation of this Agreement without
proving actual damages or posting a bond or other security. Nothing herein shall
be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach or threatened breach, including the recovery of
damages.
(b) If any of the restrictions on activities of the Executive contained in
Sections 7 or 8 shall for any reason be held by a court of competent
jurisdiction to be excessively broad as to duration, geographical scope or
activity of subject, such restrictions shall be construed so as thereafter to be
limited or reduced to be enforceable to the maximum extent compatible with the
applicable law as it shall then appear; it being understood that by the
execution of this Agreement the parties hereto regard such restrictions as
reasonable and compatible with their respective rights.
(c) Notwithstanding anything in this Agreement to the contrary, in the event
that the Company fails to make any payment of any amounts or provide any of the
benefits to the Executive when due as called for under Section 6 of this
Agreement and such failure shall continue for twenty (20) days after notice
thereof from the Executive, all restrictions on the activities of the Executive
under Sections 7 and 8 shall be immediately and permanently terminated.
10. Withholding.
The parties agree that all payments to be made to the Executive by the Company
pursuant to the Agreement shall be subject to all applicable withholding
obligations of such company.
11. Notices.
All notices required or permitted hereunder shall be in writing and shall be
deemed given and received when delivered personally, four days after being
mailed if sent by registered or certified mail, postage pre-paid, or by one day
after delivery if sent by air courier (for next-day delivery) with evidence of
receipt thereof or by facsimile with receipt confirmed by the addressee. Such
notices shall be addressed respectively:
If to the Executive, to:
Mr. Arthur Coffey
13312 South Valley Chapel Road
Valleyford, WA 99036
If to the Company, to:
WestCoast Hospitality Corporation
201 W. North River Drive
Spokane, WA 99201
Attn: Chairman of Board of Directors
With copy to:
WestCoast Hospitality Corporation
201 W. North River Drive
Spokane, WA 99201
Attn. Corporate Counsel
or to any other address of which such party may have given notice to the other
parties in the manner specified above.
12. Miscellaneous.
(a) This Agreement is a personal contract calling for the provision of unique
services by the Executive, and the Executive's rights and obligations hereunder
may not be sold, transferred, assigned, pledged or hypothecated by the
Executive. The rights and obligations of the Company hereunder will be binding
upon and run in favor of their respective successors and assigns.
(b) This Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Washington.
(c) Any controversy arising out of or relating to this Agreement or any breach
hereof shall be settled by arbitration in Spokane, Washington by a single
neutral arbitrator who shall be a retired federal or state court judge in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and judgment upon any award rendered may be entered in any court
having jurisdiction thereof, except in the event of a controversy relating to
any alleged violation by the Executive of Section 7 or 8 hereof, the Company and
the Subsidiary shall be entitled to seek injunctive relief from a court of
competent jurisdiction without the requirement to seek arbitration. In addition
to all other relief, the substantially prevailing party in any arbitration or
court action shall be entitled to their reasonable attorney fees and costs
incurred by reason of the controversy (including any appellate review and
bankruptcy or enforcement proceedings).
d) The headings of the various sections of this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
(e) The provisions of this Agreement which by their terms call for performance
subsequent to the expiration or termination of the Term shall survive such
expiration or termination.
(f) Upon the Effective Date, this Agreement supersedes any existing employment
agreements between the Employee and the Company and any of its Affiliates all of
which shall be terminated upon the Commencement Date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Effective Date first above written.
EXECUTIVE: COMPANY:
WESTCOAST HOSPITALITY CORPORATION
/s/ Arthur M. Coffey /s/ Donald K. Barbieri
_______________________ by ______________________________________
Arthur M. Coffey On behalf of the Board of Directors
Exhibit 10.2
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 27, 2003
among
WESTCOAST HOSPITALITY LIMITED PARTNERSHIP,
U.S. BANK NATIONAL ASSOCIATION
as Administrative Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS..................................................1
1.1 Certain Defined .............................................1
1.2 Other Interpretive Provisions...............................18
1.3 Accounting Principles.......................................19
1.5 Amendment and Restatement of Initial Credit Agreement.......20
1.6 Modification of Names.......................................20
ARTICLE II. THE LOANS...................................................20
2.1 Revolving Line of Credit....................................20
2.2 Manner of Borrowing.........................................21
2.3 Agent's Right to Fund.......................................21
2.4 Loan Accounts...............................................22
2.5 Mandatory Prepayments of Loans..............................22
(a) Asset Dispositions.................................22
(b) Event of Loss......................................22
(c) General............................................23
2.6 Repayment...................................................23
2.7 Interest....................................................23
2.8 Loan and Agency Fees........................................25
2.9 Commitment Fees.............................................25
2.10 Late Charge.................................................25
2.11 Computation of Interest and Fees............................25
2.12 Payments by the Borrower....................................26
2.13 Sharing of Payments, Etc....................................26
2.14 Security....................................................27
2.15 Borrowing Base..............................................27
2.16 No Prepayment Charges.......................................27
ARTICLE III. REFINANCINGS................................................27
3.1 Description of Refinancings.................................27
3.2 Conveyance of Property and Release of Collateral............28
3.3 No Modification of Refinancing Documents....................28
3.4 Loans and Contributions to the LLCs.........................28
3.5 No Further Loans; Guaranties................................28
3.6 Required Distributions......................................29
3.7 Waiver of Guaranties and Security Agreements................29
3.8 Limitation on Liens.........................................29
3.9 Contingent Obligations......................................29
3.10 Refinancing of Eligible Real Property.......................29
ARTICLE IV. TAXES, YIELD PROTECTION AND ILLEGALITY......................30
4.1 Taxes.......................................................30
4.2 Illegality..................................................31
4.3 Increased Costs and Reduction of Return.....................31
4.4 Inability to Determine Rates................................32
4.5 Certificates of Lenders.....................................32
4.6 Survival....................................................32
ARTICLE V. CONDITIONS PRECEDENT........................................33
5.1 Conditions of Initial Loans.................................33
(a) Credit Agreement and Note..........................33
(b) Resolutions; Incumbency............................33
(c) Organization Documents; Good Standing..............33
(d) Legal Opinions.....................................33
(e) Payment of Fees....................................34
(f) Collateral Documents...............................34
(g) Insurance Policies.................................35
(h) Certificate........................................35
(i) Compliance Certificate.............................35
(j) Real Property Refinancing..........................35
(k) Other Documents....................................35
(l) Payment of Indebtedness............................35
(m) Eligible Real Property.............................36
5.2 Conditions to Subsequent Loans..............................36
(a) Interest Rate Notice...............................36
(b) Notice of Borrowing; Reimbursement Agreement.......36
(c) Continuation of Representations and Warranties.....36
(d) No Existing Default................................36
(e) Satisfaction of Previous Conditions................36
(f) Further Assurances.................................36
5.3 Conditions to Become Eligible Real Property.................37
5.4 Existing Collateral Documents...............................39
ARTICLE VI. REPRESENTATIONS AND WARRANTIES..............................39
6.1 Existence and Power.........................................39
6.2 Authorization; No Contravention.............................39
6.3 Governmental Authorization..................................40
6.4 Binding Effect..............................................40
6.5 Litigation..................................................40
6.6 No Default..................................................41
6.7 ERISA Compliance............................................41
6.8 Use of Proceeds; Margin Regulations.........................41
6.9 Title to Properties.........................................42
6.10 Taxes.......................................................42
6.11 Financial Condition.........................................42
6.12 Environmental Matters.......................................43
6.13 Collateral Documents........................................43
6.14 Regulated Entities..........................................44
6.15 No Burdensome Restrictions..................................44
6.16 Copyrights, Patents, Trademarks and Licenses, Etc...........44
6.17 Subsidiaries................................................44
6.18 Insurance...................................................45
6.19 Solvency....................................................45
6.20 Full Disclosure.............................................45
ARTICLE VII. AFFIRMATIVE COVENANTS............................................45
7.1 Financial Statements........................................45
7.2 Certificates; Other Information.............................46
7.3 Notices.....................................................47
7.4 Preservation of Existence, Etc..............................48
7.5 Maintenance of Property.....................................49
7.6 Insurance...................................................49
7.7 Payment of Obligations......................................49
7.8 Compliance With Laws........................................50
7.9 Compliance With ERISA.......................................50
7.10 Inspection of Property and Books and Records................50
7.11 Environmental Laws..........................................50
7.12 Use of Proceeds.............................................51
7.13 Appraisals..................................................51
7.14 Further Assurances..........................................51
7.15 Minimum Number of Parcels...................................53
ARTICLE VIII. NEGATIVE COVENANTS.................................53
8.1 Limitation on Liens.........................................53
8.2 Disposition of Assets.......................................55
8.3 Consolidations and Mergers..................................56
8.4 Loans and Investments.......................................56
8.5 Limitation on Indebtedness..................................57
8.6 Transactions With Affiliates................................57
8.7 Use of Proceeds.............................................58
8.8 Contingent Obligations......................................58
8.9 Lease Obligations...........................................58
8.10 Restricted Payments.........................................59
8.11 ERISA.......................................................59
8.12 Change in Business..........................................60
8.13 Accounting Changes..........................................60
8.14 Financial Covenants.........................................60
(a) Recourse Funded Debt Ratio.........................60
(b) Fixed Charge Coverage Ratio........................60
8.15 Subordinated Debt...........................................60
ARTICLE IX. EVENTS OF DEFAULT...........................................60
9.1 Event of Default............................................60
(a) Nonpayment.........................................60
(b) Representation or Warranty.........................61
(c) Specific Defaults..................................61
(d) Other Defaults.....................................61
(e) Cross-Default......................................61
(f) Insolvency; Voluntary Proceedings..................62
(g) Involuntary Proceedings............................62
(h) ERISA..............................................62
(i) Monetary Judgments.................................62
(j) Nonmonetary Judgments..............................63
(k) Adverse Change.....................................63
(l) Invalidity of Subordination Provisions.............63
(m) Collateral.........................................63
9.2 Remedies....................................................63
9.3 Rights Not Exclusive........................................64
9.4 Certain Financial Covenant Defaults.........................64
ARTICLE X. THE AGENT...................................................64
10.1 Appointment and Authorization...............................64
10.2 Delegation of Duties........................................65
10.3 Liability of Agent..........................................65
10.4 Reliance by Agent...........................................65
10.5 Notice of Default...........................................66
10.6 Credit Decision.............................................66
10.7 Indemnification of Agent....................................67
10.8 Agent in Individual Capacity................................67
10.9 Successor Agent.............................................67
10.10 Withholding Tax.............................................68
10.11 Collateral Matters..........................................69
ARTICLE XI. MISCELLANEOUS...............................................70
11.1 Amendments and Waivers......................................70
11.2 Notices.....................................................71
11.3 No Waiver; Cumulative Remedies..............................71
11.4 Costs and Expenses..........................................71
11.5 Borrower Indemnification....................................72
11.6 Marshalling; Payments Set Aside.............................73
11.7 Successors and Assigns......................................73
11.8 Assignments, Participations, Etc............................73
11.9 Set-off.....................................................75
11.10 Automatic Debits of Fees....................................75
11.11 Notification of Addresses, Lending Offices, Etc.............75
11.12 Counterparts................................................76
11.13 Severability................................................76
11.14 No Third Parties Benefited..................................76
11.15 Conditions Not Fulfilled....................................76
11.16 Governing Law and Jurisdiction..............................76
11.17 Waiver of Jury Trial........................................77
11.18 Statutory Notice............................................77
11.19 Entire Agreement............................................77
SCHEDULES
Schedule 1.1 Eligible Real Property
Schedule 2.1 Commitments
Schedule 5.1(j) Real Property to be Refinanced
Schedule 6.5 Litigation
Schedule 6.7 ERISA
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.17 Subsidiaries and Minority Interests
Schedule 6.18 Insurance Matters
Schedule 7.14 Filing Jurisdictions
Schedule 8.1 Permitted Liens
Schedule 8.5 Permitted Indebtedness
Schedule 8.8 Contingent Obligations
Schedule 11.2 Lending Offices, Addresses for Notices
EXHIBITS
Exhibit A Form of Compliance Certificate
Exhibit B Form of Interest Rate Notice
Exhibit C Form of Note
Exhibit D Form of Legal Opinion of Borrower's Counsel
Exhibit E Form of Amendment to Deed of Trust
Exhibit F Form of Assignment and Acceptance
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of June 27,
2003, among WESTCOAST HOSPITALITY, LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Borrower"), the financial institutions from time to time party
to this Agreement (collectively, the "Lenders"; individually, a "Lender"), and
U.S. BANK NATIONAL ASSOCIATION, as administrative agent for the Lenders.
RECITALS
A. The Borrower and certain of the Lenders entered into that certain Credit
Agreement dated as of May 5, 1998 (together with all amendments and restatements
to such Credit Agreement heretofore entered into, including, without limitation,
that certain Amended and Restated Credit Agreement dated as of December 31,
1999, the "Initial Credit Agreement"), pursuant to which such lenders agreed to
make available to the Borrower a secured revolving loan facility upon the terms
and conditions set forth in the Initial Credit Agreement.
B. The Borrower has requested to decrease the amount of the commitment of the
secured revolving loan facility provided for in the Initial Credit Agreement and
to make certain other modifications to the provisions of the Initial Credit
Agreement. The purpose of this Agreement is to set forth the terms and
conditions upon which the Lenders have agreed to the Borrower's requests and to
restate the provisions of the Initial Credit Agreement in its entirety. NOW,
THEREFORE, in consideration of the mutual agreements, provisions and covenants
contained herein, the parties agree as follows:
ARTICLE I. DEFINITIONS
1.1 Certain Defined Terms
The following Terms have the following meanings:
"Acquisition" means any transaction or series of related transactions for the
purpose of or resulting, directly or indirectly, in (a) the acquisition of all
or substantially all of the assets of a Person, or of any business or division
of a Person, (b) the acquisition of in excess of 50% of the capital stock,
partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Subsidiary) provided that the Borrower or the Subsidiary is the
surviving entity, or (d) the acquisition of any parcel of real property,
tenant's interest in any real property lease or ground lease, or the acquisition
of any hotel, motel or hospitality property.
"Adjusted Net Income" means, for any applicable period, the aggregate of all
amounts which, in accordance with GAAP, would be included as net income (or net
loss (including any extraordinary losses other than extraordinary noncash
losses)) on a consolidated statement of income of WHC and its Subsidiaries for
such period; provided, however, that "Adjusted Net Income" shall exclude (a) the
effect of any extraordinary or other nonrecurring gain outside the ordinary
course of business, (b) any write-up in the value of any asset (to the extent
such write-up exceeds any write-down taken in connection with the same
transaction or event which gave rise to such write-up), and (c) any adjustments
to net income for minority ownership interests in other Persons.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"Agent" means U.S. Bank National Association in its capacity as administrative
agent for the Lenders hereunder, and any successor administrative agent arising
under Section 10.9.
"Agent-Related Persons" means U.S. Bank and any successor agent arising under
Section 10.9, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agreement" means this Credit Agreement.
"Approved Appraised Value" means the most recent M.A.I. appraised value of an
Eligible Real Property that (a) was ordered by the Agent, (b) has been approved
by the Agent in writing in its reasonable discretion, and (c) is in compliance
with the Financial Institutions Reform, Recovery and Enforcement Act.
"Assignee" has the meaning specified in Section 11.8(a).
"Attorney Costs" means and includes all fees and disbursements of any law firm
or other external counsel.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
101, et seq.).
"Borrowing" means a borrowing hereunder consisting of Loans of the same Type
made to the Borrower on the same day by the Lenders under Article II, and, other
than in the case of Prime Rate Loans, having the same Loan Period.
"Borrowing Base" means, on each day that any Loans are outstanding, an amount
equal to the lesser of (a) 60% of the Collateral Pool Value or (b) the Implied
Debt Service Coverage Cap.
"Business Day" means any day other than a Saturday, Sunday or other day on which
commercial banks in Seattle, Washington are authorized or required by law to
close and, if the applicable Business Day relates to any LIBOR Rate Loan, means
such a day on which dealings are carried on in the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of any
central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Cash Equivalents" means (a) securities with maturities of one year or less from
the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit, eurodollar
time deposits, overnight bank deposits, bankers' acceptances and repurchase
agreements of any Lender or any other commercial bank whose unsecured long-term
debt obligations are rated at least A-1 by Standard & Poor's Ratings Service
Group, a division of the McGraw Hill Companies, Inc., and any successor thereto
("S&P") or A-3 by Moody's Investors Service, Inc. having maturities of one year
or less from the date of acquisition, and (c) commercial paper rated at least
A-1 by S&P or P-1 by Moody's Investors Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of investments.
"Cash Flow" means, during the relevant period, an amount equal to (a) the EBITDA
from a hotel and restaurant property that constitutes Eligible Real Property or
with respect to which the Borrower has proposed to become Eligible Real
Property, less (b) a reserve for maintenance and capital improvements in an
amount equal to 4.5% of the aggregate of all amounts which, in accordance with
GAAP, would be included as gross revenue arising out of or related to such hotel
or restaurant property operations (including, without limitation, gross revenues
from the lease or licensing of space in such hotels or restaurants property).
"CERCLA" has the meaning specified in the definition of "Environmental Laws."
"Closing Date" means the date on which all conditions precedent set forth in
Section 5.1 are satisfied or waived by the Agent.
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
thereunder.
"Collateral" means all property and interests in property and proceeds thereof
now owned or hereafter acquired by the Borrower, WHC and its Subsidiaries in or
upon which a lien now or hereafter exists in favor of the Lenders, or the Agent
on behalf of the Lenders, whether under this Agreement or under any other
documents executed by any such Person and delivered to the Agent or the Lenders.
"Collateral Documents" means, collectively, (a) the Security Agreements, the
Deeds of Trust, and all other security agreements, pledge agreements, mortgages,
deeds of trust, patent and trademark assignments, lease assignments, guarantees
and other similar agreements between the Borrower, WHC or any Subsidiary and the
Lenders or the Agent for the benefit of the Lenders now, heretofore or hereafter
delivered to the Lenders or the Agent pursuant to or in connection with the
transactions contemplated hereby, and all financing statements (or comparable
documents now or hereafter filed in accordance with the Uniform Commercial Code
or comparable law) against the Borrower, WHC or any Subsidiary as debtor in
favor of the Lenders or the Agent for the benefit of the Lenders as secured
party, and (b) any amendments, supplements, modifications, renewals,
restatements, replacements, consolidations, substitutions and extensions of any
of the foregoing.
"Collateral Pool Value" means the sum of the Approved Appraised Values of all
Eligible Real Property from time to time.
"Commitment" means $4,000,000.
"Commitment Fee Percentage" means the percentage determined in accordance with
the following matrix and based upon the quarterly financial statements of the
Borrower provided to the Agent in accordance with the terms of this Agreement
for the preceding fiscal quarter; provided, however, that if the Borrower has
not delivered its financial statements for the previous fiscal quarter as of the
date that the commitment fee is payable pursuant to Section 2.9, then a
Commitment Fee Percentage of .50% shall apply:
Level Level I Level II Level III
-------------- ------------- --------------- -----------------
Recourse Funded Debt less than 2.75 greater than or greater than or
Ratio equal to 2.75 equal to 3.5
less than 3.5
- ----------------------- ------------- ------------------- -------------------
Commitment Fee .25% .25% .50%
Percentage
- ----------------------- ------------- ------------------- -------------------
"Compliance Certificate" means a certificate substantially in the form of
Exhibit A.
"Contingent Obligation" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligation") of another Person (the "primary obligor"),
including any obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to advance or
provide funds for the payment or discharge of any such primary obligation, or to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet item, level of income
or financial condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold harmless the holder
of any such primary obligation against loss in respect thereof (each, a
"Guaranty Obligation"); (b) with respect to any Surety Instrument issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials, supplies
or other property from, or to obtain the services of, another Person if the
relevant contract or other related document or obligation requires that payment
for such materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or other
property is ever made or tendered, or such services are ever performed or
tendered, or (d) in respect of any Swap Contract. The amount of any Contingent
Obligation shall, in the case of Guaranty Obligations, be deemed equal to the
stated or determinable amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof, and in the case of other
Contingent Obligation, shall be equal to the maximum reasonably anticipated
liability in respect thereof.
"Contractual Obligation" means, as to any Person, any provision of any security
issued by such Person or of any agreement, undertaking, contract, indenture,
mortgage, deed of trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
"Deed of Trust" means a deed of trust or mortgage executed by the Borrower, WHC
or a Subsidiary approved by the Agent in favor of the Agent as agent for the
Lenders pursuant to Section 5.3, in a form approved by the Agent, as well as all
amendments to the foregoing, whether any such deed of trust, mortgage or
amendment thereto was executed pursuant to the Initial Credit Agreement or
pursuant to this Agreement. The Deeds of Trust shall be in the form designated
by the Agent.
"Default" means any event or circumstance which, with the giving of notice, the
lapse of time, or both, would (if not cured or otherwise remedied during such
time) constitute an Event of Default.
"Disposition" means (a) the sale, lease, conveyance or other disposition of any
Collateral.
"Dollars," "dollars" and "$" each mean lawful money of the United States.
"EBITDA" means, with respect to WHC and its Subsidiaries for any applicable
period, Adjusted Net Income for such period, plus, to the extent deducted in
determining Adjusted Net Income for such period, the aggregate amount of
(a) Interest Expense, (b) federal, state, local and foreign income taxes and
(c) depletion, depreciation and amortization of tangible and intangible assets.
In the event that the Borrower has consummated any Acquisition during the
applicable period, "EBITDA" shall include the EBITDA from the Person acquired
(or the portion thereof allocable to the portion of the Person acquired) for
such period, provided that the Borrower has delivered to the Agent documentation
deemed adequate by the Agent to verify such EBITDA, as well as a Compliance
Certificate on a pro forma basis and pro forma financial statements on a
consolidating basis approved by the Agent. Subject to approval of the Required
Lenders confirmed in writing by the Agent, any such pro forma Compliance
Certificate and pro forma financial statements may exclude expenses of the
acquired Person that will terminate upon completion of the Acquisition, and
shall include expenses that would have been incurred during the applicable
period. An example of such an expense that may be excluded is the franchise fee
under a franchise agreement that will be terminated upon completion of the
Acquisition.
"Eligible Assignee" means (a) a commercial bank organized under the laws of the
United States, or any state thereof; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
country in which it is organized or another country which is also a member of
the OECD; (c) a Person that is primarily engaged in the business of commercial
banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person
of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a
Subsidiary; or (d) a finance company, insurance company, other financial
institution or fund, reasonably acceptable to the Agent, which has a combined
capital and surplus in excess of $100,000,000, which is regularly engaged in
making, purchasing or investing in loans of the Type proposed to be assigned to
such assignee; provided, however, that no Eligible Assignee shall be an
Affiliate or competitor of the Borrower, or an Affiliate of such competitor.
"Eligible Real Property" means each parcel of real property and related
improvements (a) that is described on Schedule 1.1 or that has been approved by
the Agent in writing in its sole discretion after the date of this Agreement,
(b) the fee title interest of which is owned by WHC or a Subsidiary approved by
the Agent (provided that in connection with the parcel or real property located
in Hillsboro, Washington County, Oregon , the Borrower's interest in the
property may be a leasehold interest provided that the Agent receives a
landlord's consent in a form acceptable to the Agent), (c) that is fully
developed and improved and with respect to which there has been issued a
certificate of occupancy, (d) in which the Agent, for the benefit of the
Lenders, holds a first priority Deed of Trust to secure the Obligations,
(e) with respect to which the Agent has obtained the Collateral Documents
described in Section 5.3, (f) with respect to which the Approved Appraised Value
has been established, (g) that is not encumbered by any Liens other than
Permitted Liens, and (h) that has positive Cash Flow for the most recent
trailing four fiscal quarters of the Borrower.
"Environmental Claims" means all claims, however asserted, by any Governmental
Authority or other Person alleging potential liability or responsibility for
violation of any Environmental Law, or for release or injury to the environment
or threat to public health, personal injury (including sickness, disease or
death), property damage, natural resources damage, or otherwise alleging
liability or responsibility for damages (punitive or otherwise), cleanup,
removal, remedial or response costs, restitution, civil or criminal penalties,
injunctive relief, or other type of relief, resulting from or based upon the
presence, placement, discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental, placement, spills, leaks, discharges, emissions or releases) of
any Hazardous Material at, in or from property owned or in the possession or
control of the Borrower, WHC or any Subsidiary.
"Environmental Laws" means all federal, state or local laws, statutes, common
law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Clean Air Act, the Federal Water Pollution Control Act of 1972,
the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery
Act, the Toxic Substance Control Act, and the Emergency Planning and Community
Right-to-Know Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Borrower, WHC or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrower, WHC or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Borrower, WHC or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in the definition of
"LIBOR Rate."
"Event of Default" means any of the events or circumstances specified in
Section 9.1.
"Event of Loss" means, with respect to any property encumbered by a Deed of
Trust, any of the following: (a) any loss, destruction or damage of such
property; (b) any pending or threatened institution of any proceedings for the
condemnation or seizure of such property or for the exercise of any right of
eminent domain; or (c) any actual condemnation, seizure or taking, by exercise
of the power of eminent domain or otherwise, of such property, or confiscation
of such property or the requisition of the use of such property.
"Exchange Act" means the Securities and Exchange Act of 1934, and regulations
promulgated thereunder.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York on the preceding Business Day
opposite the caption "Federal Funds (Effective)"; or, if for any relevant day
such rate is not so published on any such preceding Business Day, the rate for
such day will be the arithmetic mean as determined by the Agent of the rates for
the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"Financial Covenants" means the financial covenants set forth in Section 8.14.
"Financial Transaction Liability" means (a) any overdraft on any account
maintained by the Borrower with Agent, (b) liabilities owing by the Borrower to
the Agent with respect to bank card services and (c) liabilities incurred by the
Agent as a result of automated clearing house transactions for the account of
the Borrower.
"Fixed Charge Coverage Ratio" means the ratio of (a) for the applicable period,
the sum of (i) EBITDA less (ii) an amount equal to 4.5% of the aggregate of all
amounts which, in accordance with GAAP, would be included as gross revenue on a
consolidated statement of income of WHC and its Subsidiaries arising out of or
related to hotel or restaurant operations (including, without limitation, gross
revenues from the lease or licensing of space in any of the hotels or
restaurants of WHC and its Subsidiaries), (iii) income and gross receipts taxes
paid in cash or cash equivalents, (iv) Pro Forma Taxes, (v) dividends and
distributions paid in cash or cash equivalents (including, without limitation,
dividends paid on the Preferred Stock, but excluding distributions of cash made
by the Borrower to WHC in an amount necessary to allow WHC to pay income and
gross receipts taxes on the taxable income of the Borrower that is recognized by
WHC for tax purposes and excluding distributions made by any of the direct or
indirect Subsidiaries of the Borrower to the Borrower or by the Tier II LLCs to
the Tier I LLCs), and (vi) payments made to redeem or otherwise acquire for
value any partnership units of the Borrower or shares of common stock of WHC or
any warrants, rights or options to acquire such partnership units or shares of
common stock to (b) for the applicable period, the sum of (i) scheduled payments
of principal on Indebtedness of WHC and its Subsidiaries (including the portion
of payments on capitalized leases allocable to principal, but excluding
(A) mandatory prepayments of the Loans required under Section 2.5, and (B)
balloon payments made with the proceeds of Indebtedness permitted pursuant to
Section 8.5), whether or not made, (ii) Interest Expense, and (iii) Pro Forma
Interest Expense.
"FRB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"GAAP" means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances at the applicable time.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty" means all guaranties heretofore or hereafter executed by WHC and the
Subsidiaries in favor Agent as agent for the Lenders in connection with the
Initial Credit Agreement or this Agreement in forms designated by the Agent,
together with all amendments thereto.
"Guaranty Obligation" has the meaning specified in the definition of "Contingent
Obligation."
"Hazardous Materials" means all those substances that are regulated by, or which
may form the basis of liability under, any Environmental Law, including all
substances identified under any Environmental Law as a pollutant, contaminant,
hazardous waste, hazardous constituent, special waste, hazardous substance,
hazardous material, or toxic substance, or petroleum or petroleum-derived
substance or waste.
"Implied Debt Service" means the aggregate amount of annual principal and
interest payments that would be required to fully amortize the aggregate amount
of the outstanding principal balance of the Loans on the measurement date,
assuming (a) an interest rate equal to the greater of (i) 8% or (ii) the
interest rate reasonably determined by Agent on ten-year United States Treasury
Bond Equivalent Yield Rate as of the measurement date plus 3.25%, and (b) a
25-year amortization, with equal quarterly payments.
"Implied Debt Service Coverage Cap" means the maximum outstanding aggregate
principal balance of the Loans such that (a)(i) aggregate EBITDA from Eligible
Real Property (measured on a trailing four-quarter basis) less (ii) an amount
equal to 4.5% of the aggregate of all amounts which, in accordance with GAAP,
would be included as gross revenue on a consolidated statement of income of WHC
and its Subsidiaries arising out of or related to hotel or restaurant operations
of the Eligible Real Property (including, without limitation, gross revenues
from the lease or licensing of space in any of the Eligible Real Property)
equals or exceeds(b) Implied Debt Service by a ratio of 1.60:1.00.
"Indebtedness" of any Person means, without duplication, (a) all indebtedness
for borrowed money; (b) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business on ordinary terms); (c) all
noncontingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to repossession or
sale of such property); (f) all obligation with respect to capital leases;
(g) all net obligations with respect to Swap Contracts; (h) all indebtedness
referred to in clauses (a) through (g) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and contracts
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; and (i) all Guaranty Obligations in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
"Indemnification Agreements" means the indemnification agreements executed by
WHC, the Borrower and/or their Subsidiaries in favor Agent as agent for the
Lenders in connection with the Initial Credit Agreement or this Agreement, in a
form designated by the Agent, together with all amendments thereto.
"Indemnified Liabilities" has the meaning specified in Section 11.5.
"Indemnified Person" has the meaning specified in Section 11.5.
"Independent Auditor" has the meaning specified in Section 7.1(a).
"Interest Differential" shall mean that sum equal to the greater of zero or the
financial loss incurred by Lenders resulting from prepayment, calculated as the
difference between the amount of interest Lenders would have earned (from like
investments in the Money Markets as of the first day of the LIBOR Rate Loan) had
prepayment not occurred and the interest Lenders will actually earn (from like
investments in the Money Markets as of the date of prepayment) as a result of
the redeployment of funds from the prepayment.
"Initial Credit Agreement" has the meaning specified in Recital A.
"Insolvency Proceeding" means (a) any case, action or proceeding before any
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors; undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Interest Expense" means, for any applicable period, the aggregate consolidated
interest expense (both cash and non-cash and determined without regard to
original issue discount) of WHC and its Subsidiaries for such period, as
determined in accordance with GAAP, including, to the extent allocable to
interest expense in accordance with GAAP, (a) all other fees paid or owed with
respect to the issuance or maintenance of Contingent Obligations (including
letters of credit of WHC and its Subsidiaries), (b) net costs or benefit under
Swap Contracts of WHC and its Subsidiaries and (c) the portion of any payments
made in respect of obligations in respect of capitalized leases of WHC and its
Subsidiaries allocable to interest expense.
"Interest Margin" means the number of basis points per annum determined in
accordance with the following matrix and based upon the quarterly financial
statements of the Borrower provided to the Agent in accordance with the terms of
this Agreement for the preceding fiscal quarter. Adjustments shall be made 45
days after the end of each fiscal quarter (when quarterly financial statements
are required to be delivered to the Agent); provided, however, that if the
Borrower has not delivered its financial statements for the previous fiscal
quarter within 45 days of the end of such fiscal quarter, then the Interest
Margin in effect for the previous fiscal quarter shall continue to apply unless
the Agent exercises its right to impose interest at (a) the default rate as
provided for in this Agreement or (b) the rate otherwise applicable if the
Borrower had timely delivered its financial statements.
Level Level I Level II Level III
- ----------------------- ------------ ---------------- ---------------
Recourse Funded Debt less than 2.75 equal to or 2.75 equal to or
Ratio greater than 2.75 greater than
less than 3.5 3.5
- ----------------------- ------------ ---------------- ---------------
Prime Margin -0- 25 50
- ----------------------- ------------ ---------------- ---------------
LIBOR Margin 250 275 300
- ----------------------- ------------ ---------------- ---------------
The margins set forth above shall apply unless there exists an Event of Default,
in which case the Agent may elect to impose the default rate as provided for in
this Agreement.
"Interest Payment Date" means, as to any Loan other than a Prime Rate Loan, the
last day of each Loan Period applicable to such Loan and, as to any Prime Rate
Loan, the last Business Day of each calendar quarter and each date such Loan is
converted into another Type of Loan; provided, however, that if any Loan Period
for a LIBOR Rate Loan exceeds three months, the date that falls three months
after the beginning of such Loan Period and after each Interest Payment Date
thereafter is also an Interest Payment Date.
"Interest Rate Election Date" means any date as of which, the Borrower
(a) obtains Loans, (b) converts Loans of one Type to another Type, or
(c) continues as Loans of the same Type, but with a new Loan Period, Loans
having Loan Periods expiring on such date.
"Interest Rate Notice" means a notice in substantially the form of Exhibit B.
"IRS" means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Lender" has the meaning specified in the introductory clause hereto.
"Lending Office" means, as to any Lender, the office or offices of such Lender
specified as its "Lending Office" or "Domestic Lending Office" or "LIBOR Lending
Office," as the case may be, on Schedule 11.2, or such other office or offices
as the Lender may from time to time notify the Borrower and the Agent.
"LIBOR Rate Loan" has the meaning set forth in Section 2.7(a).
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the Uniform Commercial Code or any comparable law) and any
contingent or other agreement to provide any of the foregoing, but not including
the interest of a lessor under an operating lease.
"Loan" means an extension of credit by a Lender to the Borrower under
Article II, and may be a Prime Rate Loan or a LIBOR Rate Loan (each, a "Type" of
Loan).
"Loan Documents" means this Agreement, the Note, the Collateral Documents, the
Guaranty, the Reimbursement Agreements, the Indemnification Agreements and all
other documents delivered to the Agent or any Lender in connection herewith.
"Loan Period" means the period commencing on the advance date of the applicable
LIBOR Rate Loan and ending on the numerically corresponding day one, two, three
or six months thereafter matching the interest rate term selected by the
Borrower; provided, however, (a) if any Loan Period would otherwise end on a day
which is not a New York Banking Day, then the Loan Period shall end on the next
succeeding New York Banking Day unless the next succeeding New York Banking Day
falls in another calendar month, in which case the Loan Period shall end on the
immediately preceding New York Banking Day; or (b) if any Loan Period begins on
the last New York Banking Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of the Loan
Period), then the Loan Period shall end on the last New York Banking Day of the
calendar month at the end of such Loan Period.
"Margin Stock" means "margin stock" as such term is defined in Regulation T, U
or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of the Borrower or the Borrower, WHC and its
Subsidiaries taken as a whole; (b) a material impairment of the ability of the
Borrower, WHC or any Subsidiary to perform under any Loan Document and to avoid
any Event of Default; or (c) a material adverse effect upon (i) the legality,
validity, binding effect or enforceability against the Borrower, WHC or any
Subsidiary of any Loan Document, or (ii) the perfection or priority of any lien
granted under any of the Collateral Documents.
"Maturity Date" means the earlier of (i) June 30, 2005 and (ii) the date the
Obligations are accelerated pursuant to Section 9.2 hereof.
"Money Markets" refers to one or more wholesale funding markets available to
U.S. Bank, including negotiable certificates of deposit, commercial paper,
eurodollar deposits, bank notes, federal funds, interest rate swaps or others.
"Multiemployer Plan" means a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, to which the Borrower, WHC or any ERISA Affiliate
makes, is making, or is obligated to make contributions or, during the preceding
three calendar years, has made, or been obligated to make, contributions.
"Net Proceeds" means, as to any Disposition by a Person, proceeds in cash,
checks or other cash equivalent financial instruments as and when received by
such Person, net of: (a) the direct costs relating to such Disposition excluding
amounts payable to such Person or any Affiliate of such Person, (b) sale, use or
other transaction taxes paid or payable by such Person as a direct result
thereof, and (c) the amount required to be applied to repay principal, interest
and prepayment premiums and penalties on Indebtedness secured by a lien on the
asset which is the subject of such Disposition to the extent such Lien is
permitted hereunder. "Net Proceeds" shall also include proceeds paid on account
of any Event of Loss, net of (x) all money actually applied to repair or
reconstruct the damaged property or property affected by the condemnation or
taking, (y) all of the costs and expenses reasonably incurred in connection with
the collection of such proceeds, award or other payments, and (z) any amounts
retained by or paid to parties having superior rights to such proceeds, awards
or other payments.
"New York Banking Day" means any day (other than a Saturday or Sunday) on which
commercial banks are open for business in New York, New York.
"Nonrecourse Indebtedness" means Indebtedness with respect to which there is no
recourse to any of the assets of the Borrower, WHC or any Subsidiary other than
the assets encumbered by a Permitted Lien (as evidenced by documentation
provided to and approved by the Agent), with customary exceptions to the
nonrecourse nature of such Indebtedness approved by the Agent in writing, which
approval shall not be unreasonably withheld.
"Note" means a promissory note executed by the Borrower and payable to the Agent
for the benefit of the Lenders pursuant to Section 2.4, in substantially the
form of Exhibit C, together with all renewals and amendments thereto.
"Notice of Borrowing" means a written or oral request for a Loan from the
Borrower delivered to the Agent in the manner, at the time, and containing the
information required by the terms of Section 2.2 hereof.
"Obligation" means all advances, debts, liabilities, obligations, covenants and
duties arising under any Loan or Loan Document owing by the Borrower, WHC or any
Subsidiary to any Lender, the Agent, or any Indemnified Person, whether direct
or indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising.
"Organization Documents" means (a) for any limited partnership, the limited
partnership agreement, the certificate of formation, and all applicable
resolutions of the board of directors (or any committee thereof) of such limited
partnership and (b) for any corporation, the certificate or articles of
incorporation, the bylaws, any certificate of determination or instrument
relating to the rights of preferred shareholders of such corporation, any
shareholder rights or similar agreement, and all applicable resolutions of the
board of directors (or any committee thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Participant" has the meaning specified in Section 11.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental
Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the Borrower sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 8.1.
"Person" means an individual, partnership, corporation, limited liability
company, limited liability partnership, business trust, joint stock company,
trust, unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Borrower sponsors or maintains or to which the Borrower makes, is
making, or is obligated to make contributions and includes any Pension Plan.
"Preferred Stock" means the Series A and Series B preferred stock issued by WHC
as a portion of the consideration paid by WHC for the Red Lion Stock Purchase.
"Prime Rate Loan" has the meaning set forth in Section 2.7(a).
"Pro Forma Interest Expense" means Interest Expense that would have been
incurred by WHC or any of its Subsidiaries on Indebtedness incurred in
connection with any Acquisition during the applicable period if such Acquisition
had been completed and such Indebtedness incurred on the first day of the
applicable period. If such Indebtedness has a floating or formula rate of
interest, for purposes of this definition, the implied rate of interest for the
applicable period shall be determined by utilizing the rate which is or would be
in effect with respect to such Indebtedness as of the relevant date of
determination.
"Pro Forma Taxes" means income and gross receipts taxes that would have been
payable in cash or cash equivalents during the applicable period by WHC and its
Subsidiaries (including the acquired Person) on the net income and gross
receipts of any Person acquired by WHC or any of its Subsidiaries in an
Acquisition if such Acquisition had been completed on the first day of the
applicable period.
"Pro Rata Share" means, as to any Lender at any time, the percentage interest
(expressed as a decimal, rounded to the ninth decimal place) at such time of
such Lender in the combined Commitments of all Lenders.
"Recourse Funded Debt Ratio" means the ratio of (a) the Indebtedness of WHC and
its Subsidiaries as of the last day of the applicable period, excluding (i) all
Subordinated Debt, and (ii) all Nonrecourse Indebtedness, and less
(iii) Unrestricted Cash to (b) EBITDA for the applicable period, excluding all
components of EBITDA arising from any property that is encumbered to secure the
Indebtedness described in clauses (i) and (ii) above.
"Red Lion Purchase Agreement" means that certain Purchase Agreement entered into
among WHC, Doubletree Corporation and Hilton Hotels Corporation dated as of
December 21, 2001, whereby WHC agreed to acquire all of the issued and
outstanding capital stock of Red Lion Hotels, Inc.
"Refinanced Properties" has the meaning specified in Section 3.2.
"Refinancings" has the meaning specified in Section 3.1.
"Reimbursement Agreement" has the meaning specified in Section 3.2(c).
"Reportable Event" means, any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.
"Required Lenders" means at any time Lenders then holding in excess of 50% of
the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, Lenders then having Pro Rata Shares
greater than 50% of the Commitments.
"Requirement of Law" means, as to any Person, any law (statutory or common),
treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the president of the
Borrower, or any other officer having substantially the same authority and
responsibility; or, with respect to compliance with financial covenants, the
chief financial officer or the treasurer of the Borrower, or any other officer
having substantially the same authority and responsibility.
"SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Security Agreements" means all security agreements heretofore or hereafter
executed by the Borrower, WHC and the Subsidiaries and in favor the Agent as
agent for the benefit of the Lenders in connection with the Initial Credit
Agreement or this Agreement in forms designated by the Agent, together with all
amendments and restatements of the foregoing.
"Solvent" means, as to any Person at any time, that (a) the fair value of the
property of such Person is greater than the amount of such Person's liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated for purposes of Section 101(31) of the
Bankruptcy Code and, in the alternative, for purposes of the Washington Uniform
Fraudulent Transfer Act; (b) the present fair saleable value of the property of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured; (c) such Person is able to realize upon its property and pay its debts
and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (d) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (e) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Subordinated Debt" shall mean Indebtedness of the Borrower or WHC which is
subordinated to the Obligations of the Borrower, WHC and the Subsidiaries
hereunder in right of payment, exercise of remedies or both, on terms and
conditions agreed to in writing by the Agent and the Required Lenders.
"Subsidiary" of a Person means any corporation, association, partnership,
limited liability company, limited liability partnership, joint venture or other
business entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than corporations), is
owned or controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of WHC.
"Surety Instruments" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, surety bonds and similar
instruments.
"Swap Contract" means any agreement (including any master agreement and any
agreement, whether or not in writing, relating to any single transaction) that
is an interest rate swap agreement, basis swap, forward rate agreement,
commodity swap, commodity option, equity or equity index swap or option, bond
option, interest rate option, forward foreign exchange agreement, rate cap,
collar or floor agreement, currency swap agreement, cross-currency rate swap
agreement, currency option or any other, similar agreement (including any option
to enter into any of the foregoing).
"Taxes" means any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender and the Agent, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by each Lender's net income by
the jurisdiction (or any political subdivision thereof) under the laws of which
such Lender or the Agent, as the case may be, is organized or maintains a
lending office.
"Tier I LLC" has the meaning specified in Section 3.1.
"Tier II LLC" has the meaning specified in Section 3.1.
"Title Insurance Policy" means an American Land Title Association extended
coverage mortgagee's policy of title insurance (1992 form) insuring the validity
and first priority (subject only to exceptions agreed to in writing by the
Agent) of the lien of the applicable Deed of Trust against the real property
described therein, in an amount equal to or greater than (a) 60% of the Approved
Appraised Value if the real property described therein is Eligible Real Property
or (b) 60% of the Agent's estimate of fair market value of the real property
described therein, and with such endorsements as the Agent deems necessary in
its sole discretion, issued by a title insurance company reasonably acceptable
to the Agent, dated as of the date of the recording of such Deed of Trust, and
in a form acceptable to the Agent.
"Type" has the meaning specified in the definition of "Loan."
"UCC" means the Uniform Commercial Code as in effect in the State of Washington.
"Unfunded Pension Liability" means the excess of a Plan's benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Plan's
assets, determined in accordance with the assumptions used for funding the
Pension Plan pursuant to Section 412 of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of America.
"Unrestricted Cash" means cash and Cash Equivalents that are not encumbered by
any Liens other than Liens for the benefit of Agent or Lenders.
"U.S. Bank" means U.S. Bank National Association, a national banking
association.
"WHC" means WestCoast Hospitality Corporation, a Washington corporation, and its
successors.
1.2 Other Interpretive Provisions
(a). The meanings of defined terms are equally applicable to the singular and
plural forms of the defined terms.
(b). The words "hereof," "herein," "hereunder" and similar words refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
subsection, Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(c).
(i). The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced.
(ii). The term "including" is not limiting and means "including without
limitation."
(iii). In the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including"; the words "to" and
"until" each mean "to but excluding," and the word "through" means "to and
including."
(iv). The term "property" includes any kind of property or asset, real, personal
or mixed, tangible or intangible.
(d). Unless otherwise expressly provided herein, (i) references to agreements
(including this Agreement) and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document, and (ii) references to any statute or regulation are
to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e). The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f). This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(g). This Agreement and the other Loan Documents are the result of negotiations
among and have been reviewed by counsel to the Agent, the Borrower, WHC and the
other parties, and are the products of all parties. Accordingly, they shall not
be construed against the Lenders or the Agent merely because of the Agent's or
Lenders' involvement in their preparation.
(h). Each reference hereunder to Subsidiaries is effective at such time and to
the extent that any Person has existing Subsidiaries (as defined herein).
Notwithstanding any provisions of this Amendment to the contrary, each of the
Tier I LLCs and the Tier II LLCs shall constitute a "Subsidiary" for all
purposes under the provisions of the Credit Agreement and the other Loan
Documents.
1.3 Accounting Principles
(a). Unless the context otherwise clearly requires, all accounting terms not
expressly defined herein shall be construed, and all financial computations
required under this Agreement shall be made, in accordance with GAAP,
consistently applied.
(b). References herein to "fiscal year" and "fiscal quarter" refer to such
fiscal periods of the Borrower or WHC (as the case may be).
(c). In the event that GAAP changes during the term of this Agreement such that
the Financial Covenants contained in Section 8.14 would then be calculated in a
different manner or with different components or with components that are
calculated differently, (i) the parties hereto agree to enter into negotiations
with respect to amendments to this Agreement to conform those covenants as
criteria for evaluating WHC's and its Subsidiaries' financial condition to
substantially the same criteria as were effective prior to such change in GAAP,
and (ii) the Borrower and WHC shall be deemed to be in compliance with the
affected Financial Covenants contained in Section 8.14 during the 60 days
following any change in GAAP if and to the extent that the Borrower would have
been in compliance therewith under GAAP as in effect immediately before such
change; provided, however, that this paragraph shall not be deemed to require
the Borrower, the Agent or the Lenders to agree to modify any provision of this
Agreement or any of the other Loan Documents to reflect any such change to GAAP
and, if, after such 60 days, the parties, in their sole discretion, fail to
reach agreement on such modifications, the terms of this Agreement will remain
unchanged and the compliance by the Borrower and WHC with the Financial
Covenants contained in Section 8.14 will be calculated in accordance with GAAP
as in effect immediately before such change.
1.5 Amendment and Restatement of Initial Credit Agreement
Upon execution of this Agreement and the exhibits to this Agreement to be
executed concurrently with the execution of this Agreement, and the satisfaction
of the conditions precedent to the initial Funding under this Agreement, the
Initial Credit Agreement shall be deemed amended and superseded in its entirety
by this Agreement. All promissory notes signed by Borrower in connection with
the Initial Credit Agreement shall be marked "renewed" and retained by the Agent
until all of the Loans are repaid in full and the Lenders' commitments to
advance additional Loans have terminated.
1.6 Modification of Names
(a). In recognition of the name change of Cavanaughs Hospitality Limited
Partnership to WestCoast Hospitality, Limited Partnership, all references in the
Loan Documents to "Cavanaughs Hospitality Limited Partnership" are hereby
amended to "WestCoast Hospitality, Limited Partnership" and all references in
the Loan Documents to "CHC" are hereby amended to constitute references to
"WHC."
(b). In recognition of the name change of Cavanaughs Hospitality Corporation to
WestCoast Hospitality Corporation, all references in the Loan Documents to
"Cavanaughs Hospitality Corporation" are hereby amended to "WestCoast
Hospitality Corporation."
ARTICLE II. THE LOANS
2.1 Revolving Line of Credit
(a). Subject to the terms and conditions of this Agreement, each Lender hereby
severally agrees to make loans (each such loan, a "Loan") to the Borrower from
time to time on Business Days prior to the Maturity Date in amounts equal to
such Lender's Pro Rata Share of each requested loan, provided that, after giving
effect to any requested loan the aggregate of all Loans from such Lender will
not exceed at any one time outstanding such Lender's Pro Rata Share of the
Commitment. The Loans described in this Section 2.1 constitute a revolving
credit and within the amount and time specified, the Borrower may pay, prepay
and reborrow. The amount of each Lender's Pro Rata Share of the Commitment is
set forth in Schedule 2.1.
(b). Upon not fewer than ten days' prior written notice to the Agent, the
Borrower may elect to reduce the amount of the Commitment; provided, however
that any such reduction in the Commitment shall be permanent.
(c). The Loans advanced under this Agreement shall constitute a renewal of the
loans outstanding under the Initial Credit Agreement.
2.2 Manner of Borrowing
For each requested Loan, the Borrower shall give the Agent a Notice of Borrowing
specifying the date of a requested borrowing and the amount thereof. Borrower
may give a written or oral Notice of Borrowing on the same day it wishes any
Prime Rate Loan to be made if said Notice of Borrowing is received by Agent no
later than 10:00 a.m. (Seattle time) on the date of the requested borrowing. If
the Borrower shall elect to have interest accrue on a Loan at a rate indexed to
the LIBOR Rate by giving an Interest Rate Notice in respect of such borrowing,
the Notice of Borrowing shall be given prior to 10:00 a.m. (Seattle time) on a
Business Day at least two Business Days prior to the requested date of
borrowing. Requests for borrowing, or confirmations thereof, received after the
designated hour will be deemed received on the next succeeding Business Day.
Each such Notice of Borrowing shall be irrevocable and shall be deemed to
constitute a representation and warranty by Borrower that as of the date of such
notice the statements set forth in Article VI are true and correct in all
material respects and that no Default or Event of Default has occurred and is
continuing. On receipt of a Notice of Borrowing, the Agent shall promptly notify
each Lender by telephone, telex or facsimile of the date of the requested
borrowing and the amount thereof. Each Lender shall before 12:00 noon (Seattle
time) on the date of the requested borrowing, pay such Lender's Pro Rata Share
of the aggregate principal amount of the requested borrowing in immediately
available funds to the Agent at 1420 Fifth Avenue, Seattle, Washington 98101.
Upon fulfillment to the Agent's satisfaction of the applicable conditions set
forth in Article V, and after receipt by the Agent of such funds, the Agent will
either (a) promptly make such funds available to the Borrower at a general
checking account maintained by the Borrower at the Agent, or at such other place
as may be designated by the Borrower in a writing delivered to the Agent; (b) if
requested by the Borrower in writing to do so, will apply such funds against the
Borrower's obligations to make payments of interest accruing under this
Agreement, the Note or any other Loan Document; or (c) at the Agent's election,
apply such proceeds to the satisfaction of Borrower's obligations arising under
Section 3.4.
2.3 Agent's Right to Fund
Unless the Agent shall have received notice from a Lender prior to 12:00 noon
(Seattle time) on the date of any requested borrowing that such Lender will not
make available to the Agent its Pro Rata Share of the requested Borrowing, the
Agent may assume that such Lender has made such funds available to the Agent on
the date such Loan is to be made in accordance with Section 2.2 hereof and the
Agent may, in reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If and to the extent that such Lender shall
not have so made such portion available to the Agent, the Borrower and such
Lender, jointly and severally, agree to pay to the Agent forthwith on demand
such corresponding amount, together with interest thereon for each day from the
date such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at (a) in the case of the Borrower, the interest rate
applicable to such Loan and (b) in the case of such Lender, the Federal Funds
Rate. Any such repayment by the Borrower shall be without prejudice to any
rights it may have against a Lender that has failed to make available its funds
for any requested borrowing. The failure of any Lender to make available its Pro
Rata Share of a requested Borrowing shall not relieve any other Lender of any
obligation hereunder to make available its Pro Rata Share of a requested
Borrowing, but no Lender shall be responsible for the failure of any other
Lender to make available such Lender's Pro Rata Share of a requested Borrowing.
2.4 Loan Accounts
The Loans made by each Lender shall be evidenced by the Note and one or more
loan accounts or records maintained by such Lender in the ordinary course of
business. The loan accounts or records maintained by the Agent and each Lender
shall be conclusive absent manifest error of the amount of the Loans made by the
Lenders to the Borrower and the interest and payments thereon. Any failure so to
record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Borrower hereunder to pay any amount owing with respect to
the Loans. The Note is a renewal of the promissory note executed by the Borrower
in connection with the Initial Credit Agreement, as well as all renewals
thereof.
2.5 Mandatory Prepayments of Loans
(a) Asset Dispositions
If the Borrower, WHC or any Subsidiary shall at any time or from time to time
make or agree to make a Disposition then (i) the Borrower shall promptly notify
the Agent of such proposed Disposition (including the amount of the estimated
Net Proceeds to be received by the Borrower, WHC or such Subsidiary in respect
thereof) and (ii) concurrently with receipt by the Borrower, WHC or the
Subsidiary of the Net Proceeds of such Disposition, the Borrower shall prepay
the Loans in an aggregate amount equal to the amount of such Net Proceeds;
provided, however, that no such prepayment shall be required to the extent, in
each case, such Net Proceeds are from the Disposition of personal property and
are to be used within 90 days of receipt thereof to purchase replacement assets;
provided further, that such prepayment shall be required only if (i) such Net
Proceeds exceed $500,000 or (ii) the aggregate of all Net Proceeds theretofore
received by the Borrower during the preceding 12 months and not reinvested or
used to make a prepayment hereunder exceeds $500,000.
(b) Event of Loss
If the Borrower, WHC or any Subsidiary shall at any time or from time to time
suffer an Event of Loss, then (i) the Borrower shall promptly notify the Agent
of such Event of Loss (including the amount of the estimated Net Proceeds to be
received by the Borrower, WHC or such Subsidiary in respect thereof) and
(ii) promptly upon, and in no event later than two Business Days after, receipt
by the Borrower, WHC or the Subsidiary of the Net Proceeds of such Event of
Loss, the Borrower shall either (i) prepay the Loans in an aggregate amount
equal to the amount of such Net Proceeds or (ii) deposit an aggregate amount
equal to the amount of such Net Proceeds into an interest bearing blocked
account maintained with the Agent pending release for usage by the Borrower in a
manner, and during the time, specified in the proviso below; provided, however,
that no such prepayment shall be required to the extent, in each case, such Net
Proceeds are used within 90 days of receipt thereof to repair, replace or
restore the assets, if any, relating to such Event of Loss.
(c) General
Any prepayments pursuant to this Section 2.5 shall be applied first to any Prime
Rate Loans then outstanding and then to LIBOR Rate Loans with the shortest Loan
Periods remaining; provided, however, that if the amount of Prime Rate Loans
then outstanding is not sufficient to satisfy the entire prepayment requirement,
the Borrower may, at its option, place any amounts which it would otherwise be
required to use to prepay LIBOR Rate Loans on a day other than the last day of
the Loan Period therefor in an interest-bearing account pledged to the Agent for
the benefit of the Lenders until the end of such Loan Period at which time such
pledged amounts will be applied to prepay such LIBOR Rate Loans. The Borrower
shall pay, together with each prepayment under this Section 2.5, accrued
interest on the amount prepaid and any amounts required pursuant to
Section 2.7(a).
2.6 Repayment
(a). The Borrower shall repay to the Lenders from time to time such amounts of
principal as may be necessary to ensure that at all times the sum of the then
outstanding principal balance of all Loans is equal to or less than the lesser
of (i) the amount of the then applicable Commitment or (ii) the Borrowing Base.
(b). For not fewer than 30 consecutive days during each 12-month period during
the term of this Agreement and any extensions thereof, the Borrower shall repay
to the Lenders from time to time such amounts of principal and shall take such
other steps as may be necessary to reduce the sum of the outstanding principal
balance of the Commitment to zero.
(c). The Borrower shall repay the Loans in full, together with all accrued and
unpaid interest thereon, on the Maturity Date.
2.7 Interest
(a). Interest on the outstanding principal balance of the Loans shall accrue at
one of the following per annum rates selected by the Borrower (i) upon notice to
the Agent (or in the event no other selection is made by the Borrower), the
Interest Margin plus the prime rate announced by the Agent from time to time, as
and when such rate changes (a "Prime Rate Loan"); or (ii) upon a minimum of two
New York Banking Days prior notice, the Interest Margin plus the one, two, three
or six-month LIBOR rate quoted by U.S. Bank from Telerate Page 3750 or any
successor thereto (which shall be the LIBOR rate in effect two New York Banking
Days prior to commencement of the advance), adjusted for any reserve requirement
and any subsequent costs arising from a change in government regulation (a
"LIBOR Rate Loan"). No LIBOR Rate Loan may extend beyond the Maturity Date. In
any event, if the Loan Period for a LIBOR Rate Loan should happen to extend
beyond the Maturity Date, such loan must be prepaid on the Maturity Date. If a
LIBOR Rate Loan is prepaid prior to the end of the Loan Period for such loan,
whether voluntarily or because prepayment is required on the Maturity Date or
due to acceleration upon an Event of Default or otherwise, the Borrower agrees
to pay all of Lenders' costs, expenses and Interest Differential (as determined
by the Agent) incurred as a result of such prepayment. Because of the short-term
nature of this facility, the Borrower agrees that the Interest Differential
shall not be discounted to its present value. Any prepayment of a LIBOR Rate
Loan shall be in an amount equal to the remaining entire principal balance of
such loan.
(b). In the event the Borrower does not timely select another interest rate
option at least two New York Banking Days before the end of the Loan Period for
a LIBOR Rate Loan, the Agent may at any time after the end of the Loan Period
convert the LIBOR Rate Loan to a Prime Rate Loan, but until such conversion, the
funds advanced under the LIBOR Rate Loan shall continue to accrue interest at
the same rate as the interest rate in effect for such LIBOR Rate Loan prior to
the end of the Loan Period.
(c). The Agent's internal records of applicable interest rates shall be
determinative in the absence of manifest error.
(d). Each LIBOR Rate Loan shall be in a minimum principal amount of $500,000.
(e). Unless the Required Lenders otherwise agree, during the existence of a
Default or Event of Default, the Borrower may not elect to have a Loan made,
converted into or continued as a LIBOR Rate Loan.
(f). There may not be more than four different Loan Periods in effect at any
time.
(g). Interest on each Loan shall be paid in arrears on each Interest Payment
Date. Interest shall also be paid on the date of any prepayment of Loans under
Section 2.5 for the portion of the Loans so prepaid and upon payment (including
prepayment) in full thereof and, during the existence of any Event of Default,
interest shall be paid on demand of the Agent at the request or with the consent
of the Required Lenders.
(h). Notwithstanding subsection (a) of this Section, while any Event of Default
exists or after acceleration, the Borrower shall pay interest (after as well as
before entry of judgment thereon to the extent permitted by law) on the
principal amount of all outstanding Loans, at a rate per annum which is
determined by adding 2% per annum to the otherwise applicable under this
Agreement.
(i). Anything herein to the contrary notwithstanding, the obligations of the
Borrower to any Lender hereunder shall be subject to the limitation that
payments of interest and late charges shall not be required, for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Lender would be contrary
to the provisions of any law applicable to such Lender limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Lender, and in such event the Borrower shall pay such Lender interest at the
highest rate permitted by applicable law.
2.8 Loan and Agency Fees
The Borrower shall pay Lenders a loan fee in the amount of $25,000 concurrently
with the execution of this Agreement.
2.9 Commitment Fees
On the last day of each fiscal quarter during the term of the Loans, and on the
date that the Loans are repaid in full and the Commitments are terminated upon
the election of the Borrower pursuant to Section 2.1(c) or as otherwise provided
in this Agreement, Borrower shall pay to the Agent for the ratable benefit of
the Lenders commitment fees in the amount equal to Commitment Fee Percentage per
annum of the average unused portion of the Commitment during each period, to be
calculated based upon the amount of the Commitment during such period, less the
sum of the average outstanding principal balance of all Loans during such
period. The fee paid pursuant to this Section 2.9 shall be deemed fully earned
when due and non-refundable when paid without regard to any voluntary or
involuntary prepayment of the Loans (or any portion thereof), the failure to
satisfy the conditions of lending or the termination of any Commitment.
2.10 Late Charge
If any payment of principal or interest required under any of the Loans is five
days or more past due, the Borrower will be charged, for the ratable benefit of
the Lenders, a late charge of 5% of the delinquent payment or $5, whichever is
greater, for each such late payment. The five-day period provided for herein
shall not be construed as a waiver of any Default or Event of Default resulting
from any late payment under any of the Loans.
2.11 Computation of Interest and Fees
(a) All computations of interest and commitment fees shall be made on the basis
of a year of 360 days and actual days elapsed. Interest and commitment fees
shall accrue during each period during which interest or commitment fees are
computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Agent will, at the request of the Borrower or any Lender, deliver to the
Borrower or the Lender, as the case may be, a statement showing the quotations
used by the Agent in determining any interest rate and the resulting interest
rate.
2.12 Payments by the Borrower
(a) All payments to be made by the Borrower shall be made without set-off,
recoupment or counterclaim. Except as otherwise expressly provided herein, all
payments by the Borrower shall be made to the Agent for the account of the
Lenders at the Agent's, and shall be made in dollars and in immediately
available funds, no later than 10:00 a.m. (Seattle time) on the date specified
herein. The Agent will promptly distribute to each Lender its Pro Rata Share (or
other applicable share so expressly provided herein) of such payment in like
funds as received. Any payment received by the Agent later than 10:00 a.m.
(Seattle time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of "Loan Period"
herein, whenever any payment is due on a day other than a Business Day, such
payment shall be made on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or fees, as the
case may be.
(c) Unless the Agent receives notice from the Borrower prior to the date on
which any payment is due to the Lenders that the Borrower will not make such
payment in full as and when required, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Borrower has not made such
payment in full to the Agent, each Lender shall repay to the Agent on demand
such amount distributed to such Lender, together with interest thereon at this
Federal Funds Rate for each day from the date such amount is distributed to such
Lender until the date repaid.
(d) Any payment made by the Borrower hereunder shall be applied first, against
any Financial Transaction Liability of the Borrower owing to the Agent; second,
against fees, expenses and indemnities due hereunder or under any other Loan
Document; third, against interest due on amounts in default on any Loan, if any;
fourth, against interest due on any Loan; fifth, against Loan principal amounts
in default; and sixth, against Loan principal.
2.13 Sharing of Payments, Etc.
If, other than as expressly provided elsewhere herein, any Lender shall obtain
on account of the Loans made by it any payment (whether voluntary, involuntary,
through this exercise of any right of set-off, or otherwise) in excess of its
Pro Rata Share, such Lender shall immediately (a) notify the Agent of such fact,
and (b) purchase from the other Lenders such participations in the Loans made by
them as shall be necessary to cause such purchasing Lender to share the excess
payment pro rata with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the purchasing
Lender, such purchase shall to that extent be rescinded and each other Lender
shall repay to the purchasing Lender the purchase price paid therefor, together
with an amount equal to such paying Lender's ratable share (according to the
proportion of (a) the amount of such paying Lender's required repayment to
(b) the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Borrower agrees that any Lender so purchasing a
participation from another Lender may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 11.9) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such participation.
The Agent will keep records (which shall be conclusive and binding in the
absence of manifest error) of participations purchased under this Section and
will in each case notify the Lenders following any such purchases or repayments.
2.14 Security
All Obligations of the Borrower, WHC and the Subsidiaries under this Agreement,
the Note and all other Loan Documents shall be secured in accordance with the
Collateral Documents.
2.15 Borrowing Base
(a) The sum of the outstanding balance of principal of the Loans shall at no
time exceed an amount equal to the Borrowing Base.
(b) The Borrower shall submit to U.S. Bank a calculation of the Borrowing Base
(i) within 45 days of the end of each fiscal quarter of the Borrower as of the
last day of such fiscal quarter and (ii) with each Notice of Borrowing for Loans
in excess of $1,000,000 in the aggregate.
(c) If at any time the outstanding balance of principal of the Loans shall
exceed the Borrowing Base, the Borrower shall repay such outstanding portion of
the Loans in an amount equal to such excess within one Business Day. The
Borrower's failure to do so shall constitute an Event of Default.
2.16 No Prepayment Charges
Except as provided in Section 2.7(a), the Borrower may pay or prepay any Loan
without charge.
ARTICLE III. REFINANCINGS
3.1 Description of Refinancings
The Borrower has refinanced and may in the future refinance a number of its
hotel properties through special purpose, bankruptcy remote entities (the
"Refinancings"), pursuant to which the Borrower has formed or intends to form a
Delaware limited liability company for each of the properties to be refinanced,
each of which shall be a wholly owned Subsidiary of the Borrower (the "Tier I
LLCs"). Each Tier I Subsidiary has formed or intends to form a Delaware limited
liability company that shall be a wholly owned Subsidiary of such Tier I LLC
(the "Tier II LLCs"). Each property refinanced or to be refinanced has been
contributed or is to be contributed to the Tier I LLC formed for such property.
The Tier I LLC formed for each property refinanced or to be refinanced has
contributed or is to contribute such property to its respective Tier II LLC.
Each Refinancing loan has been made or is to be made to a Tier II LLC on a
nonrecourse basis and secured only by the property contributed to such Tier II
LLC.
3.2 Conveyance of Property and Release of Collateral
In order to accommodate future Refinancings, subject to the terms and conditions
of this Agreement, and provided that there exists no Event of Default and that
after giving effect to any proposed Refinancing there would no exist any Event
of Default, the Lenders hereby consent to (a) the reconveyance of any Deeds of
Trust that encumber the real property and improvements refinanced (the
"Refinanced Properties") concurrently with the refinancing of each such
Refinanced Property and (b) the contribution of the Refinanced Properties by the
Borrower to the respective Tier I LLCs and the contribution of the Refinanced
Properties by the Tier I LLCs to the respective Tier II LLCs concurrently with
or immediately preceding the refinancing of each such Refinanced Property. To
the extent of the contributions described in clause (b) of the previous
sentence, the Lenders hereby waive the provisions of Section 8.2(a), 8.4 and 8.6
of the Credit Agreement.
3.3 No Modification of Refinancing Documents
Without the prior written consent of the Agent, none of the agreements,
instruments or other documents arising out of any Refinancing shall be amended,
modified or replaced after the date of the initial funding of such Refinancing
in any manner that modifies the nonrecourse status of such Refinancing or
increases the amount of the Refinancing.
3.4 Loans and Contributions to the LLCs
(a) Unless there exists a Default or an Event of Default, the Borrower is
permitted to make loans or contributions of capital to the Tier II LLCs (either
directly or indirectly through the Tier I LLCs) in amounts not to exceed the
amounts determined by the Borrower to be reasonably necessary to (i) fund
working capital needs not met by the operating cash flow from the respective
property and (ii) fund capital expenditures that cannot be funded by the
operating cash flow from the respective property.
(b) Notwithstanding the provisions of Section 3.5(a), the Borrower shall not use
any proceeds of the Loans to fund loans or capital contributions to the Tier I
LLCs or the Tier II LLCs.
3.5 No Further Loans; Guaranties
(a) With the exception of the Refinancings and loans from the Borrower permitted
pursuant to Section 3.4(a) of this Amendment, none of the Tier I LLCs or the
Tier II LLCs shall incur any Indebtedness except Indebtedness incurred by each
Tier II LLC in the ordinary course of its business and in an amount not to
exceed 4% of the initial amount of the Refinancing made to such Tier II LLC.
(b) The Borrower shall not suffer or permit any of the Tier I LLCs or the
Tier II LLCs to, create, incur, assume or suffer to exist any Contingent
Obligations.
3.6 Required Distributions
The Borrower shall cause the Tier I LLCs and the Tier II LLCs to distribute to
the Borrower (in the case of the Tier II LLCs, through the Tier I LLCs), not
less frequently than quarterly, all cash in excess of that necessary in the
reasonable opinion of the Borrower to meet short term working capital needs and
short term capital expenditure needs of the Tier II LLCs.
3.7 Waiver of Guaranties and Security Agreements
Notwithstanding the provisions of Section 7.14(d), (a) neither the Tier I LLCs
nor Tier II LLCs shall be required to guarantee the obligations of the Borrower
under the this Agreement, (b) neither the Tier I LLCs nor Tier II LLCs shall be
required to grant the Lenders a security interest in their assets to secure the
obligations of the Borrower under the Credit Agreement, (c) the Borrower shall
not be required to pledge the membership interests of the Tier I LLCs to the
Lenders, and (d) the Tier I LLCs shall not be required to pledge the membership
interests of the Tier II LLCs to the Lenders.
3.8 Limitation on Liens
Notwithstanding the provisions of Section 8.1, the Lenders consent to the
Tier II LLCs encumbering each Refinanced Property in order to consummate the
Refinancing of such Refinanced Property.
3.9 Contingent Obligations
Notwithstanding the provisions of Section 8.8, the Lenders consent to the
Borrower executing and delivering to the lenders under the Refinancings a
guaranty of the exceptions to nonrecourse provisions under the Refinancings.
3.10 Refinancing of Eligible Real Property
The Lenders hereby approve the refinancing by the Borrower of one or more
parcels of the Eligible Real Property and the concurrent or subsequent
reconveyance of the Eligible Real Property refinanced from the lien of the
respective Deed of Trust, provided that (a) the Agent shall have approved all
terms and conditions of each such refinancing in writing, (b) concurrently with
the completion of any such refinancing, the Borrower apply to the outstanding
principal balance of the Loans all proceeds from each such refinancing net of
the direct out-of-pocket costs to the Borrower relating to each such
refinancing, and (c) after giving effect to each proposed refinancing, the
Borrower shall be in compliance with the Borrowing Base.
ARTICLE IV. TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes
(a) Any and all payments by the Borrower to each Lender or the Agent under this
Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for any Taxes. In addition, the Borrower shall
pay all Other Taxes.
(b) The Borrower agrees to indemnify and hold harmless each Lender and the Agent
for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section) paid by the
Lender or the Agent and any liability (including penalties, interest, additions
to tax and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Lender or the
Agent makes written demand therefor.
(c) If the Borrower shall be required by law to deduct or withhold any Taxes or
Other Taxes from or in respect of any sum payable hereunder to any Lender or the
Agent, then:
(i) the sum payable shall be increased as necessary so that after making all
required deductions and withholdings (including deductions and withholdings
applicable to additional sums payable under this Section) such Lender or the
Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
(ii) the Borrower shall make such deductions and withholdings;
(iii) the Borrower shall pay the full amount deducted or withheld to the
relevant taxing authority or other authority in accordance with applicable law;
and
(iv) the Borrower shall also pay to each Lender or the Agent for the account of
such Lender, at the time interest is paid, all additional amounts which the
respective Lender specified as necessary to preserve the after-tax yield the
Lender would have received if such Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the Borrower of Taxes or
Other Taxes, the Borrower shall furnish the Agent the original or a certified
copy of a receipt evidencing payment thereof, or other evidence of payment
satisfactory to the Agent.
(e) If the Borrower is required to pay additional amounts to any Lender or the
Agent pursuant to subsection (c) of this Section, then such Lender shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Borrower which may thereafter accrue, if such change in the
judgment of such Lender is not otherwise disadvantageous to such Lender.
4.2 Illegality
(a) If any Lender determines that the introduction of any Requirement of Law, or
any change in any Requirement of Law, or in the interpretation or administration
of any Requirement of Law, has made it unlawful, or that any central bank or
other Governmental Authority has asserted that it is unlawful, for any Lender or
its applicable Lending Office to make LIBOR Rate Loans, then, on notice thereof
by the Lender to the Borrower through the Agent, any obligation of that Lender
to make LIBOR Rate Loans shall be suspended until the Lender notifies the Agent
and the Borrower that the circumstances giving rive to such determination no
longer exist.
(b) If a Lender determines that it is unlawful to maintain any LIBOR Rate Loan,
the Borrower shall, upon its receipt of notice of such fact and demand from such
Lender (with a copy to the Agent), prepay in full such LIBOR Rate Loans of that
Lender then outstanding, together with interest accrued thereon and amounts
required under Section 2.7(a), either on the last day of the Loan Period
thereof, if the Lender may lawfully continue to maintain such LIBOR Rate Loans
to such day, or immediately, if the Lender may not lawfully continue to maintain
such LIBOR Rate Loan. If the Borrower is required to so prepay any LIBOR Rate
Loan, then concurrently with such prepayment, the Borrower shall borrow from the
affected Lender, in this amount of such repayment, a Prime Rate Loan.
(c) If the obligation of any Lender to make or maintain LIBOR Rate Loans has
been so terminated or suspended, the Borrower may elect, by giving notice to the
Lender through the Agent that all Loans which would otherwise be made by the
Lender as LIBOR Rate Loans shall be instead Prime Rate Loans.
(d) Before giving any notice to the Agent under this Section, the affected
Lender shall designate a different Lending Office with respect to its LIBOR Rate
Loans if such designation will avoid the need for giving such notice or making
such demand and will not, in the judgment of the Lender, be illegal or otherwise
disadvantageous to the Lender.
4.3 Increased Costs and Reduction of Return
(a) If any Lender determines that, due to either (i) the introduction of or any
change in or in the interpretation of any law or regulation or (ii) the
compliance by that Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Lender of agreeing to make or making,
funding or maintaining any LIBOR Rate Loans, then the Borrower shall be liable
for, and shall from time to time, upon demand (with a copy of such demand to be
sent to the Agent), pay to the Agent for the account of such Lender, additional
amounts as are sufficient to compensate such Lender for such increased costs.
(b) If any Lender shall have determined that (i) the introduction of any Capital
Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Lender (or
its Lending Office) or any corporation controlling the Lender with any Capital
Adequacy Regulation, affects or would affect the amount of capital required or
expected to be maintained by the Lender or any corporation controlling the
Lender and (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy and such Lender's desired return on
capital) determines that the amount of such capital is increased as a
consequence of its Commitment, loans, credits or obligations under this
Agreement, then, upon demand of such Lender to the Borrower through the Agent,
the Borrower shall pay to the Lender, from time to time as specified by the
Lender, additional amounts sufficient to compensate the Lender for such
increase.
4.4 Inability to Determine Rates
If the Agent determines that for any reason adequate and reasonable means do not
exist for determining the LIBOR Rate for any requested Loan Period with respect
to a proposed LIBOR Rate Loan, or that the LIBOR Rate applicable pursuant to
Section 2.7(a) for any requested Loan Period with respect to a proposed LIBOR
Rate Loan does not adequately and fairly reflect the cost to any Lender of
funding such Loan, the Agent will promptly so notify the Borrower and each
Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate
Loans hereunder shall be suspended until the Agent revokes such notice in
writing. Upon receipt of such notice, the Borrower may revoke any Interest Rate
Notice then submitted by it. If the Borrower does not revoke such Notice, the
Lenders shall make, convert or continue the Loans, as proposed by the Borrower,
in the amount specified in the applicable notice submitted by the Borrower, but
such Loans shall be made, converted or continued as Prime Rate Loans instead of
LIBOR Rate Loans.
4.5 Certificates of Lenders
Any Lender claiming reimbursement or compensation under this Article IV or
Section 2.7(a) shall deliver to the Borrower (with a copy to the Agent) a
certificate setting forth in reasonable detail the amount payable to the Lender
hereunder and such certificate shall be conclusive and binding on the Borrower
in the absence of manifest error.
4.6 Survival
The agreements and obligations of the Borrower in this Article IV shall survive
this payment of all other Obligations.
ARTICLE V. CONDITIONS PRECEDENT
5.1 Conditions of Initial Loans
The obligation of each Lender under this Agreement and the effectiveness of this
Agreement are subject to the condition that the Agent has received on or before
the Closing Date all of the following, in form and substance satisfactory to the
Agent and each Lender, and with sufficient copies for each Lender:
(a) Credit Agreement and Note
This Agreement and the Note duly executed by each party thereto;
(b) Resolutions; Incumbency
(i) Copies of the resolutions of the board of directors or other governing body
of the Borrower, WHC and each Subsidiary that may become party to a Loan
Document authorizing the transactions contemplated hereby, certified as of the
Closing Date by the Secretary or an Assistant Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant Secretary of the Borrower, WHC
and each Subsidiary that may become party to a Loan Document certifying the
names and true signatures of the officers of the Borrower, WHC or such
Subsidiary authorized to execute, deliver and perform, as applicable, this
Agreement, and all other Loan Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing
Each of the following documents:
(i) the Organization Documents of the Borrower, WHC and each Subsidiary party to
any Loan Document as in effect on the Closing Date, certified by the Secretary
or Assistant Secretary of the Borrower, WHC or such Subsidiary as of the Closing
Date; and
(ii) a good standing certificate for the Borrower, WHC and each Subsidiary party
to any Loan Document from the Secretary of State (or similar, applicable
Governmental Authority) of its state of organization as of a recent date;
(d) Legal Opinions
An opinion of counsel to the Borrower and WHC and each Subsidiary party to any
Loan Document as in effect on the Closing Date, addressed to the Agent and the
Lenders, substantially in the form of Exhibit D;
(e) Payment of Fees
Evidence of payment by the Borrower of all accrued and unpaid fees, costs and
expenses to the extent then due and payable under the Initial Credit Agreement
and this Agreement accrued as of the Closing Date, together with Attorney Costs
of U.S. Bank to the extent invoiced prior to or on the Closing Date; including
any such costs, fees and expenses arising under or referenced in Sections 2.8
and 11.4;
(f) Collateral Documents
The Collateral Documents, executed by the Borrower, WHC and each Subsidiary, in
appropriate form for recording, where necessary, together with:
(i) acknowledgment copies of all UCC- 1 financing statements filed, registered
or recorded to perfect the security interests of the Agent for the benefit of
the Lenders, or other evidence satisfactory to the Agent that there has been
filed, registered or recorded all financing statements and other filings,
registrations and recordings necessary and advisable to perfect the Liens of the
Agent for the benefit of the Lenders in accordance with applicable law;
(ii) written advice relating to such lien and judgment searches as the Agent
shall have requested, and such termination statements or other documents as may
be necessary to confirm that the Collateral is subject to no other Liens in
favor of any Persons (other than Permitted Liens);
(iii) funds sufficient to pay any filing or recording tax or fee in connection
with any and all UCC- 1 financing statements;
(iv) such consents, estoppels, subordination agreements and other documents and
instruments executed by landlords, tenants, franchisors, licensors and other
Persons party to material contracts relating to any Collateral as to which the
Agent shall be granted a Lien for the benefit of the Lenders, as requested by
the Agent or any Lender;
(v) evidence that all other actions necessary or, in the opinion of the Agent or
the Lenders, desirable, to perfect and protect the first priority security
interest created by the Collateral Documents and to enhance the Agent's ability
to preserve and protect its interests in and access to the Collateral, have been
taken;
(vi) amendments to all Deeds of Trust heretofore executed and delivered to the
Agent, which amendments shall be substantially in the form of Exhibit E; and
(vii) the issuance of such endorsements to each Title Insurance Policy
heretofore issued in connection with the Deeds of Trust as the Agent deems
necessary in its sole discretion, issued by a title insurance company reasonably
acceptable to the Agent, dated as of the date of the recording of the amendment
to each Deed of Trust, and in a form acceptable to the Agent.
(g) Insurance Policies
Standard lenders' payable endorsements and insurance certificates with respect
to the insurance policies or other instruments or documents evidencing insurance
coverage on the properties of the Borrower in accordance with Section 7.6;
(h) Certificate
A certificate signed by a Responsible Officer, dated as of the Closing Date,
stating that:
(i) the representations and warranties contained in Article VI are true and
correct on and as of such date, as though made on and as of such date;
(ii) no Default or Event of Default exists or would result from making the
requested Loans; and
(iii) there has occurred since March 31, 2003, no event or circumstance that has
resulted or could reasonably be expected to result in a Material Adverse Effect;
(i) Compliance Certificate
A Compliance Certificate signed by a Responsible Officer, dated as of the
Closing Date;
(j) Real Property Refinancing
Evidence acceptable to the Agent that prior to or concurrently with the initial
advance to the Borrower under the Loans, the Borrower will have completed the
refinancing of the real property described in Schedule 5.1(j) on such terms and
conditions and pursuant to such agreements and other documents that comply with
Article III and Section 5.1(l);
(k) Other Documents
Such other approvals, opinions, documents or materials as the Agent or any
Lender may request;
(l) Payment of Indebtedness
(i) Reduction in the sum of the outstanding principal balance of the Loans to an
amount equal to or less than the lesser of (A) the Borrowing Base and (B) the
amount of the Commitment; and
(ii) Evidence that all other Indebtedness not permitted by Section 8.5 has been
paid in full;
(m) Eligible Real Property
All Collateral Documents for not fewer than four parcels of Eligible Real
Property;
5.2 Conditions to Subsequent Loans
The obligation of each Lender to make Loans to the Borrower, or the Lenders to
continue or convert any Loan under Section 2.7 after the initial Loans have been
advanced is subject to the satisfaction of the following conditions precedent on
the applicable date:
(a) Interest Rate Notice
In the case of a conversion of a Loan into another Type of Loan or the
continuation of an interest rate election as of the end of an Loan Period, the
Agent shall have received an Interest Rate Notice executed by the Borrower;
(b) Notice of Borrowing; Reimbursement Agreement
The Agent shall have received, duly executed by the Borrower, a Notice of
Borrowing, in calculating the Borrowing Base;
(c) Continuation of Representations and Warranties
The representation and warranties in Article VI shall be true and correct on and
as of each such Interest Rate Election Date or date of Notice of Borrowing with
the same effect as if made on and as of such date (except to the extent such
representations and warranties solely and expressly refer to an earlier date, in
which case they shall be true and correct as of such earlier date);
(d) No Existing Default
No Default or Event of Default shall exist or shall result from such
continuation, conversion or making of Loans;
(e) Satisfaction of Previous Conditions
The conditions set forth in Section 5.1 shall have been previously satisfied or
waived by the Agent in writing;
(f) Further Assurances
To the extent not previously delivered, all other documents, agreements and
instruments from or with respect to the Borrower or any other Person that may be
called for hereunder shall be duly executed and delivered to the Agent,
including but not limited to all documents, agreements and instruments deemed
necessary by the Agent to perfect a security interest for the benefit of the
Lenders in collateral acquired after the date of this Agreement that is intended
to be encumbered pursuant to the Collateral Documents. For the purposes of this
Agreement, the waiver of delivery of any document, agreement, or instrument from
or with respect to the Borrower or any other Person does not constitute a
continuing waiver with respect to the obligation to fulfill the conditions
precedent set forth in this Section 5.2 except as otherwise specifically
provided.
Each Interest Rate Notice or Notice of Borrowing (as the case may be) submitted
by the Borrower hereunder shall constitute a representation and warranty by the
Borrower hereunder, as of the date of each such notice and as of each Interest
Rate Election Date, as applicable, that the conditions in this Section 5.2 are
satisfied.
5.3 Conditions to Become Eligible Real Property
The Borrower may elect that a parcel of real property owned by the Borrower or a
Subsidiary shall become Eligible Real Property subject to (a) making a written
request of the Agent therefor, (b) meeting the conditions set forth in the
definition of "Eligible Real Property," and (c) the condition that the Agent has
received all of the following with respect to such parcel of real property, in
form and substance satisfactory to the Agent and each Lender, and with
sufficient copies for each Lender:
(i) a Deed of Trust encumbering the parcel of real property, duly executed by
the Borrower or Subsidiary that owns the parcel of real property;
(ii) acknowledgment copies of all UCC-1 financing statements filed, registered
or recorded to perfect the security interests of the Agent for the benefit of
the Lenders, or other evidence satisfactory to the Agent that there has been
filed, registered or recorded all financing statements and other filings,
registrations and recordings necessary and advisable to perfect the Liens of the
Agent for the benefit of the Lenders in accordance with applicable law;
(iii) written advice relating to such lien and judgment searches as the Agent
shall have requested, and such termination statements or other documents as may
be necessary to confirm that the Collateral is subject to no other Liens in
favor of any Persons (other than Permitted Liens);
(iv) funds from the Borrower sufficient to pay or reimburse the Agent for all
out-of-pocket costs and expenses connected with the parcel of real property
becoming Eligible Real Property, including, without limitation, appraisal fees,
inspection fees, fees for environmental and other third party inspections and
reports, fees for the Title Insurance Policy to issue with respect to such
parcel of real property, escrow fees (if any), attorneys' fees (if any) and any
filing or recording tax or fee in connection with the Deed of Trust and all
UCC-1 financing statements;
(v) such consents, estoppels, subordination agreements and other documents and
instruments executed by landlords, tenants, franchisors, licensors and other
Persons party to material contracts relating to the parcel of real property as
to which the Agent shall be granted a Lien for the benefit of the Lenders, as
requested by the Agent or any Lender;
(vi) evidence that all other actions necessary or, in the opinion of the Agent
or the Lenders, desirable, to perfect and protect the first priority security
interest created by the Collateral Documents in the parcel of real property and
to enhance the Agent's ability to preserve and protect its interests in and
access to such Collateral, have been taken;
(vii) a Title Insurance Policy insuring the Deed of Trust;
(viii) a flood hazard determination in a form approved by the Agent for the
parcel of real property encumbered by a Deed of Trust;
(ix) (A) if requested by the Agent, an environmental checklist in a form
designated by the Agent and approved by the Agent in writing after completion by
the Borrower or Subsidiary (as the case may be), (B) an environmental site
assessment approved by the Agent in writing performed by an engineer approved by
the Agent, (C) if requested by the Agent, an American with Disabilities Act
questionnaire, (D) an Indemnification Agreement duly executed by the Borrower
and Subsidiary (if the parcel of real property is owned by a Subsidiary), and
(E) if the parcel of real property is being acquired with the proceeds of Loans,
a designation agreement executed by the Borrower in a form approved by the
Agent;
(x) lenders' payable endorsements and insurance certificates with respect to the
insurance policies related to such parcel of real property or other instruments
or documents evidencing insurance coverage on the properties of the Borrower in
accordance with Section 7.6 and the Deed of Trust;
(xi) to the extent not previously delivered, copies of the resolutions of the
board of directors of the Borrower or Subsidiary (as the case may be)
authorizing the execution and delivery to the Agent of the Collateral Documents
with respect to such parcel real property;
(xii) to the extent not previously delivered, a certificate of the Secretary or
Assistant Secretary of the Borrower or Subsidiary (as the case may be)
certifying the names and true signatures of the officers of the Borrower or
Subsidiary authorized to execute, deliver and perform, as applicable, the
Collateral Documents with respect to such real property;
(xiii) to the extent not previously delivered, the Organization Documents of the
Borrower or Subsidiary (as the case may be), certified by the Secretary or
Assistant Secretary of the Borrower or Subsidiary (as the case may be);
(xiv) to the extent not previously delivered, a good standing certificate of the
Borrower or Subsidiary (as the case may be) from the Secretary of State (or
similar, applicable Governmental Authority) of its state of organization as of a
recent date; and
(xv) to the extent not previously delivered with respect to the Collateral
Documents in question and such other matters as the Agent may reasonably
request, an opinion of counsel to the Borrower or Subsidiary (as the case may
be) and addressed to the Agent and the Lenders, in a form acceptable to the
Agent.
5.4 Existing Collateral Documents
The Borrower acknowledges and agrees that all of the "Collateral Documents" (as
such term is defined in the Initial Credit Agreement) executed and delivered in
connection with the Initial Credit Agreement shall remain in effect and shall
secure payment and performance of the obligations of the Borrower under this
Agreement, the Loans and the Loan Documents. The Borrower hereby ratifies and
reaffirms all of its obligations under such "Collateral Documents."
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and each Lender that:
6.1 Existence and Power
The Borrower, WHC and each of its Subsidiaries:
(a) is a limited partnership or corporation, duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization;
(b) has the power and authority and all governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business and to execute,
deliver and perform its obligation under the Loan Documents;
(c) is duly qualified as a foreign entity and is licensed and in good standing
under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification or license;
and
(d) is in compliance with all Requirements of Law; except, in each case referred
to in clause (c) or clause (d), to the extent that the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
6.2 Authorization; No Contravention
The execution, delivery and performance by the Borrower, WHC and its
Subsidiaries of this Agreement and each other Loan Document to which such Person
is party, have been duly authorized by all necessary action, and do not and will
not:
(a) contravene the terms of any of that Person's Organization Documents;
(b) conflict with or result in any breach or contravention of, or the creation
of any Lien under, any document evidencing any Contractual Obligation to which
such Person is a party or any order, injunction, writ or decree of any
Governmental Authority to which such Person or its property is subject; or
(c) violate any Requirement of Law.
6.3 Governmental Authorization
No approval, consent, exemption, authorization, or other action by, or notice
to, or filing with, any Governmental Authority (except for recordings or filings
in connection with the Liens granted to the Agent under the Collateral
Documents) is necessary or required in connection with the execution, delivery
or performance by, or enforcement against, the Borrower, WHC or any of its
Subsidiaries of the Agreement or any other Loan Document.
6.4 Binding Effect
This Agreement and each other Loan Document to which the Borrower, WHC or any of
their Subsidiaries is a party constitute the legal, valid and binding
obligations of the Borrower, WHC and any of their Subsidiaries to the extent it
is a party thereto, enforceable against such Person in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.5 Litigation
Except as specifically disclosed in Schedule 6.5, there are no actions, suits
proceedings, claims or disputes pending, or to the best knowledge of the
Borrower, threatened or contemplated, at law, in equity, in arbitration or
before any Governmental Authority, against the Borrower, WHC or its Subsidiaries
or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any other Loan Document,
or any of the transactions contemplated hereby or thereby; or
(b) if determined adversely to the Borrower, WHC or its Subsidiaries, would
reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
6.6 No Default
No Default or Event of Default exists or would result from the incurring of any
Obligation by the Borrower, WHC or any Subsidiary or from the grant or
perfection of the Liens of the Agent and the Lenders on the Collateral. As of
the Closing Date, neither the Borrower, WHC nor any Subsidiary is in default
under or with respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, could reasonably be expected to
have a Material Adverse Effect, or that would, if such default had occurred
after the Closing Date, create an Event of Default under Section 9.l(e).
6.7 ERISA Compliance
Except as specifically disclosed in Schedule 6.7:
(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law. Each Plan which is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of the Borrower,
nothing has occurred which would cause the loss of such qualification. The
Borrower, WHC and each ERISA Affiliate have made all required contributions to
any Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of the Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan which has resulted or could reasonably be expected to result
in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower, WHC
nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the
Borrower, WHC nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the
Borrower nor any ERISA Affiliate has engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
6.8 Use of Proceeds; Margin Regulations
The proceeds of the Loans are to be used solely for the purposes set forth in
and permitted by Section 7.12 and Section 8.7. Neither the Borrower, WHC nor any
Subsidiary is generally engaged in the business of purchasing or selling Margin
Stock or extending credit for the purpose of purchasing or carrying Margin
Stock.
6.9 Title to Properties
The Borrower, WHC and each Subsidiary have good record and marketable title in
fee simple to, or valid leasehold interests in, all real property necessary or
used in the ordinary conduct of their respective businesses, except for such
defects in title as could not, individually or in the aggregate, have a Material
Adverse Effect. As of this Closing Date, the property of the Borrower, WHC and
its Subsidiaries is subject to no Liens, other than Permitted Liens. All assets
held in the name of WHC are held for the benefit of and the beneficial interest
in all such assets is owned by the Borrower.
6.10 Taxes
The Borrower, WHC and its Subsidiaries have filed all Federal and other material
tax returns and reports required to be filed, and have paid all Federal and
other material taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided in accordance
with GAAP. There is no proposed tax assessment against the Borrower, WHC or any
Subsidiary that would, if made, have a Material Adverse Effect.
6.11 Financial Condition
(a) The audited consolidated financial statements of WHC and its Subsidiaries
dated December 31, 2002, and the consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal quarter ended on
March 31, 2003:
(i) were prepared in accordance with GAAP consistently applied throughout the
period covered thereby, except as otherwise expressly noted therein, subject to
ordinary, good faith year end audit adjustments;
(ii) fairly present the financial condition of the WHC and its Subsidiaries as
of the dates thereof and results of operations for the periods covered thereby;
and
(iii) except as specifically disclosed in Schedule 6.11, show all material
indebtedness and other liabilities, direct or contingent, of the Borrower, WHC
and their consolidated Subsidiaries as of the dates thereof, including
liabilities for taxes, material commitments and Contingent Obligations.
(b) Since March 31, 2003, there has been no Material Adverse Effect.
6.12 Environmental Matters
(a) Except as specifically disclosed in Schedule 6.12, the on-going operations
of the Borrower, WHC and each of its Subsidiaries comply in all respects with
all Environmental Laws, except such noncompliance which would not (if enforced
in accordance with applicable law) result in liability in excess of $500,000 in
the aggregate.
(b) Except as specifically disclosed in Schedule 6.12, the Borrower, WHC and
each of their Subsidiaries have obtained all licenses, permits, authorizations
and registrations required under any Environmental Law ("Environmental Permits")
and necessary for their respective ordinary course operations, all such
Environmental Permits are in good standing, and the Borrower, WHC and each of
their Subsidiaries are in compliance with all material terms and conditions of
such Environmental Permits.
(c) Except as specifically disclosed in Schedule 6.12, none of the Borrower, WHC
any of their Subsidiaries or any of their respective present property or
operations, is subject to any outstanding written order from or agreement with
any Governmental Authority, nor subject to any judicial or docketed
administrative proceeding, respecting any Environmental Law, Environmental Claim
or Hazardous Material.
(d) Except as specifically disclosed in Schedule 6.12, there are no Hazardous
Materials or other conditions or circumstances existing with respect to any
property of the Borrower, WHC or any Subsidiary, or arising from operations
prior to the Closing Date, of the Borrower, WHC or any of their Subsidiaries
that would reasonably be expected to give rive to Environmental Claims with a
potential liability of the Borrower, WHC and their Subsidiaries in excess of
$500,000 in the aggregate for any such condition, circumstance or property. In
addition, (i) neither the Borrower, WHC nor any Subsidiary has any underground
storage tanks (x) that are not properly registered or permitted under applicable
Environmental Laws, or (y) that are leaking or disposing of Hazardous Materials
off-site, and (ii) the Borrower, WHC and their Subsidiaries have notified all of
their employees of the existence, if any, of any health hazard arising from the
conditions of their employment and have met all notification requirements under
Title III of CERCLA and all other Environmental Laws.
6.13 Collateral Documents
(a) The provisions of each of the Collateral Documents are effective to create
in favor of the Agent for the benefit of the Lenders, a legal, valid and
enforceable security interest in all right, title and interest of the Borrower,
WHC and their Subsidiaries in the collateral described therein; and Deeds of
Trust have been delivered to the Agent for recording in the real estate records
of the county in which the real property to be encumbered thereby is located;
and financing statements have been delivered to the Agent for filing in the
offices in all of the jurisdictions listed in the schedule to the Security
Agreements and executed Patent Assignments, Trademarks Assignments and Copyright
Assignments have been delivered to the Agent for filing in the U.S. Patent and
Trademark Office and the U.S. Copyright Office and upon the filing of such
assignments and such financing statements in such offices, the Agent, for the
benefit of the Lenders, will have a perfected first priority security interest
in the Collateral.
(b) All representations and warranties of the Borrower, WHC and any of their
Subsidiaries party thereto contained in the Collateral Documents are true and
correct.
6.14 Regulated Entities
None of the Borrower, WHC, any Person controlling the Borrower or WHC, or any
Subsidiary, is an "Investment Company" within the meaning of the Investment
Company Act of 1940. The Borrower is not subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any state public utilities code, or any other Federal or state
statute or regulation limiting its ability to incur Indebtedness.
6.15 No Burdensome Restrictions
Neither the Borrower, WHC nor any Subsidiary is a party to or bound by any
Contractual Obligation, or subject to any restriction in any Organization
Document, or any Requirement of Law, which could reasonably be expected to have
a Material Adverse Effect.
6.16 Copyrights, Patents, Trademarks and Licenses, Etc.
The Borrower, WHC and their Subsidiaries own or are licensed or otherwise have
the right to use all of the patents, trademarks, service marks, trade names,
copyrights, contractual franchises, authorizations and other rights that are
reasonably necessary for the operation of their respective businesses, without
conflict with the rights of any other Person. To the best knowledge of the
Borrower, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Borrower, WHC or any Subsidiary infringes upon any rights held
by any other Person. Except as specifically disclosed in Schedule 6.5, no claim
or litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of the Borrower,
proposed, which, in either case, could reasonably be expected to have a Material
Adverse Effect.
6.17 Subsidiaries
The Borrower and WHC have no Subsidiaries other than those specifically
disclosed in part (a) of Schedule 6.17 hereto and have no equity investments in
any other corporation or entity other than those specifically disclosed in part
(b) of Schedule 6.17.
6.18 Insurance
Except as specifically disclosed in Schedule 6.18, the properties of the
Borrower, WHC and their Subsidiaries are insured with financially sound and
reputable insurance companies not Affiliates of the Borrower, in such amounts,
with such deductibles and covering such risks as are customarily carried by
companies engaged in similar businesses, including business interruption
insurance for a period of not less than 12 months, and owning similar properties
in localities where the Borrower, WHC or such Subsidiary operates.
6.19 Solvency
The Borrower, WHC and each of their Subsidiaries are Solvent.
6.20 Full Disclosure
None of the representations or warranties made by the Borrower, WHC or any
Subsidiary in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of the
Borrower, WHC or any Subsidiary in connection with the Loan Documents (including
the offering and disclosure materials delivered by or on behalf of the Borrower
to the Lenders prior to the Closing Date), contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
ARTICLE VII. AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment to make Loans or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Required Lenders
waive compliance in writing:
7.1 Financial Statements
The Borrower shall deliver to the Agent, in form and detail satisfactory to the
Agent and the Required Lenders, with sufficient copies for each Lender:
(a) as soon as available, but not later than 90 days after the end of each
fiscal year, a copy of the audited consolidated balance sheet of the Borrower,
WHC and their Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of BDO Seidman, LLP
or another nationally recognized independent public accounting firm
("Independent Auditor") which report shall state that such consolidated
financial statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years. Such opinion shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material portion of the
Borrower's, WHC's or any Subsidiary's records;
(b) as soon as available, but not later than 45 days after the end of each of
the first three fiscal quarters of each fiscal year a copy of the unaudited
consolidated balance sheet of the Borrower, WHC and their Subsidiaries as of the
end of such quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and the results of
operations of the Borrower, WHC and the Subsidiaries;
(c) as soon as available, but not later than 45 days after the end of each
fiscal quarter of each fiscal year, a copy of the unaudited consolidating
balance sheets of the Borrower, WHC and their Subsidiaries, and the related
consolidating statements of income, shareholders' equity and cash flows for such
quarter, all certified by a Responsible Officer as having been developed and
used in connection with the preparation of the financial statement referred to
in Section 7.1(b);
(d) as soon as available, but not later than 45 days after the end of each
fiscal quarter of each fiscal year, a copy of the unaudited operating statements
for each parcel of Eligible Real Property and each parcel of real property
encumbered by a Deed of Trust as of the end of such quarter for such quarter and
for the four quarters then ended, in such form and detail as reasonably
designated by the Agent, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith year-end
audit adjustments), the financial results of operations for each such parcel of
real property.
7.2 Certificates; Other Information
The Borrower shall furnish to the Agent, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial statements referred to in
Section 7.1(a), a certificate of the Independent Auditor stating that in making
the examination necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements referred to in
Sections 7.1(a) and (b), a Compliance Certificate executed by a Responsible
Officer and a worksheet showing the calculation of the Financial Covenants;
(c) promptly, copies of all financial statements and reports that the Borrower
or WHC sends to its shareholders, and copies of all financial statements and
regular, periodical or special reports (including Forms 10-K, 10-Q and 8-K) that
the Borrower, WHC or any Subsidiary may make to, or file with, the SEC; and
(d) promptly, such additional information regarding the business, financial,
partnership or corporate affairs of the Borrower, WHC or any Subsidiary as the
Agent, at the request of any Lender, may from time to time reasonably request.
7.3 Notices
The Borrower shall promptly notify the Agent and each Lender:
(a) of the occurrence of any Default or Event of Default, and of the occurrence
or existence of any event or circumstance that foreseeably will become a Default
or Event of Default;
(b) of (i) any breach or nonperformance of, or any default under, any
Contractual Obligation of the Borrower, WHC or any of their Subsidiaries which
could result in a Material Adverse Effect; and (ii) any dispute, litigation,
investigation, proceeding or suspension which may exist at any time between the
Borrower, WHC or any of their Subsidiaries and any Governmental Authority and
which, if adversely determined, could result in a Material Adverse Effect;
(c) of the commencement of, or any material development in, any litigation or
proceeding affecting the Borrower, WHC or any Subsidiary (i) in which the amount
of damages claimed is $1,000,000 (or its equivalent in another currency or
currencies) or more if any potential loss is not fully covered by insurance
(subject to reasonable deductibles), (ii) in which the amount of damages claimed
is $5,000,000 (or its equivalent in another currency or currencies) or more if
any potential loss is fully covered by insurance, (iii) in which injunctive or
similar relief is sought and which, if adversely determined, would reasonably be
expected to have a Material Adverse Effect, or (iv) in which the relief sought
is an injunction or other stay of the performance of this Agreement or any Loan
Document;
(d) upon, but in no event later than ten days after, becoming aware of (i) any
and all enforcement, cleanup, removal or other governmental or regulatory
actions instituted, completed or threatened against the Borrower, WHC or any
Subsidiary or any of their respective properties pursuant to any applicable
Environmental Laws, (ii) all other Environmental Claims, and (iii) any
environmental or similar condition on any real property adjoining or in the
vicinity of the property of the Borrower, WHC or any Subsidiary that could
reasonably be anticipated to cause such property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
of such property under any Environmental Laws;
(e) of any other litigation or proceeding affecting the Borrower, WHC or any of
their Subsidiaries which the Borrower would be required to report to the SEC
pursuant to the Exchange Act, within four days after reporting the same to the
SEC;
(f) of any of the following events affecting the Borrower or WHC, together with
a copy of any notice with respect to such event that may be required to be filed
with a Governmental Authority and any notice delivered by a Governmental
Authority to the Borrower with respect to such event:
(i) an ERISA Event;
(ii) if any of the representations and warranties in Section 6.7 ceases to be
true and correct;
(iii) the adoption of any new Pension Plan or other Plan subject to Section 412
of the Code;
(iv) the adoption of any amendment to a Pension Plan or other Plan subject to
Section 412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability; or
(v) the commencement of contributions to any Pension Plan or other Plan subject
to Section 412 of the Code; and
(g) of any material change in accounting policies or financial reporting
practices by the Borrower, WHC or any of its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a written statement by a
Responsible Officer setting forth details of the occurrence referred to therein,
and stating what action the Borrower, WHC or any affected Subsidiary proposes to
take with respect thereto and at what time. Each notice under Section 7.3(a)
shall describe with particularity any and all clauses or provisions of this
Agreement or other Loan Document that have been (or foreseeably will be)
breached or violated.
7.4 Preservation of Existence, Etc.
The Borrower shall, and shall cause WHC and each of their Subsidiaries to:
(a) preserve and maintain in full force and effect its legal existence and good
standing under the laws of its state or jurisdiction of organization;
(b) preserve and maintain in full force and effect all governmental rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business except in connection with
transactions permitted by Section 8.3 and sales of assets permitted by
Section 8.2;
(c) use reasonable efforts, in the ordinary course of business, to preserve its
business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks, trade names and
service marks, the nonpreservation of which could reasonably be expected to have
a Material Adverse Effect.
7.5 Maintenance of Property
The Borrower shall maintain, and shall cause WHC and each of their Subsidiaries
to maintain, and preserve all their property which is used or useful in its
business in good working order and condition, ordinary wear and tear excepted
and make all necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect, except as permitted by Section 8.2.
7.6 Insurance
In addition to insurance requirements set forth in the Collateral Documents, the
Borrower shall maintain, and shall cause WHC and each of their Subsidiaries to
maintain, with financially sound and reputable independent insurers, insurance
with respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business,
of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons including workers' compensation insurance,
public liability and property and casualty insurance which amount shall not be
reduced by the Borrower in the absence of 30 days' prior notice to the Agent.
All such insurance shall name the Agent as loss payee/mortgagee and as
additional insured, for the benefit of the Lenders, as their interests may
appear. Upon request of the Agent or any Lender, the Borrower shall furnish the
Agent, with sufficient copies for each Lender, at reasonable intervals (but not
more than once per calendar year) a certificate of a Responsible Officer of the
Borrower (and, if requested by the Agent, any insurance broker of the Borrower)
setting forth the nature and extent of all insurance maintained by the Borrower,
WHC and their Subsidiaries in accordance with this Section or any Collateral
Documents (and which, in the case of a certificate of a broker, were placed
through such broker).
7.7 Payment of Obligations
The Borrower shall, and shall cause WHC and each of their Subsidiaries to, pay
and discharge as the same shall become due and payable, all their respective
obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or levies upon it
or its properties or assets, unless the same are being contested in good faith
by appropriate proceedings and adequate reserves in accordance with GAAP are
being maintained by the Borrower, WHC or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien upon its
property; and
(c) all Indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
7.8 Compliance With Laws
The Borrower shall comply, and shall cause WHC and each of their Subsidiaries to
comply, in all material respects with all Requirements of Law of any
Governmental Authority having jurisdiction over it or its business (including
the Federal Fair Labor Standards Act), except such as may be contested in good
faith or as to which a bona fide dispute may exist.
7.9 Compliance With ERISA
The Borrower shall, and shall cause WHC and each of their ERISA Affiliates to:
(a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law;
(b) cause each Plan which is qualified under Section 401(a) of the Code to
maintain such qualification; and (c) make all required contributions to any Plan
subject to Section 412 of the Code.
7.10 Inspection of Property and Books and Records
The Borrower shall maintain and shall cause WHC and each of their Subsidiaries
to maintain proper books of record and account, in which full, true and correct
entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of the
Borrower, WHC and such Subsidiary. The Borrower shall permit, and shall cause
WHC and each Subsidiary to permit, representatives and independent contractors
of the Agent to visit and inspect any of their respective properties, to examine
their respective limited partnership or corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective directors,
officers, and independent public accountants, all at the expense of the Borrower
and at such reasonable times during normal business hours, upon reasonable
advance notice to the Borrower; provided, however, when an Event of Default
exists the Agent or any Lender may do any of the foregoing at the expense of the
Borrower at any time during normal business hours and without advance notice.
7.11 Environmental Laws
(a) The Borrower shall, and shall cause WHC and each of their Subsidiaries to,
conduct their operations and keep and maintain its property in compliance with
all Environmental Laws.
(b) Upon the written request of the Agent or any Lender, the Borrower shall
submit and cause WHC and each of their Subsidiaries to submit, to the Agent with
sufficient copies for each Lender, at the Borrower's sole cost and expense, at
reasonable intervals, a report providing an update of the status of any
environmental, health or safety compliance, hazard or liability issue identified
in any notice or report required pursuant to Section 7.3(d), that could,
individually or in the aggregate, result in liability in excess of $500,000.
7.12 Use of Proceeds
The Borrower shall use the proceeds of the Loans for working capital, funding
operations, and other general business purposes not in contravention of any
Requirement of Law or of any Loan Document; provided that all proceeds shall be
used for the benefit of the Borrower.
7.13 Appraisals
(a) Prior to a parcel of real property becoming Eligible Real Property, there
shall be established for such parcel of real property the Approved Appraisal
Value based upon an appraisal thereof performed at the Borrower's sole cost.
(b) In the event that a parcel of real property has constituted Eligible Real
Property for in excess of 18 months, the Agent may, in its discretion or at the
request of the Required Lenders, have such parcel of real property reappraised,
and upon the Agent's written approval of such reappraisal, the reappraised value
shall constitute the Approved Appraised Value for such parcel of real property.
Except as provided in Section 7.13(c), the cost of any such reappraisal shall be
borne by the Lenders based upon each Lender's Pro Rata Share.
(c) Upon the occurrence and during the continuation of any Event of Default, the
Agent may, in its discretion or at the request of the Required Lenders, have any
one or more parcels of Eligible Real Property reappraised, and upon the Agent's
written approval of any such reappraisal, the reappraised value shall constitute
the Approved Appraised Value for any such parcel of Eligible Real Property. The
Borrower shall reimburse the Agent for the cost of any such reappraisal
performed pursuant to this subsection upon demand.
(d) The Borrower shall cooperate with the Agent and its designated appraisers in
connection with all appraisals and reappraisals of real property performed
pursuant to this Agreement.
7.14 Further Assurances
(a) The Borrower shall ensure that all written information, exhibits and reports
furnished to the Agent or the Lenders do not and will not contain any untrue
statement of a material fact and do not and will not omit to state any material
fact or any fact necessary to make the statements contained therein not
misleading in light of the circumstances in which made, and will promptly
disclose to the Agent and the Lenders and correct any defect or error that may
be discovered therein or in any Loan Document or in the execution,
acknowledgment or recordation thereof.
(b) Promptly upon request by the Agent or the Required Lenders, the Borrower
shall (and shall cause WHC and any of their Subsidiaries to) do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments the Agent or such
Lenders, as the case may be, may reasonably require from time to time in order
(i) to carry out more effectively the purposes of this Agreement or any other
Loan Document, (ii) to subject to the Liens created by any of the Collateral
Documents any of the properties, rights or interests covered by any of the
Collateral Documents, (iii) to perfect and maintain the validity, effectiveness
and priority of any of the Collateral Documents and the Liens intended to be
created thereby, and (iv) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm to the Agent and Lenders the rights granted or now
or hereafter intended to be granted to the Lenders under any Loan Document or
under any other document executed in connection therewith.
(c) Within 20 days of the Closing Date, the Borrower shall deliver to the Agent,
lien search results evidencing the filing of Financing Statements (as defined in
the Security Agreements) in the jurisdictions listed in Schedule 7.14 hereto,
naming the Borrower and WHC as "debtor" and the Agent as "secured party" and
confirming that no other financing statements have been filed with respect to
the Collateral in such jurisdictions (other than Permitted Liens).
(d) Promptly upon any Person becoming after the date hereof a Subsidiary, the
Borrower:
(i) shall cause such Subsidiary to execute and deliver to the Agent a guaranty
of all of the Obligations in form and substance reasonably acceptable to the
Required Lenders and the Agent;
(ii) shall cause such Subsidiary to execute and deliver to the Agent a security
agreement granting a security interest in all of such Subsidiary's assets in
favor of the Agent for the benefit of the Lenders as security for the
Obligations (including the obligations of such Subsidiary under the guaranty
referred to in clause (i) above), in form and substance reasonably acceptable to
the Required Lenders and the Agent and shall cause to be delivered to the Agent
with respect to such Subsidiary the documents referred to in Section 5.1,
mutatis mutandis, together with such opinions in form and substance and from
counsel reasonably satisfactory to the Agent, as the Agent may require; and
(iii) shall cause such Person that is the Borrower or an Affiliate of the
Borrower that is the direct owner of any shares of capital stock (or other
evidence of beneficial ownership) of such Subsidiary to execute and deliver to
the Agent a pledge agreement pledging in favor of the Agent for the benefit of
the Lenders as security for the Obligations, all of such capital stock, in form
and substance reasonably acceptable to the Required Lenders and the Agent, and
shall cause to be delivered to the Agent certificates evidencing all of the
issued and outstanding shares of capital stock (or other evidence of beneficial
ownership) of such Subsidiary, together with undated stock powers (or similar
instruments of transfer) owned by such Persons duly executed in blank and
appropriately completed Uniform Commercial Code financing statements, if
applicable, with respect thereto (or, if any such shares of capital stock (or
other evidence of beneficial ownership) are not represented by certificates,
confirmation and evidence satisfactory to the Agent that the security interest
in such shares (or other such evidence) has been transferred and/or registered
in accordance with the laws of the applicable jurisdictions so as to create a
valid first-priority perfected security interest therein for the benefit of the
Agent and the Lenders) and together with such opinions in form and substance and
from counsel reasonably satisfactory to the Agent, as the Agent may reasonably
require; provided, that in the case of an Acquisition where the Borrower, WHC
and their Affiliates acquire less than 100% of the common shares or other common
voting equity interests of a Person, the Borrower shall be required to provide
the security agreement and guaranty provided for in clauses (i) and (ii) above
only if consented to by a majority of the holders (other than the Borrower, WHC
and their Affiliates) of the common shares or other common voting equity
interests of such Person; provided, further, that the Borrower shall be required
to make a diligent and good faith request for such consent from such holders;
provided, further, if all of the common shares or other common voting equity
interests of such Person are subsequently acquired by the Borrower, WHC and
their Affiliates, such Person shall promptly comply with clauses (i) and
(ii) above.
7.15 Minimum Number of Parcels
At all times that there are any Loans outstanding, there shall be not fewer than
three parcels of Eligible Real Property.
ARTICLE VIII. NEGATIVE COVENANTS
So long as any Lender shall have any Commitment to make Loans, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Required Lenders
waive compliance in writing:
8.1 Limitation on Liens
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
directly or indirectly, make, create, incur, assume or suffer to exist any Lien
upon or with respect to any part of its property (including, without limitation,
the partnership units of the Borrower owned by WHC), whether now owned or
hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien (other than a Lien on the Collateral) existing on property of the
Borrower, WHC or any Subsidiary on the Closing Date that is described in
Schedule 8.1 securing Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges which are
not delinquent or remain payable without penalty, or to the extent that
nonpayment thereof is permitted by Section 7.7, provided that no notice of lien
has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA and other than on the
Collateral) consisting of pledges or deposits required in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other social security legislation;
(f) Liens (other than Liens on the Collateral) on the property of the Borrower,
WHC or their Subsidiaries securing (i) the nondelinquent performance of bids,
trade contracts (other than for borrowed money), leases, statutory obligations,
(ii) contingent obligations of a like nature; in each case, incurred in the
ordinary course of business, provided all such Liens in the aggregate would not
(even if enforced) cause a Material Adverse Effect;
(g) Liens (other than Liens on the Collateral) consisting of judgment or
judicial attachment liens, provided that the enforcement of such Liens is
effectively stayed and all such liens in the aggregate at any time outstanding
for the Borrower, WHC and their Subsidiaries do not exceed $1,000,000;
(h) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct of
the businesses of the Borrower, WHC and their Subsidiaries; provided that any
such easements, rights-of-way, restrictions and other similar encumbrances
related to Eligible Real Property shall be subject to the Agent's prior written
approval;
(i) Liens on assets of Persons that become Subsidiaries after the date of this
Agreement, provided, however, that such Liens existed at the time the respective
Persons became Subsidiaries and were not created in anticipation thereof;
(j) purchase money security interests in equipment acquired or held by the
Borrower, WHC or their Subsidiaries in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any part of
the cost of acquiring such equipment; provided that (i) any such Lien attaches
to such property concurrently with or within 20 days after the acquisition
thereof and (ii) such Lien attaches solely to the property so acquired in such
transaction;
(k) Liens securing obligations in respect of capital leases on assets subject to
such leases, provided that such capital leases are otherwise permitted
hereunder;
(l) Liens arising solely by virtue of any statutory or common law provision
relating to banker's liens, rights of set-off or similar rights and remedies as
to deposit accounts or other funds maintained with a creditor depository
institution; provided that (i) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by the
Borrower in excess of those set forth by regulations promulgated by the FRB, and
(ii) such deposit account is not intended by the Borrower, WHC or any Subsidiary
to provide collateral to the depository institution;
(m) Liens on real property used primarily in the hospitality business and
acquired by the Borrower, WHC or any Subsidiary after the Closing Date that is
not encumbered by any Deed of Trust; provided that (i) any such Lien attaches to
such real property concurrently with or within 20 days after the acquisition
thereof or such Lien is to secure Indebtedness the proceeds of which are used to
refinance acquisition Indebtedness with respect to such real property, (ii) such
Lien attaches solely to such real property and personal property located on such
real property, as well as proceeds thereof, and (iii) such Acquisition is
approved in writing by the Required Lenders; and
(n) Liens on real property that (i) was acquired by the Borrower, WHC or any
Subsidiary before the Closing Date, (ii) was not encumbered by any mortgage,
deed of trust or similar instrument as of the Closing Date or the date such Lien
attaches, or with respect to which any such encumbrance that existed on the
Closing Date is removed or satisfied through the use of proceeds of the Loans or
the initial public offering of the common stock of WHC, and (iii) is not
encumbered by any Deed of Trust; provided that (iv) any such Lien is approved by
the Required Lenders and (v) such Lien attaches solely to such real property and
personal property located on such real property, as well as proceeds thereof.
8.2 Disposition of Assets
(a) The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary
to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise
dispose of any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing, except
that so long as there exists no Default or Event of Default and so long as the
proposed disposition would not cause the occurrence of a Default or an Event of
Default there shall be permitted:
(i) dispositions of inventory or used, worn-out or surplus equipment all in the
ordinary course of business;
(ii) the sale of equipment to the extent that such equipment is exchanged for
credit against the purchase price of similar replacement equipment, or the
proceeds of such sale are reasonably promptly applied, consistent with
Section 2.5, to the purchase price of such replacement equipment; and
(iii) the sale of assets (including, without limitation, Eligible Real Property)
for cash at a price equal to or greater than the fair market value of such
assets, provided that prior to or concurrently with the completion of any such
sale of Collateral, the Borrower shall repay the Loans in amount equal to the
Net Proceeds from such sale of assets.
(b) Notwithstanding the provisions of Section 8.2(a) to the contrary, the
Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
directly or indirectly, sell, assign, lease, convey, transfer or otherwise
dispose of (whether in one transaction or a series of related transactions) any
property (including accounts and notes receivable, with or without recourse) or
enter into any agreement to do any of the foregoing for an aggregate purchase
price in excess of $35,000,000 during any 12-month period.
8.3 Consolidations and Mergers
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
merge, consolidate with or into, or convey, transfer, lease or otherwise dispose
of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person, except:
(a) any Subsidiary may merge with the Borrower or WHC, provided that the
Borrower or WHC (as the case may be) shall be the continuing or surviving
entity, or with any one or more Subsidiaries, provided that if any transaction
shall be between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned
Subsidiary shall be the continuing or surviving entity; and
(b) any Subsidiary may sell all or substantially all of its assets (upon
voluntary liquidation or otherwise) to the Borrower or another Wholly-Owned
Subsidiary.
8.4 Loans and Investments
The Borrower shall not purchase or acquire, or suffer or permit WHC or any
Subsidiary to purchase or acquire, or make any commitment therefor, any capital
stock, equity interest, or any obligations or other securities of, or any
interest in, any Person, or make or commit to make any Acquisitions, or make or
commit to make any advance, loan, extension of credit or capital contribution to
or any other investment in, any Person including any Affiliate of the Borrower,
except for:
(a) investments in Cash Equivalents;
(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
(c) extensions of credit by the Borrower, WHC or any Subsidiary to any direct or
indirect wholly-owned Subsidiaries of Borrower or WHC; and
(d) investments made in connection with and constituting part of the
consideration paid for Acquisitions to the extent that (i) any such Acquisition
is not prohibited under Section 8.7, and (ii) any such Acquisition is approved
in writing by the Required Lenders; provided that no Acquisition shall be
consummated by the Borrower, WHC or any Subsidiary unless the Borrower has
demonstrated to the reasonable satisfaction of the Required Lenders with pro
forma financial statements prepared to reflect such Acquisition that the
Borrower will be in compliance with the Financial Covenants; and provided
further that Acquisitions described in Section 8.7(f) shall not require the
written approval by the Required Lenders.
8.5 Limitation on Indebtedness
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
create, incur, assume, suffer to exist, or otherwise become or remain directly
or indirectly liable with respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted pursuant to
Section 8.8;
(c) Indebtedness existing on the Closing Date that is described in Schedule 8.5
and any refinance of such Indebtedness in an amount not to exceed the
outstanding principal balance thereof as of the Closing Date; provided that if
any such Indebtedness is Nonrecourse Indebtedness that is secured by assets not
used primarily in the hospitality business, then any Indebtedness to refinance
such Indebtedness shall be Nonrecourse Indebtedness;
(d) Indebtedness consisting of Subordinated Debt incurred after the Closing
Date;
(e) Nonrecourse Indebtedness incurred after the Closing Date;
(f) Indebtedness secured by a Lien permitted under Section 8.1(j) or (m);
(g) Indebtedness incurred in connection with leases permitted pursuant to
Section 8.9(a); and
(h) Guaranty Obligations permitted under Section 8.4(e).
8.6 Transactions With Affiliates
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
enter into any transaction with any Affiliate of the Borrower, except upon fair
and reasonable terms no less favorable to the Borrower, WHC or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person not an
Affiliate of the Borrower, WHC or such Subsidiary.
8.7 Use of Proceeds
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
use any portion of the Loan proceeds, directly or indirectly, (a) to purchase or
carry Margin Stock, (b) to purchase or redeem any stock, partnership units or
other equity interest of the Borrower or WHC; provided that Loan proceeds may be
used to redeem Preferred Stock to the extent that WHC is not precluded from
redeeming Preferred Stock by the provisions of this Agreement (including,
without limitation, Section 8.10), (c) to repay or otherwise refinance
indebtedness of the Borrower or others incurred to purchase or carry Margin
Stock, (d) to extend credit for the purpose of purchasing or carrying any Margin
Stock, (e) to acquire any security in any transaction that is subject to
Section 13 or 14 of the Exchange Act, or (f) to finance or refinance the
acquisition of any interest in real property (including leasehold interests in
real property and improvements) or the acquisition of any Person.
8.8 Contingent Obligations
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
create, incur, assume or suffer to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course of business;
(b) Swap Contracts entered into in the ordinary course of business as bona fide
hedging transactions;
(c) Contingent Obligations of the Borrower, WHC and their Subsidiaries existing
as of the Closing Date that are described in Schedule 8.8; and
(d) Contingent Obligations of the Borrower, WHC and their Subsidiaries with
respect to which the contingent liability of the Borrower, WHC and/or their
Subsidiaries (as the case may be) is supported by a letter of credit or
indemnity issued to or for the benefit of the Borrower, WHC and/or their
Subsidiaries (as the case may be), which letter of credit or indemnity has been
approved in writing by the Required Lenders.
8.9 Lease Obligations
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
create or suffer to exist any obligations for the payment of rent for any
property under lease or agreement to lease, except for:
(a) capital leases of the Borrower, WHC and of the Subsidiaries to finance the
acquisition of equipment; and
(b) operating leases entered into by the Borrower, WHC or any Subsidiary in the
ordinary course of business.
8.10 Restricted Payments
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any shares of
any class of its capital stock, partnership units or other ownership interests
(as the case may be), or purchase, redeem or otherwise acquire for value any
shares of its capital stock partnership units or other ownership interests (as
the case may be) or any warrants, rights or options to acquire such shares or
partnership units, now or hereafter outstanding; except that (a) WHC or the
Borrower may declare and make dividend payments or other distributions payable
solely in its common stock or partnership units (as the case may be), (b) the
Borrower may make distributions to its partners in an amount necessary to allow
WHC to pay income and gross receipts taxes on the taxable income of the Borrower
that is recognized by its partners for tax purposes, provided that (i) at the
time of making the distribution there exists no Event of Default and (ii) after
giving effect to any proposed distribution, there would not exist any Event of
Default, (c) WHC and the Borrower may pay dividends and distributions to their
shareholders or partners (as the case may be) or purchase or redeem shares of
capital stock or partnership units (as the case may be), provided that (i) at
the time of making the dividend, distribution, purchase or redemption payment
there exists no Event of Default, (ii) after giving effect to the proposed
payment, there would not exist an Event of Default, (iii) the Agent shall have
received and approved a pro forma calculation of the Financial Covenants dated
as of the end of the fiscal quarter of the Borrower immediately preceeding that
in which the proposed payment of the dividend, distribution, purchase or
redemption is to be made reflecting pro forma compliance with the Financial
Covenants as of such date, (iv) the Agent shall have received and approved a pro
forma calculation of the Financial Covenants dated as of the end on the fiscal
quarter of the Borrower in which the proposed payment of the dividend,
distribution, purchase or redemption is to be made reflecting pro forma
compliance with the Financial Covenants as of such date, and (v) purchases and
redemptions of the common stock of WHC on and after June 30, 2002, shall not
exceed $5,000,000 in the aggregate, (d) WHC may issue stock to partners of the
Borrower in exchange for partnership units of the Borrower, (e) any Subsidiary
other than the Borrower may pay dividends and make distributions to WHC or to
any Subsidiary that owns and controls more than 50% of the voting stock,
membership interests or other equity interests of the Person paying the dividend
or making the distribution, and (f) Tier I LLCs may make distributions to the
Tier II LLCs and the Tier II LLCs may make distributions to the Borrower.
8.11 ERISA
The Borrower shall not, and shall not suffer or permit any ERISA Affiliate of
the Borrower or WHC to: (a) engage in a prohibited transaction or violation of
the fiduciary responsibility rules with respect to any Plan which has resulted
or could reasonably be expected to result in liability of the Borrower in an
aggregate amount in excess of $500,000; or (b) engage in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
8.12 Change in Business
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
engage in any material line of business substantially different from those lines
of business carried on by the Borrower, WHC and their Subsidiaries on the date
hereof.
8.13 Accounting Changes
The Borrower shall not, and shall not suffer or permit WHC or any Subsidiary to,
make any significant change in accounting treatment or reporting practices,
except as required by GAAP, or change the fiscal year of the Borrower, WHC or of
any Subsidiary.
8.14 Financial Covenants
(a) Recourse Funded Debt Ratio
As of the end of each fiscal quarter for the four fiscal quarters then ended,
commencing with the fiscal quarter ending June 30, 2003, the Recourse Funded
Debt Ratio shall not exceed 4.25:1.00.
(b) Fixed Charge Coverage Ratio
As of the end of each fiscal quarter for the four fiscal quarters then ended,
commencing with the fiscal quarter ending June 30, 2003, the Fixed Charge
Coverage Ratio shall not be less than 1.15:1.00.
8.15 Subordinated Debt
Not, and not permit WHC or any of their Subsidiaries to make any payment
(whether of principal, interest or otherwise) on any Subordinated Debt on any
day other than the stated, scheduled date for such payment set forth in the
documents and instruments evidencing such Subordinated Debt that have been
approved by the Required Lenders or in contravention or violation of the
subordination provisions thereof.
ARTICLE IX. EVENTS OF DEFAULT
9.1 Event of Default
Any of the following shall constitute an "Event of Default":
(a) Nonpayment
The Borrower fails to pay, (i) when and as required to be paid herein, any
amount of principal of any Loan, or (ii) within five days after the same becomes
due, any interest, fee or any other amount payable hereunder or under any other
Loan Document; or
(b) Representation or Warranty
Any representation or warranty by the Borrower, WHC or any Subsidiary made or
deemed made herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by the Borrower, WHC or
any Subsidiary, or any Responsible Officer, furnished at any time under this
Agreement, or in or under any other Loan Document, is incorrect in any material
respect on or as of the date made or deemed made; or
(c) Specific Defaults
The Borrower fails to perform or observe any term, covenant or agreement
contained in any of Section 7.3, 7.6 or 7.9 or in Article VIII other than
Sections 8.6 and 8.13, or the Borrower fails to perform or observe any term,
covenant or agreement contained in Section 7.1 or 7.2 within five days after
written notice is given to the Borrower by the Agent or any Lender; or
(d) Other Defaults
The Borrower, WHC or any Subsidiary party thereto fails to perform or observe
any other term or covenant contained in this Agreement or any other Loan
Document, and such default shall continue unremedied for a period of 30 days
after the occurrence of such default; or
(e) Cross-Default
The Borrower, WHC or any Subsidiary (i) fails to make any payment in respect of
any Indebtedness or Contingent Obligation having an aggregate principal amount
(including undrawn, committed or available amounts and including amounts owing
to all creditors under any combined or syndicated credit arrangement) of more
than $1,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure; or (ii) fails to perform or observe any other
condition or covenant, or any other event shall occur or condition exist, under
any agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure,
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings
The Borrower, WHC or any Subsidiary (i) ceases or fails to be solvent, or
generally fails to pay, or admits in writing its inability to pay, its debts as
they become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) voluntarily ceases to conduct its business in the
ordinary course; (iii) commences any Insolvency Proceeding with respect to
itself; or (iv) takes any action to effectuate or authorize any of the
foregoing; or
(g) Involuntary Proceedings
(i) Any involuntary Insolvency Proceeding is commenced or filed against the
Borrower, WHC or any Subsidiary, or any writ, judgment, warrant of attachment,
execution or similar process, is issued or levied against a substantial part of
the Borrower's, WHC's or any Subsidiary's properties, and any such proceeding or
petition shall not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not be released, vacated or fully bonded
within 60 days after commencement, filing or levy; (ii) the Borrower, WHC or any
Subsidiary admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order under non-U.S.
law) is ordered in any Insolvency Proceeding; or (iii) the Borrower, WHC or any
Subsidiary acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property or business;
or
(h) ERISA
(i) An ERISA Event shall occur with respect to a Pension Plan or Multiemployer
Plan which has resulted or could reasonably be expected to result in liability
of the Borrower, WHC or any Subsidiary under Title IV of ERISA to the Pension
Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$500,000; or (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $500,000; or (iii) the Borrower, WHC or any
ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate
amount in excess of $500,000; or
(i) Monetary Judgments
One or more noninterlocutory judgments, noninterlocutory orders, decrees or
arbitration awards is entered against the Borrower, WHC or any Subsidiary
involving in the aggregate a liability (i) (to the extent not covered by
independent third-party insurance as to which the insurer does not dispute
coverage) as to any single or related series of transactions, incidents or
conditions, of $1,000,000 or more, or (ii) as to any single or related series of
transactions, incidents or conditions, of $5,000,000 or more (whether or not
covered by third-party insurance as to which the insurer does not dispute
coverage), and the same shall remain unpaid or unvacated and unstayed pending
appeal for a period of ten days after the entry thereof; or
(j) Nonmonetary Judgments
Any nonmonetary judgment, order or decree is entered against the Borrower, WHC
or any Subsidiary which does or would reasonably be expected to have a Material
Adverse Effect, and there shall be any period of ten consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(k) Adverse Change
There occurs a Material Adverse Effect; or
(l) Invalidity of Subordination Provisions
The subordination provisions of any agreement or instrument governing any
Subordinated Debt is for any reason revoked or invalidated, or otherwise cease
to be in full force and effect, any Person contests in any manner the validity
or enforceability thereof or denies that it has any further liability or
obligation thereunder, or the Indebtedness hereunder is for any reason
subordinated or does not have the priority contemplated by this Agreement or
such subordination provisions; or
(m) Collateral
(i) Any provision of any Collateral Document shall for any reason cease to be
valid and binding on or enforceable against the Borrower, WHC or any Subsidiary
party thereto or the Borrower, WHC or any Subsidiary shall so state in writing
or bring an action to limit its obligations or liabilities thereunder; or and
(ii) any Collateral Document shall for any reason (other than pursuant to the
terms thereof) cease to create a valid security interest in the Collateral
purported to be covered thereby or such security interest shall for any reason
cease to be a perfected and first priority security interest subject only to
Permitted Liens
9.2 Remedies
If any Event of Default occurs, the Agent shall, at the request of, or may, with
the consent of, the Required Lenders, or as otherwise provided for in
Section 10.5:
(a) declare the commitment of each Lender to make Loans to be terminated,
whereupon such commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest
accrued and unpaid thereon, and all other amounts owing or payable hereunder or
under any other Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; and
(c) exercise on behalf of itself and the Lenders all rights and remedies
available to it and the Lenders under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 9.1 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each
Lender to make Loans shall automatically terminate and the unpaid principal
amount of all outstanding Loans, together with all interest and other amounts as
aforesaid shall automatically become due and payable without further act of the
Agent or any Lender.
9.3 Rights Not Exclusive
The rights provided for in this Agreement and the other Loan Documents are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other instrument, document
or agreement now existing or hereafter arising.
9.4 Certain Financial Covenant Defaults
In the event that, after taking into account any extraordinary charge to
earnings taken or to be taken as of the end of any fiscal period of WHC (a
"Charge"), and if solely by virtue of such Charge, there would exist an Event of
Default due to the breach of any provision of Section 8.14 as of such fiscal
period end date, such Event of Default shall be deemed to arise upon the earlier
of (a) the date after such fiscal period and date on which WHC announces
publicly that it will take, is taking or has taken such Charge (including an
announcement in the form of a statement in a report filed with the SEC) or, if
such announcement is made prior to such fiscal period end date, the date that is
such fiscal period end date, and (b) the date the Borrower or WHC delivers to
the Agent its audited annual or unaudited quarterly financial statements in
respect of such fiscal period reflecting such Charge as taken.
ARTICLE X. THE AGENT
10.1 Appointment and Authorization
Each Lender hereby irrevocably (subject to Section 10.9) appoints, designates
and authorizes the Agent to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agent.
10.2 Delegation of Duties
The Agent may execute any of its duties under this Agreement or any other Loan
Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any agent
or attorney-in-fact that it selects with reasonable care.
10.3 Liability of Agent
None of the Agent-Related Persons shall (i) be liable for any action taken or
omitted to be taken by any of them under or in connection with this Agreement or
any other Loan Document or the transactions contemplated hereby (except for its
own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Lenders for any recital, statement, representation or
warranty made by the Borrower, WHC or any Subsidiary or Affiliate of the
Borrower, or any officer thereof, contained in this Agreement or in any other
Loan Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in connection
with, this Agreement or any other Loan Document, or for the value of or title to
any Collateral, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
the Borrower or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of the
Borrower, WHC or any of the Borrower's Subsidiaries or Affiliates.
10.4 Reliance by Agent
(a) The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, statement or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Required
Lenders and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions specified in
Section 5.1, each Lender that has executed this Agreement shall be deemed to
have consented to, approved or accepted or to be satisfied with, each document
or other matter either sent by the Agent to such Lender for consent, approval,
acceptance or satisfaction, or required thereunder to be consented to or
approved by or acceptable or satisfactory to the Lender.
10.5 Notice of Default
The Agent shall not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default, except with respect to defaults in the payment
of principal, interest and fees required to be paid to the Agent for the account
of the Lenders, unless the Agent shall have received written notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default." The
Agent will notify the Lenders of its receipt of any such notice. The Agent shall
take such action with respect to such Default or Event of Default as may be
requested by the Required Lenders in accordance with Article IX; provided,
however, that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable or in the best interest of the Lenders.
10.6 Credit Decision
Each Lender acknowledges that none of the Agent-Related Persons has made any
representation or warranty to it, and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower, WHC and their
Subsidiaries, shall be deemed to constitute any representation or warranty by
any Agent-Related Person to any Lender. Each Lender represents to the Agent that
it has, independently and without reliance upon any Agent-Related Person and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower,
WHC and their Subsidiaries, the value of and title to any Collateral, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Borrower hereunder. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower, WHC and their Subsidiaries. Except for
notices, reports and other documents expressly herein required to be furnished
to the Lenders by the Agent, the Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, prospects, operations, property, financial and other condition or
creditworthiness of the Borrower, WHC or their Subsidiaries which may come into
the possession of any of the Agent-Related Persons.
10.7 Indemnification of Agent
Whether or not the transactions contemplated hereby are consummated, the Lenders
shall indemnify upon demand the Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Borrower and without limiting the obligation
of the Borrower to do so), in proportion to each Lender's Pro Rata Share, from
and against any and all Indemnified Liabilities; provided, however, that no
Lender shall be liable for the payment to the Agent-Related Persons of any
portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender shall reimburse the Agent upon demand for its ratable share of any
costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrower. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
10.8 Agent in Individual Capacity
U.S. Bank and its Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with the Borrower, WHC and their Subsidiaries and Affiliates as though
U.S. Bank were not the Agent hereunder and without notice to or consent of the
Lenders. The Lenders acknowledge that, pursuant to such activities, U.S. Bank or
its Affiliates may receive information regarding the Borrower or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Borrower, WHC or such Subsidiary) and acknowledge that the Agent
shall be under no obligation to provide such information to them. With respect
to its Loans, U.S. Bank shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent, and the terms "Lender" and "Lenders" include U.S. Bank in its
individual capacity.
10.9 Successor Agent
The Agent may, and at the request of the Required Lenders shall, resign as Agent
upon 30 days' notice to the Lenders. If the Agent resigns under this Agreement,
the Required Lenders shall appoint from among the Lenders a successor agent for
the Lenders which successor agent shall, if no Default or Event of Default then
exists, be approved by the Borrower. If no successor agent is appointed prior to
the effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Lenders and the Borrower, a successor agent from among the
Lenders. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article X and Sections 11.4 and 11.5 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of the Agent hereunder until such
time, if any, as the Required Lenders appoint a successor agent as provided for
above.
10.10 Withholding Tax
(a) If any Lender is a "foreign corporation, partnership or trust" within the
meaning of the Code and such Lender claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the Code, such Lender agrees
with and in favor of the Agent, to deliver to the Agent:
(i) if such Lender claims an exemption from, or a reduction of, withholding tax
under a United States tax treaty, properly completed IRS Forms 1001 and W-8
before the payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during which
interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this Agreement is exempt
from United States withholding tax because it is effectively connected with a
United States trade or business of such Lender, two properly completed and
executed copies of IRS Form 4224 before the payment of any interest is due in
the first taxable year of such Lender and in each succeeding taxable year of
such Lender during which interest may be paid under this Agreement, and IRS Form
W-9; and
(iii) such other form or forms as may be required under the Code or other laws
of the United States as a condition to exemption from, or reduction of, United
States withholding tax.
Such Lender agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of, withholding tax under
a United States tax treaty by providing IRS Form 1001 and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Borrower to such Lender, such Lender agrees to notify the
Agent of the percentage amount in which it is no longer the beneficial owner of
Obligations of the Borrower to such Lender. To the extent of such percentage
amount, the Agent will treat such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding tax by
filing IRS Form 4224 with the Agent sells, assigns, grants a participation in,
or otherwise transfers all or part of the Obligations of the Borrower to such a
Lender, such Lender agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable withholding tax,
the Agent may withhold from any interest payment to such Lender an amount
equivalent to the applicable withholding tax after taking into account such
reduction. If the forms or other documentation required by subsection (a) of
this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that the Agent did not properly withhold tax from
amounts paid to or for the account of any Lender (because the appropriate form
was not delivered, was not properly executed, or because such Lender failed to
notify the Agent of a change in circumstances which rendered the exemption from,
or reduction of, withholding tax ineffective, or for any other reason) such
Lender shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement to the
Agent.
10.11 Collateral Matters
(a) The Agent is authorized on behalf of all the Lenders, without the necessity
of any notice to or further consent from the Lenders, from time to time to take
any action with respect to any Collateral or the Collateral Documents which may
be necessary to perfect and maintain perfected the security interest in and
Liens upon the Collateral granted pursuant to the Collateral Documents.
(b) The Lenders irrevocably authorize the Agent, at its option and in its
discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments and payment in full of all
Loans and all other Obligations known to the Agent and payable under this
Agreement or any other Loan Document; (ii) constituting property sold or to be
sold or disposed of as part of or in connection with any disposition not
prohibited hereunder; (iii) constituting property in which the Borrower, WHC or
any Subsidiary owned no interest at the time the Lien was granted or at any time
thereafter; (iv) constituting property leased to the Borrower, WHC or any
Subsidiary under a lease which has expired or been terminated in a transaction
not prohibited under this Agreement or is about to expire and which has not
been, and is not intended by the Borrower, WHC or such Subsidiary to be, renewed
or extended; (v) consisting of an instrument evidencing Indebtedness or other
debt instrument, if the indebtedness evidenced thereby has been paid in full; or
(vi) if approved, authorized or ratified in writing by the Required Lenders or
all the Lenders, as the case may be, as provided in Section 11.1(f). Upon
request by the Agent at any time, the Lenders will confirm in writing the
Agent's authority to release particular types or items of Collateral pursuant to
this Section 10.11(b).
ARTICLE XI. MISCELLANEOUS
11.1 Amendments and Waivers
No amendment or waiver of any provision of this Agreement or any other Loan
Document, and no consent with respect to any departure by the Borrower, WHC or
any applicable Subsidiary therefrom, shall be effective unless the same shall be
in writing and signed by the Required Lenders (or by the Agent at the written
request of the Required Lenders) and the Borrower and acknowledged by the Agent,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no such waiver, amendment, or consent shall, unless in writing and signed by all
the Lenders and the Borrower and acknowledged by the Agent, do any of the
following:
(a) increase or extend the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 9.2), unless such Lender has consented thereto in
writing;
(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment (including without limit mandatory prepayments) of
principal, interest, fees or other amounts due to the Lenders (or any of them)
hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein on any
Loan, or (subject to clause (ii) below) any fees or other amounts payable
hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Lenders or any of them
to take any action hereunder; or
(e) amend the definition of "Required Lenders," this Section, or Section 2.13,
or any provision herein providing for consent or other action by all Lenders; or
(f) release any material portion of the Collateral except as otherwise may be
provided herein or in the Collateral Documents or except where the consent of
the Required Lenders only is specifically provided for; and, provided further,
that no amendment, waiver or consent shall, unless in writing and signed by the
Agent in addition to the Required Lenders or all the Lenders, as the case may
be, affect the rights or duties of the Agent under this Agreement or any other
Loan Document.
11.2 Notices
(a) All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission, provided that any matter transmitted by the Borrower by facsimile
(i) shall be immediately confirmed by a telephone call to the recipient at the
number specified on Schedule 11.2, and (ii) shall be followed promptly by
delivery of a hard copy original thereof) and mailed, faxed or delivered, to the
address or facsimile number specified for notices on Schedule 11.2; or, as
directed to the Borrower or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Borrower and the Agent.
(b) All such notices, requests and communications shall, when transmitted by
overnight delivery, or faxed, be effective when delivered by overnight
(next-day) delivery, or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date deposited
into the U.S. mail, or if delivered, upon delivery; except that notices pursuant
to Article II or X shall not be effective until actually received by the Agent.
(c) Any agreement of the Agent and the Lenders herein to receive certain notices
by telephone or facsimile is solely for the convenience and at the request of
the Borrower. The Agent and the Lenders shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Borrower to
give such notice and the Agent and the Lenders shall not have any liability to
the Borrower or other Person on account of any action taken or not taken by the
Agent or the Lenders in reliance upon such telephonic or facsimile notice. The
obligation of the Borrower to repay the Loans shall not be affected in any way
or to any extent by any failure by the Agent and the Lenders to receive written
confirmation of any telephonic or facsimile notice or the receipt by the Agent
and the Lenders of a confirmation which is at variance with the terms understood
by the Agent and the Lenders to be contained in the telephonic or facsimile
notice.
11.3 No Waiver; Cumulative Remedies
No failure to exercise and no delay in exercising, on the part of the Agent or
any Lender, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.
11.4 Costs and Expenses
The Borrower shall:
(a) whether or not the transactions contemplated hereby are consummated, pay or
reimburse U.S. Bank (including in its capacity as Agent) within five Business
days after demand (subject to Section 5.1(e)) for all costs and expenses
incurred by U.S. Bank (including in its capacity as Agent) in connection with
the development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, and the grant of Liens on any Collateral after
the date of this Agreement, including reasonable Attorneys Cost incurred by
U.S. Bank (including in its capacity as Agent) with respect to the foregoing;
and
(b) whether or not the transactions contemplated hereby are consummated, and
whether incurred or demand for payment is made prior to, concurrently with or
after the date of this Agreement, pay or reimburse U.S. Bank (including in its
capacity as Agent) within five Business days after demand (subject to
Section 5.1(e)) for all costs and expenses incurred by U.S. Bank (including in
its capacity as Agent) in connection with any Collateral or proposed Collateral,
including, without limitation, appraisal fees (including the allocated cost of
internal appraisal services), inspection fees, fees for environmental and other
third party inspections and reports, fees for the Title Insurance Policies and
the endorsements thereto, escrow fees, any filing or recording tax or fee, lien
search fees, and
(c) pay or reimburse the Agent and each Lender within five Business Days after
demand (subject to Section 5.1(e)) for all costs and expenses (including
Attorney Costs) incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
any other Loan Document during the existence of an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
11.5 Borrower Indemnification
(a) Whether or not the transactions contemplated hereby are consummated, the
Borrower shall indemnify, defend and hold the Agent-Related Persons, and each
Lender and each of its respective officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements (including
Attorney Costs) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans and the termination,
resignation or replacement of the Agent or replacement of any Lender) be imposed
on, incurred by or asserted against any such Person in any way relating to or
arising out of this Agreement or any document contemplated by or referred to
herein, or the transactions contemplated hereby, or any action taken or omitted
by any such Person under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or arising out of this
Agreement or the Loans or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that the Borrower shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities
resulting solely from the gross negligence or willful misconduct of such
Indemnified Person. The agreements and obligations set forth in this Section
shall survive payment of all other Obligations.
(b) At the election of any Indemnified Person, the Borrower shall defend such
Indemnified Person using legal counsel satisfactory to such Indemnified Person
in such Person's sole discretion, at the sole cost and expense of the Borrower.
All amounts owing under this Section shall be paid within 30 days after demand.
11.6 Marshalling; Payments Set Aside
Neither the Agent nor the Lenders shall be under any obligation to marshall any
assets in favor of the Borrower or any other Person or against or in payment of
any or all of the Obligations. To the extent that the Borrower makes a payment
to the Agent or the Lenders, or the Agent or the Lenders exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Lender in its discretion) to be repaid to a trustee, receiver or
any other party, in connection with any Insolvency Proceeding or otherwise, then
(a) to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and
(b) each Lender severally agrees to pay to the Agent upon demand its Pro Rata
Share of any amount so recovered from or repaid by the Agent.
11.7 Successors and Assigns
The provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of the Agent and each Lender.
11.8 Assignments, Participations, Etc.
(a) Any Lender may, with the written consent of the Agent and the Borrower which
shall not be unreasonably withheld, conditioned or delayed, at any time assign
and delegate to one or more Eligible Assignees (provided that no written consent
of the Agent shall be required in connection with any assignment and delegation
by a Lender to an Eligible Assignee that is an Affiliate of such Lender) (each
an "Assignee") all, or any ratable part of all, of the Loans, the Commitments
and the other rights and obligations of such Lender hereunder, in a minimum
amount of the lesser of $5,000,000 or the entire amount of the Commitment of
such Lender; provided, however, that the Borrower and the Agent may continue to
deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrower and the Agent by such Lender and
the Assignee; (ii) such Lender and its Assignee shall have delivered to the
Borrower and the Agent an Assignment and Acceptance in the form of Exhibit F
("Assignment and Acceptance"); and (iii) the assignor Lender or Assignee has
paid to the Agent a processing fee in the amount of $3,500. Notwithstanding the
foregoing, no consent of the Borrower shall be required for any such assignment
during the existence of an Event of Default.
(b) Subject to the conditions set forth in Section 11.8(a), from and after the
date that the Agent notifies the assignor Lender that it has received (and
provided its consent with respect to) an executed Assignment and Acceptance,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Loan Documents.
(c) Immediately upon each Assignee's making its processing fee payment under the
Assignment and Acceptance, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Lender pro tanto.
(d) Any Lender may at any time sell to one or more commercial banks or other
Persons not Affiliates of the Borrower (a "Participant") participating interests
in any Loans, the Commitment of that Lender and the other interests of that
Lender (the "originating Lender") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Lender's obligations under this
Agreement shall remain unchanged, (ii) the originating Lender shall remain
solely responsible for the performance of such obligations, (iii) the Borrower
and the Agent shall continue to deal solely and directly with the originating
Lender in connection with the originating Lender's rights and obligations under
this Agreement and the other Loan Documents, and (iv) no Lender shall transfer
or grant any participating interest under which the Participant has rights to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, except to the extent such amendment,
consent or waiver would require unanimous consent of the Lenders as described in
the first proviso to Section 11.1. In the case of any such participation, the
Participant shall be entitled to the benefit of Sections 4.1, 4.3 and 11.5 as
though it were also a Lender hereunder, and if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement.
(e) Notwithstanding any other provision in this Agreement, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement held by it in favor of any Federal Reserve
Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31
C.F.R. 203.14, and such Federal Reserve Bank may enforce such pledge or
security interest in any manner permitted under applicable law.
(f) The Borrower agrees to actively assist and cooperate with U.S. Bank in the
initial syndication of the Loans, including assistance in the preparation and
review of information and participation in one or more meetings with prospective
lenders.
11.9 Set-off
In addition to any rights and remedies of the Lenders provided by law, if an
Event of Default exists or the Loans have been accelerated, each Lender is
authorized at any time and from time to time, without prior notice to the
Borrower, any such notice being waived by the Borrower to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Lender to or for the credit or the
account of the Borrower against any and all Obligations owing to such Lender,
now or hereafter existing, irrespective of whether or not the Agent or such
Lender shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Lender agrees
promptly to notify the Borrower and the Agent after any such set-off and
application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
11.10 Automatic Debits of Fees
With respect to any agency fee, underwriting fee or other fee, or any other cost
or expense (including Attorney Costs) due and payable to the Agent under the
Loan Documents, the Borrower hereby irrevocably authorizes U.S. Bank to debit
any deposit account of the Borrower with U.S. Bank in an amount such that the
aggregate amount debited from all such deposit accounts does not exceed such fee
or other cost or expense. If there are insufficient funds in such deposit
accounts to cover the amount of the fee or other cost or expense then due, such
debits will be reversed (in whole or in part, in U.S. Bank's sole discretion)
and such amount not debited shall be deemed to be unpaid. No such debit under
this Section shall be deemed a set-off.
11.11 Notification of Addresses, Lending Offices, Etc.
Each Lender shall notify the Agent in writing of any changes in the address to
which notices to the Lender should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Agent shall
reasonably request.
11.12 Counterparts
This Agreement may be executed in any number of separate counterparts, each of
which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument.
11.13 Severability
The illegality or unenforceability of any provision of this Agreement or any
instrument or agreement required hereunder shall not in any way affect or impair
the legality or enforceability of the remaining provisions of this Agreement or
any instrument or agreement required hereunder.
11.14 No Third Parties Benefited
This Agreement is made and entered into for the sole protection and legal
benefit of the Borrower, the Lenders, the Agent and the Agent-Related Persons,
and their permitted successors and assigns, and no other Person shall be direct
or indirect legal beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any of the other Loan Documents.
11.15 Conditions Not Fulfilled
If any requested loan is not borrowed owing to nonfulfillment of any condition
precedent specified in Article V, no party hereto shall be responsible to any
other party for any damage or loss by reason thereof, except that the Borrower
shall in any event be liable to pay the fees, Taxes, and expenses for which it
is obligated hereunder. If for any other reason the Commitment of any Lender is
not borrowed, neither the Agent nor any Lender (other than the Lender failing to
make its Loan as required hereunder) shall be responsible to the Borrower for
any damage or loss by reason thereof, nor shall any other Lender or the Borrower
be excused from their performance hereunder.
11.16 Governing Law and Jurisdiction
(a) THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF WASHINGTON; PROVIDED THAT THE AGENT AND
THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. DEEDS OF TRUST
SHALL BE GOVERNED BY THE LAW OF THE STATE IN WHICH THE REAL PROPERTY ENCUMBERED
THEREBY IS LOCATED.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF WASHINGTON OR OF THE
UNITED STATES FOR THE WESTERN DISTRICT OF WASHINGTON, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT AND THE LENDERS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE AGENT AND THE LENDERS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWER, THE AGENT AND
THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY WASHINGTON LAW.
11.17 Waiver of Jury Trial
THE BORROWER, THE LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF
ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT
RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER, THE LENDERS AND THE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.18 Statutory Notice
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
11.19 Entire Agreement
This Agreement, together with the other Loan Documents, embodies the entire
agreement and understanding among the Borrower, the Lenders and the Agent, and
supersedes all prior to contemporaneous agreements and understandings of such
Persons, verbal or written, relating to the subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
WESTCOAST HOSPITALITY, LIMITED PARTNERSHIP
By: WestCoast Hospitality Corporation,
General Partner
By
Title
U.S. BANK NATIONAL ASSOCIATION,
as Agent and Lender
By
Title
Each of the undersigned (a) acknowledges that it has reviewed and approved this
Agreement, (b) reaffirms its obligations under its respective guaranty and the
other Loan Documents to which it is a party and (c) agrees to the addition of
the following provisions to its guaranty:
13.11 Right of Setoff
In addition to any rights and remedies of the Lenders provided by law, if an
Event of Default exists or the Loans have been accelerated, each Lender is
authorized at any time and from time to time, without prior notice to Guarantor,
any such notice being waived by Guarantor to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other indebtedness at any
time owing by, such Lender to or for the credit or the account of Guarantor
against any and all Obligations owing to such Lender, now or hereafter existing,
irrespective of whether or not the Agent or such Lender shall have made demand
under this Guaranty or any Loan Document and although such Obligations may be
contingent or unmatured. Each Lender agrees promptly to notify Guarantor and the
Agent after any such set-off and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application.
13.12 Jury Waiver
GUARANTOR, THE LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF
ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT
RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. GUARANTOR, THE LENDERS AND THE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
WESTCOAST HOSPITALITY CORPORATION
By
Title
WESTCOAST HOTELS, INC.
By
Title
TICKETSWEST.COM, INC.
By
Title
RED LION HOTELS, INC.
By
Title
RED LION PROPERTIES, INC.
Schedule 1.1
Eligible Real Property
Aberdeen, Washington: Certain real property located in Grays Harbor County,
Washington, which property is owned by Red Lion Hotels, Inc., and is encumbered
by a deed of trust recorded under recording number 2002-01030065.
Bend, Oregon: Certain real property located in Deschutes County, Oregon, which
property is owned by Red Lion Hotels, Inc., and is encumbered by a deed of trust
recorded under recording number 2002-00427.
Kalispell, Montana: Certain real property located in Kalispell County, Montana,
which property is owned by Red Lion Properties, Inc., and is encumbered by a
deed of trust recorded under recording number 200200415370.
Klamath Falls, Oregon: Certain real property located in Klamath County, Oregon,
which property is owned by Red Lion Hotels, Inc., and is encumbered by a deed of
trust recorded in Vol MO2, Pg. 444-479.
Schedule 2.1
Commitments
Commitment
Lender Amount Pro Rata Share
- -------------------------------- -------------------- ----------------------
U.S. Bank National Association $4,000,000 100%
- -------------------------------- -------------------- ----------------------
TOTAL $4,000,000 100%
- -------------------------------- -------------------- ----------------------
Schedule 5.1(j)
Real Property to be Refinanced
Boise, Idaho: Certain real property located in Ada County, Idaho, encumbered by
a deed of trust recorded under recording number 99050921.
Twin Falls, Idaho: Certain real property located in Twin Falls County, Idaho,
encumbered by a deed of trust recorded under recording number 1999-022782.
Salt Lake City, Utah: Certain real property located in Salt Lake County, Utah,
encumbered by a deed of trust recorded under recording number 7040246.
Kennewich, Washington: Certain real property located in Benton County,
Washington, encumbered by a deed of trust recorded under recording number
1998-012586.
Pasco, Washington: Certain real property located in Franklin County, Washington,
encumbered by a deed of trust recorded under recording number 1599666.
Port Angeles, Washington: Certain real property located in Clallam County,
Washington, encumbered by a deed of trust recorded under recording number
20021076402.
Richland, Washington: Certain real property located in Benton County,
Washington, encumbered by a deed of trust recorded under recording number
2002-000144.
Yakima, Washington: Certain real property located in Yakima County, Washington,
encumbered by a deed of trust recorded under recording numbers 7057014, 7057015,
7057016, and 7057017.
Eureka, California: Certain real property located in Humboldt County,
California, encumbered by a deed of trust recorded under recording number
2002-251-39.
Redding, California: Certain real property located in Shasta County, California,
encumbered by a deed of trust recorded under recording number 2002-0000841.
Schedule 6.5
Litigation
None
Schedule 6.7
ERISA
None
Schedule 6.11
Permitted Liabilities
None
Schedule 6.12
Environmental Matters
None
Schedule 6.17
Subsidiaries and Minority Interests
WestCoast Hospitality Corporation is the direct or indirect sole owner of the
following corporations formed in the State of Washington:
TicketsWest.com, Inc
North River Drive Company And
WestCoast Hotels, Inc., which in turn is the sole owner of:
Stewart Street Associates, Inc.
WestCoast Bellevue Inn, Inc
WestCoast E.P. Acquisitions, Inc.
WestCoast Hotel Properties, Inc.
WestCoast Vancouver Washington, Inc.
WestCoast Executive Park Investment, Inc.
WestCoast Hospitality Corporation is the direct or indirect sole owner of the
following corporations formed in the State of Delaware:
Red Lion Hotels, Inc, which in turn is the sole owner of
Red Lion Properties, Inc.
WestCoast Hospitality Corporation and its subsidiary WestCoast Bellevue Inn,
Inc., are the sole members of the following limited liability company formed in
the State of Washington:
Bellevue Inn, LLC
WestCoast Hospitality Corporation is the sole general partner and approximately
97% owner of the following limited partnership formed in the State of Delaware:
WestCoast Hospitality Limited Partnership
WestCoast Hospitality Limited Partnership is the direct or indirect sole member
of the following limited liability companies formed in the State of Delaware:
WHC803-M, LLC, which in turn is the sole member of WHC803, LLC;
WHC804-M, LLC, which in turn is the sole member of WHC804, LLC
WHC807-M, LLC, which in turn is the sole member of WHC807, LLC
WHC809-M, LLC, which in turn is the sole member of WHC809, LLC
WHC816-M, LLC, which in turn is the sole member of WHC816, LLC
WHC817-M, LLC, which in turn is the sole member of WHC 817, LLC
WHC818-M, LLC, which in turn is the sole member of WHC 818, LLC
WHC820-M, LLC, which in turn is the sole member of WHC 820, LLC
WHC821-M, LLC, which in turn is the sole member of WHC 821, LLC
Red Lion Hotels, Inc. is the direct or indirect sole member of the following
limited liability companies formed in the State of Delaware:
WHC831-M, LLC, which in turn is the sole member of WHC831, LLC
WHC837-M, LLC, which in turn is the sole member of WHC837, LLC
WHC839-M, LLC which in turn is the sole member of WHC839, LLC
WHC840-M, LLC, which in turn is the sole member of WHC 840, LLC
Red Lion Properties, Inc. is the direct or indirect sole member of the following
limited liability companies formed in the State of Delaware:
WHC841-M, LLC, which in turn is the sole member of WHC841, LLC
Schedule 6.18
Insurance Matters
None
Schedule 7.14
Filing Jurisdictions*
Schedule 8.1
Permitted Liens
Account Number Description Balance at 05/31/2003
(Long Term Debt)
050-2700-0000 Credit Facility - US Bank 55,800,000
050-2740-0000 Bonds - Swanbeck 1,851,400
050-2740-1000 Bonds - Olson 1,295,980
050-2740-2000 Bonds - Bashaw 1,295,980
050-2740-3000 Bonds - October 370,280
050-2740-4000 Bonds - Bellevue 370,280
070-2700-0000 Sterling Savings - Food Ct. 463,334
070-2710-0000 Notes Payable - IDS 10,981,584
160-2700-0000 Mort. Payable - Midland 3,974,356
801-2700-0000 Mort. Payable - WA Mutual 6,091,103
804-2700-0000 Notes Payable - Key Commercial 13,713,400
805-2710-0000 Industrial Rev. Bonds - WA Trust 5,321,591
808-2700-0000 Mort. Payable - Bank One 1,290,024
809-2700-0000 Notes Payable - Midland 35,222,384
812-2700-0000 Mort. Payable - WA Mutual 2,299,086
813-2700-0000 Notes Payable - US Bank 1,149,167
820-2700-0000 Notes Payable - Midland 5,931,601
821-2700-0000 Notes Payable - Key Commercial 6,660,794
822-2700-0000 Notes Payable - Bank of America 4,458,653
823-2700-0000 Notes Payable - Dupar (Seller) 1,317,892
(Other)
070-2725-0000 LID Payable - Trolley 18,413
075-2725-0000 LID Payable - Trolley 6,122
805-2700-0000 Note Payable - Equity Land 520,177
(Capital Leases)
809-2750-0000 Capital Lease - Met Life 109,014
823-2750-0000 Capital Leases 3,508
857-2750-0000 Capital Lease - GE Capital 0
Refinance debt referred to in Section 3.1 To be determined
Schedule 8.5
Permitted Indebtedness
See Schedule 8.1
Schedule 8.8
Contingent Obligations
None
Schedule 11.2
Lending Offices, Addresses for Notices
The Borrower
WestCoast Hospitality, Limited Partnership
201 W. North River Drive
Spokane, Washington 99201
Attention: Chief Financial Officer
Telephone: (509) 459-6100
Facsimile: (509) 325-7324
The Agent
U.S. Bank National Association
1420 Fifth Avenue, Suite 1100
Seattle, Washington 98101
Attention: Cathryn S. Schalkle
Telephone: (206) 344-7845
Facsimile: (206) 344-2331
The Lenders (LIBOR and Domestic Lending Offices):
U.S. Bank National Association
1420 Fifth Avenue, Suite 1100
Seattle, Washington 98101
Attention: Cathryn S. Schalkle
Telephone: (206) 344-7845
Facsimile: (206) 344-2331
Exhibit A - Form of Compliance Certificate (SB031700281);
Exhibit B - Form of Interest Rate Notice (SB031700282);
Exhibit C - Form of Renewal Promissory Note (SB031700284);
Exhibit D - Form of Legal Opinion of Borrower's Counsel
Exhibit E - Form of Amendment to Deed of Trust (SB031700053);
Exhibit F - Form of Assignment and Acceptance Agreement
Exhibit A
to Second Amended and Restated Credit Agreement
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered pursuant to the Second Amended and
Restated Credit Agreement, dated as of June 27, 2003 (together with all
amendments, if any, from time to time made thereto, the "Credit Agreement"),
WestCoast Hospitality, Limited Partnership (the "Borrower"), certain financial
institutions parties thereto (the "Lenders") and U.S. Bank National Association,
as administrative agent for the Lenders (together with any successors thereto,
the "Agent"). Unless otherwise defined herein or the context otherwise requires,
terms used herein or in any of the Attachments hereto have the meanings provided
in the Credit Agreement.
The Borrower hereby certifies, represents and warrants that for the period (the
"Computation Period") commencing on _________, ____ and ending on _________,
____ (such latter date being the "Computation Date") no Default or Event of
Default has occurred and is continuing [except as disclosed below]. The Borrower
hereby further certifies, represents and warrants that as of the Computation
Date:
(a) Recourse Funded Debt Ratio.
As of the end of the Computation Period for the four fiscal quarters then ended,
the Recourse Funded Debt Ratio was ______.
(b) Fixed Charge Coverage Ratio.
As of the end of the Computation Period for the four fiscal quarters then ended,
the Fixed Charge Coverage Ratio was _____.
IN WITNESS WHEREOF, the undersigned has caused this Compliance Certificate to be
delivered by its Responsible Officer as of this ____ day of __________, ______.
WESTCOAST HOSPITALITY, LIMITED PARTNERSHIP
By: WestCoast Hospitality Corporation,
General Partner
By
Name:
Title:
FORM OF INTEREST RATE NOTICE
U.S. Bank National Association
1420 Fifth Avenue, Suite 1100
Seattle, Washington 98101
Attention: Cathryn S. Schalkle
Re: WestCoast Hospitality, Limited Partnership
Gentlemen and Ladies:
This Interest Rate Notice is delivered to you pursuant to Section 5.2(a) of the
Second Amended and Restated Credit Agreement, dated as of June 27, 2003
(together with all amendments, if any, from time to time made thereto, the
"Credit Agreement"), among WestCoast Hospitality, Limited Partnership, a
Delaware limited partnership (the "Borrower"), certain financial institutions
parties thereto (the "Lenders") and U.S. Bank National Association, as
administrative agent for the Lenders (together with any successors thereto, the
"Agent"). Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that on ________ __, ____ (the "Interest Rate
Election Date"),
A. There be advanced to the Borrower $_________ in new Prime Rate Loans.
B. There be advanced to the Borrower $_________ in new LIBOR Rate Loans with
Loan Periods as follows:
Amount Loan Period
$_________ ________ months
$_________ ________ months
C. $_________ of Prime Rate Loans be converted to LIBOR Rate Loans with Loan
Periods as follows:
Amount Loan Period
$_________ ________ months
$_________ ________ months
D. $_________ of LIBOR Rate Loans with a Loan Period ending on ________ ___,
____ be converted to Prime Rate Loans.
E. $_________ of LIBOR Rate Loans with a Loan Period ending on ________ ___,
____ be continued as LIBOR Rate Loan(s) with Loan Periods as follows:
Amount Loan Period
$_________ ________ months
$_________ ________ months
The Borrower hereby:
(a) certifies and warrants that (i) no Default or Event of Default has occurred
and is continuing or will result from the Loans contemplated hereby; and
(ii) the representations and warranties in Article VI of the Credit Agreement
are and shall be true and correct on and as of the date of this Notice with the
same effect as if made on and as of the date of this Notice (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they were true and correct as of such earlier date); and
(b) agrees that if prior to the Interest Rate Election Date any matter certified
to herein by it will not be true and correct at such time as if then made, it
will immediately so notify the Agent.
Except to the extent, if any, that prior to the Interest Rate Election Date the
Agent shall receive written notice to the contrary from the Borrower, each
matter certified to herein shall be deemed to be certified as of the Interest
Rate Election Date as if then made.
The Borrower has caused this Notice to be executed and delivered, and the
certification and warranties contained herein to be made, by its Responsible
Officer this ____ day of ___________, ____.
WESTCOAST HOSPITALITY, LIMITED PARTNERSHIP
By: WestCoast Hospitality Corporation,
General Partner
By:
Name:
Title:
Exhibit C
to Second Amended and Restated Credit Agreement
RENEWAL PROMISSORY NOTE
$4,000,000 June 27, 2003
FOR VALUE RECEIVED, the undersigned, WESTCOAST HOSPITALITY, LIMITED PARTNERSHIP,
a Delaware limited partnership (the "Borrower"), promises to pay to the order of
U.S. Bank National Association, as administrative agent (the "Agent") for the
Lenders (as hereinafter defined), the principal sum of FOUR MILLION DOLLARS
($4,000,000) or so much thereof as advanced by the Lenders pursuant to that
certain Second Amended and Restated Credit Agreement of even date herewith
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among the Borrower, U.S. Bank
National Association, as administrative agent (the "Agent"), and the various
financial institutions as are, or may from time to time become, parties thereto
(the "Lenders"), on the Maturity Date.
The Borrower also promises to pay interest on the unpaid principal amount hereof
from time to time outstanding from the date hereof until maturity (whether by
acceleration or otherwise) and, after maturity, until paid, at the rates per
annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of the
United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Credit Agreement.
This Note is the Note referred to in, and evidences Indebtedness incurred under,
the Credit Agreement, to which reference is made for a description of the
security for this Note and for a statement of the terms and conditions on which
the Borrower is permitted and required to make prepayments and repayments of
principal of the Indebtedness evidenced by this Note and on which such
Indebtedness may be declared to be immediately due and payable. Unless otherwise
defined, terms used herein have the meanings provided in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise, severally waive
presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF WASHINGTON.
WESTCOAST HOSPITALITY, LIMITED PARTNERSHIP
By: WestCoast Hospitality Corporation,
General Partner
By
Title
Exhibit D
Form of Legal Opinion of Borrower's Counsel
US Bank National Association, as Agent for Lenders
1420 Fifth Avenue, 11th Floor
Seattle, WA 98101
Attention: Cathy Schalkle
Subject: Second Amended and Restated Credit Agreement
Exhibit E
Form of Amendment to Deed of Trust
Return Address:
U.S. Bank National Association
1420 Fifth Avenue, Suite 1100
Seattle, Washington 98101
Attention: Cathryn S. Schalkle
AMENDMENT TO DEED OF TRUST
The deed of trust, assignment of leases and rents, security agreement, and
fixture filing described below ("Deed of Trust") encumbering certain real
property in ____________ County, ___________, is hereby amended as set forth
herein:
Grantor: ______________________________
Grantee/Trustee: U.S. Bank Trust Company, National Association
Grantee/Beneficiary: U.S. Bank National Association, as agent for the lenders
under the amended and restated credit agreement dated as of December 29, 1999
(together with all amendments, modifications, supplements and exhibits thereto,
the "Credit Agreement").
Recording No. of Document Amended: __________________.
1. The Deed of Trust is hereby amended to reflect that the Credit Agreement has
been amended and restated by that certain second amended and restated credit
agreement of even date herewith.
2. Except as specifically provided for herein, all of the terms and conditions
of the Deed of Trust shall remain in full force and effect.
IN WITNESS WHEREOF, Grantor and Beneficiary have executed this amendment to deed
of trust as of June 27, 2003.
Grantor:
By
Name:
Title:
Beneficiary:
U.S. BANK NATIONAL ASSOCIATION, as Agent
By
Name:
Title:
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this ____ day of ____________, 2003, before me, the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn,
personally appeared Richard Barbieri, to me known to be the person who signed as
_______________________________ of _______________________________, the
_________________________ that executed the within and foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
corporation as general partner of said ______________________ for the uses and
purposes therein mentioned, and on oath stated that he was duly elected,
qualified and acting as said officer of the ___________________, that he was
authorized to execute said instrument, that the seal affixed, if any, is the
corporate seal of said corporation, and that said corporation was authorized to
execute said instrument on behalf of said ____________________.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day and
year first above written.
(Signature of Notary)
(Print or stamp name of Notary)
NOTARY PUBLIC in and for the State of Washington, residing
at .
My Commission Expires: .
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this _______________, 2003, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn, personally
appeared _______________________, to me known to be the person who signed as
____________________ of U.S. BANK NATIONAL ASSOCIATION, the national banking
association that executed the within and foregoing instrument, and acknowledged
said instrument to be the free and voluntary act and deed of said national
banking association for the uses and purposes therein mentioned, and on oath
stated that he was authorized to execute said instrument on behalf of the
national banking association.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day and
year first above written.
(Signature of Notary)
(Print or stamp name of Notary)
NOTARY PUBLIC in and for the State
of Washington, residing at .
My Appointment Expires: .
EXHIBIT F
to Second Amended and Restated Credit Agreement
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
Reference is made to the Second Amended and Restated Credit Agreement, dated as
of June 27, 2003 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among WestCoast Hospitality, Limited Partnership
("Borrower"), U.S. Bank National Association, as Administrative Agent
("Administrative Agent"), and the other financial institutions party hereto.
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
The Assignor named on Schedule I (the "Assignor") and the Assignee named on
Schedule I (the "Assignee") agree as follows:
The Assignor hereby irrevocably sells and assigns to the Assignee without
recourse to the Assignor, and the Assignee hereby irrevocably purchases and
assumes from the Assignor without recourse to the Assignor, as of the Effective
Date (as defined below), the Pro Rata Share specified in Schedule I (the
"Assigned Interest") in the rights and obligations under the Credit Agreement
with respect to the facility described in Schedule I.
The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other instrument or
document furnished pursuant thereto or with respect to the execution, legality,
validity, enforceability, genuiness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto, other
than that the Assignor has not created any adverse claim upon the Assigned
Interest and that such Assigned Interest is free and clear of any such adverse
claim; and (b) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of Borrower or any of its Subsidiaries
or the performance or observance by Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant thereto.
The Assignee (a) represents and warrants that it is legally authorized to enter
into this Assignment and Acceptance; (b) confirms that it has received a copy of
the Credit Agreement, together with copies of the most recent financial
statements referred to in the Section 7.1 of the Credit Agreement and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon the Assignor, the
Administrative Agent or any other Lender or the Agent and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement or any other instrument or document furnished pursuant hereto or
thereto; (d) appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
the Credit Agreement and any other instrument or document furnished pursuant
hereto or thereto as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are incidental thereto; and (e) agrees
that it will be bound by the provisions of the Credit Agreement and will perform
in accordance with its terms all the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender, including,
(i) if it is organized under the laws of a jurisdiction outside the United
States, its obligation pursuant to Section 10.10 of the Credit Agreement and
(ii) if it is not already a Lender, its obligation to deliver a written
agreement for the express benefit of the Borrower pursuant to Section 11.8 of
the Credit Agreement.
The effective date of this Assignment and Acceptance shall be as specified on
Schedule I (the "Effective Date"). Following the execution of this Assignment
and Acceptance, by Assignor and Assignee, it will be delivered to the
Administrative Agent and the Borrower for acceptance by them and recording by
the Administrative Agent pursuant to the Credit Agreement, effective as of the
Effective Date (which shall not, unless otherwise agreed to by the
Administrative Agent, be earlier than five Business Days after the execution
hereof).
Upon such acceptance and recording, from and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignee. The Assignor and the Assignee shall make all appropriate adjustments
in payments by the Administrative Agent for periods prior to the Effective Date
or with respect to the making of this assignment directly between themselves.
From and after the Effective Date, (a) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Lender thereunder and shall be bound by the
provisions thereof and (b) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement (other than any such rights which
expressly survive the termination thereof).
This Assignment and Acceptance shall be governed by and construed in accordance
with the laws of the State of Washington.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule I hereto.
SCHEDULE I
TO ASSIGNMENT AND ACCEPTANCE RELATING TO THE SECOND AMENDED AND RESTATED CREDIT
AGREEMENT, DATED AS OF JUNE 27, 2003 AMONG WESTCOAST HOSPITALITY, LIMITED
PARTNERSHIP, U.S. BANK NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT IN SUCH
CAPACITY, THE "ADMINISTRATIVE AGENT"), AND THE OTHER FINANCIAL INSTITUTIONS
PARTY HERETO.
Name of Assignor: _____________________________________________
Name of Assignee: _____________________________________________
Effective Date of Assignment: ___________ __, _______
Commitment Percentage
Assigned: ____%
The terms set forth above and in the Assignment and Acceptance to which this
Schedule I is attached are hereby agreed to:
as Assignor
By:
Its:
,
as Assignee
By:
Its:
ASSIGNMENT ACKNOWLEDGED AND
CONSENTED TO:
WESTCOAST HOSPITALITY, LIMITED
PARTNERSHIP, as the Borrower
By: WestCoast Hospitality Corporation,
General Partner
By:
Its:
U.S. BANK NATIONAL ASSOCIATION,
as Administrative Agent
By:
Its:
Exhibit 10.3
PROMISSORY NOTE
Date of Note: Effective as of June 27, 2003
Note Amount: $5,100,000.00
THIS PROMISSORY NOTE (this "Note"), is made by WHC807, LLC, a Delaware limited
liability company ("Borrower"), having an address at c/o WestCoast Hospitality
Corporation, 201 W. North River Drive, Suite 100, Spokane, Washington 99201,
Attention: Chief Financial Officer, to and in favor of COLUMN FINANCIAL, INC., a
Delaware corporation ("Lender"), having an address at 11 Madison Avenue, 5th
Floor, New York, New York 10010-3629, Attention: Edmund Taylor.
NOW, THEREFORE, FOR VALUE RECEIVED, Borrower unconditionally promises to pay to
the order of Lender, without any counterclaim, setoff or deduction whatsoever,
on the Maturity Date (as hereinafter defined), at the office of Lender, or at
such other place as Lender may designate to Borrower in writing from time to
time, the principal sum of FIVE MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($5,100,000.00), together with interest on so much thereof as is from time to
time outstanding and unpaid, from the date of the advance of the principal
evidenced hereby, at the rate of 6.70% per annum (the "Note Rate"), in lawful
money of the United States of America, which shall at the time of payment be
legal tender in payment of all debts and dues, public and private.
ARTICLE I - TERMS AND CONDITIONS
1.1 Payment of Principal and Interest.
(a) Said interest shall be computed hereunder based on a three hundred sixty
(360) day year and paid for the actual number of days elapsed for any whole or
partial month in which interest is being calculated. In computing the number of
days during which interest accrues, the day on which funds are initially
advanced shall be included regardless of the time of day such advance is made,
and the day on which funds are repaid shall be included unless repayment is
credited prior to close of business. Payments in federal funds immediately
available in the place designated for payment received by Lender prior to 2:00
p.m. local time at said place of payment on a day in which Lender is open for
business shall be credited prior to close of business, while other payments may,
at the option of Lender, not be credited until immediately available to Lender
in federal funds in the place designated for payment prior to 2:00 p.m. local
time at said place of payment on a day on which Lender is open for business.
Such principal and interest shall be payable in equal consecutive monthly
installments of $35,075.63 each, beginning on August 11, 2003 (the "First P&I
Date"), and continuing on the eleventh (11th) day of each and every month (each
a "Payment Date") thereafter through and including July 11, 2013 (the "Maturity
Date"), at which time the entire outstanding principal balance hereof, together
with all accrued but unpaid interest thereon, shall be due and payable in full.
Each such monthly installment shall be applied first to the payment of accrued
interest and then to reduction of principal.
(b) If the advance of the principal amount evidenced by this Note is made on a
date other than the eleventh (11th) day of a calendar month, then Borrower shall
pay to Lender contemporaneously with the execution hereof interest at the Note
Rate as follows: (a) if the advance of the principal amount evidenced by this
Note is made prior to the eleventh (11th) day of a calendar month, then Borrower
shall pay to Lender contemporaneously with the execution hereof interest at the
Note Rate for a period from the date of such advance through and including the
tenth (10th) day of the calendar month in which this Note is funded or (b) if
the advance of the principal amount evidenced by this Note is made after the
eleventh (11th) day of a calendar month, then Borrower shall pay to Lender
contemporaneously with the execution hereof interest at the Note Rate for a
period from the date of such advance through and including the tenth (10th) day
of the first calendar month following the month in which this Note is funded.
Each subsequent interest accrual period shall commence on the eleventh (11th)
day of each calendar month during the term of the Note and shall end on and
include the tenth (10th) day of the next occurring calendar month. For purposes
of making payments hereunder, but not for purposes of calculating interest
accrual periods, if the day on which such payment is due is not a Business Day
(as defined in the Mortgage), then amounts due on such date shall be due on the
immediately preceding Business Day.
1.2 Prepayment.
(a) Except as specifically provided otherwise herein, this Note may not be
prepaid, either in whole or part, provided, however, Borrower shall have the
right and option to have the Property (as hereinafter defined) released from the
lien of the Yakima Mortgage (as hereinafter defined) in accordance with the
terms and conditions of the Defeasance provisions set forth in Section 1.35 of
the Yakima Mortgage. This Note may be prepaid in whole but not in part at any
time after the date three (3) months prior to the Maturity Date (the "Lockout
Expiration Date"), provided (i) written notice of such prepayment is received by
Lender not more than sixty (60) days and not less than thirty (30) days prior to
the date of such prepayment, (ii) such prepayment is made on a Payment Date (or,
if such prepayment is not received on a Payment Date, interest is paid through
the tenth (10th) day of such calendar month if such prepayment is received on or
prior to the tenth (10th) day of a calendar month or interest is paid through
the tenth (10th) day of the calendar month following the month in which the
prepayment is received if prepayment is received after the eleventh (11th) day
of such calendar month) and is accompanied by all interest accrued hereunder and
all other sums due hereunder or under the other Loan Documents (as hereinafter
defined), and (iii) the Other Loans (as defined in the Yakima Mortgage) are
simultaneously paid in full.
(b)
(1) If prior to the Lockout Expiration Date and following the occurrence of
any default beyond any applicable notice and/or grace period, Borrower shall
tender payment of an amount sufficient to satisfy all of the indebtedness
evidenced by this Note and the other Loan Documents, Borrower shall pay, in
addition to the amounts payable hereunder and under the other Loan Documents, a
prepayment fee in an amount equal to Required Yield Maintenance plus one-half of
one percent (.5%) of the principal amount being prepaid. For purposes hereof,
"Prepayment Date" shall mean the date any such prepayment hereunder is received
by Lender. For purposes hereof, "Required Yield Maintenance" shall mean an
amount equal to the greater of (A) the present value as of the Prepayment Date
of the remaining scheduled payments of principal and interest from the
Prepayment Date through the Maturity Date (including an amount equal to the
outstanding principal balance of the Note on such date) determined by
discounting such payments at the Discount Rate (as hereinafter defined) less the
amount of principal being prepaid or (B) one percent (1%) of the outstanding
principal balance of the Note as of the Prepayment Date. The "Discount Rate" is
the rate which, when compounded monthly, is equivalent to the Treasury Rate (as
hereinafter defined), when compounded semi-annually. The "Treasury Rate" is the
yield calculated by the linear interpolation of the yields, as reported in the
Federal Reserve Statistical Release H.15 Selected Interest Rates (the "Release")
under the heading "U.S. government securities", and the subheading "Treasury
constant maturities" for the week ending prior to the Prepayment Date, of U.S.
Treasury constant maturities with maturity dates (one longer and one shorter)
most nearly approximating the Maturity Date. In the event the Release is no
longer published, Lender shall select a comparable publication to determine the
Treasury Rate in its reasonable discretion. Lender shall not be obligated to
accept any prepayment of the principal balance of this Note unless it is
accompanied by the prepayment consideration due in connection therewith. If
prior to the Lockout Expiration Date Lender exercises its option to declare the
entire unpaid principal balance due and payable and/or causes to be recorded a
notice of default in accordance with Washington law (or any applicable statute
or law) following the occurrence of a default, there shall be due and payable,
in addition to the unpaid principal balance, accrued interest and any other sums
due hereunder or under any of the other Loan Documents, a prepayment fee
computed as provided above in this Section 1.2.
(2) In the event that any prepayment fee is due hereunder, Lender shall deliver
to Borrower a statement setting forth the amount and determination of the
prepayment fee. Lender shall not be obligated or required to have actually
reinvested the prepaid principal balance at the Treasury Rate or otherwise as a
condition to receiving the prepayment fee. No prepayment fee or premium shall be
due or payable in connection with any prepayment of the indebtedness evidenced
by this Note made after the Lockout Expiration Date, or upon prepayment
resulting from application of insurance or condemnation proceeds as provided in
the Yakima Mortgage at any time during the loan term. With regard to any
prepayment made hereunder (except for a prepayment resulting from the
application of condemnation or insurance proceeds), if prior written notice
required in Section 1.2(a)(i) above has not been received by Lender, the
prepayment shall be increased by an amount equal to the lesser of (x) thirty
(30) days' unearned interest computed on the outstanding principal balance of
this Note so prepaid and (y) unearned interest computed on the outstanding
principal balance of this Note so prepaid for the period from, and including,
the date of prepayment through the Maturity Date.
(c) Full or partial prepayments of this Note shall be permitted in order to
apply insurance or condemnation proceeds in accordance with the terms of the
Yakima Mortgage, in which event no prepayment fee or premium shall be due. Any
such prepayment of principal shall be applied on the next succeeding Payment
Date following Lender's receipt of such insurance or condemnation proceeds and
determination to apply such sums against the outstanding principal balance of
this Note in accordance with the terms of the Yakima Mortgage. No notice of
prepayment shall be required under the circumstances specified in this
Section 1.2(c). In the event an application of insurance or condemnation
proceeds in accordance with the terms hereof result in a partial prepayment of
this Note, the monthly installment of interest and principal set forth in
Section 1.1 of this Note shall be recomputed at the Note Rate and the
outstanding principal balance of this Note remaining following such application,
based upon an amortization schedule of twenty-five (25) years less the period
(A) from the eleventh (11th) day of the calendar month in which the advance of
the principal amount evidenced by this Note is made to the date of the
application of such proceeds if the advance hereunder is made on or prior to the
eleventh (11th) day of a calendar month or (B) from the eleventh (11th) day of
the calendar month following the date of the advance hereunder to the date of
the application of such proceeds if the advance hereunder is made after the
eleventh (11th) day of a calendar month. Except as authorized pursuant to this
Section 1.2(c), partial prepayments of this Note shall not be permitted. No
principal amount repaid may be reborrowed.
(d) Except as otherwise expressly provided in this Section 1.2, the prepayment
fees provided above shall be due, to the extent permitted by applicable law,
under any and all circumstances where all or any portion of this Note is paid
prior to the Maturity Date, whether such prepayment is voluntary or involuntary,
even if such prepayment results from Lender's exercise of its rights upon
Borrower's default hereunder and acceleration of the Maturity Date of this Note
(irrespective of whether foreclosure proceedings have been commenced), and shall
be in addition to any other sums due hereunder or under any of the other Loan
Documents. No tender of a prepayment of this Note with respect to which a
prepayment fee is due shall be effective unless such prepayment is accompanied
by the prepayment fee. Borrower acknowledges that, in establishing the Note
Rate, Lender has assumed and taken into account the fact that the loan evidenced
hereby will not be prepaid (other than at the times, and on the terms, herein
provided) and that there will be no prohibited transfer of the Property or any
other event which would cause Lender to accelerate the Maturity Date. The
provisions hereof relating to Borrower's payment of a premium in the event of an
acceleration are intended to compensate Lender in the event that this assumption
proves to be incorrect.
(e) If at any time following the third (3rd) anniversary of the First P&I Date,
Borrower is unable to exercise its right to Defeasance on a specified Release
Date as set forth in Section 1.35(f) of the Yakima Mortgage, then Borrower may
prepay this Note on the specified Release Date; provided, however, any such
permitted prepayment made on or prior to the Lockout Expiration Date must be
accompanied with the Required Yield Maintenance. Any permitted prepayment made
pursuant to this Section 1.2(e) is subject to the requirements of Section
1.2(a)(i)-(iii) and Section 1.2(b)(2) of this Note; provided, however, Borrower
shall not be required to pay any prepayment penalty or fee other than the
Required Yield Maintenance (as defined in Section 1.2(b) above).
1.3 Security.
The indebtedness evidenced by this Note and the obligations created hereby are
secured by, among other things, (i) those ten (10) certain deeds of trust
(collectively, the "Mortgage") more particularly described on Schedule A
attached hereto and incorporated herein by this reference; and (ii) those ten
(10) certain assignments of leases and rents (collectively, the "Assignment"),
more particularly described on Schedule B attached hereto and incorporated
herein by this reference. The Mortgage, the Assignment, that certain Cash
Management Agreement of even date herewith, together with this Note, any
indemnity and guaranty agreement, any hazardous substances indemnity agreement,
and such other agreements, documents and instruments, together with any and all
renewals, modifications, amendments, restatements, consolidations,
substitutions, replacements, and extensions and modifications thereof, are
herein referred to collectively as the "Loan Documents". All of the terms and
provisions of the Loan Documents are incorporated herein by reference. Some of
the Loan Documents are to be filed for record on or about the date hereof in the
appropriate public records. Notwithstanding anything to the contrary contained
herein or elsewhere in any of the other Loan Documents, the liens created by the
Other Mortgages (as defined on Schedule A hereto) and the Other Assignments (as
defined on Schedule B hereto) shall no longer secure the Borrower's obligations
under this Note, upon Borrower's satisfaction of the terms of Section 1.39 of
the Yakima Mortgage.
1.4 Default.
It is hereby expressly agreed that if any sum payable under this Note is not
paid on or before the date such payment is due, or should any other default
occur under any of the Loan Documents which is not cured within any applicable
grace or cure period, including without limitation, any sale, transfer,
conveyance or other violation of the terms of Section 1.13 of the Mortgage
(unless Lender has previously expressly accepted a cure of such default), then a
default shall exist hereunder, and in such event the indebtedness evidenced
hereby, including all sums advanced or accrued hereunder or under any other Loan
Document, and all unpaid interest accrued thereon, shall, at the option of
Lender and without notice to Borrower, at once become due and payable and may be
collected forthwith, whether or not there has been a prior demand for payment
and regardless of the stipulated Maturity Date; provided, however, if a default
hereunder results from the nonpayment of any sum payable under the Note, the
indebtedness evidenced hereby shall not become subject to acceleration as
described herein unless such sum is not received within five (5) days of the
date such payment is due (provided, however, there shall be no grace period for
the payment of principal and interest due on the Maturity Date). In the event
that any installment payment is not received by Lender on the date when due
(i.e., without application of any 5-day or other grace period), then in addition
to any default interest payments due hereunder, Borrower shall also pay to
Lender a late charge in an amount equal to five percent (5.0%) of the amount of
such overdue installment payment. The foregoing late charge, however, shall not
be assessed in connection with (i) any amounts which become due as a result of
Lender's exercise of its acceleration rights hereunder, or (ii) the balance of
the principal amount which becomes due on the Maturity Date. So long as any
default exists hereunder, regardless of whether or not there has been an
acceleration of the indebtedness evidenced hereby, and at all times after
maturity of the indebtedness evidenced hereby (whether by acceleration or
otherwise), interest shall accrue on the outstanding principal balance of this
Note at a rate per annum equal to five percent (5.0%) plus the interest rate
which would be in effect hereunder absent such default or maturity, or if such
increased rate of interest may not be collected under applicable law, then at
the maximum rate of interest, if any, which may be collected from Borrower under
applicable law (the "Default Interest Rate"), and such default interest shall be
immediately due and payable. Borrower acknowledges that it would be extremely
difficult or impracticable to determine Lender's actual damages resulting from
any late payment or default, and such late charges and default interest are
reasonable estimates of those damages and do not constitute a penalty. The
remedies of Lender in this Note or in the other Loan Documents, or at law or in
equity, shall be cumulative and concurrent, and may be pursued singly,
successively or together, in Lender's discretion. Time is of the essence of this
Note. In the event either party seeks to enforce its rights under this Note in
any lawsuit or similar proceeding, the substantially prevailing party shall be
entitled to recover from the other party all costs and expenses incurred by such
prevailing party, including, but not limited to, reasonable attorneys' fees.
1.5 Exculpation.
Notwithstanding anything in the Loan Documents to the contrary, but subject to
the qualifications hereinbelow set forth, Lender agrees that (i) Borrower shall
be liable upon the indebtedness evidenced hereby and for the other obligations
arising under the Loan Documents to the full extent (but only to the extent) of
the security therefor and any rents and leases assigned to Lender, the same
being all properties (whether real or personal), rights, estates and interests
now or at any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents pursuant to the Yakima Mortgage
or Yakima Assignment (collectively, the "Property"), and any interest of Lender
as assignee under any assignment of rents and/or leases, (ii) if default occurs
in the timely and proper payment of all or any part of such indebtedness
evidenced hereby or in the timely and proper performance of the other
obligations of Borrower under the Loan Documents, any proceedings brought by
Lender against Borrower shall be limited to the preservation, enforcement and
foreclosure, or any thereof, of the liens, security titles, estates,
assignments, rights and security interests now or at any time hereafter securing
the payment of this Note and/or the other obligations of Borrower under the Loan
Documents, and exercise of power of sale and/or other rights granted under the
Mortgage and the exercise of any rights set forth in the Mortgage or any other
instrument given to secure this Note, or in any assignment of rents and leases
contained in the Mortgage or in any separate instrument affecting the Property
or other collateral and given in connection with this Note and confirmation of
any sale under power of sale, and no attachment, execution or other writ of
process shall be sought, issued or levied upon any assets, properties or funds
of Borrower or its general or limited partners other than the Property except
with respect to the liability described in items (a) through (j) below in this
section, and (iii) in the event of a foreclosure or enforcement of such liens,
security titles, estates, assignments, rights or security interests securing the
payment of this Note and/or the other obligations of Borrower under the Loan
Documents, whether by judicial proceedings or exercise of power of sale, no
judgment for any deficiency upon the indebtedness evidenced hereby shall be
sought or obtained by Lender against Borrower, except with respect to the
liability described in items (a) through (j) below in this section.
Notwithstanding the foregoing provisions of this section, Borrower shall be
fully and personally liable and subject to legal action for any damages incurred
by Lender as a result of the following:
(a) for proceeds paid to, and received by, Borrower under any insurance policies
(or paid as a result of any other claim or cause of action against any person or
entity) by reason of damage, loss or destruction to all or any portion of the
Property, to the full extent of such proceeds not previously delivered to
Lender, but which, under the terms of the Loan Documents, should have been
delivered to Lender;
(b) for proceeds or awards paid to, and received by, Borrower resulting from the
condemnation or other taking in lieu of condemnation of all or any portion of
the Property to the full extent of such proceeds or awards not previously
delivered to Lender, but which, under the terms of the Loan Documents, should
have been delivered to Lender;
(c) for all tenant security deposits or other refundable deposits paid to or
held by Borrower in connection with leases of all or any portion of the Property
which are not applied in accordance with the terms of the applicable lease or
other agreement or delivered to Lender;
(d) for rent and other payments received by Borrower from tenants under leases
of all or any portion of the Property paid more than one (1) month in advance
which are not either applied to the ordinary and necessary expenses of owning
and operating the Property, paid to Lender or otherwise applied against
Borrower's obligations hereunder or under the Loan Documents;
(e) for rents, issues, profits and revenues of all or any portion of the
Property received by Borrower after Borrower's receipt of any notice of default
from Lender hereunder or under the Loan Documents in the event of any default by
Borrower hereunder or thereunder provided that (i) Borrower does not cure same
in accordance with the terms of the applicable loan documents, (ii) Lender does
not otherwise waive such default, or (iii) such sums are not either (x) applied
to the ordinary and necessary expenses of owning and operating the Property,
(y) paid to Lender or (z) otherwise applied against Borrower's obligations
hereunder or under the other Loan Documents including the payment of debt
service;
(f) for damage to the Property as a result of the intentional misconduct or
gross negligence of Borrower or any of its principals, officers, managers,
members, or general partners, or any guarantor or any indemnitor, or any agent
or employee of any such persons, or any removal of all or any portion of the
Property by such persons in violation of the terms of the Loan Documents, to the
full extent of the losses or damages actually incurred by Lender on account of
such damage or removal;
(g) for Borrower's failure to pay any valid taxes, assessments, mechanic's
liens, materialmen's liens or other claims which could create liens on any
portion of the Property, accruing prior to the date Lender acquires actual
possession and control of the Property, which would be superior to the lien or
security title of the Yakima Mortgage or the other Loan Documents, to the full
extent of the amount claimed by any such lien claimant; provided, however,
Borrower shall have no liability for taxes, assessments or liens (i) which
accrue during any period of time when Borrower is not in effective receipt or
control of the revenue from the Property due to a receivership, foreclosure or
other remedial action by Lender, (ii) to the extent of the funds provided by
Borrower into the Impound Account (as defined in Section 1.6 of the Yakima
Mortgage) to pay such taxes and assessments, or (iii) for which there were
inadequate revenue from the Property to pay after taking into account all sums
due and paid Lender during such period and all ordinary and reasonable operating
expenses paid during such period (but without taking into account any
distributions to members or owners of Borrower),
(h) breach of any obligation or indemnity of Borrower under the Hazardous
Substances Indemnity Agreement of even date made by Borrower and WestCoast
Hospitality Corporation, a Washington corporation, or Section 1.30 of the
Mortgage;
(i) for fraud or material misrepresentation by Borrower or any of its
principals, officers, managers, members or general partners, any guarantor, any
indemnitor or any agent, employee or other person authorized to make statements
or representations on behalf of Borrower, any principal, officer, manager,
member or general partner of Borrower, or any guarantor or any indemnitor, to
the full extent of any losses, damages and expenses of Lender on account
thereof; and
(j) for any amounts paid under commercial leases (e.g., restaurants, gift shops,
etc.) containing early lease termination options or otherwise paid by any
commercial tenant(s) in consideration of an early termination of any lease and
not delivered to Lender to be held in accordance with the Yakima Mortgage.
References herein to particular sections of the Loan Documents shall be deemed
references to such sections as affected by other provisions of the Loan
Documents relating thereto. Nothing contained in this section shall (1) be
deemed to be a release or impairment of the indebtedness evidenced by this Note
or the other obligations of Borrower under the Loan Documents or the lien of the
Loan Documents upon the Property, or (2) preclude Lender from foreclosing under
the Loan Documents in case of any default or from enforcing any of the other
rights of Lender except as stated in this section, or (3) limit or impair in any
way whatsoever the Indemnity and Guaranty Agreement or the Hazardous Substances
Indemnity Agreement, each of even date herewith executed and delivered in
connection with the indebtedness evidenced by this Note or release, relieve,
reduce, waive or impair in any way whatsoever, any obligation of any party to
such Indemnity and Guaranty Agreement or Hazardous Substances Indemnity
Agreement.
Notwithstanding anything to the contrary in this Note or any of the other Loan
Documents, Lender shall not be deemed to have waived any right which Lender may
have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S.
Bankruptcy Code to file a claim for the full amount of the indebtedness
evidenced by this Note and the other obligations of Borrower under the Loan
Documents or to require that all collateral shall continue to secure all of such
indebtedness and obligations.
ARTICLE II - GENERAL CONDITIONS
2.1 No Waiver; Amendment.
No failure to accelerate the debt evidenced hereby by reason of default
hereunder, acceptance of a partial or past due payment, or indulgences granted
from time to time shall be construed (i) as a novation of this Note or as a
waiver of such right of acceleration or of the right of Lender thereafter to
insist upon strict compliance with the terms of this Note in the event of an
occurrence of a later default, or (ii) to prevent the exercise of such right of
acceleration or any other right granted hereunder or under any other Loan
Document or by any applicable laws in the event of an occurrence of a later
default; and Borrower hereby expressly waives the benefit of any statute or rule
of law or equity now provided, or which may hereafter be provided, which would
produce a result contrary to or in conflict with the foregoing. No extension of
the time for the payment of this Note or any installment due hereunder, or
release of any party, made by agreement with any person now or hereafter liable
for the payment of this Note shall operate to release, discharge, modify, change
or affect the original liability of Borrower under this Note, either in whole or
in part unless Lender agrees otherwise in writing. This Note may not be changed
orally, but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
2.2 Waivers.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment, notice of intent to accelerate maturity, notice of acceleration of
maturity and all other notices are hereby waived by Borrower. Borrower hereby
further waives and renounces, to the fullest extent permitted by law, all rights
to the benefits of any statute of limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption, appraisement,
exemption and homestead now or hereafter provided by the Constitution and laws
of the United States of America and of each state thereof, both as to itself and
in and to all of its property, real and personal, against the enforcement and
collection of the obligations evidenced by this Note or the other Loan
Documents.
2.3 Limit of Validity.
The provisions of this Note and of all agreements between Borrower and Lender,
whether now existing or hereafter arising and whether written or oral,
including, but not limited to, the Loan Documents, are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason of demand or
acceleration of the maturity of this Note or otherwise, shall the amount paid,
or agreed to be paid to Lender for the use, forbearance, retention or detention
of the money loaned under this Note and related indebtedness exceed the maximum
amount permissible under applicable law. If, from any circumstance whatsoever
(including, without limitation, the receipt of any late charge or similar
amount), performance or fulfillment of any provision hereof or of any agreement
between Borrower and Lender shall, at the time performance or fulfillment of
such provision shall be due, exceed the limit for interest prescribed by law or
otherwise transcend the limit of validity prescribed by applicable law, then
ipso facto the obligation to be performed or fulfilled shall be reduced to such
limit and if, from any circumstance whatsoever, Lender shall ever receive
anything of value deemed interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal balance owing under this Note in the inverse order of
its maturity (whether or not then due) or at the option of Lender be paid over
to Borrower, and not to the payment of interest. All interest (including any
amounts or payments deemed to be interest) contracted for, charged, taken,
reserved, paid or agreed to be paid to Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of this Note, including any extensions or renewals hereof, until payment in
full of the principal balance of this Note so that the interest thereof for such
full period will not exceed at any time the maximum amount permitted by
applicable law. This Section 2.3 will control all agreements between Borrower
and Lender.
2.4 Use of Funds.
Borrower hereby warrants, represents and covenants that no funds disbursed
hereunder shall be used for personal, family, household or agricultural
purposes.
2.5 Unconditional Payment.
Except as specifically provided herein, Borrower is and shall be obligated to
pay principal, interest and any and all other amounts which become payable
hereunder or under the other Loan Documents absolutely and unconditionally and
without any abatement, postponement, diminution or deduction and without any
reduction for counterclaim or setoff. In the event that at any time any payment
received by Lender hereunder shall be deemed by a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under
any bankruptcy, insolvency or other debtor relief law, then the obligation to
make such payment shall survive any cancellation or satisfaction of this Note or
return thereof to Borrower and shall not be discharged or satisfied with any
prior payment thereof or cancellation of this Note, but shall remain a valid and
binding obligation enforceable in accordance with the terms and provisions
hereof, and such payment shall be immediately due and payable upon demand.
2.6 Further Assurances.
Borrower shall execute and acknowledge (or cause to be executed and
acknowledged) and deliver to Lender all reasonable documents, and take all
reasonable actions, reasonably required by Lender from time to time to confirm
the rights created under this Note and the other Loan Documents, to protect and
further the validity, priority and enforceability of this Note and the other
Loan Documents, to subject to the Loan Documents any property of Borrower
intended by the terms of any one or more of the Loan Documents to be encumbered
by the Loan Documents, or otherwise carry out the purposes of the Loan Documents
and the transactions contemplated thereunder; provided, however, that no such
further actions, assurances and confirmations shall increase, modify or change
Borrower's obligations under this Note or under the other Loan Documents.
2.7 Submission to Jurisdiction; Waiver of Jury Trial.
(1) BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
(A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE WHERE THE PROPERTY IS LOCATED
OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO
THIS NOTE, (B) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN EITHER THE CITY
OR THE COUNTY WHERE THE PROPERTY IS LOCATED, (C) SUBMITS TO THE JURISDICTION OF
SUCH COURTS, AND (D) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT
BORROWER WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM, AND
BORROWER FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR
CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO BORROWER AT THE ADDRESS FOR NOTICES
DESCRIBED ON THE FIRST PAGE HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING
HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER
MANNER PERMITTED BY LAW).
(2) BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS
NOTE OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR BORROWER, OR ANY OF THEIR
DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY
OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN EACH OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
2.8 GOVERNING LAW.
THIS NOTE SHALL BE INTERPRETED, CONSTRUED AND ENFORCED ACCORDING TO THE LAWS OF
THE STATE OF WASHINGTON.
2.9 Miscellaneous.
The terms and provisions hereof shall be binding upon and inure to the benefit
of Borrower and Lender and their respective heirs, executors, legal
representatives, successors, successors-in-title and assigns, whether by
voluntary action of the parties or by operation of law. As used herein, the
terms "Borrower" and "Lender" shall be deemed to include their respective
successors, successors-in-title and assigns, whether by voluntary action of the
parties or by operation of law. Subject to the limitations set forth in
Section 1.5 above, if Borrower consists of more than one person or entity, each
shall be jointly and severally liable to perform the obligations of Borrower
under this Note. All personal pronouns used herein, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of articles and
sections are for convenience only and in no way define, limit, amplify or
describe the scope or intent of any provisions hereof. Capitalized terms used in
this Note and not otherwise defined herein shall have the meaning ascribed to
them in the Mortgage or in the other Loan Documents. Time is of the essence with
respect to all provisions of this Note, the Mortgage and the other Loan
Documents. This Note and the other Loan Documents contain the entire agreements
between the parties hereto relating to the subject matter hereof and thereof and
all prior agreements relative hereto and thereto which are not contained herein
or therein are terminated. All notices, demands, requests or other
communications to be sent by one party to the other hereunder or required by law
shall be given and become effective as provided in the Yakima Mortgage. If any
provision under this Note or the application thereof to any entity, person or
circumstance shall be invalid, illegal or unenforceable to any extent, the
remainder of this Note and the application of the provisions hereof to other
entities, persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
PROMISSORY NOTE - SIGNATURE PAGE
3011-1075/Red Lion Hotel Yakima Center
IN WITNESS WHEREOF, the Borrower, intending to be legally bound hereby, has duly
executed this Note to be effective as of the day and year first written above.
BORROWER:
WHC807, LLC,
a Delaware limited liability company
By:
Name: Arthur M. Coffey
Title: President
Schedule List
Schedule A - Mortgage Description - All Ten
Schedule B - Assignment Description - All Ten
SCHEDULE A
Mortgage Description - All Ten
(1) Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
(the "Eureka Mortgage") from WHC831, LLC to a trustee for the benefit of Lender,
as beneficiary, dated as of the date hereof, concerning certain property located
in Eureka, Humboldt County, California.
(2) Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
(the "Redding Mortgage") from WHC840, LLC to a trustee for the benefit of
Lender, as beneficiary, dated as of the date hereof, concerning certain property
located in Redding, Shasta County, California.
(3) Deed of Trust and Security Agreement (the "Boise Mortgage") from WHC817, LLC
to a trustee for the benefit of Lender, as beneficiary, dated as of the date
hereof, concerning certain property located in Boise, Ada County, Idaho.
(4) Deed of Trust and Security Agreement (the "Twin Falls Mortgage") from
WHC818, LLC to a trustee for the benefit of Lender, as beneficiary, dated as of
the date hereof, concerning certain property located in Twin Falls, Twin Falls
County, Idaho.
(5) Deed of Trust and Security Agreement (the "Salt Lake City Mortgage") from
WHC816, LLC to a trustee for the benefit of Lender, as beneficiary, dated as of
the date hereof, concerning certain property located in Salt Lake City, Salt
Lake County, Utah.
(6) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the "Kennewick Mortgage") from WHC803, LLC to a trustee for the
benefit of Lender, as beneficiary, dated as of the date hereof, concerning
certain property located in Kennewick, Benton County, Washington.
(7) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the "Pasco Mortgage") from WHC837, LLC to a trustee for the
benefit of Lender, as beneficiary, dated as of the date hereof, concerning
certain property located in Pasco, Franklin County, Washington.
(8) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the "Port Angeles Mortgage") from WHC839, LLC to a trustee for
the benefit of Lender, as beneficiary, dated as of the date hereof, concerning
certain property located in Port Angeles, Clallam County, Washington.
(9) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the "Richland Mortgage") from WHC841, LLC to a trustee for the
benefit of Lender, as beneficiary, dated as of the date hereof, concerning
certain property located in Richland, Benton County, Washington.
(10) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the "Yakima Mortgage") from WHC807, LLC to a trustee for the
benefit of Lender, as beneficiary, dated as of the date hereof, concerning
certain property located in Yakima, Yakima County, Washington.
All of the foregoing deeds of trust listed above, excluding the Yakima Mortgage,
shall be collectively referred to herein as the "Other Mortgages".
SCHEDULE B
Assignment Description - All Ten
(1) Assignment of Leases and Rents (the "Eureka Assignment") of even date
herewith by WHC831, LLC in favor of Lender concerning certain property located
in Eureka, Humboldt County, California.
(2) Assignment of Leases and Rents (the "Redding Assignment") of even date
herewith by WHC840, LLC in favor of Lender concerning certain property located
in Redding, Shasta County, California.
(3) Assignment of Leases and Rents (the "Boise Assignment") of even date
herewith by WHC817, LLC in favor of Lender concerning certain property located
in Boise, Ada County, Idaho.
(4) Assignment of Leases and Rents (the "Twin Falls Assignment") of even date
herewith by WHC818, LLC in favor of Lender concerning certain property located
in Twin Falls, Twin Falls County, Idaho.
(5) Assignment of Leases and Rents (the "Salt Lake City Assignment") of even
date herewith by WHC816, LLC in favor of Lender concerning certain property
located in Salt Lake City, Salt Lake County, Utah.
(6) Assignment of Leases and Rents (the "Kennewick Assignment") of even date
herewith by WHC803, LLC in favor of Lender concerning certain property located
in Kennewick, Benton County, Washington.
(7) Assignment of Leases and Rents (the "Pasco Assignment") of even date
herewith by WHC837, LLC in favor of Lender concerning certain property located
in Pasco, Franklin County, Washington.
(8) Assignment of Leases and Rents (the "Port Angeles Assignment") of even date
herewith by WHC839, LLC in favor of Lender concerning certain property located
in Port Angeles, Clallam County, Washington.
(9) Assignment of Leases and Rents (the "Richland Assignment") of even date
herewith by WHC841, LLC in favor of Lender concerning certain property located
in Richland, Benton County, Washington.
(10) Assignment of Leases and Rents (the "Yakima Assignment") of even date
herewith by WHC807, LLC in favor of Lender concerning certain property located
in Yakima, Yakima County, Washington.
All of the foregoing assignments of leases and rents listed above, excluding the
Yakima Assignment, shall be collectively referred to herein as the "Other
Assignments."
Exhibit 10.4
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing
BORROWER: WHC807, LLC, a Delaware limited liability company
LENDER: COLUMN FINANCIAL, INC., a Delaware corporation
LENDER: FIRST AMERICAN TITLE INSURANCE COMPANY (Trustee)
LEGAL DESCRIPTION: The complete legal description is on Exhibit A. ASSESSOR'S
PROPERTY TAX PARCEL ACCOUNT NUMBERS: 191319-12561
THIS INSTRUMENT PREPARED BY
AND WHEN RECORDED, RETURN
TO:
Kevin A. Sullivan, Esq.
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Coversheet Recording Information:
Loan No. 399735
TO BE RECORDED IN THE
DEED OF TRUST RECORDS OF
YAKIMA COUNTY, WASHINGTON
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND
FIXTURE FILING (this "Deed of Trust"), executed on June 24, 2003, but to be
effective as of June 27, 2003, is entered into by WHC807, LLC, a Delaware
limited liability company, as grantor for all purposes hereunder ("Borrower"),
whose address is c/o WestCoast Hospitality Corporation, 201 W. North River
Drive, Suite 100, Spokane, Washington 99201, Attention: Chief Financial Officer,
to FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee ("Trustee"), whose address
is National Commercial Services Division, 2101 Fourth Avenue, Suite 800,
Seattle, Washington 98121, for the benefit of COLUMN FINANCIAL, INC., a Delaware
corporation, as beneficiary for all purposes hereunder ("Lender"), whose address
is 11 Madison Avenue, 5th Floor, New York, New York 10010-3629, Attention:
Edmund Taylor. For all state law, statutory and other purposes hereunder,
(i) the term "Borrower" as used herein shall be deemed to mean a grantor of the
Property as described herein the same as if the term "grantor" were used in lieu
of the term "Borrower" throughout this Deed of Trust, and (ii) the term "Lender"
as used herein shall be deemed to mean a beneficiary of the Property with all of
the rights conferred hereby the same as if the term "beneficiary" were used in
lieu of the term "Lender" throughout this Deed of Trust.
W I T N E S S E T H:
FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited
and the trust herein created, the receipt and sufficiency of which are hereby
acknowledged, Borrower hereby irrevocably grants, transfers, conveys and assigns
to Trustee, IN TRUST WITH POWER OF SALE, for the benefit and security of Lender,
under and subject to the terms and conditions hereinafter set forth, all of the
following described property, whether now owned or hereafter acquired
(collectively, the "Property"):
(A) All that certain real property situated in the County of Yakima, State of
Washington, more particularly described on Exhibit A attached hereto and
incorporated herein by this reference (the "Land"), together with all of the
easements, rights, privileges, franchises, tenements, hereditaments and
appurtenances now or hereafter thereunto belonging or in any way appertaining
thereto, and all of the estate, right, title, interest, claim and demand
whatsoever of Borrower therein or thereto, either at law or in equity, in
possession or in expectancy, now owned or hereafter acquired;
(B) All structures, buildings and improvements of every kind and description now
or at any time hereafter located or placed on the Land (the "Improvements");
(C) All easements, rights-of-way, strips and gores of land, vaults, streets,
ways, alleys, passages, sewer rights, and other emblements now or hereafter
located on the Land or under or above the same or any part or parcel thereof,
and all estates, rights, titles, interests, tenements, hereditaments and
appurtenances, reversions and remainders whatsoever, in any way belonging,
relating or appertaining to the Property or any part thereof, or which hereafter
shall in any way belong, relate or be appurtenant thereto, whether now owned or
hereafter acquired by Borrower;
(D) All furniture, furnishings, fixtures, goods, equipment, inventory or
personal property owned by Borrower and now or hereafter located on, attached to
or used in or about the Improvements, including, but not limited to, all items
of personal property located within or adjacent to the Improvements and included
within the definition of "Property and Equipment" and "Inventories" under the
Uniform System of Accounts for Hotels as published by the American Hotel
Association of the United States and Canada (the "Uniform System of Accounts"),
and further including, without limitation, all linen, china, glassware,
tableware, uniforms, all machines, engines, boilers, dynamos, elevators,
stokers, tanks, cabinets, awnings, screens, shades, blinds, carpets, draperies,
lawn mowers, and all appliances, plumbing, heating, air conditioning, lighting,
ventilating, refrigerating, disposals and incinerating equipment, guest ledgers,
telephone systems, televisions and television systems, computer systems and all
fixtures and appurtenances thereto, and such other goods and chattels and
personal property owned by Borrower as are now or hereafter used or furnished in
operating the Improvements, or the activities conducted therein, and all
building materials and equipment hereafter situated on or about the Land or
Improvements, and all warranties and guaranties relating thereto, and all
additions thereto and substitutions and replacements therefor (exclusive of any
of the foregoing owned or leased by tenants of space in the Improvements);
(E) All water, water courses, ditches, wells, reservoirs and drains and all
water, ditch, well, reservoir and drainage rights and powers which are
appurtenant to, located on, under or above or used in connection with the Land
or the Improvements, or any part thereof, together with (i) all utilities,
utility lines, utility commitments, utility capacity, capital recovery charges,
impact fees and other fees paid in connection with same, (ii) reimbursements or
other rights pertaining to utility or utility services provided to the Land
and/or Improvements and (iii) the present or future use or availability of waste
water capacity, or other utility facilities to the extent same pertain to or
benefit the Land and/or Improvements, including, without limitation, all
reservations of or commitments or letters covering any such use in the future,
whether now existing or hereafter created or acquired;
(F) All minerals, crops, timber, trees, shrubs, flowers and landscaping features
now or hereafter located on, under or above the Land;
(G) All cash funds, deposit accounts and other rights and evidence of rights to
cash, now or hereafter created which are held by Lender pursuant to this Deed of
Trust or any other of the Loan Documents (as hereinafter defined), including,
without limitation, all funds now or hereafter on deposit in the Reserves (as
hereinafter defined);
(H) All leases, licenses, tenancies, concessions and occupancy agreements of the
Land or the Improvements now or hereafter entered into by Borrower and all
rents, royalties, issues, profits, bonus money, revenue, income, rights and
other benefits, room rentals, and revenues of any kind derived from all sources
(collectively, the "Rents" or "Rents and Profits") of the Land or the
Improvements, or the fixtures or equipment, now or hereafter arising from the
use or enjoyment of all or any portion thereof or from any present or future
lease (including, without limitation, oil, gas and mineral leases), license,
tenancy, concession, occupancy agreement or other agreement pertaining thereto
or arising from any of the Contracts (as hereinafter defined) or any of the
General Intangibles (as hereinafter defined) and all cash or securities held by
Borrower (the "Security Deposits") that secure performance by the tenants,
lessees, licensees or guests, as applicable, of their obligations under any such
leases, licenses, concessions or occupancy agreements, whether said cash or
securities are to be held until the expiration of the terms of said leases,
licenses, concessions or occupancy agreements or applied to one or more of the
installments of rent coming due prior to the expiration of said terms, subject,
however, to the provisions contained in Section 1.11 hereinbelow;
(I) All contracts and agreements now or hereafter entered by Borrower into
covering any part of the Land or the Improvements (collectively, the
"Contracts") and all revenue, income and other benefits thereof, including,
without limitation, management agreements, franchise agreements, service
contracts, maintenance contracts, equipment leases, personal property leases and
so called "patronage" agreements, agreements relating to the collection of
receivables or use of customer lists, all bookings and reservations for space
within the Improvements or other information, and any contracts or documents
relating to construction on any part of the Land or the Improvements (including
plans, specifications, studies, drawings, surveys, tests, operating and other
reports, bonds and governmental approvals) or to the management or operation of
any part of the Land or the Improvements;
(J) All present and future monetary deposits given to any public or private
utility with respect to utility services furnished to any part of the Land or
the Improvements;
(K) All present and future funds, accounts, instruments (including, without
limitation, promissory notes), investment property, letter-of-credit rights,
letters of credit, money, supporting obligations, accounts receivable,
documents, causes of action, claims, general intangibles (including, without
limitation, payment intangibles and software, trademarks, trade names, service
marks and symbols now or hereafter used by Borrower in connection with or
related to any part of the Land or the Improvements, all names by which the Land
or the Improvements may be operated or known (specifically excluding, however,
the mark "Red Lion" or "WestCoast" or related marks), all rights to carry on
business under such names, all telephone numbers or listings, and all rights,
interest and privileges which Borrower has or may have as developer or declarant
under any covenants, restrictions or declarations now or hereafter relating to
the Land or the Improvements) and all notes or chattel paper (whether tangible
or electronic) now or hereafter owned by Borrower and arising from or by virtue
of Grantor's operations related to the Land or the Improvements and all customer
lists, other lists and business information relating in any way to the Land, the
Improvements or the use thereof (collectively, the "General Intangibles");
(L) All water taps, sewer taps, certificates of occupancy, permits, special
permits, uses, licenses, franchises, certificates, consents, approvals and other
rights and privileges now or hereafter obtained in connection with the Land or
the Improvements and all present and future warranties and guaranties relating
to the Improvements or to any equipment, fixtures, furniture, furnishings,
personal property or components of any of the foregoing now or hereafter located
or installed on the Land or the Improvements;
(M) All building materials, supplies and equipment now or hereafter placed on
the Land or in the Improvements and all architectural renderings, models,
drawings, plans, specifications, studies and data now or hereafter relating to
the Land or the Improvements;
(N) All right, title and interest of Borrower in any insurance policies or
binders now or hereafter relating to the Property (whether or not such insurance
was requested or required by Lender), including any unearned premiums thereon;
(O) All proceeds, products, substitutions and accessions (including claims and
demands therefor) of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance (whether or not such insurance was requested or required
by Lender) and condemnation awards; and
(P) All other or greater rights and interests of every nature in the Land or the
Improvements and in the possession or use thereof and income therefrom, whether
now owned or hereafter acquired by Borrower.
FOR THE PURPOSE OF SECURING:
(1) The debt evidenced by and interest and all other sums owed pursuant to those
certain Promissory Notes (such Promissory Notes, together with any and all
renewals, modifications, amendments, restatements, consolidations,
substitutions, replacements and extensions thereof, are hereinafter collectively
referred to as the "Note") all being of even date with this Deed of Trust and
having a maturity date of July 11, 2013, made by the entities as indicated on
Exhibit D attached hereto and incorporated herein by reference and payable to
the order of Lender in the original principal amounts as indicated on Exhibit D
(collectively, the "Loan" or the "Loan Amount"), together with interest and any
yield maintenance premiums or other fees as therein provided;
(2) The full and prompt payment and performance of all of the provisions,
agreements, covenants and obligations herein contained and contained in any
other agreements, documents or instruments now or hereafter evidencing, securing
or otherwise relating to the indebtedness evidenced by the Note (the Note, this
Deed of Trust, the Other Deeds of Trust, as described on Exhibit E, the
Assignment, as hereinafter defined, and such other agreements, documents and
instruments related thereto, together with any and all renewals, modifications,
amendments, restatements, consolidations, substitutions, replacements, and
extensions and modifications thereof, are hereinafter collectively referred to
as the "Loan Documents") and the payment of all other sums therein covenanted to
be paid;
(3) Any and all future or additional advances (whether or not obligatory) made
by Lender to protect or preserve the Property or the lien or security interest
created hereby on the Property, or for taxes, assessments, operating expenses or
insurance premiums as hereinafter provided or for performance of any of
Borrower's obligations hereunder or under the other Loan Documents or for any
other purpose provided herein or in the other Loan Documents (whether or not the
original Borrower remains the owner of the Property at the time of such
advances) together with interest thereon at the Default Interest Rate (as
defined in the Note); and
(4) Any and all other indebtedness now owing or which may hereafter be owing by
Borrower to Lender and which is evidenced by a promissory note or other
agreement which specifically states that it is intended to be secured by this
Deed of Trust, and all renewals, modifications, amendments, restatements,
consolidations, substitutions, replacements and extensions thereof.
(All of the sums referred to in Subsections (1) through (4) above are herein
sometimes referred to as the "secured indebtedness" or the "indebtedness secured
hereby").
PROVIDED, HOWEVER, that if the principal and interest and all other sums due or
to become due under the Note, including, without limitation, any prepayment fees
required pursuant to the terms of the Note, shall have been paid at the time and
in the manner stipulated therein and all other sums payable hereunder and all
other indebtedness secured hereby shall have been paid and all other covenants
contained in the Loan Documents shall have been performed, then, upon written
request of Lender stating that all indebtedness secured hereby have been paid,
and upon surrender of this Deed of Trust and the Note to Trustee for
cancellation and retention and upon payment by Borrower of Trustee's fees,
Trustee shall reconvey to Borrower, or the person or persons legally entitled
thereto, without warranty, any portion of the Property then held hereunder. The
recitals in such reconveyance of any matters or facts shall be conclusive proof
of the truthfulness thereof. The grantee in any reconveyance may be described as
"the person or persons legally entitled thereto."
ARTICLE I
COVENANTS OF BORROWER
For the purpose of further securing the indebtedness secured hereby and for the
protection of the security of this Deed of Trust, for so long as the
indebtedness secured hereby or any part thereof remains unpaid, Borrower
represents, covenants and agrees as follows:
1.1 Warranties of Borrower. Borrower, for itself and its successors and assigns,
does hereby represent, warrant and covenant to and with Lender, its successors
and assigns, that as of the date hereof:
(a) Borrower has good, marketable and indefeasible fee simple title to the
Property, subject only to those matters expressly set forth on Exhibit B
attached hereto and by this reference incorporated herein (the "Permitted
Exceptions"), and has full power and lawful authority to grant, bargain, sell,
convey, assign, transfer and encumber its interest in the Property in the manner
and form hereby done or intended. None of the Permitted Exceptions materially
interferes with the security intended to be provided by this Deed of Trust, the
current primary use of the Property or the current ability of the Property to
generate income sufficient to service the Loan. Borrower will preserve its
interest in and title to the Property and will forever warrant and defend the
same to Trustee and Lender against any and all claims whatsoever and will
forever warrant and defend the validity and priority of the lien and security
interest created herein against the claims of all persons and parties
whomsoever, subject to the Permitted Exceptions and such matters as may be
approved in writing by Lender pursuant to this Deed of Trust. The foregoing
warranty of title shall survive the foreclosure, exercise of any power of sale
or other enforcement of this Deed of Trust (whether by power of sale or
otherwise), and shall inure to the benefit of and be enforceable by Lender in
the event Lender acquires title to the Property pursuant to any foreclosure,
exercise of any power of sale or otherwise;
(b) No bankruptcy or insolvency proceedings are pending or contemplated by
Borrower or, to the best knowledge of Borrower, against Borrower or by or
against any endorser, cosigner or guarantor of the Note;
(c) To Borrower's best knowledge, all reports, certificates, affidavits,
statements and other data furnished by Borrower to Lender in connection with the
Loan are true and correct in all material respects and do not omit to state any
fact or circumstance necessary to make the statements contained therein not
misleading;
(d) The execution, delivery and performance of this Deed of Trust, the Note and
all of the other Loan Documents have been duly authorized by all necessary
action to be taken, and are binding and enforceable against Borrower in
accordance with the respective terms thereof and do not contravene, result in a
breach of or constitute (upon the giving of notice or the passage of time or
both) a default under the partnership agreement, certificate or articles of
incorporation or other organizational documents of Borrower or any contract or
agreement of any nature to which Borrower is a party or by which Borrower or any
of its property may be bound and to the best of Borrower's knowledge do not
violate or contravene any law, order, decree, rule or regulation to which
Borrower is subject;
(e) To Borrower's best knowledge, Borrower is not required to obtain any
consent, approval or authorization from or to file any declaration or statement
with, any governmental authority or the agency in connection with or as a
condition to the execution, delivery or performance of this Deed of Trust, the
Note or the other Loan Documents which has not been so obtained or filed;
(f) To Borrower's best knowledge, Borrower has obtained or made all necessary
(i) consents, approvals and authorizations and registrations and filings of or
with all governmental authorities or agencies and (ii) consents, approvals,
waivers and notifications of partners, stockholders, members, creditors, lessors
and other non-governmental persons and/or entities, in each case, which are
required to be obtained or made by Borrower in connection with the execution and
delivery of, and the performance by Borrower of its obligations under, the Loan
Documents;
(g) Borrower is not an "investment company," or a company "controlled" by an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended;
(h) No part of the proceeds of the indebtedness secured hereby will be used by
Borrower for the purpose of purchasing or acquiring any "margin stock" within
the meaning of Regulations T, U or X of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulations T, U or X or any other Regulations of such Board of Governors, or
for any purpose prohibited by legal requirements or by the terms and conditions
of the Loan Documents;
(i) Borrower and, if Borrower is a partnership, any general partner of Borrower,
has filed all federal, state and local tax returns required to be filed and has
paid or made adequate provision for the payment of all federal, state and local
taxes, charges and assessments, including sales and payroll taxes, payable by
Borrower and its general partners, if any. Borrower and its general partners, if
any, believe that their respective tax returns properly reflect the income and
taxes of Borrower and said general partners, if any, for the periods covered
thereby, subject only to reasonable adjustments required by the Internal Revenue
Service or other applicable tax authority upon audit;
(j) Borrower is not an "employee benefit plan," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which
is subject to Title I of ERISA and the assets of Borrower do not constitute
"plan assets" of one or more such plans within the meaning of 29 C.F.R.
Section 2510.3-101;
(k) To Borrower's best knowledge, the Land and the Improvements and the intended
use thereof by Borrower comply with all applicable restrictive covenants, zoning
ordinances, subdivision and building codes, flood disaster laws, applicable
health and environmental laws and regulations and all other ordinances, orders
or requirements issued by any state, federal or municipal authorities having or
claiming jurisdiction over the Property. To Borrower's best knowledge, the Land
and Improvements constitute a separate tax parcel for purposes of ad valorem
taxation. To Borrower's best knowledge, the Land and Improvements do not require
any rights over, or restrictions against, other property in order to comply with
any of the aforesaid governmental ordinances, orders or requirements except for
such rights and restrictions which are described in the Title Insurance Policy
(as hereinafter defined);
(l) All utility services necessary and sufficient for the full use, occupancy,
operation and disposition of the Land and the Improvements for their intended
purposes are available to the Property, including water, storm sewer, sanitary
sewer, gas, electric, cable and telephone facilities, through public
rights-of-way or perpetual private easements reflected in the title insurance
policy insuring the lien of this Deed of Trust and approved by Lender (the
"Title Insurance Policy");
(m) All streets, roads, highways, bridges and waterways necessary for access to
and full use, occupancy, operation and disposition of the Land and the
Improvements have been completed, have been dedicated to and accepted by the
appropriate municipal authority and are open and available to the Land and the
Improvements without further condition or cost to Borrower;
(n) All curb cuts, driveways and traffic signals shown on the survey delivered
to Lender prior to the execution and delivery of this Deed of Trust are existing
and to Borrower's best knowledge have been fully approved by the appropriate
governmental authority;
(o) To Borrower's best knowledge, there are no judicial, administrative,
mediation or arbitration actions, suits or proceedings pending or threatened
against or affecting Borrower (and any member of Borrower) or the Property
which, if adversely determined, would have a material adverse effect on (a) the
Property, (b) the business, prospects, profits, operations or condition
(financial or otherwise) of Borrower, (c) the enforceability, validity,
perfection or priority of the lien of any Loan Document, or (d) the ability of
Borrower to perform any obligations under any Loan Document (collectively, a
"Material Adverse Effect");
(p) As of the date of this Deed of Trust (i) the Property is free from
delinquent water charges, sewer rents, taxes and assessments and from unrepaired
damage caused by fire, flood, accident or other casualty, and (ii) no part of
the Land or the Improvements has been taken in condemnation, eminent domain or
like proceeding nor is any such proceeding pending or to Borrower's knowledge
and belief, threatened or contemplated;
(q) Borrower possesses all franchises, patents, copyrights, trademarks, trade
names, licenses (including, without limitation, liquor licenses), and permits
(collectively, the "Permits") adequate for the conduct of its business
substantially as now conducted or, with respect to liquor licenses, has the
right to use the same in the operation of the Property pursuant to legal, valid
and enforceable agreements, all fees due and payable in connection with the
Permits have been paid and the Property and the conduct of Borrower's business
thereof materially complies with the Permits;
(r) Except as set forth in the Title Insurance Policy insuring the lien of this
Deed of Trust and to Borrower's best knowledge, no improvements on adjoining
properties encroach upon the Property. To Borrower's best knowledge, the
Improvements are structurally sound, in good repair and free of defects in
materials and workmanship and have been constructed and installed in substantial
compliance with the plans and specifications relating thereto. All major
building systems located within the Improvements, including, without limitation,
the heating and air conditioning systems and the electrical and plumbing
systems, are in good working order and condition, all of the guest rooms in the
Improvements are in good condition and available for regular occupancy and the
lobby, restaurant and lounge facilities, meeting rooms, "back-of-the-house"
areas, parking facilities and other public areas are in good condition and
available for regular use. The Improvements and Borrower's operations of its
business materially comply with the requirements of the Franchise Agreement (as
hereinafter defined);
(s) There are no security agreements or financing statements affecting any of
the Property other than the security agreements and financing statements created
in favor of Lender;
(t) Except as previously disclosed in Borrower's Certification Regarding Project
Documents and Financial Information dated of even date herewith and delivered to
Lender or otherwise in writing by Borrower to Lender, and other Manager
Compensation Systems (hereinafter defined), there is no: (i) collective
bargaining agreement and other labor agreement to which Borrower or the
Property, or any portion thereof, is a party or by which either is or may be
bound; (ii) employment, profit sharing, deferred compensation, bonus, stock
option, stock purchase, pension, retainer, consulting, retirement, health,
welfare, or incentive plan or contract to which Borrower or the Property, or any
portion thereof is a party, or by which either is or may be bound or (iii) plan
and agreement under which "fringe benefits" (including, but not limited to,
vacation plans or programs, and related or similar dental or medical plans or
programs, and related or similar benefits) are afforded to employees of Borrower
or the Property, or any portion thereof. As used herein, the term "Manager
Compensation Systems" shall mean those certain incentive compensation systems
and compensation/benefit programs for employees of the Manager designed to
promote increased customer use of the Property. Borrower has not violated in any
material respects any applicable laws, rules and regulations relating to the
employment of labor, including those relating to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by appropriate governmental authorities;
(u) The Property is free and clear of any mechanics' or materialmen's liens or
liens in the nature thereof, and no rights are outstanding that under law would
give rise to any such liens, any of which liens are or may be prior to, or equal
with, the lien of this Deed of Trust, except those which are insured against by
the Title Insurance Policy;
(v) Except as disclosed in the Title Insurance Policy, no Existing Lease or
Contract or easement, right-of-way, permit or declaration (collectively,
"Property Agreements") provides any party with the right to obtain a lien or
encumbrance upon the Property superior to the lien of this Deed of Trust;
(w) Borrower has delivered to Lender true, correct and complete copies of all
Property Agreements and no default exists or would exist, with the passing of
time, or the giving of notice, or both, under any Property Agreement which
would, in the aggregate, have a Material Adverse Effect;
(x) To the best knowledge of Borrower, no offset or any right of offset exists
respecting continued contributions to be made by any party to any Property
Agreement except as expressly set forth herein. Except as previously disclosed
to Lender in writing, no material exclusions or restrictions on the utilization,
leasing or improvement of the Property (including non-compete agreements) exist
in any Property Agreement;
(y) All work, if any, to be performed by Borrower under each of the Property
Agreements has been substantially performed, all contributions to be made by
Borrower to any party to such Property Agreements have been made, and all other
conditions to such party's obligations thereunder have been satisfied;
(z) The Land is taxed separately without regard to any other real estate and
constitutes a legally subdivided lot under all applicable legal requirements
(or, if not subdivided, no subdivision or platting of the Property is required
under applicable legal requirements), and for all purposes may be mortgaged,
conveyed, pledged, hypothecated, assigned or otherwise dealt with as an
independent parcel;
(aa) The Land forms no part of any property owned, used or claimed by Borrower
as a residence or business homestead and is not exempt from forced sale under
the laws of the State in which the Property is located. Borrower hereby
disclaims and renounces each and every claim to all or any portion of the
Property as a homestead. The Loan evidenced by the Loan Documents is made and
transacted solely for business, investment, commercial or other similar
purposes. No part of the Property is or will be used for agricultural or farming
purposes;
(bb) There are no outstanding options or rights of first offer or refusal to
purchase all or any portion of the Property or Borrower's interest therein or
ownership thereof made by Borrower and to Borrower's best knowledge made by any
other party;
(cc) There are no actions, suits, proceedings or orders of record or of which
Borrower has notice, and, to the best of Borrower's knowledge, there are no
inquiries or investigations, pending or threatened, in any such case against,
involving or affecting the Property, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, alleging the violation
of any federal, state or local law, statute, ordinance, rule or regulation
relating to Environmental Laws. Furthermore, Borrower has not received any
written claim, notice or opinion that the ownership or operation of the Property
violates any federal, state or local law, statute, ordinance, rule, regulation,
decree, order, and/or permit relating to Environmental Laws, and, to the best of
Borrower's knowledge, no valid basis for any proceeding, action or claim of such
nature exists;
(dd) The representations and warranties contained in this Deed of Trust, or the
review and inquiry made on behalf of Borrower therefor, have all been made by
persons having the requisite expertise and knowledge to provide such
representations and warranties. No statement or fact made by or on behalf of
Borrower in this Deed of Trust or in any certificate, document or schedule
furnished to Lender pursuant hereto, contains any untrue statement of a material
fact or omits to state any material fact necessary to make statements contained
therein or herein not misleading (which may be to Borrower's best knowledge
where so provided herein). There is no fact presently known to Borrower which
has not been disclosed to Lender which would have a Material Adverse Effect; and
(ee) Any lease, license or occupancy agreement now in effect permits the
application of insurance and condemnation proceeds as provided herein.
1.2 Defense of Title.
If, while this Deed of Trust is in force, the title to the Property or the
interest of Lender or Trustee therein shall be the subject, directly or
indirectly, of any action at law or in equity, or be attached directly or
indirectly, or endangered, clouded or adversely affected in any manner,
Borrower, at Borrower's expense, shall take all necessary and proper steps for
the defense of said title or interest, including the employment of counsel
reasonably approved by Lender, the prosecution or defense of litigation, and the
compromise or discharge of claims made against said title or interest.
1.3 Performance of Obligations.
Borrower shall pay when due the principal of and the interest on the
indebtedness secured hereby including all charges, fees and other sums required
to be paid by Borrower as provided in the Loan Documents, and shall observe,
perform and discharge all obligations and conditions, and comply with all
prohibitions, covenants and agreements to be observed, performed or discharged
by Borrower set forth in the Loan Documents in accordance with their terms. In
the event that Borrower is in default under its obligations under this Deed of
Trust or under any of the other Loan Documents and the same is continuing after
any applicable cure period, Lender may, without limiting or waiving any other
rights or remedies of Lender hereunder, perform such obligations of Borrower and
any and all costs and expenses reasonably incurred by Lender in connection
therewith, together with interest thereon at the Default Interest Rate (as
defined in the Note) from the date incurred by Lender until actually paid by
Borrower, shall be immediately paid by Borrower on demand and shall be secured
by this Deed of Trust and by all of the other Loan Documents securing all or any
part of the indebtedness evidenced by the Note.
1.4 Insurance.
Borrower shall, at Borrower's expense, maintain in force and effect on the
Property at all times while this Deed of Trust continues in effect the following
insurance:
(a) "All-risk" coverage insurance against loss or damage to the Property from
all-risk perils, with any and all exclusions subject to Lender approval and
otherwise satisfactory to Lender. The amount of such insurance shall be not less
than one hundred percent (100%) of the full replacement cost of the
Improvements, furniture, furnishings, fixtures, equipment and other items
(whether personalty or fixtures) included in the Property and owned by Borrower
from time to time, without reduction for depreciation. The determination of the
replacement cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing such coverage or, at Lender's election, by
reference to such indexes, appraisals or information as Lender determines in its
reasonable discretion. Full replacement cost, as used herein, means, with
respect to the Improvements, the cost of replacing the Improvements without
regard to deduction for depreciation, exclusive of the cost of excavations,
foundations and footings below the lowest basement floor, and means, with
respect to such furniture, furnishings, fixtures, equipment and other items, the
cost of replacing the same. Each policy or policies shall contain a replacement
cost endorsement and either an agreed amount endorsement (to avoid the operation
of any co-insurance provisions) or a waiver of any co-insurance provisions, all
subject to Lender's approval.
(b) Commercial general liability insurance for personal injury, bodily injury,
death and property damage liability in amounts not less than $5,000,000.00 per
occurrence, $6,000,000.00 aggregate (inclusive of umbrella coverage) or such
lesser amount as Lender in Lender's sole discretion may accept, for bodily
injury, personal injury and property damage. Lender hereby retains the right to
periodically review the amount of said liability insurance being maintained by
Borrower and to require an increase in the amount of said liability insurance
should Lender deem an increase to be reasonably prudent under then existing
circumstances.
(c) Insurance covering the major components of the central heating, air
conditioning and ventilating systems, boilers, other pressure vessels, high
pressure piping and machinery, elevators and escalators, if any, and other
similar equipment installed in the Improvements, in an amount equal to one
hundred percent (100%) of the full replacement cost of the Improvements which
policies shall insure against physical damage to and loss of occupancy and use
of the Improvements arising out of an accident or breakdown covered thereunder.
(d) If the Land or any part thereof is identified by the Secretary of Housing
and Urban Development as being situated in an area now or subsequently
designated as having special flood hazards (including, without limitation, those
areas designated as Zone A or Zone V), flood insurance in an amount equal to one
hundred percent (100%) of the replacement cost of the Improvements or the
maximum amount of flood insurance available under the National Flood Insurance
Program, whichever is the lesser.
(e) During the period of any construction on the Land or renovation or
alteration of the Improvements, a so-called "Builder's All-Risk Completed Value"
or "Course of Construction" insurance policy in non-reporting form for any
Improvements under construction, renovation or alteration in an amount approved
by Lender and Worker's Compensation Insurance covering all persons engaged in
such construction, renovation or alteration.
(f) Business interruption insurance in amounts sufficient to compensate Borrower
for all Rents and Profits during a period of not less than eighteen (18) months
in which the Property may be damaged or destroyed; provided, however, the
required period of coverage shall be twelve (12) months during any period of
time in which the outstanding balance of the Loan is less than Twenty Million
Dollars ($20,000,000.00).
(g) Law and ordinance coverage in an amount satisfactory to Lender if the
Property, or any part thereof, shall constitute a nonconforming use or structure
under applicable zoning ordinances, sub-division and building codes or other
laws, ordinances, orders and requirements.
(h) Such other insurance on the Property or on any replacements or substitutions
thereof or additions thereto as may from time to time be required by Lender
against other insurable hazards or casualties, including, without limitation,
innkeeper's liability and liquor liability, which at the time are commonly
insured against in the case of property similarly situated, due regard being
given to the height and type of buildings, their construction, location, use and
occupancy.
The "all-risk" commercial property and rental income insurance required under
Section 1.4(a) and 1.4(f) above shall cover perils of terrorism and acts of
terrorism and Borrower shall maintain commercial property and rental income
insurance for loss resulting from perils and acts of terrorism on terms
(including amounts) consistent with those required under Section 1.4(a) and
1.4(f) above at all times during the term of the Loan, provided, however,
Borrower's insurance coverage may exclude perils and acts of terrorism if
Borrower also obtains, at Borrower's sole cost and expense, a Terrorism Policy
(hereinafter defined). The term "Terrorism Policy", as used herein, shall mean a
separate stand-alone terrorism insurance policy obtained by Borrower which
corresponds to Borrower's primary insurance exclusion relating to acts or perils
of terrorism such that there are no gaps in coverage and being otherwise
acceptable to Lender and consistent as to coverage amounts, ratings and
conditions with the requirements of this Section 1.4 as it relates to other
sorts of insurance coverage. Borrower shall not decline or otherwise terminate
any terrorism coverage offered under Borrower's all-risk commercial policy (as
opposed to ancillary insurance, such as earthquake, flood, automobile and the
like) unless a Terrorism Policy is already in place.
All such insurance shall (i) be issued by companies approved by Lender and
licensed to do business in the state where the Property is located, with a
claims paying ability rating of "AA-" or better by Standard & Poor's Rating
Services, a division of The McGraw Hill Companies, Inc., (ii) contain the
complete address of the Land (or a complete legal description), (iii) be for a
term of at least one (1) year, (iv) contain deductibles no greater than
$25,000.00 or as otherwise required by Lender, and (v) be subject to the
approval of Lender as to insurance companies, amounts, content, forms of
policies, any exclusions, method by which premiums are paid and expiration
dates. Notwithstanding the rating requirements described in subitem (i) of this
paragraph, the insurance company providing general liability coverage may have a
claims paying ability rating of as low as "A" by Standard & Poor's Rating
Service and be on a "non-admitted" basis and the insurance company providing
property coverage pursuant to Section 1.4(a) hereinabove in excess of
$10,000,000.00 of loss may have a claims paying ability rating of as low as
"BBB" by Standard & Poor's Rating Service so long as such insurance company is
admitted.
Borrower shall as of the date hereof deliver to Lender evidence that said
insurance policies have been paid current as of the date hereof and original
certificates of insurance signed by an authorized agent evidencing such
insurance satisfactory to Lender. Borrower shall renew all such insurance and
deliver to Lender certificates evidencing such renewals at least thirty (30)
days before any such insurance shall expire. Without limiting the required
endorsements to insurance policies, Borrower further agrees that all such
policies and any other policies covering the Property or any portion thereof,
whether or not required or requested by Lender, shall provide that proceeds
thereunder shall be payable to Lender, its successors and assigns, pursuant and
subject to a mortgagee clause (without contribution) of standard form attached
to, or otherwise made a part of, the applicable policy and that Lender, its
successors and assigns, shall be named as an additional insured under all
liability insurance policies. Borrower further agrees that all such insurance
policies and any other policies covering the Property or any portion thereof,
whether or not required or requested by Lender: (i) shall provide for at least
thirty (30) days' prior written notice to Lender prior to any cancellation or
termination thereof and prior to any modification thereof which affects the
interest of Lender; (ii) shall contain an endorsement or agreement by the
insurer that any loss shall be payable to Lender in accordance with the terms of
such policy notwithstanding any act or negligence of Borrower which might
otherwise result in forfeiture of such insurance; and (iii) shall either name
Lender as an additional insured or waive all rights of subrogation against
Lender. The delivery to Lender of the insurance policies or the certificates of
insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance policies by Borrower to Lender as further security
for the indebtedness secured hereby. In the event of foreclosure of this Deed of
Trust, or other transfer of title to the Property in extinguishment in whole or
in part of the secured indebtedness, all right, title and interest of Borrower
in and to all proceeds payable under such policies then in force concerning the
Property shall thereupon vest in the purchaser at such foreclosure, or in Lender
or other transferee in the event of such other transfer of title. Approval of
any insurance by Lender shall not be a representation of the solvency of any
insurer or the sufficiency of any amount of insurance. In the event Borrower
fails to provide, maintain, keep in force or deliver and furnish to Lender the
policies of insurance required by this Deed of Trust or evidence of their
renewal as required herein, Lender may, but shall not be obligated to, procure
such insurance and Borrower shall pay all amounts advanced by Lender, together
with interest thereon at the Default Interest Rate (as defined in the Note) from
and after the date advanced by Lender until actually repaid by Borrower,
promptly upon demand by Lender. Any amounts so advanced by Lender, together with
interest thereon, shall be secured by this Deed of Trust and by all of the other
Loan Documents securing all or any part of the indebtedness evidenced by the
Note. Lender shall not be responsible for nor incur any liability for the
insolvency of the insurer or other failure of the insurer to perform, even
though Lender has caused the insurance to be placed with the insurer after
failure of Borrower to furnish such insurance.
1.5 Payment of Taxes.
Borrower shall pay or cause to be paid, except to the extent provision is
actually made therefor pursuant to Section 1.6 of this Deed of Trust, all taxes
and assessments which are or may become a lien on the Property or which are
assessed against or imposed upon the Property. Borrower shall furnish Lender
with receipts (or if receipts are not immediately available, with copies of
canceled checks evidencing payment with receipts to follow promptly after they
become available) showing payment of such taxes and assessments at least fifteen
(15) days prior to the applicable delinquency date therefor. Notwithstanding the
foregoing, Borrower may in good faith, by appropriate proceedings and upon
notice to Lender, contest the validity, applicability or amount of any asserted
tax or assessment so long as (a) such contest is diligently pursued, (b) such
contest suspends the obligation to pay the tax or assessment and that nonpayment
of such tax or assessment will not result in the sale, loss, forfeiture or
diminution of the Property or any part thereof or any interest of Lender
therein, and (c) prior to the earlier of the commencement of such contest or the
delinquency date of the asserted tax or assessment, Borrower deposits in the
Impound Account (as hereinafter defined) an amount determined by Lender to be
adequate to cover the payment of such tax or assessment and a reasonable
additional sum to cover possible interest, costs and penalties; provided,
however, that Borrower shall promptly cause to be paid any amount adjudged by a
court of competent jurisdiction to be due, with all interest, costs and
penalties thereon, promptly after such judgment becomes final; and provided
further that in any event each such contest shall be concluded and the taxes,
assessments, interest, costs and penalties shall be paid prior to the date any
writ or order is issued under which the Property may be sold, lost or forfeited.
1.6 Tax and Insurance Impound Account.
Borrower shall establish and maintain at all times while this Deed of Trust
continues in effect an impound account (the "Impound Account") with Lender for
payment of real estate taxes, ad valorem taxes, personal property taxes,
assessments and insurance on the Property and as additional security for the
indebtedness secured hereby. Borrower shall deposit in the Impound Account an
amount determined by Lender to be sufficient (when added to the monthly deposits
described herein) to pay the next due annual installment of real estate taxes,
ad valorem taxes, personal property taxes and assessments on the Property at
least one (1) month prior to the delinquency date thereof (if paid in one
installment) and the next due annual insurance premiums with respect to the
Property at least one (1) month prior to the due date thereof (if paid in one
installment). Commencing on the first monthly payment date under the Note and
continuing thereafter on each monthly payment date under the Note, Borrower
shall pay to Lender (by distribution from the Rent Account to the Impound
Account in accordance with the Cash Management Agreement), concurrently with the
monthly payment due under the Note, an amount equal to one-twelfth (1/12) of the
amount of the annual real estate taxes, ad valorem taxes, personal property
taxes and assessments that will next become due and payable on the Property,
plus one-twelfth (1/12) of the amount of the annual premiums that will next
become due and payable on insurance policies which Borrower is required to
maintain hereunder, each as reasonably estimated and determined by Lender. So
long as no default hereunder or under the other Loan Documents has occurred and
is continuing, all sums in the Impound Account shall be held by Lender in the
Impound Account to pay said taxes, assessments and insurance premiums in one
installment before the same become delinquent. Borrower shall be responsible for
ensuring the receipt by Lender, at least thirty (30) days prior to the
respective due date for payment thereof, of all bills, invoices and statements
for all taxes, assessments and insurance premiums to be paid from the Impound
Account, and so long as no default hereunder or under the other Loan Documents
has occurred and is continuing, Lender shall pay the governmental authority or
other party entitled thereto directly to the extent funds are available for such
purpose in the Impound Account. In making any payment from the Impound Account,
Lender shall be entitled to rely on any bill, statement or estimate procured
from the appropriate public office or insurance company or agent without any
inquiry into the accuracy of such bill, statement or estimate and without any
inquiry into the accuracy, validity, enforceability or contestability of any
tax, assessment, valuation, sale, forfeiture, tax lien or title or claim
thereof. No interest on funds contained in the Impound Account shall be paid by
Lender to Borrower and any interest or other earnings on funds deposited in the
Impound Account shall be solely for the account of Lender. If the total funds in
the Impound Account shall exceed the amount of payments actually applied by
Lender for the purposes of the Impound Account, such excess may be credited by
Lender on subsequent payments to be made hereunder or, at the option of Lender,
refunded to Borrower within ten (10) business days after payment thereof. If,
however, the Impound Account shall not contain sufficient funds to pay the sums
required when the same shall become due and payable, Borrower shall, within ten
(10) days after receipt of written notice thereof, deposit with Lender the full
amount of any such deficiency.
1.7 FF&E Reserve.
As additional security for the indebtedness secured hereby, Borrower shall
establish and maintain at all times while this Deed of Trust continues in effect
a reserve (the "FF&E Reserve") with Lender for the payment of costs and expenses
incurred by Borrower in connection with capital improvements, repairs and
replacements performed at the Property, including but not limited to, the
performance of work to the roofs, chimneys, gutters, downspouts, paving, curbs,
ramps, driveways, balconies, porches, patios, exterior walls, exterior doors and
doorways, windows, carpets, appliances, fixtures, elevators, and mechanical and
HVAC equipment and the replacement of furnishings, fixtures and equipment in the
guest rooms, hallways, lobbies, restaurants, lounges, meeting and banquet rooms,
parking facilities and other public areas accessible by the public for regular
use and such other items as Lender may approve from time to time in its
reasonable discretion (collectively, the "Repairs"). Commencing on the first
monthly payment date under the Note, and continuing thereafter on each monthly
payment date under the Note, Borrower shall pay to Lender (by distribution from
the Rent Account in accordance with the Cash Management Agreement), concurrently
with and in addition to the monthly payment due under the Note, and until the
Note and all other indebtedness secured hereby is fully paid and performed, a
deposit to the FF&E Reserve in an amount equal to the Required Percentage
(hereinafter defined) of the annual "gross revenues", as hereinafter defined,
from the Property for the prior calendar year, divided by twelve (12). As used
herein, "gross revenues" shall mean all Rents and Profits derived by Borrower
from room sales, telephone sales, net fax sales, net vending sales, net catering
sales, net guest laundry sales, and any other miscellaneous sales not including
interest income, dividend income, gains on the sale of stock, bonds or other
securities, or from the sale of used furniture, fixtures and equipment, or from
any other passive income source. As used herein, "Required Percentage" shall
mean five percent (5%) through and including the deposit to be made into the
TILC Reserve contemporaneously with the thirty-sixth (36th) monthly payment due
under the Note and four percent (4%) thereafter. So long as no default hereunder
or under the other Loan Documents has occurred and is continuing, (i) all sums
in the FF&E Reserve shall be held by Lender in the FF&E Reserve to pay and/or
reimburse Borrower for the costs and expenses of Repairs, and (ii) Lender shall,
so long as no default hereunder or under the other Loan Documents has occurred
and is continuing, and to the extent funds are available for such purpose in the
FF&E Reserve, disburse to Borrower the amount paid or incurred by Borrower in
performing such Repairs within ten (10) days following: (a) the receipt by
Lender of a written request from Borrower for disbursement from the FF&E Reserve
and a certification by Borrower to Lender that the applicable item of Repair has
been completed; (b) the delivery to Lender of invoices, receipts or other
evidence verifying the cost of performing the Repairs; and (c) for disbursement
requests (i) in excess of $20,000.00 with respect to any single Repair, or
(ii) for any single Repair that is structural in nature, delivery to Lender of
the following documents, if applicable, (1) affidavits, lien waivers or other
evidence reasonably satisfactory to Lender showing that all materialmen,
laborers, subcontractors and any other parties who might or could claim
statutory or common law liens and are furnishing or have furnished materials or
labor to the Property have been paid all amounts due for labor and materials
furnished to the Property; (2) a certification from an inspecting architect or
other third party acceptable to Lender describing the completed Repairs and
verifying the completion of the Repairs and the value of the completed Repairs;
and (3) a new (or amended) certificate of occupancy for the portion of the
Improvements covered by such Repairs, if said new certificate of occupancy is
required by law, or a certification by Borrower that no new certificate of
occupancy is required by law. Lender shall not be required to make advances from
the FF&E Reserve more frequently than once in any thirty (30) day period. In
making any payment from the FF&E Reserve, Lender shall be entitled to rely on
such request from Borrower, and on any bill, statement, or estimate from any
third party, without any inquiry into the accuracy, validity or contestability
of any such amount. Lender may, at Borrower's expense (not to exceed $2,500.00
annually), make or cause to be made during the term of this Deed of Trust an
annual inspection of the Property to determine the need, as determined by Lender
in its reasonable judgment, for further Repairs of the Property. In the event
that such inspection reveals that further Repairs of the Property are required,
Lender shall provide Borrower with a written description of the required Repairs
and Borrower shall complete such Repairs to the reasonable satisfaction of
Lender within ninety (90) days after the receipt of such description from
Lender, or such later date as may be approved by Lender in its sole discretion.
Interest or other earnings on the funds contained in the FF&E Reserve shall be
credited to Borrower as provided in Section 5.28 hereof. In the event that the
amounts on deposit or available in the FF&E Reserve are inadequate to pay the
cost of the Repairs, Borrower shall pay the amount of such deficiency.
1.8 Security Interest in Reserves.
(a) As additional security for the payment and performance by Borrower of all
duties, responsibilities and obligations under the Note and the other Loan
Documents, Borrower hereby unconditionally and irrevocably assigns, conveys,
pledges, mortgages, transfers, delivers, deposits, sets over and confirms unto
Lender, and hereby grants to Lender a security interest in all sums on deposit
or due under this Deed of Trust and the other Loan Documents including, without
limitation, (i) the Impound Account, the FF&E Reserve, the Repair Reserve, the
Curtailment Reserve and any other reserve, if any, set forth on Exhibit C
attached hereto and made a part hereof (collectively, the "Reserves"), (ii) the
accounts into which the Reserves have been deposited, (iii) all insurance on
said accounts, (iv) all accounts, contract rights and general intangibles or
other rights and interests pertaining thereto, (v) all sums now or hereafter
therein or represented thereby, (vi) all replacements, substitutions or proceeds
thereof, (vii) all instruments and documents now or hereafter evidencing the
Reserves or such accounts, (viii) all powers, options, rights, privileges and
immunities pertaining to the Reserves (including the right to make withdrawals
therefrom), and (ix) all proceeds of the foregoing. Borrower hereby authorizes
and consents to the account into which the Reserves have been deposited being
held in Lender's name or the name of any entity servicing the Note for Lender
and hereby acknowledges and agrees that Lender, or at Lender's election, such
servicing agent, shall have exclusive control over said account. Notice of the
assignment and security interest granted to Lender herein may be delivered by
Lender at any time to the financial institution wherein the Reserves have been
established, and Lender, or such servicing entity, shall have possession of all
passbooks or other evidences of such accounts. Borrower hereby holds Lender
harmless with respect to all risk of loss regarding amounts on deposit in the
Reserves, except to the extent that any such loss is caused by the gross
negligence or intentional misconduct of Lender. Borrower hereby knowingly,
voluntarily and intentionally stipulates, acknowledges and agrees that the
advancement of the funds from the Reserves as set forth herein is at Borrower's
direction and is not the exercise by Lender of any right of set-off or other
remedy upon a default. If a default shall occur hereunder or under any other of
the Loan Documents which is not cured within any applicable grace or cure
period, then Lender may, without notice or demand on Borrower, at its option:
(A) withdraw any or all of the funds (including, without limitation, interest)
then remaining in the Reserves and apply the same, after deducting all costs and
expenses of safekeeping, collection and delivery (including, but not limited to,
attorneys' fees, costs and expenses) to the indebtedness evidenced by the Note
or any other obligations of Borrower under the other Loan Documents in such
manner as Lender shall deem appropriate in its sole discretion, and the excess,
if any, shall be paid to Borrower, (B) exercise any and all rights and remedies
of a secured party under any applicable Uniform Commercial Code, or (C) exercise
any other remedies available at law or in equity. No such use or application of
the funds contained in the Reserves shall be deemed to cure any default
hereunder or under the other Loan Documents.
(b) The Reserves are solely for the protection of Lender and entail no
responsibility on Lender's part beyond the payment of the respective costs and
expenses in accordance with the terms thereof and beyond the allowing of due
credit for the sums actually received. Upon assignment of this Deed of Trust by
Lender, any funds in the Reserves shall be turned over to the assignee and any
responsibility of Lender, as assignor, with respect thereto shall terminate. The
Reserves shall not, unless otherwise explicitly required by applicable law, be
or be deemed to be escrow or trust funds, but, at Lender's option and in
Lender's discretion, may either be held in a separate account or be commingled
by Lender with the general funds of Lender. Upon full payment of the
indebtedness secured hereby in accordance with its terms (or if earlier, the
completion of the applicable conditions to release of each Reserve to Lender's
satisfaction) or at such earlier time as Lender may elect, the balance in the
Reserves then in Lender's possession shall be paid over to Borrower and no other
party shall have any right or claim thereto.
(c) Any amounts received by Lender from Borrower may be invested by Lender (or
its servicer) for its benefit, and Lender shall not be obligated to pay, or
credit, any interest earned thereon to Borrower except as may be otherwise
specifically provided in this Deed of Trust.
1.9 Casualty and Condemnation.
Borrower shall give Lender prompt written notice of the occurrence of any
casualty affecting greater than $25,000.00 of the value of the Property, or the
institution of any proceedings for eminent domain or for the condemnation of,
the Property or any portion thereof (collectively, an "Insured Event"). All
insurance proceeds on the Property (whether or not such insurance was requested
or required by Lender), and all causes of action, claims, compensation, awards
and recoveries for any damage, condemnation or taking of all or any part of the
Property or for any damage or injury to it for any loss or diminution in value
of the Property, are hereby assigned to and shall be paid to Lender. Lender may
participate in any suits or proceedings relating to any such proceeds, causes of
action, claims, compensation, awards or recoveries, and Lender is hereby
authorized, in its own name or in Borrower's name, to adjust any loss covered by
any insurance (whether or not such insurance was requested or required by
Lender) or any condemnation claim or cause of action, and to settle or
compromise any claim or cause of action in connection therewith, and Borrower
shall from time to time deliver to Lender any instruments required to permit
such participation; provided, however, that Lender shall not have the right to
participate in the adjustment of any loss which is not in excess of the lesser
of (i) ten percent (10%) of the then outstanding principal balance of the Note,
and (ii) $350,000.00. Provided no default is then continuing hereunder or under
any of the other Loan Documents and no event has occurred which, with the giving
of notice or the passage of time or both, would constitute a default hereunder
or under any of the other Loan Documents, Lender shall apply any sums received
by it under this Section first to the payment of all of its costs and expenses
(including, but not limited to, reasonable legal fees and disbursements)
incurred in obtaining those sums, and then, as follows:
(a) In the event that Lender receives insurance proceeds or condemnation awards
upon the occurrence of an Insured Event in an amount not in excess of the lesser
of (i) ten percent (10%) of the then outstanding principal balance of the Note,
and (ii) $350,000.00, (collectively, the "Threshold Amount"), Borrower shall
repair or restore the Property, and Lender shall, to the extent such insurance
proceeds or condemnation awards are available for such purpose, disburse to
Borrower the amount paid or incurred by Borrower as a result of any such Insured
Event for costs and expenses incurred by Borrower to repair or restore the
Property (collectively, the "Casualty Repairs") in accordance with, and
satisfaction of, the same terms and conditions for disbursement set forth in
Section 1.7 of this Deed of Trust but as applied to disbursements for Casualty
Repairs.
(b) In the event any proceeds or awards from an Insured Event exceed the
Threshold Amount but less than fifty percent (50%) of the Improvements located
on the Land have been taken or destroyed, then if:
(1) the Property can, in Lender's reasonable judgment, with diligent restoration
or repair, be returned to a condition at least equal to the condition thereof
that existed prior to the casualty or partial taking causing the loss or damage
by the earlier to occur of the following dates: (i) twelve (12) months after the
receipt of insurance proceeds or condemnation awards by either Borrower or
Lender, and (ii) six (6) months prior to the Maturity Date (as defined in the
Note), and
(2) all necessary governmental approvals can be obtained to allow the rebuilding
and reoccupancy of the Property as described in Section 1.9(b)(1) above, and
(3) there are sufficient sums available (through insurance proceeds or
condemnation awards and contributions by Borrower, the full amount of which
additional contributions shall at Lender's option have been deposited with
Lender) for such restoration or repair (including, without limitation, for any
reasonable costs and expenses of Lender to be incurred in administering said
restoration or repair) and for payment of principal and interest to become due
and payable under the Note during such restoration or repair, and
(4) the economic feasibility of the Improvements after such restoration or
repair will be such that income from their operation is reasonably anticipated
to be sufficient to pay operating expenses of the Property and debt service on
the indebtedness secured hereby in full with a 1.55:1 debt service coverage
ratio, and
(5) Borrower shall have delivered to Lender, at Borrower's sole cost and
expense, an appraisal report from an appraiser, in form and substance
satisfactory to Lender appraising the value of the Property as proposed to be
restored or repaired to be not less than the appraised value necessary to
support the loan to value ratio which was initially required by Lender in its
determination to make the Loan (i.e., 1.55:1.0), and
(6) Such damage or destruction shall not allow the termination of any franchise
agreement covering the Property, or if such termination is allowed, Borrower has
obtained and delivered to Lender evidence satisfactory to Lender that such right
to terminate has been waived by the franchisor,
then, Lender shall, solely for the purposes of such restoration or repair,
advance so much of the remainder of such sums as may be required to facilitate
such restoration or repair, and any funds deposited by Borrower therefor, to
Borrower in the manner and upon such terms and conditions as would be required
by a prudent interim construction lender, including, but not limited to, the
prior approval by Lender of plans and specifications, contractors and the form
of construction contracts and the furnishing to Lender of permits, bonds, lien
waivers, invoices, receipts and affidavits from contractors and subcontractors,
in form and substance reasonably satisfactory to Lender. Any remaining proceeds
shall be (a) (i) applied for payment of the Yakima Loan, and then (ii) applied
for payment of the other indebtedness secured hereby, or (b) released to
Borrower, in Lender's absolute discretion. Borrower shall, in good faith,
undertake reasonable efforts to cause the conditions described in this
Section 1.9(b) to be fully satisfied (e.g., Borrower shall timely make
applications for necessary governmental permits, shall order an appropriate
appraisal report, etc.). If such conditions are satisfied, Borrower shall be
obligated to undertake restoration and repair of the damaged improvements
subject to the terms of this Section 1.9.
Any disbursement pursuant to this Section 1.9(b) of sums by Lender shall,
subject to Borrower's satisfaction of the provisions hereof, be in a manner to
promptly facilitate the restoration or repair of the Property. In the event
Borrower fails to meet the requirements of this Section 1.9(b), then Lender may
elect, in its absolute discretion and without regard to the adequacy of Lender's
security, to apply any remaining insurance or condemnation proceeds (a)(i) for
payment of the Yakima Loan, then (ii) payment of the other indebtedness secured
hereby, or (b) released to Borrower, in Lender's absolute discretion.
(c) In all other cases, namely, in the event that fifty percent (50%) or more of
the Improvements located on the Land have been taken or destroyed, Lender may
elect, in Lender's absolute discretion and without regard to the adequacy of
Lender's security, to (i) require Borrower to obtain the release of the Property
in accordance with Section 1.39 hereof, including, without limitation, requiring
the payment in full of the accrued interest and outstanding principal balance of
the Yakima Loan, and (ii) make insurance or condemnation proceeds available to
Borrower for repair or restoration if Borrower establishes to the satisfaction
of Lender, in its sole discretion, that Borrower otherwise satisfies the
requirements of Section 1.9(b) above. Should Lender make the election described
immediately above in item (ii) of this Section 1.9(c), Borrower shall be
obligated to undertake restoration and repair of the damaged Improvements
consistent with the provisions of this Section 1.9.
(d) Any reduction in the indebtedness secured hereby resulting from Lender's
application of any sums received by it hereunder shall take effect only when
Lender actually receives such sums and elects to apply such sums to the
indebtedness secured hereby and, in any event, the unpaid portion of the
indebtedness secured hereby shall remain in full force and effect and Borrower
shall not be excused in the payment thereof. Partial payments received by
Lender, as described in the preceding sentence, shall be applied against the
Note consistent with the prepayment provisions described therein for casualty or
condemnation proceeds. If Borrower undertakes to restore or repair the Property
after the occurrence of a casualty or partial taking of the Property as provided
above, Borrower shall promptly and diligently, at Borrower's sole cost and
expense and regardless of whether the insurance proceeds or condemnation award,
as appropriate, shall be sufficient for the purpose, restore, repair, replace
and rebuild the Property as nearly as possible to its value, condition and
character immediately prior to such casualty or partial taking in accordance
with the foregoing provisions and Borrower shall pay to Lender all costs and
expenses of Lender incurred in administering said rebuilding, restoration or
repair, provided that Lender makes such proceeds or award available for such
purpose. Borrower agrees to execute and deliver from time to time such further
instruments as may be requested by Lender to confirm the foregoing assignment to
Lender of any award, damage, insurance proceeds, payment or other compensation.
Borrower hereby irrevocably constitutes and appoints Lender as the
attorney-in-fact of Borrower (which power of attorney shall be irrevocable so
long as any indebtedness secured hereby is outstanding, shall be deemed coupled
with an interest, shall survive the voluntary or involuntary dissolution of
Borrower and shall not be affected by any disability or incapacity suffered by
Borrower subsequent to the date hereof), with full power of substitution,
subject to the terms of this Section, to settle for, collect and receive any
such awards, damages, insurance proceeds, payments or other compensation from
the parties or authorities making the same, to appear in and prosecute any
proceedings therefor and to give receipts and acquittance therefor.
1.10 Mechanics' Liens.
Borrower shall pay when due all claims and demands of mechanics, materialmen,
laborers and others for any work performed or materials delivered for the Land
or the Improvements which are performed by delivered at the direction of
Borrower; provided, however, that, Borrower shall have the right to contest in
good faith any such claim or demand, so long as it does so diligently, by
appropriate proceedings and without prejudice to Lender and provided that
neither the Property nor any interest therein would be in any danger of sale,
loss or forfeiture during the pendency of such proceeding or contest. In the
event Borrower shall contest any such claim or demand, Borrower shall promptly
notify Lender of such contest and thereafter shall, upon Lender's request,
promptly provide a bond, cash deposit or other security satisfactory to Lender
to protect Lender's interest and security should the contest be unsuccessful. If
Borrower shall fail to immediately discharge or provide security against any
such claim or demand as aforesaid, Lender may do so and any and all expenses
incurred by Lender, together with interest thereon at the Default Interest Rate
(as defined in the Note) from the date incurred by Lender until actually paid by
Borrower, shall be immediately paid by Borrower on demand and shall be secured
by this Deed of Trust and by all of the other Loan Documents securing all or any
part of the indebtedness evidenced by the Note.
1.11 Assignment of Leases and Rents.
Borrower acknowledges and confirms that, as additional collateral security for
the payment of the indebtedness secured hereby, and cumulative of any and all
rights and remedies herein provided, it has executed and delivered to Lender an
Assignment of Leases and Rents of even date herewith (the "Assignment"),
intending such Assignment to create a present, absolute assignment to Lender of
all current or future leases of all or any portion of the Property and Rents.
Upon the occurrence of a default under this Deed of Trust which has not been
cured within any applicable grace or cure period, Lender shall be entitled to
exercise any or all of the remedies provided in this Deed of Trust and in the
Assignment, including, without limitation, the appointment of a receiver. The
Assignment shall continue in full force and effect during any period of
foreclosure or redemption with respect to the Property.
1.12 Leases and Licenses.
(a) All leases entered into by Borrower after the date hereof (excluding,
however, any standard, commercially reasonable registration card for overnight
guests and any standard, commercially reasonable agreements for the use of
banquet facilities or meeting rooms entered into in the ordinary course of
business), shall be written on the standard form lease (without any material
changes) which Lender has approved or shall approve prior to the use thereof (or
other custom form lease as may be approved by Lender) and shall be on arm's
length terms consistent with the terms for similar leases in the market area of
the Land, shall provide for free rent only if the same is consistent with
prevailing market conditions and shall provide for market rents then prevailing
in the market area of the Land or otherwise approved in writing by Lender. Such
leases shall also provide for Security Deposits in reasonable amounts. Borrower
shall also submit to Lender for Lender's approval, which approval shall not be
unreasonably withheld, prior to the execution thereof, any proposed lease,
license or occupancy agreement of the Improvements or any portion thereof that
differs materially and adversely from the aforementioned form lease. Borrower
shall not execute any lease, license or occupancy agreement for all or a
substantial portion of the Property, except for an actual occupancy by the
tenant, lessee or licensee thereunder, and shall at all times promptly and
faithfully perform, or cause to be performed, all of the covenants, conditions
and agreements contained in all leases, licenses and occupancy agreements with
respect to the Property, now or hereafter existing, on the part of the landlord,
lessor or licensor thereunder to be kept and performed. Upon the request of
Lender, Borrower shall deliver to Lender a copy of each such lease, license and
occupancy agreement. Borrower shall not do or suffer to be done any act that
might result in a default by the landlord, lessor or licensor under any such
lease, license or occupancy agreement or allow the tenant, lessee or licensee
thereunder to withhold payment or rent and, except as otherwise expressly
permitted by the terms of Section 1.13 hereof, shall not further assign any such
lease, license or occupancy agreement or any such rents. Borrower, at no cost or
expense to Lender, shall enforce, short of termination, the performance and
observance of each and every condition and covenant of each of the parties under
such leases. Borrower shall not, without the prior written consent of Lender,
modify any of the leases, terminate or accept the surrender of any leases, waive
or release any other party from the performance or observance of any obligation
or condition under such leases except in the normal course of business in a
manner which is consistent with sound and customary leasing and management
practices for similar properties in the community in which the Property is
located. Borrower shall not permit the prepayment of any rents under any of the
leases for more than one (1) month prior to the due date thereof.
(b) Borrower shall be entitled to enter into such discount programs or other
patronage agreements without Lender's prior approval so long as such programs
and agreements are in accordance with industry customs and standards and
otherwise reflect sound business practices.
1.13 Alienation and Further Encumbrances.
(a) Borrower acknowledges that Lender has relied upon the principals of Borrower
and their experience in owning and operating properties similar to the Property
in connection with the closing of the Loan. Accordingly, except as specifically
allowed hereinbelow in this Section and notwithstanding anything to the contrary
contained in Section 5.5 hereof, in the event that the Property or any part
thereof or interest therein shall be sold (including any installment sales
agreement), conveyed, disposed of, alienated, hypothecated, leased (except to
tenants of space or overnight guests and users of banquet or meeting facilities
in the Improvements in accordance with the provisions of Section 1.12 hereof),
assigned, pledged, mortgaged, further encumbered or otherwise transferred or
Borrower shall be divested of its title to the Property or any interest therein,
in any manner or way, whether voluntarily or involuntarily, without the prior
written consent of Lender being first obtained, which consent may be withheld in
Lender's sole discretion, then the same shall constitute a default hereunder and
Lender shall have the right, at its option, to declare any or all of the
indebtedness secured hereby, irrespective of the Maturity Date, immediately due
and payable and to otherwise exercise any of its other rights and remedies
contained in Article III hereof. If such acceleration is during any period when
a prepayment fee is payable pursuant to the provisions set forth in the Note,
then, in addition to all of the foregoing, such prepayment fee shall also then
be immediately due and payable to the same end as though Borrower were prepaying
the entire indebtedness secured hereby on the date of such acceleration. For the
purposes of this Section, the sale, conveyance, transfer, disposition,
alienation, hypothecation, pledge or encumbering (whether voluntarily or
involuntarily) of all or any portion of the ownership interest in (or, directly
or indirectly through constituent parties, any of the ultimate beneficial
ownership interest in) Borrower shall be deemed to be a transfer of an interest
in the Property. Notwithstanding the foregoing, however, transfers or
assignments of ownership interests in Borrower (or its constituent parties) may
be undertaken without the consent of Lender in the following circumstances:
(1) In the case of a Borrower which is a limited partnership, up to 49% of the
limited partnership interests in Borrower shall be freely transferable so long
as those persons responsible for the management and control of Borrower and the
Property remain unchanged following such transfer.
(2) In the case of a Borrower which constitutes a limited liability company, up
to 49% of the non-managing membership interests in Borrower shall be freely
transferable so long as those persons responsible for the management and control
of Borrower and the Property remain unchanged following such transfer.
(3) In the case of a Borrower which constitutes a corporation, up to 49% of the
aggregate of the issued and outstanding capital stock of Borrower may be sold or
assigned, taking into account (i) any prior sales or assignments, and (ii) the
effective change in ownership resulting from any issuance of new shares of
capital stock in Borrower or its constituent party so long as those persons
responsible for the management and control of Borrower and the Property remain
unchanged following such transfer.
(4) Gifts for estate planning purposes of any individual's interests in Borrower
or in any of Borrower's general partners, members or joint venturers to the
spouse or any lineal descendant of such individual, or to a trust for the
benefit of any one or more of such individual, spouse or lineal descendant,
shall not be a default under this Deed of Trust so long as Borrower is
reconstituted, if required, following such gift and so long as those persons
responsible for the management of the Property and Borrower remain unchanged
following such gift or any replacement management is approved by Lender.
(5) Involuntary assignments or transfers caused by the death, incompetence or
dissolution of Borrower, one of its constituent parties or the owner of one of
its constituent parties are permitted if: (i) Borrower is reconstituted, if
required, following such death, incompetence or dissolution, and (ii) those
persons responsible for the management and control of Borrower and the Property
remain unchanged as a result of such death, incompetence or dissolution or any
replacement management is approved by Lender.
In all cases where assignment of ownership interests is allowed without the
consent of Lender pursuant to this Section 1.13(a), the proportionate ownership
which is proposed to be transferred shall be calculated so as to take into
account prior transfers or assignments. Furthermore, the sale, conveyance,
transfer, disposition, alienation, hypothecation, pledge or encumbering (whether
voluntarily or involuntarily) of all or any portion of the ownership interest in
(or, directly or indirectly through constituent parties, any of the ultimate
beneficial ownership interest in) any guarantor of Borrower's obligation
hereunder or under any of the other Loan Documents shall constitute a default
hereunder and Lender shall have the right to exercise its various remedies
described hereinabove; provided, however, ownership interests in any such
guarantor may be transferred in a manner consistent with the allowable transfers
of ownership interests in Borrower described hereinabove.
Notwithstanding the foregoing, for so long as WestCoast Hospitality Corporation
("WCH"), a Washington corporation and general partner of WestCoast Hospitality
Limited Partnership ("WestCoast Hospitality") remains a publicly-traded company
the stock of such corporation shall be freely transferable without the consent
of Lender, notwithstanding that WCH may be a beneficial owner through
constituent parties of Borrower and a guarantor of Borrower's obligations
hereunder. At any time that WCH ceases to be a public traded company, WCH shall
be subject to the limitations set forth in this Section 1.13. Furthermore,
notwithstanding that WestCoast Hospitality may be a beneficial owner through
constituent parties of Borrower, limited partnership interests in WestCoast
Hospitality shall be freely transferable without the consent of Lender so long
as WCH remains the sole general partner, majority owner in WestCoast Hospitality
and remains responsible for the management and control of WestCoast Hospitality.
The merger of WCH and WestCoast Hospitality or the transfer of assets from
WestCoast Hospitality to WCH shall not require the consent of Lender and shall
not constitute a default under this Section 1.13 so long as prior written notice
thereof is provided to Lender.
(b) Notwithstanding the foregoing provisions of this Section 1.13, Lender shall
consent to a sale, conveyance or transfer of the Property in its entirety,
including sale, conveyance or transfer of all of the ownership interest in
Borrower (hereinafter, a "Sale") to any person or entity provided that each of
the following terms and conditions are satisfied:
(1) No default is then continuing hereunder or under any of the other Loan
Documents;
(2) Borrower gives Lender written notice of the terms of such prospective Sale
not less than thirty (30) days before the date on which such Sale is scheduled
to close and, concurrently therewith, gives Lender all reasonable information
concerning the proposed transferee of the Property (hereinafter, a "Buyer") or
any replacement guarantor as Lender would require in evaluating an initial
extension of credit to a borrower and pays to Lender a non-refundable
application fee in the amount of $5,000.00 (the "Application Fee"). Lender shall
have the right, in its reasonable discretion, to approve or disapprove the
proposed Buyer and the substitution of the replacement guarantor. In determining
whether to give or withhold its approval of the proposed Buyer and replacement
guarantor, Lender shall consider, among other things, the Buyer's experience and
track record in owning and operating facilities similar to the Property or the
same of the professional management company proposed by Buyer, the Buyer's
entity structure, the Buyer's financial strength, the Buyer's general business
standing, the Buyer or the proposed manager's relationships and experience with
contractors, vendors, tenants, lenders and other business entities, and the
proposed guarantor's financial ability to perform the obligations of the
indemnity and guaranty;
(3) Borrower pays Lender, concurrently with the closing of such Sale, a
non-refundable assumption fee (the "Assumption Fee") in an amount equal to
one-half of one percent (.5%) of the then outstanding principal balance of the
Yakima Note for the first Sale and one percent (1%) of the then outstanding
principal balance of the Yakima Note for any sales thereafter;
(4) The Buyer assumes and agrees to pay the indebtedness secured hereby subject
to the provisions of Section 5.23 hereof and to perform the covenants of
Borrower under the Loan Documents, and, prior to or concurrently with the
closing of such Sale, the Buyer executes, without any cost or expense to Lender,
such documents and agreements as Lender shall reasonably require to evidence and
effectuate said assumption and delivers such legal opinions as Lender may
require;
(5) Borrower and the Buyer hereby authorize Lender to prepare, file of record or
otherwise effectuate new financing statements or financing statement amendments
which describe all or any portion of the assets of Borrower and the Buyer as
collateral thereunder and further, Borrower and the Buyer will execute any other
additional documents reasonably requested by Lender in order to perfect Lender's
security interest in the Property, all without cost to Lender. Borrower and the
Buyer specifically authorize Lender to cause such financing statements to be
filed without any signature of a representative of the Borrower or Buyer
appearing thereon, where such filings are permitted by applicable law;
(6) Borrower delivers to Lender, without any cost or expense to Lender, such
endorsements to Lender's Title Insurance Policy, hazard insurance endorsements
or certificates and other similar materials as Lender may deem necessary at the
time of the Sale, all in form and substance satisfactory to Lender, including,
without limitation, an endorsement or endorsements to Lender's Title Insurance
Policy insuring the lien of this Deed of Trust, extending the effective date of
such policy to the date of execution and delivery (or, if later, of recording)
of the assumption agreement referenced above in Subsection (4) of this
Section 1.13(b), with no additional exceptions added to such policy except such
encumbrances previously approved in writing by Lender, and insuring that fee
simple title to the Property is vested in the Buyer;
(7) Borrower executes and delivers to Lender, without any cost or expense to
Lender, a release of Lender, its officers, directors, employees and agents, from
all claims and liability relating to the transactions evidenced by the Loan
Documents, through and including the date of the closing of the Sale, which
agreement shall be in form and substance satisfactory to Lender and shall be
binding upon the Buyer;
(8) Subject to the provisions of Section 5.23 hereof, such Sale is not construed
so as to relieve Borrower of any personal liability under the Note or any of the
other Loan Documents for any acts or events occurring or obligations arising
prior to or simultaneously with the closing of such Sale, and Borrower executes,
without any cost or expense to Lender, such documents and agreements as Lender
shall reasonably require to evidence and effectuate the ratification of said
personal liability;
(9) Such Sale is not construed so as to relieve any current guarantor or
indemnitor of its obligations under any guaranty or indemnity agreement executed
in connection with the Loan and each such current guarantor and indemnitor
executes, without any cost or expense to Lender, such documents and agreements
as Lender shall reasonably require to evidence and effectuate the ratification
of each such guaranty and indemnity agreement, provided that if a party
associated with the Buyer approved by Lender in its reasonable discretion
assumes the obligations of the current guarantor or indemnitor under its
guaranty or indemnity agreement and such party associated with the Buyer
executes, without any cost or expense to Lender, a new guaranty or indemnity
agreement which is in the same form and substance as the then existing guaranty
and indemnity agreement or otherwise in form and substance satisfactory to
Lender, then Lender shall release the current guarantor or indemnitor from all
obligations arising under its guaranty or indemnity agreement after the closing
of such Sale;
(10) The Buyer shall furnish, if the Buyer is a corporation, partnership, or
other entity, all documents evidencing the Buyer's capacity and good standing,
and the qualification of the signers to execute the assumption of the
indebtedness secured hereby, which documents shall include, but not in any way
be limited to, certified copies of all documents relating to the organization
and formation of the Buyer and of the entities, if any, which are partners or
members of the Buyer. The Buyer and such constituent partners, members or
shareholders of Buyer (as the case may be), as Lender may require, shall be
single-purpose, single-asset "bankruptcy remote" entities, whose formation
documents shall be approved by counsel to Lender; provided, however, the Buyer
shall not be required to be "bankruptcy remote" from any affiliated entity of
Buyer which purchases any of the Other Properties as required by subsection 17
herein. An individual recommended by the Buyer and approved by Lender shall
serve as an Independent Director (as defined in Section 1.32(t) of this Deed of
Trust) of the Buyer (if the Buyer is a corporation or a limited liability
company) or the Buyer's corporate or limited liability company general partner
(if the Buyer is a partnership) or an independent member or, in Lender's
discretion, manager, of Buyer (if the Buyer is a limited liability company).
Unanimous consent of the board of directors (including the Independent Director)
shall be required for, among other things, any merger, consolidation,
dissolution, bankruptcy or insolvency of any such constituent partner, member or
shareholder of the Buyer (as the case may be) or of the Buyer;
(11) The Buyer, if required by Lender, shall furnish an opinion of counsel
satisfactory to Lender and its counsel (i) that the Buyer's formation documents
provide for the matters described in Section 1.13(b)(10) hereof, (ii) that the
assumption of the indebtedness evidenced hereby has been duly authorized,
executed and delivered, and that the Loan Documents are valid, binding and
enforceable against the Buyer in accordance with their terms, (iii) that the
Buyer and any entity which is a controlling stockholder, member or general
partner of Buyer, have been duly organized, and are in existence and in good
standing, (iv) that the assets of the Buyer will not be consolidated with the
assets of any other entity (including the Buyer's general partner or managing
member, if any) having an interest in, or affiliation with, the Buyer, in the
event of bankruptcy or insolvency of any such entity or such general partner or
managing member, and (v) with respect to such other matters, as Lender may
reasonably request;
(12) If the Buyer is a single-member limited liability company, Buyer must be
formed in the state of Delaware, and the Buyer's operating agreement must
provide for the continued existence of the Buyer in the event of the bankruptcy,
death, or dissolution, liquidation, termination or adjudication of incompetency
of the sole member. The Buyer, if required by Lender, shall also furnish an
opinion of counsel satisfactory to Lender and its counsel that if the Buyer is a
single-member limited liability company, (i) the Buyer is a separate legal
entity formed in the state of Delaware; (ii) the separate existence of the Buyer
shall continue until the cancellation of the certificate of organization;
(iii) the Buyer's operating agreement provides for the continued existence of
the Buyer in the event of the bankruptcy, death, or dissolution, liquidation,
termination or adjudication of incompetency of the sole member, and that such
provisions would be enforceable notwithstanding the bankruptcy, death,
dissolution, liquidation, termination or adjudication of incompetency of the
sole member; (iv) any judgment creditor of the sole member may not satisfy its
claims against the sole member by asserting a claim against the Property or any
other assets of the Buyer; and (v) a federal bankruptcy court would hold that
the laws of the state of organization of the Buyer, and not federal law, govern
the determination of what persons or entities have authority to file a voluntary
bankruptcy petition on behalf of the Buyer; (vi) in order for any person or
entity to file a voluntary bankruptcy petition on behalf of the Buyer, the prior
unanimous approval or written consent of the member and the board of directors,
including the Independent Director, of the Borrower (each as defined in
Section 1.32(t)) is required; and (vii) such requirements and all other
provisions of the Buyer's operating agreement are the valid, binding and
enforceable agreements of the sole member;
(13) If required under the operative documents with respect to a Secondary
Market Transaction (as hereinafter defined), Lender shall have received evidence
in writing from the Rating Agency (as hereinafter defined) to the effect that
the Sale will not result in a re-qualification, reduction, downgrade or
withdrawal of any rating initially assigned or to be assigned in a Secondary
Market Transaction or, if no such rating has been issued, in Lender's good faith
judgment, such Sale shall not have an adverse effect on the level of rating
obtainable in connection with the Loan;
(14) Borrower shall reimburse Lender for all of Lender's reasonable
out-of-pocket costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements and Rating Agency fees and expenses) incurred
or anticipated to be incurred by Lender in connection with a Sale including,
without limitation, Lender's determination of whether Borrower has satisfied all
of the conditions and requirements set forth in this Section 1.13(b);
(15) Borrower's obligations under the contract of sale pursuant to which such
Sale, conveyance or transfer is proposed to occur shall expressly be subject to
the satisfaction of the terms and conditions of this Section 1.13(b);
(16) The Buyer shall obtain the written consent of the Franchisor (hereinafter
defined) to the transfer of the Property and the Franchise Agreement in favor of
Franchisor to Buyer as well as a comfort letter from Franchisor substantially in
the form of the comfort letter obtained in connection with the initial funding
of the Note and otherwise in form and substance satisfactory to Lender; and
(17) The Other Properties (hereinafter defined) shall be subject to simultaneous
Sales to the identical Buyer in accordance with the terms of the Other Deeds of
Trust.
1.14 Payment of Utilities, Assessments, Charges, Etc.
Borrower shall pay when due all utility charges which are incurred by Borrower
or which may become a charge or lien against any portion of the Property for
gas, electricity, water and sewer services furnished to the Land and/or the
Improvements and all other assessments or charges of a similar nature, or
assessments payable pursuant to any restrictive covenants, whether public or
private, affecting the Land and/or the Improvements or any portion thereof,
whether or not such assessments or charges are or may become liens thereon.
1.15 Access Privileges and Inspections.
Lender and the agents, representatives and employees of Lender shall, subject to
the rights of tenants, have full and free access to the Land and the
Improvements and any other location where books and records concerning the
Property are kept at all reasonable times for the purposes of inspecting the
Property and of examining, copying and making extracts from the books and
records of Borrower relating to the Property. Borrower shall lend assistance to
all such agents, representatives and employees of Lender.
1.16 Waste; Alteration of the Property.
Borrower shall not commit, suffer or permit any waste on the Property nor take
any actions that might invalidate any insurance carried on the Property.
Borrower shall maintain the Property in good condition and repair but in any
event, not less than the standard prevailing for hotels of similar age, size,
construction and franchise affiliation in the metropolitan area where the
Property is located. No part of the Improvements may be removed, demolished or
materially altered, without the prior written consent of Lender, except that
Borrower may remove worn-out or obsolete items of furnishings, equipment or
personal property without Lender's consent provided such items are replaced with
items of comparable value and utility. Without the prior written consent of
Lender, Borrower shall not commence construction of any improvements on the Land
other than improvements required for the maintenance or repair of the Property.
1.17 Zoning/Use.
Without the prior written consent of Lender, Borrower shall not seek, make,
suffer, consent to or acquiesce in any change in the zoning or conditions of use
of the Land or the Improvements. Borrower shall comply with and make all
payments required under the provisions of any covenants, conditions or
restrictions affecting the Land or the Improvements. Borrower shall comply with
all existing and future requirements of all governmental authorities having
jurisdiction over the Property. Borrower shall keep all licenses, permits,
franchises, certificates of occupancy, consents, and other approvals necessary
for the operation of the Property in full force and effect. Borrower shall
operate the Property as a hotel complex for so long as the indebtedness secured
hereby is outstanding. If, under applicable zoning provisions, the use of all or
any part of the Land or the Improvements is or becomes a nonconforming use,
Borrower shall not cause or permit such use to be discontinued or abandoned
without the prior written consent of Lender. Further, without Lender's prior
written consent, Borrower shall not file or subject any part of the Land or the
Improvements to any declaration of condominium or cooperative or convert any
part of the Land or the Improvements to a condominium, cooperative or other form
of multiple ownership and governance.
1.18 Financial Statements and Books and Records.
Borrower shall keep accurate books and records of account of the Property and
its own financial affairs in accordance with the Uniform System of Accounts as
revised from time to time and sufficient to permit the preparation of financial
statements therefrom in accordance with generally accepted accounting
principles. In addition to statements prepared in accordance with the Uniform
System of Accounts, Borrower must submit statements prepared in accordance with
generally accepted accounting principles consistently applied. Lender and its
duly authorized representatives shall have the right to examine, copy and audit
Borrower's records and books of account at all reasonable times. So long as this
Deed of Trust continues in effect, Borrower shall provide to Lender, in addition
to any other financial statements required hereunder or under any of the other
Loan Documents, the following financial statements and information, all of which
must be certified to Lender as being true and correct by Borrower or the entity
to which they pertain, as applicable, be prepared in accordance with generally
accepted accounting principles consistently applied and be in form and substance
acceptable to Lender:
(a) copies of all tax returns filed by Borrower, within thirty (30) days after
the date of filing;
(b) quarterly operating statements for the Property, within forty-five (45) days
after the end of each March, June, September and December, provided operating
statements shall be delivered monthly for the first twelve (12) full calendar
months of the Note within thirty (30) days after the end of each month;
(c) annual balance sheets, statements of income and expenses and statements of
changes in financial position for the Property and annual financial statements
for Borrower, each principal, member or general partner in Borrower, and each
indemnitor and guarantor under any indemnity or guaranty executed in connection
with the Loan, within ninety (90) days after the end of each fiscal year audited
by (i) BDO Seidman, LLP or one of the "big 4" national accounting firms, so long
as the then outstanding balance of the Loan equals or exceeds Thirty-Five
Million Dollars ($35,000,000.00), or (ii) to the extent that the outstanding
balance of the Loan is then less than Thirty-Five Million Dollars
($35,000,000.00), an accounting firm reasonably acceptable to Lender; and
(d) such other information with respect to the Property, Borrower, the
principals, members or general partners in Borrower, and each indemnitor and
guarantor under any indemnity or guaranty executed in connection with the Loan,
which may be requested from time to time by Lender, within a reasonable time
after the applicable request.
If any of the aforementioned materials are not furnished to Lender within the
applicable time periods, Borrower shall pay to Lender a late fee of $250.00.
Further, if any of the aforementioned materials are not furnished to Lender
within the applicable time periods, or there is evidence of an event of default
hereunder or under any of the other Loan Documents and Lender is reasonably
dissatisfied with the contents of any of the foregoing, in addition to any other
rights and remedies of Lender contained herein, Lender shall have the right, but
not the obligation, to obtain the same by means of an audit by an independent
certified public accountant selected by Lender, in which event Borrower agrees
to pay, or to reimburse Lender for, any expense of such audit and further agrees
to provide all necessary information to said accountant and to otherwise
cooperate in the making of such audit. Borrower agrees that any and all
materials furnished hereunder are the property of Lender (and Lender's servicer)
and may be released and made available to such parties as Lender or its servicer
deems appropriate in connection with the servicing of the Yakima Loan, including
any Rating Agency responsible for rating securities issued in any Secondary
Market Transaction (as such terms are defined in Section 5.32 hereof).
1.19 Further Documentation.
Borrower shall, on the request of Lender in Lender's reasonable discretion and
at the expense of Borrower, promptly correct any defect, error or omission which
may be discovered in the contents of this Deed of Trust or in any of the other
Loan Documents and promptly execute, acknowledge, deliver and record or file
such further instruments and do such further acts as may be necessary, desirable
or proper to carry out more effectively the purposes of this Deed of Trust and
the other Loan Documents or as may be deemed advisable by Lender to protect,
continue or preserve the liens and security interests hereunder, including,
without limitation, security instruments, financing statements and continuation
statements.
1.20 Payment of Costs; Advances to Protect Property.
(a) Payment of Costs. Borrower shall pay all reasonable costs and expenses of
every character incurred in connection with the closing of the Loan or otherwise
attributable or chargeable to Borrower as the owner of the Property, including,
without limitation, appraisal fees, recording fees, documentary, stamp, mortgage
or intangible taxes, brokerage fees and commissions, title policy premiums and
title search fees, uniform commercial code/tax lien/litigation search fees,
escrow fees and reasonable attorneys' fees.
(b) Advances to Protect Property. Without limiting or waiving any other rights
and remedies of Lender hereunder, if Lender determines that Borrower has failed
to perform any of its obligations, covenants or agreements contained in this
Deed of Trust or in any of the other Loan Documents and such failure is not
cured within any applicable grace or cure period, or if any action or proceeding
of any kind (including, but not limited to, any bankruptcy, insolvency,
arrangement, reorganization or other debtor relief proceeding) is commenced
which would affect Lender's interest in the Property or Lender's right to
enforce its security therein, then Lender may, at its option, with or without
notice to Borrower, make any appearances, disburse or advance any sums and take
any actions as may be necessary or desirable to protect or enforce the security
of this Deed of Trust or to remedy the failure of Borrower to perform its
covenants and agreements (without, however, waiving any default of Borrower);
provided, however, Lender may not for a period of thirty (30) days take the
foregoing action if Borrower is contesting such action or proceeding (unless, in
Lender's judgment, any delay would potentially further damage the Property or
Lender's interest therein). Borrower agrees to pay on demand all expenses of
Lender reasonably incurred with respect to the foregoing (including, but not
limited to, fees and disbursements of counsel), together with interest thereon
at the Default Interest Rate (as defined in the Note) from and after the date on
which Lender incurs such expenses until reimbursement thereof by Borrower. Any
such expenses so incurred by Lender, together with interest thereon as provided
above, shall be additional indebtedness of Borrower secured by this Deed of
Trust and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. The necessity for any such actions and of
the amounts to be paid shall be determined by Lender in its sole and absolute
discretion. Lender is hereby empowered to enter and to authorize others to enter
upon the Property or any part thereof for the purpose of performing or observing
any such defaulted term, covenant or condition without thereby becoming liable
to Borrower or any person in possession holding under Borrower. Borrower hereby
acknowledges and agrees that the remedies set forth in this Section 1.20(b)
shall be exercisable by Lender, and any and all payments made or costs or
expenses incurred by Lender in connection therewith shall be secured hereby and
shall be, without demand, immediately repaid by Borrower with interest thereon
at the Default Interest Rate (as defined in the Note), notwithstanding the fact
that such remedies were exercised and such payments made and costs incurred by
Lender after the filing by Borrower of a voluntary case or the filing against
Borrower of an involuntary case pursuant to or within the meaning of the
Bankruptcy Reform Act of 1978, as amended (the "Act"), Title 11 U.S.C., or after
any similar action pursuant to any other debtor relief law (whether statutory,
common law, case law or otherwise) of any jurisdiction whatsoever, now or
hereafter in effect, which may be or become applicable to Borrower, Lender, any
guarantor or indemnitor, the secured indebtedness or any of the Loan Documents.
This indemnity shall survive payment in full of the indebtedness secured hereby.
This Section 1.20(b) shall not be construed to require Lender to incur any
expenses, make any appearances or take any actions.
1.21 Security Interest.
This Deed of Trust is also intended to encumber and create a security interest
in, and Borrower hereby grants to Lender a security interest in all Reserves (as
hereinabove defined), fixtures, chattels, accounts, equipment, inventory,
contract rights, general intangibles and other personal property included within
the Property, all renewals, replacements of any of the aforementioned items, or
articles in substitution therefor or in addition thereto or the proceeds thereof
(said property is hereinafter referred to collectively as the "Collateral"),
whether or not the same shall be attached to the Land or the Improvements in any
manner. It is hereby agreed that to the extent permitted by law, all of the
foregoing property is to be deemed and held to be a part of and affixed to the
Land and the Improvements. The foregoing security interest shall also cover
Borrower's leasehold interest in any of the foregoing property which is leased
by Borrower. Notwithstanding the foregoing, all of the foregoing property shall
be owned by Borrower and no leasing or installment sales or other financing or
title retention agreement in connection therewith shall be permitted without the
prior written approval of Lender. Borrower shall promptly replace all of the
Collateral subject to the lien or security interest of this Deed of Trust when
worn out or obsolete with Collateral comparable to the worn out or obsolete
Collateral when new and will not, without the prior written consent of Lender,
remove from the Land or the Improvements any of the Collateral subject to the
lien or security interest of this Deed of Trust except such as is replaced by an
article of equal suitability and value as above provided, owned by Borrower free
and clear of any lien or security interest except that created by this Deed of
Trust and the other Loan Documents and except as otherwise expressly permitted
by the terms of Section 1.13 of this Deed of Trust. All of the Collateral shall
be kept at the location of the Land except as otherwise required by the terms of
the Loan Documents. Borrower shall not use any of the Collateral in violation of
any applicable statute, ordinance or insurance policy.
1.22 Security Agreement.
This Deed of Trust constitutes both a real property deed of trust and a
"security agreement" between Borrower and Lender with respect to the Collateral
in which Lender is granted a security interest hereunder, and, cumulative of all
other rights and remedies of Lender hereunder, Lender shall have all of the
rights and remedies of a secured party under any applicable Uniform Commercial
Code. Borrower hereby authorizes Lender to prepare, file of record or otherwise
effectuate new financing statements or financing statement amendments which
describe all or any portion of the assets of Borrower as collateral thereunder.
Borrower specifically agrees that Lender may cause such financing statements and
financing statement amendments to be filed without any signature of a
representative of the Borrower appearing thereon, where such filings are
permitted by applicable law. Borrower hereby further agrees to execute and
deliver on demand such security agreements, financing statements, continuation
statements or other instruments as Lender may request or require in order to
impose, perfect or continue the perfection of the lien or security interest
created hereby.
Borrower will not change the principal place of business or chief executive
office set forth below, or change the state of its organization or registration,
or change its name, without in each instance the prior written consent of
Lender, which consent shall not be unreasonably withheld, delayed or
conditioned. Lender's consent will, however, be conditioned upon, among other
things, the execution and delivery of additional financing statements, security
agreements and other instruments which may be necessary to effectively evidence
or perfect Lender's security interest in the Collateral as a result of such
changes. The name, principal place of business and chief executive office of
Borrower (as Debtor under any applicable Uniform Commercial Code), as of the
date hereof, are:
WHC807, LLC
c/o WestCoast Hospitality Corporation
201 W. North River Drive, Suite 100
Spokane, Washington 99201
Attention: Chief Financial Officer
The name and address of Lender (as Secured Party under any applicable Uniform
Commercial Code), as of the date hereof, are:
Column Financial, Inc.
11 Madison Avenue
5th Floor
New York, New York 10010-3629
Attention: Edmund Taylor
1.23 Easements and Rights-of-Way.
Borrower shall not grant any easement or right-of-way with respect to all or any
portion of the Land or the Improvements without the prior written consent of
Lender. The purchaser at any foreclosure sale hereunder may, at its discretion,
disaffirm any easement or right-of-way granted in violation of any of the
provisions of this Deed of Trust and may take immediate possession of the
Property free from, and despite the terms of, such grant of easement or
right-of-way. If Lender consents to the grant of an easement or right-of-way,
Lender agrees to grant such consent without charge to Borrower other than
reasonable expenses, including, without limitation, reasonable attorneys' fees,
incurred by Lender in the review of Borrower's request and, if applicable, in
the preparation of documents relating to the subordination of this Deed of Trust
to such easement or right-of-way.
1.24 Compliance with Laws.
(a) Borrower shall at all times comply with all statutes, ordinances,
regulations and other governmental or quasi-governmental requirements and
private covenants now or hereafter relating to the ownership, construction, use
or operation of the Property, including, but not limited to, those concerning
employment and compensation of persons engaged in operation and maintenance of
the Property and any environmental or ecological requirements, even if such
compliance shall require structural changes to the Property; provided, however,
that, Borrower may, upon providing Lender with security satisfactory to Lender,
proceed diligently and in good faith to contest the validity or applicability of
any such statute, ordinance, regulation or requirement so long as during such
contest the Property shall not be subject to any lien, charge, fine or other
liability and shall not be in danger of being forfeited, lost or closed during
the pendency of such contest. Borrower shall not use or occupy, or allow the use
or occupancy of, the Property in any manner which violates any lease of or any
other agreement applicable to the Property or any applicable law, rule,
regulation or order or which constitutes a public or private nuisance or which
makes void, voidable or cancelable, or materially increases the premium of, any
insurance then in force with respect thereto.
(b) Borrower agrees that the Property shall at all times comply to the extent
applicable with the requirements of the Americans with Disabilities Act of 1990,
the Fair Housing Amendments Act of 1988 and all other state and local laws and
ordinances related to handicapped access and all rules, regulations, and orders
issued pursuant thereto including, without limitation, the Americans with
Disabilities Act Accessibility Guidelines for Buildings and Facilities ("Access
Laws"). Borrower agrees to give prompt notice to Lender of the receipt by
Borrower of any complaints related to any material violations of any Access Laws
and of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
1.25 Additional Taxes.
In the event of the enactment after this date of any law of the state where the
Property is located or of any other governmental entity deducting from the value
of the Property for the purpose of taxation any lien or security interest
thereon, or imposing upon Lender the payment of the whole or any part of the
taxes or assessments or charges or liens herein required to be paid by Borrower,
or changing in any way the laws relating to the taxation of deeds of trust,
mortgages or security agreements or debts secured by deeds of trust, mortgages
or security agreements or the interest of the beneficiary, mortgagee or secured
party in the property covered thereby, or the manner of collection of such
taxes, so as to adversely affect this Deed of Trust or the indebtedness secured
hereby or Lender, then, and in any such event, Borrower, upon demand by Lender,
shall pay such taxes, assessments, charges or liens, or reimburse Lender
therefor; provided, however, that if in the opinion of counsel for Lender (a) it
might be unlawful to require Borrower to make such payment, or (b) the making of
such payment might result in the imposition of interest beyond the maximum
amount permitted by law, then and in either such event, Lender may elect, by
notice in writing given to Borrower, to declare all of the indebtedness secured
hereby to be and become due and payable in full, sixty (60) days from the giving
of such notice.
1.26 Borrower's Waivers.
To the full extent permitted by law, Borrower agrees that Borrower shall not at
any time insist upon, plead, claim or take the benefit or advantage of any law
now or hereafter in force providing for any appraisement, valuation, stay,
moratorium or extension, or any law now or hereafter in force providing for the
reinstatement of the indebtedness secured hereby prior to any sale of the
Property to be made pursuant to any provisions contained herein or prior to the
entering of any decree, judgment or order of any court of competent
jurisdiction, or any right under any statute to redeem all or any part of the
Property so sold. To the full extent permitted by law, Borrower shall not have
or assert any right under any statute or rule of law pertaining to the exemption
of homestead or other exemption under any federal, state or local law now or
hereafter in effect, the administration of estates of decedents or any other
matters whatsoever to defeat, reduce or affect the right of Lender under the
terms of this Deed of Trust to a sale of the Property, for the collection of the
secured indebtedness without any prior or different resort for collection, or
the right of Lender under the terms of this Deed of Trust to the payment of the
indebtedness secured hereby out of the proceeds of sale of the Property in
preference to every other claimant whatever. Borrower, for Borrower and
Borrower's successors and assigns, and for any and all persons ever claiming any
interest in the Property, to the full extent permitted by law, hereby knowingly,
intentionally and voluntarily with and upon the advice of competent counsel
waives, releases, relinquishes and forever forgoes: (a) all rights of valuation,
appraisement, stay of execution, reinstatement and notice of election or
intention to mature or declare due the secured indebtedness (except such notices
as are specifically provided for herein); (b) all right to a marshaling of the
assets of Borrower, including the Property, to a sale in the inverse order of
alienation, or to direct the order in which any of the Property shall be sold in
the event of foreclosure of the liens and security interests hereby created and
agrees that any court having jurisdiction to foreclose such liens and security
interests may order the Property sold as an entirety; (c) all rights and periods
of redemption provided under applicable law; and (d) all present and future
statutes of limitations as a defense to any action to enforce the provisions of
this Deed of Trust or to collect any of the indebtedness secured hereby to the
fullest extent permitted by law and agrees that it shall not solicit or aid the
solicitation of the filing of any Petition (as hereinafter defined) against the
Borrower, whether acting on its own behalf or on behalf of any other party.
Without limiting the generality of the foregoing, Borrower shall not (i) provide
information regarding the identity of creditors or the nature of creditors'
claims to any third party unless compelled to do so by order of a court of
competent jurisdiction or by regulation promulgated by a governmental agency; or
(ii) pay the legal fees or expenses of any creditor of or interest holder in
Borrower with respect to any matter whatsoever.
1.27 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
(i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF WASHINGTON OVER ANY SUIT,
ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS
DEED OF TRUST OR ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREES THAT ANY SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION PRESIDING OVER YAKIMA COUNTY, WASHINGTON, (iii) SUBMITS
TO THE JURISDICTION OF SUCH COURTS, AND (iv) AGREES THAT IT WILL NOT BRING ANY
ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT
THE RIGHT OF LENDER OR TRUSTEE TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY
OTHER FORUM). TO THE FULL EXTENT PERMITTED BY LAW, BORROWER FURTHER CONSENTS AND
AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE
PREPAID, TO THE BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 5.4
HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY
RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE
VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY
LAW).
(b) BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE
INDEBTEDNESS SECURED HEREBY OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR
BORROWER, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MANAGERS, MEMBERS,
EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR
BORROWER, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE.
1.28 Contractual Statute of Limitations.
Borrower hereby agrees that any claim or cause of action by Borrower against
Lender, or any of Lender's directors, officers, employees, agents, accountants
or attorneys, based upon, arising from or relating to the indebtedness secured
hereby, or any other matter, cause or thing whatsoever, whether or not relating
thereto, occurred, done, omitted or suffered to be done by Lender or by Lender's
directors, officers, employees, agents, accountants or attorneys, whether
sounding in contract or in tort or otherwise, shall be barred unless asserted by
Borrower by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within three (3) years after Borrower
first acquires or reasonably should have acquired knowledge of the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based and service of a summons and complaint on an officer of Lender
or any other person authorized to accept service of process on behalf of Lender,
within thirty (30) days thereafter. Borrower agrees that such three (3) year
period of time is reasonable and sufficient time for a borrower to investigate
and act upon any such claim or cause of action. The three (3) year period
provided herein shall not be waived, tolled or extended except by the specific
written agreement of Lender. This provision shall survive any termination of
this Deed of Trust or any of the other Loan Documents.
1.29 Management.
The management of the Property shall be by either: (a) Borrower or an entity
affiliated with Borrower approved by Lender for so long as Borrower or said
affiliated entity is managing the Property in a first class manner, or (b) a
professional property management company approved by Lender (any such person or
entity which manages the Property, other than Borrower, is hereinafter referred
to as the "Manager"). Any such management by an affiliated entity or a
professional property management company shall be pursuant to a written
agreement approved by Lender. In no event shall any Manager be removed or
replaced or the terms of any management agreement modified or amended without
the prior written consent of Lender. In the event (x) of default hereunder or
under any management contract then in effect, which default is not cured within
any applicable grace or cure period, or (y) of a change in control (fifty
percent or more) of the ownership of Manager or if Manager provides cause for
termination, including, without limitation, gross negligence, willful misconduct
or fraud, or (z) of the Manager becoming insolvent or a debtor in any bankruptcy
or insolvency proceeding, Lender shall have the right to terminate, or direct
Borrower to terminate, such management contract at any time and, in any such
event of termination of the management contract, to retain, or to direct
Borrower to retain, a new management agent approved by Lender. Any such
successor manager shall be a reputable management company having a senior
executive with at least seven (7) years' experience in the management of
hotel/hospitality properties in the state where the Property is located, shall
be the manager of at least five (5) projects comparable to the Property and
shall be reasonably acceptable to Lender. Borrower further covenants and agrees
that Borrower shall require the Manager (or any successor managers) to maintain
at all times during the term of this Deed of Trust worker's compensation
insurance as required by applicable governmental authorities or legal
requirements.
1.30 Hazardous Materials and Environmental Concerns.
(a) Borrower hereby represents and warrants to Lender, that, as of the date
hereof: (i) to the best of Borrower's knowledge, information and belief, the
Property has not been in direct or indirect violation of any Environmental Laws
(as defined below); (ii) to the best of Borrower's knowledge, information and
belief, no Hazardous Substances (as defined below) are located on or have been
handled, manufactured, generated, stored, processed, transported to or from, or
disposed of on or Released or discharged from the Property (including
underground contamination) except for those substances used by Borrower in the
ordinary course of its business and in compliance with all Environmental Laws;
(iii) the Property is not subject to any private or governmental lien or
judicial, administrative or other notice or action relating to Hazardous
Substances or noncompliance with Environmental Laws, nor is Borrower aware of
any basis for such lien, notice or action; (iv) except as previously disclosed
to Lender, to the best of Borrower's knowledge, information and belief, there
are no underground storage tanks or other underground storage receptacles used
to store Hazardous Substances on the Property; (v) Borrower has received no
notice of, and to the best of Borrower's knowledge and belief, there does not
exist any investigation, action, proceeding or claim by any agency, authority or
unit of government or by any third party which could result in any liability,
penalty, sanction or judgment under any Environmental Laws with respect to any
condition, use or operation of the Property, nor does Borrower know of any basis
for such investigation, action, proceeding or claim; (vi) Borrower has received
no notice that, and, to the best of Borrower's knowledge and belief there has
been no claim by any party that, any use, operation or condition of the Property
has caused any nuisance, trespass or any other liability or adverse condition on
any other property, nor does Borrower know of any basis for such notice or
claim; and (vii) to Borrower's best knowledge, information and belief, there are
no present environmental conditions or events or past environmental conditions
or events on or near the Property that could be reasonably anticipated to
materially adversely affect the value of the Property.
(b) Borrower shall keep or cause the Property to be kept free from Hazardous
Substances (except those substances used by Borrower in the ordinary course of
its business and in compliance with all Environmental Laws) and in compliance
with all Environmental Laws, shall not install or use any underground storage
tanks, shall expressly prohibit the use, generation, handling, storage,
production, processing and disposal of Hazardous Substances by all tenants
(except those substances used by tenants in the ordinary course of their
activities and in compliance with all Environmental Laws), invitees and
trespassers, and, without limiting the generality of the foregoing, during the
term of this Deed of Trust, shall not install in the Improvements or permit to
be installed in the Improvements asbestos or any substance containing asbestos.
If required by Lender, in its reasonable discretion or under any Environmental
Law, Borrower shall maintain an Operations and Maintenance Program ("O&M
Program") for the management of asbestos, lead-based paint, radon or any other
Hazardous Substances at the Property.
(c) Borrower shall promptly notify Lender if Borrower shall become aware of
(i) any Release or threatened Release of Hazardous Substances at, on, under,
from or affecting or threatening to affect the Property (except those substances
used by Borrower or tenants in the ordinary course of their business or
activities, respectively, and in compliance with all Environmental Laws),
(ii) any lien or filing of lien, action or notice affecting or threatening to
affect the Property or Borrower resulting from any violation or alleged
violation of Environmental Law, (iii) any investigation, inquiry or proceeding
concerning Borrower or the Property pursuant to any Environmental Law or
otherwise relating to Hazardous Substances, or (iv) any occurrence, condition or
state of facts which would render any representation or warranty in this Section
incorrect in any respect if made at the time of such discovery. Further,
Borrower shall timely deliver to Lender copies of any and all orders, notices,
permits, applications, reports, and other communications, documents and
instruments pertaining to the actual, alleged or potential non-compliance with
any Environmental Laws in connection with the Property or presence or existence
of any Hazardous Substances at, on, about, under, within, near or in connection
with the Property (except those substances used in the ordinary course of its
business and in compliance with all Environmental Laws). Borrower shall,
promptly and when and as required, at Borrower's sole cost and expense, take all
actions as shall be necessary or advisable for compliance with the terms of this
Section 1.30 or for the remediation of any and all portions of the Property or
other affected property, including, without limitation, all investigative,
monitoring, removal, containment, remedial and response actions in accordance
with all applicable Environmental Laws and shall further pay or cause to be
paid, at no expense to Lender, all remediation, response, administrative and
enforcement costs of applicable governmental agencies which may be asserted
against the Property. In the event Borrower fails to do so within thirty (30)
days after Borrower's receipt of written notice thereof (1) Lender may, but
shall not be obligated to, undertake remediation at the Property or other
affected property necessary to bring the Property into conformance with the
terms of Environmental Laws, and (2) Borrower hereby grants to Lender and its
agents and employees access to the Property and a license to do all things
Lender shall deem necessary to bring the Property into conformance with
Environmental Laws. Any and all costs and expenses reasonably incurred by Lender
in connection therewith, together with interest thereon at the Default Interest
Rate (as defined in the Note) from the date incurred by Lender until actually
paid by Borrower, shall be immediately paid by Borrower on demand and shall be
secured by this Deed of Trust and by all of the other Loan Documents securing
all or any part of the indebtedness evidenced by the Note. BORROWER COVENANTS
AND AGREES, AT BORROWER'S SOLE COST AND EXPENSE, TO INDEMNIFY, DEFEND (AT TRIAL
AND APPELLATE LEVELS, AND WITH ATTORNEYS, CONSULTANTS AND EXPERTS ACCEPTABLE TO
LENDER), AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL LIENS, DAMAGES,
LOSSES, LIABILITIES, OBLIGATIONS, SETTLEMENT PAYMENTS, PENALTIES, ASSESSMENTS,
CITATIONS, DIRECTIVES, CLAIMS, LITIGATION, DEMANDS, DEFENSES, JUDGMENTS, SUITS,
PROCEEDINGS, COSTS, DISBURSEMENTS AND EXPENSES OF ANY KIND OR OF ANY NATURE
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS', CONSULTANTS'
AND EXPERTS' FEES AND DISBURSEMENTS ACTUALLY INCURRED IN INVESTIGATING,
DEFENDING, SETTLING OR PROSECUTING ANY CLAIM, LITIGATION OR PROCEEDING) WHICH
MAY AT ANY TIME BE IMPOSED UPON, INCURRED BY OR ASSERTED OR AWARDED AGAINST
LENDER OR THE PROPERTY, AND ARISING DIRECTLY OR INDIRECTLY FROM OR OUT OF:
(A) THE PRESENCE, RELEASE OR THREAT OF RELEASE OF ANY HAZARDOUS SUBSTANCES ON,
IN, UNDER, AFFECTING OR THREATENING TO AFFECT ALL OR ANY PORTION OF THE PROPERTY
OR ANY SURROUNDING AREAS, REGARDLESS OF WHETHER OR NOT CAUSED BY OR WITHIN THE
CONTROL OF BORROWER; (B) THE VIOLATION OF ANY ENVIRONMENTAL LAWS RELATING TO OR
AFFECTING OR THREATENING TO AFFECT THE PROPERTY, WHETHER OR NOT CAUSED BY OR
WITHIN THE CONTROL OF BORROWER; (C) THE FAILURE BY BORROWER TO COMPLY FULLY WITH
THE TERMS AND CONDITIONS OF THIS SECTION 1.30; (D) THE BREACH OF ANY
REPRESENTATION OR WARRANTY CONTAINED IN THIS SECTION 1.30; OR (E) THE
ENFORCEMENT OF THIS SECTION 1.30, INCLUDING, WITHOUT LIMITATION, THE COST OF
ASSESSMENT, CONTAINMENT AND/OR REMOVAL OF ANY AND ALL HAZARDOUS SUBSTANCES ON
AND/OR FROM ALL OR ANY PORTION OF THE PROPERTY OR ANY SURROUNDING AREAS, THE
COST OF ANY ACTIONS TAKEN IN RESPONSE TO THE PRESENCE, RELEASE OR THREAT OF
RELEASE OF ANY HAZARDOUS SUBSTANCES ON, IN, UNDER OR AFFECTING ANY PORTION OF
THE PROPERTY OR ANY SURROUNDING AREAS TO PREVENT OR MINIMIZE SUCH RELEASE OR
THREAT OF RELEASE SO THAT IT DOES NOT MIGRATE OR OTHERWISE CAUSE OR THREATEN
DANGER TO PRESENT OR FUTURE PUBLIC HEALTH, SAFETY, WELFARE OR THE ENVIRONMENT,
AND COSTS INCURRED TO COMPLY WITH THE ENVIRONMENTAL LAWS IN CONNECTION WITH ALL
OR ANY PORTION OF THE PROPERTY. THE INDEMNITY SET FORTH IN THIS SECTION 1.30(c)
SHALL ALSO INCLUDE ANY DIMINUTION IN THE VALUE OF THE SECURITY AFFORDED BY THE
PROPERTY OR ANY FUTURE REDUCTION IN THE SALES PRICE OF THE PROPERTY BY REASON OF
ANY MATTER SET FORTH IN THIS SECTION 1.30(c), AND ANY AND ALL LIENS, DAMAGES,
LOSSES, LIABILITIES, OBLIGATIONS, SETTLEMENT PAYMENTS, PENALTIES, ASSESSMENTS,
CITATIONS, DIRECTIVES, CLAIMS, LITIGATION, DEMANDS, DEFENSES, JUDGMENTS, SUITS,
PROCEEDINGS, COSTS, DISBURSEMENTS OR EXPENSES OF ANY KIND OR OF ANY NATURE
WHATSOEVER ARISING OUT OF OR RELATING TO INJURY OR DEATH DUE TO EXPOSURE FROM
HAZARDOUS SUBSTANCES THAT MAY BE PRESENT OR RELEASED AT, ON, UNDER OR FROM THE
PROPERTY. LENDER'S RIGHTS UNDER THIS SECTION SHALL SURVIVE PAYMENT IN FULL OF
THE INDEBTEDNESS SECURED HEREBY AND SHALL BE IN ADDITION TO ALL OTHER RIGHTS OF
LENDER UNDER THIS DEED OF TRUST, THE NOTE AND THE OTHER LOAN DOCUMENTS.
(d) Upon Lender's request, at any time after the occurrence of a default under
this Section 1.30 or at such other time as Lender has reasonable grounds to
believe that Hazardous Substances are or have been handled, generated, stored,
processed, transported to or from, or released or discharged from or disposed of
on or around the Property (other than in the normal course of Borrower's or the
tenants' business or activities, respectively, and in compliance with all
Environmental Laws) or that Borrower, any tenant or the Property may be in
violation of Environmental Laws, Borrower shall provide, at Borrower's sole cost
and expense, an environmental site assessment or environmental compliance audit
of the Property prepared by a hydrogeologist or environmental engineer or other
appropriate consultant approved by Lender to determine (i) whether there has
been a Release or threatened Release of Hazardous Substances at, on, under, or
from the Property onto adjoining properties, and (ii) if the Property is in full
compliance with Environmental Laws (including as to asbestos containing material
and lead-based paint). If Borrower fails to provide such assessment or audit
within sixty (60) days after such request, Lender may order the same, and
Borrower hereby grants to Lender and its employees and agents access to the
Property and a license to undertake such assessment or audit. The cost of such
assessment or audit, together with interest thereon at the Default Interest Rate
(as defined in the Note) from the date incurred by Lender until actually paid by
Borrower, shall be immediately paid by Borrower on demand and shall be secured
by this Deed of Trust and by all of the other Loan Documents securing all or any
part of the indebtedness evidenced by the Note.
(e) Without limiting the foregoing, Lender and its authorized representatives
may, during normal business hours and at its own expense, inspect the Property
and Borrower's records related thereto for the purpose of determining compliance
with Environmental Laws and the terms and conditions of this Section 1.30.
(f) As used herein, the term "Release" or "Released" shall include, without
limitation, any intentional or unintentional placing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing, discarding or abandoning of any Hazardous
Substance other than in the normal course of business or activities of Borrower
or its tenants, and in compliance with all Environmental Laws.
(g) For purposes of this Section 1.30, the term "best knowledge, information and
belief" of Borrower shall mean the conscious awareness of the directors,
officers and employees of Borrower who are involved in the consummation of the
Loan or the management of the Property.
(h) As used herein, the term "Environmental Laws" shall mean local, state or
federal law, rule or regulation pertaining to environmental regulation,
contamination, remediation, human health or clean-up, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. 9601 et seq. and 40 CFR 302.1 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. 1251 et seq. and 40 CFR 116.1 et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. 1801 et seq.), and the
regulations promulgated pursuant to said laws, all as amended.
(i) As used herein, the term "Hazardous Substances" shall mean hazardous, toxic
or harmful substances, wastes, materials, pollutants or contaminants, including,
without limitation, asbestos, polychlorinated biphenyls, petroleum products,
radon, lead-based paints, flammable explosives, radioactive materials,
infectious substances or raw materials which include hazardous constituents or
any other substances or materials which are included under or regulated by
Environmental Laws.
Notwithstanding anything contained herein to the contrary, specifically
including, but not limited to this Section 1.30 and Section 1.24, this Deed of
Trust does not secure any guaranty or indemnification of Borrower or any third
party to the extent the instrument evidencing the same states that such
obligations are not so secured. Any obligations that are secured by this Deed of
Trust that are the substantial equivalent of Borrower's indemnities in the
Hazardous Substances Indemnity Agreement shall be limited to the actual and
consequential damages incurred by Lender, including all advances or payments
paid or agreed to be paid by Lender pursuant to its rights to require
environmental assessments, join or participate in any proceedings, cure
Borrower's default or enforce its remedies (a) prior to and after any judicial
foreclosure of this Deed of Trust or the date a deed is delivered and accepted
in lieu thereof, or (b) prior to any non-judicial foreclosure of this Deed of
Trust or the date a deed is delivered and accepted in lieu thereof. The
obligations of Borrower under this Section shall be mutually exclusive of any
liabilities arising after a non-judicial foreclosure of this Deed of Trust or
the delivery and acceptance of a deed in lieu of such non-judicial foreclosure
which are evidenced by the Hazardous Substances Indemnity Agreement.
1.31 Indemnification; Subrogation.
(a) BORROWER SHALL INDEMNIFY, DEFEND AND HOLD LENDER HARMLESS AGAINST: (i) ANY
AND ALL CLAIMS FOR BROKERAGE, LEASING, FINDER'S OR SIMILAR FEES WHICH MAY BE
MADE RELATING TO THE PROPERTY OR THE SECURED INDEBTEDNESS, (ii) ANY AND ALL
LIABILITY, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS, SUITS,
LIENS, CHARGES, ENCUMBRANCES, COSTS AND EXPENSES (INCLUDING LENDER'S ATTORNEYS'
FEES, TOGETHER WITH REASONABLE APPELLATE COUNSEL FEES, IF ANY) OF WHATEVER KIND
OR NATURE WHICH MAY BE ASSERTED AGAINST, IMPOSED ON OR INCURRED BY LENDER UNDER
ANY LEASE OR OCCUPANCY AGREEMENT, FOR ANY LOSS ARISING FROM A FAILURE OR
INABILITY TO COLLECT RENTS AND PROFITS OR IN CONNECTION WITH THE SECURED
INDEBTEDNESS, THIS DEED OF TRUST, THE PROPERTY, OR ANY PART THEREOF, OR THE
EXERCISE BY LENDER OF ANY RIGHTS OR REMEDIES GRANTED TO IT UNDER THIS DEED OF
TRUST, AND ANY DEFAULT UNDER THIS DEED OF TRUST, (iii) ANY LIENS (WHETHER
JUDGMENTS, MECHANICS', MATERIALMEN'S OR OTHERWISE), CHARGES AND ENCUMBRANCES
FILED AGAINST THE PROPERTY, AND (iv) ANY CLAIMS AND DEMANDS FOR DAMAGES OR
INJURY, INCLUDING CLAIMS FOR PROPERTY DAMAGE, PERSONAL INJURY OR WRONGFUL DEATH,
ARISING OUT OF OR IN CONNECTION WITH ANY ACCIDENT OR FIRE OR OTHER CASUALTY ON
THE LAND OR THE IMPROVEMENTS OR ANY NUISANCE OR TRESPASS MADE OR SUFFERED
THEREON, INCLUDING, IN ANY CASE, ATTORNEYS' FEES, COSTS AND EXPENSES AS
AFORESAID, WHETHER AT PRETRIAL, TRIAL OR APPELLATE LEVEL FOR ANY CIVIL, CRIMINAL
OR ADMINISTRATIVE PROCEEDINGS. SHOULD LENDER INCUR ANY LIABILITY UNDER THIS DEED
OF TRUST OR ANY OF THE OTHER LOAN DOCUMENTS, THE AMOUNT THEREOF, INCLUDING,
WITHOUT LIMITATION, COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, TOGETHER
WITH INTEREST THEREON AT THE DEFAULT INTEREST RATE (AS DEFINED IN THE NOTE) FROM
THE DATE INCURRED BY LENDER UNTIL ACTUALLY PAID BY BORROWER, SHALL BE
IMMEDIATELY DUE AND PAYABLE TO LENDER BY BORROWER ON DEMAND AND SHALL BE SECURED
HEREBY AND BY ALL OF THE OTHER LOAN DOCUMENTS SECURING ALL OR ANY PART OF THE
INDEBTEDNESS EVIDENCED BY THE NOTE. HOWEVER, NOTHING HEREIN SHALL BE CONSTRUED
TO OBLIGATE BORROWER TO INDEMNIFY, DEFEND AND HOLD HARMLESS LENDER FROM AND
AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
CLAIMS, ACTIONS, SUITS, COSTS OR EXPENSES ASSERTED AGAINST, IMPOSED ON OR
INCURRED BY LENDER BY REASON OF LENDER'S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.
THIS INDEMNITY SHALL SURVIVE PAYMENT IN FULL OF THE INDEBTEDNESS SECURED HEREBY.
(b) Lender may engage the services of attorneys to enforce the terms of this
Deed of Trust or to protect its rights hereunder, and in the event of any such
engagement, Borrower shall pay Lender's attorneys' fees (together with
reasonable appellate counsel fees, if any), consultants' fees, experts' fees and
expenses reasonably incurred by Lender, whether or not an action is actually
commenced against Borrower. All references to "attorneys" in this Subsection and
elsewhere in this Deed of Trust shall include without limitation any attorney or
law firm engaged by Lender and Lender's in-house counsel, and all references to
"fees and expenses" in this Subsection and elsewhere in this Deed of Trust shall
include without limitation any fees of such attorney or law firm and any
allocation charges and allocation costs of Lender's in-house counsel.
(c) A waiver of subrogation shall be obtained by Borrower from its insurance
carrier and, consequently, Borrower waives any and all right to claim or recover
against Lender, its officers, employees, agents and representatives, for loss of
or damage to Borrower, the Property, Borrower's property or the property of
others under Borrower's control from any cause insured against or required to be
insured against by the provisions of this Deed of Trust.
1.32 Covenants with Respect to Indebtedness, Operations and Fundamental Changes
of Borrower.
Borrower represents, warrants and covenants as of the date hereof and until such
time as the loan evidenced by the Note is paid in full, that Borrower:
(a) does not own and will not own any encumbered asset other than (i) the
Property, and (ii) incidental personal property necessary for the operation of
the Property;
(b) is not engaged and will not engage in any business other than the ownership,
management and operation of the Property;
(c) will not enter into any contract or agreement with any member, manager,
general partner, principal or affiliate of Borrower or any affiliate thereof,
except in the ordinary course of business and upon terms and conditions that are
intrinsically fair and are no less favorable to it than those that would be
obtained in a comparable arms-length transaction with an unrelated third party;
(d) has not incurred and will not incur any debt, secured or unsecured, direct
or contingent (including guaranteeing any obligation), other than (i) the
secured indebtedness, and (ii) Permitted Trade Debt (hereinafter defined). As
used herein, the term "Permitted Trade Debt" shall mean trade and operational
debt incurred by Borrower (including, but not limited to, debt related to
furniture, fixture and equipment or the leases therefor) in the ordinary course
of business which satisfies each of the following requirements:
(i) with the exception of equipment leases, such trade or operational debt shall
not exceed sixty (60) days in duration so long as the aggregate balance of the
Loan exceeds Twenty Million and No/100 Dollars ($20,000,000.00);
(ii) such trade or operational debt and leases shall not exceed (in the
aggregate with any trade debt, operational debt or leases incurred by Other
Borrowers with respect to the Other Property) four percent (4%) of the then
outstanding principal balance of the Loan;
(iii) all debt related to furniture, fixtures or equipment (including equipment
leases) incurred by Borrower (without taking into account any similar trade or
operational debt or equipment leases incurred by Other Borrowers) shall not
exceed Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00);
(iv) without limitation to the preceding constraints, such operational or trade
debt shall be with trade creditors and be in amounts normal and reasonable under
the circumstances; and
(v) except for equipment leases, such debt shall not be secured (whether by
senior lien or security interests, subordinate or pari passu) by all or any
portion of the Property.
(e) has not made and will not make any loans or advances to any third party
(including any member, manager, general partner, principal or affiliate of
Borrower, or any guarantor);
(f) is and will be solvent and pay its debts from its assets as the same shall
become due; provided, however, solely for purposes of determining compliance
with the provisions of this Section1.32(f) any lack of solvency or inability to
pay debts by Borrower shall be evaluated on an aggregate basis with those of the
Other Borrowers (or, in the event of an Uncross Amendment, with those other
borrowers in a Crossed Group);
(g) has done or caused to be done and will do all things necessary to preserve
its existence and corporate, limited liability company and partnership
formalities (as applicable), and will not, nor will any partner, limited or
general, shareholder or member thereof, amend, modify or otherwise change its
partnership certificate, partnership agreement, certificate, articles of
incorporation, by-laws, certificate of organization or formation, or articles of
organization, operating agreement or regulations in a manner which adversely
affects Borrower's, or any such partner's, member's or shareholder's existence
as a single-purpose, single-asset "bankruptcy remote" entity;
(h) will conduct and operate its business as presently conducted and operated;
(i) has maintained, and will maintain books and records and bank accounts
separate from those of its affiliates, including its general partners,
principals and members;
(j) will be, and at all times will hold itself out to the public as, a legal
entity separate and distinct from any other entity (including any affiliate of
Borrower, any constituent party of Borrower, any guarantor or any affiliate of
any constituent party or guarantor); has corrected, and shall correct any known
misunderstanding regarding its status as a separate entity; has conducted, and
shall conduct, its business in its own name; has paid, and will pay, its own
liabilities out of its own funds and assets; has not, and shall not identify
itself or any of its affiliates as a division or part of the other; and has
maintained and utilized, and shall maintain and utilize a separate telephone
number and separate stationery, invoices and checks from any other entity;
(k) will file its own tax returns except to the extent applicable law permits
Borrower to file a consolidated return with its owners in which event Borrower
shall be shown as a separate member of such group and such consolidated returns
shall be maintained in a manner so as to account separately for Borrower's
taxes, such that Borrower's separate information may be readily accessible;
(l) will maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations; provided, however, solely for purposes of
determining compliance with the provisions of this Section 1.32(l) capital
adequacy of Borrower shall be evaluated on an aggregate basis with those of the
Other Borrowers (or, in the event of an Uncross Amendment, with those other
borrowers in a Crossed Group);
(m) will not, nor will any member, manager, shareholder, partner, principal or
affiliate, seek the dissolution or winding up, in whole or in part, of Borrower;
(n) will not enter into any transaction of merger or consolidation, or acquire
by purchase or otherwise all or substantially all of the business or assets of,
or any stock or beneficial ownership of, any entity;
(o) has not, and will not commingle the funds and other assets of Borrower with
those of any member, manager, general partner, principal or affiliate or any
other person;
(p) has maintained, and will maintain its assets in such a manner that it is not
costly or difficult to segregate, ascertain or identify its individual assets
from those of any affiliate or any other person;
(q) has, and any general partner or managing member of Borrower has, at all
times since their respective formation, observed all legal and customary
formalities regarding their respective formation and will continue to observe
all legal and customary formalities;
(r) does not and will not hold itself out to be responsible for the debts or
obligations of any other person except those obligations of the Other Borrowers
to Lender prior to an Uncross Amendment (and after the occurrence of an Uncross
Amendment except for the other borrowers within a Crossed Group);
(s) upon the commencement of a voluntary or involuntary bankruptcy proceeding by
or against Borrower, Borrower shall not seek a supplemental stay or otherwise
pursuant to 11 U.S.C. 105 or any other provision of the Act, or any other debtor
relief law (whether statutory, common law, case law, or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, to stay, interdict, condition, reduce or inhibit the ability of
Lender to enforce any rights of Lender against any guarantor or indemnitor of
the secured obligations or any other party liable with respect thereto by virtue
of any indemnity, guaranty or otherwise;
(t) if Borrower is a limited partnership or a limited liability company, the
general partner or managing (or sole) member (the "SPC Entity") shall be a
corporation (or limited liability company) whose sole asset is its interest in
Borrower and the SPC Entity will at all times comply, and will cause Borrower to
comply, with each of the representations, warranties, and covenants contained in
this Section 1.32 as if such representation, warranty or covenant was made
directly by the SPC Entity. If Borrower is a corporation, Borrower itself shall
comply with each of the representations, warranties and covenants contained in
this Section 1.32 as an SPC Entity. Borrower shall at all times cause there to
be at least one duly appointed member of the board of directors (an "Independent
Director") of the Borrower reasonably satisfactory to Lender who shall not have
been at the time of such individual's appointment, and may not have been at any
time during the preceding five (5) years (i) a shareholder of, or an officer,
director, attorney, counsel, partner or employee of, Borrower or any of its
shareholders, subsidiaries or affiliates, (ii) a customer of, or supplier to,
Borrower or any of its shareholders, subsidiaries or affiliates, (iii) a person
or other entity controlling or under common control with any such shareholder,
partner, supplier or customer, or (iv) a member of the immediate family of any
such shareholder, officer, director, partner, employee, supplier, customer or
any other director of the Borrower. As used herein, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person or entity, whether through
ownership of voting securities, by contract or otherwise;
(u) has not caused and shall not cause, as applicable, the board of directors of
Borrower, the members or managers of Borrower, or the board of directors,
members or managers of any general partner of Borrower to take any action which,
under the terms of the organizational documents for Borrower and its general
partner or manager, as applicable, requires the unanimous affirmative vote of
one hundred percent (100%) of the members of the board of directors, members or
manager, unless at the time of such action there shall be at least one director,
member or manager, as applicable, who is an Independent Director;
(v) shall conduct its business so that the assumptions of fact made with respect
to Borrower in that certain opinion letter dated the date hereof delivered by
Paine, Hamblen, Coffin, Brooke & Miller LLP (the "Non-Consolidation Opinion")
with respect to non-consolidation issues, delivered in connection with the
execution and delivery of the Loan Documents shall be true and correct, in all
material respects at all times;
(w) upon the commencement of a voluntary or involuntary bankruptcy proceeding by
or against Borrower, Borrower shall not seek a supplemental stay or otherwise
pursuant to 11 U.S.C. 105 or any other provision of the Act, or any other debtor
relief law (whether statutory, common law, case law, or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, to stay, interdict, condition, reduce or inhibit the ability of
Lender to enforce any rights of Lender against any guarantor or indemnitor of
the secured obligations or any other party liable with respect thereto by virtue
of any indemnity, guaranty or otherwise; and
(x) is and shall remain organized in the State of Delaware, has and shall
maintain in effect an operating agreement which provides for the continued
existence of Borrower in the event of the bankruptcy or dissolution of the sole
member, and shall conduct its business so that the assumptions of fact made with
respect to Borrower in that certain single member limited liability company
opinion letter dated the date hereof delivered by Richards, Layton & Finger (the
"Single Member LLC Opinion") delivered in connection with the execution and
delivery of the Loan Documents shall be true and correct, in all material
respects at all times.
1.33 Litigation.
Borrower will give prompt written notice to Lender of any litigation or
governmental proceedings pending or threatened (in writing) against Borrower
which might have a Material Adverse Effect.
1.34 ERISA.
(a) Borrower shall not engage in any transaction which would cause any
obligation, or action taken or to be taken, hereunder (or the exercise by Lender
of any of its rights under the Note, this Deed of Trust or any of the other Loan
Documents) to be a non-exempt (under a statutory or administrative class
exemption) prohibited transaction under ERISA.
(b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of this
Deed of Trust, as requested by Lender in its sole discretion, that (i) Borrower
is not an "employee benefit plan" as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, or a "governmental plan" within the meaning of
Section 3(3) of ERISA; (ii) Borrower is not subject to state statutes regulating
investments and fiduciary obligations with respect to governmental plans; and
(iii) one or more of the following circumstances is true:
(1) Equity interests in Borrower are publicly offered securities within the
meaning of 29 C.F.R. Section 2510.3-101(b)(2) as amended from time to time or
any successor provision;
(2) Less than twenty-five percent (25%) of each outstanding class of equity
interests in Borrower are held by "benefit plan investors" within the meaning of
29 C.F.R. Section 2510.3-101(f)(2) as amended from time to time or any successor
provision; or
(3) Borrower qualifies as an "operating company" or a "real estate operating
company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e) or an
investment company registered under the Investment Company Act of 1940.
(c) BORROWER SHALL INDEMNIFY LENDER AND DEFEND AND HOLD LENDER HARMLESS FROM AND
AGAINST ALL CIVIL PENALTIES, EXCISE TAXES, OR OTHER LOSS, COST, DAMAGE AND
EXPENSE (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES AND
DISBURSEMENTS AND COSTS INCURRED IN THE INVESTIGATION, DEFENSE AND SETTLEMENT OF
CLAIMS AND LOSSES INCURRED IN CORRECTING ANY PROHIBITED TRANSACTION OR IN THE
SALE OF A PROHIBITED LOAN, AND IN OBTAINING ANY INDIVIDUAL PROHIBITED
TRANSACTION EXEMPTION UNDER ERISA THAT MAY BE REQUIRED, IN LENDER'S SOLE
DISCRETION) THAT LENDER MAY INCUR, DIRECTLY OR INDIRECTLY, AS A RESULT OF A
DEFAULT UNDER THIS SECTION 1.34. THIS INDEMNITY SHALL SURVIVE ANY TERMINATION,
SATISFACTION OR FORECLOSURE OF THIS DEED OF TRUST.
1.35 Defeasance.
(a) Notwithstanding anything to the contrary contained in the Note, this Deed of
Trust or the other Loan Documents, at any time after the second (2nd)
anniversary of the date that is the "startup day," within the meaning of
Section 860G(a)(9) of the Internal Revenue Code of 1986, as amended from time to
time or any successor statute (the "Code"), of a "real estate mortgage
investment conduit" ("REMIC") within the meaning of Section 860D of the Code,
that holds the Note and this Deed of Trust and provided (unless Lender shall
otherwise consent, in its sole discretion) no default has occurred and is
continuing hereunder or under any of the other Loan Documents, Borrower shall
have the right to obtain the release of the Property from the lien of this Deed
of Trust and the other Loan Documents upon the satisfaction of each of the
following conditions precedent (such transaction being referred to herein as a
"Defeasance"):
(1) not less than thirty (30) days' prior written notice to Lender specifying a
regular Payment Date under the Note (the "Release Date") on which the Defeasance
Collateral (hereinafter defined) is to be delivered;
(2) the remittance to Lender on the related Release Date of interest accrued and
unpaid on the outstanding principal amount of the Note to and including the
Release Date and the scheduled amortization payment due on such Release Date,
together with all other amounts then due and payable under the Note, this Deed
of Trust and the other Loan Documents;
(3) the delivery on or prior to the Release Date to Lender of:
(A) an amount equal to that which is sufficient to purchase U.S. Government
Securities (hereinafter defined) that provide for payments prior, but as close
as possible, to all successive monthly Payment Dates (as defined in the Note)
occurring after the Release Date including the payment made on the Maturity
Date, with each such payment being equal to or greater than the amount of the
corresponding installment of principal, interest and, if applicable, the fee of
the Servicer required to be paid hereunder and/or under the Note (the
"Defeasance Collateral"), each of which shall be duly endorsed by the holder
thereof as directed by Lender or accompanied by a written instrument of transfer
in form and substance wholly satisfactory to Lender (including, without
limitation, such instruments as may be required by the depository institution
holding such securities to effectuate book-entry transfers and pledges through
the book-entry facilities of such institution) in order to create a first
priority security interest therein in favor of Lender in conformity with all
applicable state and federal laws governing granting of such security interests;
(B) a pledge and security agreement, in form and substance satisfactory to
Lender, creating a first priority security interest in favor of Lender in the
Defeasance Collateral (the "Defeasance Security Agreement"), which Defeasance
Security Agreement shall (i) provide, among other things, that any excess
received by Lender from the Defeasance Collateral over the amounts payable by
Borrower hereunder shall be refunded to Borrower promptly after each Payment
Date, and (ii) be included within the definition of "Deed of Trust" for purposes
of each Loan Document from and after the date of its execution;
(C) a certificate of an authorized representative of Borrower certifying that
the requirements set forth in this Section 1.35(a) have been satisfied;
(D) an opinion of counsel for Borrower in form and substance satisfactory to
Lender to the effect that Lender has a perfected first priority security
interest in the Defeasance Collateral and the Defeasance Security Agreement is
enforceable against Borrower in accordance with its terms;
(E) an opinion of counsel for Lender, prepared and delivered by counsel for the
Servicer at Borrower's reasonable expense, stating that any trust formed as a
REMIC in connection with any Secondary Market Transaction (as defined in
Section 5.32 hereof) will not fail to maintain its status as a REMIC as a result
of such Defeasance;
(F) a certificate from a firm of independent public accountants acceptable to
Lender certifying that the Defeasance Collateral is sufficient to satisfy the
requirements of Section 1.35(a)(3)(A) hereinabove;
(G) a proposed release of the Property from this Deed of Trust, the Assignment
and any UCC Financing Statements relating thereto and a termination of the Cash
Management Agreement (for execution by Lender) in a form appropriate for
cancellation of such documents in the jurisdiction in which the Property is
located;
(H) evidence in writing from the applicable Rating Agency to the effect that the
collateral substitution will not result in a downgrading, withdrawal or
qualification of the respective ratings in effect immediately prior to such
Defeasance for any securities issued in connection with the Secondary Market
Transaction (as defined in Section 5.32 hereof) which are then outstanding;
(I) such other certificates, documents or instruments as Lender may reasonably
request;
(4) the payment by Borrower to Lender of all reasonable out-of-pocket costs and
expenses (including, without limitation, attorneys' and accountant's fees and
disbursements, and Rating Agency fees and expenses, if any) incurred or
anticipated to be incurred by Lender in connection with the satisfaction of the
conditions and requirements described in this Section 1.35; and
(5) contemporaneous Defeasance election being undertaken and completed relative
to the Other Properties and pursuant to the terms of the Other Deeds of Trust.
(b) Upon compliance with the requirements of this Section 1.35, the Property
shall be released from the lien of this Deed of Trust, the Assignment and any
UCC Financing Statements related thereto, the obligations hereunder and under
the other Loan Documents with respect to the Property shall no longer be
applicable and the Defeasance Collateral shall be the sole source of collateral
securing the Note and all other obligations under the Loan Documents. Lender
shall apply the Defeasance Collateral and the payments received therefrom to the
payment of all scheduled principal and interest payments (the "Scheduled
Defeasance Payments") due on all successive Payment Dates under the Note after
the Release Date including the payment due on the Maturity Date. Borrower,
pursuant to the Defeasance Security Agreement or other appropriate document,
shall direct that the payments received from the Defeasance Collateral shall be
made directly to Lender and applied to satisfy the obligations of Borrower under
the Note and the Defeasance Security Agreement.
(c) In connection with the release of the Property in accordance with this
Section 1.35, if Borrower shall continue to own any assets other than the
Defeasance Collateral, Borrower shall establish or designate a single-purpose,
bankruptcy-remote successor entity acceptable to Lender (the "Successor
Trustor"), with respect to which a non-consolidation opinion satisfactory in
form and substance to Lender has been delivered to Lender (if such
non-consolidation opinion was required of Borrower in connection with the
origination of the indebtedness secured hereby) in which case Borrower shall
transfer and assign to the Successor Trustor all obligations, rights and duties
under the Note and the Defeasance Security Agreement, together with the pledged
Defeasance Collateral. The Successor Trustor shall assume the obligations of
Borrower under the Note and the Defeasance Security Agreement pursuant to an
assumption agreement satisfactory to Lender in its sole discretion. As a
condition to such assignment and assumption, Borrower shall (i) deliver to
Lender an opinion of counsel in form and substance and delivered by counsel
satisfactory to Lender in its sole discretion stating, among other things, that
such assumption agreement is enforceable against Borrower and such successor
entity in accordance with their respective terms, and (ii) pay all costs and
expenses incurred by Lender or its agents in connection with such assignment and
assumption (including, without limitation, the review of the proposed transferee
and the preparation of the assumption agreement and related documentation). Upon
such assumption, Borrower shall be relieved of its obligations hereunder, under
the other Loan Documents and under the Defeasance Security Agreement other than
those obligations which are specifically intended to survive the termination,
satisfaction or assignment of this Deed of Trust or the exercise of Lender's
rights and remedies hereunder.
(d) Upon the release of the Property in accordance with this paragraph, Borrower
shall have no further right to prepay the Note pursuant to the other provisions
of this paragraph or otherwise. In connection with the conditions set forth in
Section 1.35(a)(3)(A) above, Borrower hereby appoints Lender as its agent and
attorney-in-fact for the purpose of purchasing the Defeasance Collateral with
funds provided by Borrower. Borrower shall pay any and all expenses incurred in
the purchase of the Defeasance Collateral and any revenue, documentary stamp or
intangible taxes or any other tax or charge due in connection with the transfer
of the Note or otherwise required to accomplish the agreements of this
paragraph.
(e) As used herein, the term "U.S. Government Securities" shall mean
non-redeemable securities evidencing an obligation to timely pay principal
and/or interest in a full and timely manner that are direct obligations of the
United States of America for the full and timely payment of which its full faith
and credit is pledged.
(f) Notwithstanding the provisions of clauses (a)-(e) above, if at any time
following the third (3rd) anniversary of the First P&I Date (as defined in the
Note) Borrower delivers to Lender a written notice pursuant to
Section 1.35(a)(i) above specifying a Release Date and, if as a result of delays
by Lender in including the Loan in a Secondary Market Transaction, Lender is
unable due to REMIC restrictions to exercise its right to Defeasance on the
specified Release Date, then Borrower may prepay the Note on the specified
Release Date, in accordance with Section 1.2(e) of the Note. Any such permitted
prepayment made on or prior to the Lockout Expiration Date (as defined in the
Note) shall be accompanied with payment of Required Yield Maintenance.
1.36 Franchise Agreement.
Borrower shall comply with all terms and provisions of that certain Franchise
License Agreement ("Franchise Agreement"), dated on or about the date hereof
between Borrower and WestCoast Hotels, Inc., a Washington corporation (the
"Franchisor") relating to the Property, a copy of which has been delivered to
Lender, and shall keep the Franchise Agreement in full force and effect so long
as any portion of the secured indebtedness remains outstanding. Borrower shall
promptly provide Lender with full and complete copies of all notices of default
and other correspondence received by Borrower pursuant to such Franchise
Agreement which relates to the performance of Borrower under such Franchise
Agreement, including, without limitation, all franchise inspections (quality
assurance reports). Notwithstanding anything in this Section to the contrary,
Borrower shall have the right to replace the Franchisor by executing a new
franchise agreement with another franchisor, which agreement and franchisor must
be reasonably acceptable to Lender.
1.37 Personal Property Leases.
Borrower has leased certain personal property pursuant to leases (the "Personal
Property Leases"), copies of which Borrower has delivered to Lender. Borrower
shall comply with all terms and provisions of the Personal Property Leases and
shall keep the Personal Property Leases in full force and effect (except for
worn out or obsolete items replaced by Borrower) so long as any portion of the
secured indebtedness remains outstanding.
1.38 Partial Release.
If fifty percent (50%) or more of the Improvements located on the Property is
taken or destroyed as described in Section 1.9(c) hereinabove, Lender may
require a prepayment of the Yakima Note pursuant to such Section 1.9(c) whether
or not the proceeds from such taking or destruction are adequate to fund such
prepayment. The amount of such partial prepayment (the "Casualty Release
Payment") shall equal the greater of (i) the casualty or condemnation proceeds,
or (ii) the Minimum Release Payment (hereinafter defined). Upon payment of the
Casualty Release Payment, Lender shall give written consent to Borrower to a
release (a "Casualty Release") of the Property upon the satisfaction (in the
determination of Lender) of the following conditions precedent (singularly and
collectively referred to as a "Casualty Release Condition"):
(a) Any and all sums then due and payable to Lender under the Loan Documents
pertaining to the Yakima Loan shall be fully paid (including, without
limitation, principal and interest under the Yakima Note) and no event of
default (as described in Article II herein) shall exist and be continuing, nor
shall Lender have given Borrower notice of any event or condition which, with
the passage of time or the giving of notice (or both), could result in an event
of default if not cured by Borrower.
(b) Borrower shall have established a good record in the payment of sums when
due under the Loan Documents.
(c) Borrower shall submit a prepared release instrument (the "Casualty Release
Instrument") in form and substance satisfactory to Lender and any information
necessary for Lender to process the Casualty Release Instrument, including a lot
and block or metes and bounds description of the Property, the name and address
of the title insurance company to whose attention the Casualty Release
Instrument should be directed, numbers that reference the Casualty Release
Instrument (i.e., tax parcel numbers, title company order numbers, release
numbers, etc.), the date when the Casualty Release is to become effective, the
name and address of the prospective purchaser of the Property, the intended use
thereof, and such other documents and information as Lender may reasonably
request. The Casualty Release Instrument shall be delivered, in escrow, by
Lender to the title company so designated, to be held, released, delivered and
recorded in accordance with Lender's escrow instructions, which shall require
delivery of the Casualty Release Payment to Lender prior to delivery and
recordation of the Casualty Release Instrument and the satisfaction of all
Casualty Release Conditions. In no event shall the execution and delivery of a
Casualty Release Instrument affect any of Lender's obligations under this
Mortgage or the other Loan Documents.
(d) All reasonable costs and expenses incurred by Lender (and any servicer of
the Yakima Loan) in connection with the review, approval and execution of any
Casualty Release shall be paid by Borrower prior to and as a condition of the
execution of any Casualty Release Instrument, including (but not limited to) the
Administration Fee (hereafter described), reasonable attorneys' fees, all costs
and expenses of Lender (and any servicer of the Yakima Loan) incurred in
connection with obtaining any engineering reports, opinions and consents, and
the endorsement to the Title Insurance Policy. All recording fees and taxes are
to be paid by Borrower.
(e) Payment to Lender of an administrative fee (the "Administration Fee") in the
amount of $500.00.
(f) The satisfaction of such other conditions precedent as Lender may reasonably
require.
As used herein, the term "Minimum Release Payment" shall mean the sum of the
indebtedness outstanding as evidenced by the Yakima Note. Lender shall (upon
written notice to Borrower) apply the required prepayment in the following order
and priority: first, to the accrued interest and outstanding principal balance
of the Yakima Loan, next to the accrued interest and principal balance of the
Other Loans in an allocated amount and in a manner deemed appropriate by Lender
in its sole discretion.
In any instance herein where the approval, consent or the exercise of judgment
of Lender is required, the granting or denial of such approval or consent and
the exercise of such judgment shall be (a) within the sole discretion of Lender;
(b) deemed to have been given only by a specific writing intended for the
purpose and executed by Lender; and (c) free from any limitation or requirement
of reasonableness, unless otherwise expressly provided. Each provision for
consent, approval, inspection, review or verification by Lender is only for
Lender's own purposes and benefit.
1.39 Uncrossing the Yakima Loan and One or More of the Other Loans.
In the circumstances described in this Section 1.39, the provisions of this Deed
of Trust and other Loan Documents shall be amended such that (i) this Deed of
Trust shall only thereafter secure certain of the promissory notes and loans
currently described on Exhibit D hereto and the terms "Other Notes" and "Note"
and "Loan" and "Other Loans" shall be thereafter modified to only include such
specified promissory notes and loans which shall remain so secured by this Deed
of Trust, (ii) the cross-default provisions later described with respect to the
deeds of trust and properties described on Exhibit E attached hereto shall be
modified such that only certain of such properties and deeds of trust shall
thereafter be subject to such cross-default with this Deed of Trust and the
terms "Other Deeds of Trust" and "Other Properties" shall be thereafter modified
to only include such specified deeds of trust and properties, and
(iii) conforming changes shall be made to all of the other Loan Documents. Such
amendment to be undertaken to the Loan Documents to accomplish the modifications
described in the immediately preceding sentence shall be referred to herein as
an "Uncross Amendment".
(a) Uncross Amendment Undertaken at Lender's Election. At any time, or from time
to time, Lender may elect and require Borrower and all of the Other Borrowers to
effectuate an Uncross Amendment as Lender may elect and specify. Any Uncross
Amendment required by Lender pursuant to this Section 1.39(a) shall not require
Borrower's compliance with the conditions specified in Section 1.39(b) but shall
be undertaken at Borrower's expense. In such circumstance, Borrower shall
execute all such documents as may be reasonably required by Lender in order to
undertake the Uncross Amendment and, to the extent Borrower should fail to
timely execute any such documents as may be required to undertake the Uncross
Amendment, Lender shall be entitled, as Borrower's agent and attorney-in-fact,
to execute any such documents by and on behalf of Borrower, it being agreed and
understood that such appointment is deemed coupled with an interest and hence
irrevocable.
(b) Uncross Amendment Undertaken at Borrower's Election. Borrower shall be
entitled to elect that an Uncross Amendment be undertaken, but only upon
Borrower's written notice to Lender that Borrower so elects to cause an Uncross
Amendment to be undertaken and upon Borrower's provision of evidence to Lender
that the following conditions precedent to such Uncross Amendment have been
fully satisfied:
(1) No default or circumstance or event shall have occurred which, with the
giving of notice, the passage of time or both, would constitute an event of
default hereunder or under any of the other Loan Documents shall have occurred
and then be continuing; and
(2) Lender shall have received approved MAI appraisals and other financial
information with respect to the Property and all of the Other Properties, which
such appraisals and financial information shall satisfy the following financial
requirements with respect to each group of properties or loans which, pursuant
to the proposed Uncross Amendment, are proposed to be then subject to
cross-collateralization and cross-default arrangements amongst each other (each
such group of properties and loans being hereinafter referred to as a "Crossed
Group"):
(i) the aggregate loan-to-value ratio of each Crossed Group, as determined by
Lender, which would result if the proposed Uncross Amendment were to occur shall
be equal to or less than fifty-five percent (55%) based upon such new MAI
appraisals, all provided by appraisers and using reasonably assumptions approved
by Lender and taking into account the outstanding balance of the loan in such
Crossed Group should the Uncross Amendment occur;
(ii) the debt service coverage ratio of the aggregate properties and loans in
each Crossed Group resulting from the proposed Uncross Amendment shall be not
less than 1.80:1 based on (1) actual but ordinary revenue from the respective
properties calculated on a trailing 12-month basis, (2) a limitation that total
expenses (including reserves) as a percentage of total revenue is not to be less
than seventy-five percent (75%), and (3) a requirement that debt service is
calculated based on the greater of the debt service payments required under the
loans within each Crossed Group or a hypothetical debt service which would
result from such same loans bearing an eight percent (8%) interest rate and an
otherwise identical amortization schedule; and
(iii) after taking into account the effect of the Uncross Amendment, Lender's
estimation of cash flow available for debt service with respect to one (1)
Crossed Group shall be no less than sixty percent (60%) of the aggregate cash
flow available for debt service as to the Property and all of the Other
Properties in the aggregate prior to the Uncross Amendment.
(3) Borrower shall execute such amendments as Lender may reasonably require with
respect to this Deed of Trust and all of the other Loan Documents and shall
provide such amendments to any title policy (or supplemental title information),
opinion letter(s) of borrower's counsel or other similar information as Lender
may reasonably require;
(4) If required under the operative documents with respect to a Secondary Market
Transaction (as hereinafter defined), Lender shall have received evidence in
writing from the Rating Agency (as hereinafter defined) to the effect that the
Uncross Amendment will not result in a re-qualification, reduction, downgrade or
withdrawal of any rating initially assigned or to be assigned in a Secondary
Market Transaction or, if no such rating has been issued, in Lender's good faith
judgment, such Sale shall not have an adverse effect on the level of rating
obtainable in connection with the Loan or the Crossed Group; and.
(5) Borrower shall reimburse Lender for all of Lender's reasonable costs or
expenses incurred with respect to the Uncross Amendment including, without
limitation, reasonable attorneys' fees.
ARTICLE II
EVENTS OF DEFAULT
2.1 Events of Default.
The occurrence of any of the following events shall be a default hereunder:
(a) Borrower fails to (i) make any payment under the Note when due, or
(ii) timely make any regularly scheduled monthly deposit into a Reserve under
this Deed of Trust or any of the other Loan Documents when due.
(b) Borrower fails to punctually perform any other covenant, agreement,
obligation, term or condition hereof which requires payment of any money to
Lender and such failure continues for ten (10) days after Lender's written
notice to Borrower of such amount due (it being expressly agreed and understood
that no notice or grace period whatsoever shall be applicable with respect to
those items described in Section 2.1(a) hereinabove).
(c) Borrower fails to provide insurance as required by Section 1.4 hereof or
fails to perform any covenant, agreement, obligation, term or condition set
forth in Section 1.16 or Section 1.30 hereof; provided, however, the
cancellation of any such insurance due to Lender's failure to pay the premium
thereof in accordance with Section 1.6 hereof shall not be an event of default
hereunder.
(d) Borrower fails to perform any other covenant, agreement, obligation, term or
condition set forth herein, other than those otherwise described in this
Section 2.1, and, to the extent such failure or default is susceptible of being
cured, the continuance of such failure or default for thirty (30) days after
written notice thereof from Lender to Borrower; provided, however, that if such
default is susceptible of cure but such cure cannot be accomplished with
reasonable diligence within said period of time, and if Borrower commences to
cure such default promptly after receipt of notice thereof from Lender, and
thereafter prosecutes the curing of such default with reasonable diligence, such
period of time shall be extended for such period of time as may be necessary to
cure such default with reasonable diligence, but not to exceed an additional
ninety (90) days.
(e) Any representation or warranty made herein, in or in connection with any
application or commitment relating to the Loan, or in any of the other Loan
Documents to Lender by Borrower, by any principal, managing member or general
partner in Borrower or by any indemnitor or guarantor under any indemnity or
guaranty executed in connection with the Loan is determined by Lender to have
been false or misleading in any material respect at the time made and, to the
extent such default is susceptible of being cured, the continuance of such
default for thirty (30) days after written notice therefrom from Lender to
Borrower.
(f) There shall be a sale, conveyance, disposition, alienation, hypothecation,
leasing, assignment, pledge, mortgage, granting of a security interest in or
other transfer or further encumbrancing of the Property, Borrower or its owners,
or any portion thereof or any interest therein, in violation of Section 1.13
hereof.
(g) A default occurs under any of the other Loan Documents which has not been
cured within any applicable grace or cure period therein provided.
(h) Borrower, any principal, general partner or managing member (as applicable)
in Borrower, WestCoast Hospitality, Red Lion Hotels, Inc., Red Lion Hotel
Properties, Inc., WCH, or any indemnitor or guarantor under any indemnity or
guaranty executed in connection with the Loan becomes insolvent, or shall make a
transfer in fraud of Lender or other creditors, or shall make an assignment for
the benefit of creditors other than Lender, shall file a petition in bankruptcy,
shall voluntarily be adjudicated insolvent or bankrupt or shall admit in writing
the inability to pay debts as they mature, shall petition or apply to any
tribunal for or shall consent to or shall not contest the appointment of a
receiver, trustee, custodian or similar officer for Borrower, for any such
principal, general partner or managing member of Borrower, WestCoast
Hospitality, Red Lion Hotels, Inc., Red Lion Hotel Properties, Inc., WCH, or for
any such indemnitor or guarantor or for a substantial part of the assets of
Borrower, of any such principal, general partner or managing member of Borrower
or of WestCoast Hospitality, Red Lion Hotels, Inc., Red Lion Hotel Properties,
Inc., WCH, or of any such indemnitor or guarantor, or shall commence any case,
proceeding or other action under any bankruptcy, reorganization, arrangement,
readjustment or debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect.
(i) A petition ("Petition") is filed or any case, proceeding or other action is
commenced against Borrower, against any principal, general partner or managing
member of Borrower or against any indemnitor or guarantor under any indemnity or
guaranty executed in connection with the Loan seeking to have an order for
relief entered against it as debtor or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts or other
relief under any law relating to bankruptcy, insolvency, arrangement,
reorganization, receivership or other debtor relief under any law or statute of
any jurisdiction, whether now or hereafter in effect, or a court of competent
jurisdiction enters an order for relief against Borrower, against any principal,
general partner or managing member of Borrower or against any indemnitor or
guarantor under any indemnity or guaranty executed in connection with the Loan,
as debtor, or an order, judgment or decree is entered appointing, with or
without the consent of Borrower, of any such principal, general partner or
managing member of Borrower or of any such indemnitor or guarantor, a receiver,
trustee, custodian or similar officer for Borrower, for any such principal,
general partner or managing member of Borrower or for any such indemnitor or
guarantor, or for any substantial part of any of the properties of Borrower, of
any such principal, general partner or managing member of Borrower or of any
such indemnitor or guarantor, and if any such event shall occur, such Petition,
case, proceeding, action, order, judgment or decree shall not be dismissed
within sixty (60) days after being commenced.
(j) Borrower solicits or aids the solicitation of the filing of any Petition
against Borrower including, without limitation: (i) providing information
regarding the identity of creditors or the nature of creditors' claims to any
third party in connection with the filing of a Petition unless compelled to do
so by order of a court of competent jurisdiction or by regulation promulgated by
a governmental agency, or (ii) paying the legal fees or expenses of any creditor
of or interest holder in Borrower in connection with the filing of the Petition.
(k) The Property or any material part thereof shall be taken on execution or
other process of law in any action against Borrower and, to the extent such
default is susceptible of being cured, the continuance of such default for
thirty (30) days after written notice thereof from Lender to Borrower.
(l) Borrower abandons all or a material portion of the Property.
(m) The holder of any lien or security interest on the Property (without
implying the consent of Lender to the existence or creation of any such lien or
security interest), whether superior or subordinate to this Deed of Trust or any
of the other Loan Documents, declares a default and such default is not cured
within any applicable grace or cure period set forth in the applicable document
or such holder institutes foreclosure or other proceedings for the enforcement
of its remedies thereunder and, to the extent such default is susceptible of
being cured, the continuance of such default for thirty (30) days after written
notice thereof from Lender to Borrower.
(n) The Property, or any part thereof, is subjected to actual or threatened
waste or to removal, demolition or material alteration so that the value of the
Property is materially diminished thereby and Lender reasonably determines that
it is not adequately protected from any loss, damage or risk associated
therewith and, to the extent such default is susceptible of being cured, the
continuance of such default for thirty (30) days after written notice thereof
from Lender to Borrower.
(o) Any dissolution, termination, partial or complete liquidation, merger or
consolidation of Borrower, its managing member(s) or WCH or WestCoast
Hospitality or Red Lion Hotels, Inc. or Red Lion Hotel Properties, Inc. (other
than a consolidation, merger or similar event amongst affiliated parties and
undertaken consistent with the requirements of Section 1.13 hereof).
(p) Any franchise agreement or management agreement affecting the Property is
terminated and is not replaced with a franchise agreement or management
agreement, as applicable, reasonably acceptable to Lender within sixty (60) days
of such termination.
(q) Any liquor license relating to the Property, if any, ceases to be in full
force and effect, and such liquor license is not restored within sixty (60)
days, except with Lender's prior written consent.
(r) If any of the facts forming the basis of the assumptions set forth in the
Non-Consolidation Opinion, shall no longer be true and correct in all material
respects. and, to the extent such default is susceptible of being cured, the
continuance of such default for thirty (30) days after written notice thereof
from Lender to Borrower.
(s) If any of the facts forming the basis of the assumptions set forth in the
Single Member LLC Opinion, shall no longer be true and correct in all material
respects.
(t) The occurrence of any default (and expiration of any expressly provided
grace or cure period relative thereto) pursuant to any of those nine (9) certain
Deed of Trusts and Security Agreements (collectively, "Other Deeds of Trust"),
all dated of even date herewith executed by the entities as indicated on Exhibit
E attached hereto and incorporated herein by reference, to a trustee for the
benefit of Lender relative to properties located in the counties and states as
indicated on Exhibit E (collectively, "Other Properties") and more particularly
described in the other Deeds of Trust.
ARTICLE III
REMEDIES
3.1 Remedies Available.
If there shall occur a default under this Deed of Trust, and such default has
not been cured within any applicable grace or cure period, then this Deed of
Trust is subject to foreclosure as provided by law and Lender may, at its option
and by or through a trustee, nominee, assignee or otherwise, to the fullest
extent permitted by law, exercise any or all of the following rights, remedies
and recourses, either successively or concurrently:
(a) Acceleration. Accelerate the Maturity Date and declare any or all of the
indebtedness secured hereby to be immediately due and payable without any
presentment, demand, protest, notice or action of any kind whatever (each of
which is hereby expressly waived by Borrower), whereupon the same shall become
immediately due and payable. Upon any such acceleration, payment of such
accelerated amount shall constitute a prepayment of the principal balance of the
Note and any applicable prepayment fee provided for in the Note shall then be
immediately due and payable.
(b) Entry on the Property. Without in any way curing or waiving any default of
Borrower, either in person or by agent or by court-appointed receiver, with or
without bringing any action or proceeding, or by a receiver appointed by a court
and without regard to the adequacy of its security, enter upon and take
possession of the Property, or any part thereof, in its own name or in the name
of the Trustee, without force or with such force as is permitted by law and
without notice or process or with such notice or process as is required by law,
unless such notice and process are waivable, in which case Borrower hereby
waives such notice and process, and do any and all acts and perform any and all
work which may be desirable or necessary in Lender's judgment to complete any
unfinished construction on the Land, to preserve and/or enhance the value,
marketability or rentability of the Property, to increase the income therefrom,
to manage and operate the Property or to protect the security hereof, and all
sums expended by Lender therefor, together with interest thereon at the Default
Interest Rate (as defined in the Note), shall be immediately due and payable to
Lender by Borrower on demand and shall be secured hereby and by all of the other
Loan Documents securing all or any part of the indebtedness evidenced by the
Note.
(c) Collect Rents and Profits. With or without taking possession of the
Property, sue for or otherwise collect the Rents and Profits, including those
past due and unpaid, and apply the same, less costs and expenses of operation
and collection, including reasonable attorneys' fees, upon any indebtedness
secured hereby, all in such order as Lender in its discretion may determine.
(d) Appointment of Receiver. Upon, or at any time prior or after, initiating the
exercise of any power of sale, instituting any judicial foreclosure or
instituting any other foreclosure of the liens and security interests provided
for herein or any other legal proceedings hereunder, make application, ex parte,
to a court of competent jurisdiction for appointment of a receiver for all or
any part of the Property, as a matter of strict right and without notice to
Borrower and without regard to the adequacy of the Property for the repayment of
the indebtedness secured hereby or the solvency of Borrower or any person or
persons liable for the payment of the indebtedness secured hereby, and Borrower
does hereby irrevocably consent to such appointment, waives any and all notices
of and defenses to such appointment and agrees not to oppose any application
therefor by Lender, but nothing herein is to be construed to deprive Lender of
any other right, remedy or privilege Lender may now have under the law to have a
receiver appointed, provided, however, that the appointment of such receiver,
trustee or other appointee by virtue of any court order, statute or regulation
shall not impair or in any manner prejudice the rights of Lender to receive
payment of the Rents and Profits pursuant to other terms and provisions of this
Deed of Trust or the Assignment. Any such receiver shall have all of the usual
powers and duties of receivers in similar cases, including, without limitation,
the full power to hold, develop, rent, lease, manage, maintain, operate and
otherwise use or permit the use of the Property upon such terms and conditions
as said receiver may deem to be prudent and reasonable under the circumstances
as more fully set forth in Section 3.3 below. Such receivership shall, at the
option of Lender, continue until full payment of all of the indebtedness secured
hereby or until title to the Property shall have passed by foreclosure sale
under this Deed of Trust or deed in lieu of foreclosure.
(e) Foreclosure. Immediately commence an action to foreclose this Deed of Trust
or to specifically enforce its provisions or any of the indebtedness secured
hereby, pursuant to the applicable Washington state law, and sell the Property
or cause the Property to be sold in accordance with the requirements and
procedures provided by the applicable Washington state law in a single parcel or
in several parcels at the option of Lender.
(1) In the event foreclosure proceedings are filed by Lender, all expenses
incident to such proceedings, including, but not limited to, attorneys' fees and
costs, shall be paid by Borrower and secured by this Deed of Trust and by all of
the other Loan Documents securing all or any part of the indebtedness evidenced
by the Note. The secured indebtedness and all other obligations secured by this
Deed of Trust, including, without limitation, interest at the Default Interest
Rate (as defined in the Note), any prepayment charge, fee or premium required to
be paid under the Note in order to prepay principal (to the extent permitted by
applicable law), reasonable attorneys' fees and any other amounts due and unpaid
to Lender under the Loan Documents, may be bid by Lender in the event of a
foreclosure sale hereunder. In the event of a judicial sale pursuant to a
foreclosure decree, it is understood and agreed that Lender or its assigns may
become the purchaser of the Property or any part thereof.
(2) Lender may, by following the procedures and satisfying the requirements
prescribed by applicable law, foreclose on all or only a portion of the Property
and, in such event, said foreclosure shall not affect the lien of this Deed of
Trust on the remaining portion of the Property.
(f) Trustee's Sale. Cause the Trustee to sell the Property at a trustee's sale
in accordance with the non-judicial foreclosure procedures required by
Washington law.
(g) Judicial Remedies. Proceed by suit or suits, at law or in equity, instituted
by Lender, or Trustee, upon written request of Lender, to enforce the payment of
the indebtedness secured hereby or the other obligations of Borrower hereunder
or pursuant to the Loan Documents, to foreclose the liens and security interests
of this Deed of Trust as against all or any part of the Property, and to have
all or any part of the Property sold under the judgment or decree of a court of
competent jurisdiction. In the event of a judicial sale pursuant to a
foreclosure decree, it is understood and agreed that Lender or its assigns may
become the purchaser of the Property. This remedy shall be cumulative of any
other non-judicial remedies available to the Lender with respect to the Loan
Documents. Proceeding with the request or receiving a judgment for legal relief
shall not be or be deemed to be an election of remedies or bar any available
non-judicial remedy of the Lender.
(h) Security Agreement Remedies. Expenses of retaking, holding, preparing for
sale, selling or the like (including, without limitation, Lender's reasonable
attorneys' fees and legal expenses), together with interest thereon at the
Default Interest Rate from the date incurred by Lender until actually paid by
Borrower, shall be paid by Borrower on demand and shall be secured by this Deed
of Trust and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note. If notice is required by law, Lender shall
give Borrower at least ten (10) days' prior written notice of the time and place
of any public sale of such property or of the time of or after which any private
sale or any other intended disposition thereof is to be made, and if such notice
is sent to Borrower, as the same is provided for the mailing of notices herein,
it is hereby deemed that such notice shall be and is reasonable notice to
Borrower. No such notice is necessary for any such property which is perishable,
threatens to decline speedily in value or is of a type customarily sold on a
recognized market. Any sale made pursuant to the provisions of this
Section 3.1(h) shall be deemed to have been a public sale conducted in a
commercially reasonable manner if held contemporaneously with the foreclosure
sale as provided in Section 3.1(e) hereof upon giving the same notice with
respect to the sale of the Property hereunder as is required under said
Section 3.1(e). Furthermore, to the extent permitted by law, in conjunction
with, in addition to or in substitution for the rights and remedies available to
Lender pursuant to any applicable Uniform Commercial Code:
(i) In the event of a foreclosure sale, the Property may, at the option of
Lender, be sold as a whole; and
(ii) It shall not be necessary that Lender take possession of the aforementioned
Collateral (as defined in Section 1.21 herein), or any part thereof, prior to
the time that any sale pursuant to the provisions of this Section is conducted
and it shall not be necessary that said Collateral, or any part thereof, be
present at the location of such sale; and
(iii) Lender may appoint or delegate any one or more persons as agent to perform
any act or acts necessary or incident to any sale held by Lender, including the
sending of notices and the conduct of the sale, but in the name and on behalf of
Lender.
(i) Other. Exercise any other right or remedy available hereunder, under any of
the other Loan Documents or at law or in equity.
3.2 Application of Proceeds.
To the fullest extent permitted by law, the proceeds of any sale under this Deed
of Trust shall be applied, to the extent funds are so available, to the
following items in such order as Lender in its discretion may determine:
(a) To payment of the costs, expenses and fees of taking possession of the
Property, and of holding, operating, maintaining, using, leasing, repairing,
improving, marketing and selling the same and of otherwise enforcing Lender's
right and remedies hereunder and under the other Loan Documents, including, but
not limited to, a reasonable fee to the Trustee, receivers' fees, court costs,
attorneys', accountants', appraisers', auctioneers', managers' and other
professionals' fees, title charges and transfer taxes and payment of all
expenses, liabilities and advances of Trustee.
(b) To payment of all sums expended by Lender under the terms of any of the Loan
Documents and not yet repaid, together with interest on such sums at the Default
Interest Rate (as defined in the Note).
(c) To payment of the secured indebtedness and all other obligations secured by
this Deed of Trust, including, without limitation, interest at the Default
Interest Rate (as defined in the Note) for any applicable period and, to the
extent permitted by applicable law, any prepayment fee, charge or premium
required to be paid under the Note in order to prepay principal, in any order
that Lender chooses in its sole discretion.
(d) The remainder, if any, of such funds shall be disbursed to Borrower or to
the person or persons legally entitled thereto.
3.3 Right and Authority of Receiver or Lender in the Event of Default; Power of
Attorney.
Upon the occurrence of a default hereunder, which default is not cured within
any applicable grace or cure period, and entry upon the Property pursuant to
Section 3.1(b) hereof or appointment of a receiver pursuant to Section 3.1(d)
hereof, and under such terms and conditions as may be prudent and reasonable
under the circumstances in Lender's or the receiver's sole discretion, all at
Borrower's expense, Lender or said receiver, or such other persons or entities
as they shall hire, direct or engage, as the case may be, may do or permit one
or more of the following, successively or concurrently: (a) enter upon and take
possession and control of any and all of the Property; (b) take and maintain
possession of all documents, books, records, papers and accounts relating to the
Property; (c) manage and operate the Property; (d) preserve and maintain the
Property; (e) make repairs and alterations to the Property; (f) complete any
construction or repair of the Improvements, with such changes, additions or
modifications of the plans and specifications or intended disposition and use of
the Improvements as Lender may in its sole discretion deem appropriate or
desirable to place the Property in such condition as will, in Lender's sole
discretion, make it or any part thereof readily marketable or rentable;
(g) conduct a marketing or leasing program with respect to the Property, or
employ a marketing or leasing agent or agents to do so, directed to the leasing
or sale of the Property under such terms and conditions as Lender may in its
sole discretion deem appropriate or desirable; (h) employ such contractors,
subcontractors, materialmen, architects, engineers, consultants, managers,
brokers, marketing agents, or other employees, agents, independent contractors
or professionals, as Lender may in its sole discretion deem appropriate or
desirable to implement and effectuate the rights and powers herein granted;
(i) execute and deliver, in the name of Lender as attorney-in-fact and agent of
Borrower or in its own name as Lender, such documents and instruments as are
necessary or appropriate to consummate authorized transactions; (j) enter into
such leases, whether of real or personal property, or tenancy agreements, under
such terms and conditions as Lender may in its sole discretion deem appropriate
or desirable; (k) collect and receive the Rents and Profits from the Property;
(l) eject tenants or repossess personal property, as provided by law, for
breaches of the conditions of their leases or other agreements; (m) sue for
unpaid Rents and Profits, payments, income or proceeds in the name of Borrower
or Lender; (n) maintain actions in forcible entry and detainer, ejectment for
possession and actions in distress for rent; (o) compromise or give acquittance
for Rents and Profits, payments, income or proceeds that may become due;
(p) delegate or assign any and all rights and powers given to Lender by this
Deed of Trust; and (q) do any acts which are necessary to protect the security
hereof and use such measures, legal or equitable, reasonably necessary to
implement and effectuate the provisions of this Deed of Trust. This Deed of
Trust shall constitute a direction to and full authority to any lessee, or other
third party who has heretofore dealt or contracted or may hereafter deal or
contract with Borrower or Lender, at the request of Lender, to pay all amounts
owing under any lease, contract, concession, license or other agreement to
Lender without proof of the default relied upon. Any such lessee or third party
is hereby irrevocably authorized to rely upon and comply with (and shall be
fully protected by Borrower in so doing) any request, notice or demand by Lender
for the payment to Lender of any Rents and Profits or other sums which may be or
thereafter become due under its lease, contract, concession, license or other
agreement, or for the performance of any undertakings under any such lease,
contract, concession, license or other agreement, and shall have no right or
duty to inquire whether any default under this Deed of Trust or under any of the
other Loan Documents has actually occurred or is then existing. Borrower hereby
constitutes and appoints Lender, its assignees, successors, transferees and
nominees, as Borrower's true and lawful attorney-in-fact and agent, with full
power of substitution in the Property, in Borrower's name, place and stead, to
do or permit any one or more of the foregoing described rights, remedies, powers
and authorities, successively or concurrently, and said power of attorney shall
be deemed a power coupled with an interest and irrevocable so long as any
indebtedness secured hereby is outstanding. Any money advanced by Lender in
connection with any action taken under this Section 3.3, together with interest
thereon at the Default Interest Rate (as defined in the Note) from the date of
making such advancement by Lender until actually paid by Borrower, shall be a
demand obligation owing by Borrower to Lender and shall be secured by this Deed
of Trust and by every other instrument securing the secured indebtedness.
3.4 Occupancy After Foreclosure.
In the event there is a foreclosure or comparable sale or sales hereunder and at
the time of such sale or sales, Borrower or Borrower's representatives,
successors or assigns, or any other persons claiming any interest in the
Property by, through or under Borrower (except tenants of space in the
Improvements subject to leases entered into prior to the date hereof), are
occupying or using the Property, or any part thereof, then, to the extent not
prohibited by applicable law, each and all shall, at the option of Lender or the
purchaser at such sale, as the case may be, immediately become the tenant of the
purchaser at such sale, which tenancy shall be a tenancy from day-to-day,
terminable at the will of either landlord or tenant, at a reasonable rental per
day based upon the value of the Property occupied or used, such rental to be due
daily to the purchaser. Further, to the extent permitted by applicable law, in
the event the tenant fails to surrender possession of the Property upon the
termination of such tenancy, the purchaser shall be entitled to institute and
maintain an action for unlawful detainer of the Property in the appropriate
court of the county in which the Land is located.
3.5 Notice to Account Debtors.
Lender may, at any time after a default hereunder, which default is not cured
within any applicable grace or cure period, notify the account debtors and
obligors of any accounts, chattel paper, negotiable instruments or other
evidences of indebtedness to Borrower included in the Property to pay Lender
directly. Borrower shall at any time or from time to time upon the request of
Lender provide to Lender a current list of all such account debtors and obligors
and their addresses.
3.6 Cumulative Remedies.
All remedies contained in this Deed of Trust are cumulative and Lender shall
also have all other remedies provided at law and in equity or in any other Loan
Documents. Such remedies may be pursued separately, successively or concurrently
at the sole subjective direction of Lender and may be exercised in any order and
as often as occasion therefor shall arise. No act of Lender shall be construed
as an election to proceed under any particular provisions of this Deed of Trust
to the exclusion of any other provision of this Deed of Trust or as an election
of remedies to the exclusion of any other remedy which may then or thereafter be
available to Lender. No delay or failure by Lender to exercise any right or
remedy under this Deed of Trust shall be construed to be a waiver of that right
or remedy or of any default hereunder. Lender may exercise any one or more of
its rights and remedies at its option without regard to the adequacy of its
security.
3.7 Payment of Expenses.
Borrower shall pay on demand all of Lender's expenses reasonably incurred in any
efforts to enforce any terms of this Deed of Trust, whether or not any lawsuit
is filed and whether or not foreclosure is commenced but not completed,
including, but not limited to, reasonable legal fees and disbursements,
including those incurred at trial, on appeal and on petition for review, in
arbitration and mediation proceedings and in connection with negotiation,
compromise or settlement of the secured or unsecured obligations and any
proceedings for relief in bankruptcy, foreclosure costs and the costs of
searching records, obtaining title reports, surveyors' reports, engineering and
environmental reports, attorneys' opinions, title insurance policies,
appraisals, expert witness fees and fees for the trustee under the deed of
trust, together with interest thereon from and after the date incurred by Lender
until actually paid by Borrower at the Default Interest Rate (as defined in the
Note), and the same shall be secured by this Deed of Trust and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Note.
ARTICLE IV
CONCERNING THE TRUSTEE
4.1 No Required Action.
Trustee shall not be required to take any action toward the execution and
enforcement of the trust hereby created or to institute, appear in, or defend
any action, suit, or other proceeding in connection therewith where, in his
opinion, such action would be likely to involve him in expense or liability,
unless requested so to do by a written instrument signed by Lender and, if
Trustee so requests, unless Trustee is tendered security and indemnity
satisfactory to Trustee against any and all cost, expense, and liability arising
therefrom. Trustee shall not be responsible for the execution, acknowledgment,
or validity of the Loan Documents, or for the proper authorization thereof, or
for the sufficiency of the lien and security interest purported to be created
hereby, and Trustee makes no representation in respect thereof or in respect of
the rights, remedies, and recourses of Lender.
4.2 Certain Rights.
With the approval of Lender, Trustee shall have the right to take any and all of
the following actions: (i) to select, employ, and consult with counsel (who may
be, but need not be, counsel for Lender) upon any matters arising hereunder,
including the preparation, execution, and interpretation of the Loan Documents,
and shall be fully protected in relying as to legal matters on the advice of
counsel, (ii) to execute any of the trusts and powers hereof and to perform any
duty hereunder either directly or through his agents or attorneys, (iii) to
select and employ, in and about the execution of his duties hereunder, suitable
accountants, engineers and other experts, agents and attorneys-in-fact, either
corporate or individual, not regularly in the employ of Trustee (and Trustee
shall not be answerable for any act, default, negligence, or misconduct of any
such accountant, engineer or other expert, agent or attorney-in-fact, if
selected with reasonable care, or for any error of judgment or act done by
Trustee in good faith, or be otherwise responsible or accountable under any
circumstances whatsoever, except for Trustee's gross negligence or bad faith),
and (iv) any and all other lawful action that Lender may instruct Trustee to
take to protect or enforce Lender's rights hereunder. Trustee shall not be
personally liable in case of entry by Trustee, or anyone entering by virtue of
the powers herein granted to Trustee, upon the Property for debts contracted for
or liability or damages incurred in the management or operation of the Property.
Trustee shall have the right to rely on any instrument, document, or signature
authorizing or supporting any action taken or proposed to be taken by Trustee
hereunder, believed by Trustee in good faith to be genuine. Trustee shall be
entitled to reimbursement for expenses incurred by Trustee in the performance of
Trustee's duties hereunder and to reasonable compensation for such of Trustee's
services hereunder as shall be rendered. Borrower will, from time to time, pay
the compensation due to Trustee hereunder and reimburse Trustee for, and save
Trustee harmless against, any and all liability and expenses which may be
incurred by Trustee in the performance of Trustee's duties except for
liabilities arising from Trustee's gross negligence or willful misconduct.
4.3 Retention of Money.
All moneys received by Trustee shall, until used or applied as herein provided,
be held in trust for the purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to the extent required by
applicable law), and Trustee shall be under no liability for interest on any
moneys received by Trustee hereunder.
4.4 Successor Trustees.
Trustee may resign by the giving of notice of such resignation in writing or
verbally to Lender. If Trustee shall die, resign, or become disqualified from
acting in the execution of this trust, or if, for any reason, Lender shall
prefer to appoint a substitute trustee or multiple substitute trustees, or
successive substitute trustees or successive multiple substitute trustees, to
act instead of the aforenamed Trustee, Lender shall have full power to appoint a
substitute trustee (or, if preferred, multiple substitute trustees) in
succession who shall succeed (and if multiple substitute trustees are appointed,
each of such multiple substitute trustees shall succeed) to all the estates,
rights, powers, and duties of the aforenamed Trustee. Such appointment may be
executed by any authorized agent of Lender, and if such Lender be a corporation
and such appointment be executed in its behalf by any officer of such
corporation, such appointment shall be conclusively presumed to be executed with
authority and shall be valid and sufficient without proof of any action by the
board of directors or any superior officer of the corporation. Borrower hereby
ratifies and confirms any and all acts which the aforenamed Trustee, or his
successor or successors in this trust, shall do lawfully by virtue hereof. If
multiple substitute Trustees are appointed, each of such multiple substitute
Trustees shall be empowered and authorized to act alone without the necessity of
the joinder of the other multiple substitute trustees, whenever any action or
undertaking of such substitute trustees is requested or required under or
pursuant to this Deed of Trust or applicable law.
4.5 Perfection of Appointment.
Should any deed, conveyance, or instrument of any nature be required from
Borrower by any Trustee or substitute Trustee to more fully and certainly vest
in and confirm to the Trustee or substitute Trustee such estates, rights,
powers, and duties, then, upon request by the Trustee or substitute Trustee, any
and all such deeds, conveyances and instruments shall be made, executed,
acknowledged, and delivered and shall be caused to be recorded and/or filed by
Borrower.
4.6 Succession Instruments.
Any substitute Trustee appointed pursuant to any of the provisions hereof shall,
without any further act, deed, or conveyance, become vested with all the
estates, properties, rights, powers, and trusts of its or his predecessor in the
rights hereunder with like effect as if originally named as Trustee herein; but
nevertheless, upon the written request of Lender or of the substitute Trustee,
the Trustee ceasing to act shall execute and deliver any instrument transferring
to such substitute Trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers, and trusts of the Trustee so ceasing to act, and
shall duly assign, transfer and deliver any of the property and moneys held by
such Trustee to the substitute Trustee so appointed in the Trustee's place.
4.7 No Representation by Trustee.
By accepting or approving anything required to be observed, performed, or
fulfilled or to be given to Trustee (on its own behalf or on behalf of Lender)
pursuant to the Loan Documents, including, without limitation, any officer's
certificate, balance sheet, statement of profit and loss or other financial
statement, survey, appraisal, or insurance policy, neither Trustee nor Lender
shall be deemed to have warranted, consented to, or affirmed the sufficiency,
legality, effectiveness, or legal effect of the same, or of any term, provision,
or condition thereof, and such acceptance or approval thereof shall not be or
constitute any warranty or affirmation with respect thereto by Trustee, either
on its own behalf or on behalf of Lender.
ARTICLE V
MISCELLANEOUS TERMS AND CONDITIONS
5.1 Time of Essence.
Time is of the essence with respect to all provisions of this Deed of Trust.
5.2 Reconveyance by Trustee.
Upon written request of Lender stating that all sums and obligations secured
hereby have been paid and satisfied, and upon surrender of this Deed of Trust
and the Note to Trustee for cancellation and retention and upon payment by
Borrower of Trustee's fees, Trustee shall reconvey to Borrower, or the person or
persons legally entitled thereto, without warranty, any portion of the Property
then held hereunder. The recitals in such reconveyance of any matters or facts
shall be conclusive proof of the truthfulness thereof. The grantee in any
reconveyance may be described as "the person or persons legally entitled
thereto."
5.3 Certain Rights of Lender.
Without affecting Borrower's liability for the payment of any of the
indebtedness secured hereby, Lender may from time to time and without notice to
Borrower: (a) release any person liable for the payment of the indebtedness
secured hereby; (b) extend or modify the terms of payment of the indebtedness
secured hereby; (c) accept additional real or personal property of any kind as
security or alter, substitute or release any property securing the indebtedness
secured hereby; (d) recover any part of the Property; (e) consent in writing to
the making of any subdivision map or plat thereof; (f) join in granting any
easement therein; or (g) join in any extension agreement of this Deed of Trust
or any agreement subordinating the lien hereof.
5.4 Notices.
Any notice, report, demand, request or other instrument authorized or required
to be given or furnished hereunder, under any of the other Loan Documents or as
required by law ("Notices") shall be in writing and shall be given as follows:
(a) by hand delivery; (b) by deposit in the United States mail as first class
certified mail, return receipt requested, postage paid; (c) by expedited,
prepaid, nationwide courier service, either commercial or United States Postal
Service, with proof of actual or attempted delivery; or (d) by telecopy
transmission (other than for notices of default) with a confirmation copy to be
delivered by duplicate notice in accordance with any of clauses (a)-(c) above,
in each case, addressed to the party intended to receive the same at the
following address(es):
Lender:
Column Financial, Inc.
11 Madison Avenue
5th Floor
New York, New York 10010-3629
Attention: Edmund Taylor
Telecopier: (212) 325-8106
Re: Red Lion Hotel Yakima Center
Yakima, Washington
with copies to:
Credit Suisse First Boston Mortgage Capital LLC
Legal & Compliance Department
One Madison Avenue
New York, New York 10010
Attention: Pamela L. McCormack, Esq.
Telecopier: (917) 326-7805
Re: Red Lion Hotel Yakima Center
Yakima, Washington
and Servicer:
KeyCorp Real Estate Capital Markets, Inc.
911 Main Street
Suite 1500
Kansas City, Missouri 64105
Attention: Diane Haislip
Telecopier: (216) 357-6543
or any successor servicer of the Loan.
Re: Red Lion Hotel Yakima Center
Yakima, Washington
Borrower:
WHC807, LLC
c/o WestCoast Hospitality Corporation
201 W. North River Drive, Suite 100
Spokane, Washington 99201
Attention: Chief Financial Officer
Telecopier: (509) 325-7324
with a copy to:
Paine, Hamblen, Coffin, Brooke & Miller LLP
717 W. Sprague, Suite 1200
Spokane, Washington 99202
Attention: Thomas L. McKeirnan, Esq.
Telecopier: (509) 838-0007
Any party may change the address to which any such Notice is to be delivered to
any other address within the United States of America, by furnishing ten (10)
days written notice of such change to the other parties in accordance with the
provisions of this Section 5.4. All notices, demands and requests shall be
effective upon personal delivery, or one (1) business day after being deposited
with the private courier service, or two (2) business days after being deposited
in the United States mail as required above. The inability to deliver Notices
because of a changed address of which no Notice was given, or rejection or
refusal to accept any Notice offered for delivery shall be deemed to be receipt
of the Notice as of the date of such inability to deliver or rejection or
refusal to accept delivery. Notice for either party may be given by its
respective counsel. Additionally, Notice from Lender may also be given by the
Servicer.
5.5 Successors and Assigns.
The terms, provisions, indemnities, covenants and conditions hereof shall be
binding upon Borrower and the successors and assigns of Borrower, including all
successors in interest in and to all or any part of the Property, and shall
inure to the benefit of Lender and its successors and assigns and shall
constitute covenants running with the land. If Borrower consists of more than
one person or entity, each will be jointly and severally liable to perform the
obligations of Borrower.
5.6 Severability.
A determination that any provision of this Deed of Trust is unenforceable or
invalid shall not affect the enforceability or validity of any other provision.
5.7 Gender.
Within this Deed of Trust, words of any gender shall be held and construed to
include any other gender, and words in the singular shall be held and construed
to include the plural, and vice versa, unless the context otherwise requires.
5.8 Waiver; Discontinuance of Proceedings.
Lender may waive any single default by Borrower hereunder without waiving any
other prior or subsequent default, and may remedy any default by Borrower
hereunder without waiving the default remedied. Neither the failure or delay by
Lender in exercising, any right, power or remedy upon any default by Borrower
hereunder shall be construed as a waiver of such default or as a waiver of the
right to exercise any such right, power or remedy at a later date. No single or
partial exercise by Lender of any right, power or remedy hereunder shall exhaust
the same or shall preclude any other or further exercise thereof, and every such
right, power or remedy hereunder may be exercised at any time and from time to
time. No modification or waiver of any provision hereof nor consent to any
departure by Borrower therefrom shall in any event be effective unless the same
shall be in writing and signed by Lender, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose given.
No notice to nor demand on Borrower in any case shall of itself entitle Borrower
to any other or further notice or demand in similar or other circumstances.
Acceptance by Lender of any payment in an amount less than the amount then due
on any of the secured indebtedness shall be deemed an acceptance on account only
and shall not in any way affect the existence of a default hereunder.
5.9 Section Headings.
The headings of the sections and paragraphs of this Deed of Trust are for
convenience of reference only, are not to be considered a part hereof and shall
not limit or otherwise affect any of the terms hereof.
5.10 GOVERNING LAW.
THIS DEED OF TRUST WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF WASHINGTON, PROVIDED THAT TO THE EXTENT THAT ANY OF SUCH LAWS
MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, SUCH FEDERAL LAW SHALL SO
GOVERN AND BE CONTROLLING.
5.11 Counting of Days.
The term "days" when used herein shall mean calendar days. If any time period
ends on a Saturday, Sunday or holiday officially recognized by the state within
which the Land is located, the period shall be deemed to end on the next
succeeding business day; provided, however, that in the case of payments due by
Borrower to Lender on a Saturday, Sunday or holiday (e.g., monthly deposits into
Reserves, payments on the Note, etc.) such payments shall be deemed due on the
immediately preceding business day. The term "business day" or "Business Day"
when used herein shall mean a weekday, Monday through Friday, except a legal
holiday or a day on which banking institutions in New York, New York are
authorized by law to be closed.
5.12 Intentionally omitted.
5.13 Unsecured Portion of Indebtedness.
If any part of the secured indebtedness cannot be lawfully secured by this Deed
of Trust or if any part of the Property cannot be lawfully subject to the lien
and security interest hereof to the full extent of such indebtedness, then all
payments made shall be applied on said indebtedness first in discharge of that
portion thereof which is unsecured by this Deed of Trust.
5.14 Cross Default.
A default hereunder which has not been cured within any applicable grace or cure
period shall be a default under each of the other Loan Documents.
5.15 Interest After Sale.
In the event the Property or any part thereof shall be sold upon foreclosure as
provided hereunder, to the extent permitted by law, the sum for which the same
shall have been sold shall, for purposes of redemption (if applicable pursuant
to the laws of the state in which the Property is located), bear interest at the
Default Interest Rate (as defined in the Note).
5.16 Construction of this Document.
This document may be construed as a mortgage, security deed, deed of trust,
chattel mortgage, conveyance, assignment, security agreement, pledge, financing
statement, hypothecation or contract, or any one or more of the foregoing, in
order to fully effectuate the liens and security interests created hereby and
the purposes and agreements herein set forth.
5.17 No Merger.
It is the desire and intention of the parties hereto that this Deed of Trust and
the lien hereof shall not merge in fee simple title to the Property.
5.18 Rights With Respect to Junior Encumbrances.
Any person or entity purporting to have or to take a junior deed of trust or
mortgage or other lien upon the Property or any interest therein shall be
subject to the rights of Lender to amend, modify, increase, vary, alter or
supplement this Deed of Trust, the Note or any of the other Loan Documents, to
extend the Maturity Date, to increase the amount of the indebtedness secured
hereby, to waive or forebear the exercise of any of its rights and remedies
hereunder or under any of the other Loan Documents and to release any collateral
or security for the indebtedness secured hereby, in each and every case without
obtaining the consent of the holder of such junior lien and without the lien or
security interest of this Deed of Trust losing its priority over the rights of
any such junior lien.
5.19 Lender May File Proofs of Claim.
In the case of any receivership, insolvency, bankruptcy, reorganization,
arrangement, adjustment, composition or other proceedings affecting Borrower or
the principals, members or general partners in Borrower, or their respective
creditors or property, Lender, to the extent permitted by law, shall be entitled
to file such proofs of claim and other documents as may be necessary or
advisable in order to have the claims of Lender allowed in such proceedings for
the entire secured indebtedness at the date of the institution of such
proceedings and for any additional amount which may become due and payable by
Borrower hereunder after such date.
5.20 After-Acquired Property.
All property acquired by Borrower after the date of this Deed of Trust which by
the terms of this Deed of Trust shall be subject to the lien and the security
interest created hereby, shall immediately upon the acquisition thereof by
Borrower and without further deed, grant, encumbrance, conveyance or assignment
become subject to the lien and security interest created by this Deed of Trust.
5.21 No Representation.
By accepting delivery of any item required to be observed, performed or
fulfilled or to be given to Lender pursuant to the Loan Documents, including,
but not limited to, any officer's certificate, balance sheet, statement of
profit and loss or other financial statement, survey, appraisal or insurance
policy, Lender shall not be deemed to have warranted, consented to, or affirmed
the sufficiency, legality, effectiveness or legal effect of the same, or of any
term, provision or condition thereof, and such acceptance of delivery thereof
shall not be or constitute any warranty, consent or affirmation with respect
thereto by Lender.
5.22 Counterparts.
This Deed of Trust may be executed in any number of counterparts, each of which
shall be effective only upon delivery and thereafter shall be deemed an
original, and all of which shall be taken to be one and the same instrument, for
the same effect as if all parties hereto had signed the same signature page.
5.23 Personal Liability.
Notwithstanding anything to the contrary contained in this Deed of Trust, the
liability of Borrower and its general partners for the indebtedness secured
hereby and for the performance of the other agreements, covenants and
obligations contained herein and in the Loan Documents shall be limited as set
forth in Section 1.5 of the Note; provided, however, that nothing herein shall
be deemed to be a waiver of any right which Lender or Trustee may have under
Sections 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy
Code to file a claim for the full amount of the indebtedness secured hereby or
to require that all collateral shall continue to secure all indebtedness owing
to Lender in accordance with the Note, this Deed of Trust and the other Loan
Documents.
5.24 Recording and Filing.
Borrower will cause the Loan Documents and all amendments and supplements
thereto and substitutions therefor to be recorded, filed, re-recorded and
re-filed in such manner and in such places as Lender shall reasonably request,
and will pay on demand all such recording, filing, re-recording and re-filing
taxes, fees and other charges. Borrower shall reimburse Lender, or its servicing
agent, for the costs incurred in obtaining a tax service company to verify the
status of payment of taxes and assessments on the Property.
5.25 Entire Agreement and Modifications.
This Deed of Trust and the other Loan Documents contain the entire agreements
between the parties and supersede any prior agreements (oral or written), and
may not be amended, revised, waived, discharged, released or terminated orally
but only by a written instrument or instruments executed by the party against
which enforcement of the amendment, revision, waiver, discharge, release or
termination is asserted.
5.26 Maximum Interest.
The provisions of this Deed of Trust and of all agreements between Borrower and
Lender, whether now existing or hereafter arising and whether written or oral,
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of demand or acceleration of the maturity of the Note or
otherwise, shall the amount paid, or agreed to be paid ("Interest") to Lender
for the use, forbearance, retention or detention of the money loaned under the
Note exceed the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, performance or fulfillment of any provision hereof or
of any agreement between Borrower and Lender shall, at the time performance or
fulfillment of such provision shall be due, exceed the limit for Interest
prescribed by law or otherwise transcend the limit of validity prescribed by
applicable law, then ipso facto the obligation to be performed or fulfilled
shall be reduced to such limit, and if, from any circumstance whatsoever, Lender
shall ever receive anything of value deemed Interest by applicable law in excess
of the maximum lawful amount, an amount equal to any excessive Interest shall be
applied to the reduction of the principal balance owing under the Note in the
inverse order of its maturity (whether or not then due) or at the option of
Lender be paid over to Borrower, and not to the payment of Interest. All
Interest (including any amounts or payments judicially or otherwise under law
deemed to be Interest) contracted for, charged, taken, reserved, paid or agreed
to be paid to Lender shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of the Note,
including any extensions and renewals thereof until payment in full of the
principal balance of the Note so that the Interest thereon for such full term
will not at any time exceed the maximum amount permitted by applicable law. This
Section will control all agreements between Borrower and Lender.
5.27 Application of Default Interest Rate Not a Waiver.
Application of the Default Interest Rate (as defined in the Note) shall not be
deemed to constitute a waiver of any default or any rights or remedies of Lender
under this Deed of Trust, any other Loan Document or applicable legal
requirements, or a consent to any extension of time for the payment or
performance of any obligation with respect to which the Default Interest Rate
(as defined in the Note) may be invoked.
5.28 Interest Payable by Lender.
Lender shall cause funds in the Curtailment Reserve and the FF&E Reserve (the
"Funds") to be deposited into interest bearing accounts of the type customarily
maintained by Lender or its servicing agent for the investment of similar
reserves, which accounts may not yield the highest interest rate then available.
The Funds shall be held in an account in Lender's name (or such other account
name as Lender may elect) at a financial institution or other depository
selected by Lender (or its servicer) in its sole discretion (collectively, the
"Depository Institution"). Borrower shall earn no more than an amount of
interest on the Funds equal to an amount determined by applying to the average
monthly balance of such Funds the quoted interest rate for the Depository
Institution's money market savings account, as such rate is determined from time
to time (such allocated amount being referred to as "Borrower's Interest").
Lender, the servicer or the Depository Institution shall be entitled to report
under Borrower's Federal tax identification number, the Borrower's Interest on
the Funds. If the Depository Institution does not have an established money
market savings account (or if an interest rate for such account cannot otherwise
be determined in connection with the deposit of such Funds), a comparable
interest rate quoted by the Depository Institution and acceptable to Lender (or
its servicer) in its reasonable discretion shall be used. The amount of
Borrower's Interest allocated to Funds shall be added to the balance in the
Curtailment Reserve and the FF&E Reserve and shall be disbursed for payment of
the items for which other Funds in the Curtailment Reserve and the FF&E Reserve
are to be disbursed. Furthermore, reference is also made to Section C-1 on
Exhibit C of this Deed of Trust with respect to the inclusion of certain
additional monies from the Cash Management Account (as defined in the Cash
Management Agreement) within the term "Funds" for purposes of this Section 5.28.
5.29 Further Stipulations.
The additional covenants, agreements and provisions set forth in Exhibit C
attached hereto, if any, shall be a part of this Deed of Trust and shall, in the
event of any conflict between such further stipulations and any of the other
provisions of this Deed of Trust, be deemed to control.
5.30 Relationship of the Parties.
The relationship between Borrower and Lender is that of a borrower and a lender
only and neither of those parties is, nor shall it hold itself out to be, the
agent, employee, joint venturer or partner of the other party.
5.31 Fixture Filing.
This Deed of Trust shall be effective from the date of its recording as a
financing statement filed as a fixture filing with respect to all goods
constituting part of the Property which are or are to become fixtures. The
mailing address of Borrower and the address of Lender from which information
concerning the security interests may be obtained are set forth in Section 1.22
above.
5.32 Sale of Note and Securitization.
At the request of the Lender and, to the extent not already required to be
provided by Borrower under this Deed of Trust, Borrower shall use reasonable
efforts to satisfy the market standards to which the Lender customarily adheres
or which may be reasonably required in the marketplace or by the Rating Agencies
in connection with any Secondary Market Transaction of rated single or
multi-class securities (the "Securities") secured by or evidencing ownership
interests in the Note and this Deed of Trust, including, without limitation, to:
(a) (i) provide such financial and other information with respect to the
Property, the Borrower and the Manager, (ii) provide budgets relating to the
Property; (iii) perform or permit or cause to be performed or permitted such
site inspection, appraisals, market studies, environmental reviews and reports
(Phase I's and, if appropriate, Phase II's), engineering reports and other due
diligence investigations of the Property, as may be reasonably requested by the
Lender or the Rating Agencies or as may be necessary or appropriate in
connection with the Secondary Market Transaction; and (iv) make such
representations and warranties as of the closing date of the Secondary Market
Transaction with respect to the Property, Borrower and the Loan Documents as are
customarily provided in securitization transactions and as may be reasonably
requested by the Lender or the Rating Agencies and consistent with the facts
covered by such representations and warranties as they exist on the date
thereof, including the representations and warranties made in the Loan Documents
(collectively, the "Provided Information"), together, if customary, with
appropriate verification and/or consents of the Provided Information through
letters of auditors or opinions of counsel of independent attorneys acceptable
to the Lender and the Rating Agencies;
(b) at Borrower's expense, cause its counsel to render opinions, which may be
relied upon by the Lender, the Rating Agencies and their respective counsel,
agents and representatives, as to non-consolidation, fraudulent conveyance, and
true sale or any other opinion customary in securitization transactions with
respect to the Property and Borrower and its affiliates, which counsel and
opinions shall be reasonably satisfactory to the Lender and the Rating Agencies;
(c) execute such amendments to the Loan Documents and organizational documents,
enter into a lockbox or similar arrangement with respect to the Rents and
establish and fund such reserve funds (including, without limitation, reserve
funds for deferred maintenance and capital improvements) as may be requested by
the Lender or the Rating Agencies or otherwise to effect the Secondary Market
Transaction; provided, however, that the Borrower shall not be required to
modify or amend any Loan Document if such modification or amendment would (on an
aggregate basis) (i) change the interest rate, the stated maturity or the
amortization of principal set forth in the Note, or (ii) modify or amend any
other material economic term of the Loan; and
(d) execute such amendment to the Loan Documents in order to reallocate the
aggregate Loan Amount amongst the Yakima Loan and the Other Loans all as Lender
may require; provided, however, that the Borrower shall not be required to
modify or amend any Loan Document if such modification or amendment would (on an
aggregate basis) (i) change the interest rate, the stated maturity or the
amortization of principal set forth in the Note, or (ii) modify or amend any
other material economic term of the Loan.
For purposes hereof, a "Secondary Market Transaction" shall be (a) any sale or
assignment of this Deed of Trust, the Note and the other Loan Documents to one
or more investors as a whole loan; (b) a participation of the Loan to one or
more investors; (c) any deposit of this Deed of Trust, the Note and the other
Loan Documents with a trust or other entity which may sell certificates or other
instruments to investors evidencing an ownership interest in the assets of such
trust or other entity; or (d) any other sale, assignment or transfer of the Loan
or any interest therein to one or more investors. At any time during which the
Loan is an asset of a securitization or is otherwise an asset of any rated
transaction, "Rating Agency" shall mean the rating agency or rating agencies
that from time to time rate the Securities, certificates or other instruments
issued in connection with such securitization or other transaction.
All reasonable third party costs and expenses incurred by Lender in connection
with Borrower's complying with requests made under this Section shall be paid by
Borrower.
In the event that the provisions of this Deed of Trust or any of the other Loan
Documents require the receipt of written confirmation from each Rating Agency
with respect to the ratings on the Securities, or, in accordance with the terms
of the transaction documents relating to a Secondary Market Transaction, such a
rating confirmation is required in order for the consent of the Lender to be
given, the Borrower shall pay all of the costs and expenses of the Lender,
Servicer and each Rating Agency in connection therewith, and, if applicable,
shall pay any fees imposed by any Rating Agency as a condition to the delivery
of such confirmation.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
Signature Page
IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has duly
executed this Deed of Trust to be effective as of the date set forth in the
first paragraph hereof.
BORROWER:
WHC807, LLC,
a Delaware limited liability company
By:
Name: Arthur M. Coffey
Title: President
STATE OF WASHINGTON )
: ss.
COUNTY OF SPOKANE )
I certify that I know or have satisfactory evidence that Arthur M. Coffey is the
person who appeared before me, and said person acknowledged that he signed this
instrument, on oath stated that he was authorized to execute the instrument and
acknowledged it as the President of WHC807, LLC, a Delaware limited liability
company, to be the free and voluntary act of such party for the uses and
purposes mentioned in this instrument.
Dated: June ____, 2003.
Print Name:
Notary Public in and for the State of Washington,
residing at
My commission expires:
EXHIBIT LIST
Exhibit A - Legal Description
Exhibit B - Permitted Exceptions
Exhibit C - Additional Stipulations
Exhibit D - Note Description - All Ten
Exhibit E - Other Deeds of Trust
EXHIBIT A
Legal Description
EXHIBIT B
Permitted Exceptions
EXHIBIT C
Additional Stipulations
C-1 Cash Management Stipulations. Borrower, Lender and any Manager have, of even
date herewith, entered into that certain Cash Management Agreement (the "Cash
Management Agreement") of even date herewith which, among other things, provides
for the disposition of Rents and Profits from the Property. It is specifically
agreed that (i) the Cash Management Agreement is one of the Loan Documents (as
defined in this Deed of Trust), and (ii) the Lock Box Account, the Cash
Management Account and all other Accounts and Sub-Accounts (as such terms are
described or defined in the Cash Management Agreement) shall be included within
the Reserves (as defined in this Deed of Trust). The Reserves and any
disbursement therefrom shall be subject to both this Deed of Trust, the Cash
Management Agreement and the other Loan Documents. All references in this Deed
of Trust to the Impound Account and to the other Reserves shall be deemed to
refer to the Sub-Account of the Cash Management Account (as defined in the Cash
Management Agreement) into which the proceeds of each such Reserve have been
deposited pursuant to the Cash Management Agreement. All payments from Borrower
to Lender with respect to Reserves shall be made by disbursement from the Lock
Box Account or as otherwise provided in the Cash Management Agreement. All sums
held in the Cash Management Account prior to being allocated into the
Sub-Accounts shall also be considered "Funds" for purposes of Section 5.28
hereof and shall bear interest to be added to the Cash Management Account in
accordance with that provision; provided, however, once such monies in the Cash
Management Account have been allocated to Sub-Accounts pursuant to the terms of
the Cash Management Agreement, such Sub-Accounts shall bear interest for the
ultimate benefit of Borrower only to the extent required by Section 5.28 hereof
or by the Cash Management Agreement.
C-2 Repair Reserve. Prior to the execution of this Deed of Trust, Lender has
caused the Property to be inspected and such inspection has revealed that the
Property is in need of certain maintenance, repairs and/or remedial or
corrective work. Contemporaneously with the execution hereof, Borrower has
established with the Lender a reserve in the amount of $50,075.00 (the "Repair
Reserve") by depositing such amount with Lender. Borrower shall cause each of
the items described in that certain engineering report (the "Engineering
Report") dated May 15, 2003 and prepared by National Assessment Corporation,
relative to the Property, copies of which have been provided to, and receipt of
which is hereby acknowledged by, Borrower (the "Deferred Maintenance") to be
completed, performed and corrected to the satisfaction of Lender and as
necessary to bring the Property into compliance with all applicable laws,
ordinances, rules and regulations on or before one year from the effective date
hereof, as such time period may be extended by Lender in its sole discretion. So
long as no default hereunder or under the other Loan Documents has occurred and
is continuing (i) all sums in the Repair Reserve shall be held by Lender in the
Repair Reserve to pay the costs and expenses of completing the Deferred
Maintenance, and (ii) Lender shall, to the extent funds are available for such
purpose in the Repair Reserve, disburse to Borrower the amount paid or incurred
by Borrower in completing, performing or correcting the Deferred Maintenance
upon (a) the receipt by Lender of a written request from Borrower for
disbursement from the Repair Reserve which shall include a certification by
Borrower that the applicable item of Deferred Maintenance has been completed in
accordance with the terms of this Deed of Trust, (b) delivery to Lender of
invoices, receipts or other evidence satisfactory to Lender verifying the costs
of the Deferred Maintenance to be reimbursed, and (c) for disbursement requests
(i) for any single item of Deferred Maintenance that is structural in nature,
delivery to Lender of (1) affidavits, lien waivers or other evidence reasonably
satisfactory to Lender showing that all materialmen, laborers, subcontractors
and any other parties who might or could claim statutory or common law liens and
are furnishing or have furnished materials or labor to the Property have been
paid all amounts due for labor and materials furnished to the Property; (2) a
certification from an inspecting architect or other third party consultant
reasonably acceptable to Lender describing the completed Deferred Maintenance
and verifying the completion of such Deferred Maintenance and the value of the
completed Deferred Maintenance so performed, and, if applicable, certifying that
the Property is, as a result of such Deferred Maintenance, in compliance with
all applicable laws, ordinances, rules and regulations relating to the Deferred
Maintenance so performed; and (3) a new (or amended) certificate of occupancy
for the portion of the Improvements covered by such Deferred Maintenance, if
said new certificate of occupancy is required by law, or a certification by
Borrower that no new certificate of occupancy is required by law. Lender shall
not be required to make advances from the Repair Reserve more frequently than
one time in any calendar month. In making any payment from the Repair Reserve,
Lender shall be entitled to rely on such request from Borrower without any
inquiry into the accuracy, validity or contestability of any such amount. No
interest or other earnings on the funds contained in the Repair Reserve shall be
paid to Borrower and any interest or other earnings on funds deposited into the
Repair Reserve shall be solely for the account of Lender. In the event that the
amounts on deposit or available in the Repair Reserve are inadequate to pay the
costs of the Deferred Maintenance, Borrower shall pay the amount of such
deficiency.
C-3 Additional Washington Provisions.
(a) This Deed of Trust shall constitute a Financing Statement filed as a fixture
filing pursuant to Article 9 of the Uniform Commercial Code (RCW 62A.9-502(c)).
Parts of the Property are or are to become fixtures or Improvements (defined
above).
(b) Borrower hereby represents, warrants and covenants that none of the Property
is used principally or at all for agricultural or farming purposes. The Property
does not constitute the homestead of Borrower.
(c) At Lender's option, any written notice or default given to Borrower under
this Deed of Trust may be given in the form of a statutory notice of default
under the Washington Deed of Trust Act or any other form as Lender may elect.
(d) ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT OR TO
FORBEAR ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
C-4 Environmental Reserve. Prior to the execution of this Deed of Trust, Lender
has caused the Property to be inspected and such inspection has revealed that
the Property is in need of certain maintenance, repairs and/or remedial or
corrective work relative to environmental concerns. Contemporaneously with the
execution hereof, Borrower has established with the Lender a reserve in the
amount of $232,500.00 (the "Environmental Reserve") by depositing such amount
with Lender. Borrower shall cause each of the items (collectively, the
"Environmental Work") described in that certain Phase I Environmental Assessment
dated May 16, 2003 and prepared by Environmental Assessment Corporation,
relative to the Property together with that certain Addendum to Phase I
Environmental Site Assessment Report dated June 23, 2003 (collectively, the
"Environmental Report"), copies of which have been provided to, and receipt of
which is hereby acknowledged by, Borrower to be completed, performed, remediated
and corrected to the satisfaction of Lender and as necessary to bring the
Property into compliance with all applicable laws, ordinances, rules and
regulations on or before one year from the effective date hereof, as such time
period may be extended by Lender in its sole discretion. The Environmental Work
includes, without limitation, the following items: Borrower is to have a
subsurface investigation conducted by an environmental consulting firm
acceptable to Lender to determine the environmental integrity of the Property in
the area of former gasoline service station in accordance with a scope of work
acceptable to Lender and consistent with the recommendations and protocols
contained in the Environmental Report. Should petroleum constituents be
identified in soil and/or groundwater samples collected in connection with such
subsurface investigation above regulatory action levels, Borrower shall (a)
promptly notify the appropriate Washington environmental regulatory agencies (b)
conduct such further investigation and activities as specified and recommended
in the Environmental Report and (c) take such other action to obtain regulatory
closure of the Property all in a manner acceptable to Lender. So long as no
default hereunder or under the other Loan Documents has occurred and is
continuing (i) all sums in the Environmental Reserve shall be held by Lender in
the Environmental Reserve to pay the costs and expenses of completing the
Environmental Work, and (ii) Lender shall, to the extent funds are available for
such purpose in the Environmental Reserve, disburse to Borrower the amount paid
or incurred by Borrower in completing, performing, remediating or correcting the
Environmental Work upon (a) the receipt by Lender of a written request from
Borrower for disbursement from the Environmental Reserve which shall include a
certification by Borrower that the applicable item of Environmental Work has
been completed in accordance with the terms of this Deed of Trust, (b) delivery
to Lender of invoices, receipts or other evidence satisfactory to Lender
verifying the costs of the Environmental Work to be reimbursed, and (c) for
disbursement requests (i) in excess of $20,000.00 with respect to any single
item of Environmental Work or (ii) for any single item of Environmental Work
that is structural in nature, delivery to Lender of (1) affidavits, lien waivers
or other evidence reasonably satisfactory to Lender showing that all
materialmen, laborers, subcontractors and any other parties who might or could
claim statutory or common law liens and are furnishing or have furnished
materials or labor to the Property have been paid all amounts due for labor and
materials furnished to the Property; (2) a certification from an inspecting
architect, environmental consultant or other third party acceptable to Lender
describing the completed Environmental Work and verifying the completion of such
Environmental Work and the value of such completed Environmental Work; and (3) a
new (or amended) certificate of occupancy for the portion of the Improvements
covered by such Environmental Work, if said new certificate of occupancy is
required by law, or a certification by Borrower that no new certificate of
occupancy is required by law. Lender shall not be required to make advances from
the Environmental Reserve more frequently than one time in any calendar month.
In making any payment from the Environmental Reserve, Lender shall be entitled
to rely on such request from Borrower without any inquiry into the accuracy,
validity or contestability of any such amount. No interest or other earnings on
the funds contained in the Environmental Reserve shall be paid to Borrower and
any interest or other earnings on funds deposited into the Environmental Reserve
shall be solely for the account of Lender. To the extent Lender should ever
determine that the remaining costs for the Environmental Work should exceed the
remaining balance in the Environmental Reserve, Lender shall be entitled to
require an additional deposit into the Environmental Reserve equal to one
hundred and fifty percent (150%) of Lender's estimate of such additional costs.
In the event that the amounts on deposit or available in the Environmental
Reserve are ultimately inadequate to pay the costs of the Environmental Work,
Borrower shall pay the amount of such deficiency.
C-5 Definitions. For the purposes of this Exhibit C, the following terms shall
have the following meanings:
(a) "Operative Period" means (a) if Borrower fails to provide Lender with a
Commitment on or prior to the Refinance Notification Date, the period commencing
on the Refinance Notification Date and ending on the date on which the
indebtedness secured hereby has been paid in full, and (b) if Borrower provides
Lender with a Commitment on or prior to the Refinance Notification Date and the
Void Commitment Date occurs, the period commencing on the Void Commitment Date
and ending on the date on which the indebtedness secured hereby has been paid in
full.
(b) "Commitment" shall have the meaning specified in Section C-6 hereof.
(c) "Refinance Notification Date" shall have the meaning specified in
Section C-6 hereof.
(d) "Void Commitment Date" shall have the meaning specified in Section C-6
hereof.
(e) "Qualified Institutional Lender" means a financial institution or other
lender with a long term credit rating which is not less than investment grade.
(f) "Net Operating Income" means the difference (determined on a cash basis)
between (A) Revenues received during the preceding calendar month, and (B) the
sum of (1) Operating Expenses paid during such month and (2) monthly payments
under the Note, deposits to the Reserves, and any other payments required by the
Loan Documents which Borrower has made to Lender during the immediately
preceding calendar month.
(g) "Operating Expenses" means with respect to any period all normal and
customary expenses payable in the ordinary course of operating the Property as a
hotel project (but such expenses being determined on an accrual basis for the
relevant calculation period, unless otherwise expressly provided herein), but
excluding all Excluded Items.
(h) "Excluded Items" means (A) any capital expenditure, (B) any expenses for the
payment of any debts or obligations of Borrower which are not directly related
to the operation of the Property, (C) any payments for services which have not
yet been rendered, goods which have not yet been received, or any other item of
expense for which payment is not currently due, (D) any debt service payment
upon, or any other payments with respect to, any indebtedness, including the
indebtedness secured hereby, (E) any allowance for depreciation, and
(F) distributions to stockholders or partners in Borrower, and income taxes.
(i) "Revenues" shall be determined on an accrual basis (unless otherwise
indicated) and in accordance with generally accepted accounting principles for
the applicable period, and means all Rents and Profits during the period in
question, after deducting all allowances for rebates and adjustments, whether
cash or credit, derived directly or indirectly from any source, including,
without limitation: rental of rooms; food and beverage; sales from gift or other
shops managed directly by Borrower or any agent of Borrower; telephone; net
vending income (gross vending revenue reduced by the amount payable to equipment
vendors for the use thereof); commissions; net rentals of cars, bicycles and
other items; meeting room rentals; all net revenue received from any third party
concessionaires operating any concession under any agreement with Borrower or
its agents, and other persons occupying space at the Property and/or rendering
services to guests staying at the Property; and any form of incentive payments
or awards received by Borrower from any source whatsoever which are attributable
to the operation of the Property.
C-6 Repayment; Refinancing. Borrower shall repay the indebtedness secured hereby
in accordance with the provisions of the Note. Borrower shall deliver to Lender
a written commitment or engagement letter ("Commitment"), which Commitment shall
set forth specific terms and conditions for the refinancing of the entire
outstanding amount of the indebtedness secured hereby from a Qualified
Institutional Lender or a national recognized investment banking firm on or
before the date which is ninety (90) days prior to the stated maturity date of
the Note (the "Refinance Notification Date"). If Borrower fails to deliver such
Commitment prior to the Refinance Notification Date or if such Commitment is
delivered on or before the Refinance Notification Date, but lapses, terminates
or is otherwise withdrawn prior to the funding of such Commitment and the use of
the proceeds thereof to pay the entire outstanding amount of the indebtedness
secured hereby (the date upon which such Commitment lapses, terminates or is
otherwise withdrawn is hereinafter referred to as the "Void Commitment Date"),
unless the indebtedness secured hereby shall have been paid in full prior to the
Refinance Notification Date or the Void Commitment Date, as the case may be, an
Operative Period shall be in effect and all Net Operating Income shall be paid
to Lender for deposit to the Curtailment Reserve pursuant to Section C-7 hereof.
C-7 Curtailment Reserve.
(a) Immediately upon the commencement of an Operative Period, Borrower shall
establish and maintain at all times thereafter while this Deed of Trust remains
in effect a reserve (the "Curtailment Reserve") with Lender, which Curtailment
Reserve shall be additional security for the indebtedness secured hereby. In the
event that Borrower is required to establish and maintain the Curtailment
Reserve, then beginning on the day on which Borrower is required to establish
the Curtailment Reserve, and on the eleventh (11th) day of each month
thereafter, Borrower shall pay to Lender a deposit in the Curtailment Reserve in
an amount equal to all Net Operating Income for the prior month. Upon
termination of the Operative Period, Borrower shall not thereafter be required
to make such monthly deposits. Borrower shall provide to Lender, not later than
the day on which any deposit into the Curtailment Reserve is required to be
made, an operating statement and other information reasonably necessary with
respect to the Property for the preceding calendar month, indicating the amount
of the Net Operating Income for purposes of this Section, all in reasonable
detail and certified by Borrower to be true, correct and complete, and prepared
otherwise in accordance with the requirements set forth in Section 1.18 hereof.
Such statements shall also contain such information and detail as is reasonably
necessary for the determination of Net Operating Income, Revenues and Operating
Expenses for the purposes of this Section. Such determination shall be subject
to final confirmation by Lender.
(b) The Curtailment Reserve shall not, unless otherwise explicitly required by
applicable law, be or be deemed to be escrow or trust funds, but, at Lender's
option and Lender's discretion may either be held in a separate account or be
commingled by Lender with the general funds of Lender. The Curtailment Reserve
is solely for the protection of Lender and entails no responsibility on Lender's
part beyond the allowing of due credit for sums actually received. Upon
assignment of this Deed of Trust by Lender, any funds in the Curtailment Reserve
shall be turned over to the assignee and any responsibility of Lender, as
assignor, with respect thereto shall terminate. Upon full payment of the
indebtedness secured hereby in accordance with its terms or at such earlier time
as Lender may elect, the balance of the Curtailment Reserve then in Lender's
possession shall be paid over to Borrower and no other party shall have any
right or claim thereto.
(c) As additional security for the payment and performance by Borrower of all
duties, responsibilities and obligations under the Note and the other Loan
Documents, Borrower hereby unconditionally and irrevocably assigns, conveys,
pledges, mortgages, transfers, delivers, deposits, sets over and confirms unto
Lender, and hereby grants to Lender a security interest in (i) the Curtailment
Reserve, (ii) the account into which the Curtailment Reserve has been deposited,
if any, (iii) all insurance of said account, (iv) all accounts, contract rights
and general intangibles or other rights and interests pertaining thereto,
(v) all sums now or hereafter therein or represented thereby, (vi) all
replacements, substitutions or proceeds thereof, (vii) all instruments and
documents now or hereafter evidencing the Curtailment Reserve or such accounts,
(viii) all powers, options, rights, privileges and immunities pertaining to the
Curtailment Reserve (including the right to make withdrawals therefrom), and
(ix) all proceeds of the foregoing. Borrower hereby authorizes and consents to
any account into which the Curtailment Reserve will be deposited being held in
Lender's name or the name of any entity servicing the Note for Lender and hereby
acknowledges and agrees that Lender, or at Lender's election, such servicing
agent, shall have exclusive control over said account. Notice of the assignment
and security interest granted to Lender herein may be delivered by Lender at any
time to the financial institution wherein the Curtailment Reserve has been
established, and Lender, or such servicing entity, shall have possession of all
passbooks or other evidences of such accounts. Borrower hereby assumes all risk
of loss with respect to amounts on deposit in the Curtailment Reserve, except to
the extent such loss is caused by the gross negligence or intentional misconduct
of Lender. Borrower hereby waives all right to withdraw funds from the
Curtailment Reserve. If, after the establishment of the Curtailment Reserve, a
default shall occur hereunder or under any other of the Loan Documents which is
not cured within any applicable grace or cure period, then Lender may, without
notice or demand on Borrower, at its option: (A) withdraw any or all of the
funds (including, without limitation, any interest) then remaining in the
Curtailment Reserve and apply the same, after deducting all costs and expenses
of safekeeping, collection and delivery (including, but not limited to,
attorneys' fees, costs and expenses) to the indebtedness evidenced by the Note
or any other obligations of Borrower under the other Loan Documents in such
manner or as Lender shall deem appropriate in its sole discretion, and the
excess, if any, shall be paid to Borrower, (B) exercise any and all rights and
remedies of a secured party under any applicable Uniform Commercial Code, or
(C) exercise any other remedies available at law or in equity. No such use or
application of the funds contained in the Curtailment Reserve shall be deemed to
cure any default hereunder or under the other Loan Documents. If the Curtailment
Reserve is established pursuant to this Section, Borrower agrees and it shall
execute any and all agreements Lender deems necessary in order to further
perfect the security interest granted to Lender in this Deed of Trust and to
further confirm the agreements set forth in this Section.
C-8 Termite Reserve. Prior to the execution of this Deed of Trust, Borrower has
caused the Property to be inspected with respect to termites and other pests
which inspections has revealed that the Property is in need of treatment and/or
remedial or corrective work. Contemporaneously with the execution hereof,
Borrower has established with Lender a reserve in the amount of $18,725.00 (the
"Termite Reserve") by depositing such amount with Lender. Borrower shall cause
each of the items described in that certain Wood Destroying Pests and Organisms
Inspection Report dated April 24, 2003 and prepared by All Seasons Pest Control
as supplemented by estimate for corrective work prepared by Bill Radtke
Construction, Inc., relative to the Property, copies of which were provided by
Borrower to Lender (the "Termite Work") to be treated, performed and corrected
to the satisfaction of Lender and as necessary to enable such licensed pest
inspector to provide a "clean" report with respect to the Property on or before
sixty (60) days from the effective date hereof, as such time period may be
extended by Lender in its sole discretion. So long as no default hereunder or
under the other Loan Documents has occurred and is continuing (i) all sums in
the Termite Reserve shall be held by Lender in the Termite Reserve to pay the
costs and expenses of completing the Termite Work, and (ii) Lender shall, to the
extent funds are available for such purpose in the Termite Reserve, disburse to
Borrower the entire balance of the Termite Reserve in a single lump sum
disbursement upon Borrower's provision of evidence reasonably satisfactory to
Lender that Borrower has caused the Termite Work to be fully completed, which
such evidence may include, without limitation, a "clean" termite and pest report
on the standard form used in the state of Washington. Lender may further
require, at Lender's discretion, copies of invoices, receipts or other evidence
satisfactory to Lender verifying that the costs of the Termite Work have been
satisfied in full. No interest or other earnings in the funds contained in the
Termite Reserve shall be paid to Borrower and any interest or other earnings on
funds deposited into the Termite Reserve shall be solely for the account of
Lender. In the event that the amounts on deposit are available in the Termite
Reserve are inadequate to pay the costs of the Termite Work, Borrower shall pay
the amount of such deficiency.
EXHIBIT D
Note Description - All Ten
(1) Promissory Note ("Eureka Note") made by WHC831, LLC in the original
principal amount of THREE MILLION AND NO 100/DOLLARS ($3,000,000.00). The loan
evidenced by the Eureka Note shall be referred to herein as the "Eureka Loan" or
the "Eureka Loan Amount."
(2) Promissory Note ("Redding Note") made by WHC840, LLC in the original
principal amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00). The loan
evidenced by the Redding Note shall be referred to herein as the "Redding Loan"
or the "Redding Loan Amount."
(3) Promissory Note ("Boise Note") made by WHC817, LLC in the original principal
amount of SEVEN MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($7,100,000.00).
The loan evidenced by the Boise Note shall be referred to herein as the "Boise
Loan" or the "Boise Loan Amount."
(4) Promissory Note ("Twin Falls Note") made by WHC818, LLC in the original
principal amount of THREE MILLION AND NO/100 DOLLARS ($3,000,000.00). The loan
evidenced by the Twin Falls Note shall be referred to herein as the "Twin Falls
Loan" or the "Twin Falls Loan Amount."
(5) Promissory Note ("Salt Lake City Note") made by WHC816, LLC in the original
principal amount of SIX MILLION AND NO/100 DOLLARS ($6,000,000.00). The loan
evidenced by the Salt Lake City Note shall be referred to herein as the "Salt
Lake City Loan" or the "Salt Lake City Loan Amount."
(6) Promissory Note ("Kennewick Note") made by WHC803, LLC in the original
principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($2,500,000.00). The loan evidenced by the Kennewick Note shall be referred to
herein as the "Kennewick Loan" or the "Kennewick Loan Amount."
(7) Promissory Note ("Pasco Note") made by WHC837, LLC in the original principal
amount of TEN MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS
($10,300,000.00). The loan evidenced by the Pasco Note shall be referred to
herein as the "Pasco Loan" or the "Pasco Loan Amount."
(8) Promissory Note ("Port Angeles Note") made by WHC839, LLC in the original
principal amount of NINE MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($9,100,000.00). The loan evidenced by the Port Angeles Note shall be referred
to herein as the "Port Angeles Loan" or the "Port Angeles Loan Amount."
(9) Promissory Note ("Richland Note") made by WHC841, LLC in the original
principal amount of FOUR MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($4,100,000.00). The loan evidenced by the Redding Note shall be referred to
herein as the "Richland Loan" or the "Richland Loan Amount."
(10) Promissory Note ("Yakima Note") made by WHC807, LLC in the original
principal amount of FIVE MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($5,100,000.00). The loan evidenced by the Yakima Note shall be referred to
herein as the "Yakima Loan" or the "Yakima Loan Amount."
All of the foregoing promissory notes listed above, excluding the Yakima Note,
shall be collectively referred to herein as the "Other Notes." The loans
evidenced, in part, by the promissory notes listed above, excluding the Yakima
Loan, shall be collectively referred to herein as the "Other Loans." The
borrower's with respect to each of the Other Loans are collectively referred to
as the "Other Borrowers".
EXHIBIT E
Other Deeds of Trust
(1) Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
(the ''Eureka Mortgage'') from WHC831, LLC to a trustee for the benefit of
Lender, as beneficiary, dated as of the date hereof, concerning certain property
located in Humboldt County, California.
(2) Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
(the ''Redding Mortgage'') from WHC840, LLC to a trustee for the benefit of
Lender, as beneficiary, dated as of the date hereof, concerning certain property
located in Shasta County, California.
(3) Deed of Trust and Security Agreement (the ''Boise Mortgage'') from WHC817,
LLC to a trustee for the benefit of Lender, as beneficiary, dated as of the date
hereof, concerning certain property located in Ada County, Idaho.
(4) Deed of Trust and Security Agreement (the ''Twin Falls Mortgage'') from
WHC818, LLC to a trustee for the benefit of Lender, as beneficiary, dated as of
the date hereof, concerning certain property located in Twin Falls County,
Idaho.
(5) Deed of Trust and Security Agreement (the ''Salt Lake City Mortgage'') from
WHC816, LLC to a trustee for the benefit of Lender, as beneficiary, dated as of
the date hereof, concerning certain property located in Salt Lake County, Utah.
(6) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the ''Kennewick Mortgage'') from WHC803, LLC to a trustee for
the benefit of Lender, as beneficiary, dated as of the date hereof, concerning
certain property located in Benton County, Washington.
(7) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the ''Pasco Mortgage'') from WHC837, LLC to a trustee for the
benefit of Lender, as beneficiary, dated as of the date hereof, concerning
certain property located in Franklin County, Washington.
(8) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the ''Port Angeles Mortgage'') from WHC839, LLC to a trustee for
the benefit of Lender, as beneficiary, dated as of the date hereof, concerning
certain property located in Clallam County, Washington.
(9) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the ''Richland Mortgage'') from WHC841, LLC to a trustee for the
benefit of Lender, as beneficiary, dated as of the date hereof, concerning
certain property located in Benton County, Washington.
Exhibit 10.5
INDEMNITY AND GUARANTY AGREEMENT
THIS INDEMNITY AND GUARANTY AGREEMENT (this "Agreement"), executed to be
effective as of June 27, 2003, is made by WESTCOAST HOSPITALITY CORPORATION, a
Washington corporation ("Indemnitor"), whose address is 201 W. North River
Drive, Suite 100, Spokane, Washington 99201, Attention: Chief Financial Officer
in favor of COLUMN FINANCIAL, INC., a Delaware corporation ("Lender"), whose
address is 11 Madison Avenue, 5th Floor, New York, New York 10010-3629,
Attention: Edmund Taylor.
W I T N E S S E T H:
WHEREAS, WHC807, LLC, a Delaware limited liability company (the "Borrower"), has
obtained a loan (the "Loan") in the principal amount of FIVE MILLION ONE HUNDRED
THOUSAND AND NO/100 DOLLARS ($5,100,000.00) from Lender; and
WHEREAS, the Loan is evidenced by a Promissory Note (the "Note") dated of even
date herewith, executed by Borrower and payable to the order of Lender, in the
stated principal amount of FIVE MILLION ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($5,100,000.00), and is secured by, among other things, a Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing (the
"Mortgage") dated of even date herewith from Borrower for the benefit of Lender,
encumbering that certain real property situated in the County of Yakima, State
of Washington, as more particularly described on Exhibit A attached hereto and
incorporated herein by this reference, together with the buildings, structures
and other improvements now or hereafter located thereon (said real property,
buildings, structures and other improvements being hereinafter collectively
referred to as the "Property"), and by other documents and instruments (the
Note, the Mortgage and such other documents, agreements, and instruments, as the
same may from time to time be amended, consolidated, renewed or replaced, being
collectively referred to herein as the "Loan Documents"); and
WHEREAS, as a condition to making the Loan to Borrower, Lender has required that
Indemnitor indemnify Lender from and against and guarantee payment to Lender of
those items for which Borrower is personally liable and for which Lender has
recourse against Borrower under the terms of the Note and the Mortgage; and
WHEREAS, Indemnitor is an affiliate of Borrower, the extension of the Loan to
Borrower is of substantial benefit to Indemnitor and, therefore, Indemnitor
desires to indemnify Lender from and against and guarantee payment to Lender of
those items for which Borrower is personally liable and for which Lender has
recourse against Borrower under the terms of the Note and the Mortgage.
NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and in
consideration of the foregoing premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Indemnitor hereby covenants and agrees for the benefit of Lender, as follows:
1. INDEMNITY AND GUARANTY.
INDEMNITOR HEREBY ASSUMES LIABILITY FOR, HEREBY GUARANTEES PAYMENT TO LENDER OF,
HEREBY AGREES TO PAY, PROTECT, DEFEND AND SAVE LENDER HARMLESS FROM AND AGAINST,
AND HEREBY INDEMNIFIES LENDER FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
ATTORNEYS' FEES), CAUSES OF ACTION, SUITS, CLAIMS, DEMANDS AND JUDGMENTS OF ANY
NATURE OR DESCRIPTION WHATSOEVER (COLLECTIVELY, "COSTS") WHICH MAY AT ANY TIME
BE IMPOSED UPON, INCURRED BY OR AWARDED AGAINST LENDER AS A RESULT OF:
(a) PROCEEDS PAID TO, AND RECEIVED BY, BORROWER UNDER ANY INSURANCE POLICIES (OR
PAID AS A RESULT OF ANY OTHER CLAIM OR CAUSE OF ACTION AGAINST ANY PERSON OR
ENTITY) BY REASON OF DAMAGE, LOSS OR DESTRUCTION TO ALL OR ANY PORTION OF THE
PROPERTY, TO THE FULL EXTENT OF SUCH PROCEEDS NOT PREVIOUSLY DELIVERED TO
LENDER, BUT WHICH, UNDER THE TERMS OF THE LOAN DOCUMENTS, SHOULD HAVE BEEN
DELIVERED TO LENDER;
(b) PROCEEDS OR AWARDS PAID TO, AND RECEIVED BY, BORROWER RESULTING FROM THE
CONDEMNATION OR OTHER TAKING IN LIEU OF CONDEMNATION OF ALL OR ANY PORTION OF
THE PROPERTY, TO THE FULL EXTENT OF SUCH PROCEEDS OR AWARDS NOT PREVIOUSLY
DELIVERED TO LENDER, BUT WHICH, UNDER THE TERMS OF THE LOAN DOCUMENTS, SHOULD
HAVE BEEN DELIVERED TO LENDER;
(c) ALL TENANT SECURITY DEPOSITS OR OTHER REFUNDABLE DEPOSITS PAID TO OR HELD BY
BORROWER IN CONNECTION WITH LEASES OF ALL OR ANY PORTION OF THE PROPERTY, WHICH
ARE NOT APPLIED IN ACCORDANCE WITH THE TERMS OF THE APPLICABLE LEASE OR OTHER
AGREEMENT;
(d) RENT AND OTHER PAYMENTS RECEIVED FROM TENANTS UNDER LEASES OF ALL OR ANY
PORTION OF THE PROPERTY PAID MORE THAN ONE (1) MONTH IN ADVANCE WHICH ARE NOT
EITHER APPLIED TO THE ORDINARY AND NECESSARY EXPENSES OF OWNING AND OPERATING
THE PROPERTY, PAID TO LENDER OR OTHERWISE APPLIED AGAINST BORROWER'S OBLIGATIONS
UNDER THE LOAN DOCUMENTS INCLUDING THE PAYMENT OF DEBT SERVICE;
(e) RENTS, ISSUES, PROFITS AND REVENUES OF ALL OR ANY PORTION OF THE PROPERTY
RECEIVED BY BORROWER AFTER BORROWER'S RECEIPT OF ANY NOTICE OF DEFAULT FROM
LENDER UNDER THE LOAN DOCUMENTS, IN THE EVENT OF ANY DEFAULT BY BORROWER
THEREUNDER, PROVIDED THAT (I) BORROWER DOES NOT CURE SAME IN ACCORDANCE WITH THE
TERMS OF THE APPLICABLE LOAN DOCUMENTS, (II) LENDER DOES NOT OTHERWISE WAIVE
SUCH DEFAULT, OR (III) SUCH SUMS ARE NOT EITHER APPLIED TO THE ORDINARY AND
NECESSARY EXPENSES OF OWNING AND OPERATING THE PROPERTY, PAID TO LENDER OR
OTHERWISE APPLIED AGAINST BORROWER'S OBLIGATIONS UNDER THE LOAN DOCUMENTS
INCLUDING THE PAYMENT OF DEBT SERVICE;
(f) DAMAGE TO THE PROPERTY AS A RESULT OF THE INTENTIONAL MISCONDUCT OR GROSS
NEGLIGENCE OF BORROWER OR ANY OF ITS PRINCIPALS, OFFICERS, MANAGERS, MEMBERS OR
GENERAL PARTNERS, INDEMNITOR, OR ANY AGENT OR EMPLOYEE OF SUCH PERSONS, OR ANY
REMOVAL OF ALL OR ANY PORTION OF THE PROPERTY IN VIOLATION OF THE TERMS OF THE
LOAN DOCUMENTS, TO THE FULL EXTENT OF THE LOSSES OR DAMAGES INCURRED BY LENDER
ON ACCOUNT OF SUCH DAMAGE OR REMOVAL;
(g) FAILURE BY BORROWER TO PAY ANY VALID TAXES, ASSESSMENTS, MECHANIC'S LIENS,
MATERIALMEN'S LIENS OR OTHER CLAIMS WHICH COULD CREATE LIENS ON ANY PORTION OF
THE PROPERTY WHICH WOULD BE SUPERIOR TO THE LIEN OR SECURITY TITLE OF THE
MORTGAGE OR THE OTHER LOAN DOCUMENTS; PROVIDED, HOWEVER, INDEMNITOR SHALL HAVE
NO LIABILITY FOR TAXES OR ASSESSMENTS OR LIENS (i) WHICH ACCRUE DURING ANY
PERIOD OF TIME WHEN BORROWER IS NOT IN EFFECTIVE RECEIPT OR CONTROL OF THE
REVENUE FROM THE PROPERTY DUE TO A RECEIVERSHIP, FORECLOSURE OR OTHER REMEDIAL
ACTION BY LENDER, (ii) TO THE EXTENT OF THE FUNDS PROVIDED BY BORROWER INTO THE
IMPOUND ACCOUNT (AS DEFINED IN SECTION 1.6 OF THE MORTGAGE) TO PAY SUCH TAXES
AND ASSESSMENTS, OR (iii) FOR WHICH THERE WERE INADEQUATE REVENUE FROM THE
SECURITY PROPERTY TO PAY AFTER TAKING INTO ACCOUNT ALL SUMS DUE AND PAID LENDER
DURING SUCH PERIOD AND ALL ORDINARY AND REASONABLE OPERATING EXPENSES PAID
DURING SUCH PERIOD (BUT WITHOUT TAKING INTO ACCOUNT ANY DISTRIBUTIONS TO MEMBERS
OR OWNERS OF BORROWER);
(h) BREACH OF ANY OBLIGATION OR INDEMNITY OF BORROWER UNDER THE HAZARDOUS
SUBSTANCES INDEMNITY AGREEMENT OF EVEN DATE HEREWITH MADE BY BORROWER AND
INDEMNITOR OR UNDER SECTION 1.30 OF THE MORTGAGE;
(i) FRAUD OR MATERIAL MISREPRESENTATION BY BORROWER OR INDEMNITOR OR ANY OF
THEIR PRINCIPALS, OFFICERS, AGENTS OR EMPLOYEES TO THE FULL EXTENT OF ANY
LOSSES, DAMAGES AND EXPENSES OF LENDER ON ACCOUNT THEREOF; AND
(j) ANY AMOUNTS PAID UNDER LEASES CONTAINING EARLY LEASE TERMINATION OPTIONS OR
OTHERWISE PAID BY ANY TENANT(S) IN CONSIDERATION OF AN EARLY TERMINATION OF ANY
LEASE AND NOT DELIVERED TO LENDER TO BE HELD IN ACCORDANCE WITH THE MORTGAGE.
This is a guaranty of payment and performance and not of collection. The
liability of Indemnitor under this Agreement shall be absolute, direct and
immediate and not conditional or contingent upon the pursuit of any remedies
against Borrower or any other person (including, without limitation, other
guarantors, if any), nor against the collateral for the Loan. Indemnitor waives
any right to require that an action be brought against Borrower or any other
person or to require that resort be made to any collateral for the Loan or to
any balance of any deposit account or credit on the books of Lender in favor of
Borrower or any other person. In the event, on account of the Bankruptcy Reform
Act of 1978, as amended, or any other debtor relief law (whether statutory,
common law, case law or otherwise) of any jurisdiction whatsoever, now or
hereafter in effect, which may be or become applicable, Borrower shall be
relieved of or fail to incur any Costs as provided in the Loan Documents,
Indemnitor shall nevertheless be fully liable for such Costs. In the event of a
default under the Loan Documents which is not cured within any applicable grace
or cure period, Lender shall have the right to enforce its rights, powers and
remedies (including, without limitation, foreclosure of all or any portion of
the collateral for the Loan) thereunder or hereunder, in any order, and all
rights, powers and remedies available to Lender in such event shall be
non-exclusive and cumulative of all other rights, powers and remedies provided
thereunder or hereunder or by law or in equity. If the indebtedness and
obligations guaranteed hereby are partially paid or discharged by reason of the
exercise of any of the remedies available to Lender, this Agreement shall
nevertheless remain in full force and effect, and Indemnitor shall remain liable
for all remaining indebtedness and obligations guaranteed hereby, even though
any rights which Indemnitor may have against Borrower may be destroyed or
diminished by the exercise of any such remedy.
2. Indemnification Procedures.
(a) If any action shall be brought against Lender based upon any of the matters
for which Lender is indemnified hereunder, Lender shall notify Indemnitor in
writing thereof and Indemnitor shall promptly assume the defense thereof,
including, without limitation, the employment of counsel acceptable to Lender
and the negotiation of any settlement; provided, however, that any failure of
Lender to notify Indemnitor of such matter shall not impair or reduce the
obligations of Indemnitor hereunder. Lender shall have the right, at the expense
of Indemnitor (which expense shall be included in Costs), to employ separate
counsel in any such action and to participate in the defense thereof. In the
event Indemnitor shall fail to discharge or undertake to defend Lender against
any claim, loss or liability for which Lender is indemnified hereunder
thirty (30) days after Indemnitor receives written notice demand therefor,
Lender may, at its sole option and election, defend or settle such claim, loss
or liability. The liability of Indemnitor to Lender hereunder shall be
conclusively established by such settlement, provided such settlement is made in
good faith, the amount of such liability to include both the settlement
consideration and the costs and expenses, including, without limitation,
attorneys' fees and disbursements, incurred by Lender in effecting such
settlement. In such event, such settlement consideration, costs and expenses
shall be included in Costs and Indemnitor shall pay the same as hereinafter
provided.
(b) Indemnitor shall not, without the prior written consent of Lender:
(i) settle or compromise any action, suit, proceeding or claim or consent to the
entry of any judgment that does not include as an unconditional term thereof the
delivery by the claimant or plaintiff to Lender of a full and complete written
release of Lender (in form, scope and substance reasonably satisfactory to
Lender) from all liability in respect of such action, suit, proceeding or claim
and a dismissal with prejudice of such action, suit, proceeding or claim; or
(ii) settle or compromise any action, suit, proceeding or claim in any manner
that may adversely affect Lender or obligate Lender to pay any sum or perform
any obligation as reasonably determined by Lender.
(c) All Costs shall be immediately reimbursable to Lender when and as incurred
and, in the event of any litigation, claim or other proceeding, without any
requirement of waiting for the ultimate outcome of such litigation, claim or
other proceeding, and Indemnitor shall pay to Lender any and all Costs within
ten (10) days after written notice from Lender itemizing the amounts thereof
incurred to the date of such notice. In addition to any other remedy available
for the failure of Indemnitor to periodically pay such Costs, such Costs, if not
paid within said ten-day period, shall bear interest at the Default Interest
Rate (as defined in the Note).
3. Reinstatement of Obligations.
If at any time all or any part of any payment made by Indemnitor or received by
Lender from Indemnitor under or with respect to this Agreement is or must be
rescinded or returned for any reason whatsoever (including, but not limited to,
the insolvency, bankruptcy or reorganization of Indemnitor or Borrower), then
the obligations of Indemnitor hereunder shall, to the extent of the payment
rescinded or returned, be deemed to have continued in existence, notwithstanding
such previous payment made by Indemnitor, or receipt of payment by Lender, and
the obligations of Indemnitor hereunder shall continue to be effective or be
reinstated, as the case may be, as to such payment, all as though such previous
payment by Indemnitor had never been made.
4. Waivers by Indemnitor.
(1) To the extent permitted by law and by executing this Agreement, Indemnitor
freely, irrevocably and unconditionally waives all rights and defenses that the
Indemnitor may have because the Borrower's debt is secured by real property;
this means, among other things, Indemnitor hereby waives and agrees not to
assert or take advantage of:
(a) Any right to require Lender to proceed against Borrower or any other
indemnitor, guarantor or any other person or to proceed against or exhaust any
security held by Lender at any time or to pursue any other remedy in Lender's
power or under any other agreement before proceeding against Indemnitor
hereunder;
(b) Intentionally omitted;
(c) Any defense that may arise by reason of the incapacity, lack of authority,
death or disability of any other person or persons or the failure of Lender to
file or enforce a claim against the estate (in administration, bankruptcy or any
other proceeding) of any other person or persons;
(d) Demand, presentment for payment, notice of nonpayment, protest, notice of
protest and all other notices of any kind, or the lack of any thereof,
including, without limiting the generality of the foregoing, notice of the
existence, creation or incurring of any new or additional indebtedness or
obligation or of any action or non-action on the part of Borrower, Lender, any
endorser or creditor of Borrower or of Indemnitor or on the part of any other
person whomsoever under this or any other instrument in connection with any
obligation or evidence of indebtedness held by Lender;
(e) Any defense based upon an election of remedies by Lender;
(f) Any right or claim of right to cause a marshalling of the assets of
Indemnitor;
(g) Intentionally omitted;
(h) Any duty on the part of Lender to disclose to Indemnitor any facts Lender
may now or hereafter know about Borrower or the Property, regardless of whether
Lender has reason to believe that any such facts materially increase the risk
beyond that which Indemnitor intends to assume or has reason to believe that
such facts are unknown to Indemnitor or has a reasonable opportunity to
communicate such facts to Indemnitor, it being understood and agreed that
Indemnitor is fully responsible for being and keeping informed of the financial
condition of Borrower, of the condition of the Property and of any and all
circumstances bearing on the risk that liability may be incurred by Indemnitor
hereunder;
(i) Any lack of notice of disposition or of manner of disposition of any
collateral for the Loan;
(j) Any invalidity, irregularity or unenforceability, in whole or in part, of
any one or more of the Loan Documents;
(k) Any lack of commercial reasonableness in dealing with the collateral for the
Loan;
(l) Any deficiencies in the collateral for the Loan or any deficiency in the
ability of Lender to collect or to obtain performance from any persons or
entities now or hereafter liable for the payment and performance of any
obligation hereby guaranteed or indemnified against;
(m) An assertion or claim that the automatic stay provided by 11 U.S.C. 362
(arising upon the voluntary or involuntary bankruptcy proceeding of Borrower) or
any other stay provided under any other debtor relief law (whether statutory,
common law, case law or otherwise) of any jurisdiction whatsoever, now or
hereafter in effect, which may be or become applicable, shall operate or be
interpreted to stay, interdict, condition, reduce or inhibit the ability of
Lender to enforce any of its rights, whether now or hereafter required, which
Lender may have against Indemnitor or the collateral for the Loan;
(n) Any modifications of the Loan Documents or any obligation of Borrower
relating to the Loan by operation of law or by action of any court, whether
pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other debtor
relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, or otherwise; and
(o) Any action, occurrence, event or matter consented to by Indemnitor under
Section 5(h) hereof, under any other provision hereof, or otherwise.
(2) Without limitation but in addition to the foregoing, by executing this
Agreement, Indemnitor freely, irrevocably and unconditionally waives all rights
and defenses that the Indemnitor may have because the Borrower's debt is secured
by real property; this means, among other things:
(a) Lender may collect from the Indemnitor without first foreclosing on any real
or personal property collateral pledged by the Borrower.
(b) If Lender forecloses on any real property collateral pledged by the
Borrower:
(i) The amount of the debt may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price.
(ii) The Lender may collect from the Indemnitor even if the Lender, by
foreclosing on the real property collateral, has destroyed any right the
Indemnitor may have to collect from the Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses the Indemnitor may have because
the Borrower's debt is secured by real property.
(c) Indemnitor waives all rights and defenses arising out of an election of
remedies by Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
the Indemnitor's rights of subrogation and reimbursement against the principal.
(d) Intentionally omitted.
(e) Indemnitor acknowledges and agrees that Lender is relying on the above
waivers in making the Loan, and that these waivers are a material part of the
consideration which Lender is receiving for making the Loan.
(f) Indemnitor waives the right, if any, to the benefit of, or to direct the
application of, any security held by Lender, including, without limitation, the
Property described in the Deed of Trust; and, until all the indebtedness and
obligations, payment and performance of which are hereby guaranteed, have been
paid and performed in full, any right to enforce any remedy which Lender now has
or hereafter may have against Borrower, and any right to participate in any
security now or hereafter held by Lender.
5. General Provisions.
(a) Fully Recourse. All of the terms and provisions of this Agreement are
recourse obligations of Indemnitor and not restricted by any limitation on
personal liability.
(b) Unsecured Obligations. Indemnitor hereby acknowledges that Lender's
appraisal of the Property is such that Lender is not willing to accept the
consequences of the inclusion of Indemnitor's indemnity set forth herein among
the obligations secured by the Mortgage and the other Loan Documents and that
Lender would not make the Loan but for the unsecured personal liability
undertaken by Indemnitor herein.
(c) Survival. This Agreement shall be deemed to be continuing in nature and
shall remain in full force and effect and shall survive the exercise of any
remedy by Lender under the Mortgage or any of the other Loan Documents,
including, without limitation, any foreclosure or deed in lieu thereof, even if,
as a part of such remedy, the Loan is paid or satisfied in full.
(d) No Subrogation; No Recourse Against Lender. Notwithstanding the satisfaction
by Indemnitor of any liability hereunder until a year and a day have elapsed for
the payment in full of the Loan (the "Waiver Period"), Indemnitor shall not
enforce any right of subrogation, contribution, reimbursement or indemnity
whatsoever or any right of recourse to or with respect to Borrower or the assets
or property of Borrower or to any collateral for the Loan. In connection with
the foregoing, Indemnitor expressly waives any and all rights of subrogation to
Lender against Borrower, and Indemnitor hereby waives any rights to enforce any
remedy which Lender may have against Borrower and any right to participate in
any collateral for the Loan during the Waiver Period. In addition to and without
in any way limiting the foregoing, Indemnitor hereby subordinates any and all
indebtedness of Borrower now or hereafter owed to Indemnitor to all indebtedness
of Borrower to Lender, and agrees with Lender that Indemnitor shall not demand
or accept any payment of principal or interest from Borrower, shall not claim
any offset or other reduction of Indemnitor's obligations hereunder because of
any such indebtedness and shall not take any action to obtain any of the
collateral from the Loan during the Waiver Period. Further, Indemnitor shall not
have any right of recourse against Lender by reason of any action Lender may
take or omit to take under the provisions of this Agreement or under the
provisions of any of the Loan Documents.
(e) Reservation of Rights. Nothing contained in this Agreement shall prevent or
in any way diminish or interfere with any rights or remedies, including, without
limitation, the right to contribution, which Lender may have against Borrower,
Indemnitor or any other party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (codified at Title 42 U.S.C. 9601 et
seq.), as it may be amended from time to time, or any other applicable federal,
state or local laws, all such rights being hereby expressly reserved.
(f) Financial Statements. Indemnitor hereby agrees, as a material inducement to
Lender to make the Loan to Borrower, to maintain a net worth of no less than
$15,000,000.00 (based upon the fair market value of Guarantor's assets as
evidenced by an annual audited financial statement prepared by an independent
certified public accountant reasonably acceptable to Lender) for so long as any
portion of the Loan shall remain outstanding and to furnish to Lender in the
manner and within the time periods set forth in the Mortgage current and dated
financial statements. Indemnitor hereby warrants and represents unto Lender that
any and all balance sheets, net worth statements and other financial data which
have heretofore been given or may hereafter be given to Lender with respect to
Indemnitor did or will at the time of such delivery fairly and accurately
present the financial condition of Indemnitor.
(g) Rights Cumulative; Payments. Lender's rights under this Agreement shall be
in addition to all rights of Lender under the Note, the Mortgage and the other
Loan Documents. Further, payments made by Indemnitor under this Agreement (or
any other indemnitor under separate agreement) shall not reduce in any respect
Borrower's obligations and liabilities under the Note, the Mortgage and the
other Loan Documents.
(h) No Limitation on Liability. Indemnitor hereby consents and agrees that
Lender may at any time and from time to time without further consent from
Indemnitor do any of the following events, and the liability of Indemnitor under
this Agreement shall be unconditional and absolute and shall in no way be
impaired or limited by any of the following events, whether occurring with or
without notice to Indemnitor or with or without consideration: (i) any
extensions of time for performance required by any of the Loan Documents or
extension or renewal of the Note; (ii) any sale, assignment or foreclosure of
the Note, the Mortgage or any of the other Loan Documents or any sale or
transfer of the Property; (iii) any change in the composition of Borrower,
including, without limitation, the withdrawal or removal of Indemnitor from any
current or future position of ownership, management or control of Borrower;
(iv) the accuracy or inaccuracy of the representations and warranties made by
Indemnitor herein or by Borrower in any of the Loan Documents; (v) the release
of Borrower or of any other person or entity from performance or observance of
any of the agreements, covenants, terms or conditions contained in any of the
Loan Documents by operation of law, Lender's voluntary act or otherwise;
(vi) the release or substitution in whole or in part of any security for the
Loan; (vii) Lender's failure to record the Mortgage or to file any financing
statement (or Lender's improper recording or filing thereof) or to otherwise
perfect, protect, secure or insure any lien or security interest given as
security for the Loan; (viii) the modification of the terms of any one or more
of the Loan Documents; or (ix) the taking or failure to take any action of any
type whatsoever with respect to Lender's rights under the Loan Documents. No
such action which Lender shall take or fail to take in connection with the Loan
Documents or any collateral for the Loan, nor any course of dealing with
Borrower or any other person, shall limit, impair or release Indemnitor's
obligations hereunder, affect this Agreement in any way or afford Indemnitor any
recourse against Lender. Nothing contained in this Section shall be construed to
require Lender to take or refrain from taking any action referred to herein.
(i) Entire Agreement; Amendment; Severability. This Agreement contains the
entire agreement between the parties respecting the matters herein set forth and
supersedes all prior agreements, whether written or oral, between the parties
respecting such matters. Any amendments or modifications hereto, in order to be
effective, shall be in writing and executed by the parties hereto. A
determination that any provision of this Agreement is unenforceable or invalid
shall not affect the enforceability or validity of any other provision, and any
determination that the application of any provision of this Agreement to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to any other
persons or circumstances.
(j) Governing Law; Binding Effect; Waiver of Acceptance. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
WASHINGTON, EXCEPT TO THE EXTENT THAT THE APPLICABILITY OF ANY OF SUCH LAWS MAY
NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, IN WHICH CASE SUCH FEDERAL LAW
SHALL SO GOVERN AND BE CONTROLLING. This Agreement shall bind Indemnitor and its
heirs, personal representatives, successors and assigns and shall inure to the
benefit of Lender and the officers, directors, shareholders, agents and
employees of Lender and their respective heirs, successors and assigns.
Notwithstanding the foregoing, Indemnitor shall not assign any of its rights or
obligations under this Agreement without the prior written consent of Lender,
which consent may be withheld by Lender in its sole discretion. Indemnitor
hereby waives any acceptance of this Agreement by Lender, and this Agreement
shall immediately be binding upon Indemnitor.
(k) Notices. All notices, demands, requests or other communications to be sent
by one party to another hereunder or required by law shall be given and become
effective as provided in the Mortgage, provided that the address of Indemnitor
shall be as follows:
WestCoast Hospitality Corporation
201 W. North River Drive, Suite 100
Spokane, Washington 99201
Attention: Chief Financial Officer
FACSIMILE: (509) 325-7324
(l) No Waiver; Time of Essence; Business Day. The failure of any party hereto to
enforce any right or remedy hereunder, or to promptly enforce any such right or
remedy, shall not constitute a waiver thereof nor give rise to any estoppel
against such party nor excuse any of the parties hereto from their respective
obligations hereunder. Any waiver of such right or remedy must be in writing and
signed by the party to be bound. This Agreement is subject to enforcement at law
or in equity, including actions for damages or specific performance. Time is of
the essence hereof. The term "business day" as used herein shall mean a weekday,
Monday through Friday, except a legal holiday or a day on which banking
institutions in New York, New York are authorized by law to be closed.
(m) Captions for Convenience. The captions and headings of the sections and
paragraphs of this Agreement are for convenience of reference only and shall not
be construed in interpreting the provisions hereof.
(n) Attorneys' Fees. In the event it is necessary for Lender to retain the
services of an attorney or any other consultants in order to enforce this
Agreement, or any portion thereof, Indemnitor agrees to pay to Lender any and
all costs and expenses, including, without limitation, attorneys' fees, incurred
by Lender as a result thereof and such costs, fees and expenses shall be
included in Costs.
(o) Successive Actions. A separate right of action hereunder shall arise each
time Lender acquires knowledge of any matter indemnified or guaranteed by
Indemnitor under this Agreement. Separate and successive actions may be brought
hereunder to enforce any of the provisions hereof at any time and from time to
time. No action hereunder shall preclude any subsequent action, and Indemnitor
hereby waives and covenants not to assert any defense in the nature of splitting
of causes of action or merger of judgments.
(p) Reliance. Lender would not make the Loan to Borrower without this Agreement.
Accordingly, Indemnitor intentionally and unconditionally enters into the
covenants and agreements as set forth above and understands that, in reliance
upon and in consideration of such covenants and agreements, the Loan shall be
made and, as part and parcel thereof, specific monetary and other obligations
have been, are being and shall be entered into which would not be made or
entered into but for such reliance.
(q) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(1) INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
(A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF WASHINGTON OVER ANY SUIT,
ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT,
(B) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION PRESIDING OVER YAKIMA COUNTY,
WASHINGTON, (C) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (D) TO THE
FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING ANY ACTION, SUIT
OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF
LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM). INDEMNITOR
FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, CITATION, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR
CERTIFIED U.S. MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO THE
INDEMNITOR AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 5(k) HEREOF, AND
CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID
AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
(2) INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS
AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR INDEMNITOR, OR ANY OF
THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR
ANY OTHER PERSONS AFFILIATED WITH LENDER OR INDEMNITOR, IN EACH OR THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
(r) Additional Waivers by Indemnitor.
(1) Indemnitor covenants and agrees that, upon the commencement of a voluntary
or involuntary bankruptcy proceeding by or against Borrower (or any other
indemnitor relative to the Loan or the Costs), Indemnitor shall not seek or
cause Borrower or any other person or entity to seek a supplemental stay or
other relief, whether injunctive or otherwise, pursuant to 11 U.S.C. 105 or any
other provision of the Bankruptcy Reform Act of 1978, as amended, or any other
debtor relief law, (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, to stay, interdict, condition, reduce or inhibit the ability of
Lender to enforce any rights of Lender against Indemnitor or the collateral for
the Loan by virtue of this Agreement or otherwise.
(2) Indemnitor covenants and agrees that it shall not solicit or aid the
solicitation of the filing of any Petition (as defined in the Mortgage) against
the Borrower, whether acting on its own behalf or on behalf of any other party,
including, without limitation: (i) providing information regarding the identity
of creditors or the nature of creditors' claims to any third party in connection
with the filing of a Petition unless compelled to do so by order of a court of
competent jurisdiction or by regulation promulgated by a governmental agency; or
(ii) paying the legal fees or expenses of any creditor of or interest holder in
the Borrower in connection with the filing of a Petition. (s) Joint and Several
Liability. Notwithstanding anything to the contrary herein, the representations,
warranties, covenants, agreements and obligations made and undertaken by
Indemnitor herein, and all representations, warranties, covenants, agreements,
liability and obligations made or undertaken by other indemnitors or obligors
(including Borrower) relative to the Loan, shall be joint and several.
Signature Page
IN WITNESS WHEREOF, Indemnitor has executed this Indemnity and Guaranty
Agreement to be effective as of the date first written above.
INDEMNITOR:
WESTCOAST HOSPITALITY CORPORATION,
a Washington corporation
By:
Name: Arthur M. Coffey
Title: President
Exhibit 31.1
WESTCOAST HOSPITALITY CORPORATION
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Arthur M. Coffey, President and Chief Executive Officer of WestCoast
Hospitality Corporation certify that:
1. I have reviewed this quarterly report on Form 10-Q of WestCoast Hospitality
Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-25(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and;
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors:
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: August 14, 2003
/s/ Arthur M. Coffey
_________________________________________
Arthur M. Coffey
President and Chief Executive Officer
Exhibit 31.2
WESTCOAST HOSPITALITY CORPORATION
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter P. Hausback, Vice President, Chief Financial Officer of WestCoast
Hospitality Corporation certify that:
1. I have reviewed this quarterly report on Form 10-Q of WestCoast Hospitality
Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-25(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and;
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors:
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: August 14, 2003
/s/ Peter P. Hausback
_________________________________________
Peter P. Hausback
Vice President, Chief Financial Officer
Exhibit 32.1
WESTCOAST HOSPITALITY CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WestCoast Hospitality Corporation
(the "Company") on Form 10-Q for the period ending June 30, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Arthur M. Coffey, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Arthur M. Coffey
_________________________________________________
Arthur M. Coffey
President and Chief Executive Officer
August 14, 2003
Exhibit 32.2
WESTCOAST HOSPITALITY CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WestCoast Hospitality Corporation
(the "Company") on Form 10-Q for the period ending June 30, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Peter P. Hausback, Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Peter P. Hausback
___________________________________________________
Peter P. Hausback
Vice President and Chief Financial Officer
August 14, 2003