Loan No.: 51579
Servicing No.: 3091477
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BANK OF AMERICA, N.A.
as Lender
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LOAN AGREEMENT
dated as of September 24, 1999
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INNKEEPERS RI NORTHWEST, L.P.
and
INNKEEPERS SUMMERFIELD GENERAL, L.P.
as Borrower
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions.......................................................1
Section 1.2 Other Definitional Provisions....................................23
ARTICLE II
THE LOAN
Section 2.1 Loan Terms.......................................................24
Section 2.2 Interest.........................................................24
Section 2.3 Term.............................................................24
Section 2.4 Payments.........................................................24
Section 2.5 Release of Properties............................................24
Section 2.6 Substitution of Properties.......................................25
ARTICLE III
CONDITIONS PRECEDENT TO LOAN
Section 3.1 Loan Documents...................................................34
Section 3.2 Brokerage Commissions............................................34
Section 3.3 Title Evidence...................................................34
Section 3.4 Survey...........................................................34
Section 3.5 Insurance........................................................34
Section 3.6 Authority Documents..............................................34
Section 3.7 Financial Statements and Operating Statements....................35
Section 3.8 Opinions.........................................................35
Section 3.9 Compliance with Laws.............................................35
Section 3.10 Agreements.......................................................35
Section 3.11 Taxes............................................................36
Section 3.12 Utilities........................................................36
Section 3.13 Reserve Accounts.................................................36
Section 3.14 Engineering Report...............................................36
Section 3.15 Certificate of Occupancy and Other Permits.......................36
Section 3.16 Environmental Assessment and O&M Program.........................36
Section 3.17 Appraisal........................................................36
Section 3.18 Equity...........................................................36
Section 3.19 Debt Service.....................................................36
Section 3.20 Loan to Value Ratio..............................................37
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Section 3.21 Special Purpose Entity...........................................37
Section 3.22 Miscellaneous....................................................37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Existence; Compliance with Law...................................37
Section 4.2 Equity Interests.................................................37
Section 4.3 Power; Authorization; Enforceable Obligations....................37
Section 4.4 No Legal Bar.....................................................38
Section 4.5 No Litigation....................................................38
Section 4.6 No Default.......................................................38
Section 4.7 Solvency; Fraudulent Conveyance..................................38
Section 4.8 Special Purpose Entity...........................................39
Section 4.9 Taxes............................................................39
Section 4.10 No Burdensome Restrictions.......................................39
Section 4.11 Investment Company Act; Other Regulations........................39
Section 4.12 Subsidiaries.....................................................39
Section 4.13 Title to Premises................................................40
Section 4.14 Ownership of Personalty..........................................40
Section 4.15 Financial Statements.............................................40
Section 4.16 No Change........................................................40
Section 4.17 Accuracy of Information..........................................41
Section 4.18 Principal Place of Business......................................41
Section 4.19 Taxpayer Identification Number...................................41
Section 4.20 Insurance........................................................41
Section 4.21 Mechanic's Liens, etc............................................41
Section 4.22 No Violation.....................................................41
Section 4.23 ERISA............................................................41
Section 4.24 O&M Program......................................................42
Section 4.25 No Organizational Document Amendment.............................42
Section 4.26 Permitted Encumbrances...........................................42
Section 4.27 Insolvency Opinion...............................................42
Section 4.28 Year 2000........................................................42
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Affirmative Covenants of the Borrower............................43
Section 5.2 Negative Covenants of the Borrower...............................49
Section 5.3 Environmental Covenants..........................................54
Section 5.4 Recourse Covenants...............................................56
Section 5.5 Insurance........................................................56
Section 5.6 Lockbox..........................................................58
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ARTICLE VI
RESERVE ACCOUNTS
Section 6.1 Establishment of Reserve Accounts................................58
Section 6.2 Initial Reserve Deposits.........................................58
Section 6.3 Monthly Reserve Deposits.........................................58
Section 6.4 Replacement Reserve Account......................................58
Section 6.5 Permitted Investments, Earnings, Charges and Annual Accounting...59
Section 6.6 Assignment to the Lender of Reserve Accounts and Rights
and Claims.......................................................60
Section 6.7 Application of Reserve Accounts Upon an Event of Default.........60
Section 6.8 Disbursements from Tax and Insurance Reserve Account.............61
Section 6.9 Disbursements from Repair Escrow Account and Replacement
Reserve Account..................................................61
Section 6.10 Disbursements from Cash Management Account.......................63
Section 6.11 Indemnification..................................................64
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
Section 7.1 Events of Default................................................64
Section 7.2 Remedies.........................................................66
ARTICLE VIII
CASUALTY LOSSES; EMINENT DOMAIN
Section 8.1 Repairs and Casualty Losses......................................67
Section 8.2 Eminent Domain...................................................67
Section 8.3 Application of Insurance Proceeds and Condemnation Awards........68
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Remedies Cumulative; Waivers.....................................69
Section 9.2 Benefit..........................................................70
Section 9.3 Assignment and Assumption........................................70
Section 9.4 Securitization Cooperation/Indemnification.......................72
Section 9.5 Information......................................................76
Section 9.6 Nonrecourse Loan; Exceptions.....................................76
Section 9.7 Amendments.......................................................76
Section 9.8 Governing Law and Jurisdiction...................................76
Section 9.9 Savings Clause...................................................77
Section 9.10 Execution in Counterparts........................................77
Section 9.11 Notices..........................................................77
Section 9.12 Right of Set-Off.................................................77
Section 9.13 Written Agreement................................................78
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Section 9.14 Waiver of Jury Trial.............................................78
Section 9.15 Cross Default, Cross-Collateralization, Waiver of Marshalling
of Assets........................................................79
Section 9.16 Servicer.........................................................79
ARTICLE X
SPECIAL PROVISIONS
Section 10.1 Termination of Manager...........................................80
Section 10.2 Substitution of Operating Lessee.................................80
SCHEDULES
SCHEDULE 1 Allocated Loan Amounts
SCHEDULE 2 Franchise Agreements
SCHEDULE 3 Operating Leases
SCHEDULE 4 Equipment Leases
SCHEDULE 5 Multi-Family Leases
SCHEDULE 6 Property-Specific Leases
EXHIBITS
EXHIBIT A Equity Interests
EXHIBIT B Immediate Repairs, Replacements and Reserve Amounts
EXHIBIT C Addresses for Notice
EXHIBIT D Program Rider
EXHIBIT E-1 Form of Subordination, Nondisturbance and Attornment Agreement
for Summerfield Operating Leases
EXHIBIT E-2 Form of Subordination and Attornment Agreement for Residence
Inn Operating Leases
EXHIBIT F Form of Tenant Estoppel Certificate
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EXHIBIT G Form of Subordination, Nondisturbance and Attornment Agreement
for Subleases
EXHIBIT H Form of Hazardous Substance Indemnification Agreement
EXHIBIT I Form of Operating Lessee Estoppel Certificate
EXHIBIT J Form of Line of Credit Direction Letter
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LOAN AGREEMENT
LOAN AGREEMENT, dated as of September 24, 1999 (together with
all exhibits, schedules, riders and addenda hereto, which are hereby
incorporated herein, the "Loan Agreement" or "Agreement"), by and between
INNKEEPERS RI NORTHWEST, L.P., a Virginia limited partnership, and INNKEEPERS
SUMMERFIELD GENERAL, L.P., a Virginia limited partnership (each an "Individual
Borrower" and collectively, the "Borrower"), each with its principal place of
business at 000 Xxxxx Xxxxxxxxx Xxx, Xxxx Xxxxx, Xxxxxxx 00000, and BANK OF
AMERICA, N.A., a national banking association, with its principal offices in
Charlotte, North Carolina (together with its successors and assigns, the
"Lender").
RECITALS:
The Borrower has applied to the Lender for a loan in the
original principal amount of $58,000,000 (the "Loan") to be made by the Lender
pursuant to the terms hereof.
The Loan will be secured by, among other things, a first
priority lien on the Land, Improvements, Personalty and Rents and Profits.
The Lender is willing to make the Loan based on the terms and
conditions set forth in this Loan Agreement and subject to the execution and
delivery of each of the Loan Documents.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Borrower Principal and the Lender hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
As used in this Agreement, the other Loan Documents, or any
certificate or other document made or delivered pursuant hereto, the capitalized
terms used herein shall, unless otherwise defined herein or therein, have the
following meanings:
Additional Repair(s). Any repairs, replacements or
improvements, (i) other than Immediate Repairs, which are advisable to keep the
Premises in good order and repair and in good marketable condition, or to
prevent deterioration of the Premises, or (ii) with respect to any Immediate
Repair the amount by which such Immediate Repair exceeds 125% of the estimated
cost of such Immediate Repair as set forth in Exhibit B hereto.
Adjusted Release Amount. Shall mean, for any Individual
Property, 125% of the Allocated Loan Amount for such Individual Property.
Affiliate(s). As to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person,
including without limitation (i) any person who has a familial relationship, by
blood, marriage or otherwise with any member or employee of Borrower, or any
affiliate thereof and (ii) any Person which receives compensation for
administrative, legal or accounting services from the Borrower or any affiliate.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" or
"controlled" have meanings correlative to the foregoing.
Notwithstanding anything to the contrary contained in this
Loan Agreement, any two Persons whose shares are both publicly traded shall not
be deemed Affiliates regardless of any common shareholders or directors.
Allocated Loan Amount. Shall mean the portion of the Loan
Amount allocated, solely for purposes of performing certain calculations
hereunder, to each Individual Property, as set forth in Schedule 1 hereto.
Appraisal. An appraisal of each Individual Property prepared
at the Borrower's expense by a qualified appraiser designated by and
satisfactory to the Lender, in accordance with written instructions from the
Lender, dated as of a date acceptable to the Lender and otherwise satisfactory
in form and substance to the Lender.
Approved Insurer. An insurer previously approved by the Lender
with a Standard and Poor's rating of AA or better, and which is authorized to
issue insurance in each state where an Individual Property is located.
Assignment of Leases and Rents. Each of the Assignments of
Leases and Rents, dated as of even date herewith, executed by each Borrower, as
Operating Lessor, assigning the interest of each Borrower under the Operating
Lease and any additional rights to rents from the Premises to Lender.
Bankruptcy Event. As to any Person, the occurrence of any of
the following with respect to such Person: (i) a court or governmental agency
having jurisdiction over the Premises shall enter a decree or order for relief
in respect of such Person in an involuntary case under any applicable
bankruptcy, insolvency, reorganization, moratorium, sequestration, liquidation,
consolidation or other similar law now or hereafter in effect, or appoint a
receiver, liquidator, assignee, custodian, conservator, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its property
or order the winding up or liquidation of its affairs; (ii) an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect is commenced against a Person and such petition remains
unstayed and in effect for a period of sixty (60) consecutive days; (iii) such
Person shall commence a voluntary case under any applicable bankruptcy,
insolvency or similar law or make any general assignment for the benefit of
creditors; (iv) such Person shall admit in writing its inability to pay its
debts generally as they become due (otherwise than on a purely temporary basis),
or (v) such Person shall take any action in furtherance of any of the aforesaid
purposes.
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Basic Carrying Costs. Shall mean, with respect to an
Individual Property, the sum of the following costs associated with such
Individual Property for the relevant calendar year or payment period: (i) Taxes
(as defined in the Cash Management Agreement) and (ii) Insurance Premiums (as
defined in the Cash Management Agreement).
Borrower Party. Shall mean the Borrower Principal, any
guarantor, any general partner of Borrower if Borrower is a partnership or
limited partnership, any general partner in any partnership or limited
partnership that is a general partner of Borrower, any managing member of
Borrower if Borrower is a limited liability company, and any managing member in
any limited liability company that is a managing member of Borrower, any at any
level.
Borrower Principal. Shall mean Innkeepers USA Limited
Partnership, a Virginia limited partnership.
Business Day. Any day other than a Saturday, a Sunday, a legal
holiday in Charlotte, North Carolina, or a day on which banking institutions
located in Charlotte, North Carolina are authorized by law or other governmental
action to close.
Cash Management Account. An Eligible Account established and
maintained pursuant to the terms of this Loan Agreement.
Cash Management Agreement. The Cash Management Agreement,
dated as of even date herewith, executed by the Borrower, the Lender and the
Servicer.
Certification. As to any specified report, Financial
Statement, Operating Statement, Rent Roll or other document, a written
certification by a Responsible Officer of the Person providing such report,
Financial Statement, Operating Statement, Rent Roll or other document that such
report, Financial Statement, Operating Statement, Rent Roll or other document,
as at the date thereof, (i) contains all of the information and statements
required to be set forth therein, (ii) that such information and statements are
true and correct in all material respects, (iii) that there is no untrue
statement of a material fact required to be stated therein, (iv) that there is
no failure to state therein any information or fact that is necessary to make
the information or statements contained therein, in light of the circumstances
under which they are made, not misleading, and (v) that there is no fact known
to such Responsible Officer that materially adversely affects any of the
information or statements set forth therein.
Closing Date. The date set forth in the first paragraph of
this Loan Agreement.
Code. Shall have the meaning set forth in the Note.
Commitment. The Lender's commitment letter, dated July 20,
1999, with respect to the Loan as accepted by the Borrower and the Borrower
Principal in accordance with the terms thereof.
Debt Service. Shall mean the installments of principal and
interest due and payable in accordance with the Note, the Defeased Note or the
Undefeased Note, as the case may be, during any applicable period.
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Debt Service Coverage Ratio Leases. Shall mean the ratio that
shall be applied by Lender for the applicable period calculated as follows
(assuming for purposes of this calculation, the Debt Service would include
amortization based on a twenty-two (22) year amortization schedule):
(a) with respect to the Operating Leases for the
Premises, the ratio of the (i) Net Operating Income
Leases for the Premises for the immediately preceding
twelve (12) calendar month period to (ii) the Debt
Service that would be due on the Loan with respect to
the Premises for the twelve (12) calendar month
period immediately following such calculation; and
(b) with respect to any Operating Leases for an
Individual Property, the ratio of (i) Net Operating
Income Leases for the subject Individual Property for
the immediately preceding twelve (12) month period to
(ii) the projected Debt Service that would be due
with respect to the Allocated Loan Amount applicable
to the subject Individual Property for the twelve
(12) month period immediately following such
calculation.
Debt Service Coverage Ratio Premises. Shall mean the ratio to
be applied by Lender, calculated as follows:
(a) with respect to revenues of the Premises, the ratio
of (i) Net Operating Income Premises of the Premises
for the immediately preceding twelve (12) calendar
month period to (ii) the projected Debt service that
would be due on the Loan with respect to the Premises
for the twelve (12) month period immediately
following such calculation; and
(b) with respect to an Individual Property, the ratio of
(i) Net Operating Income Premises for the subject
Individual Property for the immediately preceding
twelve (12) month period to (ii) the projected Debt
Service that would be due with respect to the
Allocated Loan Amount applicable to the subject
Individual Property for the twelve (12) month period
immediately following such calculation.
Debt Service Reserve Account: Shall mean an Eligible Account
established and maintained pursuant to the terms of this Loan Agreement.
Default Condition. The occurrence or existence of an event or
condition which, upon the giving of notice or the passage of time, or both,
would constitute an Event of Default.
Defeasance. Shall have the meaning set forth in the Note.
Defeasance Collateral. Shall have the meaning set forth in
Section 4(b)(i)(C)(2) of the Note.
Defeased Note. Shall have the meaning set forth in Section
4(c) of the Note.
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Eligible Account. An account or accounts that are either (i)
maintained with a federal or state-chartered depository institution or trust
company whose commercial or finance paper or other similar obligations are rated
A-1 or better by Standard and Poor's, P-1 or better by Xxxxx'x, D-1 by Duff, or
F-1 + by Fitch, (ii) maintained with a depository institution with a minimum
long-term unsecured debt rating of AA or better by Standard & Poor's or Fitch
and Duff, or Aaa or better by Xxxxx'x, provided that the deposits in such
account or accounts are fully insured by the Federal Deposit Insurance
Corporation, (iii) a segregated trust account maintained with the corporate
trust department of an institution with capital and surplus of not less than
$50,000,000 and with a minimum long-term unsecured debt rating of AA or better
by Standard & Poor's or Fitch and Duff, or Aaa or better by Xxxxx'x, or (iv)
otherwise acceptable to the Lender.
Eligible Institution. shall mean a depository institution or
trust company insured by the Federal Deposit Insurance Company the short term
unsecured debt obligations or commercial paper of which are rated at least A-1
by S & P and P-1 by Xxxxx'x, in the case of accounts in which funds are held for
30 days or less (or, in the case of accounts in which funds are held for more
than 30 days, the long term unsecured debt obligations of which are rated at
least "AA-" by S&P and "Aa3" by Xxxxx'x).
Engineering Report. An engineering report of the Premises from
an engineer approved by the Lender and dated as of a date acceptable to the
Lender, which report shall, among other things, conform to all requirements of
the Lender and address the requirements of the Americans with Disabilities Act
of 1990.
Environmental Assessment. A report of a Phase I environmental
assessment of each Individual Property (and, if recommended by the Phase I
environmental assessment, a Phase II environmental assessment including, but not
limited to, the taking of soil borings and air and ground water samples and
other above and below ground testing) of such scope as the Lender may request,
by a consulting firm acceptable to the Lender, which shall, among other things,
be dated as of a date acceptable to the Lender and conform to (i) the current
minimum standards for the American Society of Testing and Materials, and (ii)
the Lender's then current requirements.
Environmental Covenant(s). Each of the covenants, agreements
and/or indemnities set forth in Section 5.3 of this Loan Agreement.
Environmental Indemnity. Shall mean an Environmental
Indemnification Agreement in a form acceptable to Lender in its sole discretion
setting forth such covenants, agreements and/or indemnities sufficient to
indemnify Lender, including without limitation, the covenants, agreements and
indemnities set forth in Section 5.3 of this Loan Agreement.
Equity Interests. Any and all shares, interests,
participations and other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person not a
corporation (including, without limitation, general and limited partnership
interests in a limited partnership), and any and all warrants and options to
purchase any of the foregoing.
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ERISA. The Employee Retirement Income Security Act of 1974.
Event of Default. The occurrence of any event or condition
specified in Section 7.1 of this Loan Agreement.
Financial Statement. With respect to the Borrower, shall mean
(i) an Operating Statement with respect to each Individual Property showing
profits and losses and budgeted to actual of revenues and expenses, (ii) a
statement with respect the Premises showing profits and losses and a comparison
of budgeted to actual for revenues and expenses and (iii) an Operating Statement
for each Individual Property based upon a report prepared annually based upon
agreed upon procedures prepared by a "Big Five" accounting firm or other
independent certified public accountant acceptable to Lender. With respect to
the REIT, shall mean for any specified period, (i) the 10Q filed with the SEC by
the REIT on a quarterly basis, (ii) the 10K filed with the SEC by the REIT on an
annual basis, (iii) audited financial statements for the consolidated REIT on an
annual basis, and (iv) the REIT's annual budget, to the extent such information
is a matter of public record. As to any other indicated Person, for any
specified period, financial statements of such Person, including, at a minimum,
a current balance sheet, a current income and expense statement, a statement
showing contingent liabilities and any other supporting schedules or
documentation that the Lender may from time to time require, and, in the case of
the Borrower, a detailed cash flow statement for each property and/or entity in
which the Borrower has an interest, prepared in accordance with Required
Accounting Standards. The Operating Statements provided shall include, as
applicable, with respect to each Individual Property, the property and entity
name, location, size (including the number of rooms with respect to hotels),
occupancy status, its average daily rate, its revenue per available room, its
Operating Income Premises (including the sources of Operating Income Premises),
its Operating Expenses Premises, its Net Operating Income Premises, any loan
balance currently outstanding, the amount and beneficiary of any cash
distributions by such person, the amount invested in and/or received from such
property or entity. Each Financial Statement shall include a Certification
thereto. All required financial statements shall list only the assets of the
indicated Person, and in no event shall the assets of the indicated Person
include the assets of any other entity. Each financial statement shall be
accompanied by (i) a comparison of the budgeted income and expenses and the
actual income and expenses for the prior fiscal year, (ii) a certificate
executed by the chief financial officer of the Person stating that each such
annual financial statement presents fairly the financial condition and the
results of the operations of the Person and the Property being reported upon and
has been prepared in accordance with Required Accounting Standards, (iii) a
report prepared annually based upon agreed upon procedures prepared by a "Big
Five" accounting firm or other independent certified public accountant
reasonably acceptable to Lender, and (iv) as to any Person other than Borrower,
Borrower Principal or the REIT, a schedule audited by such independent certified
public accountant reconciling Net Operating Income to Net Cash Flow, which shall
itemize all adjustments made to Net Operating Income to arrive at Net Cash Flow
deemed material by such independent certified public accountant.
Financing Statements. The UCC financing statements filed in
order to perfect the Lender's lien on certain personal property and fixtures as
more particularly described therein. The Financing Statements shall be on forms
approved for filing in the applicable state and local filing offices of the
applicable state in which any filings are necessary or, in the Lender's opinion
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desirable, to be made to perfect the interests of the Lender granted under the
Loan Documents, together with the search results for such filing offices,
including copies of all reported financing statements.
Franchise Agreement. Means, with respect to any Individual
Property, that certain franchise agreement more specifically identified on
Schedule 2 attached hereto. With respect to Sections 2.6, 5.1(x), 5.2(k) and the
Program Rider, Franchise Agreement means, in addition, any franchise brand owned
by Marriott International, Inc., Promus Hotel Corp., Hilton Hotels Corp., Bass
PLC, and Hyatt Corporation.
GAAP. Generally accepted accounting principles, as from
time-to-time in effect in the United States of America, consistently applied
except as disclosed in the notes to the financial statements prepared for the
REIT and filed with the SEC or otherwise disclosed in writing to Lender and
approved by Lender.
Governmental Action. The issuance or reasonably threatened
issuance of any claim, citation, notice of any pending or threatened suit,
proceeding, order or governmental inquiry or opinion involving the Premises that
alleges the violation of any Requirement of Law or Hazardous Materials Law.
Governmental Authorities. Any governmental (including health
and environmental) agency, office, officer or official whose consent or approval
is required as a prerequisite to the commencement of the construction,
renovation or expansion of the Improvements or to the operation and occupancy of
the Improvements or the Premises or to the performance of any act or obligation
or the observance of any agreement, provision or condition of whatsoever nature
herein contained.
Ground Lease. Each ground lease, if any, pursuant to which the
Borrower acquires an interest as ground lessee of any portion of the Premises.
Hazardous Materials. Includes petroleum and petroleum
products, flammable explosives, radioactive materials (excluding radioactive
materials in smoke detectors), polychlorinated biphenyls, lead, asbestos or
asbestos containing materials in any form that is or could become friable,
hazardous waste, toxic or hazardous substances or other related materials
whether in the form of a chemical, element, compound, solution, mixture or
otherwise including, but not limited to, those materials defined as "hazardous
substances," "extremely hazardous substances," "hazardous chemicals," "hazardous
materials," "toxic substances," "solid waste," "toxic chemicals," "air
pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous
waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated
by Hazardous Materials Law in any manner whatsoever, and all other "Hazardous
Materials", if any, identified in the Program Rider.
Hazardous Materials Law. All federal, state, and local laws,
ordinances and regulations and standards, rules, policies and other governmental
requirements and any court judgments applicable to the Borrower or to the
Premises relating to industrial hygiene or to environmental or unsafe conditions
or to human health including, but not limited to, those
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relating to the generation, manufacture, storage, handling, transportation,
disposal, release, emission or discharge of Hazardous Materials, those in
connection with the construction, fuel supply, power generation and
transmission, waste disposal or any other operations or processes relating to
the Premises, and those relating to the condition of the atmosphere, soil,
surface and ground water, wetlands, stream sediments and vegetation on, under,
in or about the Premises. "Hazardous Materials Law" also shall include, but not
be limited to, the following laws, as amended as set forth herein and as
subsequently amended: (1) the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 USCA 9601 et seq.; (2) the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976,
as amended by the Hazardous and Solid Waste Amendments of 1984, 42 USCA 6901 et
seq.; (3) the Federal Water Pollution Control Act, as amended by the Clean Water
Act of 1977, 33 USCA 1251 et seq.; (4) the Toxic Substances Control Act, 15 USCA
2601 et seq.; (5) the Emergency Planning and Community Right-to-Know Act of
1986, 42 XXXX 00000 et seq.; (6) the Clean Air Act, as amended by the Clean Air
Act Amendments, 42 USCA 7401 et seq.; (7) the National Environmental Policy Act
of 1969, 42 USCA 4321 et seq.; (8) the River and Harbor Act of 1899, 33 USCA 401
et seq.; (9) the Endangered Species Act of 1973, 16 USCA 1531 et seq.; (10) the
Occupational Safety and Health Act of 1970, 29 USCA 651 et seq.; (11) the Safe
Drinking Water Act, 42 USCA 300(f) et seq.; and (12) the Hazardous Materials
Transportation Act, 49 USCA 1801 et seq., and all regulations from time to time
adopted in respect to the foregoing laws.
Hazardous Substance Indemnity. Shall mean a Hazardous
Substance Indemnification Agreement substantially in the form attached hereto as
Exhibit H.
Immediate Repair(s). Those repairs, replacements and
improvements listed as "Immediate Repairs" on Exhibit B hereto.
Improvements. As defined in the Security Instruments.
Indemnitor. Shall mean the Borrower.
Individual Property. Shall mean each parcel of real property
and the Improvements thereon encumbered by the Security Instruments, together
with all rights pertaining to such property and improvement as more particular
described in the granting clauses of the Security Instruments and comprising the
Premises.
Initial Reserve Deposit(s). Any amount required to be
deposited into any Reserve Account on or before the Closing Date in accordance
with the terms of this Loan Agreement, including without limitation, any initial
deposit to any Reserve Account identified on Exhibit B hereto or in the Program
Rider.
Insurance. All of the following insurance coverages:
(i) Property Insurance. Insurance with respect to the
Improvements against any peril included within the classification "All
Risks of Physical Loss" with extended coverage in amounts at all times
sufficient to prevent it from becoming a co-insurer
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within the terms of the applicable policies, but in any event such
insurance shall be maintained in an amount equal to the full insurable
value of the Premises and with deductibles acceptable to the Lender.
The term "full insurable value" as used herein shall mean the actual
replacement cost of the Premises (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping and paving). The policy must include an agreed value
clause, which must be updated annually.
(ii) Liability Insurance. Comprehensive general liability
insurance, including bodily injury, death and property damage
liability, dram shop coverage and umbrella liability insurance against
any and all claims, including all legal liability to the extent
insurable imposed upon the Lender and all court costs and attorneys'
fees and expenses, arising out of or connected with the possession,
use, leasing, operation, maintenance or condition of the Premises in
such amounts as the Lender may require but in no event for a combined
single limit of less than a $1,000,000.00 minimum (or a $3,000,000.00
minimum if the Premises contains one or more elevators) with a
$2,000,000.00 minimum (or a $6,000,000.00 minimum if the Premises
contains one or more elevators) general aggregate limit. In the event
that any payment of proceeds is made under any umbrella liability
insurance policy, the Borrower shall immediately purchase additional
liability insurance coverage so that at all times there shall be no
less than a $1,000,000.00 minimum (or a $3,000,000.00 minimum if the
Premises contains one or more elevators) of liability insurance
coverage per occurrence with a $2,000,000.00 minimum (or a
$6,000,000.00 minimum if the Premises contains one or more elevators)
general aggregate limit.
(iii) Workers' Compensation Insurance. Statutory workers'
compensation insurance (to the extent the risks to be covered thereby
are not already covered by other policies of insurance maintained by
it), providing minimum limits of $1,000,000.00 for each accident with
respect to any work on, about or regarding the Premises.
(iv) Business Interruption. Business interruption and/or "loss
of rental" insurance, as appropriate, in an amount equal to eighteen
(18) months of the Premises' projected gross income and an extended
period of indemnity endorsement providing an additional eighteen (18)
months business interruption or rental loss insurance after the
Premises has been restored or until the projected gross income returns
to the level that existed prior to the happening of the loss, whichever
is first to occur, and, in any event in an amount sufficient to avoid
any co-insurance penalty and to provide proceeds which will cover a
period of at least eighteen (18) months or such other period acceptable
to the Lender in its reasonable discretion.
(v) Boiler and Machinery Insurance. Broad form boiler and
machinery insurance covering all boilers and other pressure vessels,
machinery and equipment located in, on or about the Premises and
insurance against loss of occupancy or use arising from any such
breakdown in an amount equal to 100% of the actual replacement cost of
such machinery (without taking into account any depreciation) and
containing such deductibles as the Lender may require.
9
(vi) Flood Insurance. If all or any portion of the Premises is
located within a federally designated flood hazard zone, flood
insurance as is generally available and in such amounts and with such
deductibles as the Lender may require.
(vii) Other Insurance. Such other insurance (including,
without limitation, earthquake insurance, and law and ordinance
insurance) with respect to the Premises against loss or damage of the
kinds from time to time required by the Lender in connection with loans
secured by properties comparable to the Premises.
Intangible Personalty. As defined in the Security Instruments.
Land. As defined in the Security Instruments.
Lease(s). As defined in the Cash Management Agreement.
Lessee. As defined in the Cash Management Agreement.
Letter of Credit. Shall mean shall mean an irrevocable,
unconditional standby letter of credit in favor of Lender and entitling Lender
to draw thereon in Charlotte, North Carolina, issued by an Eligible Institution.
Lien. Any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any financing lease
having substantially the same economic effect as any of the foregoing).
Loan. Shall have the meaning set forth in the recitals hereto.
Loan Amount. The original principal amount of the Note.
Loan Document(s). This Loan Agreement, the Note, the Security
Instruments, the Financing Statements, the Assignment of Leases and Rents, the
Subordination and Attornment Agreement, the Subordination, Non-Disturbance and
Attornment Agreement, the Tenant Estoppel Certificates, the Hazardous Substance
Indemnity, the Cash Management Agreement, the Contribution Agreement, the Pledge
Agreement and all other documents evidencing, securing or relating to the Loan.
Loan to Value Ratio. Shall mean the quotient of the then
outstanding principal amount of the Loan divided by the value of the Premises
remaining subject to the Lien of the Security Instruments (together with the
value of any Defeasance Collateral), pursuant to Lender's review and approval of
a new or updated Appraisal obtained by Lender at Borrower's expense.
Lockbox Account. The account specified for deposits of Rents
and Profits and other receipts from the Premises.
10
Management Agreement. Shall mean, with respect to any
Individual Property, the written management agreement for each Individual
Property, if any, in form and substance satisfactory to the Lender, by and
between the Borrower, as owner, and a management company acceptable to the
Lender, as manager.
Manager. Shall mean the manager of the Premises under the
Management Agreement and its successors and assigns.
Maturity Date. Shall have the meaning set forth in the Note.
Minimum Defeasance Collateral Requirement. Shall mean, with
respect to a Property Release resulting in a Defeasance (other than a total
Defeasance of the Loan), Defeasance Collateral in an amount sufficient to pay
125% of the Allocated Loan Amount applicable to the Individual Property which is
the subject of the Property Release, and sufficient to pay scheduled interest
payments (such payments, the "Defeasance Debt Service Payments") on the portion
of the Loan equal to such Allocated Loan Amount on such Individual Property,
through and including the Maturity Date together with the outstanding principal
balance of the Note as of the Maturity Date. Sufficient portions of the
Defeasance Collateral must mature on or before the dates when such amounts are
required to be applied to pay Defeasance Debt Service Payments when due.
Monthly Reserve Deposits. Any monthly payment or deposit
required in connection with any Reserve Account, including without limitation,
any monthly payments or deposits to any Reserve Account identified in Exhibit B
hereto or in the Program Rider.
Net Operating Income Leases. With respect to any specified
period, (i) Operating Income Leases, minus (ii) (A) Operating Expenses Leases,
and (B) replacement reserves (which includes capital expenditures) equal to four
percent (4%) of Operating Income Leases.
Net Operating Income Premises. With respect to any specified
period, (i) Operating Income Premises, minus (ii) (A) Operating Expenses
Premises, (B) management expenses equal to the greater of actual management
expenses or four percent (4%) of Operating Income Premises; and (C) replacement
reserves (which includes capital expenditures) equal to four and one-half
percent (4 1/2%) of Operating Income Premises.
Non-Consolidation Opinion. Shall have the meaning set forth in
Section 4.27 hereof.
Note. The promissory note of the Borrower in connection with
the Loan in favor of the Lender, together with all prior notes amended,
modified, renewed, extended, restated, supplemented, replaced or substituted
thereby.
Note Payment Amount. For any Payment Date, the total amount
due and owing under the Note on such Payment Date.
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O&M Program. An operations and maintenance program (in form
and substance satisfactory to the Lender) relating to the use, handling and/or
abatement of one or more Hazardous Materials and which is accepted in writing by
the Borrower.
Obligations. As to any stated Person, the unpaid principal of
and interest on any promissory note or other indebtedness of such Person
(including, without limitation, interest accruing after the maturity of any such
promissory note or indebtedness and interest accruing thereon after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to such Person, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
and all other obligations and liabilities of such Person, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without limitation,
all fees and disbursements of counsel) or otherwise.
Officer's Certificate. Shall mean a certificate delivered to
Lender and signed by an officer of the Borrower.
Operating Expenses Leases. Any expense paid or to be paid by
the Borrower (or any of its agents or by the Lender on account or on behalf of
the Borrower) under the Operating Lease determined on an accrual basis, in
accordance with GAAP, including, without limitation, (i) all payments required
to be made pursuant to any franchise or other agreement, (ii) undistributed
expenses, including without limitation, general and administrative, marketing,
utilities, operations and maintenance, (iii) legal, accounting, appraisal and
other professional fees, costs and disbursements, including annual fees and
other amounts (including indemnity payments) payable annually or otherwise, (iv)
taxes, insurance premiums and impositions of any type, and (v) all items, if
any, defined as an Operating Expenses Leases herein. Notwithstanding the
foregoing, Operating Expenses Leases will not include (A) depreciation or
amortization, (B) any expenses that in accordance with GAAP should be
capitalized (other than current charges for any such expenses included in the
preceding sentence), (C) the principal of and interest on the Note and (D) any
item of expense that would otherwise be considered within Operating Expenses
Leases pursuant to the provisions above but which is required to be paid
directly by the Operating Lessee under the Operating Lease.
Operating Expenses Premises. Any expenses in connection with
the operation of the Premises determined (as if there were no Operating Lease)
on an accrual basis, in accordance with GAAP, including, without limitation, (i)
all payments required to be made pursuant to any franchise agreement, (ii)
undistributed expenses, including without limitation, general and
administrative, marketing, utilities, operations and maintenance, and other
expenses and deposits required to be made to the Reserve Accounts, as
appropriate, (iii) legal, accounting, appraisal and other professional fees,
costs and disbursements, including annual fees and other amounts (including
indemnity payments) payable annually or otherwise, (iv) taxes (real or
personal), insurance premiums and impositions of any type, (v) all items, if
any, defined as an Operating Expenses Premises in the Program Rider, and (vi)
the direct operating expenses. Notwithstanding the foregoing, Operating Expenses
Premises will not include (A) depreciation or amortization, (B) any expenses
that in accordance with GAAP should be capitalized (other
12
than current charges for any such expenses included in the preceding sentence),
(C) the principal of and interest on the Note and (D) management fees.
Operating Income Leases. Shall mean all rent payments to
Borrower under the Operating Leases.
Operating Income Premises. Shall mean, as if there were no
Operating Lease, all rents (net of concessions), charges, fees, expense
recovery, revenues and other income (including interest income) paid (other than
security deposits from tenants or other Persons under valid leases or other
agreements and insurance, eminent domain or similar proceeds and awards paid
directly to the Lender pursuant to the provisions of the Loan Agreement and any
disbursements to Borrower from any Reserve Accounts) at any time to the Borrower
(or to any of its agents for the account of the Borrower) by any Person in
connection with the operation of the Premises or under the Operating Leases, as
applicable, determined on an accrual basis, and all items, if any, defined as
Operating Income in the Program Rider.
Operating Lease. Shall mean, with respect to any Individual
Property, the lease agreement in effect between Borrower and the Operating
Lessee for the use and operation of each Individual Property and all amendments,
modifications, renewals, substitutions or replacements of such lease. The
initial Operating Leases in effect as of the date hereof are identified on
Schedule 3 hereto.
Operating Lessee. Shall mean, with respect to each Summerfield
Suites Individual Property, Summerfield KPA Lessee, L.P., together with their
approved successors and assigns, and with respect to each Residence Inn
Individual Property, Innkeepers Hospitality VII, Inc., together with their
approved successors and assigns.
Operating Lessor. Shall mean, with respect to each Summerfield
Suites Individual Property, Innkeepers Summerfield General, L. P. and with
respect to each Residence Inn Individual Property, Innkeepers RI Northwest, L.P.
Operating Statement. As to the Premises, for any period
indicated, a statement of the Borrower, as reflecting, truly and accurately, the
items set forth therein as at the date thereof, showing the Operating Income
Premises and Operating Expenses Premises for the indicated period. Each
Operating Statement shall include a Certification.
Opinion of Counsel. Shall have the meaning given in Section
3.8 of this Loan Agreement.
Partial Defeasance Collateral. Shall mean U.S. Obligations
which provide payments (i) on or prior to, but as close as possible to, all
Scheduled Payment Dates and other scheduled payment date, if any, under the
Defeased Note after the Partial Defeasance Date and up to and including the
Maturity Date, and (ii) in amounts equal to or greater than the Scheduled
Defeasance Payments.
Partial Defeasance Date. Shall have the meaning given in
Section 4(c) of the Note.
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Payment Date. Each date any payment of principal or interest
on the Note is due and payable thereunder.
Permitted Encumbrances. As defined in the Security
Instruments, together with (i) any Liens which have been bonded over (A) within
thirty (30) days after the date of filing thereof, (B) with a bonding company
satisfactory to the Lender, (C) in an amount satisfactory to the Lender, and (D)
otherwise in form and substance satisfactory to the Lender, in each case, in the
Lender's reasonable discretion, and (ii) Liens on or leases of equipment
acquired in the ordinary course of business and in reasonable amounts with
respect to satellite dishes, cable TV systems and other similar equipment which
is normally leased by other hotel owners.
Permitted Investments. Shall mean any one or more of the
following obligations or securities acquired at a purchase price of not greater
than par, including those issued by the servicer, the trustee under any
Securitization, as hereinafter defined, or any of their respective Affiliates,
payable on demand or having a maturity date not later than the Business Day
immediately prior to the first Monthly Payment Date following the date of
acquiring such investment and meeting one of the appropriate standards set forth
below:
(i) obligations of, or obligations fully guaranteed as to
payment of principal and interest by, the United States or any agency
or instrumentality thereof provided such obligations are backed by the
full faith and credit of the United States of America including,
without limitation, obligations of: the U.S. Treasury (all direct or
fully guaranteed obligations), the Farmers Home Administration
(certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S. Maritime
Administration (guaranteed Title XI financing), the Small Business
Administration (guaranteed participation certificates and guaranteed
pool certificates), the U.S. Department of Housing and Urban
Development (local authority bonds) and the Washington Metropolitan
Area Transit Authority (guaranteed transit bonds); provided, however,
that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot
vary or change, (B) if rated by Standard and Poor's, must not have an
"r" highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(ii) Federal Housing Administration debentures;
(iii) obligations of the following United States government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt
obligations), the Farm Credit System (consolidated systemwide bonds and
notes), the Federal Home Loan Banks (consolidated debt obligations),
the Federal National Mortgage Association (debt obligations), the
Student Loan Marketing Association (debt obligations), the Financing
Corp. (debt obligations), and the Resolution Funding Corp. (debt
obligations); provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by Standard and
Poor's, must not have an "r" highlighter affixed to their rating, (C)
if such investments
14
have a variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(iv) federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements with
maturities of not more than 365 days of any bank, the short term
obligations of which at all times are rated in the highest short term
rating category by each Rating Agency, as hereinafter defined, (or, if
not rated by all Rating Agencies, rated by at least one Rating Agency
in the highest short term rating category and otherwise acceptable to
each other Rating Agency, as confirmed in writing that such investment
would not, in and of itself, result in a downgrade, qualification or
withdrawal of the initial, or, if higher, then current ratings assigned
to the Securities); provided, however, that the investments described
in this clause must (A) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (B) if rated by Standard
and Poor's, must not have an "r" highlighter affixed to their rating,
(C) if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed spread
(if any) and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their maturity;
(v) fully Federal Deposit Insurance Corporation-insured demand
and time deposits in, or certificates of deposit of, or bankers'
acceptances issued by, any bank or trust company, savings and loan
association or savings bank, the short term obligations of which at all
times are rated in the highest short term rating category by each
Rating Agency (or, if not rated by all Rating Agencies, rated by at
least one Rating Agency in the highest short term rating category and
otherwise acceptable to each other Rating Agency, as confirmed in
writing that such investment would not, in and of itself, result in a
downgrade, qualification or withdrawal of the initial, or, if higher,
then current ratings assigned to the Securities); provided, however,
that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot
vary or change, (B) if rated by Standard and Poor's, must not have an
"r" highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(vi) debt obligations with maturities of not more than 365
days and at all times rated by each Rating Agency (or, if not rated by
all Rating Agencies, rated by at least one Rating Agency and otherwise
acceptable to each other Rating Agency, as confirmed in writing that
such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings assigned to the Securities) in its highest long-term unsecured
rating category; provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar of principal due
at maturity that cannot vary or change, (B) if rated by Standard and
Poor's, must not have an "r" highlighter affixed to their rating, (C)
if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus
15
a fixed spread (if any) and must move proportionately with that index,
and (D) such investments must not be subject to liquidation prior to
their maturity;
(vii) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than one year after the date of
issuance thereof) with maturities of not more than 365 days and that at
all times is rated by each Rating Agency (or, if not rated by all
Rating Agencies, rated by at least one Rating Agency and otherwise
acceptable to each other Rating Agency, as confirmed in writing that
such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings assigned to the Securities) in its highest short-term unsecured
debt rating; provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by Standard and
Poor's, must not have an "r" highlighter affixed to their rating, (C)
if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed spread
(if any) and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their maturity;
(viii) units of taxable money market funds or mutual funds,
which funds are regulated investment companies, seek to maintain a
constant net asset value per share and invest solely in obligations
backed by the full faith and credit of the United States, which funds
have the highest rating available from each Rating Agency for taxable
money market funds or mutual funds (or, if not rated by all Rating
Agencies, rated by at least one Rating Agency and otherwise acceptable
to each other Rating Agency, as confirmed in writing that such
investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings assigned to the Securities) for money market funds or mutual
funds; and
(ix) any other security, obligation or investment which has
been approved as a Permitted Investment in writing by (a) Lender and
(b) each Rating Agency, as evidenced by a written confirmation that the
designation of such security, obligation or investment as a Permitted
Investment will not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings assigned to the Securities by such Rating Agency;
provided, however, that no obligation or security shall be a Permitted
Investment if (A) such obligation or security evidences a right to receive only
interest payments or (B) the right to receive principal and interest payments on
such obligation or security are derived from an underlying investment that
provides a yield to maturity in excess of 120% of the yield to maturity at par
of such underlying investment.
Person. An individual, a general or limited partnership, a
limited liability company, a limited liability partnership, a corporation, a
business trust, a joint stock company, a trust, an unincorporated association, a
joint venture, a Governmental Authority or other entity of whatever nature.
16
Personalty. The Tangible Personalty and the Intangible
Personalty.
Premises. The collective reference to the Land, the
Improvements and the Tangible Personalty for each of the eight (8) Individual
Properties more particularly described in the Security Instruments and any
Substituted Properties, less any Individual Properties released from the Lien of
the Security Instruments.
Program Rider. The Program Rider attached as Exhibit D to this
Loan Agreement.
Property Release. Shall have the meaning set forth in Section
2.5.
Prohibited Activities or Conditions. Causing or permitting,
whether directly or indirectly, (i) the presence, use, generation, manufacture,
production, processing, installation, release, discharge, storage (including
storage in above ground and underground storage tanks for petroleum or petroleum
products), treatment, handling, or disposal of any Hazardous Materials
(excluding the safe and lawful use and storage of quantities of Hazardous
Materials or petroleum products, customarily used in the ordinary operations of
the Borrower or customarily used in the ordinary operations of any tenant
previously approved by the Lender) on or under the Premises, or in any way
affecting the Premises or its value or which may form the basis for any present
or future claim, demand or action seeking cleanup of the Premises, (ii) the
transportation of any Hazardous Materials to or from the Premises (excluding the
safe and lawful use and storage of quantities of Hazardous Materials or
petroleum products, customarily used in the ordinary operations of the Borrower
or customarily used in the ordinary operations of any tenant previously approved
by the Lender), or (iii) any occurrence or condition on the Premises (or
exacerbation of the same) that is or may be in violation of Hazardous Materials
Law.
Qualified Manager. Means a professional management company
which at the time of its engagement as Manager shall be (or which together with
any Subsidiary and commonly controlled Persons, shall be) the property manager
for at least ten (10) hotel properties containing at least one thousand three
hundred (1,300) rooms exclusive of the Premises.
Qualified Operating Lessee. Means a hotel operating company
which at the time of its engagement as Operating Lessee shall be (or which
together with any Subsidiary and commonly controlled Persons, shall be)
operating and controlling, as owner, manager or operating lessee, at least
twelve (12) hotel properties consisting of at least one thousand five hundred
(1,500) rooms exclusive to the Premises, and (b) is a single purpose
bankruptcy-remote entity in accordance with the then-current standards of the
Rating Agencies.
Qualified Resultant Owner. Means one or more Persons which,
individually or collectively (together with any Subsidiary or commonly
controlled Person), own at least fifty-one percent (51%) of the beneficial
interest in and control of the REIT or the Borrower Principal, as applicable;
and (1)(a) is or is controlled by either a pension fund, pension fund advisor,
and insurance company, a domestic bank (with total assets of at least One
Billion Dollars ($1,000,000,000)) or publicly or privately traded real estate
investment trust or other publicly
17
traded or privately held company, (b) has a then current net worth of at least
One Hundred Million Dollars ($100,000,000) and total real estate assets of at
least Two Hundred Million Dollars ($200,000,000), in each case exclusive of the
Premises (or in the case of a pension fund advisor, controls at least Five
Hundred Million ($500,000,000) in real estate assets), and (c) controls
(exclusive of the Premises) at least ten (10) hotel properties containing in the
aggregate at least one thousand three hundred (1,300) rooms and (2) if the
transaction occurs at any time that the Loan is not part of a Securitization,
(x) such Person(s) are not and have not been, within the previous ten (10)
years, subject to any material, uncured event of default which resulted in
litigation or an acceleration of any indebtedness under any agreement with
Lender, (y) such Person(s) are not subject to any bankruptcy action and (z) the
principals or entities which control such Person(s) have never been convicted of
a felony.
Rating Agencies. Shall mean, as applicable, each of Standard &
Poor's Ratings Group, a division of XxXxxx-Xxxx, Inc. ("Standard and Poor's"),
Xxxxx'x Investors Services, Inc. ("Moody's"), Xxxx & Xxxxxx Credit Rating Co.
("Duff") and Fitch IBCA, Inc. ("Fitch"), or any other nationally-recognized
statistical rating agency which has been approved by Lender which rated the
securities in connection with the Securitization (as defined inss.9.3 below).
Recourse Covenant(s). Each of those covenants and/or
agreements set forth in Section 5.4 of this Loan Agreement.
REIT. Shall mean Innkeepers USA Trust, a Maryland real estate
investment trust.
Release Property. Shall have the meaning set forth in Section
4(c) of the Note.
REMIC. Shall have the meaning set forth in the Note.
Rent Roll. As to the Premises, a rent schedule in a form
acceptable to the Lender, including a Certification thereof, showing the legal
and trade name of each tenant, and for each tenant, the gross and net square
feet occupied, the lease expiration date, the rent payable (both base rent and
additional rent), right of first refusal, options, rights to move tenants,
security deposits and any other information requested by the Lender and, as to
any annual Rent Roll, copies of paid tax receipts for the related fiscal year.
Notwithstanding the foregoing, for purposes herein, Rent Roll shall not include
a roll with respect to the eight (8) residential Leases for the Individual
Property known as West Hollywood.
Rents and Profits. As defined in the Security Instruments.
Repair Escrow Account. An Eligible Account established and
maintained pursuant to the terms of this Loan Agreement.
Replacement Reserve Account. An Eligible Account established
and maintained pursuant to the terms of this Loan Agreement.
Required Accounting Standards. GAAP or such alternative
accounting standard as may be reasonably acceptable to the Lender, consistently
applied.
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Required DSCR. As defined in Section 7.1(n) of this Agreement.
Requirement(s) of Law. As to any Person, the organizational or
governing documents of such Person, and any statute, law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority (including, without limitation, all requirements relating to zoning,
parking, ingress and egress, building setbacks, or use of the Premises, all
Hazardous Materials Laws, the Architectural Barriers Act of 1968, the
Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, erosion
control ordinances, storm drainage control laws and doing business and/or
licensing laws), in each case applicable to or binding upon such Person or any
of its property or to which such Person or any of its property is subject.
Reserve Account(s). The Repair Escrow Account, the Tax and
Insurance Reserve Account, the Replacement Reserve Account, and all other
reserve and/or escrow accounts established or required pursuant to the
provisions of the Loan Documents, including, without limitation, pursuant to the
Program Rider.
Responsible Officer. As to any Person, the general partner (if
the general partner is not an individual, then the chief executive officer, the
chief financial officer or the president or similar individual of the general
partner), the chief executive officer, the chief financial officer, the
president, an executive vice president, a vice president or similar individual
of such Person.
Scheduled Defeasance Payments. Shall have the meaning set
forth in the Note.
SEC. Shall mean the United States Securities and Exchange
Commission.
Securities. Any certificates, notes or other securities issued
in connection with a Securitization of the Loan.
Securitization. Shall have the meaning set forth in Section
9.3 herein.
Security Instruments. The deeds of trust or other instruments,
dated as of even date herewith, executed by the Borrower granting to the Lender
a first priority lien or title priority on the Premises, the Intangible
Personalty and the Rents and Profits to secure the obligations of the Borrower
under the Loan Documents, together with all prior instruments amended, modified,
renewed, extended, restated, supplemented, replaced or substituted thereby.
Servicer. Shall mean Bank of America, N.A.
Special Purpose Entity. An entity whose structure and
organizational and governing documents are in form and substance acceptable to
the Lender and which satisfies all of the following requirements:
(i) Its purpose shall be limited solely to, as applicable, (a)
entering into this Loan Agreement with the Lender, (b) owning, holding,
selling, leasing, transferring, exchanging, operating and managing the
Premises and (c) transacting any and all lawful
19
business for which it may be organized under its constitutive law that
is incident, necessary and appropriate to accomplish the foregoing.
(ii) It does not own and will not own any asset or property
other than (a) the Premises, and/or (b) incidental Personalty necessary
for and used or to be used in connection with the ownership or
operation of the Premises.
(iii) It will not engage in any business other than the
ownership, management and operation of the Premises.
(iv) It will not enter into any contract or agreement with any
Affiliate, any constituent party of itself, any of its owners, any
guarantors of its obligations, or any Affiliate of any constituent
party, owner or guarantor (collectively, the "Related Parties") of
itself, except upon terms and conditions that are intrinsically fair,
commercially reasonable and substantially similar to those that would
be available on an arms-length basis with third parties not so
affiliated with itself or such Related Parties.
(v) It has not incurred and will not incur any indebtedness
other than, as applicable, (a) the Loan, (b) trade and operational debt
incurred in the ordinary course of business with trade creditors in
reasonable amounts, provided such debt is not evidenced by a note and
is not in excess of sixty days past due, and (c) equipment Leases in
the ordinary course of business and in reasonable amounts with respect
to satellite dishes, cable TV Systems and other similar equipment which
is normally leased by other hotel owners. No other indebtedness may be
secured (senior, subordinate or pari passu) by the Premises.
(vi) It has not made and will not make any loans or advances
to any Person and shall not acquire obligations or securities of any
Related Party.
(vii) It is and will remain solvent and it will pay its debts
and liabilities (including, as applicable, shared personnel and
overhead expenses) from its assets as the same shall become due.
(viii) It has done or caused to be done and will do all things
necessary to observe organizational formalities and preserve its
existence, and it will not, nor will it permit any related party to,
amend, modify or otherwise change the partnership certificate,
partnership agreement, articles of incorporation and bylaws, operating
agreement, trust or other organizational documents of Borrower or such
related party without the prior written consent of Lender.
(ix) It will maintain all of its books, records, financial
statements and bank accounts separate from those of any other Person
and its assets will not be listed as assets on the financial statement
of any other Person except to the extent required by GAAP for
accounting purposes. It will file its own tax returns and will not file
a consolidated federal income tax return with any other Person, except
to the extent required by the Internal Revenue Code. It shall maintain
its books, records, resolutions and agreements as official records.
20
(x) It will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other Person
(including any Affiliate or other related party), shall correct any
known misunderstanding regarding its status as a separate entity, shall
conduct business in its own name, shall not identify itself or any of
its Affiliates as a division or part of the other and shall maintain
and utilize separate checks.
(xi) It will maintain from its own assets (and without
contribution by other Persons) adequate capital for the normal
obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations.
(xii) Neither it nor any related party will seek its own
dissolution, winding up, liquidation, consolidation or merger in whole
or in part, or the sale of its material assets.
(xiii) It will not commingle its assets with those of any
other Person and will hold all of its assets in its own name.
(xiv) Other than the Contribution Agreement, it will not
guarantee or become obligated for the debts of any other Person and
does not and will not hold itself out as being responsible for the
debts or obligations of any other Person (except in the case of each
Residence Inn Individual Property, the guaranty by Borrower of the
obligations under the Franchise Agreement between Innkeepers
Hospitality Inc. and Marriott International, Inc.).
(xv) If it is a limited partnership or a limited liability
company, at least one general partner or member, or if it is a general
partnership at least two general partners (each, an "SPC Party") shall
be a corporation whose sole asset is the interest in Special Purpose
Entity and each such SPC Party will at all times comply, and will cause
it to comply, with each of the representations, warranties, and
covenants contained in this definition of Special Purpose Entity as if
such representation, warranty or covenant was made directly by such SPC
Party. Upon the withdrawal or the disassociation of the SPC Party from
the Special Purpose Entity, the Special Purpose Entity shall
immediately appoint a new member whose articles of incorporation are
substantially similar to those of the SPC Party and deliver a new
Insolvency Opinion to the Rating Agency or Rating Agencies, as
applicable, with respect to the new SPC Party and its equity owners.
(xvi) It shall at all times have (if a corporation) or cause
there to be at least one duly appointed member of the board of
directors (an "Independent Director") of each SPC Party (if Borrower is
a limited partnership or a limited liability company) reasonably
satisfactory to Lender who is not at the time of initial appointment
and has not been at any time during the preceding five (5) years: (i) a
stockholder, director, officer, employee, partner, attorney or counsel
of Borrower or such SPC Party or any Affiliate of either of them; (ii)
a customer, supplier or other Person who derives more than one percent
(1%) of its purchases or revenues from its activities with Borrower or
such SPC Party or any Affiliate of either of them; (iii) a Person
controlling or under common control with any such stockholder, partner,
customer, supplier or other Person; or (iv) a member of the immediate
family of any such stockholder, director, officer, employee,
21
partner, customer, supplier or other Person. (As used herein, the term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of management, policies or activities of
a Person, whether through ownership of voting securities, by contract
or otherwise).
(xvii) It shall not cause or permit the board of directors of
an SPC Party to take any action which, under the terms of any
certificate of incorporation, by-laws or any voting trust agreement
with respect to any common stock, requires the vote of any SPC Party
unless at the time of such action there shall be at least one member
who is an Independent Director.
(xviii) It shall allocate fairly and reasonably any overhead
expenses that are shared with an Affiliate, including paying for office
space and services performed by any employee of an Affiliate or related
party.
(xix) It shall not pledge its assets for the benefit of any
other Person other than with respect to the Loan.
(xx) It shall maintain a sufficient number of employees in
light of its contemplated business operations and pay the salaries of
its own employees from its own funds.
(xxi) It shall conduct its business so that the assumptions
made with respect to Borrower in the Insolvency Opinion shall be true
and correct in all respects.
Subordination, Nondisturbance and Attornment Agreement. Shall
mean, for each Summerfield Individual Property, that certain Subordination,
Nondisturbance and Attornment Agreement among Lender, Borrower and Operating
Lessee, substantially in the form attached hereto as Exhibit E-1 (as such
Subordination, Nondisturbance and Attornment Agreement may be amended to include
any revisions required by Lender in the event a different form of Operating
Lease than those currently in existence is entered into by Operating Lessee).
Subordination and Attornment Agreement. Shall mean, for each
Residence Inn Individual Property, that certain Subordination and Attornment
Agreement among Lender, Borrower and Operating Lessee, substantially in the form
attached hereto as Exhibit E-2 (as Subordination and Attornment Agreement may be
amended to include any revisions required by Lender in the event of a different
form of Operating Lease than those currently in existence is used by Operating
Lessee).
Subsidiary. Shall mean as to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person.
22
Survey. A survey of the Land and Improvements (as-built) made
by a civil engineer or surveyor, duly licensed or registered in the State where
the applicable property is located, dated as of a date acceptable to the Lender,
containing a surveyor's certification acceptable to the Lender for the benefit
of the Borrower and the Lender (which certification shall, among other things,
indicate whether or not any of the Land or Improvements are located within an
area identified as having "special flood hazards" as such term is used in the
Flood Disaster Protection Act of 1973), together with its successors and
assigns, as their interests may appear, and otherwise in form and substance
acceptable to the Lender.
Tangible Personalty. As defined in the Security Instruments.
Tax and Insurance Reserve Account. An Eligible Account
established and maintained pursuant to the terms of this Loan Agreement.
Tenant Estoppel Certificate. A tenant estoppel certificate
substantially in the form attached hereto as Exhibit F.
Title Insurance Policy. Shall mean, with respect to each
Individual Property, a title insurance policy in a form acceptable to Lender in
its sole discretion, including all amendments and endorsements thereto.
Total Defeasance Collateral Requirement. Shall mean with
respect to a Defeasance of the Lien of the Security Instruments with respect to
all of the Individual Properties, Defeasance Collateral in an amount sufficient
to pay all principal indebtedness outstanding as of the date of Defeasance under
the Note as it becomes due and sufficient to pay scheduled interest payments on
the Loan. All Defeasance Collateral must mature on or before the Maturity Date.
Undefeased Note. Shall have the meaning set forth in Section
4(c) of the Note.
U.S. Obligations. Any direct obligations of the United States
Government, including, without limitation, treasury bills, notes and bonds.
Section 1.2 Other Definitional Provisions.
(a) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The word
"including" when used in this Agreement is intended to be illustrative and not
exclusive. Section, subsection, paragraph, clause, exhibit, schedule, addendum
and rider references contained in this Agreement are references to sections,
subsections, paragraphs, clauses, exhibits, schedules, addenda and riders in or
to this Agreement unless otherwise specified. The captions herein are inserted
only as a matter of convenience and for reference and in no way define, limit or
describe the scope of this Loan Agreement nor the intent of any provision
hereof. The terms set forth herein are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as the feminine and
neuter genders of such terms.
23
(b) All references in this Loan Agreement or any other Loan
Document to any Loan Document, agreement, contract, license, document or
instrument shall mean such Loan Document, agreement, contract, license, document
or instrument as amended, modified, renewed, extended, restated, supplemented,
reissued, and/or substituted from time to time.
(c) All references or citations in this Loan Agreement or any
other Loan Document to any statute, law, treaty, rule, regulation or other
Requirement of Law shall mean such statute, law, treaty, rule, regulation or
other Requirement of Law as amended, modified, supplemented, replaced or
substituted from time to time.
ARTICLE II
THE LOAN
Section 2.1 Loan Terms.
Subject to the terms and conditions of this Loan Agreement and
the other Loan Documents, the Lender agrees to make the Loan to the Borrower in
the principal sum of the Loan Amount, such borrowing to be evidenced by the Note
and the other Loan Documents.
Section 2.2 Interest.
The outstanding principal balance of the Loan shall bear
interest, and principal and interest shall be repayable, in accordance with the
terms of the Note. Section 2.3 Term.
The Loan shall be due and payable in full, unless accelerated
sooner pursuant to the terms of this Loan Agreement, on the Maturity Date.
Section 2.4 Payments.
All payments by the Borrower under the Loan shall be made in
accordance with the terms of the Note.
Section 2.5 Release of Properties.
Except as set forth in this Section 2.5, no repayment or
prepayment of all or any portion of the Note shall cause, give rise to a right
to require, or otherwise result in, the release of the Lien of the Security
Instruments on the Premises or any portion thereof.
(a) Release on Payment in Full. If Borrower shall pay or cause
to be paid, the principal of and interest on the Note in full at maturity or as
permitted in accordance with the terms thereof and all other Indebtedness
payable to Lender hereunder by Borrower or secured by the Security Instruments
or by the other Loan Documents and all of the payment Obligations shall have
been performed, then the Security Instruments and all the other Loan Documents
shall be discharged and satisfied or assigned (to Borrower or to any other
Person at Borrower's direction and without representation or warranty by, or
recourse to, Lender), at Borrower's
24
option, without warranty (except that Lender shall be deemed to have represented
that such release and termination or reassignment has been duly authorized and
that it has not assigned or encumbered the Security Instruments or the other
Loan Documents), at the expense of Borrower upon its written request.
Concurrently with such release and satisfaction or assignment of any Security
Instruments and all the other Loan Documents, Lender will return to Borrower (or
in the case of an assignment, the assignee) the Note and all insurance policies
relating to the Premises which may be held by Lender, any amounts held in escrow
pursuant to the Security Instruments or the Cash Management Agreement, if
applicable, or otherwise, and any part of the Premises or other Collateral that
may be in its possession and, on the written request and at the expense of
Borrower, will promptly execute and deliver such instruments of conveyance,
assignment and release (including appropriate UCC-3 termination statements)
prepared by Borrower and as may reasonably be requested by Borrower to evidence
such release and satisfaction, or assignment, and any such instrument, when duly
executed by Lender and, if appropriate, duly recorded by Borrower in the places
where the Security Instruments and each other Loan Document is recorded, shall
conclusively evidence the release and satisfaction or assignment of the Security
Instruments and the other Loan Documents.
(b) Successor Borrower. In connection with any release of a
lien under this Section 2.5, Borrower may, or at the request of Lender shall,
establish or designate a successor entity (the "Successor Borrower"), which
shall be a single purpose bankruptcy remote entity approved by Lender, and
Borrower shall transfer and assign all obligations, rights and duties under and
to the Note or the Defeased Note, as applicable, together with the pledged U.S.
Obligations to such Successor Borrower. Such Successor Borrower may have as the
managing member, general partner or other control person, the managing member of
any Borrower provided such managing member, general partner or other control
person complies with all of the Special Purpose Entity requirements contained
herein. Such Successor Borrower shall assume the obligations under the Note or
the Defeased Note, as applicable, and the Security Agreement and Borrower shall
be relieved of its obligations under such documents. Borrower shall pay $100.00
to any such Successor Borrower as consideration for assuming the obligations
under the Note or the Defeased Note, as applicable. Notwithstanding anything in
this Agreement to the contrary, no other assumption fee shall be payable upon a
transfer of the Note or the Defeased Note, as applicable, in accordance with
this Section 2.5, but Borrower shall pay all costs and expenses incurred by
Lender, including Lender's reasonable attorneys' fees and expenses, incurred in
connection therewith.
Section 2.6 Substitution of Properties. Subject to the terms
and conditions set forth in this Section 2.6, Borrower may obtain a release of
the Lien of a Security Instrument (and the related Loan Documents) encumbering
an Individual Property (a "Substituted Property") by substituting therefor its
fee interest in one or more hotel properties of like kind and quality acquired
by Borrower (individually, a "Substitute Property" and collectively, the
"Substitute Properties"), provided that no such substitution may occur after the
Maturity Date. In addition, any such substitution shall be subject, in each
case, to the satisfaction of the following conditions precedent:
(i) The Substitute Property must be a property as to which
Borrower will hold in defeasible fee or ground leasehold title free and
clear of any lien or other encumbrance
25
except for Permitted Encumbrances, Leases and easements, restrictive
covenants and other title exceptions which do not have a material
adverse effect on the utility or value of such property (or its current
use).
(ii) Lender and Rating Agencies shall have received (A) a copy
of a deed conveying all of Borrower's right, title and interest in and
to the Substituted Property (x) to an entity other than Borrower or its
general partner or managing member (as applicable) in an arms' length
transaction or (y) to the REIT or the Operating Partnership and (B) a
letter from Borrower countersigned by a title insurance company
acknowledging receipt of such deed and agreeing to record such deed in
the real estate records for the county in which the Substituted
Property is located. In the event the Substituted Property is to be
conveyed to the REIT or the Operating Partnership, Lender shall also
have received (a) a copy of a fully executed contract of sale between
the REIT or the Operating Partnership, as applicable, and a purchaser,
which contract of sale (i) at the time of substitution, is not subject
to any contingencies, except for the payment of the purchase price by
the purchaser and the delivery of title by the REIT or the Operating
Partnership, as applicable and (ii) contains a closing date which is
not more than thirty (30) days following the date of the proposed
substitution and (b) evidence that any good-faith deposit required
under such contract of sale has been deposited into escrow.
(iii) Lender and the applicable Rating Agencies shall have
received an MAI appraisal of the Substitute Property dated no more than
forty-five (45) days prior to the substitution by an appraiser
acceptable to Lender (Hospitality Valuation Services is hereby
approved) and such Rating Agencies, indicating an appraised value of
the Substitute Property that is at least equal to the greater of the
appraised value of the Substituted Property determined by the same
appraiser, or another appraiser acceptable to Lender as of (A) the date
hereof or (B) the date immediately preceding the encumbrance of the
Substitute Property by the related Security Instruments. If the Loan is
not part of a Securitization, Lender shall have determined that the
fair market value of the Substitute Property is at least equal to the
greater of the fair market value of the Substituted Property as of (A)
the date hereof or (B) the date immediately preceding the encumbrance
of the Substitute Property by the related Security Instruments, such
determination to be made by Lender in its sole reasonable discretion
consistent with the methodology used by Lender in determining property
values in connection with the origination of the Loan (which
determination may include an appraisal satisfactory to Lender in all
respects).
(iv) After giving effect to the substitution, the Debt Service
Coverage Ratio Leases for the Loan for all of the Individual Properties
is not less than the Debt Service Coverage Ratio Leases for the Loan
for all of the Individual Properties as of the date immediately
preceding the substitution.
(v) The Net Operating Income Premises for the Substitute
Property either (A) does not show a successive decrease in any material
amount over the three (3) years immediately prior to the date of
substitution, or (B) with respect to a Substitute Property for which
information regarding the Net Operating Income Premises of such
Substitute Property for the three (3) years immediately prior to the
date of substitution cannot be
26
obtained by Borrower after Borrower's exercise of diligent efforts, the
Net Operating Income Premises shall not show a successive decrease for
such lesser period of no less than twelve (12) months, or (C) if the
Substitute Property has been substantially renovated within such three
(3) year period, the Net Operating Income Premises shall not show a
successive decrease in any material amount for such lesser period of no
less than twelve (12) months.
(vi) The Net Operating Income Leases for the Substitute
Property; either (A) does not show a successive decrease in any
material amount over the three (3) years immediately prior to the date
of Substitution, or (B) if the Substitute Property has been
substantially renovated within such three (3) year period, the Net
Operating Income Leases shall not show a successive decrease in any
material amount for such lesser period of no less than twelve (12)
months.
(vii) The Net Operating Income Premises for the twelve (12)
month period immediately preceding the substitution for the Substitute
Property is at least one hundred five (105%) of the Net Operating
Income Premises for the twelve (12) month period immediately preceding
the substitution for the Substituted Property.
(viii) The Net Operating Income Leases for the twelve (12)
month period immediately preceding the substitution for the Substitute
Property is at least one hundred five percent (105%) the Net Operating
Income Leases for the twelve (12) month period immediately preceding
the substitution for the Substituted Property.
(ix) After giving effect to the substitution, the Debt Service
Coverage Ratio Premises for the Loan for all of the Individual
Properties is not less than the Debt Service Coverage Ratio Premises
for the Loan for all of the Individual Properties as of the date
immediately preceding the substitution.
(x) The Person transferring the Substitute Property is solvent
and the Substitute Property was transferred to Borrower in an arm's
length transaction.
(xi) If the Loan is part of a Securitization, Lender shall
have received evidence in writing from the Rating Agencies to the
effect that such substitution will not result in a withdrawal,
qualification or downgrade of the respective ratings in effect
immediately prior to such substitution for the Securities issued in
connection with the Securitization that are then outstanding.
(xii) No Event of Default shall have occurred and be
continuing. Lender and the Rating Agencies (if applicable) shall have
received a certificate from Borrower confirming the foregoing.
(xiii) Borrower shall have executed, acknowledged and
delivered to Lender (A) a Security Instrument, and two UCC Financing
Statements with respect to the Substitute Property, together with a
letter from Borrower countersigned by a title insurance company
acknowledging receipt of such Security Instruments and UCC-1 Financing
Statements and agreeing to record or file, as applicable, such Security
27
Instruments and one of the UCC-1 Financing Statements in the real
estate records for the county in which the Substitute Property is
located and to file one of the UCC-1 Financing Statements in the office
of the Secretary of State of the state in which the Substitute Property
is located, so as to effectively create upon such recording and filing
valid and enforceable liens upon the Substitute Property, of the
requisite priority, in favor of Lender (or such other trustee as may be
desired under local law), subject only to the Permitted Encumbrances
and such other liens as are permitted pursuant to the Loan Documents,
(B) a Hazardous Substance Indemnity with respect to the Substitute
Property, (C) a Subordination, Nondisturbance and Attornment Agreement
or a Subordination and Attornment Agreement, as applicable, for the
Substitute Property and (D) written confirmation from each Indemnitor
regarding such substitution. The Security Instruments, UCC-1 Financing
Statements and Hazardous Substance Indemnity shall be the same in form
and substance as the counterparts of such documents executed and
delivered with respect to the related Substituted Property subject to
modifications reflecting the Substitute Property as the Individual
Property that is the subject of such documents and such modifications
reflecting the laws of the state in which the Substitute Property is
located as shall be recommended by the counsel admitted to practice in
such state and delivering the opinion as to the enforceability of such
documents required pursuant to clause (xiv) below. The Security
Instruments encumbering the Substitute Property shall secure all
amounts evidenced by the Note, provided that in the event that the
jurisdiction in which the Substitute Property is located imposes a
mortgage recording, intangibles or similar tax and does not permit the
allocation of indebtedness for the purpose of determining the amount of
such tax payable, the principal amount secured by such Security
Instruments shall be equal to one hundred twenty-five percent (125%) of
the amount of the Loan allocated to the Substitute Property. The amount
of the Loan allocated to the Substitute Property for release purposes
(such amount being hereinafter referred to as the "Substitute Release
Amount") shall equal the Adjusted Release Amount of the related
Substituted Property.
(xiv) Lender shall have received (A) any "tie-in" or similar
endorsement to each Title Insurance Policy insuring the lien of an
existing Security Instruments as of the date of the substitution
available with respect to the Title Insurance Policy insuring the lien
of the Security Instruments with respect to the Substitute Property and
(B) a Title Insurance Policy (or a marked, signed and redated
commitment to issue such Title Insurance Policy) insuring the lien of
the Security Instruments encumbering the Substitute Property, issued by
the title company that issued the Title Insurance Policies insuring the
lien of the existing Security Instruments and dated as of the date of
the substitution, with reinsurance and direct access agreements that
replace such agreements issued in connection with the Title Insurance
Policy insuring the lien of the Security Instruments encumbering the
Substituted Property, to the extent such agreements are available in
the jurisdiction in which the Substitute Property is located. The Title
Insurance Policy issued with respect to the Substitute Property shall
(1) provide coverage in the amount of the Substitute Release Amount if
the "tie-in" or similar endorsement described above is available or, if
such endorsement is not available, in an amount equal to one hundred
fifty percent (150%) of the Allocated Loan Amount or one hundred ten
percent (110%) for those Individual Properties located in the State of
Texas, (2) insure Lender that the
28
relevant Security Instruments creates a valid first lien on the
Substitute Property encumbered thereby, free and clear of all
exceptions from coverage other than Permitted Encumbrances and standard
exceptions and exclusions from coverage (as modified by the terms of
any endorsements), (3) contain such endorsements and affirmative
coverages as are contained in the Title Insurance Policies insuring the
liens of the existing Security Instruments, to the extent available in
the jurisdiction in which the Substitute Property is located and (4)
name Lender as the insured. Lender also shall have received copies of
paid receipts showing that all premiums in respect of such endorsements
and Title Insurance Policies have been paid.
(xv) Lender shall have received a current title survey for
each Substitute Property, certified to the title company and Lender and
their successors and assigns, in the same form and having the same
content as the certification of the Survey of the Substituted Property
prepared by a professional land surveyor licensed in the state in which
the Substitute Property is located and acceptable to the Rating
Agencies in accordance with the 1997 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys, including items 1, 2, 3,
4, 6, 7(a), (b), (c), 8, 9, 10, 11 and 13 from Table A. Such survey
shall reflect the same legal description contained in the Title
Insurance Policy relating to such Substitute Property and shall
include, among other things, a metes and bounds description of the real
property comprising part of such Substitute Property. The surveyor's
seal shall be affixed to each survey and each survey shall certify that
no Improvements on the surveyed property are located in a
"one-hundred-year flood hazard area," or appropriate flood insurance
has been obtained.
(xvi) Lender shall have received valid certificates of
insurance indicating that the requirements for the policies of
insurance required for an Individual Property hereunder have been
satisfied with respect to the Substitute Property and evidence of the
payment of all premiums payable for the existing policy period.
(xvii) Lender shall have received a Phase I environmental
report and, if recommended under the Phase I environmental report, a
Phase II environmental report from a nationally recognized
environmental consultant approved by Lender (Xxxxxxx Consultants, Inc.
is hereby approved) and, if a substitution occurs after a
Securitization, approved by the Rating Agencies, not less than
forty-five (45) days prior to such release and substitution, which
conclude that the Substitute Property does not contain any Hazardous
Materials (except for cleaning and other products used in connection
with the routine maintenance or repair of the Substitute Property or
the operation thereof as a hotel, in full compliance with Hazardous
Materials Laws) and is not subject to any risk of contamination from
any off-site Hazardous Materials. If any such report discloses the
presence of any Hazardous Materials (except for cleaning and other
products used in connection with the routine maintenance or repair of
the Substitute Property or the operation thereof as a hotel, in full
compliance with Hazardous Materials Laws) or the risk of contamination
from any off-site Hazardous Materials, such report shall include an
estimate of the cost of any related remediation and Borrower shall
deposit with Lender an amount equal to one hundred twenty-five percent
(125%) of such estimated cost, which deposit shall constitute
additional security for the Loan and shall be released to Borrower
29
upon the delivery to Lender of (A) an update to such report indicating
that there is no longer any Hazardous Materials (except for cleaning
and other products used in connection with the routine maintenance or
repair of the Substitute Property or the operation thereof as a hotel,
in full compliance with Hazardous Materials Laws) on the Substitute
Property or any danger of contamination from any off-site Hazardous
Materials that has not been fully remediated in accordance with all
applicable laws and (B) paid receipts indicating that the costs of all
such remediation work have been paid. Such report shall also state the
amount of time that will be necessary to complete such remediation, as
may be required by law. Borrower covenants to undertake any repairs,
cleanup or remediation indicated for Hazardous Materials on the
Substitute Property.
(xviii) Borrower shall deliver or cause to be delivered to
Lender (A) updates certified by Borrower of all organizational
documentation related to Borrower and/or the formation, structure,
existence, good standing and/or qualification to do business delivered
to Lender in connection with the Closing Date; (B) good standing
certificates, certificates of qualification to do business in the
jurisdiction in which the Substitute Property is located (if required
in such jurisdiction) and (C) resolutions of the general partner of
Borrower authorizing the substitution and any actions taken in
connection with such substitution.
(xix) Lender shall have received the following opinions of
Borrower's counsel (which opinions, with respect to the opinions set
forth in clauses (A), (B) and (C) below, shall be in form similar to
the corresponding opinions delivered in connection with the closing of
the Loan): (A) an opinion or opinions of counsel admitted to practice
under the laws of the state in which the Substitute Property is located
stating that the Loan Documents delivered with respect to the
Substitute Property pursuant to clause (xiii) above are valid and
enforceable in accordance with their terms, subject to the laws
applicable to creditors' rights and equitable principles, and that
Borrower is qualified to do business and in good standing under the
laws of the jurisdiction where the Substitute Property is located or
that Borrower is not required by applicable law to qualify to do
business in such jurisdiction; (B) an opinion of counsel stating that
the Loan Documents delivered with respect to the Substitute Property
pursuant to clause (xiii) above were duly authorized, executed and
delivered by Borrower and that, to the best of Borrower's counsel's
knowledge, the execution and delivery of such Loan Documents and the
performance by Borrower of its obligations thereunder will not cause a
breach of, or a default under, any agreement, document or instrument to
which Borrower is a party or to which it or its properties are bound;
(C) an opinion of counsel stating that subjecting the Substitute
Property to the lien of the related Security Instruments and the
execution and delivery of the related Loan Documents does not and will
not affect or impair the ability of Lender to enforce its remedies
under all of the Loan Documents or to realize the benefits of the
cross-collateralization provided for thereunder; (D) an update of the
Non-Consolidation Opinion indicating that the substitution does not
affect the opinions set forth therein; (E) an opinion of counsel
acceptable to the Rating Agencies stating that the substitution and the
related transactions do not constitute a fraudulent conveyance under
applicable bankruptcy and insolvency laws and (F) an opinion of counsel
acceptable to the Rating Agencies that the substitution does not
constitute a "significant
30
modification" of the Loan under Section 1001 of the Code or otherwise
cause a tax to be imposed on a "prohibited transaction" by any REMIC.
(xx) Borrower shall have paid or caused to be paid all Basic
Carrying Costs relating to each of the Individual Properties and the
Substitute Property, including, without limitation, (i) accrued but
unpaid insurance premiums relating to each of the Individual Properties
and the Substitute Property, (ii) currently due Taxes (including any in
arrears) relating to each of the Individual Properties and the
Substitute Property and (iii) any other charges relating to each of the
Individual Properties and Substitute Property which are currently due.
(xxi) Borrower shall have paid or reimbursed Lender for all
third party out-of-pocket costs and expenses incurred by Lender
(including, without limitation, reasonable attorneys fees and
disbursements) in connection with the substitution and Borrower shall
have paid all recording charges, filing fees, taxes or other expenses
(including, without limitation, mortgage and intangibles taxes and
documentary stamp taxes) payable in connection with the substitution.
Borrower shall have paid all costs and expenses of the Rating Agencies
incurred in connection with the substitution.
(xxii) Lender shall have received annual operating statements
and occupancy statements for the Substitute Property for the three (3)
most recently completed fiscal years and a current operating statement
for the Substituted Property or, if information is not available for a
three (3) year period or if the Substituted Property has been
substantially renovated within such three (3) year period, such lesser
period as is available, but in no event less than twelve (12) months.
Each of the statements required under this clause (xxii) shall be
certified to Lender as being true and correct and a certificate from
Borrower certifying that there has been no adverse change in the
financial condition of the Substitute Property since the date of such
operating statements.
(xxiii) Borrower shall have delivered to Lender estoppel
certificates from any Operating Lessees and other tenants of Borrower
in the Substitute Property. All such estoppel certificates shall be in
the form attached hereto as Exhibit F or Exhibit I, as applicable, and
shall indicate, among other things, that (1) the subject lease is a
valid and binding obligation of the tenant thereunder, (2) there are no
defaults under such lease on the part of the landlord or tenant
thereunder, (3) the tenant thereunder has no defense or offset to the
payment of rent under such leases, (4) no rent under such lease has
been paid more than one (1) month in advance, (5) the tenant thereunder
has no option or right of first refusal under such lease other than as
set forth in the Operating Lease to purchase all or any portion of the
Substitute Property and (6) all tenant improvement work required under
such lease has been completed and the tenant under such lease is in
actual occupancy of its leased premises. If an estoppel certificate
indicates that all tenant improvement work required under the subject
lease has not yet been completed, Borrower shall, if required by the
Rating Agencies, deliver to Lender financial statements indicating that
Borrower has adequate funds to pay all costs related to such tenant
improvement work as required under such lease.
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(xxiv) Lender shall have received copies of all Operating
Leases affecting the Substitute Property certified by Borrower as being
true and correct. Lender shall have received a current Rent Roll of the
Substitute Property certified by Borrower as being true and correct.
(xxv) Lender shall have received a Subordination,
Nondisturbance and Attornment Agreement substantially in the form
attached hereto as Exhibit E-1 with respect to all Operating Leases not
from an Affiliate of Borrower Principal and a Subordination and
Attornment Agreement substantially in the form attached hereto as
Exhibit E-2 from any Affiliate of Borrower Principal and any other
leases which are not subordinate by their terms to the Security
Instruments with respect to the Substitute Property.
(xxvi) Lender shall have received (A) an endorsement to the
Title Insurance Policy insuring the lien of the Security Instruments
encumbering the Substitute Property insuring that the Substitute
Property constitutes a separate tax lot or, if such an endorsement is
not available in the state in which the Substitute Property is located,
a letter from the title insurance company issuing such Title Insurance
Policy stating that the Substitute Property constitutes a separate tax
lot or (B) a letter from the appropriate taxing authority stating that
the Substitute Property constitutes a separate tax lot.
(xxvii) Lender shall have received a physical conditions
report with respect to the Substitute Property from a nationally
recognized structural consultant approved by the Rating Agencies in a
form recognized and approved by such Rating Agencies not less than
forty-five (45) days prior to such release and substitution stating
that the Substitute Property and its use comply in all material
respects with all applicable Requirements of Law (including, without
limitation, zoning, subdivision and building laws) and that the
Substitute Property is in good condition and repair and free of damage
or waste. If compliance with any Requirements of Law are not addressed
by the physical conditions report, such compliance shall be confirmed
by delivery to Lender of a certificate of an architect licensed in the
state in which the Substitute Property is located, a letter from the
municipality in which such Substitute Property is located, a
certificate of a surveyor that is licensed in the state in which the
Substitute Property is located (with respect to zoning and subdivision
laws), an ALTA 3.1 zoning endorsement to the Title Insurance Policy
delivered pursuant to clause (xii) above (with respect to zoning laws)
or a subdivision endorsement to the Title Insurance Policy delivered
pursuant to clause (xii) above (with respect to subdivision laws) to
the extent such endorsements are available in the jurisdiction in which
the Substitute Property is located. If the physical conditions report
recommends that any repairs be made with respect to the Substitute
Property, such physical conditions report shall either (A) include an
estimate of the cost of such recommended repairs (in which case
Borrower shall deposit into the Repair Escrow Account an amount equal
to one hundred twenty-five percent (125%) of such estimated cost), or
(B) state the specific amounts that need to be reserved over time in
order to meet the requirements of such replacements, but in no event
less than five percent (5%) of Operating Income Premises (in which case
Borrower shall deposit such reserves into the Replacement Reserve
Account on a monthly basis). Any such deposits shall constitute
32
additional security for the Loan pursuant to Section 6.6 and shall be
released to Borrower pursuant to Section 6.9. Borrower covenants to
undertake any repairs, cleanup or remediation indicated in the physical
conditions report before the earlier of (i) the time required by
applicable law or (ii) the time recommended in the physical conditions
report.
(xxviii) Lender shall have received and approved each
Operating Lease, Franchise Agreement and Management Agreement relating
to the Substitute Property, and Borrower shall have demonstrated that
such agreements are substantially similar (as determined by Lender in
its reasonable discretion) to the agreements then in place at the
Substituted Property.
(xxix) Lender shall have received such other and further
approvals, opinions, documents and information in connection with the
substitution as the Rating Agencies may have requested.
(xxx) Lender shall have received copies of all contracts and
agreements relating to the leasing and operation of the Substitute
Property together with a certification of Borrower attached to each
such contract or agreement certifying that the attached copy is a true
and correct copy of such contract or agreement and all amendments
thereto.
(xxxi) Borrower shall submit to Lender, not less than thirty
(30) days prior to the date of such substitution, a release of lien
(and related Loan Documents) for the Substituted Property for execution
by Lender. Such release shall be in a form appropriate for the
jurisdiction in which the Substituted Property is located. Borrower
shall deliver an Officer's Certificate certifying that the requirements
set forth in this Section 2.6 have been satisfied.
(xxxii) The total Allocated Loan Amount, in the aggregate for
all prior Substituted Properties is less than twenty-five percent (25%)
of the Original Principal Amount of the Loan.
(xxxiii) The Substitute Property shall be subject to the lien
of the Security Instruments and subject to the cross collateralization
and cross default provisions of this Loan Agreement and the Security
Instruments.
(xxxiv) With respect to the Substitute Property, Borrower
shall deliver to Lender (i) copies of all franchisor inspection reports
and performance improvement programs with respect to the Substitute
Property for the two (2) year period prior to the substitution and (ii)
an Officer's Certificate certifying that the items delivered in (i)
above indicate that Borrower is in compliance with the franchisor's
requirements.
Upon the satisfaction of the foregoing conditions precedent, Lender will release
its lien from the Substituted Property to be released and the Substitute
Property shall be deemed to be an Individual Property for purposes of this Loan
Agreement and the Substitute Release Amount with respect to any Substitute
Property shall be deemed to be the Allocated Loan Amount with respect to such
Substitute Property for all purposes hereunder. At the request of Borrower an
33
executed deed of release for the Substituted Property shall be deposited in
escrow to be released from escrow upon satisfaction of the foregoing conditions.
ARTICLE III
CONDITIONS PRECEDENT TO LOAN
The obligation of the Lender to make the Loan is subject to
the Lender's waiver or satisfaction, by proper evidence, execution and/or
delivery to the Lender of each of the following items, each in form and
substance satisfactory to the Lender and the Lender's counsel:
Section 3.1 Loan Documents.
Each of the Loan Documents.
Section 3.2 Brokerage Commissions.
All brokerage commissions, finder's fees or similar
compensation in connection with the purchase of the Premises (if all or any
portion of the Premises is being purchased with Loan proceeds), the making of
the Loan, or the transactions contemplated by the Loan Documents have been paid
in full.
Section 3.3 Title Evidence.
An original signed title commitment in form and substance
satisfactory to the Lender, for a standard ALTA mortgagee policy as to the
Premises from a company or from companies approved by the Lender (including any
reinsurance agreements and endorsements required by the Lender), providing
coverage for the full principal amount of the Loan, containing such coverages
and endorsements as may be required by the Lender, together with copies of all
recorded documents creating exceptions to such policy.
Section 3.4 Survey.
Two (2) originals of the Survey.
Section 3.5 Insurance.
Each policy of insurance required by this Loan Agreement is in
full force and effect on the Closing Date.
Section 3.6 Authority Documents.
(a) Organizational Documents. As applicable, a certified copy
of each limited partnership agreement, limited partnership certificate,
partnership agreement, articles of incorporation, bylaws, shareholder
agreements, articles of organization and operating agreement of the Borrower and
the Borrower Principal, and each general partner, member or shareholder of the
Borrower and the Borrower Principal (when not an individual), with all
amendments, modifications, supplements and restatements thereto.
34
(b) Assumed Name Certificate. A certified copy of each assumed
name certificate, if any, of the Borrower and the Borrower Principal (when not
an individual).
(c) Good Standing Certificates. Good standing certificates, or
their equivalent, issued by the Secretary of State and all other appropriate
offices of the state organization of the Borrower and the Borrower Principal
(when not an individual) and evidence satisfactory to the Lender of the
Borrower's and the Borrower Principal's authorization to do business in each
state where an Individual Property is located if the state of the Borrower's and
the Borrower Principal's organization is other than the state where such
Individual Property is located.
(d) Resolutions and Consents. Certified resolutions and/or
consents authorizing the Borrower and the Borrower Principal (when not an
individual) to enter into the Loan Documents.
Section 3.7 Financial Statements and Operating Statements.
Financial Statements of the REIT and the Borrower as of the
end of the most recent fiscal year, together with Operating Statements for the
period from the beginning of the current fiscal year and ending on a date not
more than thirty (30) days prior to the Closing Date.
Section 3.8 Opinions.
Opinions of independent counsel to the Borrower in form and
substance acceptable to the Lender, dated as of the Closing Date including,
without limitation, an opinion with respect to the due execution and
enforceability of the Loan Documents and an opinion that in the event of a
bankruptcy proceeding involving an Affiliate of Borrower the assets of Borrower
including the Premises shall not be substantively consolidated with the assets
of the Affiliate (each an "Opinion of Counsel", collectively the "Opinions of
Counsel").
Section 3.9 Compliance with Laws.
The Premises and the Intangible Personalty, and the intended
uses thereof, are in compliance with all Requirements of Law.
Section 3.10 Agreements.
Copies of all operating agreements, service contracts, labor
contracts, license agreements and equipment leases, if any, relating to the
Borrower's ownership and operation of the Premises executed by or binding
against Borrower. Copies, including a Certification thereof, of all franchise
agreements and purchase contracts, comfort letters and Subordination and
Nondisturbance Agreements relating to the Premises.
35
Section 3.11 Taxes.
The Land and the Improvements are separately assessed for tax
purposes, together with tax parcel identification numbers, tax rates, estimated
tax values and the identities of the taxing authorities.
Section 3.12 Utilities.
The availability and suitability of the water, storm water,
electric, oil, natural gas, sewer and telephone utilities needed to properly
service the Premises in its intended use.
Section 3.13 Reserve Accounts.
The establishment of each Reserve Account with balances equal
to any Initial Reserve Deposit thereto required by this Loan Agreement
(including the Program Rider) or any of the other Loan Documents.
Section 3.14 Engineering Report.
An Engineering Report.
Section 3.15 Certificate of Occupancy and Other Permits.
Such certificates of occupancy, permits and licenses as the
Lender may require to evidence that the Premises are suitable for occupancy and
use.
Section 3.16 Environmental Assessment and O&M Program.
An Environmental Assessment of the Premises. The Borrower
shall furnish and adopt an O&M Program with respect to all Hazardous Materials,
if any, identified in such Environmental Assessment or as otherwise reasonably
required by the Lender.
Section 3.17 Appraisal.
An Appraisal of each Individual Property.
Section 3.18 Equity.
The Borrower's equity as of the Closing Date is acceptable to
the Lender.
Section 3.19 Debt Service.
As of the closing date the Borrower's (a) Debt Service
Coverage Ratio Premises for the Premises in the aggregate, shall be a minimum of
2.50x provided, however, in no event shall the Debt Service Coverage Ratio
Premises of any Individual Property be less than or equal to 2.10x; and (b) Debt
Service Coverage Ratio Leases for the Premises in the aggregate shall be a
minimum of 2.00x.
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Section 3.20 Loan to Value Ratio.
The Loan to Value Ratio in aggregate as calculated for the
Premises by Lender is a maximum of fifty percent (50%).
Section 3.21 Special Purpose Entity.
The Borrower is a Special Purpose Entity.
Section 3.22 Miscellaneous.
All other documents or items set forth in the Commitment
(including all supplemental and special conditions included in the Commitment)
or otherwise required by the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make
the Loan, the Borrower hereby represents and warrants to the Lender (for itself,
but not otherwise) on the Closing Date as follows:
Section 4.1 Existence; Compliance with Law.
The Borrower and the Borrower Principal (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the power and authority, and the legal right, to own and
operate its property, to lease the property it operates as lessor and to conduct
the business in which it is currently engaged, (c) is duly qualified to do
business in and is in good standing under the laws of each jurisdiction where
any Individual Property is located and where its ownership, lease or operation
of property or the conduct of its business requires such qualification and (d)
is in compliance with all Requirements of Law.
Section 4.2 Equity Interests.
The owners (beneficial and otherwise) of all of the Equity
Interests in the Borrower are as set forth in Exhibit A and have been duly
authorized, are validly issued and outstanding, fully paid and non-assessable.
There are no outstanding options or other rights pertaining to the Equity
Interests in the Borrower, and no voting trust or similar agreement affecting
either ownership of or the right to vote such Equity Interests (except for those
items detailed in the Borrower's or the Borrower Principal's partnership or
operating agreement or certificate of incorporation).
Section 4.3 Power; Authorization; Enforceable Obligations.
The Borrower has all requisite legal power and authority, and
the legal right, to make, deliver and perform each Loan Document to which it is,
or is to be, a party and to borrow hereunder, and has taken all necessary
corporate, partnership or company action (as the case may
37
be) to authorize the execution, delivery and performance of each Loan Document
to which it is, or is to be, a party and to authorize the borrowings on the
terms and conditions of this Agreement and the Note. No consent or authorization
of, filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of any Loan Document, except to the extent specified in any such
Loan Document. Each Loan Document has been (or will be) duly executed by, and
delivered on behalf of the Borrower and the Borrower Principal, as the case may
be. Each Loan Document constitutes (or when executed and delivered will
constitute) the legal, valid and binding obligation, enforceable against the
Borrower and the Borrower Principal, as the case may be, in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, sequestration, liquidation,
consolidation or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
Section 4.4 No Legal Bar.
The execution, delivery and performance of the Loan Documents
will not violate any Requirement of Law applicable to the Borrower and the
Borrower Principal or any contractual obligation, security, agreement,
instrument, license or other undertaking by which the Borrower or the Borrower
Principal is bound and will not result in, or require, the creation or
imposition of any Lien (other than under the Loan Documents) on any of their
properties or revenues pursuant to any such Requirement of Law or contractual
obligation, security, agreement, instrument, license or other undertaking.
Section 4.5 No Litigation.
No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority that may have a material adverse effect on
Borrower is pending or, to the knowledge of the Borrower and the Borrower
Principal, threatened against any of them or any of their properties or
revenues, or with respect to any Loan Document or any of the transactions
contemplated thereby, and the Borrower is not a surety on any bond through which
a Lien might be created superior to the Security Instruments.
Section 4.6 No Default.
The Borrower is not in default, under or with respect to any
contractual obligation, security, agreement, instrument, license or other
undertaking by which the Borrower is bound which is in excess of $150,000. No
Default Condition or Event of Default has occurred and is continuing.
Section 4.7 Solvency; Fraudulent Conveyance.
The Borrower and the Borrower Principal is solvent and will
not be rendered insolvent by the transactions contemplated hereby and, after
giving effect to such transactions, will not be left with an unreasonably small
amount of capital with which to engage in its business. Neither the Borrower nor
the Borrower Principal intends to incur, or believes that it
38
has incurred, debts beyond its ability to pay such debts as they mature. Neither
the Borrower nor the Borrower Principal has commenced or filed nor contemplates
the commencement or filing of any bankruptcy, insolvency, reorganization,
moratorium, sequestration, liquidation, consolidation or similar proceedings or
the appointment of a receiver, liquidator, assignee, conservator, trustee,
sequestrator or similar official in respect of it or any of its assets. The
amount of the Loan constitutes reasonably equivalent value and fair
consideration for the transfer to the Lender of the interest in the Premises
represented by the Security Instruments. Neither the Borrower nor the Borrower
Principal is transferring any interest in the Premises with any intent to
hinder, delay or defraud any of its creditors.
Section 4.8 Special Purpose Entity.
The Borrower is a Special Purpose Entity.
Section 4.9 Taxes.
The Borrower and the Borrower Principal, respectively, has
filed or caused to be filed all tax returns which are required to be filed and
has paid all taxes shown to be due and payable on said returns and on any
assessments made against it and any of its property and, to its knowledge, all
other taxes, fees and other charges imposed on it and any of its property by any
Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with Required Accounting Standards have
been provided on its books). No tax Lien has been filed with respect to any such
tax, fee or other charge. To its knowledge, no claim is being asserted with
respect to any such tax, fee or other charge which, in either case, could
reasonably be expected to have a material adverse change with respect to the
Borrower or the Premises.
Section 4.10 No Burdensome Restrictions.
The Borrower is not a party to or subject to any contractual
obligation, security agreement, instrument, license or other undertaking by
which the Borrower is bound (other than the Loan Documents) which could have a
material adverse change on the business, properties, assets, operations or
condition, financial or otherwise, of it, or on the ability of it to carry out
its obligations hereunder or under the other Loan Documents.
Section 4.11 Investment Company Act; Other Regulations.
Neither the Borrower nor the Borrower Principal is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. Neither
the Borrower nor the Borrower Principal is subject to regulation under any
Requirement of Law which limits its ability to incur Obligations, other than as
set forth herein or in the other Loan Documents.
Section 4.12 Subsidiaries.
The Borrower has no Subsidiaries.
39
Section 4.13 Title to Premises.
The Borrower is seized of the Land and Improvements (and any
fixtures) in fee, or is the owner of a leasehold interest in the Land and
Improvements (and any fixtures) pursuant to a Ground Lease, and has marketable
title to any appurtenant easements and has the right to convey the same, that
title to such property is free and clear of all encumbrances except for the
Permitted Encumbrances, and that it will warrant and defend the title to such
property (except for the Permitted Encumbrances) against the claims of all
Persons. As to the balance of the Premises, the Rents and Profits and the
Intangible Personalty, the Borrower represents and warrants that it has
marketable title to such property, that it has the right to convey such property
and that it will warrant and defend such property against the claims of all
persons or parties.
Section 4.14 Ownership of Personalty.
The Borrower owns, subject to no Lien other than the Lien of
the Security Instruments and the other Loan Documents, as appropriate, all of
the Personalty except for equipment leases shown on Schedule 4, and except Liens
on or leases of equipment acquired in the ordinary course of business and in
reasonable amounts with respect to satellite dishes, cable TV systems and other
similar equipment which is normally leased by other hotel owners.
Section 4.15 Financial Statements.
As of the date of the most recent Financial Statement
furnished to the Lender, or as disclosed to Lender in writing, the Borrower had
no material (a) indebtedness for borrowed money or for the deferred purchase
price of property or services, as evidenced by bonds, notes or other similar
instruments or agreements, (b) obligations as a lessee under leases which shall
have been or should be, in accordance with Required Accounting Standards,
recorded as capital leases, (c) obligations under direct or indirect guaranties
in respect of, or any obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or any obligations of another of the kind referred to in clause (a)
or (b) above, (d) contingent liability or liability for taxes, or (e) long-term
lease or unusual forward or long-term commitment, including, without limitation,
any interest rate or foreign currency swap or exchange transaction, which is
not, to the extent required by Required Accounting Standards, reflected in the
foregoing statements or in the notes thereto. No sale, transfer or other
disposition by the Borrower of any material part of its business or property has
occurred since the most recent Financial Statement furnished to the Lender.
Section 4.16 No Change.
There has been no development or event which has had or could
reasonably be expected to have a material adverse change (a) with respect to the
Borrower since the most recent Financial Statement furnished to the Lender, or
(b) with respect to the Premises since the date of the most recent Operating
Statements furnished to the Lender.
40
Section 4.17 Accuracy of Information.
Each exhibit, Financial Statement, Operating Statement, Rent
Roll, document, book, record, report and other item of written information
furnished by the Borrower or the Borrower Principal, as the case may be, to the
Lender in connection with the Loan Documents is in accordance with GAAP or
Required Accounting Standards, as applicable, and no such document contains any
material misstatement of fact or omits to state a material fact.
Section 4.18 Principal Place of Business.
The Borrower's principal place of business and chief executive
office is at the location set forth in the first paragraph of this Loan
Agreement and it has not operated under any name other than its own name at any
time from the date of its formation.
Section 4.19 Taxpayer Identification Number.
The Borrower's taxpayer identification number is as set forth
in the Note.
Section 4.20 Insurance.
The Borrower does not know of and has not received any written
notice of any violation of any insurance policy term that remains uncured and,
to its best knowledge, it and the Premises and the use thereof materially comply
with all insurance policy terms.
Section 4.21 Mechanic's Liens, etc.
Except as have been paid for in full by the Borrower on or
before the Closing Date or as shall be paid prior to delinquency in the ordinary
course of the Borrower's business, (i) no improvements or repairs have been made
to the Premises during the one hundred twenty (120) days preceding the date
hereof and (ii) there are no contracts not fully performed, and no outstanding
bills incurred, for labor or materials used in making improvements or repairs on
the Premises, or for services of architects, surveyors or engineers incurred in
connection therewith. The Borrower has made no contract or arrangement of any
kind whatsoever, the performance of which by the other party thereto could give
rise to a Lien on the Premises superior to that of the Security Instruments.
Section 4.22 No Violation.
The Borrower has not received any notice of, and, to the best
of its knowledge is not in violation of any Requirement of Law, any Hazardous
Materials Law or any Governmental Action.
Section 4.23 ERISA.
(a) The Borrower is not an "employee benefit plan" as defined
in Section 3(3) of ERISA, which is subject to Title I of ERISA, (b) the assets
of the Borrower do not constitute "plan assets" of one or more such plans within
the meaning of 29 C.F.R. ss.2510.3-101, (c) neither
41
the Borrower nor any of its general partners, members or shareholders, as the
case may be, have any trust or custodial relationship with the Lender or any
affiliate of the Lender with respect to any ERISA plan, and (d) neither the
Borrower nor any general partner, member or shareholder of the Borrower is a
participant in any governmental plan that has a trust or custodial relationship
with the Lender or any affiliate of the Lender. The Borrower (i) is not a
"governmental plan" within the meaning of Section 3(32) of ERISA and (ii)
transactions by or with the Borrower to Borrower's knowledge are not subject to
Requirements of Law regulating investments of and fiduciary obligations with
respect to government plans.
Section 4.24 O&M Program.
The Borrower has adopted an O&M Program with respect to all
Hazardous Materials, if any, identified in the Environmental Assessment
furnished to the Lender prior to the Closing Date or as otherwise required by
the Lender.
Section 4.25 No Organizational Document Amendment.
At no time after the date hereof while the Loan is outstanding
shall the Borrower, nor any member or general partner of the Borrower, amend or
modify their respective organizational documents without the prior written
consent of Lender.
Section 4.26 Permitted Encumbrances.
The Permitted Encumbrances as set forth in the Security
Instruments do not materially and adversely affect the Lender's lien on the
Premises created by the Security Instruments, and do not materially and
adversely affect the use, operation or value of the Premises.
Section 4.27 Insolvency Opinion.
All of the assumptions made with respect to the Borrower in
that certain substantive non-consolidation opinion letter dated the date hereof,
delivered by Borrower's counsel in connection with the Loan and any subsequent
non-consolidation opinion delivered in accordance with the terms and conditions
of this Agreement (the "Non-consolidation Opinion"), including, but not limited
to, any exhibits attached thereto, are true and correct in all material
respects.
Section 4.28 Year 2000.
The Borrower and its Affiliates are taking all necessary and
appropriate steps to ascertain the extent of, and to quantify and successfully
address, business and financial risks facing the Borrower and its Affiliates as
a result of what is commonly referred to as the "Year 2000 Problem" (i.e., the
inability of certain computer applications to recognize correctly and perform
date-sensitive functions involving certain dates prior to and after January 1,
2000), including risks resulting from the failure of key vendors and suppliers
of the Borrower and its Affiliates to successfully address the Year 2000
Problem, and (b) the Borrower's and its
42
Affiliates' material computer applications and those of its key vendors and
suppliers will, on a timely basis, adequately address the Year 2000 Problem in
all material respects.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Affirmative Covenants of the Borrower.
During any period in which the Loan is outstanding, the
Borrower agrees that it will:
(a) Use of Loan Funds. Cause all Loan proceeds to be used for
the purposes set forth in a loan closing statement approved by the Lender and
use all excess Loan proceeds disbursed to the Borrower only for lawful business
purposes permitted under the Borrower's organizational documents. No part of the
proceeds of the Loan will be used for "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect or for any purpose which violates the
provisions of the Regulations of such Board of Governors. If requested by the
Lender, the Borrower will furnish to the Lender a statement to the foregoing
effect in conformity with the requirements of FR Form U-1 referred to in said
Regulation U. No part of the proceeds of the Loan has been used in any manner
that could result in a violation of Regulations G, T, V or X of the Board of
Governors of the Federal Reserve System.
(b) Payment. Pay when due all sums owing to the Lender and
others in accordance with the terms of the Loan Documents.
(c) Fees, Costs and Expenses. Pay when due all fees, costs and
expenses required to be paid by the Borrower pursuant to the terms of the
Commitment or any of the other Loan Documents, including without limitation,
reasonable attorneys fees and other fees, costs and expenses of the Lender in
connection with the enforcement of the Lender's rights under the Loan Documents.
Any such amounts paid by the Lender shall be due and payable upon demand.
(d) Condition of Premises. Keep and maintain the Premises in
good order, condition and repair and shall make, as and when the same shall
become necessary, all repairs and maintenance necessary or appropriate in order
to keep the Premises from deteriorating.
(e) Compliance. Comply with all (i) building, zoning, fire,
health, environmental, disability and use laws (including, but not limited, to
all state and local handicapped access laws, the Architectural Barriers Act of
1968, the Fair Housing Amendments Act of 1988, the Rehabilitation Act of 1973,
the Americans with Disabilities Act of 1990 and similar laws and ordinances),
codes, ordinances, rules and regulations, to the extent required by applicable
Governmental Authorities, (ii) covenants and restrictions of record and (iii)
easements which are in any way applicable to the Premises or any part thereof
and the use or enjoyment thereof.
43
(f) Inspection. Subject to the rights of any tenants of the
Premises under their leases, permit the Lender and/or its authorized agents to
enter upon the Premises during normal working hours and as often as the Lender
desires, for the purpose of inspecting the Improvements specifically and the
condition and operation of the Premises generally. In connection therewith, the
Borrower shall permit the Lender and the Lender's representatives (including an
independent Person such as an engineer, architect, or inspector) or third
parties making Immediate Repairs or Additional Repairs to enter onto the
Premises during normal business hours (subject to the rights of any tenants of
the Premises under their leases) to inspect the progress of any Immediate
Repairs or Additional Repairs and all materials being used in connection
therewith, to examine all plans, specifications and shop drawings relating to
such Immediate Repairs or Additional Repairs which are or may be kept at the
Premises, and to complete any Immediate Repairs or Additional Repairs. The
Borrower agrees to cause all contractors, subcontractors, agents, architects and
inspectors reasonably to cooperate with the Lender and the Lender's
representatives or such other Persons described above in connection with
inspections or the completion of Immediate Repairs or Additional Repairs.
(g) Reimbursement. The Borrower agrees that if it shall fail
to pay when due any tax, assessment or charge levied or assessed against the
Premises (other than any amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with Required Accounting Standards have been provided on
its books), or any utility charge, whether public or private, or any insurance
premium or if it shall fail to procure the Insurance required hereunder and
cause the delivery of the insurance certificates as required herein, or if it
shall fail to pay any other charge or fee described herein, then the Lender, at
its option, may pay, procure or cause the delivery of the same. The Borrower
will reimburse the Lender upon demand for any sums of money paid by the Lender
pursuant to this Section, together with interest on each such payment at the
default rate set forth in the Note and all such sums and interest thereon shall
be secured hereby.
(h) Environmental Assessment. Provide to the Lender from
time-to-time, at the Borrower's sole fee, cost and expense, if the Lender shall
ever have reason to believe that any Hazardous Material affects the Premises, or
if any Governmental Action is made or threatened, or if an Event of Default
shall have occurred, an Environmental Assessment, which Environmental Assessment
shall have been ordered by the Borrower within ten (10) days after the Lender's
request and which shall be delivered to the Lender promptly after the date of
the Lender's request. At all other times, the Lender may request an
Environmental Assessment to be provided by the Borrower at the Lender's expense.
The Borrower will cooperate with each consulting firm making any Environmental
Assessment and will promptly supply to the consulting firm, from time to time
upon request, all information available to the Borrower to facilitate the
completion of the Environmental Assessment. If the Borrower fails to furnish the
Lender within ten (10) days after the Lender's request with a copy of an
agreement with an acceptable environmental consulting firm to provide such
Environmental Assessment, or if the Borrower fails to order such Environmental
Assessment within ten (10) days after the Lender's request, the Lender may cause
any such Environmental Assessment to be made at the Borrower's fee, cost,
expense and risk. The Lender may disclose to interested parties after an Event
of Default or in connection with a Securitization any information the Lender
ever has about the environmental condition or compliance of the Premises, but
shall be under no duty to disclose
44
any such information except as may be required by law. The Lender shall be under
no duty to make any Environmental Assessment of the Premises, and in no event
shall any such Environmental Assessment by the Lender be or give rise to a
representation that any Hazardous Material is or is not present on the Premises,
or that there has been or shall be compliance with any Hazardous Materials Law,
nor shall the Borrower or any other Person be entitled to rely on any
Environmental Assessment made by the Lender or at the Lender's request. The
Lender owes no duty of care to protect the Borrower or any other Person against,
or to inform them of, any Hazardous Material or other adverse condition
affecting the Premises.
(i) Appraisal. At all times during the term of the Loan,
cooperate with the Lender and use its best efforts to assist the Lender in
obtaining an Appraisal of each Individual Property, and will promptly supply to
the Lender, from time to time upon request, all information available to the
Borrower to facilitate the completion of the Appraisal. If any Event of Default
occurs, or if a casualty loss or governmental taking occurs and results in
insurance or eminent domain proceeds in excess of $125,000.00 for an Individual
Property, the Lender may, in its reasonable discretion, choose the appraiser,
but the Borrower shall be responsible for any reasonable fees payable to said
appraiser in connection with an Appraisal of the Premises. Under all other
circumstances, the appraiser performing any such Appraisal shall be engaged by
the Lender, and the Lender shall be responsible for any fees payable to said
appraiser in connection with an Appraisal of the Premises.
(j) Surveys. Following any change in the exterior
configuration of the Premises or any rezoning affecting the Premises, provide
the Lender with such additional Surveys as requested by the Lender.
(k) Other Tests. Promptly submit to the Lender copies of
reports of all physical tests at any time made on the Land, the Improvements or
the materials to be incorporated into the Improvements and shall, at the
Borrower's expense, cause to be made such additional tests from time to time as
the Lender may reasonably require (i) after the occurrence and during the
continuance of an Event of Default or (ii) receipt by the Lender of any such
report.
(l) Taxes and Fees. Except as otherwise provided herein, pay
as they become due all taxes, general and special assessments (other than any
amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
Required Accounting Standards have been provided on its books), permit fees,
inspection fees, license fees, water and sewer charges, franchise fees and
equipment rents to the extent required to be paid by Borrower under an Operating
Lease, against it or the Premises and the Borrower, upon request of the Lender,
will submit to the Lender receipts evidencing said payments.
(m) Financial Statements and Operating Statements. Furnish, or
cause to be furnished to the Lender, annual Financial Statements for Borrower
and REIT. Monthly Operating Statements for the Premises shall be submitted to
the Lender when requested by the Lender and for any period during which any
Event of Default is continuing. Operating Statements shall be delivered to the
Lender within thirty (30) days of the end of each of the
45
Borrower's fiscal quarters, and an annual Financial Statements shall be
submitted to the Lender within ninety (90) days (or one hundred twenty (120)
days if such annual Financial Statements are audited) of the Borrower's fiscal
year end in lieu of an Operating Statement for the Borrower's fourth fiscal
quarter. Until such time as there is a Securitization of the Loan, Borrower
shall provide Lender with Operating Statements and Financial Statements on a
monthly basis. Without limiting any other rights available to the Lender under
this Loan Agreement or any of the other Loan Documents, in the event the
Borrower shall fail to timely furnish the Lender any Financial Statement in
accordance with this subsection, the Borrower shall promptly pay to the Lender a
penalty in the amount of $1,000.00 for each such failure.
(n) Books and Records. Keep and maintain at all times at the
Premises, at the Borrower's address set forth herein, or at such other place as
the Lender may approve in writing, complete and accurate books of accounts and
records adequate to reflect correctly the results of the operation of the
Premises and copies of all written contracts, leases and other instruments which
affect the Premises (including, but not limited to, all bills, invoices and
contracts for utilities, waste management service, telephone service and
management services, rent registrations and all materials filed with any
Governmental Authority where applicable) to the extent not maintained and
provided by Operating Lessee. Such books, records, contracts, leases and other
instruments shall be subject to examination and inspection at any time by the
Lender upon reasonable prior notice.
(o) Further Assurances. The Borrower shall furnish or cause to
be furnished such further documentation or information (including without
limitation, amendments, replacements, corrections, deletions or additions to the
Loan Documents or any other materials furnished to the Lender in connection with
the Loan) which is (i) reasonably required to enable the Lender to sell the
Loan, or (ii) deemed necessary or appropriate by the Lender in the exercise of
its rights under any of the Loan Documents or to perfect, protect, maintain,
preserve, continue and/or extend any Lien granted to the Lender under the
Security Instruments or any other Loan Document, provided, however, that the
Borrower shall not be required to do anything that (A) has the effect of (I)
changing the essential economic terms of the Loan set forth in the Loan
Documents or (II) imposing greater liability under the Loan Documents, or (B)
results in the aggregate in any substantial fee, cost or expense to the
Borrower. In addition, the Borrower shall furnish or cause to be furnished such
further documentation and information (including without limitation, amendments,
replacements, corrections, deletions and additions to the Loan Documents and
other materials furnished to the Lender in connection with the Loan) deemed
necessary or appropriate by the Lender to correct patent mistakes in the Loan
Documents, materials relating to title insurance policies and other insurance
required hereunder, and the funding of the Loan, provided that any such further
documentation or information shall be at the sole fee, cost and expense of the
Lender.
(p) Payment of Operating Expenses. Pay all Operating Expenses
Leases, except to the extent that the Lender is obligated to pay any Operating
Expenses Premises or Operating Expenses Leases on behalf of the Borrower from
the Tax and Insurance Reserve Account.
46
(q) Payment of Recurring Capital Expenditures. Pay all
expenditures with respect to the Premises related to capital repairs,
replacements and improvements (other than Additional Repairs) performed from
time to time.
(r) ERISA. Deliver to the Lender such certifications or other
evidence from time to time throughout the term of the Loan, as requested by the
Lender in its reasonable discretion, that (i) the Borrower is not an "employee
benefit plan," a "governmental plan" and/or subject to state statutes regulating
investments and fiduciary obligations with respect to governmental plans; and
(ii) one or more of the following circumstances is true:
(A) Less than twenty-five percent (25%) of all Equity
Interests in the Borrower are held by "benefit plan investors"
within the meaning of 29 C.F.R. ss.2510.3-101(f)(2); and/or
(B) The Borrower qualifies as an "operating company"
or a "real estate operating company" within the meaning of 29
C.F.R. ss.2510.3-101(c) or (e).
(s) Actions and Proceedings. Promptly notify the Lender in
writing of any action or proceeding relating to any condemnation or other
taking, whether direct or indirect, of the Premises or any portion thereof, or
purporting to affect the Premises, any Loan Document or any right of the Lender
hereunder or thereunder. In each such action or proceeding, the Borrower shall,
unless otherwise directed by the Lender in writing, appear in and prosecute or
defend any such action or proceeding. The Borrower hereby further authorizes the
Lender to participate and appear in (at the Borrower's expense, including
without limitation, the Lender's reasonable attorney's fees) any action or
proceeding relating to any condemnation or other taking of the Premises, whether
direct or indirect, and, following an Event of Default, to settle or compromise
any claim in connection with such condemnation or other taking.
(t) Completion of Immediate Repairs and Additional Repairs.
(i) The Borrower shall complete all Immediate Repairs by the
time specified on Exhibit B attached hereto, and in no event later than
twelve (12) months from the date of this Agreement, except for those
Individual Properties known as Belmont and Irving, for which such
Immediate Repairs shall be completed in no event later than ninety (90)
days from the date hereof. The Borrower covenants and agrees that each
of the Immediate Repairs and Additional Repairs and all materials,
equipment, fixtures, and any other item comprising a part of any
Immediate Repair or Additional Repair shall be constructed, installed
or completed, as applicable, free and clear of all mechanic's,
materialman's or other liens (except for those liens existing on the
date of this Agreement which have been approved in writing by the
Lender).
(ii) If the Lender determines, in its reasonable discretion,
that Additional Repairs are advisable in order to keep the Premises in
good order and repair, the Lender may send the Borrower written notice
of the need for making such Additional Repairs. The Borrower shall
promptly, in accordance with sound construction practices and taking
into account shortages of materials, commence making such Additional
Repairs. If the
47
Borrower fails to commence such Additional Repairs within sixty (60)
days after such notice and diligently pursue completion of such
Additional Repairs, then, in addition to all other rights the Lender
may have under the Loan Documents, the Lender may contract with third
parties to make such Additional Repairs and may in its sole discretion
(A) apply the funds in the Repair Escrow Account and/or Replacement
Reserve Account toward the labor and materials necessary to complete
such Additional Repairs, and/or (B) demand payment for such Additional
Repairs from the Borrower.
(iii) In the event the Lender determines in its reasonable
discretion that any Immediate Repair or Additional Repair has not been
completed in a workmanlike and timely manner, the Lender shall have the
option to withhold disbursement from the Reserve Accounts for such
unsatisfactory Immediate Repair or Additional Repair and to proceed
under existing contracts or to contract with third parties to complete
such Immediate Repair or Additional Repair and to apply the Repair
Escrow Account or the Replacement Reserve Account toward the labor and
materials necessary to complete such Immediate Repair or Additional
Repair to the reasonable satisfaction of the Lender, without providing
any prior notice to the Borrower.
(iv) In order to facilitate the Lender's completion or making
of the Immediate Repairs or Additional Repairs, the Lender is granted
the irrevocable right to enter onto the Premises and perform any and
all work and labor necessary to complete or make the Immediate Repairs
or Additional Repairs and employ watchmen to protect the Premises from
damage, loss and/or theft. All sums so expended by the Lender shall be
deemed to have been advanced to the Borrower and secured by the
Security Instruments and the other Loan Documents.
(v) All Immediate Repairs and Additional Repairs shall comply
with all Requirements of Law and applicable insurance requirements
including, without limitation, applicable building codes, special use
permits, environmental regulations, and requirements of insurance
underwriters.
(u) Assumptions in Non-consolidation Opinion. Borrower has
complied and will comply with all of the assumptions made with respect to it in
the Non-consolidation Opinion. Each entity other than the Borrower with respect
to which an assumption is made in the Non-consolidation Opinion has complied and
will comply with all of the assumptions made with respect to it in the
Non-consolidation Opinion.
(v) Program Rider. Comply with all covenants and agreements of
Borrower set forth in the Program Rider.
(w) Operating Leases. Comply with all covenants, obligations
and agreements contained in the Operating Leases. Borrower will exercise any and
all cure rights under the Operating Leases in order to cure any breach by
Borrower or any Affiliate of Borrower as Lessor thereunder.
48
(x) Franchise Agreements. Borrower shall at all times during
the term of the Loan maintain, or cause to be maintained, Franchise Agreements
for each Individual Property.
(y) Liquidity Requirement. Borrower shall maintain at all
times during the term of the Loan $1,350,000.00 of liquidity (the Liquidity
Requirement") in the form of (i) cash, (ii) a Letter of Credit acceptable to
Lender in its sole discretion, (iii) amounts in the Debt Service Reserve
Account, or (iv) a reserve on that certain line of credit from Lender to the
REIT pursuant to a direction letter in the form attached hereto as Exhibit J and
in an amount which, at all times while the Loan is outstanding, and when
combined with the other acceptable forms of liquidity in (i) - (iii) above, is
sufficient to meet the Liquidity Requirement.
(z) Agreed Upon Procedures Report. The Borrower shall deliver
to Lender an agreed upon procedures report covering the Individual Properties
and collectively for all of the Premises, prepared annually by PriceWaterhouse
Coopers or any accounting firm acceptable to Lender.
(aa) Summerfield Letter of Credit. Borrower shall at all times
cause that certain Letter of Credit dated June 3, 1998, from The Chase Manhattan
Bank or a renewal (the "Chase Letter of Credit") thereof to be in effect while
the Loan is outstanding or shall deliver to Lender either (i) a substitute
Letter of Credit, reasonably acceptable to Lender, from (A) The Chase Manhattan
Bank, (B) an Eligible Institution or (C) a financial institution reasonably
acceptable to Lender or (ii) such other collateral as Operating Lessee is
permitted to supply under that certain Lease Master Agreement dated June 20,
1997 to be held by Lender as additional collateral.
(bb) Lake Oswego PIP. Prior to December 31, 1999, Borrower
shall complete all required improvements contained in that certain Property
Improvement Plan from Marriott International Inc., dated August 24, 1996 with
respect to that Individual Property known as Lake Oswego and upon completion
shall deliver an Officer's Certificate to Lender certifying as to the completion
of such improvements. In the event that Borrower fails to complete such
improvements prior to December 31, 1999, Borrower shall deposit or cause to be
deposited into the Immediate Repairs Account an amount as determined by a
physical inspection report performed by an engineer or an inspection by Lender
to be disbursed in accordance with Section 6.9 hereof.
Section 5.2 Negative Covenants of the Borrower.
During any period in which the Loan is outstanding, the
Borrower agrees that it will not without the prior written consent of Lender:
(a) Sale or Encumbrance of Personalty. Sell, encumber or
otherwise dispose of any of the Personalty except (i) to incorporate Tangible
Personalty into the Improvements or replace Tangible Personalty with goods of
quality and value at least equal to that replaced, or (ii) for the sale,
disposal or use of inventory, if any, in the ordinary course of the Borrower's
business at the Premises; provided, however, in the event the Borrower sells or
otherwise disposes of any of the Personalty, the Lender's security interest in
the proceeds of the Personalty
49
shall continue pursuant to the Security Instruments and the other Loan
Documents, as appropriate.
(b) Construction. Construct or permit the construction of any
improvements on the Premises other than Immediate Repairs or as otherwise
required hereunder or by Franchisors and which construction will not diminish
the value of the Premises or were previously consented to in writing by the
Lender, which consent shall not be unreasonably withheld, conditioned or
delayed.
(c) Change in Ownership; Identity of the Borrower. Permit any
sale, transfer, assignment or other disposition of, or grant or create any Lien
on, any of the following interests in the Borrower except that:
(1) Holders of membership/partnership interests in Borrower
and beneficiaries of holders of interests of Borrower as of the date of
this Agreement (the "Interest Holders") shall have the right to
Transfer their interest in Borrower (or any entity directly or
indirectly holding a membership interest in Borrower) without Lender's
consent; provided, however, that (i) after taking into account any
prior Transfers pursuant to this section, whether to the proposed
transferee or otherwise, no such Transfer (or series of Transfers)
shall result in (x) the proposed transferee, or any affiliates thereof,
owning in the aggregate (directly, indirectly or beneficially) 49% or
more of the interests in Borrower (or any entity directly or indirectly
holding a membership interest in Borrower), or (y) a Transfer in the
aggregate of 49% or more of the interests in Borrower as of the date
hereof, (ii) no such Transfer of interest shall result in a change of
control of Borrower or the day to day operations of the secured
Premises, (iii) Borrower shall give Lender notice of such Transfer
together with copies of all instruments effecting such Transfer not
less than fifteen (15) business days prior to the date of such
Transfer; (iv) no Event of Default has occurred and remains uncured;
and (v) the legal and financial structure of Borrower after such
Transfer and its shareholders, partners or members, as applicable, and
the Special Purpose Entity nature of Borrower satisfies Lender's and
the Rating Agency's then current applicable underwriting criteria and
requirements including, without limitation, the requirement at the
request of Lender, to deliver evidence reasonably satisfactory to
Lender that the Special Purpose Entity nature of Borrower following
such Transfer is in accordance with the standards of the Rating
Agencies or, if a Securitization has occurred, the Rating Agencies
rating the Securities in the Securitization (including, in such event,
written confirmations from such Rating Agencies that such Transfer or
series of Transfers will not result in a requalification, reduction or
withdrawal of the ratings then applicable to such Securities), and
Opinions of Counsel (including a Non-consolidation Opinion) as may be
reasonably requested by Lender and the Rating Agencies.
(2) Transfers by any of the Interest Holders of their direct
or indirect interests in Borrower (or any entity that directly or
indirectly holds a membership interest in Borrower which result in (x)
the proposed transferee, or any affiliates thereof, owning in the
aggregate (directly, indirectly or beneficially) 49% or more of the
interests in Borrower (or any entity directly or indirectly holding a
membership interest in
50
Borrower), or (y) a Transfer in the aggregate of 49% or more of the
interests in Borrower as of the date hereof, shall be permitted only
with the Lender's prior written consent, which shall not be
unreasonably withheld; provided that such Transfer must comply with the
provisions of clauses (iii), (iv) and (v) of subparagraph (1) above,
and clauses (A) through (D) below:
(A) The Interest Holder shall pay to the Lender all
reasonable and customary expenses incurred by the Lender in
connection with any such Transfer and a processing fee (i)
with respect to any Transfer requested or occurring prior to
the sale of the Loan by the Lender in the secondary market, in
an amount equal to the greater of 1% of the then outstanding
principal amount of the Loan as of the date the Borrower
requests the Lender to consent to such Transfer, or
$10,000.00, and (ii) with respect to any such Transfer
thereafter, in an amount equal to $10,000.00.
(B) With respect to any Transfer requested or
occurring prior to the sale of the Loan by the Lender in the
secondary market, the consideration paid or to be paid by the
assignee or purchaser in connection with the Transfer shall
not be less than the appraised value of the Premises used by
the Lender in underwriting the Loan, as determined by the
Lender in its reasonable judgment, multiplied by the
percentage of interests (direct or indirect) being transferred
in the Borrower. The Borrower shall furnish the Lender at the
Borrower's sole cost and expense such information as the
Lender shall request in connection with any Transfer,
including without limitation, an Appraisal or other evidence
satisfactory to the Lender in its reasonable discretion of the
value of the Premises as of the date of the Transfer.
(C) The assignee or purchaser must meet Lender's
reasonable underwriting standards concerning, including
without limitation, its net worth and operating history, as
determined by Lender in its sole reasonable discretion.
(D) No Transfer shall relieve the Borrower of its
Obligations under this Loan Agreement or any of the other Loan
Documents.
(d) No Consent. Notwithstanding anything to the contrary
contained in this Loan Agreement, the Security Instruments or any other Loan
Documents, Lender's consent shall not be required for any of the following
sales, transfers, assignments, pledges, conveyances or encumbrances, provided
that Lender has received payment in full of all its actual expenses incurred in
connection therewith:
(i) with respect to the REIT and any holders of interests
therein, directly or indirectly, (A) Transfer of all or any portion of
any shares of beneficial interests of the REIT for so long as the
shares of the REIT continue to be publicly traded on a national stock
exchange and (B) the issuance of additional shares of the REIT;
51
(ii) with respect to the Operating Partnership and any holders
of interests therein, (A) any Transfer (direct or indirect) of limited
partnership interests in the Operating Partnership and (B) the issuance
of additional limited partnership units or other securities, even if
such issuance results in a reduction of the partnership interest of the
REIT or its wholly-owned Affiliate in the Operating Partnership,
provided that, after giving effect to such transfer or series of
transfers described in (A) or (B), the REIT owns more than fifty-one
percent (51%) of the partnership interests of the Operating Partnership
or continues to be the sole general partner of the Operating
Partnership; or
(iii) a Fundamental Transaction relating to the REIT or the
Operating Partnership.
(e) Fundamental Transaction. As used herein, the term
"Fundamental Transaction" shall mean any acquisition by, merger with or
consolidation with or into, or sale of substantially all of its assets to, an
entity (the "Successor") in which the following conditions have been satisfied
as of the consummation of the transaction:
(i) the Successor owns, directly or indirectly, substantially
all the assets which the Operating Partnership owned immediately prior
to the effective date of such merger, consolidation or sale;
(ii) the Successor agrees in writing to assume all obligations
of the Operating Partnership under the Loan Documents to which the
Operating Partnership is a party;
(iii) upon the consummation of such transaction, Successor
shall either be (A) owned by a Qualified Resultant Owner or (B) owned
(i) at least 20% by the executive management of the REIT immediately
prior to such transfer and (ii) the remainder by one (1) or more
nationally recognized investors with substantial experience in real
estate related leveraged buyouts and evidence demonstrating that it has
sufficient capital to operate the Successor as contemplated;
(iv) Lender shall have confirmations in writing from the
Rating Agencies to the effect that such transfer will not result in a
re-qualification, reduction or withdrawal of any rating then assigned
to any Securities in a Securitization;
(v) with respect to any Individual Property that is the
subject of a Management Agreement, the Manager shall be either the
Manager immediately prior to such transfer or a Qualified Manager, and
any new Management Agreement shall be reasonably satisfactory to
Lender;
(vi) with respect to any Individual Property that is the
subject of an Operating Lease, the Operating Lessee shall be either the
Operating Lessee immediately prior to such transfer or a Qualified
Operating Lessee, and any new Operating Lease shall be reasonably
satisfactory to Lender;
52
(vii) the Premises will be owned by one or more special
purpose bankruptcy remote entities and a non-consolidation opinion
acceptable to Lender and the Rating Agencies has been delivered with
respect to any Successor; and
(viii) Lender has received no less than forty-five (45) days'
prior written notice of such transfer.
The Borrower hereby acknowledges to the Lender that (i) the identity of the
Borrower and the expertise available to the Borrower were and continue to be
material circumstances upon which the Lender has relied in connection with, and
which constitute valuable consideration to the Lender for, the extending to the
Borrower of the indebtedness evidenced by the Note and (ii) any change in such
identity or expertise could materially impair or jeopardize the security for the
payment of the Note granted to the Lender by the Security Instruments and the
other Loan Documents, as appropriate.
(f) Prepayment of Rent. Accept any prepayment of rent or
installments of rent for more than two (2) months in advance without the prior
written consent of the Lender.
(g) No Other Name. Change its name or operate under any name
other than its name as set forth herein.
(h) No Restricted Payments. Make any payment or take any other
action constituting (i) any direct or indirect purchase or other acquisition by
the Borrower of Equity Interests of any other Person, or any direct or indirect
loan, advance (other than advances to employees for moving and travel expenses,
drawing accounts and expenditures in the ordinary course of business) or capital
contribution by the Borrower to any other Person, including all debt and any
Obligation of any sort, and/or (ii) a payment or prepayment on account of, or
the setting apart of assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of
subordinated debt, either directly or indirectly, whether in cash or in property
or in obligations of any Person.
(i) No Waste or Abandonment. Suffer, permit or commit waste,
permit impairment or deterioration of, or abandon, the Premises or any portion
thereof. The Borrower will not itself, or permit any tenant or other Person to,
remove, demolish or alter any improvement now existing or hereafter erected on
the Premises or any fixture, equipment or machinery in or on the Premises except
in connection with any Immediate Repair or Additional Repair.
(j) Use of Premises. Except as required by applicable law, or
as otherwise permitted in writing by the Lender, allow any change in the
business use of all or any portion of Premises from the use thereof as of the
Closing Date.
(k) Franchise Agreements. Borrower shall not amend or
terminate any Franchise Agreement or permit Operating Lessee to terminate any
Franchise Agreement unless (i) such Franchise Agreement is replaced by another
Franchise Agreement with the same economic terms and conditions or economic
terms and conditions which are more favorable to
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Borrower and (ii) Borrower delivers to Lender an Officer's Certificate
evidencing satisfaction of the requirements set forth in (i) above.
Section 5.3 Environmental Covenants.
The Borrower hereby consents to:
(a) Not cause, permit or exacerbate any Prohibited Activities
or Conditions. The Borrower represents and warrants that it has not at any time
caused or permitted any Prohibited Activities or Conditions except as set forth
in the Environmental Assessment and that no Prohibited Activities or Conditions
exist or, to Borrower's knowledge, have existed on or under the Premises. The
Borrower shall take all appropriate steps to prevent its employees, agents, and
contractors, and any tenants from causing, permitting, or exacerbating any
Prohibited Activities or Conditions. The Borrower shall not lease or allow the
sublease or use of all or any portion of the Premises to any tenant, subtenant
or user that, in the ordinary course of its business, would cause, permit, or
exacerbate any Prohibited Activities or Conditions, and all leases, subleases
and use agreements relating to the Premises shall contain provisions sufficient
to ensure that tenants, subtenants and users shall not cause, permit or
exacerbate any Prohibited Activities or Conditions.
(b) Comply in a timely manner with, and cause all employees,
agents, and contractors of the Borrower and any other persons present on the
Premises to so comply with, (i) any O&M Program now or hereafter in effect
during the term of the Loan, and (ii) Hazardous Materials Law, so as to minimize
any economic loss to the Premises and the Loan. The Borrower shall adopt an O&M
Program with respect to any Hazardous Materials identified in any Environmental
Assessment or any Governmental Action relating to the Premises, or as otherwise
reasonably required by the Lender with respect to the Premises. Any O&M Program
shall be performed by a qualified contractor under the supervision of a
consulting engineer hired by the Borrower with the prior written approval of the
Lender which approval shall not be unreasonably withheld, conditioned or
delayed. All costs and expenses of any O&M Program shall be paid by the
Borrower, including without limitation the charges of such contractors and
consulting engineer and the Lender's fees, costs and expenses incurred in
connection with the monitoring and review of the O&M Program and the Borrower's
performance thereunder.
(c) Promptly notify the Lender in writing of: (i) any
Governmental Action it becomes aware of, (ii) any claim made or threatened by
any third party against the Borrower, the Lender, or the Premises relating to
loss or injury resulting from any occurrence or condition on the Premises or any
other real property that could require the removal from the Premises of any
Hazardous Materials or cause any restrictions on the ownership, occupancy,
transferability or use of the Premises under Hazardous Materials Law or (iii)
the occurrence of any Prohibited Activities or Conditions. The Borrower shall
cooperate with any governmental inquiry, and shall comply with any governmental
or judicial order, request or directive which arises from any alleged Prohibited
Activities or Conditions; provided the Borrower may contest or object to a good
faith dispute regarding said request or directive if the Borrower notifies the
Lender in advance of said contest or objection and as long as said contest or
objection does not result in a violation of law or fines assessed against the
Premises.
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(d) Pay promptly all costs and expenses incurred by the Lender
in connection with any Governmental Action, including but not limited to costs
of any environmental audits, studies, investigations or remedial activities
including but not limited to the removal of any Hazardous Materials from the
Premises. The Borrower also shall pay promptly the costs of any environmental
audits, studies, investigations or the removal of any Hazardous Materials from
the Premises reasonably required by the Lender as a condition of its consent to
any sale or transfer of all or any part of the Premises or any interest therein
or reasonably required by the Lender following a reasonable determination by the
Lender that there may be Prohibited Activities or Conditions on or under the
Premises. Any such costs or expenses incurred by the Lender (including but not
limited to reasonable fees and expenses of attorneys and consultants, whether
incurred in connection with any judicial or administrative process or otherwise)
which the Borrower fails to pay promptly shall become additional indebtedness
secured by the Security Instruments.
(e) HOLD HARMLESS, DEFEND AND INDEMNIFY THE LENDER AND ITS
OFFICERS, DIRECTORS, TRUSTEES, EMPLOYEES, AGENTS, AFFILIATES (INCLUDING ANY
PARENT CORPORATION), SUCCESSORS AND ASSIGNS, FROM AND AGAINST ALL PROCEEDINGS,
CLAIMS, DAMAGES, PENALTIES, FEES, COSTS AND EXPENSES (INCLUDING WITHOUT
LIMITATION REASONABLE FEES AND EXPENSES OF ATTORNEYS AND EXPERT WITNESSES,
INVESTIGATORY FEES, AND CLEANUP AND REMEDIATION EXPENSES, WHETHER INCURRED IN
CONNECTION WITH ANY JUDICIAL OR ADMINISTRATIVE PROCESS OR OTHERWISE), ARISING
DIRECTLY OR INDIRECTLY FROM (i) ANY BREACH OF ANY REPRESENTATION, WARRANTY, OR
OBLIGATION OF THE BORROWER CONTAINED IN THIS SECTION 5.3 OR (ii) THE PRESENCE OF
HAZARDOUS MATERIALS ON OR UNDER THE PREMISES OR ANY PROPERTY PROXIMATE TO THE
PREMISES OR ANY GOVERNMENTAL ACTION ALLEGING ANY SUCH PRESENCE, EXCEPT TO THE
EXTENT THAT THE BORROWER CAN CONCLUSIVELY PROVE BOTH THAT SUCH PRESENCE OR
GOVERNMENTAL ACTION ALLEGING SUCH PRESENCE WAS CAUSED SOLELY BY ACTIONS,
CONDITIONS, OR EVENTS THAT OCCURRED AFTER THE DATE THAT THE LENDER (OR ANY
PURCHASER AT A FORECLOSURE SALE) ACTUALLY ACQUIRED TITLE TO THE PREMISES AND
THAT SUCH PRESENCE OR GOVERNMENTAL ACTION ALLEGING SUCH PRESENCE WAS NOT CAUSED
BY THE DIRECT OR INDIRECT ACTIONS OF THE BORROWER OR THE BORROWER PRINCIPAL, OR
ANY PARTNER, MEMBER, PRINCIPAL, OFFICER, DIRECTOR, TRUSTEE OR MANAGER OF THE
BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR OR AFFILIATE OF THE BORROWER OR THE
BORROWER PRINCIPAL. THE OBLIGATIONS AND LIABILITIES OF THE BORROWER UNDER THIS
SECTION 5.3(e) SHALL SURVIVE ANY TERMINATION, SATISFACTION, ASSIGNMENT, ENTRY OF
A JUDGMENT OF FORECLOSURE OR DELIVERY OF A DEED IN LIEU OF FORECLOSURE OF THE
SECURITY INSTRUMENTS.
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Section 5.4 Recourse Covenants.
Except as otherwise expressly permitted by the Loan Documents,
during any period in which the Loan is outstanding, the Borrower agrees that it
will not, without the prior written consent of the Lender:
(a) Sale, Transfer, Conveyance or Disposal. Permit any sale,
transfer, conveyance or other disposal of the Premises, the Rents and Profits or
the Intangible Personalty.
(b) Other Financing and Liens. Engage in any other financing
with respect to the Borrower (except payables incurred with trade creditors in
reasonable amounts, provided such debt is not evidenced by a note and is not in
excess of sixty days past due in the ordinary course of business and paid prior
to delinquency), the Premises, the Rents and Profits or the Intangible
Personalty, except Liens on or leases of equipment acquired in the ordinary
course of business and in reasonable amounts with respect to satellite dishes,
cable TV systems and other similar equipment which is normally leased by other
hotel owners, or grant any consensual Liens against the Premises, the Rents and
Profits or the Intangible Personalty. Nor shall Borrower or any member or
partner of Borrower or Owner pledge any interest in Borrower without the prior
written consent of Lender such consent not to be unreasonably withheld, and
without written confirmation from applicable Rating Agencies that such pledge
will not result in a downgrade, qualification or withdrawal of the initial, or,
if higher, then current ratings assigned to the Securities by such Rating
Agency.
(c) Special Purpose Entity. Fail to be a Special Purpose
Entity.
Section 5.5 Insurance.
(a) Maintenance of Insurance. The Borrower shall keep, or
cause to be kept, at no cost or expense to Lender, in full force and effect all
Insurance. If the Borrower fails to maintain, or cause to be maintained, any
Insurance required by this Agreement, the Lender may, at its option, procure
such Insurance, and the Borrower shall reimburse the Lender for the amount of
all premiums paid by the Lender thereon promptly upon demand by the Lender, with
interest thereon at the rate then provided by the Note from the date paid by the
Lender to the date of repayment, and such sum shall be a part of the
indebtedness secured by the Security Instruments. The Lender shall not by the
fact of approving, disapproving, accepting, preventing, obtaining or failing to
obtain any Insurance, incur any liability for or with respect to the amount of
Insurance carried, the form or legal sufficiency of insurance contracts,
solvency of insurance companies, or payment or defense of lawsuits, and the
Borrower, for itself, hereby expressly assumes full responsibility therefor and
all liability, if any, with respect thereto.
(b) Insurance with Respect to Immediate Repairs and Additional
Repairs. In addition to and to the extent not covered by any Insurance required
under the Loan Documents, the Borrower shall provide or cause to be provided
worker's compensation insurance, builder's risk, and public liability insurance
and other insurance to the extent required under applicable law in connection
with a particular Immediate Repair, or Additional Repair reasonably required by
the Lender.
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(c) Approved Insurers. Each of the Borrower's insurers shall
be an Approved Insurer. If any of the Borrower's insurers shall at any time
cease to be an Approved Insurer, then within thirty (30) days after notice from
the Lender to the Borrower, the Borrower will obtain replacement Insurance or
additional Insurance issued by one or more other Approved Insurers.
(d) Form of Insurance Policies; Endorsements. All policies for
Insurance shall be in such form and with such endorsements as are comparable to
the forms of and endorsements to the Borrower's, or if applicable, its tenant's,
insurance policies in effect on the date hereof or otherwise in accordance with
commercially reasonable standards applied by prudent owners of similar
businesses in the general vicinity of the Premises and generally acceptable to
institutional lenders for comparable properties and risks. All such policies
shall name the Lender, and its successors and assigns, as additional insureds,
mortgagees and/or loss payees, as deemed appropriate by the Lender, and shall
provide that all proceeds are payable to the Lender and shall contain: (i) a
standard "non-contributory mortgagee" endorsement or its equivalent relating,
inter alia, to recovery by the Lender notwithstanding the negligent or willful
acts or omissions of the named Borrower; (ii) to the extent available at
commercially reasonable rates, a waiver of subrogation endorsement as to the
Lender; (iii) an endorsement providing that no policy shall be impaired or
invalidated by virtue of any act, failure to act, negligence of, or violation of
declarations, warranties or conditions contained in such policy by the Borrower,
any tenant at the Premises, the Lender or any other named insured, additional
insured, mortgagee or loss payee, except for the willful misconduct of the
Lender knowingly in violation of the conditions of such policy; (iv) an
endorsement providing for a deductible per loss of an amount not more than that
which is customarily maintained by prudent owners of similar businesses in the
general vicinity of the Premises; (v) a provision that such policies shall not
be canceled or amended, including, without limitation, any amendment reducing
the scope or limits of coverage, without at least thirty (30) days prior written
notice to the Lender in each instance, and (vi) effective waivers by the insurer
of all claims for insurance premiums against any loss payees, additional
insureds, mortgagees and named insureds (other than the Borrower). Any insurance
coverage relating to the Premises that is carried by the Borrower or, if
applicable, its tenants, in excess of the Insurance required hereunder shall
name the Lender, and its successors and assigns, as additional insureds,
mortgagees and/or loss payees, as appropriate, as provided herein. A certificate
executed by the Borrower's insurance consultant and other evidence of Insurance
required by the Lender shall be delivered to the Lender not less than ten (10)
days prior to the expiration date of any of the policies for Insurance required
to be maintained hereunder which certificate and other evidence shall certify
payment of applicable premiums for renewal and replacement policies. The
Borrower may effect any Insurance required hereunder through blanket insurance
policies. The Borrower shall deliver to the Lender certified copies of all
policies or certificates reasonably acceptable to Lender for Insurance which
shall be taken out upon the Premises while any part of the Loan shall remain
unpaid.
(e) Compliance with Insurance Policy Terms. The Borrower shall
comply with all terms of policies for Insurance and shall not bring or keep or
permit to be brought or kept any article upon the Premises or cause or permit
any condition to exist thereon which would be prohibited by or could invalidate
any Insurance required hereunder.
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Section 5.6 Lockbox.
The Borrower has established as of the date hereof the Lockbox
Account, which Lockbox Account shall, in all respects, be governed by the Cash
Management Agreement.
ARTICLE VI
RESERVE ACCOUNTS
Section 6.1 Establishment of Reserve Accounts.
On or before the Closing Date, the Lender shall establish each
Reserve Account. Each Reserve Account shall be under the sole dominion and
control of the Lender.
Section 6.2 Initial Reserve Deposits.
On the Closing Date, the Borrower shall pay to the Lender for
deposit into each Reserve Account any Initial Reserve Deposit applicable to such
Reserve Account.
Section 6.3 Monthly Reserve Deposits.
On each Payment Date, the Borrower shall pay to the Lender for
deposit into each Reserve Account any Monthly Reserve Deposit applicable to such
Reserve Account. The Lender may, upon written request from the Borrower, waive
any requirement for the payment of a Monthly Reserve Deposit, provided however,
that any such waiver by the Lender of a requirement that the Borrower pay such
Monthly Reserve Deposit may be revoked by the Lender, in the Lender's sole
discretion, at any time upon notice in writing to the Borrower.
Section 6.4 Replacement Reserve Account.
(a) On and after the first anniversary of the date of this
Agreement, the Lender may, in the Lender's reasonable discretion, annually
adjust the Monthly Reserve Deposit to the Replacement Reserve Account to an
amount sufficient, in the Lender's reasonable judgment, to maintain adequate
balances necessary for Additional Repairs, including, without limitation,
Additional Repairs made pursuant to the terms of and consistent with the
requirements of the applicable Franchise Agreement and Operating Lease. Between
annual adjustments the Lender may from time to time, but not more than once a
year, adjust the Monthly Reserve Deposit to the Replacement Reserve Account to
an amount sufficient, in the Lender's reasonable judgment, to maintain adequate
balances necessary for Additional Repairs, including, without limitation,
Additional Repairs made pursuant to the terms of and consistent with the
requirements of the applicable Franchise Agreement and Operating Lease.
Notwithstanding the foregoing, in the event the Lender shall at any time
increase the Monthly Reserve Deposit to the Replacement Reserve Account over the
Monthly Reserve Deposit to the Replacement Reserve Account then required
pursuant to Exhibit B hereto, the Borrower may, at its election, request that
the Lender obtain, at the sole cost, fee and expense of the Borrower, an
engineering report from an engineer to be selected by the Lender in its
reasonable discretion, in which case the Monthly Reserve Deposit to the
Replacement Reserve Account shall be adjusted by the Lender based on such
engineering report, provided that in no event shall the Monthly Reserve Deposit
to the
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Replacement Reserve Account be decreased below the applicable amount set forth
on Exhibit B hereto. Following any defeasance of any permitted portion of the
Premises, or substitution of properties pursuant to Section 2.6 hereof, and upon
written request from Borrower, Lender will, at Borrower's expense, commission an
updated engineering report (from an engineer selected by Lender) of the
remaining portion of the Premises and, subject to Lender's review and approval,
the amount of the Monthly Reserve Deposit to the Replacement Reserve Account
shall be adjusted to reflect that the defeased portion of the Premises no longer
serves as collateral for the Loan.
Section 6.5 Permitted Investments, Earnings, Charges and
Annual Accounting.
(a) Permitted Investments. The Lender may invest and reinvest,
or cause to be invested or reinvested, all or any portion of any funds on
deposit in any Reserve Account in Permitted Investments. The maturities of the
Permitted Investments on deposit in any Reserve Account shall be selected and
coordinated to become due not later than the day before any disbursements from
any Reserve Account must be made. All such Permitted Investments shall be held
in the name and be under the sole dominion and control of the Lender, to the
extent permitted by applicable laws, and no Permitted Investment shall be made
unless the Lender shall perfect its first priority Lien in such Permitted
Investment and, to the extent permitted by applicable laws, the Lender shall
have sole possession and control over each such Permitted Investment and the
income thereon, and any certificate or other instrument or document evidencing
any such investment shall be delivered directly to the Lender, together with any
document of transfer necessary to transfer title to such investment to the
Lender. The Lender shall not have any liability (other than for the Lender's
gross negligence or willful misconduct) for any loss in investments of funds in
any Reserve Account that are invested in Permitted Investments and no such loss
shall affect the Borrower's obligation to (i) make any payment hereunder, under
the Security Instruments, the Note or any other Loan Document, or (ii) fund, or
have liability for funding, any Reserve Account. The Borrower agrees that it
shall include all interest, earnings or profits on Permitted Investments of
funds on deposit in any Reserve Account as its income (and, if the Borrower is a
partnership or other pass-through entity, the partners, members or beneficiaries
of the Borrower, as the case may be), and shall be the owner of such accounts
for federal and applicable state and local tax purposes, except to the extent
the Lender retains such interest, earnings or profits for its own account in
accordance with the provisions of Section 6.5(b) of this Loan Agreement. The
Borrower shall have no right whatsoever to direct the investment of the proceeds
in any Reserve Account.
(b) Earnings. All interest, earnings or profits on the
Permitted Investments of funds in any of the Reserve Accounts shall be deposited
into the applicable Reserve Account, provided that the Lender may, at its
election, retain for its own account any such interest, earnings or profits on
any or all of the Reserve Accounts during the occurrence and continuance of an
Event of Default.
(c) Charges. Except as prohibited by applicable laws, the
Lender may charge the Borrower for holding, maintaining and applying funds in
any of the Reserve Accounts to the extent funds on deposit in such Reserve
Account are invested or reinvested in Permitted Investments and the Lender does
not retain for its own account any interest, earnings or profits
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on such Reserve Account in accordance with the provisions of Section 6.5(b) of
this Loan Agreement.
(d) Monthly Accounting. The Lender shall furnish or cause to
be furnished to the Borrower, without charge, a monthly accounting of each
Reserve Account in the normal format of the Lender or its agent, showing credits
and debits to such Reserve Account and the purpose for which each debit to such
Reserve Account was made.
Section 6.6 Assignment to the Lender of Reserve Accounts and
Rights and Claims.
(a) The Borrower hereby assigns to the Lender the Reserve
Accounts as additional security for all of the Borrower's Obligations to the
Lender, under the Note and under the other Loan Documents; provided, however,
the Lender shall make disbursements from the Reserve Accounts in accordance with
the terms of this Agreement, including without limitation, the Program Rider.
(b) The Borrower assigns to the Lender all rights and claims
the Borrower may have against (i) all persons or entities claiming amounts due
for taxes, utilities, rent or insurance, or (ii) all persons or entities
supplying labor or materials in connection with the Immediate Repairs or
Additional Repairs; provided, however, that the Lender may not pursue any such
right or claim unless an Event of Default exists under this Agreement or the
Loan Documents.
Section 6.7 Application of Reserve Accounts Upon an Event of
Default.
If any Event of Default occurs, then the Borrower shall
immediately lose all of its rights to receive disbursements from the Reserve
Accounts unless and until the earlier to occur of or concurrently with (a) the
date on which such Event of Default is fully cured, and (b) the date on which
all amounts secured by the Security Instruments and the other Loan Documents
have been paid in full and the lien of the Security Instruments and the other
Loan Documents, as appropriate, have been released by the Lender. Upon any Event
of Default, the Lender may in its sole discretion, use the Reserve Accounts (or
any portion thereof) for any purpose, including but not limited to (i) repayment
of any indebtedness secured by the Security Instruments and the other Loan
Documents, including but not limited to principal prepayments and the prepayment
premium applicable to such full or partial prepayment (as applicable); provided,
however, that such application of funds shall not cure or be deemed to cure any
Event of Default, (ii) reimbursement of the Lender for all losses, fees, costs
and expenses (including, without limitation, reasonable legal fees) suffered or
incurred by the Lender as a result of such Event of Default, (iii) payment of
any amount expended in exercising all rights and remedies available to the
Lender at law or in equity or under this Agreement or under any of the other
Loan Documents, or (iv) to the payment of any item for which payment is required
or permitted from any of the Reserve Accounts pursuant to the terms of this Loan
Agreement. Nothing in this Loan Agreement shall obligate the Lender to apply all
or any portion of the Reserve Accounts on account of any Event of Default by the
Borrower or to pay the indebtedness secured by the Security Instruments or any
of the other Loan Documents or in any specific order of priority.
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Section 6.8 Disbursements from Tax and Insurance Reserve
Account.
(a) The Lender shall disburse, to the extent of amounts on
deposit in the Tax and Insurance Reserve Account, directly to each Person owed
any portion of the water and sewer assessments and frontage charges, taxes,
assessments and insurance premiums, the total sum owed to such Person. Such
disbursements shall be made by the Lender (i) so as to coincide in frequency
with the regular billing cycle of such Person, and (ii) on or before the date
that each such payment is due.
(b) The Lender may require the Borrower to pay to the Lender
in advance, additional amounts for taxes, charges, premiums, assessments, and
impositions in connection with the Borrower or the Premises which the Lender
shall reasonably deem necessary. Unless otherwise provided by applicable law,
the Lender may require payments for such other amounts to be paid by the
Borrower in a lump sum or periodic installments, at the Lender's option.
(c) If the amount held in the Tax and Insurance Reserve
Account at the time of the monthly accounting thereof shall exceed the amount
deemed necessary by the Lender to provide for the payment of water and sewer
assessments and frontage charges, taxes, assessments, impositions and insurance
premiums, as they fall due, such excess shall be paid to Borrower. If at any
time the amount held in the Tax and Insurance Reserve Account shall be less than
the amount deemed necessary by the Lender to pay water and sewer assessments and
frontage charges, taxes, assessments, impositions and insurance premiums, the
Borrower shall pay to the Lender any amount necessary to make up the deficiency
within thirty (30) days after notice from the Lender to the Borrower requesting
payment thereof.
(d) Upon payment in full of all amounts owed by the Borrower
under or otherwise secured by any of the Loan Documents, all remaining amounts
on deposit, if any, in the Tax and Insurance Reserve Account shall be
distributed to the Borrower.
Section 6.9 Disbursements from Repair Escrow Account and
Replacement Reserve Account.
(a) Upon written request from the Borrower and satisfaction of
the requirements set forth in Section 6.9 of this Loan Agreement, the Lender
shall disburse to the Borrower amounts from the Repair Escrow Account necessary
to reimburse the Borrower for the actual costs of Immediate Repairs and shall
disburse amounts from the Replacement Reserve Account necessary to reimburse the
Borrower for the actual costs of Additional Repairs (but, as to any Immediate
Repair, such amount shall not exceed 125% of the original estimated cost of such
Immediate Repair or Additional Repair set forth on Exhibit B to this Loan
Agreement, unless the Lender agrees to such reimbursement).
(b) Upon written request from the Borrower, the Lender may, in
its discretion, disburse amounts from the Repair Escrow Account and/or
Replacement Reserve Account to reimburse the Borrower for the actual cost of
labor and materials associated with an Additional Repair. Each such request from
the Borrower shall include a statement regarding why such disbursement should be
made. If the Lender determines that (i) such Additional Repair is of the
61
type intended to be covered by this Agreement and (ii) the amount of funds in
the Repair Escrow Account and/or the Replacement Reserve Account, as applicable,
is sufficient to pay the Additional Repair and 125% of the then current
estimated cost of completing all remaining Immediate Repairs, as applicable, and
(iv) all other conditions for disbursement under this Loan Agreement under this
Section 6.9 have been met, then the Lender shall disburse funds from the Repair
Escrow Account and/or the Replacement Reserve Account, as applicable, for such
Additional Repair.
(c) Each request for disbursement from the Repair Escrow
Account or Replacement Reserve Account shall provide an invoice (or another form
approved by Lender) that sets forth (i) the specific Immediate Repairs or
Additional Repair, as the case may be, for which the disbursement is requested,
(ii) the quantity and price of each item purchased, if the Immediate Repair or
Additional Repair, as the case may be, includes the purchase or replacement of
specific items, (iii) the price of all materials (grouped by type or category)
used in any Immediate Repair or Additional Repair, as the case may be, other
than the purchase or replacement of specific items, and (iv) the cost of all
contracted labor or other services applicable to each Immediate Repair or
Additional Repair, as the case may be, for which such request for disbursement
is made. With each request the Borrower shall certify that all Immediate
Repairs, or Additional Repairs, as the case may be, have been made in accordance
with the requirements of this Loan Agreement and all Requirements of Laws. Each
request for disbursement shall include (A) copies of invoices for all items or
materials purchased and all contracted labor or services provided, and (B) such
acknowledgments of payment, lien waivers and/or releases with respect to the
Immediate Repairs and Additional Repairs for which disbursement is requested as
the Lender may require. In connection with each disbursement from the Repair
Escrow Account or the Replacement Reserve Account, as the case may be, the
Lender may require the Borrower to provide the Lender with a "bring down"
endorsement to the Lender's title insurance policy showing that no Liens have
been placed against the Premises since the date of recordation of the Security
Instruments (other than Permitted Encumbrances and any other Liens previously
approved in writing by the Lender, if any).
(d) Except as provided in the following sentence, each request
for disbursement from the Repair Escrow Account or the Replacement Reserve
Account shall be made only after completion (as reasonably determined by the
Lender) of the Immediate Repair or Additional Repair for which disbursement is
requested. If (i) the cost of the Immediate Repair, or Additional Repair exceeds
the lesser of (A) 1% of the original Loan Amount, or (B) $35,000.00 per
Individual Property and (ii) the written contract with respect to such Immediate
Repair or Additional Repair requires periodic payment for such work pursuant to
the terms thereof, then a request for reimbursement from the Repair Escrow
Account and/or Replacement Reserve Account may be made after completion of a
portion of the work under such contract, provided (1) the materials for which
the request is made are on site at the Premises and are properly secured or have
been installed in the Premises, (2) all other conditions in this Loan Agreement
in this Section 6.9 for disbursement have been satisfied, and (3) funds
remaining in the Repair Escrow Account or the Replacement Reserve Account, as
the case may be, are, in the Lender's reasonable judgment, sufficient to
complete such Immediate Repair or Additional Repair and all the other Immediate
Repairs when required. The Lender, at its option, may issue joint checks,
payable to the Borrower and unpaid supplier, materialman, mechanic,
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contractor, subcontractor or other party to whom payment is due in connection
with any such periodic payment for an Immediate Repair or Additional Repair to
be paid from the Repair Escrow Account or Replacement Reserve Account, as the
case may be.
(e) The Lender shall have no obligation to make any
disbursement from the Repair Escrow Account or the Replacement Reserve Account
more frequently than once in any month and (except in connection with the final
disbursement) in any amount in the aggregate less than the lesser of (i) 1% of
the original Loan Amount, or (ii) $5,000.00.
(f) Prior to any disbursement from the Repair Escrow Account
or the Replacement Reserve Account, the Lender may, at the Borrower's expense,
require an inspection by an appropriate independent qualified professional
reasonably selected by the Lender and a copy of a certificate of completion by
an independent qualified professional reasonably acceptable to the Lender prior
to the disbursement of any amounts for any one (1) item of work performed on the
Premises from the Repair Escrow Account or the Replacement Reserve Account
exceeding $50,000.00. The Borrower shall pay the Lender a reasonable inspection
fee not exceeding $1,000.00 for each such inspection.
(g) The Lender shall not be obligated to make disbursements
from the Repair Escrow Account or the Replacement Reserve Account to reimburse
the Borrower for the costs of routine maintenance to the Premises, tenant
improvements or leasing commissions.
(h) Upon the earlier to occur of (i) the timely completion of
all Immediate Repairs in accordance with the requirements of this Loan
Agreement, as verified by the Lender in its reasonable discretion, or (ii) the
payment in full of all amounts owed by the Borrower under or otherwise secured
by any of the Loan Documents, all amounts remaining on deposit, if any, in the
Repair Escrow Account shall be distributed to the Borrower.
(i) Upon payment in full of all amounts owed by the Borrower
under or otherwise secured by any of the Loan Documents, all amounts remaining
on deposit, if any, in the Replacement Reserve Account shall be distributed to
the Borrower.
Section 6.10 Disbursements from Cash Management Account.
Borrower shall establish on the date hereof a Cash Management
Account (the "Cash Management Account") which shall be under the sole dominion
and control of Lender. Each month, Lender will disburse from the Cash Management
Account funds to (i) pay monthly debt service payments and, (ii) fund all
reserves due under the Loan, including tax, insurance, replacement reserves, and
debt service reserves (if any). Sufficient funds will remain in each account to
meet all disbursements outlined above for the following month and funds in
excess of this amount will not be disbursed to the Borrower until each monthly
disbursement is made, at which time the Cash Management Account must be
replenished prior to any further disbursements to Borrower.
During the term of the Operating Leases, Lender shall require
that payment of any and all amounts actually due the Borrower under the
Operating Leases be deposited directly into the Cash Management Account.
Borrower agrees that if at any time it has the right to additional
63
funds from the collateral Premises, whether due to expiration, cancellation or
default of any of the Operating Leases or for any other reason, it will enforce
its rights to such additional funds and cause such funds to be deposited into
the Cash Management Account. In the event the Debt Service Coverage Ratio
Premises for the Premises in the aggregate is less than 1.75x, funds sufficient
to pay three (3) months debt service for the Loan shall be immediately deposited
directly into the Cash Management Account.
Section 6.11 Indemnification.
The Borrower agrees to indemnify the Lender and to hold the
Lender harmless from and against any and all actions, suits, claims, demands,
counterclaims, cross-claims, liabilities, losses, damages, obligations, fees and
costs and expenses (including litigation costs, reasonable attorneys' fees and
expenses) arising from or in any way connected with (a) the performance of the
Immediate Repairs or Additional Repairs, (b) unpaid taxes, utility bills, rent
or insurance premiums owed by the Borrower, and/or (c) the holding or investment
of the Reserve Accounts, except to the extent any of the foregoing is the direct
result of the gross negligence or willful misconduct of the Lender.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
Section 7.1 Events of Default.
An Event of Default shall occur if any of the following has
occurred and is continuing:
(a) Payments. The Borrower fails to make any payment
hereunder, under the Note or under any other Loan Document, when due and
payable, and such payment is not received prior to the 10th day after the same
is due (or such greater period, if any, required by applicable law).
(b) Bankruptcy, etc. The occurrence of any Bankruptcy Event
with respect to the Borrower, the Borrower Principal, or any general partner or
member thereof.
(c) Judgments. One or more judgments or decrees exceeding
$100,000 per Individual Property shall be entered against the Borrower (not paid
or fully covered by insurance provided by a carrier who has acknowledged
coverage), and any such judgments or decrees shall not have been vacated,
discharged, stayed or bonded (through appeal or otherwise) within thirty (30)
calendar days from the entry thereof.
(d) Recourse Covenants. The Borrower violates any of the
Recourse Covenants.
(e) Compliance with Sections 5.1(o) and (p). The Borrower
fails to comply with any or all of the provisions of either Section 5.1(o) or
5.1(p) and such failure continues for a period of thirty (30) calendar days
following (i) in the case of Section 5.1(o), the date demand by the Lender is
made upon the Borrower for the execution of any agreement or document in
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accordance with the provisions of Section 5.1(o) or (ii) in the case of Section
5.1(p), the date on which any Operating Expenses Leases becomes due and payable
in accordance with the terms thereof, without regard to any extension,
modification or waiver relating thereto; provided that if any Operating Expenses
Leases is the subject of a bona fide dispute and is less than 1% of the
outstanding balance of the Loan as of the date on which the particular Operating
Expenses Leases in dispute became due and payable, then the Borrower shall have
ninety (90) days from the date the same becomes due and payable to pay such
Operating Expenses or to furnish the Lender a bond or other collateral
acceptable to the Lender in the Lender's reasonable discretion.
(f) Representations and Warranties. Any representation,
warranty, acknowledgment or statement made by the Borrower or the Borrower
Principal herein, in any other Loan Document or in any written statement or
certificate delivered or required to be delivered pursuant hereto shall prove
untrue in any material respect on the date as of which it was deemed to have
been made; or any representation, warranty acknowledgment or statement submitted
to the Lender concerning the financial condition or credit standing of the
Borrower, any general partner or member thereof or the Borrower Principal proves
to be false or misleading in any material respect.
(g) Compliance with Covenants and Agreements. The Borrower
shall fail to comply with, observe or perform any covenant or agreement made by
it herein, in the Program Rider or in any other Loan Document, which failure
continues for thirty (30) days following written notice thereof to the Borrower;
provided that if such failure is of a type which can not feasibly be cured
within such thirty (30) day period and the Borrower is diligently and in good
faith pursuing such cure, then the Borrower shall have a reasonable period of
time (but in no event more than ninety (90) days following such written notice)
to cure such failure without the same becoming an Event of Default hereunder.
Nothing in this Section 7.1(g) shall be deemed or construed to entitle the
Borrower to any notice and opportunity to cure with respect to any failure to
comply with, observe or perform any covenant or agreement which constitutes an
Event of Default under any other subsection of this Section 7.1 or to extend any
notice and/or opportunity to cure otherwise provided for in any other subsection
of this Section 7.1.
(h) Operating Lease. The Borrower fails to comply with,
observe or perform any covenant or agreement made by Borrower under the
Operating Leases or the Borrower Principal fails to comply with, observe or
perform any covenant or agreement made by Borrower Principal under the
Environmental Indemnification Agreement, which failure continues to the later of
(i) beyond any applicable grace or cure period provided for in the Operating
Leases and (ii) for thirty (30) days following written notice thereof to
Borrower.
(i) No Encumbrances. The Borrower fails to keep the Premises
free and clear of all encumbrances (as used herein, the term "encumbrance" shall
not include communication easements granted for the purpose of allowing
installation and maintenance of satellite dishes or other communications or
similar equipment on any Individual Property), liens, deeds of trust, security
interests and subordinate financing, except for Permitted Encumbrances as may be
permitted by the Loan Documents or otherwise approved in writing by the Lender
in its sole discretion.
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(j) No Transfer. Except as permitted in Section 5.2 and 5.4(b)
hereof, the Borrower permits any sale, transfer, conveyance or other disposition
of, engages in any subordinate financing with respect to, or grants any
consensual liens against, the Premises, the Rents and Profits or the Intangible
Personalty without the consent of Lender.
(k) Special Purpose Entity. The Borrower fails to be a Special
Purpose Entity at any time while the Loan is outstanding.
(l) Events of Default under the Program Rider or other Loan
Documents. The occurrence of any Event of Default or similar event under any of
the Program Rider or the other Loan Documents, after giving effect to any period
of time provided for the cure of any such event or occurrence in the Program
Rider or any such Loan Document.
(m) Non-Consolidation Assumptions. If any of the assumptions
contained in the Non-consolidation Opinion, or in any other "non-consolidation"
opinion delivered to Lender in connection with the Loan, or in any other
"non-consolidation" opinion delivered subsequent to the Loan, is or shall become
untrue in any material respect.
(n) Required Debt Service Coverage Ratio Premises. The
Borrower fails to maintain a Debt Service Coverage Ratio Premises of 1.50x based
on the operation of the Premises in the aggregate (the "Required DSCR
Premises").
(o) Required Debt Service Coverage Ratio Leases. The Borrower
fails to maintain a Debt Service Coverage Ratio Leases of 1.30x (the "Required
DSCR Leases").
(p) Franchise Agreement. If any Franchise Agreement is
amended, modified or terminated without Lender's prior written consent (except
as permitted by Section 5.2(k)).
(q) Liquidity Requirement. The failure by the Borrower to
maintain at all times during the term of the loan the Liquidity Requirement.
Section 7.2 Remedies.
Upon the occurrence of an Event of Default, the Lender may, at
its option:
(a) Acceleration. Accelerate the entire unpaid principal
balance of the Loan and all accrued interest thereon without advance notice to
the Borrower, the same becoming immediately due and payable. In addition, upon
acceleration, any and all other Obligations of the Borrower to the Lender shall
be immediately due and payable.
(b) Replacement of Property Manager. Upon written notice to
the Borrower, require the replacement of any property manager or managing agent
for the Premises with a property manager or managing agent acceptable to the
Lender.
(c) Other Remedies. Invoke any other remedies set forth herein
or in any of the other Loan Documents, including without limitation, foreclosure
of the Lien granted in the
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Security Instruments and enforcement of the assignment to the Lender of the
Rents and Profits in accordance with the terms of the Security Instruments.
ARTICLE VIII
CASUALTY LOSSES; EMINENT DOMAIN
Section 8.1 Repairs and Casualty Losses.
(a) Restoration of Premises. Except as otherwise provided in
this Section 8.1, the Borrower shall, at its expense, promptly repair, restore,
replace or rebuild any part of the Premises which is damaged or destroyed by any
casualty or as the result of any taking under the power of eminent domain,
provided the Lender has made available insurance proceeds or eminent domain
proceeds or awards available to the Borrower for such repair, restoration,
replacement or rebuilding. The Borrower shall, subject to the other express
terms of this Loan Agreement (i) substitute a Substitute Property (pursuant to
the terms of Section 2.6 hereof) for each damaged or destroyed Individual
Property, or (ii) cause all repairs, rebuilding, replacements or restorations to
be (in the reasonable opinion of the Lender) of substantially equivalent quality
to the Premises as of the date hereof, ordinary wear and tear excepted.
(b) Proof of Loss; Claims Settlement. In the event of loss,
the Borrower shall give prompt written notice thereof to the insurance carrier
and the Lender, and the Lender may make proof of loss if not made promptly by
the Borrower. During the existence of any Event of Default, the Lender is hereby
authorized, in its reasonable discretion, to adjust, compromise and collect the
proceeds of any insurance claims.
(c) Application of Insurance Proceeds. The Borrower hereby
assigns the proceeds of any such insurance policies to the Lender and hereby
directs and authorizes each insurance company to make payment for such loss
directly to the Lender. The proceeds of any insurance or any part thereof shall
be applied by the Lender in accordance with the provisions of Section 8.3 of
this Loan Agreement.
Section 8.2 Eminent Domain.
(a) Participation in Proceedings. The Borrower shall promptly
notify the Lender of any actual or threatened initiation of any eminent domain
proceeding or other taking for public use as to the whole or any part of the
Premises and/or any rights incident or appurtenant thereto and shall deliver to
the Lender copies of any and all papers served or received in connection with
such proceedings, and the Lender shall have the right, at its option, to
participate in such proceedings at the expense of the Borrower (including,
without limitation, the Lender's reasonable attorneys' fees) and the Borrower
will execute such documents and take such other steps as required to permit such
participation.
(b) Right to Settle Claims. During the existence of any Event
of Default, the Lender is hereby authorized to adjust, compromise and collect
the proceeds of any eminent domain or similar award or settle a claim for
damages and to apply the same (or any part thereof) to the then outstanding
balance of the Loan.
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(c) Use of Proceeds. The Borrower assigns to the Lender any
proceeds or awards which may become due by reason of any condemnation or other
taking for public use of the whole or any part of the Premises and any rights
incident or appurtenant thereto. The proceeds of any such condemnation award or
proceeds of any part thereof shall be applied by the Lender in accordance with
the provisions of Section 8.3 of this Loan Agreement.
(d) Further Assignments; Acceleration. The Borrower agrees to
execute such further assignments and agreements as may be reasonably required by
the Lender to assure the effectiveness of this Section 8.2. In the event any
governmental agency or authority subject to Section 8.3 below shall require or
commence any proceedings for the seizing or demolishing of any part of the
Premises, or shall commence any proceedings to condemn or otherwise take
pursuant to the power of eminent domain (or other power) a material portion of
the Premises and such portion of the Premises has not been substituted pursuant
to the terms of Section 2.6 hereof, the Lender may, at its option, declare the
Loan to be immediately due and payable in full and apply all or any portion of
the eminent domain (or similar) awards or proceeds to the then outstanding
balance of the Loan.
Section 8.3 Application of Insurance Proceeds and Condemnation
Awards.
(a) Unless a Substitute Property has been substituted pursuant
to the terms of Section 2.6 hereof for each Individual Property affected, all
proceeds of insurance assigned to the Lender pursuant to Section 8.1 of this
Loan Agreement, and all proceeds or awards which may become due by reason of any
condemnation or other taking for public use of the whole or any part of the
Premises or any rights incident or appurtenant thereto and that have been
assigned to the Lender pursuant to Section 8.2 of this Loan Agreement shall be
eligible to be applied by the Lender in its sole discretion to the repayment of
the Loan; provided, however, that subject to the provisions of this Section 8.3,
such proceeds shall be held in an Eligible Account and applied to the repair or
restoration of the Premises if all of the following conditions are met:
(i) there exists no Default Condition or Event of Default;
(ii) the Borrower presents sufficient evidence to the Lender
that (A) with respect to any casualty loss, there are sufficient funds
from the insurance proceeds and from equity funds, if needed, to
completely restore or repair the damaged Premises, or (B) with respect
to any condemnation award, there are sufficient funds from the
condemnation award or proceeds and from equity funds, if needed, to
completely restore the Premises to an architectural whole and to pay
Operating Expenses Premises, and (C) the insurance proceeds or
condemnation award is less than 20% of the original Loan Amount;
(iii) the Operating Lessees agree in a manner reasonably
satisfactory to the Lender that they will continue or extend their
interests and arrangements for the contract terms then in effect
following the repair, restoration, replacement or rebuilding;
(iv) all parties having material operating, management and/or
franchise interests in, and arrangements concerning, the Premises agree
that they will continue their
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interests and arrangements for the contract terms then in effect
following the repair, restoration, replacement or rebuilding;
(v) the Borrower presents sufficient evidence to the Lender
that the Premises will be repaired or restored to an architectural
whole two (2) years prior to the maturity date of the Loan;
(vi) the Lender will not incur any liability to any other
Person as a result of such use or release of proceeds; and
(vii) (A) as to any casualty loss, the insurance proceeds
shall be held by the Lender and disbursed as repair, restoration,
replacement or rebuilding progresses substantially in accordance with
the procedures set forth in this Loan Agreement for disbursement from
the Replacement Reserve Account; provided, however that insurance
proceeds of $150,000.00 or less for any Individual Property will be
disbursed directly to the Borrower for repair, restoration, replacement
or rebuilding and (B) as to any condemnation award, the condemnation
award or proceeds shall be held by the Lender and disbursed as repair,
restoration, replacement or rebuilding progresses substantially in
accordance with the procedures set forth in this Loan Agreement for
disbursement from the Replacement Reserve Account.
(b) If the above-stated conditions are not satisfied within
ninety (90) days of loss, then the Lender may, at its option, apply any proceeds
in repayment of the amount then outstanding under the Note.
(c) Upon the completion of any repair, restoration,
replacement or rebuilding any remaining proceeds shall be paid to the Lender in
repayment of the amount then outstanding under the Note in accordance with the
provisions of the Note.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Remedies Cumulative; Waivers.
All remedies of the Lender provided for herein and/or in the
other Loan Documents are cumulative and shall be in addition to any and all
other rights and remedies provided for or available under the other Loan
Documents, at law and/or in equity. The exercise of any right or remedy by the
Lender hereunder shall not in any way constitute a cure or waiver of any Default
Condition or Event of Default hereunder or under any other Loan Document, or
invalidate any act done pursuant to any notice of the occurrence of any Default
Condition or Event of Default, or prejudice the Lender in the exercise of any of
its rights hereunder or under or any other Loan Document, unless, in the
exercise of said rights, the Lender realizes all amounts owed to it under the
Loan Documents. No waiver of any Default Condition or Event of Default hereunder
shall be implied from any delay or omission by the Lender to take action on
account of such Default Condition or Event of Default, and no express waiver
shall affect any Default Condition or Event of Default other than the Default
Condition or Event of Default specified in the waiver and it shall be operative
only for the time and to the extent therein stated.
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Waivers of any covenants, terms or conditions contained herein must be in
writing and shall not be construed as a waiver of any subsequent failure to
observe or comply with the same covenant, term or condition. The consent or
approval by the Lender to or of any act by the Borrower requiring further
consent or approval shall not be deemed to waive or render unnecessary the
consent or approval to or of any subsequent or similar act.
Section 9.2 Benefit.
This Loan Agreement is made and entered into for the sole
protection and benefit of the Lender and the Borrower, their successors and
permitted assigns, and no other Person or Persons shall have any right to action
hereon or rights to the Loan proceeds at any time, nor shall the Lender owe any
duty whatsoever to any claimant for labor performed or material furnished in
connection with the construction of the Improvements, or to apply any
undisbursed portion of the Loan to the payment of any such claim, or to exercise
any right or power of the Lender hereunder or arising from any Default Condition
or Event of Default by the Borrower.
Section 9.3 Assignment and Assumption.
(a) The terms hereof shall be binding upon and inure to the
benefit of the heirs, successors, assigns, and personal representatives of the
parties hereto.
(b) Subject to the provisions of Sections 2.5, 2.6, 5.2 and
10.1(c) hereof, neither Borrower nor any other Person having beneficial or
ownership interest in Borrower shall assign or permit any assumption of this
Loan Agreement, any of the other Loan Documents or any of its rights, interests,
duties or obligations hereunder or thereunder or any Loan proceeds or other sums
to be advanced hereunder in whole or in part without the prior written consent
of the Lender. Lender shall consent, no more than once, to such assignment
and/or assumption to a qualified borrower acceptable to Lender at its sole
discretion upon the payment to the Lender of all reasonable and customary
expenses incurred by the Lender in connection with any such assignment and/or
assumption and of a processing fee in an amount equal to 1% of the outstanding
principal amount of the Loan as of the date the Borrower requests the Lender to
consent to such assignment or assumption. Any assignment or assumption (whether
voluntary or by operation of law) without said consent shall be void. Without in
any way limiting the foregoing, in no event shall the Lender consent to any
assignment or assumption requested or occurring prior to the sale of the Loan by
the Lender in the secondary market if the consideration paid or to be paid by
the assignee or purchaser of the Premises in connection therewith, as determined
by the Lender in its reasonable judgment, is less than the appraised value of
the Premises used by the Lender in underwriting the Loan. The Borrower shall
furnish the Lender at the Borrower's sole cost and expense such information as
the Lender shall request in connection with any assignment or assumption,
including without limitation: (i) an Appraisal or other evidence satisfactory to
the Lender in its reasonable discretion of the value of the Premises as of the
date of the assignment and/or assumption; (ii) confirmation from the Rating
Agencies that the credit ratings of Securities immediately prior to assignment
and/or assumption will not be qualified, downgraded or withdrawn as a result of
such assignment and/or assumption, which affirmation may be granted or withheld
in the Rating Agencies sole and absolute discretion; (iii) evidence that the
assignee is a Special Purpose Entity satisfying Lender's and Rating
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Agency's then current applicable underwriting criteria and requirements; and
(iv) delivery of a "non-consolidation" opinion in form and substance
satisfactory to Lender that, in the event of a bankruptcy proceeding involving
any Affiliate of Borrower, the assets of the Borrower, including the Premises,
shall not be substantively consolidated with the assets of the Affiliate. Lender
further reserves the right to condition the consent to any assignment or
assumption upon (i) payment of all of Lender's reasonable expenses incurred in
connection with such transfer; (ii) the confirmation in writing by the
applicable Rating Agencies that the proposed transfer will not, in and of
itself, result in a downgrade, qualification or withdrawal of the initial, or,
if higher, then current respective ratings in effect immediately prior to such
assignment or assumption for the Securities issued in connection with a
securitization; (iii) the delivery of a non-consolidation opinion reflecting the
proposed transfer in form and substance reasonably satisfactory to Lender that,
in the event of a bankruptcy proceeding involving any Affiliate of Borrower, the
assets of the Borrower, including the Premises, shall not be substantively
consolidated with the assets of the Affiliate to Lender; and (iv) the delivery
to Lender of such additional documents, certificates and legal opinions as it
may reasonably request. In addition, the assignee or purchaser of the Premises
shall be required to assume the Borrower's duties and obligations under this
Loan Agreement and shall be required to execute and deliver to the Lender such
documents, opinions, certificates and information as the Lender reasonably
requires to effectuate such assumption of duties and obligations. No sale,
assignment or assumption shall relieve the Borrower of its Obligations under
this Loan Agreement or any of the other Loan Documents, unless the Borrower has
obtained the prior written consent of the Lender, which consent shall not be
unreasonably withheld or delayed.
(c) Lender shall have the right to sell, assign or otherwise
transfer the Loan or any portion thereof or interest therein held by Lender
without the consent of Borrower or the satisfaction of any other requirement
with respect to Borrower. At the request of the holder of the Note and, to the
extent not already required to be provided by Borrower under this agreement or
the Security Instruments, Borrower shall use reasonable efforts to satisfy the
market standards to which the holder of the Note customarily adheres or which
may be reasonably required in the marketplace or by the Rating Agencies of the
Note or participation therein or the first successful public or private
securitization (such sale and/or securitization, the "Securitization") of rated
single or multi-class Securities secured by or evidencing ownership interests in
the Note and the Security Instruments, including, without limitation, to:
(i) (A) provide such financial and other information with
respect to the Premises, and the Borrower (B) provide budgets relating
to the Premises and (C) to permit to be performed or permitted such
site inspection, appraisals, market studies, environmental reviews and
reports (Phase I reports and, if appropriate, Phase II reports),
engineering reports and other due diligence investigations of the
Premises, as may be reasonably requested by the holder of the Note or
the Rating Agencies or as may be reasonably necessary or appropriate in
connection with the Securitization (the "Provided Information"),
together, if customary, with appropriate verification of and/or
consents to the use of the Provided Information through letters of
auditors or opinions of counsel of independent attorneys reasonably
acceptable to the Lender and acceptable to the Rating Agencies;
provided, however, that Phase II reports and other invasive testing may
not be
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performed at the Premises until Borrower has received reasonably
appropriate and evidence of insurance from any Person preparing such
report or performing such testing;
(ii) cause counsel to render opinions as to non-consolidation,
fraudulent conveyance, and true sale or any other opinion customary in
securitization transactions with respect to the Premises, the Borrower,
and its Affiliates, which counsel and opinions shall be reasonably
satisfactory to the holder of the Note and the Rating Agencies;
(iii) make such representations and warranties as of the
closing date of the Securitization with respect to the Premises, the
Borrower and the Loan Documents as are customarily provided in
securitization transactions and as may be reasonably requested by the
holder of the Note or the Rating Agencies and consistent with the facts
covered by such representations and warranties as they exist on the
date thereof to the extent such representations and warranties are true
as of the closing date of the Securitization, including the
representations and warranties made in the Loan Documents to the extent
such representations and warranties are true as of the closing date of
the Securitization; and
(iv) execute such agreements and amendments to the Loan
Documents and organizational documents and enter into a lockbox or
similar arrangement with respect to the Rents and Profits from the
Premises as may be reasonably requested by the holder of the Note or as
may be requested by the Rating Agencies or as may be otherwise
necessary to effect the Securitization; provided, however, that the
Borrower shall not be required to modify or amend any Loan Document if
such modification or amendment would (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 or
increase Borrower's or Owner's obligations or liabilities under the
Loan Documents.
All third party costs and expenses incurred by Lender in
connection with the Securitization or other sale or transfer of the Loan and all
reasonable third party costs and expenses incurred by Borrower in connection
with the Securitization or other sale or transfer of the Loan shall be paid by
Lender.
Section 9.4 Securitization Cooperation/Indemnification.
(a) Borrower understands that certain of the Provided
Information and the books and records delivered to Lender pursuant to Section
5.1(n) hereof, (the "Required Records") may be included in disclosure documents
in connection with the Securitization, including, without limitation, a
prospectus or private placement memorandum (each, a "Disclosure Document") and
may also be included in filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or
provided or made available to investors or prospective investors in the
Securities, the Rating Agencies, and service providers relating to the
Securitization. In the event that the Disclosure Document is required to be
revised prior to the sale of all Securities, the Borrower will cooperate with
the holder of the
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Note in updating the Disclosure Document by providing all current information
necessary to keep the Disclosure Document accurate and complete in all material
respects.
(b) Borrower agrees to provide in connection with each of (i)
a preliminary and a private placement memorandum or (ii) a preliminary and final
prospectus, as applicable, an indemnification certificate (A) certifying that
Borrower has carefully examined such memorandum or prospectus, as applicable,
but only as such memorandum or prospectus relates to the Premises, the Borrower,
the Borrower Principal or their Affiliates, including without limitation, the
sections entitled "Special Considerations," "Description of the Security
Instruments," "Description of the Loans and Properties," "The Manager," "The
Borrower" and "Certain Legal Aspects of the Loan," and such sections (and any
other sections reasonably requested) do not, and with respect to any portions of
such sections prepared in reliance upon the reports of third parties, to
Borrower's knowledge do not, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading, (B)
indemnifying Lender, subject to Section 9.5 (and for purposes of this Section
9.4, Lender hereunder shall include its officers, directors and employees), the
Affiliate of such Lender entity (the "Lender Entity") that has filed the
registration statement relating to the securitization (the "Registration
Statement"), each of its directors, each of its officers who have signed the
Registration Statement and each person or entity who controls the Affiliate
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (collectively, the "Lender Group"), and Lender Entity, each of its
directors and each person who controls Lender Entity within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act
(collectively, the "Underwriter Group") for any losses, claims, damages or
liabilities (the "Liabilities") to which Lender, the Lender Group or the
Underwriter Group may become subject insofar as the Liabilities arise out of any
untrue statement or alleged untrue statement of any material fact contained in
such sections, but only as such memorandum or prospectus relates to the
Premises, the Borrower, the Borrower Principal or their Affiliate, (other than
any such statement made in reliance upon the reports of third parties that do
not, to Borrower's knowledge, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading) or arise
out of the omission or alleged omission to state therein a material fact known
to Borrower and required to be stated in such sections or necessary in order to
make the statements in such sections or in light of the circumstances under
which they were made, not misleading and (C) agreeing to reimburse Lender, the
Lender Group and the Underwriter Group for any legal or other expenses
reasonably incurred by Lender and Lender Group in connection with investigating
or defending the Liabilities; provided, however, that Borrower will be liable in
any such case under clauses (B) or (C) above only to the extent that any such
loss, claim, damage, liability or expense arises out of any such untrue
statement or omission made therein in reliance upon and in conformity with
written information furnished to Lender by or on behalf of Borrower expressly
for use in the Disclosure Document; and provided further, that this indemnity
agreement shall not apply to any loss, liability, claim, damage or expense to
the extent arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with written
information furnished to the Borrower by Lender, any member of the Lender Group
or any member of the Underwriter Group expressly for use in the Disclosure
Document. The foregoing indemnity with respect to any untrue statement
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contained in or omission from a preliminary private placement memorandum or
preliminary prospectus shall not inure to the benefit of any member of the
Underwriting Group (or any person controlling such member of the Underwriting
Group) from whom the Person asserting any such loss, liability, claim, damage or
expense purchased any of the Securities which are the subject thereof if the
Borrower shall sustain the burden of proving that any such loss, liability,
claim, damage or expense resulted from the fact that such Person was not sent or
given a copy of the final private placement memorandum or final prospectus at or
prior to the written confirmation of the sale of such Security to such Person
and the loss, liability, claim, damage or expense resulted from an untrue
statement contained in or omission from such preliminary private placement
memorandum or preliminary prospectus that was corrected in the final private
placement memorandum or final prospectus.
(c) In connection with filings under the Exchange Act,
Borrower agrees to indemnify (i) Lender, the Lender Group and the Underwriter
Group for Liabilities to which Lender, the Lender Group or the Underwriter Group
may become subject insofar as the Liabilities arise out of or are based upon the
omission or alleged omission to state in the Provided Information or Required
Records a material fact required to be stated in the Provided Information or
Required Records in order to make the statements in the Provided Information or
Required Records, in light of the circumstances under which they were made, not
misleading and (ii) reimburse Lender, the Lender Group or the Underwriter Group
for any legal or other expenses reasonably incurred by Lender, the Lender Group
or the Underwriter Group in connection with defending or investigating the
Liabilities provided, however, that Borrower will be liable in any such case
under clauses (i) or (ii) above only to the extent that any such loss claim,
damage, liability or expense arises out of any such untrue statement or omission
made therein in reliance upon and in conformity with written information
furnished to Lender by or on behalf of Borrower expressly for use in the
Disclosure Document; and provided further, that this indemnity agreement shall
not apply to any loss, liability, claim, damage or expense to the extent arising
out of any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information furnished to
the Borrower by Lender, any member of the Lender Group or any member of the
Underwriter Group expressly for use in the Disclosure Document.
(d) Lender Entity agrees to indemnify and hold harmless
Borrower, each of its directors and each Person, or Entity who controls Borrower
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (collectively, the "Borrower Group") against any and all losses,
claims, damages or liabilities, joint or several, to which such group may become
subject, under the Securities Act or otherwise, and will reimburse such group
for any legal or other expenses reasonably incurred by such group in connection
with investigating or defending any such loss, claim, damage, liability or
action, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in a Disclosure Document or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission relates to information that
does not accurately reflect Provided Information.
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(e) Promptly after receipt by an indemnified party under this
Section 9.4 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9.4, notify the indemnifying party in writing of the
commencement thereof, but the omission to so notify the indemnifying party will
not relieve the indemnifying party from any liability which the indemnifying
party may have to any indemnified party hereunder except to the extent that
failure to notify causes prejudice to the indemnifying party. In the event that
any action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled, jointly with any other indemnifying party, to participate therein and,
to the extent that it (or they) may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party, provided that no compromise or settlement shall be
entered without the consent of such indemnified party, which consent shall not
be unreasonably withheld. After notice from the indemnifying party to such
indemnified party under the immediately preceding sentence of this Section 9.4
and except as otherwise explicitly provided herein, the indemnifying party shall
not be responsible for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof; provided, however, if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there are any legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. The indemnifying party shall not be liable for the expenses of more
than one separate counsel unless an indemnified party shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to another indemnified party. In no event
shall an indemnifying party be liable to an indemnified party under this Section
9.4 for any losses, claims, damages or liabilities to which such indemnified
party may become subject to the extent the same arise by reason of the gross
negligence, illegal acts, fraud or willful misconduct of such indemnified party.
(f) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section 9.4
is for any reason held to be unenforceable by an indemnified party in respect of
any losses, claims, damages or liabilities (or action in respect thereof)
referred to therein which would otherwise be indemnifiable under Section 9.4,
the indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
action in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation; and provided further, that Borrower
will be liable under this Section 9.4 only to the extent that any such loss,
claim, damage or liability (or action in respect thereof) arises out of any
untrue statement or omission made therein in reliance upon and in conformity
with written information furnished to Lender by Borrower expressly for use in
the Disclosure Document or any failure to state any material fact known to
Borrower and required to be stated in such written information in order to make
such written information in light of the circumstances under which they were
made not misleading. In
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determining the amount of contribution to which the respective parties are
entitled, the following factors shall be considered: (i) Lender Entity and
Borrower's relative knowledge and access to information concerning the matter
with respect to which claim was asserted; (ii) the opportunity to correct and
prevent any statement or omission; and (iii) any other equitable considerations
appropriate in the circumstances. Lender Entity and Borrower hereby agree that
it would not be equitable if the amount of such contribution were determined by
pro rata or per capita allocation.
(g) The liabilities and obligations of both Borrower and
Lender under this Section 9.4 shall survive the termination of the Security
Instruments and the satisfaction and discharge of the Indebtedness for such
period of time under any applicable statute of limitations that (i) any third
party may bring any claim against Lender or Borrower, or (ii) Lender or Borrower
may bring any claim against each other, whether based on indemnification for a
third party claim or otherwise.
Section 9.5 Information.
The Borrower hereby gives permission to the Lender and its
Affiliates to release publicity articles, mutually agreed upon by Borrower and
Lender, concerning the existence, structure and the terms of the Loan and the
Borrower and principals involved in the financing of the Premises. It is also
expressly recognized and agreed that the Lender may share any information
pertaining to the Loan Documents, the Borrower, the Borrower Principal, the
transactions contemplated thereby and the records maintained by the Lender in
connection therewith with Bank of America Corporation, including its bank
subsidiaries and BancAmerica Securities, LLC and any of the other Affiliates of
the foregoing and any other Persons which require such information in connection
with the sale of the Loan in the secondary mortgage market.
Section 9.6 Nonrecourse Loan; Exceptions.
The Note provides that the Loan is nonrecourse to the Borrower
and the Borrower Principal, except for (a) the lien of the Security Instruments
and the other Loan Documents and (b) the exceptions provided for in the Note.
Section 9.7 Amendments.
This Loan Agreement shall not be amended except by a written
instrument signed by all parties hereto.
Section 9.8 Governing Law and Jurisdiction.
This Loan Agreement and the other Loan Documents and all
matters relating thereto shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina except that the Security
Instruments shall be governed by and construed and interpreted in accordance
with the laws of the state in which the applicable Individual Property is
located. The Borrower and all of its general partners/members and the Borrower
Principal hereby submit to the jurisdiction of the state and federal courts
located in the State of
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North Carolina and agree that the Lender may, at its option, enforce its rights
under the Loan Documents in such courts.
Section 9.9 Savings Clause.
Invalidation of any one or more of the provisions of this Loan
Agreement shall in no way affect any of the other provisions hereof, which shall
remain in full force and effect.
Section 9.10 Execution in Counterparts.
This Loan Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument, and in making proof of this Loan
Agreement, it shall not be necessary to produce or account for more than one
such counterpart.
Section 9.11 Notices.
All notices and other communications shall have been duly
given and shall be effective (a) when delivered, (b) when transmitted via
telecopy (or other facsimile device) to the number set forth in Exhibit C
hereto, (c) the day following the day on which the same has been delivered
prepaid to a reputable national overnight air courier service, or (d) the third
Business Day following the day on which the same is sent by certified or
registered mail, postage prepaid, in each case to the respective party at the
address set forth in Exhibit C hereto, or at such other address as such party
may specify by written notice to the other party hereto. No notice of change of
address shall be effective except upon actual receipt. This Section 9.11 shall
not be construed in any way to affect or impair any waiver of notice or demand
provided in any Loan Document or to require giving of notice or demand to or
upon any Person in any situation or for any reason. In addition to the
foregoing, the Lender may, from time to time, specify to the Borrower additional
notice parties by providing to the Borrower written notice of the name, address,
telephone number and telecopy number of any such additional notice party. Each
such additional notice party shall be entitled to receive and/or give any notice
required or permitted to be given under this Loan Agreement or any other Loan
Document.
Section 9.12 Right of Set-Off.
In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default, the
Lender is authorized at any time and from time to time, without presentment,
demand, protest or other notice of any kind (all of which rights being hereby
expressly waived), to set-off and to appropriate and apply any and all deposits
(general or special) and any other indebtedness at any time held by or owing to
the Lender (including, without limitation branches, agencies or Affiliates of
the Lender wherever located) to or for the credit or the account of the Borrower
against the obligations and liabilities of the Borrower to the Lender hereunder,
under the Note or otherwise, irrespective of whether the Lender shall have made
any demand hereunder and although such obligations, liabilities or claims, or
any of them, may be contingent or unmatured, and any such set-off shall be
deemed to have been made immediately upon the occurrence of an Event of Default
even though such charge is made or
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entered on the books of the Lender subsequent thereto. The Lender agrees to
notify the Borrower subsequent to any such set-off or application.
Section 9.13 Written Agreement.
(a) THE RIGHTS AND OBLIGATIONS OF THE BORROWER, THE BORROWER
PRINCIPAL AND THE LENDER, AS APPROPRIATE, SHALL BE DETERMINED SOLELY FROM THIS
WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND ANY PRIOR OR
CONTEMPORANEOUS ORAL OR WRITTEN AGREEMENTS BETWEEN THE LENDER, THE BORROWER AND
THE BORROWER PRINCIPAL CONCERNING THE SUBJECT MATTER HEREOF AND OF THE OTHER
LOAN DOCUMENTS ARE SUPERSEDED BY AND MERGED INTO THIS LOAN AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(b) THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY NOT
BE VARIED BY ANY ORAL AGREEMENTS OR DISCUSSIONS THAT OCCUR BEFORE,
CONTEMPORANEOUSLY WITH, OR SUBSEQUENT TO THE EXECUTION OF THIS LOAN AGREEMENT OR
THE OTHER LOAN DOCUMENTS.
(c) THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 9.14 Waiver of Jury Trial.
THE LENDER, THE BORROWER AND THE BORROWER PRINCIPAL HEREBY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT
MATTER OF THIS LOAN AGREEMENT. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY THE LENDER, THE BORROWER AND THE BORROWER PRINCIPAL, AND THE
LENDER, THE BORROWER AND THE BORROWER PRINCIPAL ACKNOWLEDGE THAT NO PERSON
ACTING ON BEHALF OF ANOTHER PARTY TO THIS LOAN AGREEMENT HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. THE LENDER, THE BORROWER AND THE BORROWER
PRINCIPAL FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LOAN AGREEMENT AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE
WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.
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Section 9.15 Cross Default, Cross-Collateralization, Waiver of
Marshalling of Assets.
(a) Borrower acknowledges that Lender has made the Loan to
Borrower upon the security of its collective interest in the Individual
Properties and in reliance upon the aggregate of the Individual Properties taken
together being of greater value as collateral security than the sum of the
Individual Properties taken separately. Borrower agrees that the Security
Instruments are and will be cross-collateralized and cross-defaulted with each
other so that (i) an Event of Default under any of the Security Instruments
shall constitute an Event of Default under each of the other Security
Instruments which secure the Note; (ii) an Event of Default under the Note or
this Loan Agreement shall constitute an Event of Default under each Security
Instruments; and (iii) each Security Instruments shall constitute security for
the Note as if a single blanket lien were placed on all of the Individual
Properties as security for the Note.
(b) To the fullest extent permitted by law, Borrower, for
itself and its successors and assigns, waives all rights to a marshalling of the
assets of Borrower, Borrower's partners and others with interests in Borrower,
and of the Individual Properties, or to a sale in inverse order of alienation in
the event of foreclosure of all or any of the Security Instruments, and agrees
not to assert any right under any laws pertaining to the marshalling of assets,
the sale in inverse order of alienation, homestead exemption, the administration
of estates of decedents, or any other matters whatsoever to defeat, reduce or
affect the right of Lender under the Loan Documents to a sale of the Individual
Properties for the collection of the Loan without any prior or different resort
for collection or of the right of Lender to the payment of the Loan out of the
net proceeds of the Individual Properties in preference to every other claimant
whatsoever. In addition, Borrower, for itself and its successors and assigns,
waives in the event of foreclosure of any or all of the Security Instruments,
any equitable right otherwise available to Borrower which would require the
separate sale of the Individual Properties or require Lender to exhaust its
remedies against any Individual Property or any combination of the Individual
Properties before proceeding against any other Individual Property or
combination of Individual Properties; and further in the event of such
foreclosure Borrower does hereby expressly consents to and authorizes, at the
option of Lender, the foreclosure and sale either separately or together of any
combination of the Individual Properties.
Section 9.16 Servicer.
At the option of Lender, the Loan may be serviced by a
servicer (the "Servicer") selected by Lender and Lender may delegate all or any
portion of its responsibilities under this Agreement and the other Loan
Documents to the Servicer pursuant to a servicing agreement (the "Servicing
Agreement") between Lender and Servicer. Until Lender may elect otherwise, the
Servicer shall be Bank of America.
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ARTICLE X
SPECIAL PROVISIONS
Section 10.1 Termination of Manager.
To the extent Borrower enters into any Management Agreement,
such Management Agreement shall include provisions that if any of the following
conditions occur during the term of the Loan: (a) at any time, the Debt Service
Coverage Ratio for the Premises for the immediately preceding twelve (12) month
period is less than 1.50x or (b) the amounts evidenced by the Note have been
accelerated or (c) the Manager shall become insolvent, the Borrower shall, at
the request of Lender, terminate the Management Agreement and replace the
Manager with a manager approved by Lender on terms and conditions satisfactory
to Lender, it being understood and agreed that the management fee for such
replacement manager shall not exceed then prevailing market rates.
Notwithstanding the foregoing, if the reason for termination of the Manager is
subsection (a) above, the Borrower may elect from time to time to provide
additional collateral for a portion of the Loan such that, if the outstanding
principal balance of the Loan were equal to such principal balance less the
lower of (as determined by Lender) the face amount or fair market value of the
additional collateral, the Debt Service Coverage Ratio Premises (after adjusting
the Debt Service accordingly to reflect same) would equal or exceed 1.50x, in
which case no termination would be effective. Any such additional collateral
would not be released until Borrower has demonstrated a Debt Service Coverage
Ratio Premises in excess of 1.50x without taking into account the additional
collateral. All additional collateral must be U.S. Obligations and must be
accompanied by such additional security agreements, financing statements and
other documents or instruments, including opinions of Borrower's counsel, which
in the reasonable opinion of Lender and its counsel would be necessary or
advisable to create in Lender a first perfected security interest in the
additional collateral. In addition and as a condition to the posting of such
additional collateral, Lender shall have received written affirmation from the
Rating Agencies that the credit ratings of the Securities immediately prior to
such posting will not be qualified, downgraded or withdrawn as a result of such
posting, which affirmation may be granted or withheld in the Rating Agencies'
sole and absolute discretion.
Section 10.2 Substitution of Operating Lessee.
(a) Notwithstanding anything to the contrary contained herein,
Lender may consent to the termination of the Operating Lease for an Individual
Property in its sole discretion. Such consent of Lender shall not be required,
provided that Lender has received payment in full of any and all actual expenses
incurred in connection therewith and the following conditions have been
satisfied as of the consummation of the transaction:
(i) (x) the Code (or regulations promulgated under the Code)
shall have been revised or determined to permit the Borrower or its
affiliates to operate the Individual Property directly as determined by
a nationally recognized law firm; (y) the Code (or regulations
promulgated under the Code) shall have been revised or determined to
permit the Borrower to enter into a management agreement rather than an
operating lease with respect to the operation of the Individual
Property, and the Borrower proposes to enter
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into a management agreement with a Qualified Manager with respect to
the property or (z) is a direct or indirect Subsidiary of the REIT
which is a Single Purpose Entity and proposes to enter into a
management agreement with a Qualified Manager.
(ii) Lender has received no less than forty-five (45) days
prior written notice of such event;
(iii) Lender shall have confirmations from any franchisors
under any Franchise Agreements that such Franchise Agreements, or new
Franchise Agreements with economic terms no less favorable to the
Borrower, shall remain or be in full force and effect after the
consummation of such event; and
(iv) Lender shall have confirmations in writing from any
applicable Rating Agencies to the effect that such transactions(s) will
not result in a re-qualification, reduction or withdrawal of any rating
then assigned to any securities in a securitization.
(b) Notwithstanding anything to the contrary contained herein,
Lender may consent to the termination of the Operating Lease and substitution of
a new operating lease (the "New Operating Lease") in its sole discretion. Such
consent shall not be required, provided that Lender has received payment in full
of any and all actual expenses incurred in connection therewith and the
following conditions have been satisfied as of the consummation of the
transaction:
(i) the operating lessee under the New Operating Lease (x) is
a Qualified Operating Lessee; or (y) is a public company whose shares
were initially distributed to the shareholders and unitholders of the
REIT and Operating Partnership at the time the new Operating Lease is
executed;
(ii) the terms of the New Operating Lease, including without
limitation, economic provisions, are substantially similar or more
preferential to Lender than the Operating Lease;
(iii) Lender has received no less than forty-five (45) days'
prior written notice of such transfer;
(iv) if Qualified Operating Lessee is an Affiliate of
Borrower: (x) Qualified Operating Lessee has fully subordinated all of
its rights under the New Operating Lease to the Lien of the Security
Instruments including but not limited to all provisions regarding
insurance, condemnation and any purchase option exercisable by
Qualified Operating Lessee; and (y) Borrower shall have delivered a
Non-Consolidation opinion, as acceptable to Lender in its reasonable
discretion with respect to Qualified Operating Lessee and its equity
owners;
(v) Lender shall have confirmations from any franchisors under
any Franchise Agreements that such Franchise Agreements shall remain in
full force and effect after the consummation of such New Operating
Lease; and
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(vi) Lender shall have confirmations in writing from any
applicable Rating Agencies to the effect that such new Operating Lease
will not result in a re-qualification, reduction or withdrawal of any
rating then assigned to any securities in a securitization.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Borrower and the Lender have executed
this Loan Agreement under Seal as of the above-written date.
BORROWER:
INNKEEPERS RI NORTHWEST, L.P.,
a Virginia limited partnership
By: INNKEEPERS RI NORTHWEST, INC., a
Virginia corporation, its general partner
By:_____________________________________(SEAL)
Name:
Title:
INNKEEPERS SUMMERFIELD GENERAL, L.P.,
a Virginia limited partnership
By: INNKEEPERS RI NORTHWEST, INC., a
Virginia corporation, its general partner
By:_____________________________________(SEAL)
Name:
Title:
LENDER:
BANK OF AMERICA, N.A., a national banking
association
By:_________________________________________(SEAL)
Name:
Title:
I-1
