EXHIBIT 10.18
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is entered into on July 20, 2004 by and
between FIRST NATIONAL BANK OF OMAHA, a national banking association ("Lender"),
and SUMMIT HOTEL PROPERTIES, LLC ("Company"), a South Dakota limited liability
company.
WHEREAS, under the terms and conditions of this Agreement, Lender has
approved the extension of a line of credit loan in the maximum principal amount
of $18,000,000.00 (the "Loan") to Company to be used by Company as provided for
in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the parties agree as follows:
ARTICLE I
LINE OF CREDIT
1.1. Line of Credit. Subject to the terms of this Agreement, Lender may
lend Company, from time to time until the termination hereof and subject to the
limitations set forth below, such sums as Company may request, but which shall
not exceed in the aggregate principal amount at any time outstanding Eighteen
Million and No/100 Dollars ($18,000,000.00). Subject to the conditions and
limitations set forth herein, advances or readvances under the Line of Credit
(each, an "Advance", and collectively, "Advances") will be made to Company, from
time to time during the period commencing on the date hereof to but not
including July ___, 2006 (the "Termination Date"), unless renewed by written
agreement between Lender and Company. Lender will complete a renewal review of
the Line of Credit on every anniversary date of this Agreement. In addition to
the foregoing, the Line of Credit shall be deemed to automatically terminate if
Lender accelerates any Term Note evidencing an Advance following an Event of
Default, or if the occurrence of an Event of Default (as defined under Article
VI hereof) causes any Term Note to become immediately due and payable,
1.2. Purpose. Company shall use the Advances for the following purposes:
(i) to finance Company's purchase of a limited service hotel(s) (an Advance used
for such purpose shall be hereinafter referred to as an "Acquisition Advance");
(ii) to finance the equity to be raised by Company from investors in connection
with the purchase a limited service hotel, with the remainder of the purchase
price for the limited service hotel financed through other financial
accommodations obtained by Company (an Advance used for such purpose shall be
hereinafter referred to as an "Equity Advance"); and (iii) to finance Company's
working capital needs (an Advance used for working capital needs shall be
hereinafter referred to as a "Working Capital Advance"). As used in this
Agreement, the term "Property" shall mean a limited service hotel and all assets
related thereto purchased by Company and financed with Lender with an
Acquisition Advance or with the equity financed with an Equity Advance. The term
Advance shall refer collectively to Acquisition Advances, Equity Advances and
Working Capital Advances. The term Equity Investor shall mean a person or entity
who contributes cash capital as part of the equity raised to purchase a
Property. The term Investor Equity shall mean the cash capital contributed to a
Property by an Equity Investor.
An initial Advance in the amount of $9,952,000 will be used to refinance
Company's existing indebtedness to Lender evidenced by that certain Term Note in
the principal amount of $3,000,000.00 dated February 12, 2004 executed and
delivered by Company to Lender and the indebtedness owed to the other Equity
Lenders on the Hotels described in and as such terms are defined in that certain
Loan Agreement dated February 12, 2004 between Company and Lender. Such Advance
shall be an Equity Advance and shall be evidenced by a Term Note in the form of
the Term Note form attached hereto as Exhibit A.
1.3. Limitations on Advances. Working Capital Advances shall at no time
exceed $2,000,000 outstanding at any one time in the aggregate. Each Equity
Advance shall be in the maximum amount of forty percent (40%) of the lesser of
(i) the total amount of the purchase price, franchise fees, franchise required
expenditures including, but not limited to, capital improvements, signage and
computer systems, architectural expenses, permits and fees, initial working
capital and financing and closing costs (collectively, "Project Costs") for the
Property acquired by Company where Company's equity in such Property is financed
with an Equity Advance or (ii) the appraised value of such Property and the
financing used by Company to finance the remainder of the Project Costs of such
Property shall not exceed sixty-five percent (65%) of the lesser of (i) the
appraised value of such Property or (ii) the Project Costs for such Property.
Acquisition Advances shall at no time exceed the lesser of (i) the Project Costs
for Property acquired with such Acquisition Advance or (ii) the appraised value
of such Property.
1.4. Notes. On the Closing Date (hereinafter defined) Company shall execute
and deliver to Lender this Agreement and the other Loan Documents (as such term
is defined below). Lender is authorized to record in a manner satisfactory to
Lender, appropriate notations evidencing the date, type and amount of each
Advance and the date and amount of each payment, which recording shall
constitute prima facie evidence of the accuracy of the information recorded;
provided, however, that the failure to make such recordings shall not affect the
obligations of Company under this Agreement, any Term Note or affect the
validity of any Advance. Each Acquisition Advance, Equity Advance and Working
Capital Advance shall be evidenced by a Term Note in the form attached hereto as
Exhibit A in the principal amount of such Acquisition Advance, Equity Advance or
Working Capital Advance, as applicable. Each Term Note evidencing an Acquisition
Advance or an Equity Advance will be limited to a term of one year and have a
maturity date of the first anniversary date of the Term Note evidencing such
Acquisition Advance or Equity Advance. The availability under the Line of Credit
for Advances shall be reduced by the aggregate principal balance outstanding on
Term Notes evidencing Acquisition Advances, Equity Advances and Working Capital
Advances.
1.5. Repayment. Each Term Note evidencing an Acquisition Advance or an
Equity Advance shall be payable as follows: (i) interest only shall be paid
monthly, in arrears and (ii) the principal balance together with accrued and
unpaid interest shall be due and payable in full on the first anniversary date
of the Term Note evidencing such Acquisition Advance or Equity Advance. In
addition, on each Term Note evidencing an Acquisition Advance or an Equity
Advance Company shall apply and pay on such Term Note the Investor Equity as and
when the Investor Equity collected by Company from each Equity Investor is
funded and subsequently released pursuant to that certain Summit Hotel
Properties, LLC Escrow Account ("Escrow Account") created under that certain
Escrow Agreement dated May 26, 2004 among Company, Lender and Guarantor (the
"Escrow Agreement"), net of reasonable expenses of raising and collecting the
Investor Equity. Company shall cause the Investor Equity to be deposited into
the Escrow Account. The principal balance outstanding together with accrued and
unpaid interest shall be due and payable in full on the first anniversary date
of such Term Note whether or not Investor Equity has been committed and/or
funded,
Each Term Note evidencing a Working Capital Advance shall be payable as
follows: (i) interest only shall be paid monthly, in arrears and (ii) the
principal balance together will accrued and unpaid interest shall be due and
payable in full on the Termination Date.
1.6. Interest. The principal balance of each Acquisition Advance shall bear
interest at a variable per annum rate equal to one quarter of one percent (1/4%)
below the National Base Rate. The principal balance of each Equity Advance shall
bear interest at a variable per annum rate equal to the National Base Rate. The
principal balance of each Working Capital Advance shall bear interest at a
variable per annum rate equal to the National Base Rate. Interest on Advances
shall be payable monthly, in arrears, Accrued interest shall also be payable at
maturity, whether by acceleration or otherwise, Interest shall be calculated on
the number of days outstanding based upon a year consisting of three hundred and
sixty (360) days. The principal balance of the
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Advances shall bear interest after default or maturity at a variable per annum
rate of four percent (4%) in excess of the National Base Rate, but not to exceed
the maximum rate allowed by law. National Base Rate means the per annum rate of
interest announced by Lender from time to time as its prime rate of interest,
which when used to compute the rate of interest hereunder shall change as of the
day immediately following the date of any change in said National Base Rate. No
representation is made that the National Base Rate is the best, lowest or a
favored rate of interest.
1.7. Requests for Advances. Company shall make requests for Advances (a
"Request for Advance") to Lender in writing. Each Request for Advance shall
specify the type of Advance requested, the amount of such Advance, the requested
funding date for such Advance if an Equity Advance or an Acquisition Advance,
the Property location, brand and Project Costs and such other information as
Lender may require. Company shall submit to Lender a Request for Advance for an
Acquisition Advance not less than 30 Business Days prior to the requested
funding date for such Acquisition Advance. Lender shall not be obligated to fund
an Acquisition Advance until the conditions applicable to Acquisition Advances
set forth below have been fully satisfied.
Company shall submit to Lender a Request for Advance for an Equity Advance
not less than 10 Business Days prior to the requested funding date for such
Equity Advance. Contemporaneously with such Request for Advance for an Equity
Advance, Company will notify Lender in writing of the lender providing permanent
financing for Company's purchase of the applicable Property, including the
amount, interest rate and repayment terms of such permanent financing. Lender
shall not be obligated to fund an Equity Advance until the conditions applicable
to Equity Advances set forth below have been fully satisfied.
Company shall submit to Lender a Request for Advance for a Working Capital
Advance not less than one (1) Business Day prior to the requested funding date
for such Working Capital Advance.
Lender will credit the proceeds of any Advances to Company's deposit
account at Lender or as otherwise mutually agreed upon by Company and Lender.
1.8. Conditions to Advances. Each Request for Advance shall be deemed to
constitute a representation by Company at the time of the request that no Event
of Default (as defined in Article VI hereof) exists or is imminent and that the
representations and warranties of Company contained in this Agreement are true
in all material respects on or as of the date of such Request for Advance.
1.9. Compensating Balances. In lieu of a commitment fee for the Line of
Credit, Company agrees to maintain a compensating balance of not less than
$2,000,000 in a depositary account Company shall maintain with Lender.
ARTICLE II
COLLATERAL
Payment of Company's obligations hereunder, under the Loan and under the
Loan Documents shall be secured and/or supported by the following (hereinafter
collectively referred to as the "Collateral") until all such obligations are
paid in full:
2.1. Real Property. Contemporaneously with the issuance of a Term Note
evidencing an Acquisition Advance, Company shall grant and execute in favor of
Lender a first priority deed of trust or mortgage and assignment of rents and
leases on the Property acquired with the Acquisition Advance, with such deed of
trust or mortgage in form and substance acceptable to Lender. Thereafter, such
deed of trust or mortgage and assignment of rents and leases shall secure the
Advances.
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2.2. Guaranty. The Summit Group, Inc. ("Guarantor") shall issue to Lender
an unlimited, unconditional and continuing guaranty ("Guaranty") in support of
the Advances. Such Guaranty shall be in form and substance acceptable to Lender.
Guarantor's obligations under the Guaranty shall be secured by an assignment and
pledge of and grant of a security interest in Guarantor's membership interest in
Company pursuant to a Pledge Agreement of even date herewith (the "Pledge
Agreement") executed by Guarantor in favor of Lender.
2.3. Other Documents, Company and Guarantor agree to furnish such
information and to execute such other documents or undertake any other acts as
may be reasonably necessary to attach, perfect and maintain the security
interests and assignments contemplated by a deed of trust, mortgage, assignment
of rents and leases, Guaranty, Pledge Agreement and/or this Agreement, or as
otherwise reasonably requested by Lender from time to time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Company represents and warrants to Lender (which representations and
warranties will survive the delivery of the Line of Credit Note, each Term Note
and shall continue so long as any sums remain outstanding under the Loan, this
Agreement or any other Loan Document) as follows:
3.1. Standing. Company is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of South
Dakota. Company is duly qualified and is in good standing in every other
jurisdiction where such qualification and good standing is required in order to
conduct business in such jurisdiction. Company has the power and authority to
own its property and to carry on its business.
3.2. Authority. Company has the full power and authority to execute and
deliver this Agreement and the other Loan Documents, and the same constitute the
binding and enforceable obligations of Company in accordance with their terms.
No consent or approval of the officers, members or managers of Company or any
other person, entity, creditor, governmental department, agency or body are
required as a condition to the effectiveness and validity of the Loan Documents.
The execution of and performance by Company of its obligations under the Loan
Documents has been duly authorized by all appropriate and required limited
liability company proceedings and action and will not violate or contravene any
provisions of law, Company's Articles of Organization, Operating Agreement or
any indenture, agreement, lease, contract or other instrument governing or
binding on Company.
3.3. Litigation. There are no actions, suits, arbitration proceedings or
other proceedings of any nature pending or, to the knowledge of Company,
threatened, or any basis therefor, against or affecting Company or the
Collateral at law or in equity, in any court or before any governmental
department or agency, which may result in any material adverse change in the
properties, assets, business or condition, financial or otherwise, of Company or
the ability of Company to perform its obligations under this Agreement and/or
the other Loan Documents.
3.4. Conflicting Agreements. There are no provisions of any existing note,
loan agreement, mortgage, indenture, contract or agreement binding on Company or
affecting its property which would conflict with or in any way prevent the
execution, delivery, or carrying out of the terms of this Agreement and/or the
Loan Documents. Company is not in default in any respect in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any agreement or instrument to which it is a party.
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3.5. Title and Liens. Company has good, valid and marketable title of
record to its real and personal property, all of which is owned free and clear
of all mortgages, liens, pledges, charges, attachments and other security
interests and encumbrances of any nature, except as provided in this Agreement
or disclosed on Schedule 5.1 attached hereto and incorporated herein by
reference.
3.6. Taxes. Company has filed all federal, state and other tax and similar
returns and has paid or provided for the payment of all taxes and assessments
due thereunder through the date of this Agreement, including without limitation,
all withholding, FICA and franchise taxes.
3.7. Financial Statements. The financial information Company is required to
provide to Lender pursuant to Section 4.2 below shall be complete and correct
and fairly and accurately present the financial condition of Company as of such
date and the results of its operations for the period covered by such
statements, prepared in accordance with Internal Revenue Service guidelines.
Company has no material liabilities, direct or contingent, except those
disclosed to Lender in writing. No information, exhibit or report furnished by
Company to Bank in connection with the Loan, this Agreement or any other Loan
Document contains any material misstatement of fact or omits to state a material
fact or any fact necessary to make the statement contained therein incomplete or
not materially misleading.
3.8. Other. All statements by Company contained in any certificate,
statement, document or other instrument or writing delivered by or on behalf of
Company at any time pursuant to this Agreement or the other Loan Documents shall
constitute representations and warranties made by Company hereunder. No
representation or warranty of Company contained in this Agreement or any other
Loan Document, and no statement contained in any certificate, schedule, list,
financial statement or other instrument furnished to Lender by or on behalf of
Company contains, or will contain, any untrue statement of a material fact, or
omits, or will omit, to state a material fact necessary to make the statements
contained herein or therein not misleading. To the best of Company's knowledge,
all information material to the transactions contemplated in this Agreement has
been expressly disclosed to Lender in writing.
3.9. Regulation U. No part of the proceeds of the Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any such margin stock or to reduce or retire any
indebtedness incurred for any such purpose. If requested by Lender, Company will
furnish to Lender a statement in conformity with the requirements of Federal
Reserve Form U-l referred to in Regulation U to the foregoing effect.
3.10 ERISA. Each "employee benefit plan", "employee pension benefit plan",
"defined benefit plan" or "multi-employer benefit plan" (as such terms are
defined in the Employee Retirement Income Security Act of 1974, as amended)
which Company has established, maintained or to which it is required to
contribute (collectively, the "Plans") is in compliance with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
(as amended, replaced or supplemented from time to time, "ERISA"), and the
Internal Revenue Code and the rules and regulations thereunder as well as the
Plan's terms and conditions. There have been no "prohibited transactions" and no
"reportable event" (as such terms are defined in ERISA) has occurred with
respect to any Plan. Company has no "multi-employer benefit plan". Company has
not incurred any liability to the Pension Benefit Guaranty Corporation in
connection with a Plan, other than for premiums due in the ordinary course.
ARTICLE IV
AFFIRMATIVE AND FINANCIAL COVENANTS
So long as this Agreement remains in effect, or as long as there is any
principal or interest due under the Loan, unless Lender shall otherwise consent
in writing, Company shall:
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4.1. Books and Records; Inspections. Maintain proper books and records, and
account for financial transactions, applied in a manner consistent with those
used in the preparation of the financial statements referenced in Section 4.2
below, and permit Lender's officers and/or its authorized representatives or
accountants to visit and inspect Company's properties, examine its books and
records, and discuss its accounts and business with its respective officers,
accountants and auditors, all at reasonable times upon reasonable notice.
Without the prior written consent of Lender, Company shall not change in any
material way the accounting principles upon which the financial statements
referenced in Section 4.2 are prepared and based.
4.2. Financial Reporting. Deliver to Lender financial information in such
form and detail and at such times as are reasonable and satisfactory to Lender,
including, without limitation:
(a) Company's year end financial statements for Company's fiscal year
2004 (to include, but not be limited to, balance sheet, income statement,
and net worth reconciliation), reviewed by a certified public accounting
firm selected and approved by Company's audit committee) as soon as
available but not later than one hundred twenty (120) days after the end of
Company's'2004 fiscal year;
(b) Company's year end audited financial statements for Company's
fiscal year 2005 and each fiscal year of Company thereafter (to include,
but not be limited to, balance sheet, income statement, and net worth
reconciliation) audited by a certified public accounting firm selected and
approved by Company's audit committee) as soon as available but not later
than one hundred twenty (120) days after the end of Company's fiscal year;
(c) Company's interim monthly financial statements (to include its
unaudited statements of income for such monthly period and the portion of
the fiscal year through such date, setting forth in each case in
comparative form the figures for the previous year), signed and certified
correct by the Chief Financial Officer or equivalent of Company (subject to
normal year-end adjustments), as soon as available but not later than
thirty (30) days after the end of such period;
(d) Company's internally prepared quarterly balance sheets signed and
certified correct by the Chief Financial Officer or equivalent of Company
as soon as available but not later than thirty (30) days after the end of
each quarter;
(e) A report in form and substance satisfactory to Lender disclosing
the Investor Equity committed and the amounts collected thereon within
thirty (30) days after the end of each calendar month or at such other time
as reasonably requested by Lender;
(f) Guarantor's interim monthly financial statements (to include its
unaudited statements of income for such monthly period and the portion of
the fiscal year through such date, setting forth in each case in
comparative form the figures for the previous year), signed and certified
correct by the Chief Financial Officer or equivalent of Guarantor (subject
to normal year-end adjustments), as soon as available but not later than
thirty (30) days after the end of such period;
(g) Guarantor's internally prepared quarterly balance sheets signed
and certified correct by the Chief Financial Officer or equivalent of
Guarantor as soon as available but not later than thirty (30) days after
the end of each quarter;
(h) Guarantor's federal income tax returns with all schedules attached
within ten (10) days after the filing deadline for such returns; and
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(i) Such other financial information concerning Company and/or
Guarantor as Lender may reasonably require from time to time.
All financial statements required hereunder shall be complete and correct in all
respects and shall be prepared in reasonable detail.
4.3. Payment of Debts, Taxes and Claims. Promptly pay and discharge prior
to delinquency all debts, accounts, liabilities, taxes, assessments and other
governmental charges or levies imposed upon, or due from, Company, as well as
all claims of any kind (including claims for labor, materials and supplies)
which, if unpaid, might by law become a lien or charge upon any of its property,
except that nothing herein contained shall be interpreted to require the payment
of any such debt, account, liability, tax, assessment or charge so long as its
validity is being contested in good faith by appropriate legal proceedings.
4.4. Insurance. Company will purchase, pay for in advance, and at all times
maintain insurance including but not limited to: (i) fire, windstorm and other
hazards, casualties and contingencies covered by the "all-risk" form of
insurance; (ii) public liability; (iii) workers' compensation and (iv) property
damage as is customarily maintained by similar businesses and/or as Lender from
time to time reasonably requires. Lender shall be named as loss payee on the
Property which is Collateral following an Acquisition Advance.
4.5 Property Maintenance. Keep its properties in good repair, working
order, and condition and from time to time make any needful and proper repairs,
renewals, replacements, extensions, additions, and improvements thereto so that
the business of Company will be conducted at all times in accordance with
prudent business management.
4.6. Existence; Compliance With Laws. Take or cause to be taken such action
as from time to time may be necessary to preserve and maintain its corporate
existence in its jurisdiction of organization and qualify and remain qualified
as a foreign entity in each jurisdiction in which such qualification is required
and use due diligence to comply with all laws pertaining to the business or
property of Company, or any part thereof, and with all other lawful government
requirements relating to its business and property.
4.7. Litigation; Adverse Events. Promptly inform Lender of the commencement
of any material action, suit, proceeding or investigation against Company or
Guarantor, or the making of any material counterclaim against Company or
Guarantor and of all material liens against any of the Company's property and
promptly advise Lender in writing of any other condition, event or act which
comes to its attention that would or might materially prejudice Lender's rights
under this Agreement or the Loan Documents.
4.8. Notification. Notify Lender immediately if it becomes aware of the
occurrence of any Event of Default (as defined under Article VI hereof) or of
any fact, condition, or event that, only with the giving of notice or passage of
time or both, would become an Event of Default, or if it becomes aware of a
material adverse change in the business prospects, financial condition
(including, without limitation, proceedings in bankruptcy, insolvency,
reorganization, or the appointment of a receiver or trustee), or results of
operations of Company, or the failure of Company to observe any of its
undertakings under the Loan Documents. Company shall also notify Lender in
writing of any default under any other indenture, agreement, contract, lease or
other instrument to which Company is a party or under which Company is
obligated, and of any acceleration of the maturity of any material indebtedness
of Company which default or acceleration could have a material adverse effect on
Company or Company's business, and Company shall take all steps necessary to
remedy promptly any such default, to protect against any such adverse claim, to
defend any such proceeding and to resolve all such controversies.
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4.9. Inspections, Company shall allow Lender, its employees, officers,
agents and representatives, at any time during normal business hours and at
reasonable intervals, to inspect Company's operations, corporate books and
records, financial books and records (including the right to make copies
thereof) and to discuss Company's affairs, finances and accounts with Company's
principal officers and independent public accountants. Company acknowledges that
any reports and inspections conducted or generated by Lender or its agents or
representatives, shall be made for the sole benefit of Lender and not for the
benefit of Company or any third party, and Lender does not assume any liability,
responsibility or obligation to Company or any third party by reason of such
inspections or reports.
4.10. Conduct of Business. Continue to engage in an efficient and
economical manner in the business currently conducted by Company on the date of
this Agreement.
4.11. Debt Service Coverage Ratio. Company shall maintain at all times, on
a rolling four-quarter average (for Company's four most recent fiscal quarters
then ended), a Debt Service Coverage Ratio of not less than 1.50 to 1.0. The
Debt Service Coverage Ratio shall be calculated as earnings before interest,
income taxes, depreciation and amortization divided by principal and interest
payments. Expenses of Company funded with loan proceeds from the refinance of a
hotel(s) owned by Company where such loan proceeds are used for repair and
maintenance of such hotel(s) shall be excluded from the determination of
earnings before interest, income taxes, depreciation and amortization. The first
quarterly calculation and measurement of the Debt Service Coverage Ratio shall
March 30, 2005.
ARTICLE V
NEGATIVE COVENANTS
So long as this Agreement remains in effect, or as long as there is any
principal or interest due under the Loan, this Agreement or any of the other
Loan Documents, Company shall not, without the prior written consent of Lender:
5.1. Liens. Create, incur, assume or suffer to exist any security interest,
mortgage, pledge, lien or other encumbrance of any nature upon any of its
personal properties or assets, whether now owned or hereafter acquired, except
such security interests, mortgages, pledges, liens or other encumbrances created
or granted by Company under or pursuant to this Agreement, allowed in connection
with debt permitted under Section 5.4 below or in the ordinary course of its
business, consistent with current practices such as purchase money security
interests in favor of Company's trade creditors, or as disclosed in Schedule 5.1
attached to this Agreement and incorporated herein by reference.
5.2. Fundamental Changes. Wind up, liquidate, or dissolve; reorganize,
merge or consolidate with or into another entity, purchase or otherwise acquire
all or substantially all of the assets of any corporation, limited liability
company, partnership, or other entity, or any shares or similar interest in any
other entity; terminate, amend or otherwise modify any of its organizational
documents, including, but not limited to, its articles of organization,
operating agreement or any other document relating in any respect to its
organization, structure, voting rights or authority to act; provided, however,
that Company may, without Lender's prior consent, purchase or otherwise acquire
all or substantially all of the assets of any corporation, limited liability
company, partnership, or other entity, or any shares or similar interest in any
other entity, relating to the purchase of additional Property ("Permitted
Transactions").
5.3. Conduct of Business. Materially alter the character in which it
conducts its business or the locations of such business or the nature of such
business conducted at the date hereof.
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5.4. Debt. Without the prior written consent of Lender, create, incur,
assume or suffer to exist any direct or indirect indebtedness, except:
(a) Indebtedness under or pursuant to this Agreement or the other Loan
Documents; or
(b) Accounts payable to trade creditors for goods or services which
are not aged more than the later of (i) sixty (60) days from the billing
date, or (ii) ten (10) days from the due date, or (iii) the "special
payment date" offered to Company from time to time by a particular trade
creditor, and current operating liabilities (other than for borrowed money)
which are not more than thirty (30) days past due, in each case incurred in
the ordinary course of business, as presently conducted, and paid within
the specified time, unless contested in good faith and by appropriate
proceedings;
(c) Debt incurred in connection with the purchase of furniture,
fixtures and equipment required in the ordinary course of business, and
Borrower may grant a purchase money security interest in such furniture,
fixtures and equipment;
(d) Debt incurred in connection with a Permitted Transaction; and
(e) The debt listed in Schedule 5.4 attached to this Agreement and
incorporated herein by reference.
5.5. Investments. Acquire for investment purposes, investments that would
not qualify as "customary and prudent investments", consistent with the current
investment practices of Company.
5.6. Loan. Directly or indirectly loan amounts to or guarantee the debts of
any affiliate, subsidiary or parent of Company, or any shareholder, member,
manager, partner, limited partner or officer thereof or of any member, officer
or manager of Company or to any entity controlled by any such entity, member,
officer or manager.
5.7. Sale of Assets. Sell, lease, assign, transfer or otherwise dispose of
any of the properties in Company's portfolio; provided, however, that in any
fiscal year, Company may sell up to ten (10%) percent (including the property at
the ten percent (10%) threshold) of Company's current portfolio of properties
without Lender's prior consent. Lender will, in good faith, consider any request
by Company to sell properties in excess of the ten percent (10%) threshold.
Provided, further, that Company may rent rooms in the Property and sell its
inventory in the ordinary course of business.
5.8. Refinance. Company shall not refinance any Property where the
principal amount of the debt exceeds seventy percent (70%) of the appraised
value of such Property. Any loan proceeds from the refinancing of debt on
Property in excess of the payoff balance of such debt ("Takeout Equity") shall
not be distributed to Company's members, officers, investors, affiliates or any
other related entity if before or after giving effect to such distribution all
such distributions of Takeout Equity in the aggregate in any fiscal year of
Company exceeds fifteen percent (15%) of Company's tangible net worth (with
tangible net worth calculated in accordance with generally accepted accounting
principles and measured at the time of such distribution).
ARTICLE VI
EVENTS OF DEFAULT
6.1. Events of Default. The occurrence of any one or more of the following
events shall constitute a default by Company under this Agreement ("Event of
Default"):
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(a) The non-payment, when due, whether by demand, acceleration or
otherwise, of any principal and/or interest payment or the non-payment of
any other fee or monetary obligation under the Loan, this Agreement or
under any other Loan Document and the same remains unpaid for a period of
ten (10) days after written notice from Lender to Company of such failure;
or
(b) A breach by Company in the performance or observance of any term,
covenant or provision contained in Sections 4.8, 4.11, 5.1, 5.2, 5.4, 5.5,
5.7 or 5.8 of this Agreement and the same remains unperformed or is not
cured for a period often (10) days after written notice from Lender to
Company of such failure; or
(c) A breach by Company in the performance or observance of any
agreement, term, covenant or condition contained herein (other than (a) or
(b) above) or in the other Loan Documents and such failure shall not have
been remedied within a period of thirty (30) days after written notice is
given to Company of such default; or
(d) Any information, representation or warranty made herein, in the
Loan Documents or in any other writing furnished to Lender in connection
with the Loan, this Agreement or any other Loan Document both before and
after the execution hereof, shall be or become incomplete, misleading or
false in any material respect; or
(e) Company or Guarantor shall (i) fail to pay any indebtedness for
borrowed money, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise)
and such failure shall continue after any applicable grace/period, unless
Company or Guarantors are contesting such failure in good faith through
appropriate proceedings, and if requested by Lender, Company or Guarantor
have bonded, reserved or otherwise provided for payment of such
indebtedness; or (ii) fail to perform or observe any term, covenant, or
condition on its or their part to be performed or observed under any
agreement or instrument relating to any such indebtedness, when required to
be performed or observed, if the effect of such failure is to permit the
acceleration of the maturity of such indebtedness; or (iii) the occurrence
of any default under any contract, lease, agreement or obligation of
Company or Guarantor beyond any applicable grace and/or cure period which
default would, in Lender's discretion, materially affect Company or
Guarantor's obligations under the Loan Documents, unless Company or
Guarantor are contesting such default in good faith through appropriate
proceedings, and if requested by Lender, Company or Guarantor have bonded,
reserved or otherwise provided for payment of such indebtedness; or
(f) Company or Guarantor shall (i) generally not pay, or be unable to
pay, or admit in writing its inability to pay its debts as such debts
become due; or (ii) make an assignment for the benefit of creditors, or
petition or apply to any tribunal for the appointment of a custodian,
receiver, or trustee for it or for a substantial part of its assets; or
(iii) commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; or (iv)
have any such bankruptcy, reorganization, dissolution or readjustment of
debt petition or application filed or any such proceeding commenced against
it which is not discharged within thirty (30) days; or (v) take any action
indicating consent to, approval of, or acquiescence in any such proceeding,
or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its assets and properties; or
(vi) suffer any judgment, writ of attachment, execution or similar process
to be issued or levied against all or a substantial part of its property or
assets which is not released, stayed or bonded within thirty (30) days; or
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(g) Company transfers, sells, assigns, or conveys all or any material
part of its assets or property without the prior written consent of Lender;
or
(h) Guarantor revokes or attempts to revoke its Guaranty, or
repudiates its liability thereunder or is in default under the terms
thereof or under the Pledge Agreement securing its Guaranty, or Guarantor
dissolves or ceases to exist; or
(i) Company shall fail to deposit the Investor Equity into the Escrow
Account.
6.2. Remedies. Upon the occurrence of an Event of Default beyond any
applicable notice and cure period, the sums payable under the Loan (as well as
any other indebtedness of Company to Lender or any affiliate or subsidiary of
Lender) then outstanding, shall become forthwith due and payable in full,
together with interest thereon, and Lender shall have no obligation to make any
further Advances under the Line of Credit. Lender may resort to any and all
security and to any remedy existing at law or in equity for the collection of
all outstanding indebtedness and the enforcement of the covenants and provisions
of the Loan Documents against Company. Lender's resort to any remedy, shall not
prevent the concurrent and subsequent employment of any remedy or claim against
Company.
6.3. Waiver. Any waiver of an Event of Default by Lender shall not extend
to or affect any subsequent Event of Default. No failure or delay by Lender in
exercising any right hereunder shall operate as a waiver, nor shall any single
or partial exercise of any right preclude any other right hereunder.
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions Precedent to Closing. As a condition precedent to Closing,
Company and Guarantor shall have delivered to Lender the following documents:
(a) This Agreement and the Term Note evidencing the initial Equity
Advance described above, duly executed by the authorized officers or
managers of Company;
(b) the Guaranty duly executed by Guarantor in favor of Lender and
delivered to Lender;
(c) The Pledge Agreement duly executed by Guarantor along with any
financing statements or other instruments required by Lender to create,
attach and/or perfect Lender's interest in the Collateral;
(d) Certified copies of the Articles of Organization and Operating
Agreement of Company and an appropriate resolution or authority of Company
duly authorizing the execution and delivery of the Loan Documents and
Company's performance hereunder and thereunder;
(e) Company shall have delivered to Lender a certificate of good
standing dated not more than thirty (30) days prior to the date of this
Agreement from the South Dakota Secretary of State;
(f) The payment of the origination fee, Lender's counsel's fees, and
any other costs and expenses incurred by Lender in underwriting,
documenting, securing and funding the Loan in immediately available funds;
(g) An appropriate resolution from Guarantor authorizing the execution
and delivery of its Guaranty and the Pledge Agreement and the performance
of its obligations thereunder; and
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(h) Any other documents, instruments and reports as Lender shall
reasonably request.
The documents set forth in subsections (a) - (c) above, along with any
subsequent Term Notes, deeds of trust, mortgages, assignments of rents and
leases and related documents shall be collectively referred to herein as the
"Loan Documents".
7.2. Conditions Precedent to an Equity Advance. Lender shall have no
obligation to fund an Equity Advance until Company provides Lender with or
satisfies all of the following requirements and Lender approves such
requirements:
(a) Company identifies to Lender the Property being acquired by
Company by brand and address;
(b) Company notifies Lender of the total Project Costs of the Property
being acquired;
(c) Company provides Lender with an MAI Appraisal Report of the
Property being acquired meeting FIRREA guidelines and otherwise in form
acceptable to Lender which establishes the fair market value of the
Property being acquired; and
(d) Company provides Lender with the equity requirement and a list of
any Equity Investors who have committed Investor Equity along with the
dollar amount of each Equity Investor's commitment.
7.3. Conditions Precedent to an Acquisition Advance. Lender shall have no
obligation to fund an Acquisition Advance until Company provides Lender with or
satisfies all of the following requirements and Lender approves such
requirements:
(a) Company shall comply with and provide Lender with the items set
forth in Section 7.2 above relating to an Equity Advance;
(b) Along with the Term Note evidencing such Acquisition Advance,
Company shall execute in favor of and deliver to Lender a deed of trust or
mortgage and assignment of rents and leases encumbering the Property and
constituting a valid and perfected first lien on the Property;
(c) Company shall deliver to Lender a lender's title' policy in form
and substance satisfactory to Lender and issued by a title company
acceptable to Lender. Such title policy shall insure in the amount of the
Acquisition Advance that the deed of trust or mortgage is a valid and
subsisting first priority lien on the Property acquired with the
Acquisition Advance, subject only to exceptions acceptable to Lender, and
containing such endorsements required by Lender;
(d) a duly certified ALTA/ACSM urban class survey showing the
boundaries of the Property being acquired with the Acquisition Advance and
all improvements thereon, with flood zone and wetlands certification, and
showing the location of all encroachments, easements and other matters
affecting such Property required to be shown in an XXXX xxxxx class survey,
with such survey in form and substance satisfactory to Lender;
(e) A Phase I environmental site assessment of the Property being
acquired with the Acquisition Advance meeting current ASTM Standards and
otherwise in form and scope satisfactory to Lender and such other reports
or studies of such Property as may be reasonably required by Lender,
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performed by an environmental consultant or engineer acceptable to Lender,
which establishes the environmental condition of such Property as
satisfactory to Lender;
(f) Evidence satisfactory to Lender that all installments of general
real estate taxes, special assessments and other levies against the
Property being acquired with the Acquisition Advance have been paid in
full; and
(g) Such other matters and requirements as Lender may reasonably
require in connection with its due diligence and underwriting of a
particular Property being acquired with an Acquisition Advance.
ARTICLE VIII
MISCELLANEOUS
8.1. Amendments. This Agreement may be amended or modified in whole or in
part at any time provided that such amendment or modification be in writing and
signed by the parties hereto.
8.2. Expenses. All costs, expenses and liabilities incurred by Lender in
the collection, or in attempting to collect, any indebtedness arising under the
Loan Documents, and all reasonable attorneys' and paralegals' fees, costs and
expenses incurred in connection with such matters, shall constitute a demand
obligation owing by Company and shall bear interest at the highest rate of
interest provided for under this Agreement. In addition, Company shall pay or
reimburse Lender on demand for all costs and expenses, including reasonable
attorneys' fees and costs, incurred by Lender in connection with the
underwriting, documenting, negotiating, securing, closing, and funding of the
Loan, including the attachment and recordation of Lender's security interest in
the Collateral, and Lender's underwriting and due diligence in connection with
the underwriting, documenting and funding of any Acquisition Advance or Equity
Advance.
8.3. Delay; Waiver. Any waiver of an Event of Default by Lender shall not
extend to or affect any subsequent default, whether it be the same Event of
Default or not, nor impair any right consequent thereon. No failure or delay on
the part of Lender in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. No waiver of any provision
of this Agreement or of any instrument executed hereunder or pursuant hereto or
consent to any departure by Company therefrom shall be effective unless the same
shall be in writing, signed by an officer of Lender, and then only to the extent
specified. All rights and remedies of Lender herein and by law afforded will be
cumulative and will be available to Lender until the indebtedness of Company
under the Loan Documents is paid in full.
8.4. Notices. Any notice, request, authorization, approval or consent made
hereunder shall be in writing and shall be personally delivered or sent by
registered or certified mail, and shall be deemed given when delivered or
postmarked and mailed postage prepaid to the following addresses:
If to Lender: First National Bank of Omaha
1620 Dodge Street
Stop 1050
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
If to Company: Summit Hotel Properties, LLC
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0000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxx 0
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000
Attn: Xxxxx Xxxx
Lender and Company may designate a change of address by notice given in
accordance with the provisions of this Subsection at least five (5) days before
such change is to become effective.
8.5. Transfer or Assignment. This Agreement shall extend to and be binding
upon the successors and assigns of the parties hereto; provided, however, that
Company shall not assign or transfer its rights or obligations hereunder without
the prior written consent of Lender, and any such assignment or transfer without
such consent shall be void. Lender may sell participations in the Line of Credit
without notice to Company.
8.6. Construction of Agreement. The titles and headings of the Subsections
and paragraphs of this Agreement have been inserted for convenience of reference
only and are not intended to summarize or otherwise describe the subject matter
of such Subsections and paragraphs and shall not be given any consideration in
the construction of this Agreement.
8.7. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Nebraska, exclusive of its choice of
laws rules.
A CREDIT AGREEMENT MUST BE IN WRITING TO BE ENFORCEABLE UNDER NEBRASKA LAW.
TO PROTECT YOU (BORROWER) AND US (LENDER) FROM ANY MISUNDERSTANDINGS OR
DISAPPOINTMENTS, ANY CONTRACT, PROMISE, UNDERTAKING, OR OFFER TO FOREBEAR
REPAYMENT OF MONEY OR TO MAKE ANY OTHER FINANCIAL ACCOMMODATION IN CONNECTION
WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF CREDIT, OR ANY AMENDMENT OF,
CANCELLATION OF, WAIVER OF, OR SUBSTITUTION FOR ANY OR ALL OF THE TERMS OR
PROVISIONS OF ANY INSTRUMENT OR DOCUMENT EXECUTED IN CONNECTION WITH THIS LOAN
OF MONEY OR GRANT OR EXTENSION OF CREDIT, MUST BE IN WRITING TO BE EFFECTIVE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the day and year first above
written.
FIRST NATIONAL BANK OF OMAHA
By: /s/ Xxx Xxxxxx
------------------------------------
Title: VP
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SUMMIT HOTEL PROPERTIES, LLC,
by THE SUMMIT GROUP, INC.,
its Company Manager
By: /s/ Xxxxx X. Xxxxxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxxxxx, President
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EXHIBIT A
(TERM NOTE FORM)
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