REPLACEMENT RESERVE
AND SECURITY AGREEMENT
THIS REPLACEMENT RESERVE AND SECURITY AGREEMENT (this "Agreement") is made
as of December 18, 1996, by XXXXX X. XXXXXXXXX, XXXXX X. XXXXXXXXX, and BOY X.X.
XXX XXXX, trustees of the Charterhouse of Cambridge Trust, and not individually,
under a Declaration of Trust dated December 27, 1963 and recorded at Middlesex
South Deeds Book 11160, Page 340, as amended by Amendment of Declaration of
Trust dated July 8, 1966 and recorded at Middlesex South Deeds Book 11160, Page
359 ("Charterhouse"), and SONESTA OF MASSACHUSETTS, INC., a Massachusetts
corporation ("Sonesta," and, together with Charterhouse, collectively,
("Debtor"), for the benefit of SUNAMERICA LIFE INSURANCE COMPANY, an Arizona
corporation ("Secured Party").
RECITALS
A. Secured Party has agreed to extend to Debtor a loan (the "Loan") in the
principal amount of $22,880,000.00, to be evidenced by a Promissory Note, of
even date herewith, payable to the order of Secured Party and in the original
principal amount of the Loan (the "Note") and secured by, among other things, a
Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment
of Leases and Rents of even date herewith (the "Mortgage"), encumbering certain
real property located in Cambridge, Massachusetts, more particularly described
therein (the "Property").
B. The Note, Mortgage and all other documents and instruments now or
hereafter evidencing or securing the Loan shall hereinafter be referred to as
the "Loan Documents." Capitalized terms not otherwise defined herein shall bear
the meanings set forth in the Mortgage.
C. To provide for a reserve for capital improvements, Debtor has agreed to
execute this Agreement.
D. To further secure the Note, Secured Party has requested and Debtor has
agreed to assign to Secured Party and to grant to Secured Party a security
interest in certain property of Debtor.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees as follows:
1. Assignment and Grant of Security Interest. Debtor hereby assigns to
Secured Party, and grants to Secured Party a security interest in, the
Collateral (as hereinafter defined) to secure the timely payment and
performance by Debtor of the Obligations (as hereinafter defined).
2. Collateral. The term "Collateral" shall mean: all funds from time
to time on deposit in the "Replacement Reserve Account" (as hereinafter
defined), all Debtor's right, title and interest in and to the Replacement
Reserve Account; all rights to payment from the Replacement Reserve Account
and the money deposited therein or credited thereto (whether now due or in
the future due and whether now or in the future on deposit); all interest
thereon; any certificates, instruments and securities, if any, representing
the Replacement Reserve Account; all claims, demands, general intangibles,
choses in action and other rights or interests of Debtor in respect of the
Replacement Reserve Account; any increases, renewals, extensions,
substitutions and replacements thereof; and all proceeds of the foregoing.
3. Obligations. The obligations secured by this Agreement shall
consist of any and all debts, obligations, and liabilities of Debtor to
Secured Party arising out of, connected with, or related to the Note, the
Loan Documents, this Agreement, and all amendments, extensions, or renewals
of all such documents, whether now existing or hereafter arising (all of
the obligations described in this Paragraph 3 are collectively referred to
herein as the "Obligations").
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4. Replacement Reserve.
(a) On or before March 1, 1997 (the "Commencement Date"), and
continuing on or before the first day of each month thereafter during
the term of the Loan, Debtor shall deposit into an account at an
FDIC-insured financial institution chosen by Debtor and acceptable to
Secured Party in its reasonable discretion (the "Replacement Reserve
Account"), four percent (4%) of Gross Revenue (hereinafter defined)
for the calendar month ending on the last day of the month that is two
months preceding such date. For example, assuming the Commencement
Date is November 1, then Debtor shall deposit 4% of Gross Revenue for
the period from September 1 through September 30 into the Replacement
Reserve Account on or before November 1; Debtor shall deposit 4% of
Gross Revenue for the period from October 1 through October 31 into
the Replacement Reserve Account on or before December 1, and so on.
The sum of all monies on deposit from time to time in the Replacement
Reserve Account, including any interest earned thereon, is referred to
hereinafter as the "Replacement Reserve."
(b) For purposes of this Agreement, "Gross Revenue" shall mean
all revenue received by or on behalf of Debtor from or with respect to
the Property for the relevant period for which the calculation of
Gross Revenue is being made, including, but not limited to, payments
to Debtor from tenants and other occupants in connection with Leases
of any portion of the Property or from the operation of the Property,
room rentals or occupancy fees or charges, telephone and television
charges, usage fees for spa or pool facilities, advertising revenues,
garage and parking fees, vending machine and concession revenues,
payments received from insurance on account of business or rental
interruption and condemnation proceeds from any temporary use or
occupancy. Gross Revenue shall not include: (i) proceeds from the sale
or other disposition of any part or all of the Property, or from any
financing or refinancing of the Property; (ii) proceeds from any
condemnation of any part or all of the Property (except for temporary
use or occupancy); (iii) proceeds on account of a casualty to the
Property (other than payments from insurance on account of business or
rental interruption); (iv) other insurance proceeds (other than in
compensation of lost revenues or its equivalent); (v) security
deposits paid under Leases of all or a part of the Property, unless
and until retained and applied by Debtor in accordance with the terms
of such Leases; (vi) similar
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items or transactions, the proceeds of which under generally accepted
accounting principles are deemed attributable to capital and are not
in the nature of rent or compensation therefor; and (vii)
contributions or loans to Debtor by any affiliate of Debtor.
(c) Notwithstanding the foregoing, Debtor shall be permitted to
implement the approved Budget (as hereinafter defined) program for the
current calendar year notwithstanding that the amount of funds in the
Replacement Reserve Account is not then adequate to cover the cost of
items purchased or work undertaken pursuant to the Budget, and Debtor
shall be solely responsible for funding out of its separate funds the
difference between the amount of funds in the Replacement Reserve
Account and the cost of such items and work. Any such amounts funded
by Debtor out of its separate funds shall, if consistent with the
Budget, be reimbursed to Debtor out of first funds subsequently
deposited in the Replacement Reserve Account in the remaining months
of the same calendar year. Debtor shall, further, provide Secured
Party with regular updates regarding the status of items purchased and
work performed pursuant to the current year's Budget.
5. Purpose of Replacement Reserve. The Replacement Reserve shall be
maintained by Debtor solely for payment for capital improvements and
replacements to the furniture, fixtures and equipment located at the
Property (collectively, "Capital Expenses"). Subject to the terms and
conditions of this Agreement, Debtor may withdraw funds from the
Replacement Reserve Account for Capital Expenses, and for no other purpose.
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6. Capital Budgets.
(a) On or before the Commencement Date and on or before each
succeeding November 1 during the term of the Loan, Debtor shall
deliver to Secured Party a proposed capital budget for the Property
for the immediately succeeding calendar year, which budget shall set
forth Debtor's projection of necessary Capital Expenses for such
calendar year, and which budget shall be subject to Secured Party's
reasonable approval.
(b) Secured Party may request reasonable modifications to any
budget delivered to Secured Party by Debtor. Once Debtor has made all
revisions requested by Secured Party, if any, the revised budget for
the Property shall be delivered to Secured Party and shall thereafter
become the Capital Expense budget for the Property hereunder (each
such budget a "Budget") for the applicable calendar year. If Debtor
and Secured Party are unable to agree upon a Budget for any calendar
year, the budgeted Capital Expenses provided in the Budget for the
preceding calendar year (absent extraordinary items) shall be
considered the Budget for the subject calendar year until Secured
Party and Debtor agree upon a new Budget for such calendar year.
(c) From time to time Debtor may submit proposed changes to the
current year's Budget to Secured Party, which changes shall be subject
to Secured Party's reasonable approval; provided, however, that
Secured Party may withhold its approval to any such proposed change in
its sole discretion if the implementation of such change (i) would
cause the total cost of the Budget for the current year to exceed four
percent (4%) of forecasted Gross Revenues for the current year, and
(ii) are not either mandated by applicable law or necessary to
preserve the safety of Property employees and guests or to maintain
the structural integrity of the Property.
7. Withdrawals from Replacement Reserve Account. Debtor may make
withdrawals from the Replacement Reserve Account (each, a "Withdrawal") for
Capital Expenses upon the following terms and conditions:
(a) Debtor shall not be entitled to any Withdrawal if a Default
(as defined in the Mortgage) or Event of
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Default (hereinafter defined) has occurred and is continuing under the
terms of the Note, Mortgage or any other Security Document.
(b) Debtor may make a Withdrawal for Capital Expenses, and for no
other purpose, and only to the extent that Secured Party has given its
prior written approval of such Withdrawal or such Capital Expense is
set forth in the applicable Budget.
8. Reports.
(a) On or before the fifteenth (15th) day of each calendar month,
Debtor shall deliver to Secured Party a statement concerning the
preceding calendar month period, which statement shall detail all of
Debtor's Withdrawals from the Replacement Reserve Account, the Capital
Expenses for which such Withdrawals were made, and shall contain a
reconciliation of Debtor's Withdrawals versus the Budget for the
applicable calendar month and for the applicable calendar year to
date. Debtor shall also provide to Secured Party such supporting
information, including, without limitation, invoices and paid
receipts, as reasonably required by Secured Party to verify such
Capital Expenses. If any such statement discloses any inconsistency
between the Budget (or any other Capital Expense approved by Secured
Party pursuant to Section 7(b) hereof) and the purposes for which
Debtor made such Withdrawals, then Debtor shall, within five (5) days
of demand therefor, deposit into the Replacement Reserve Account the
amount of any such discrepancy.
(b) Debtor shall deliver to Secured Party all financial
statements reasonably required by Secured Party to calculate Gross
Revenue, including, without limitation, a statement to be delivered to
Secured Party with each deposit of Gross Revenue, that sets forth the
amount of Gross Revenue accompanying such statement, if any, and
Debtor's calculation of Gross Revenue for the relevant calendar month.
Such statements shall be certified by an executive officer of Debtor
as having been prepared in accordance with the terms hereof and to be
true, accurate and complete in all material respects. If any such
statement discloses any inconsistency between the calculation of Gross
Revenue and the amount of Gross Revenue actually remitted to Secured
Party, Debtor shall immediately remit to Secured Party the amount of
any underpayment of Gross Revenue. Secured Party may notify Debtor
within thirty (30) days after receipt of any
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statement or report required hereunder that Secured Party disputes any
computation or item contained in any portion of such statement or
report. If Secured Party so notifies Debtor, Secured Party and Debtor
shall meet in good faith within ten (10) days after Secured Party's
notice to Debtor to resolve such disputed items. If, despite such good
faith efforts, the parties are unable to resolve the dispute at such
meeting or within ten (10) days thereafter, the items shall be
resolved by an independent certified public accountant designated by
Secured Party within fifteen (15) days after such ten (10) day period.
The determination of such accountant shall be final. All fees of such
accountant shall be paid by Debtor, provided, however, that if such
accountant determines that no additional Gross Revenue is due to be
remitted to Secured Party, then Secured Party shall pay the fees of
such accountant. Debtor shall remit to Secured Party any additional
Gross Revenue found to be due for such periods within ten (10) days
after the resolution of such dispute by the parties or the
accountant's determination, as applicable. Debtor shall at all times
keep and maintain full and accurate books of account and records
adequate to reflect correctly all items required in order to calculate
Gross Revenue.
9. Event of Default and Remedies.
(a) An "Event of Default" shall occur under this Agreement if (i)
Debtor fails to perform any monetary obligation under this Agreement
within five (5) days after its due date, (ii) if Debtor fails to
comply with any of the non-monetary terms of this Agreement within
thirty (30) days following notice of default thereof, (iii) an Event
of Default occurs under any of the Loan Documents, or (iv) any
representation or warranty contained hereunder proves to be untrue or
misleading in any material respect.
(b) An Event of Default hereunder shall constitute an Event of
Default under all of the Loan Documents.
(c) Upon the occurrence of an Event of Default, (i) Debtor shall
not be entitled to any Withdrawal from the Replacement Reserve
Account; (ii) Secured Party may, at its option, declare all
Obligations to be immediately due and payable; and (iii) Secured Party
shall be entitled to take immediate possession and control of the
Replacement Reserve Account and to
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pursue all of its rights and remedies hereunder, under the Loan
Documents, and to which it is entitled at law and in equity.
10. Representations and Warranties. In addition to all representations
and warranties of Debtor set forth in the Loan Documents, which are
incorporated herein by this reference, Debtor hereby represents and
warrants that:
(a) Debtor is the sole and absolute owner of the Collateral and
no other person or entity has any right, title, claim, or interest
(whether a security interest, lien, charge or otherwise) in, against,
or to the Collateral;
(b) All information heretofore, herein, or (to the best of
Debtor's knowledge) hereafter supplied to Secured Party by or on
behalf of Debtor with respect to the Collateral and its rights thereto
is and will be true and correct in all material respects;
(c) To the best of Debtor's knowledge, no person or entity has
any defense, set off, claim or counterclaim against Debtor which can
be asserted against Secured Party, whether in any proceeding to
enforce Secured Party's rights in the Collateral or otherwise;
(d) No financing statements covering any of the Collateral are on
file in any public office other than any financing statements which
reflect the security interest granted by this Agreement; and
(e) Debtor has full right to grant to Secured Party the security
interest contemplated herein in accordance with the terms of this
Agreement.
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11. Covenants of Debtor. Debtor hereby covenants and agrees:
(a) That Debtor will not, without the prior written consent of
Secured Party: (i) grant any security interest or any other interest
in any of the Collateral, other than the security interest granted by
this Agreement; or (ii) subordinate or permit the subordination of the
security interest granted to Secured Party herein to the interest of
any other person or entity in or to any of the Collateral. Any attempt
to do any of the foregoing without the prior written consent of
Secured Party shall be void and ineffective as against Secured Party
and shall constitute an Event of Default under the terms of this
Agreement;
(b) At Debtor's sole cost and expense, to appear in and defend
any action or proceeding arising under, growing out of, or in any
manner connected with the Collateral or the Obligations, and to pay
all reasonable costs and expenses of Secured Party, including
attorneys' fees in a reasonable sum, in any such action or proceeding
in which Secured Party may appear;
(c) To do all acts that may be necessary to maintain, preserve
and protect the Collateral;
(d) Not to use or permit any Collateral to be used unlawfully or
in violation of any provision of this Agreement, any Security
Document, or any applicable statute, regulation or ordinance or any
policy of insurance covering the Collateral, or to withdraw any funds
from the Replacement Reserve Account for any purpose inconsistent with
this Agreement;
(e) To pay promptly when due all taxes, assessments, charges,
encumbrances, and liens now or hereafter imposed upon or affecting any
Collateral;
(f) To give prompt notice to Secured Party of any change in
either the name or the place of business of Debtor;
(g) To procure, execute, and deliver from time to time any
endorsements, assignments, financing statements, and other writings
deemed necessary or appropriate by Secured Party to perfect, maintain,
and protect its security interest hereunder and the priority thereof,
and to deliver promptly to Secured Party all Collateral consisting of
chattel paper or instruments;
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(h) To keep separate, accurate, and complete records of the
Collateral and to provide Secured Party with such records and such
other reports and information relating to the Collateral as Secured
Party may request from time to time;
(i) Not to surrender or lose possession of (other than to Secured
Party), sell, encumber, lease, rent, or otherwise dispose of or
transfer any Collateral or right or interest therein, and to keep the
Collateral free of all levies and security interests or other liens or
charges except those approved in writing by Secured Party;
(j) To deliver promptly to Secured Party copies of all material
notices or communications received by Debtor concerning the
Collateral; and
(k) That this Agreement shall in no way operate to prevent
Secured Party from pursuing any remedy which it now or hereafter may
have because of any present or future breach of the terms or
conditions of the Obligations or any amendment, modification, or
extension thereof.
12. No Assumption by Secured Party; Indemnification. Secured Party
shall not be obligated to perform or discharge, nor does it hereby
undertake to perform or discharge, any obligation, duty or liability under
any Collateral or by reason of this Agreement. This Agreement and the
rights granted Secured Party hereunder shall in no way be construed to make
Secured Party a partner of Debtor. Debtor shall perform and discharge all
of its obligations, duties and liabilities with respect to any Collateral.
Debtor hereby agrees to indemnify Secured Party against and hold it
harmless from any and all liability, loss or damage which it may or might
incur by reason of this Agreement, and against and from any and all claims
and demands whatsoever which may be asserted against it by reason of any
alleged obligation or undertaking on its part to perform or discharge any
of the terms, covenants or agreements with respect to any Collateral
(except any liability arising as the result of Secured Party's willful
misconduct). Should Secured Party incur any such liability, loss or damage
under any Collateral or by reason of this Agreement, or in the defense
against any such claims or demands, the amount thereof, including costs,
expenses and reasonable attorneys' fees (together with interest at the
Default
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Rate set forth in the Note from the date ten (10) days following demand
therefor until paid) shall be included in the Obligations secured hereby,
and Debtor shall reimburse Secured Party therefor promptly upon demand, and
upon the failure of Debtor to do so, Secured Party may deem Debtor in
default of this Agreement and exercise all remedies granted hereby.
13. Notice of Security Interest; Perfection; Financing Statements. At
its option, Secured Party may notify the financial institution that holds
the Replacement Reserve Account of Secured Party's security interest in
such account. Debtor shall execute such financing statements as Secured
Party may request to perfect the rights assigned and the security interest
granted by this Agreement, and shall pay the cost of filing such financing
statements in such offices in such jurisdictions as Secured Party may
require.
14. Other Information. Secured Party or its agents shall have the
right to review and Debtor shall deliver to Secured Party, upon reasonable
notice, copies of any documents or instruments affecting or relating to any
of the Collateral.
15. Waiver of Hearing. To the fullest extent permitted by law, Debtor
hereby expressly waives any constitutional or other right to a judicial
hearing prior to the time Secured Party takes possession, disposes of,
assigns, or succeeds to the Collateral upon an Event of Default as provided
in Paragraph 9 hereof. Debtor hereby expressly waives any right to require
Secured Party to proceed against any person or to exhaust any security or
to pursue any remedy in Secured Party's power.
16. Cumulative Rights. The rights, powers and remedies of Secured
Party under this Agreement shall be in addition to all rights, powers and
remedies given to Secured Party by virtue of any statute or rule of law or
the terms and conditions of the Obligations, all of which rights, powers
and remedies shall be cumulative and may be exercised successively or
concurrently without impairing Secured Party's security interest in the
Collateral.
17. Waiver. Any forbearance, failure or delay by Secured Party in
exercising any right, power or remedy shall not preclude the further
exercise thereof, and every right, power or remedy of Secured Party shall
continue in full force and effect
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until such right, power or remedy is specifically waived in a writing
executed by Secured Party.
18. Setoff. Debtor agrees that Secured Party may exercise its rights
of setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
19. No Assignment; Successors and Assigns. Except as otherwise
provided herein, Debtor may not assign, encumber, or transfer in any manner
whatsoever all or any part of its interest in the Collateral without the
prior written consent of Secured Party. Secured Party's consent to one
assignment or other transfer shall not be deemed to be a consent to any
subsequent assignment or transfer. Any transferee or assignee of all or any
part of Debtor's interest in any Collateral shall hold such interest
subject to all the terms, conditions and provisions of this Agreement. All
rights of Secured Party under this Agreement shall inure to the benefit of
its successors and assigns, and all obligations of Debtor shall bind its
successors and assigns.
20. Severability. If any of the provisions of this Agreement shall be
held invalid or unenforceable, this Agreement shall be construed as if not
containing those provisions and the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired.
21. Choice of Law. This Agreement shall be construed in accordance
with and governed by the laws of the Commonwealth of Massachusetts, and,
where applicable and except as otherwise defined herein, terms used herein
shall have the meanings given them in the Massachusetts Uniform Commercial
Code. Any dispute concerning Section 6(b), 8(a) or 8(b) shall be resolved
pursuant to the expedited Commercial Rules of the American Arbitration
Association. Any arbitration shall be held in Boston, Massachusetts, and
the prevailing party shall be entitled to receive all costs and expenses
incurred in connection with such arbitration.
22. Address; Trade Name; Records. Debtor represents that its residence
or chief place of business is located in either Cambridge, Massachusetts,
or Boston, Massachusetts, and that Debtor's records concerning the
Collateral are kept at either or both of such locations.
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23. Notices. Any written notice, consent or other communication
provided for this Agreement shall be deemed to have been properly given (a)
upon personal delivery, (b) on the first business day after receipt of
delivery to a courier service which guarantees next-day business delivery,
or (c) on the third business day after mailing, by registered or certified
United States mail, postage prepaid, in any case to the appropriate party
at its address set forth below:
Secured Party: SunAmerica Life Insurance Company
0 XxxXxxxxxx Xxxxxx
Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Director--Mortgage Lending and
Real Estate
Debtor: c/o Sonesta International Hotels Corporation
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Office of the Treasurer
Such addresses may be changed by written notice given as provided herein.
24. Joint and Several Obligation. If Debtor is more than one person or
entity, then (a) all persons or entities comprising Debtor are jointly and
severally liable for all of the Debtor's obligations hereunder; (b) all
representations, warranties, and covenants made by Debtor shall be deemed
representations, warranties, and covenants of each of the persons or
entities comprising Debtor; (c) any breach, Default or Event of Default by
any of the persons or entities comprising Debtor hereunder shall be deemed
to be a breach, Default, or Event of Default of Debtor; and (d) any
reference herein contained to the knowledge or awareness of Debtor shall
mean the knowledge or awareness of any of the persons or entities
comprising Debtor.
25. Headings. Headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
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IN WITNESS WHEREOF, Debtor has executed this Replacement Reserve and
Security Agreement as of the day and year first above written.
DEBTOR:
/s/
-----------------------------------
Xxxxx X. Xxxxxxxxx, Trustee of
the Charterhouse of Cambridge
Trust, and not individually
/s/
-----------------------------------
Xxxxx X. Xxxxxxxxx, Trustee under
a Grant of Trustee Power,
Authority and Discretion dated
December 5, 1996 from Boy X.X.
xxx Xxxx, Trustee of the
Charterhouse of Cambridge Trust,
and not individually
SONESTA OF MASSACHUSETTS, INC.,
a Massachusetts corporation
By:/s/
---------------------------------
Xxxxx X. Xxxxxxxxx
Vice President
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