1
Exhibit 10.8(a)
FIRST AMENDED REVOLVING CREDIT AND TERM LOAN AGREEMENT
DATED AS OF FEBRUARY 20, 1996
BY AND AMONG
RFS HOTEL INVESTORS, INC.,
RFS PARTNERSHIP, L.P.,
AND
BOATMEN'S BANK OF TENNESSEE
2
TABLE OF CONTENTS OF FIRST AMENDED REVOLVING CREDIT
AND TERM LOAN AGREEMENT
ARTICLE I - DEFINITIONS AND ACCOUNTING TERMS......................................................................2
1.01. Defined Terms............................................................................................2
1.02. Accounting Terms.........................................................................................8
ARTICLE II - AMOUNT AND TERMS OF THE LOANS........................................................................8
2.01. Revolving Credit Loan....................................................................................8
2.02. Term Loan Option.........................................................................................8
2.03. Notice and Manner of Borrowing...........................................................................9
2.04. Interest.................................................................................................9
2.05. Note.....................................................................................................9
2.06. Prepayments and Funding Losses; Increased Costs; Unavailability of Dollar Deposits;
Illegality and Risk Based Capital.......................................................................10
(a) Prepayment.....................................................................................10
(b) Increased Costs................................................................................10
(c) Unavailability of Dollar Deposits..............................................................10
(d) Illegality.....................................................................................11
(e) Risk-based Capital.............................................................................12
2.07. Method of Payment.......................................................................................12
2.08. Use of Loan Proceeds....................................................................................13
(a) Working Capital................................................................................13
(b) Acquisition....................................................................................13
(c) Development....................................................................................13
2.09. Collateral Pool.........................................................................................14
(a) Mortgages......................................................................................14
(b) Security Agreements............................................................................14
(c) Evidence of Due Authorization of Security Documents and Corporate or
Partnership Good Standing......................................................................14
(d) Assignments of Rents and Leases................................................................15
(e) Franchise Agreements...........................................................................15
(f) Leases.........................................................................................15
(g) Subordinations.................................................................................15
(h) Management Agreements..........................................................................15
(i) Surveys........................................................................................15
(j) Title Insurance Policies.......................................................................15
(k) Environmental Audits...........................................................................16
(l) Physical Inspections...........................................................................16
(m) Hazard Insurance...............................................................................16
(n) Appraisals.....................................................................................16
(o) Environmental Indemnity........................................................................16
(p) Opinion of Counsel for Borrower and Rfsp.......................................................16
3
(q) Independent Market Study.......................................................................16
(r) Other Documents................................................................................16
2.10. Adjustments to Collateral Pool Valuation................................................................17
(a) Appraisals.....................................................................................17
(b) Mandatory Adjustments..........................................................................17
(c) Adjustments for Franchise Cancellations........................................................17
(d) Pre-approvals..................................................................................18
2.11. Sale of Hotel Properties................................................................................18
2.12. Fees....................................................................................................18
(a) Commitment Fee.................................................................................18
(b) Agent's Fee....................................................................................18
ARTICLE III CONDITIONS PRECEDENT ................................................................................18
3.01. Intentionally Omitted...................................................................................18
3.02. Conditions Precedent to Advances under the Revolving Credit Loan.......................................18
3.03. Conditions Precedent to the Term Loan...................................................................19
(a) Note...........................................................................................19
(b) Opinion of Counsel for Borrower and RFSP.......................................................19
(c) Officer's Certificate, Etc.....................................................................19
(d) Modifications of Mortgages/Title Endorsements..................................................19
(e) Additional Documentation ......................................................................19
ARTICLE IV - REPRESENTATIONS AND WARRANTIES .....................................................................20
4.01. Incorporation, Good Standing, and Due Qualification of Borrower.........................................20
4.02. Corporate Power and Authority of Borrower...............................................................20
4.03. Existence and Due Qualification of Rfsp.................................................................20
4.04. Power and Authority of Rfsp.............................................................................20
4.05. Legally Enforceable Agreement...........................................................................21
4.06. Labor Disputes and Acts of God..........................................................................21
4.07. Other Agreements........................................................................................21
4.08. Litigation..............................................................................................21
4.09. No Defaults on Outstanding Judgments or Orders..........................................................21
4.10. Ownership and Liens.....................................................................................22
4.11. Operation of Business...................................................................................22
4.12. Taxes...................................................................................................22
4.13. Debt....................................................................................................22
4.14. Environmental Compliance................................................................................22
4.15. Ada Compliance..........................................................................................22
4.16. Operations; Room Rents..................................................................................23
ARTICLE V - AFFIRMATIVE COVENANTS...............................................................................23
5.01. Maintenance of Existence................................................................................23
5.02. Maintenance of Records..................................................................................23
4
5.03. Maintenance of Properties...............................................................................23
5.04. Conduct of Business.....................................................................................23
5.05. Maintenance of Insurance................................................................................23
5.06. Compliance with Laws....................................................................................24
5.07. Right of Inspection.....................................................................................24
5.08. Reporting Requirements..................................................................................24
(a) Quarterly Financial Statements.................................................................24
(b) Annual Financial Statements....................................................................24
(c) Management Letters.............................................................................25
(d) Certificate of No Default......................................................................25
(e) Notice of Litigation...........................................................................25
(f) Notice of Defaults and Events of Default.......................................................25
(g) Reports to Other Creditors.....................................................................25
(h) Proxy Statements, Etc..........................................................................25
(i) Tax Receipts...................................................................................26
(j) General Information............................................................................26
5.09. Debt Coverage Ratios....................................................................................26
(a) Debt Coverage Ratio (NOI)......................................................................26
(b) Debt Coverage Ratio (CF).......................................................................26
(c) Debt Coverage Ratio (CFO)......................................................................26
(d) Quarterly Calculations.........................................................................26
(e) Revolving Credit Loan Calculation..............................................................26
5 10. Reserve for Room Renovations............................................................................27
5.11. Maintenance of Franchises...............................................................................27
5.12. Minimum Net Worth.......................................................................................27
5.13. Operations; Room Rents..................................................................................27
5.14. Minimum Cash Flow.......................................................................................27
ARTICLE VI NEGATIVE COVENANTS....................................................................................27
6.01. Liens...................................................................................................28
6.02. Debt....................................................................................................28
6.03. Mergers, Etc............................................................................................29
6.04. Leases..................................................................................................29
6.05. Sale and Leaseback......................................................................................29
6.06. Guaranties, Etc.........................................................................................29
6.07. Condition of Hotels.....................................................................................29
ARTICLE VII - EVENTS OF DEFAULT..................................................................................30
7.01. Events of Default.......................................................................................30
ARTICLE VIII - MISCELLANEOUS.....................................................................................32
8.01. Amendments, Etc.........................................................................................32
8.02. Notices, Etc............................................................................................32
8.03. No Waiver; Remedies.....................................................................................32
8.04. Successor and Assigns...................................................................................33
5
8.05. Costs, Expenses, and Taxes..............................................................................33
8.06. Right of Set-off........................................................................................33
8.07. Waiver of Right to Jury Trial...........................................................................33
8.08. Governing Law...........................................................................................34
8.09. Severability of Provision...............................................................................34
8.10. Headings................................................................................................34
8.11. Joinder by RFSP.........................................................................................34
8.12. Jurisdiction and Venue..................................................................................34
8.13. No Third Party Beneficiaries............................................................................35
8.14. No Agency...............................................................................................35
8.15. Bank Approvals..........................................................................................35
8.16. Lending Limitation; Participation.......................................................................35
6
FIRST AMENDED REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS FIRST AMENDED REVOLVING CREDIT AND TERM LOAN AGREEMENT
("AGREEMENT") dated as of February 20, 1996, between RFS HOTEL INVESTORS, INC.,
a Tennessee corporation ("Borrower"); RFS PARTNERSHIP, L.P., a Tennessee limited
partnership ("RFSP"); and BOATMEN'S BANK OF TENNESSEE, a Tennessee banking
corporation ("Bank"), on behalf of itself as well as all Participants.
RECITALS:
A. Borrower is an equity real estate investment trust ("REIT") and is
the majority owner and general partner of RFSP which owns certain Hotel
Properties, as herein defined, in various states.
B. Bank and the Participants, as herein defined, have heretofore
committed to make advances to Borrower on a revolving credit basis in an amount
not to exceed at any one time outstanding the maximum aggregate principal sum of
Fifty Million and No/100 dollars ($50,000,000.00). Accordingly, Bank, Borrower,
RFSP and RFS Management Co., Inc. ("RFSM") entered into that certain Revolving
Credit and Term Loan Agreement dated as of the 8th day of September, 1994 (the
"First Loan Agreement"), and Bank and the Participants entered into the
Participation Agreement, as herein defined, setting forth the terms and
conditions of Bank's and the Participant's agreement to fund their respective
Percentage Interests of the Revolving Credit Loan, as herein defined.
C. RFSM has been merged into RFS, Inc. ("RFS") which has merged with
Doubletree, Corporation, and has asked to be removed from this Agreement, as
well as for certain changes to the form of lease subordination agreement
executed formerly by RFSM, and to be executed henceforth by RFS, in connection
with each of the Hotel Properties.
D. Bank, Borrower, RFSP and RFS have heretofore entered into that
certain First Modification Agreement dated as of the 31st day of August, 1995,
and that certain Second Modification Agreement dated as of the 31st day of
October, 1995 (collectively the "Modification Agreements").
E. Bank, Borrower and RFSP have all agreed to enter into this Agreement
amending and restating the First Loan Agreement to remove RFS therefrom, include
the changes set forth in the Modification Agreements, and to include certain
other amendments as hereinafter set forth.
NOW, THEREFORE, in consideration of their mutual covenants, the
financial accommodations extended to Borrower herein which will benefit not only
Borrower but RFSP as well, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree to and affirm the foregoing recitals, and further agree as follows:
7
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. DEFINED TERMS. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
(a) "Additional Hotel Properties" means all Hotel Properties acquired by
Borrower or RFSP subsequent to the date of this Agreement, regardless
of whether the same are included in the Collateral Pool.
(b) "Agreement means this First Amended Revolving Credit and Term Loan
Agreement, as hereinafter amended, supplemented, or modified from time
to time.
(c) "Annual Debt Service" means the annual payments of principal and/or
interest, as the case may be, required to be paid on a particular Debt
of Borrower which, when referring to all of Borrower's Debt shall
include, without limitation, projected annual payments of principal and
interest on the Revolving Credit Loan using the projected debt service
calculation set forth in Section 5.09e herein, as well as payments paid
on the principal indebtedness outstanding under obligations assumed by
Borrower on any Additional Hotel Properties acquired by Borrower.
(d) "Asbestos" shall have the meanings provided under the Environmental
Laws (as hereinafter defined), and shall include, but not be limited
to, asbestos fibers and friable asbestos, as such terms are defined
under the Environmental Laws.
(e) "Assignments of Rents and Leases" means the assignments of rents,
leases, issues and profits covering the Hotel Properties described in
the Mortgages.
(f) "Base Rate" means a variable rate and is a benchmark or reference rate
of interest established by Bank as its corporate base rate to be in
effect from time to time whether or not such rate is otherwise
published, which rate may not be the Bank's lowest or best rate;
provided, that in the event this Agreement is assigned to another
holder of the Revolving Credit Note which is a commercial bank, Base
Rate shall mean the reference rate of interest established by such
subsequent holder from and after the date of such assignment, as its
base rate from time to time.
(g) "Borrowing Base" shall mean a sum equal to thirty three percent (33%)
of the Value of the Collateral Pool, to be determined by Bank, from
time to time, including, without limitation, whenever an advance is
requested by Borrower under the Revolving Credit Loan.
(h) "Business Day" means any Domestic Business Day on which Bank is open
for business.
2
8
(i) "Capital Lease" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
(j) "Cash Flow" or "CF" means the gross income received by Borrower and/or
by RFSP, as the case may be, from lease payments received from
Collateral Pool Properties, less real property taxes and insurance
premiums paid in connection therewith, and less a proportionate share
of any and all other expenses of every type and character incurred by
Borrower and/or RFSP (except for depreciation and amortization and
interest expense), such proportion being equal to the ratio of the
total number of hotel rooms contained in the Collateral Pool Properties
divided by the total number of hotel rooms contained in all of the
Hotel Properties.
(k) "Cash Flow Operations" or "CFO" means the gross income received by
Borrower and/or by RFSP, as the case may be, from lease payments
received from all Hotel Properties, less real property taxes and
insurance premiums paid in connection therewith, and less any and all
other expenses of every type and character incurred by Borrower and/or
RFSP (except for depreciation and amortization, and interest expense).
(l) "Collateral" means all property which is subject or is to be subject to
the Liens granted by the Security Agreements.
(m) "Collateral Pool" means such of the Initial Hotels and the Additional
Hotel Properties which Bank has accepted as part of the Collateral Pool
pursuant to the terms of Section 2.09 hereof.
(n) "Collateral Pool Property" means any of the Initial Hotels or the
Additional Hotel Properties which may, at the relevant time, be part of
the Collateral Pool.
(o) "Commitment" means Bank's obligation to make the Loans to Borrower
pursuant to Sections 2.01 and 2.02 in the amount referred to therein.
(p) "Cost Basis" means the original acquisition cost of a Hotel Property or
Properties, as the case may be, plus the actual cost of any permanent
improvements increasing the net useable square footage of the Hotel
Property or Properties in question, determined according to GAAP.
(q) "Debt" means: (a) indebtedness or liability for borrowed money, or for
the deferred purchase price of property or services (excluding trade
obligations incurred in the ordinary course of business); (b)
obligations as lessee under Capital Leases; (c) obligations under
letters of credit issued for the account of any Person; (d) all
guarantees, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in
any Person, or otherwise to assure a creditor against loss; and (e)
obligations secured by
3
9
any Lien on property owned by the Person, whether or not the
obligations have been assumed.
(r) "Debt Coverage Ratio (CF)," applies to Borrower's Debt relating to the
Revolving Credit Loan only, and shall mean the ratio of Cash Flow from
the Collateral Pool Properties to Annual Debt Service on the Revolving
Credit Loan using the projected debt service calculation set forth in
Section 5.09e hereof.
(s) "Debt Coverage Ratio (CFO)," applies to all Debt and Hotel Properties
of Borrower, and shall mean the ratio of CFO from all Hotel Properties
to Annual Debt Service on the Revolving Credit Loan.
(t) "Debt Coverage Ratio (NOI)," applies to all Debt and Hotel Properties
of Borrower, and shall mean the ratio of Net Operating Income from all
Hotel Properties to Annual Debt Service on all of Borrower's Debt.
(u) "Default" means any of the events specified in Section 7.01, whether or
not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
(v) "Development" means the construction of "Additional Hotel Properties"
as defined in the Loan Agreement, and all reasonable, normal and
necessary costs incident thereto including, without limitation, costs
incurred for acquisition, engineering, architectural, planning,
rezoning, environmental testing and appraisal.
(w) "Domestic Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in Memphis, Tennessee, are
authorized or required to close under the laws of the state of
Tennessee.
(x) "Easements" means any agreements entered into by Borrower, RFSP or RFS
with any other Persons, which agreements grant to such Person the right
to use any portion of any of the Hotel Properties, including, without
limitation, any reciprocal easement agreement entered into with
adjoining landowners owning property adjacent to any of the Hotel
Properties.
(y) "Environmental Laws" means the Toxic Substances Control Act of 1976,
the Resource Conservation and Recovery Act of 1976, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Federal Response, Compensation and Liability Act of 1980, the Federal
Insecticide, Fungicide and Rodenticide Act of 1972, the Clean Air Act
of 1971, as amended, the Clean Water Act of 1977, the Safe Drinking
Water Act of 1977 and the National Environmental Policy Act of 1969,
including all amendments to and regulations under such acts, and all
other applicable federal, state and local laws, rules, regulations,
orders, judicial determinations and decisions or determinations by any
judicial, legislative or executive body of any governmental or quasi-
4
10
governmental entity, whether in the past, the present or the future,
with respect to: (1) the installation, existence, or removal of, or
exposure to, Asbestos at any Hotel Property owned by Borrower or RFSP;
(2) the existence on, discharge from, or removal from any such Hotel
Property of Hazardous Wastes; and (3) the effects on the environment of
any such Hotel Property or of any activity now, previously, or
hereafter conducted on any such Hotel Property.
(z) "Event of Default" means any of the events specified in Section 7.01,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
(aa) "GAAP" means generally accepted accounting principles in the United
States.
(bb) "Hazardous Wastes" means any chemical, material or substance to which
exposure is prohibited, limited or regulated by any Environmental Law
or which even if not so regulated, is known to pose a hazard to health
and safety, including, but not limited to, Asbestos and any of the
following as defined by the Environmental Laws: solid wastes; toxic or
hazardous substances, wastes or contaminants (including, without
limitation, polychlorinated biphenyls ["PCB's"], paint containing lead
and urea formaldehyde foam insulation); and discharges of sewage and
effluent.
(cc) "Head Office" means the principal office of Bank at 0000 Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxx 00000; or the principal office of any subsequent
holder of the Revolving Credit Note.
(dd) "Hotel Properties" means all hotel properties now owned, or hereafter
acquired, by RFSP or Borrower including, without limitation, the
Initial Hotels and the Additional Hotel Properties, regardless of
whether any of the same are included in the Collateral Pool or not.
(ee) "Initial Hotels" means the Hotel Properties presently owned by RFSP.
(ff) "Interest Period" means a period of ninety (90) days commencing on each
date the interest rate payable on the Revolving Credit Loan is adjusted
as provided in Section 2.04 hereof.
(gg) "Leases" means any and all leases of any or all of the Hotel Properties
by RFSP or Borrower, as lessor therein.
(hh) "LIBOR Rate," as used herein, shall mean the average of interbank three
(3) month offered rates for U.S. dollar deposits in the London market
based on quotations at five major banks, as published in The Wall
Street Journal and set forth under its "Money Rates" and described as
"LONDON INTERBANK OFFERED RATES (LIBOR)"; provided that if two or more
three-month LIBOR Rates are published, the LIBOR Rate shall be the
arithmetic mean of such offered rates rounded upwards, if necessary, to
the
5
11
nearest 1/16th of one percent; provided further, however, that if the
rate adjustment date falls on a Saturday, Sunday or legal holiday, or
if a LIBOR Rate does not appear in The Wall Street Journal on the rate
adjustment date, then the LIBOR Rate shall be the LIBOR Rate as
published in The Wall Street Journal on the next Domestic Business Day
on which a three (3) month LIBOR Rate appears; and provided further,
however, that if at any time hereafter The Wall Street Journal ceases
to publish the LIBOR Rate, then "LIBOR Rate" shall mean the arithmetic
mean rounded upwards, if necessary, to the nearest 1/16th of one
percent of the interest rates per annum at which deposits in an amount
comparable to the aggregate principal amount outstanding under the
Revolving Credit Note in U.S. Dollars are offered by the Reference
Banks, as hereinafter defined, to leading banks in the London Interbank
market for a period of three (3) months as of 11:00 a.m., London time,
on the day which is two Business Days prior to the first day of the
applicable Interest Period.
The term "Reference Banks" means Barclays Bank PLC, Bankers Trust
Company, National Westminster PLC and Bank of Tokyo, and, in the event
data from any such bank is unavailable, in the order of priority,
Credit Suisse, Deutsche Bank, Swiss Bank and/or Citibank, N.A.
(ii) "Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security
agreement, or preferential arrangement, charge, or encumbrance of any
kind or nature whatsoever (including without limitation, any
conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any
of the foregoing).
(jj) "Loans" means the Revolving Credit Loan or the Term Loan or both as the
context may require.
(kk) "Loan Documents" means this Agreement, the Note, the Mortgages, the
Assignment of Rents and Leases, the Security Agreements, the
Environmental Indemnity Agreement and any additional documents required
to be delivered by Borrower, RFSP or RFS under this Agreement, or
otherwise evidencing, securing and/or relating to the Loans.
(ll) "Loan to Value Ratio" shall mean that percentage that the current
outstanding principal balance of the Loans bears to the aggregate Value
of the Collateral Pool, as such ratio is computed by Bank from time to
time.
(mm) "Mortgages" means the deeds of trust or mortgages covering the Initial
Hotels and any Additional Hotel Properties.
(nn) "Net Operating Income" means the sum of (a) net income after tax
(excluding any net capital gain) for the preceding twelve (12) months,
plus (b) interest expense and/or
6
12
percentage rent payments, as the case may be, for that period, plus (c)
depreciation and amortization expense for that period, all performed on
a consolidated basis.
(oo) "Note" means the Revolving Credit Note and may also mean, if the
context requires and if Borrower does not execute a replacement note
when the Revolving Credit Loan is converted to the Term Loan, the
promissory note evidencing the Term Loan.
(pp) "Operating Income" means the gross revenue derived from the operation
of the Collateral Pool Properties, less all expenses pertaining
thereto, including, without limitation, real and personal property
taxes and insurance premiums, and projected expenses associated with
the replacement of fixed assets of four percent (4%) of gross revenues,
and projected expenses associated with the management of the Collateral
Pool Properties of four percent (4%) of gross revenues.
(qq) "Participants" means those certain lenders who have agreed, or will
agree, from time to time, to fund a portion of the Commitment, and/or
purchase a portion of the Loans.
(rr) "Participation Agreement" means any participation agreement, as
subsequently modified or amended, entered into by and among Bank and
the Participants, pursuant to which each Participant has agreed, or
will agree, to purchase and/or fund its respective Percentage Interest
in the Loans, including all loan advances and other extensions of
credit made or to be made pursuant to the provisions hereof, as said
Participation Agreement may be amended from time to time.
(ss) "Percentage Interest" means, as applicable and as the context would
require, either (i) the proportionate share of Bank or each Participant
of the Revolving Credit Loan, or (ii) the proportionate share of Bank
or each Participant of the principal balance outstanding at any given
time under the Revolving Credit Loan.
(tt) "Person" means any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity of whatever nature.
(uu) "Revolving Credit Loan" shall have the meaning assigned to such term in
Section 2.01.
(vv) "Revolving Credit Note" shall have the meaning assigned to such term in
Section 2.05.
(ww) "Security Agreements" means the Security Agreements to be delivered by
Borrower and RFSP under the terms of this Agreement and may be included
in the Mortgages.
(xx) "Termination Date" means September 8, 1998, and is the date on which
Bank's commitment to make advances under the Revolving Credit Loan
shall terminate, and on which date the outstanding principal balance
under the Revolving Credit Loan, plus all accrued and unpaid interest
shall be due and payable in full.
7
13
(yy) "Term Loan" shall have the meaning assigned to such term in Section
2.02.
(zz) "Value" means the lesser of (i) the actual Cost Basis of the Collateral
Pool, determined according to GAAP, or (ii) the most recent appraised
value of the Collateral Pool.
SECTION 1.02. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with that
applied in the preparation of the financial statements referred to in Section
5.08, and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
SECTION 2.01. REVOLVING CREDIT LOAN. Bank agrees, subject to the terms
and conditions hereinafter set forth (including, without limitation, the
restriction on Bank's obligation to disburse any portion the Participants have
failed to fund as provided in Section 8.16 hereof), to make advances to Borrower
from time to time during the period from September 8, 1994, up to but not
including the Termination Date (the "Revolving Credit Loan") in an aggregate
principal amount outstanding not to exceed at any time the lesser of: (a) Fifty
Million and No/100 Dollars ($50,000,000.00), less any sums which the
Participants have failed to fund, as more fully provided in Section 8.16 hereof,
or (b) the Borrowing Base which shall be equal to thirty three percent (33%) of
the Value of the Collateral Pool Properties, subject to adjustment in accordance
with Section 2.10. Within the limits of the Commitment, Borrower may borrow,
prepay pursuant to Section 2.06, and reborrow under this Section 2.01.
SECTION 2.02. TERM LOAN OPTION. Provided that no Default or Event of
Default has occurred and is then existing under the terms of this Agreement, and
Borrower is in material compliance with the provisions of any other agreement
with Bank, at the Termination Date, Borrower shall have the option (the "Term
Loan Option") to convert the principal balance outstanding under the Revolving
Credit Loan (in a principal amount not exceeding the Commitment) to a term loan
(the "Term Loan"), as shall be provided in the Revolving Credit Note, in form
and content prepared by and acceptable to Bank. All accrued and outstanding
interest on the portion of the Revolving Credit Loan converted to the Term Loan
shall be paid on or prior to the date such conversion becomes effective. The
outstanding principal balance of the Term Loan shall accrue and bear interest
throughout its term at the option of Borrower at either (a) a fixed rate of
interest equal to two and one-half percent (2 1/2%)in excess of the five (5)
year U.S. Treasury Bond yield as reported in The Wall Street Journal under its
money rates on the date of conversion or (b) a variable rate equal to Bank's
corporate Base Rate plus one percent (1%) floating, as the same may change from
time to time. Borrower's interest rate option shall be a one-time option only
and must be exercised within ten (10) days prior to the Termination Date.
Interest shall be calculated on the basis of a year of 360 days from the actual
number of days elapsed. The Term Loan shall be payable over five (5) years in
consecutive monthly installments of principal and interest commencing the first
day of the month following conversion and due on
8
14
the first day of each month thereafter for the remainder of the five-year term.
The first fifty-nine (59) monthly payments shall be computed based on a ten (10)
year amortization, with the sixtieth and final such monthly payment to be in the
amount of the entire remaining principal and all accrued and unpaid interest.
SECTION 2.03. NOTICE AND MANNER OF BORROWING. Borrower shall submit to
Bank a request for an advance under the Revolving Credit Loan at least five (5)
Domestic Business Days prior to the requested date for funding. Each such
request for advance shall specify the effective date for funding and the amount
of the advance requested, specify the use to be made of the proceeds of such
advance in such detail as Bank shall require, and be accompanied by (a) a debt
service coverage worksheet depicting the debt service coverage calculation for
the twelve-month period ending with the last day of the most recent fiscal
quarter (the "Debt Coverage Worksheet"), and (b), a borrowing base certificate
("Borrowing Base Certificate"), all of which request for advance, Debt Coverage
Worksheet and Borrowing Base Certificate shall be submitted in form and content
acceptable to Bank , as the same may be modified by Bank from time to time. Not
later than 2:00 p.m. Memphis, Tennessee, applicable central time on the date
such advance under the Revolving Credit Loan is to be effective, provided all of
the applicable conditions set forth in Article III hereof have been fulfilled to
Bank's satisfaction, Bank and/or the Participants, as the case may be, will make
such advance under the Revolving Credit Loan available to Borrower in
immediately available funds by crediting the amount thereof to Borrower's
account with Bank.
SECTION 2.04. INTEREST. Borrower shall pay interest to Bank on the
outstanding and unpaid principal amount of the Revolving Credit Loan at a
floating rate equal to one and three-fourths percent (1 3/4%) in excess of the
LIBOR Rate on the date of the initial advance under the Revolving Credit Loan
hereunder, and on the ninetieth (90th) day of each Interest Period thereafter to
correspond to the LIBOR Rate published or determined on the date of such
adjustment; such rate as adjusted shall be effective for the next succeeding
ninety-day period. The interest rate as so determined shall be applicable to all
advances under the Revolving Credit Loan and shall be subject to adjustment on
the same date for each new Interest Period, regardless of the date of any
particular advance under the Revolving Credit Loan. Interest shall be calculated
on the basis of a year of three hundred sixty (360) days for the actual number
of days elapsed. Interest on the Revolving Credit Loan shall be paid in
immediately available funds on the first day of each month at the Head Office.
Any principal installment or final payment amount under any Note not paid when
due at maturity, by acceleration, or otherwise, shall bear interest thereafter
until paid at a rate which shall be equal to the maximum effective rate of
interest which Bank or the then current holder of the Note is permitted to
contract for and charge from time to time.
SECTION 2.05. NOTE. The Revolving Credit Loan and advances thereunder
shall be evidenced by, and repaid with interest in accordance with, a single
promissory note of Borrower in form and content acceptable to Bank, in the
original principal amount of Fifty Million and No/100 Dollars ($50,000,000.00)
dated September 8, 1994, which Note shall be payable to Bank, and maturing as to
principal on the Termination Date (the "Revolving Credit Note"). In the absence
of manifest error, the amounts reflected on Bank's and the Participants'
internal records
9
15
shall be deemed conclusive as to the outstanding balance of principal and
interest under the Revolving Credit Loan from time to time. The Term Loan, if
Borrower exercises the Term Loan Option, shall also be evidenced by the
Revolving Credit Note, with applicable provisions therein pertaining to the Term
Loan Option as required by Bank. In the event Borrower exercises the Term Loan
Option, if requested by Bank, Borrower shall execute a replacement note, in form
and content acceptable to Bank, evidencing the Term Loan.
SECTION 2.06. PREPAYMENTS AND FUNDING LOSSES; INCREASED COSTS;
UNAVAILABILITY OF DOLLAR DEPOSITS; ILLEGALITY AND RISK BASED CAPITAL.
(a) PREPAYMENT. Borrower may, upon at least five (5) Domestic
Business Days' notice to Bank, prepay the Revolving Credit Loan or the
Term Loan, in whole or in part, without penalty, with accrued interest
to the date of such prepayment on the amount prepaid.
(b) INCREASED COSTS. In the event that any applicable law or
regulation or the interpretation or administration thereof by any
governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law) (i)
shall change the basis of taxation of payments to Bank of any amounts
payable by Borrower hereunder (other than taxes imposed on the overall
net income of Bank), or (ii) shall impose, modify or deem applicable
any reserve, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by Bank, or
(iii) shall impose any other condition with respect to the Loans, and
the result of any of the foregoing is to increase the cost to Bank of
making or maintaining the Loans or to reduce any amount receivable by
Bank, and Bank determines that such increased costs or reduction in
amount receivable was attributable to the LIBOR Rate basis used to
establish the interest rate applicable to the Revolving Credit Loan,
then Borrower shall from time to time, upon demand by Bank, pay to Bank
additional amounts sufficient to compensate Bank for such increased
cost. A detailed statement as to the amount of such increased cost,
prepared in good faith and submitted to Borrower by Bank, shall be
conclusive and binding in the absence of manifest error.
(c) UNAVAILABILITY OF DOLLAR DEPOSITS. If Borrower selects the
LIBOR Rate, if on or prior to the first day of any Interest Period: (i)
Borrower is advised by Bank that deposits in Dollars (in the applicable
amounts) are not being offered to Bank in the Euro-dollar interbank
market for such Interest Period, or (ii) Borrower is advised by Bank
that the Reserve Adjusted LIBOR Rate will not adequately and fairly
reflect the cost to Bank of funding the Loans for such Interest Period,
until the circumstances giving rise to such suspension no longer exist,
the Reserve Adjusted LIBOR Rate shall be suspended as the basis for
establishing the interest rate at which interest will accrue under the
Revolving Credit Loan. Commencing on the day Borrower receives advice
of such suspension, and continuing for a maximum of ten (10) Domestic
Business Days thereafter, Bank and Borrower shall conduct good faith
negotiations to establish a mutually agreeable substitute method of
determining the rate at which interest will accrue under the Revolving
Credit
10
16
Loans during such period of suspension. Bank shall be under no
obligation to make further advances under the Revolving Credit Loan
during such period of suspension. If Bank and Borrower have not reached
an agreement with respect to such substitute method of determining
interest by the end of such negotiation period, Borrower shall, at its
option, (i) prepay the entire unpaid principal balance and all accrued
but unpaid interest then outstanding under the Revolving Credit Loan
within fifteen (15) days after the termination of such negotiations as
evidenced by Bank's written statement delivered to Borrower indicating
the failure of such negotiations, or (ii) elect to convert the entire
outstanding principal balance under the Revolving Credit Loan to the
Term Loan in strict accordance with Section 2.02 and provided the
conditions specified in said Section 2.02 are satisfied and Borrower
gives Bank five (5) days' prior written notice thereof, which
conversion shall be effective the fifteenth (15th) day following the
termination of negotiations. For purposes of such prepayment, interest
shall accrue under the Revolving Credit Loan for any period during
which the LIBOR Rate basis was suspended at the interest rate per annum
required to be paid hereunder on the day immediately prior to the day
such suspension began continuing until agreement is reached as to a
substitute method of determining the interest rate or the principal is
paid in full. The suspension shall not affect the rate applicable to
the Term Loan during the suspension period, which shall remain the rate
set forth in the Note.
(d) ILLEGALITY. Notwithstanding any other provision herein, if
Bank determines that any applicable law, rule, or regulation, or any
change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank, or comparable
agency charged with the interpretation or administration thereof, or
compliance by Bank with any request or directive (whether or not having
the force of law) of any such authority, central bank, or comparable
agency, shall make it unlawful or impossible for Bank to maintain or
fund the Revolving Credit Loan based upon the Reserve Adjusted LIBOR
Rate and Bank so advises Borrower of such fact, until other
circumstances giving rise to such suspension no longer exist, the LIBOR
Rate shall be suspended as the basis for establishing the interest rate
at which interest shall accrue under the Revolving Credit Loan.
Commencing on the day Borrower receives advice of such suspension, and
continuing for a maximum of ten (10) Domestic Business Days thereafter,
Bank and Borrower shall conduct good faith negotiations to establish a
mutually agreeable substitute method of determining the rate at which
interest shall accrue under the Revolving Credit Loan during such
period of suspension. Bank shall be under no obligation to make further
advances of Revolving Credit Loan during such period of suspension. If
Bank and Borrower have not reached an agreement with respect to such
substitute method of determining interest by the end of such
negotiation period, Borrower shall, at its option, (i) prepay the
entire unpaid principal balance and all accrued but unpaid interest
then outstanding under the Revolving Credit Loan within fifteen (15)
days after the termination of such negotiations as evidenced by Bank's
written statement delivered to Borrower indicating the failure of such
negotiations, or (ii) elect to convert the entire outstanding principal
balance under the Revolving Credit Loan to the Term Loan in strict
accordance with Section 2.02 and provided the conditions specified in
said 2.02 are
11
17
satisfied and Borrower gives Bank five (5) days' prior written notice
thereof, which conversion shall be effective the fifteenth (15th) day
following the termination of negotiations. For purposes of such
prepayment, interest shall accrue under the Revolving Credit Loan for
any period during which the LIBOR Rate basis was suspended at the
interest rate per annum required to be paid hereunder on the day
immediately prior to the day such suspension began and continuing until
agreement is reached as to a substitute method of determining the
interest rate or the principal is paid in full.
(e) RISK-BASED CAPITAL. In the event that the (i) introduction
of or any change in the judicial, administrative, or other governmental
interpretation of any law or regulation or (ii) compliance by Bank or
any corporation controlling Bank with any guideline or request from any
central bank or other governmental authority (whether or not having the
force of law), has the effect of requiring an increase in the amount of
capital required or expected to be maintained by Bank or any
corporation controlling Bank, and Bank determines that such increase is
based upon its obligations hereunder, and other similar obligations,
Borrower shall pay to Bank such additional amount as shall be certified
by Bank to be the amount allocable to Bank's obligations to the
Borrower hereunder. Provided, however, with respect to the occurrence
of any increase in premiums payable by Bank to the Federal Deposit
Insurance Corporation which is the direct result of an unsound practice
or procedure of Bank in the opinion of said agency, said increase alone
shall not serve as the basis of the requirement of Bank hereunder that
Borrower pay any additional amounts and Bank must have an independent
basis for assessing such additional amount. Bank will notify Borrower
of any event occurring after the date hereof that will entitle Bank to
compensation pursuant to this subsection as promptly as practicable
after it obtains knowledge thereof and determines to request such
compensation. Determination by Bank for purposes of this subsection of
the effect of any increase in the amount of capital required to be
maintained by Bank and of the amount allocable to Bank's obligations to
Borrower hereunder shall be conclusive, provided that such
determinations are made on a reasonable basis. Notwithstanding anything
to the contrary contained in this Agreement or any other Loan Document,
Borrower's obligations to pay increased interest rates and other fees
and charges under this Section 2.06 are limited to the extent that such
obligations do not arise or are effected due to acts or omissions of
Bank resulting from gross negligence, willful or unlawful conduct.
SECTION 2.07. METHOD OF PAYMENT. Borrower shall make each payment under
this Agreement and under the Note not later than 2:00 p.m., Memphis, Tennessee,
time, on the date when due in lawful money of the United States to Bank at the
Head Office in immediately available funds. Borrower hereby authorizes Bank, if
and to the extent payment is not made when due under this Agreement or under the
Note, to charge from time to time against any account of Borrower with Bank
containing unrestricted funds any amount so due. Whenever any payment to be made
under this Agreement or under the Note shall be stated to be due on a Saturday,
Sunday, or a public holiday, or Banking holiday under the laws of the state in
which the Head Office is located, such payment shall be made on the next
succeeding Domestic Business Day, and such extension of time shall in such case
be included in the computation of the payment of interest.
12
18
SECTION 2.08. USE OF LOAN PROCEEDS. Advances under the Revolving Credit
Loan shall be used by Borrower for the following purposes only:
(a) Working Capital. Working capital needs including, without
limitation, the payment of dividends in the ordinary course of
operations (and advances to RFSP for its working capital
needs), such advances for working capital needs not to exceed
the aggregate sum of Five Million and No/100 Dollars
($5,000,000.00) outstanding at any one time;
(b) Acquisition. Acquisition of Additional Hotel Properties by
RFSP or Borrower (provided however, no portion of the Loans
shall be used for international hotel acquisitions);
(c) Development. Development of Additional Hotel Properties, such
advances for ----------- Development not to exceed the
aggregate sum of Thirty-Five Million and No/100 Dollars
($35,000,000.00) outstanding at any one time, provided
however, that Bank shall be under no obligation to allow
Advances for Development unless and until Bank deems itself
fully secured by enough Hotel Properties which have been
accepted into the Collateral Pool in order to maintain,
including the Advance requested for any such Development
purpose, the proper Loan to Value Ratio required in Section
2.10 of this Agreement.
In the event that the acquisition of any Additional Hotel
Property shall be funded with proceeds from the Revolving
Credit Loan, Bank shall have received at least thirty (30)
days prior notice if such Additional Hotel Property is to be
added to the Collateral Pool upon the acquisition thereof
pursuant to the terms of this Agreement. Borrower shall have
full responsibility to deliver or have delivered to Bank those
items specified in subsections 2.09 (a) - (r) below in the
form required, and to otherwise comply with all other
requirements set forth therein on or before the date of
closing of any acquisition, or the date Borrower shall
otherwise require such proceeds for the acquisition of any
Additional Hotel Properties. Notwithstanding the foregoing, in
the event Borrower shall request an advance under the
Revolving Credit Loan in accordance with Section 2.03 above
and such request is within the limits of the Commitment
pursuant to Section 2.01 above and Borrower otherwise complies
with the provisions of Article III, said advance under the
Revolving Credit Loan may be used by Borrower to acquire an
Additional Hotel Property with respect to which all items
specified in Section 2.09 have not been satisfied at the time
of the advance thereunder in the event that Borrower shall not
at the time of such advance seek to have such Additional Hotel
Property made a part of the Collateral Pool. If Borrower shall
thereafter seek to have such Additional Hotel Property
approved for the Collateral Pool, it shall satisfy in full the
requirements of Section 2.09 with respect thereto, provided,
however, that all Additional Hotel Properties to be added to
the Collateral Pool must be added within sixty (60) days of
acquisition or Bank shall be under no obligation to
13
19
thereafter consider accepting any such Additional Hotel
Properties into the Collateral Pool.
SECTION 2.09. COLLATERAL POOL. Borrower and RFSP shall provide Bank
with enough Hotel Properties acceptable to Bank for inclusion in the Collateral
Pool which are sufficient to maintain, at all times relevant hereto, a Value of
the Collateral Pool Properties equal to or greater than One Hundred Fifty-One
Million, Five Hundred Thousand and No/100 Dollars ($151,500,000.00). All such
Hotel Properties shall be deemed a part of the Collateral Pool for purposes of
Section 2.01 only after Bank has received, with respect to each such Hotel
Property, each of the following documents within the time limits set forth in
Section 2.08 above, which documents shall be in all respects acceptable in form
and content to Bank and its counsel:
(a) Mortgages. A Mortgage in recordable form duly executed by
Borrower and RFSP in form and content acceptable to Bank and its
counsel and giving Bank a first lien on said Hotel Property subject
only to those easements or encumbrances consented to in writing by Bank
("Permitted Exceptions").
(b) Security Agreements. Security Agreements duly executed by
Borrower and RFSP, as applicable, granting to Bank a first security
interest in all furniture, furnishings, equipment, fixtures, supplies,
inventory, accounts, licenses, franchise agreements, general
intangibles and other personal property of every kind and description
used in connection with the ownership, operation and or management of
each such Hotel Property, together with (i) acknowledgment copies of
Financing Statements (UCC-1) duly filed under the Uniform Commercial
Code of all jurisdictions necessary or, in the opinion of Bank,
desirable to perfect the security interest created by the Security
Agreement; and (ii) certified copies of requests for information (Form
UCC-11) identifying all of the financing statements on file with
respect to Borrower, RFSP and RFS, as applicable, indicating that no
party claims an interest in any of the Collateral. At Bank's option,
the Security Agreements may be contained in the Mortgages.
(c) Evidence of Due Authorization of Security Documents and
Corporate or Partnership Good Standing. Certified copies of all
partnership or corporate action, as applicable, taken by each party
executing a Mortgage, Security Agreement, Assignments of Rents and
Leases, Subordinations and/or Assignments of Leases and Management
Agreements, UCC-1 financing statement, and all other instruments,
certificates or agreements required by Bank (the "Security Documents"),
including resolutions of its Board of Directors or appropriate
partnership action, as applicable, authorizing the execution, delivery
and performance of the Security Documents and evidence of the good
standing of each party to each of the Security Documents under their
respective states organization and any other state Bank deems necessary
or appropriate.
14
20
(d) Assignments of Rents and Leases. An Assignment of Rents
and Leases with respect to each such Hotel Property duly executed by
Borrower and RFSP, in form and content acceptable to Bank and its
counsel.
(e) Franchise Agreements. Copies of the franchise agreement
under which each such Hotel Property will be operated, a copy of the
franchisor's most recent inspection report, and, unless waived by Bank,
a letter from franchisor agreeing to give notices to Bank of any
defaults by the franchisee.
(f) Leases. Copies of each lease of each such Hotel Property
(collectively, the "Leases"), which Leases shall be acceptable to Bank,
it being understood that the form of lease used for the Initial Hotels
is acceptable to Bank.
(g) Subordinations. Subordination agreement(s) duly executed
by the lessees under the Leases subordinating the Leases to the
Mortgages.
(h) Management Agreements. Copy of any management agreement
for any Hotel Property subject to a management agreement providing for
management by a company satisfactory to Bank, and an assignment to Bank
of any such management agreement, as well as the subordination thereof
and management fees thereunder to the Mortgage for the subject Hotel
Property, and the consent of the manager thereto, all in form and
content acceptable to Bank and its counsel.
(i) Surveys. An ALTA as-built survey of each such Hotel
Property from a licensed surveyor acceptable to Bank, Bank's counsel
and the title insurance company. The survey must be sufficient in form
and content so that the title insurance company will issue an ALTA
mortgagee's title insurance policy in which the standard boundary,
encroachment and survey exceptions have been deleted. The survey must
be dated within ninety (90) days prior to the issuance of the title
policy and be certified to Bank and the title insurance company in form
acceptable to Bank. The survey must show all easements or restrictions
reflected as exceptions in the title insurance policies and must not
show any matters affecting a particular property which is objectionable
to Bank. The survey shall indicate whether any part of the particular
Hotel Property is located within a flood plan area.
(j) Title Insurance Policies. A mortgagee title insurance
policy with respect to each such Hotel Property in an amount
satisfactory to Bank, naming Bank as the insured party, showing no
indebtedness against such Hotel Property except for the Mortgage and
reflecting fee simple title to the Hotel Property in RFSP, subject to
no exceptions except for Permitted Exceptions. Such policy shall
contain affirmative coverage as to survey matters, and such other
affirmative coverage or endorsements as may be reasonably required by
Bank.
15
21
(k) Environmental Audits. A Phase I environmental audit for
each such Hotel Property, or higher, if reasonably required by Bank,
performed and issued by a nationally recognized environmental audit
firms, or as otherwise mutually agreed upon by Borrower and Bank,
addressed to Bank as a party entitled to rely thereon, dated not more
than six (6) months prior to the date the applicable Hotel Property is
accepted into the Collateral Pool, reflecting no indication of adverse
environmental conditions at the subject Hotel Property.
(l) Physical Inspections. Unless waived by Bank, report of an
independent inspecting engineering firm satisfactory to Bank as to the
physical condition of each such Hotel Property reflecting the condition
of such Hotel Property acceptable to Bank and the independent
satisfaction of Bank with the physical condition of the Hotel Property
pursuant to the on-site inspection of officers to Bank, for which
inspections such officers shall be permitted access to the Hotel
Property during reasonable hours. All out of pocket expenses incurred
by Bank in connection with such inspections shall be payable on demand
by Borrower.
(m) Hazard Insurance. Certificate of insurance coverage for
each such Hotel Property of the type required to be carried as provided
in Section 5.05.
(n) Appraisals. An appraisal of each such Hotel Property in
form and content satisfactory to Bank prepared by an MAI appraiser
familiar with values of Hotel Properties in the area in which the
subject Hotel Property is located, or other appraiser satisfactory to
Bank in its discretion.
(o) Environmental Indemnity. An Environmental Indemnity
Agreement in form and content satisfactory to Bank and its counsel,
executed by Borrower and RFSP, as applicable, with respect to each such
Hotel Property.
(p) Opinion of Counsel for Borrower and RFSP. Favorable
opinions of counsel for Borrower and RFSP as to the existence and
authority of each such entity and the enforceability against such
entity of the Security Documents, as applicable, and all other
documents to be delivered by such entities and, with respect to RFSP,
specifically opining as to the existence and sufficiency of
consideration for the Security Documents to be signed by it, each such
opinion letter to be in form and content acceptable to Bank, and
opining as to such other matters as Bank may request.
(q) Independent Market Study. An independent market study
acceptable to Bank on each such Hotel Property.
(r) Other Documents. Such other approvals, opinions, or
documents as Bank may request.
16
22
If at any time Bank reasonably determines, in its sole discretion, that
a Hotel Property should be removed from the Collateral Pool, whether due to
environmental concerns which have changed or become known since the date of
inclusion in the Collateral Pool, casualty or otherwise, Bank shall so notify
Borrower in writing and such Hotel Property shall thereafter no longer be
considered part of the Collateral Pool, nor included in the calculation of the
Borrowing Base. As promptly as possible thereafter, Borrower or RFSP, as the
case may be, shall pledge to Bank another unencumbered Hotel Property proposed
by Borrower and acceptable to Bank in substitution thereof and in accordance
with this Section 2.09. It is understood and agreed that at any time it becomes
necessary pursuant to the terms hereof to pledge a Hotel Property to Bank for
inclusion in the Collateral Pool, Bank shall initially consider any Hotel
Property proposed by Borrower, but if Borrower does not propose a Hotel Property
acceptable to Bank, Bank shall be allowed to choose from all unencumbered Hotel
Properties not then included in the Collateral Pool, and Borrower and RFSP shall
provide to Bank all such information and documents on such Hotel Properties as
Bank may reasonably request to enable Bank to choose the Hotel Properties
necessary to be pledged to Bank pursuant to the terms hereof.
SECTION 2.10. ADJUSTMENTS TO COLLATERAL POOL VALUATION.
(a) Appraisals. Bank may require Borrower to furnish Bank
updated appraisals of each Collateral Pool Property bi-annually, or
more often as Bank may from time to time require in order to assist
Bank in determining the present Loan to Value Ratio (hereinafter
referred to as "LTV Ratio"). All such appraisals shall comply in all
respects with the requirements of subsection 2.09(n) above.
(b) Mandatory Adjustments. In the event that at any time
during the term hereof the LTV Ratio exceeds The Borrowing Base of
thirty three percent (33%), Borrower shall within thirty (30) days
following notification from Bank: (i) prepay such amount of the Loans
as may be necessary to reduce said ratio on the date of payment to
thirty three percent (33%) or less, or (ii) pledge additional
collateral acceptable to Bank with an appraised value sufficient to
reduce the LTV Ratio to thirty three percent (33%) or less.
(c) Adjustments for Franchise Cancellations. In no event shall
Borrower be entitled hereunder to borrow amounts which will increase
the LTV Ratio to greater than thirty three percent (33%), nor shall the
aggregate sum outstanding at any time under the Loans exceed Fifty
Million and no/100 Dollars ($50,000,000.00). Furthermore, the Value of
any Collateral Pool Property whose operating franchise license is
cancelled shall be immediately deducted from the value of the
Collateral Pool until such time as a national franchise reasonably
acceptable to Bank is obtained with respect to such property and a new
appraisal is obtained reflecting the same. In the interim, Bank shall
have the right to deliver the notice set forth in subsection (b) above,
in which event said subsection (b) shall be applicable in full. For
purposes of the computation of the LTV Ratio, the Value of the
Collateral Pool Property with respect to which such franchise is
canceled shall be deemed $0.
17
23
(d) Pre-Approvals. Borrower may from time to time submit
information to Bank concerning hotels to be purchased by Borrower or
RFSP which are not to be purchased with proceeds of the Revolving
Credit Loan, such submission to be for the purpose of pre-approving
such Hotel Properties for satisfaction of all requirements set forth in
Section 2.09 and inclusion in the Collateral Pool at the option of
Borrower, subject to all requirements and provisions herein relating to
the purchase of Additional Hotel Properties for inclusion in the
Collateral Pool.
SECTION 2.11. SALE OF HOTEL PROPERTIES. Upon the written request of
Borrower, Bank shall release from the liens of any Mortgages such Hotel
Properties as Borrower may sell from time to time, provided that the LTV Ratio
will not exceed thirty three percent (33%) after any requested releases of any
Collateral Pool Properties.
SECTION 2.12. FEES. In consideration of Bank's Commitment to advance
funds under the Revolving Credit Loan, Borrower agrees to pay to Bank the
following annual fees:
(a) Commitment Fee. A commitment fee equal to one-quarter
percent (.25%) of the maximum amount of the Commitment, determined
without regard to the Collateral Pool valuation limitation (the
"Maximum Committed Amount"), such fee to be paid annually upon the
anniversary date of the execution of the First Loan Agreement; and
(b) Agent's Fee. An agent's fee equal to one-quarter percent
(.25%) of the maximum amount of the Commitment, determined without
regard to the Maximum Committed Amount, such fee to be paid annually
upon the anniversary date of the execution of the First Loan Agreement.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. INTENTIONALLY OMITTED.
SECTION 3.02. CONDITIONS PRECEDENT TO ADVANCES UNDER THE REVOLVING
CREDIT LOAN. The obligation of Bank or the Participants to make advances under
the Revolving Credit Loan is subject to the conditions precedent that on the
date of each advance under the Revolving Credit Loan:
(a) The following statements shall be true and Bank shall have
received a certificate signed by a duly authorized officer of Borrower
dated the date of each advance under the Revolving Credit Loan, stating
that:
18
24
(i) The representations and warranties contained in
Article IV of this Agreement are correct on and as of the date
of such advance as though made on and as of such date;
(ii) No Default or Event of Default has occurred and
is continuing, or would result from such advance;
(iii) There has been no material adverse change in
the financial condition of Borrower or RFSP since the date of
the financial statements, if any, delivered to Bank pursuant
to Section 5.08; and
(iv) The principal amount outstanding under the
Revolving Credit Loan, when aggregated with the principal
amount of the advance requested, shall not exceed the limits
of the Commitment pursuant to Section 2.01 above.
(b) Bank shall have received such other approvals, opinions,
or documents as Bank may reasonably request.
SECTION 3.03. CONDITIONS PRECEDENT TO THE TERM LOAN. The obligation of
Bank to make the Term Loan shall be subject to the condition precedent that Bank
shall have received on or before the day of the Term Loan all of the documents
required by Section 3.02 and each of the following, in form and substance
satisfactory to Bank and its counsel:
(a) Note. The Note duly executed by Borrower, or any
replacement note requested by bank;
(b) Opinion of counsel for Borrower and RFSP. A favorable
opinion of counsel for Borrower and RFSP dated the date of the Term
Loan, in form and content acceptable to Bank;
(c) Officer's certificate, etc. The following statements shall
be true and Bank shall have received a certificate signed by a duly
authorized officer of Borrower dated the date of the Term Loan stating
that:
(i) The representations and warranties contained in
Article IV of this Agreement are correct on and as of the date
of the Term Loan as though made on and as of such date; and
(ii) No Default or Event of Default has occurred and
is continuing, or would result from the Term Loan.
(d) Modifications of Mortgages/Title Endorsements. If
reasonably required by Bank, modification agreements with respect to
the Mortgages on the Hotel Properties pledged as collateral for the
Loans and endorsements to the policies of mortgagee title
19
25
insurance reflecting the conversion of the Revolving Credit Loan to the
Term Loan and showing no adverse title matters as to any such Hotel
Property; and
(e) Additional Documentation. Bank shall have received such
other approvals, opinions, or documents as Bank may request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower and/or RFSP, as the case may be or the context would require, represent
and warrant to Bank that:
SECTION 4.01. INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION OF
BORROWER. Borrower is a corporation duly incorporated, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation; has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged; and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required.
SECTION 4.02. CORPORATE POWER AND AUTHORITY OF BORROWER. The execution,
delivery, and performance by Borrower of the Loan Documents have been duly
authorized by all necessary corporate action and do not and will not (1) require
any consent or approval of the stockholders of Borrower; (2) contravene any
provision of Borrower's charter or bylaws; (3) violate any provision of any law,
rule, regulation (including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination, or award presently in effect having applicability to
Borrower; (4) result in a breach of or constitute a default under (whether with
the giving of notice, passage of time, or both) any indenture or loan or credit
agreement or any other agreement, lease, or instrument to which Borrower is a
party or by which it is or its properties may be bound or affected; (5) result
in, or require, the creation or imposition of any lien, upon or with respect to
any of the properties now owned or hereafter acquired by Borrower; or (6) cause
Borrower to be in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination, or award or any such indenture,
agreement, lease, or instrument.
SECTION 4.03. EXISTENCE AND DUE QUALIFICATION OF RFSP. RFSP is validly
existing and in good standing under the laws of the State of Tennessee; has the
power and authority to own its assets and to transact the business in which it
is now engaged or proposed to be engaged in; and is duly qualified and in good
standing under the laws of each other jurisdiction in which such qualification
is required.
SECTION 4.04. POWER AND AUTHORITY OF RFSP. The execution, delivery and
performance by RFSP of any of the Loan Documents to which it is a party, have
been duly authorized by all necessary partnership action, and do not and will
not (1) require any consent or approval of any
20
26
limited partners; (2) contravene any partnership agreement; (3) violate any
provision of any law, rule, regulation (including, without limitation,
Regulation U of the Board of Governors of the Federal Reserve System) order,
writ, judgment, injunction, decree, determination, or award presently in effect
having applicability to RFSP ; (4) result in a breach of or constitute a default
under (whether with the giving of notice, passage of time, or both) any
indenture or loan or credit agreement or any other agreement, lease, or
instrument to which is a party or by which its properties may be bound or
affected; (5) result in or require the creation of imposition of any Lien upon
or with respect to any of the properties now owned or hereafter acquired by it;
or (6) cause either RFSP to be in default under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination, or award for any such
indenture, agreement, lease, or instrument.
SECTION 4.05. LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be,
legal, valid, and binding obligations of Borrower, or of RFSP, as applicable,
enforceable in accordance with their respective terms, except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally.
SECTION 4.06. LABOR DISPUTES AND ACTS OF GOD. Neither the respective
businesses, nor the respective properties, of Borrower or RFSP are affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy, or other
casualty (whether or not covered by insurance), materially and adversely
affecting such businesses or properties or the operations of Borrower or RFSP.
SECTION 4.07. OTHER AGREEMENTS. Neither Borrower nor RFSP is a party to
any indenture, loan, or credit agreement, or to any lease, or other agreement or
instrument, or subject to any charter or corporate restriction, or partnership
restriction, which could have a material adverse effect on the business
properties, assets, operations, or conditions, financial or otherwise, of
Borrower or of RFSP, or the ability of Borrower or of RFSP to carry out their
respective obligations under the Loan Documents to which they are a party.
Neither Borrower nor RFSP is in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which any
of them is a party, including, without limitation, any of the Easements, or the
Leases.
SECTION 4.08. LITIGATION. There is no pending or threatened action or
proceeding against or affecting Borrower or RFSP before any court, governmental
agency, or arbitrator, which may, in any one case or in the aggregate,
materially adversely affect the respective financial conditions, operations,
properties, or businesses of Borrower or RFSP or the ability of Borrower or RFSP
to perform their respective obligations under the Loan Documents to which they
are a party.
SECTION 4.09. NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. Borrower
and RFSP have satisfied all judgments, and neither Borrower nor RFSP is in
default with respect to any judgment, writ, injunction, decree, rule, or
regulation of any court, arbitrator, or federal,
21
27
state, municipal, or other government authority, commission, board, bureau,
agency, or instrumentality, domestic or foreign.
SECTION 4.10. OWNERSHIP AND LIENS. Borrower and RFSP have title to all
of their respective properties and assets, real and personal, and none of the
properties and assets owned by Borrower or RFSP is subject to any Lien except as
provided in Section 6.01. RFSP has unencumbered fee simple title to all of the
Initial Hotels.
SECTION 4.11. OPERATION OF BUSINESS. Except as may have been disclosed
in writing to, and approved by, Bank, Borrower and RFSP have made application
for or otherwise possess all licenses, permits, franchises, patents, copyrights,
trademarks, and trade names, or rights thereto, to conduct their respective
businesses substantially as now conducted and as presently proposed to be
conducted, and neither Borrower nor RFSP are in violation of any of the
foregoing or any valid rights of others with respect to any of the foregoing.
SECTION 4.12. TAXES. Borrower and RFSP have filed all tax returns
(federal, state, and local) required to be filed and have paid all taxes,
assessments, and governmental charges and levies shown or required to be shown
thereon to be due, including interest and penalties, and have paid all real
estate and personal property taxes due to date with respect to each Hotel
Property and their other assets.
SECTION 4.13. DEBT. Borrower has provided to Bank a complete and
correct list of all credit agreements, indentures, purchase agreements,
guaranties, Capital Leases, and other investments, agreements, and arrangements
presently in effect providing for or relating to extensions of credit (including
agreements and arrangement for the issuance of letters of credit or for
acceptance financing) in respect of which Borrower or RFSP is in any manner
directly or contingently obligated; and the maximum principal or face amounts of
the credits in question, which are outstanding and which can be outstanding,
have been correctly stated, and all liens of any nature given or agreed to be
given as security therefor have been correctly described or identified to Bank.
SECTION 4.14. ENVIRONMENTAL COMPLIANCE. The Hotel Properties are not
currently used in any manner, and, to the best of the knowledge of Borrower and
RFSP, no prior use by Borrower or RFSP, or any prior owner or tenant has
occurred, which violates applicable Environmental Laws; neither Borrower nor
RFSP, nor any tenant has received any notice from a governmental agency of a
violation of such laws. If any such notice is received, Borrower shall
immediately notify Bank. Borrower will not use or permit to be used any Hotel
Property in a manner which would violate Environmental Laws.
SECTION 4.15. ADA COMPLIANCE. To the best of Borrower's and RFSP's
respective knowledges, the Hotel Properties comply with all applicable
provisions of the Americans With Disabilities Act which would result in material
liability if said Hotel Properties were found to be in non-compliance.
22
28
SECTION 4.16. OPERATIONS; ROOM RENTS. The Hotel Properties have been
operated in a prudent manner consistent with other hotels of similar character
and location, and neither Borrower nor RFSP have diverted or transferred any
motel receipts or room rents for any use inconsistent with such operations
performed in the ordinary course of operating the Hotel Properties.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note shall remain unpaid or Bank shall have any
Commitment under this Agreement, Borrower and RFSP covenant as follows:
SECTION 5.01. MAINTENANCE OF EXISTENCE. Borrower will preserve and
maintain its corporate existence and good standing in the jurisdiction of its
incorporation, qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is required, and retain its
qualification as a REIT under federal income tax regulations; ; and RFSP will
maintain its existence as a limited partnership and will remain qualified in
each jurisdiction in which qualification is required.
SECTION 5.02. MAINTENANCE OF RECORDS. Borrower and RFSP will keep
adequate records and books of account in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all financial
transactions.
SECTION 5.03. MAINTENANCE OF PROPERTIES. Borrower and RFSP will
maintain, keep, and preserve all of their respective properties (tangible and
intangible) necessary or useful in the proper conduct of their respective
businesses in good working order and condition, ordinary wear and tear and
insured casualty damage or taking through the power of eminent domain excepted.
SECTION 5.04. CONDUCT OF BUSINESS. Borrower and RFSP will continue to
engage in an efficient and economical manner in a business of the same general
type as conducted by them on the date of this Agreement.
SECTION 5.05. MAINTENANCE OF INSURANCE. Borrower and RFSP will maintain
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated. RFSP
will maintain with respect to each Hotel Property fire and extended coverage
insurance in form and content acceptable to Bank, including vandalism and
malicious mischief coverage, in an amount not less than the full replacement
cost of the improvements. The policies must contain coverage for damage from
wind and earthquake and be issued by a company which is approved by the
applicable governmental entity overseeing the insurance industry in the state
where the Hotel Property is located, and which is acceptable to Bank. If at any
time during the term hereof it is determined that any Hotel Property is located
in a "special flood hazard area"
23
29
requiring flood insurance under the Flood Disaster Protection Act of 1973, RFSP
shall provide satisfactory flood insurance with respect to such property. All
policies of insurance required to be maintained hereunder shall name Bank as
loss payee under the standard New York mortgagee clause or the equivalent
thereof acceptable to Bank.
SECTION 5.06. COMPLIANCE WITH LAWS. Borrower and RFSP will comply in
all material respects with all applicable laws, rules, regulations, and orders,
such compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments, and governmental charges imposed upon them or
upon their respective properties.
SECTION 5.07. RIGHT OF INSPECTION. At any reasonable time and from time
to time, Borrower and RFSP will permit Bank or any agent or representative
thereof to examine and make copies of and abstracts from their records and books
of account of, and visit their properties and to discuss their affairs,
finances, and accounts with any of their respective officers and directors and
their independent accountants.
SECTION 5.08. REPORTING REQUIREMENTS. Borrower and RFSP shall furnish
to Bank:
(a) Quarterly financial statements. No later than twenty-five
(25) days after the end of each quarter, or more frequently if Bank
shall reasonably request, but in any event, no later than one (1) day
prior to the filing of such information with the Securities and
Exchange Commission, after the end of each of the first three quarters
of each fiscal year, balance sheets as of the end of such quarter,
statements of income and retained earnings for the portion of the
fiscal year ending with the end of such quarter, a statement of change
in cash flow for the portion of the fiscal year ending with the last
day of such quarter, a properly completed Debt Coverage Worksheet, plus
all supporting documentation, covering the twelve-month period ending
with the last day of such quarter, statements of operation for all of
the Hotel Properties and a combined statement of operations for all
Hotel Properties for such quarter, and detailed information regarding
occupancy figures and average daily room rates for all of the Hotel
Properties for such quarter in form and content acceptable to Bank, as
same may be modified by Bank from time to time, all in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the previous fiscal year and all
prepared in accordance with GAAP consistently applied and certified by
their chief financial officers (subject to year-end adjustments);
(b) Annual financial statements. As soon as available and in
any event within ninety (90) days after the end of each fiscal year,
balance sheets as of the end of their respective fiscal years,
statements of income and retained earnings as of the end of such fiscal
years, statements of changes in cash flows for such fiscal years, and,
with respect to each of the foregoing, accompanied by an opinion
thereon acceptable to Bank by Coopers & Xxxxxxx or other independent
certified public accountants acceptable to Bank, a properly completed
Debt Coverage Worksheet, covering such fiscal year, statements of
operation for all of the Hotel Properties and a combined statement of
operations for such
24
30
fiscal year (both including an itemized account of gross income and
expenses), and detailed information regarding occupancy figures and
average daily room rates for all of the Hotel Properties for such
fiscal year, and detailed information regarding occupancy figures and
average daily room rates for all of the Hotel Properties for such
fiscal year, all of the foregoing to be in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the prior fiscal year and all prepared
in accordance with GAAP consistently applied and certified as correct
by their chief financial officers;
(c) Management letters. Promptly upon receipt thereof, copies
of any reports submitted by independent certified public accountants in
connection with any audits of their financial statements made by such
accountants;
(d) Certificate of no Default. Within ninety (90) days after
the end of each of the quarters of each of their respective fiscal
years, certificates of their chief financial officers certifying that
to the best of their knowledge no Default or Event of Default has
occurred and is continuing, or if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and
the action which is proposed to be taken with respect thereto;
(e) Notice of litigation. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any court
or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting Borrower or RFSP,
which, if determined adversely, could have a material adverse effect on
their respective financial conditions, properties, or operations;
(f) Notice of Defaults and Events of Default. As soon as
possible and in any event within ten (10) days after the occurrence of
each Default or Event of Default, a written notice setting forth the
details of such Default or Event of Default and the action which is
proposed to be taken with respect thereto;
(g) Reports to other creditors. Promptly after the furnishing
thereof, copies of any financial statement or report furnished to any
other party pursuant to the terms of any indenture, loan, or credit or
similar agreement and not otherwise required to be furnished to Bank
pursuant to any other clause of this Section 5.08;
(h) Proxy statements, etc. Promptly after the sending or
filing thereof, copies of all proxy statements, financial statements,
and reports which Borrower or RFSP sends to their respective
stockholders or partners, as applicable, and copies of all regular,
periodic, and special reports, and all registration statements which
Borrower or RFSP files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or with
any national securities exchange;
25
31
(i) Tax receipts. Copies of paid real estate ad valorem tax
receipts for all Hotel Properties prior to delinquency; and
(j) General information. Such other information respecting the
condition or operations, financial or otherwise, as Bank may from time
to time request.
SECTION 5.09. DEBT COVERAGE RATIOS.
(a) Debt Coverage Ratio (NOI). Borrower shall maintain a Debt
Coverage Ratio (NOI) on all of Borrower's Debt and Hotel
Properties, whether such Debt was incurred with Bank or any
other creditor, of at least 3.0:1 at all times during the term
hereof.
(b) Debt Coverage Ratio (CF). Borrower shall maintain a Debt
Coverage Ratio (CF) on just the Revolving Credit Loan and
Collateral Pool Properties of at least 2.25:1 at all times
during the term hereof, and must maintain a minimum level of
Operating Income from Collateral Pool Properties at all times
of at least $17,500,000.00.
(c) Debt Coverage Ratio (CFO). Borrower shall maintain a Debt
Coverage Ratio (CFO) on all of Borrower's Debt and Hotel
Properties, whether such Debt was incurred with Bank or any
other creditor, of at least 1.75:1 at all times during the
term hereof.
(d) Quarterly Calculations. The Debt Coverage Ratios shall be
calculated each quarter using a trailing twelve (12) month
rolling average using the NOI, CF, or CFO, as applicable, for
the immediately preceding twelve (12) month period. Borrower
shall prepay a portion of the Loans sufficient to achieve such
of the required Debt Coverage Ratios as are not in compliance
within thirty days following notification from Bank if any
such quarterly calculation shall result in a Debt Coverage
Ratio less than the minimums set forth above. Bank may refuse
any draw request made by Borrower if the result of the making
of the advance requested would be that the calculation of any
of the required Debt Coverage Ratios, using an Annual Debt
Service amount computed on the total principal which would be
outstanding after the advance of the draw requested, would
result in Borrower's failure to maintain any of the required
Debt Coverage Ratios. Borrower shall be allowed to borrow
additional funds at such time as Borrower can demonstrate that
it has sufficient net taxable income for the preceding four
calendar quarters to provide the required coverage for all
Debt Coverage Ratios not in compliance.
(e) Revolving Credit Loan Calculation. With respect to the
calculation of the Debt Coverage Ratio relating to the
Revolving Credit Loan, the Annual Debt Service on Borrower's
outstanding Debt thereunder shall be determined as though
26
32
such Debt was being amortized to arrive at a monthly
installment amount using a ten (10) year term and an assumed
interest rate equal to the greater of (i) 1.75%, in excess of
the Libor Rate, or (ii) the five (5) year U.S. Treasury Note
yield, plus 2.5%.
SECTION 5.10. RESERVE FOR ROOM RENOVATIONS. Borrower shall maintain a
reserve account at Bank, into which Borrower shall deposit, or shall have
deposited, as the case may be, commencing with the calendar quarter beginning
July 1, 1994, the sum of $75.00 per room for all Hotel Properties pledged as
collateral for the Loans followed by deposits on or before the first day of each
calendar quarter thereafter during the term hereof (January 1, April 1, July 1,
and October 1). Borrower or RFSP may withdraw funds from said account at any
time prior to an Event of Default without restriction. Borrower or RFSP shall
furnish Bank an accounting of all sums withdrawn from such account at the end of
each calendar quarter (March 31, June 30, September 30 and December 31).
SECTION 5.11. MAINTENANCE OF FRANCHISES. Borrower and RFSP, as
applicable, shall comply with the requirements imposed on any of them as
franchisee under all franchise agreements held for operation of the Initial
Hotels, and any Additional Hotel Properties acquired with proceeds of the
Revolving Credit Loan. Copies of any notices of default under said franchise
agreements and copies of any other material correspondence received from a
franchisor under such franchise agreements shall be given immediately to Bank.
SECTION 5.12. MINIMUM NET WORTH. Borrower shall maintain at all
applicable times, a minimum net worth in an amount equal to the net worth of
Borrower as reported to, and accepted by, Bank in Borrower's most recent fiscal
year-end audited financing statement, as such net worth may change from year to
year.
SECTION 5.13. OPERATIONS; ROOM RENTS. BORROWER AND RFSP shall ensure
that the operations of the Hotel Properties are conducted in a prudent manner
consistent with other hotels of similar character and location, and shall not
divert or transfer any receipts or room rents for any use inconsistent with such
operations performed in the ordinary course of operating the Hotel Properties.
SECTION 5.14. MINIMUM CASH FLOW. Borrower and RFSP shall maintain at
all times a Cash Flow amount which is equal to or greater than thirty-five
percent (35%) of the committed amount of the Revolving Credit Loan.
27
33
ARTICLE VI
NEGATIVE COVENANTS
So long as any Note shall remain unpaid or Bank shall have any
Commitment under this Agreement, Borrower and RFSP will comply with the
following negative covenants:
SECTION 6.01. LIENS. Borrower and RFSP will not create, incur, assume,
or suffer to exist, any lien upon with respect to any of their respective
properties, now owned or hereafter acquired, except:
(a) Liens in favor of Bank;
(b) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or, if due and payable, if they
are being contested in good faith by appropriate proceedings and for
which appropriate reserves are maintained;
(c) Liens imposed by law, such as mechanics' materialmen's,
landlords', warehousemen's, and carrier's Liens, and other similar
Liens, securing obligations incurred in the ordinary course of business
which are not past due for more than thirty (30) days or which are
being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established;
(d) Liens under workmen's compensation, unemployment
insurance, social security, or similar legislation;
(e) Liens, deposits, or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of
money), leases (permitted under the terms of this Agreement), public or
statutory obligations, surety, stay, appeal, indemnity, performance or
other similar bonds, or other similar obligations arising in the
ordinary course of business;
(f) Judgment and other similar liens arising in connection
with court proceedings, provided the execution or other enforcement of
such liens is effectively stayed and the claims secured thereby are
being actively contested in good faith and by appropriate proceedings;
(g) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with
the occupation, use, and enjoyment of their property or assets
encumbered thereby in the normal course of their respective businesses
or materially impair the value of their property subject thereto;
(h) Existing mortgage liens on any Hotel Properties securing
obligations assumed by Borrower or RFSP, provided, however, such Hotel
Properties shall not be
28
34
purchased with proceeds from the Revolving Credit Loan, nor pledged to
Bank as collateral for the Loans, nor be submitted for inclusion in the
Collateral Pool, unless Bank shall consent in its sole discretion after
request from Borrower. 28
SECTION 6.02. DEBT. Neither Borrower nor RFSP will create, incur,
assume, or suffer to exist any Debt, except:
(a) Debt of Borrower under this Agreement or the Note;
(b) Accounts payable to trade creditors, including without
limitation, amounts payable under service contracts, for goods or
services incurred in the ordinary course of business and paid within
the specified time, unless contested in good faith and by appropriate
proceedings;
(c) Debt assumed by Borrower or RFSP secured by any of the
Additional Hotel Properties, provided, however, that (i) such debt
assumed by Borrower or RFSP shall never exceed in the aggregate Twenty
Million and no/100 Dollars ($20,000,000.00), (ii) the total LTV Ratio
may not exceed thirty three percent (33%) after including the debt
assumed, if such Additional Hotel Properties were purchased with
proceeds from the Revolving Credit Loan (iii) such Additional Hotel
Properties shall not be included in the Collateral Pool, unless Bank
shall consent in its sole discretion, and (iv) Borrower will maintain
the required Debt Coverage Ratio after including the debt assumed.
SECTION 6.03. MERGERS, ETC. Neither Borrower nor RFSP will merge or
consolidate with, or sell, assign, lease, or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of
their assets (whether now owned or hereafter acquired) to any person, or acquire
all or substantially all of the assets or the business of any person, other than
acquisition of Hotel Properties by RFSP in the ordinary course of business.
SECTION 6.04. LEASES. Neither Borrower nor RFSP will create, incur,
assume, or suffer to exist any obligation as lessee for the rental or hire of
any real or personal property, except for non-Capital Leases incurred in the
ordinary course of business and for any Capital Leases of equipment necessary
for the operation of the Hotel Properties.
SECTION 6.05. SALE AND LEASEBACK. Neither Borrower nor RFSP will sell,
transfer, or otherwise dispose of any real or personal property to any Person
and thereafter directly or indirectly lease back the same or similar property.
SECTION 6.06. GUARANTIES, ETC. Neither Borrower nor RFSP will assume,
guarantee, endorse, or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, an agreement to purchase
any obligation, stock, assets, goods, or services, or to supply or advance any
funds, assets, goods, or services, or to maintain or cause such person to
maintain a minimum working capital or net worth, or otherwise to assure the
creditors of any
29
35
person against loss) for obligations of any person, except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.
SECTION 6.07. CONDITION OF HOTELS. Neither Borrower nor RFSP will
suffer to occur any material adverse change in the physical condition of any of
the Hotel Properties as determined in the sole but reasonable discretion of Bank
based on an appraisal or engineering report meeting
the requirements of Section 2.09(l) and (n), respectively, delivered to Bank as
required hereunder, other than losses from insured casualty or takings under the
power of eminent domain.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. EVENTS OF DEFAULT. If any of the following events
("Events of Default") shall occur:
(a) Borrower should fail to pay the principal of, or interest
on, the Note, or any amount of a commitment fee, within fifteen (15)
days following the date on which the same becomes due and payable;
(b) Any representation or warranty made or deemed made by
Borrower, RFSP or RFS in this Agreement, the Loan Documents or in any
certificate, document, opinion, or financial or other statement
furnished at any time under or in connection with any Loan Document
shall prove to have been incorrect in any material respect on or as of
the date made or deemed made;
(c) Borrower, RFSP or RFS shall fail to perform or observe any
term, covenant, or agreement contained in any Loan Document (other than
the Note) to which any of them is a party on their part to be performed
or observed, and such failure shall continue for a period of thirty
(30) days after notice to Borrower from Bank describing the nature of
the failure; provided that, if such failure is not susceptible of cure
within thirty (30) days, such party shall be allowed an additional
thirty (30) days to effect such cure provided it promptly begins
efforts to cure and thereafter diligently pursues such cure to
conclusion;
(d) Borrower or RFSP shall (i) fail to pay any indebtedness
for borrowed money (other than the Note), or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise); (ii) fail to perform or observe
any term, covenant, or condition on their parts 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 to perform or observe is to accelerate, or to permit
the acceleration after the giving of notice or passage of time, or
both, of the maturity of such indebtedness, whether or not such failure
to perform or observe shall be waived by the holder of such
indebtedness; or any such indebtedness shall
30
36
be declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment), prior to the stated
maturity thereof; or (iii) suffer a material adverse change in
condition (financial or otherwise);
(e) Each of Borrower or RFSP (i) shall generally not, or shall
be unable to, or shall admit in writing its inability to pay its debts
as such debts become due; or (ii) shall make an assignment for the
benefits of creditors, petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
Bankruptcy, reorganization, arrangements, readjustment of debt,
dissolution, or liquidation law or statute of any jurisdiction whether
now or hereafter in effect, or (iv) shall have any such petition or
application filed or any such proceeding commenced against it in which
an order for relief is entered or adjudication or appointment is made
and which remains undismissed for a period of sixty (60) days or more;
or (v) by any act or omission shall indicate its consent to, approval
of, or acquiescence in any such petition, application, or proceeding,
or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties; or (vi)
shall suffer any such custodianship, receivership, or trusteeship to
continue undischarged for a period of sixty (60) days or more;
(f) One or more judgments, decrees, or orders for the payment
of money in excess of One Million and No/100 Dollars ( 1,000,000.00) in
the aggregate shall be rendered against Borrower or RFSP, and such
judgments, decrees, or orders shall continue unsatisfied and in effect
for a period of twenty (20) consecutive days without being vacated,
discharged, satisfied, or stayed or bonded pending appeal;
(g) Any single Mortgage or Security Agreement shall at any
time after its execution and delivery and for any reason, other than
payment in full of the obligations so secured, cease: (i) to create a
valid and perfected first priority mortgage or security interest in and
to the property purported to be subject thereto; or (ii) to be in full
force and effect or shall be declared null and void, or the validity or
unenforceability thereof shall be contested by RFSP, or RFSP shall deny
it has any further liability or obligation under any such Mortgage or
Security Agreement, or RFSP shall fail to perform any of its
obligations under any such Mortgage or Security Agreement, if the
effect of removing the affected Collateral Pool Property from the
Collateral Pool would result in a violation of the required LTV Ratio;
(h) RFSP shall sell, transfer or convey any interest
whatsoever in any of the Hotel Properties or the personal property held
in connection therewith or the rental income therefrom (except for the
leases to RFS ), or enter into any termination of, or material
amendment to, any of the leases on any of the Collateral Pool
Properties, without the prior written consent of Bank, which consent
shall not be unreasonably withheld;
(i) Borrower ceases to qualify as a REIT under applicable law
entitled to all the benefits thereof, or RFSP ceases to be actively
involved in the ownership of
31
37
Borrower and the Hotel Properties, or if any further encumbrances,
whether by way of mortgage, deed of trust, financing lease, declaration
of trust, or other instrument is placed on any of the Hotel Properties
without the prior written consent of Bank;
(j) Borrower's charter is amended to allow a LTV Ratio higher
than thirty three percent (33%);
(k) Borrower or RFSP defaults under any other agreement to
which any is a party, which affects or relates to any of the Hotel
Properties, such agreements including, without limitation, any of the
Easements or the Leases;
then, and in any such event, Bank may, by notice to Borrower, (1) declare its
obligation to make advances under the Revolving Credit Loan terminated,
whereupon the same shall forthwith terminate, (2) declare the outstanding
principal balance owing under the Loans, all interest thereon, and all other
amounts payable under this Agreement, or otherwise to be forthwith due and
payable, whereupon the Loans, all such interest, and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly waived by
Borrower and RFSP , provided, however, that occurrence of any event specified in
subsection (e) above shall constitute an immediate and automatic termination of
Bank's obligation to make advances under the Revolving Credit Loan hereunder,
and all sums then outstanding shall become automatically and simultaneously due
and payable in full without any action on the part of Bank, (3) avail itself of
any and all remedies available to it in any of the Loan Documents, including,
without limitation, appointment of receivers for the Hotel Properties, (4) avail
itself of any and all other or additional remedies available by law.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC. No amendment, modification, termination,
or waiver of any provision of any Loan Document, nor consent to any departure by
Borrower, RFSP or RFS from any Loan Document to which any of them is a party,
shall in any event be effective unless the same shall be in writing and signed
by Bank, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 8.02. NOTICES, ETC. All notices and other communications
provided for under this Agreement and under the other Loan Documents shall be in
writing (including telegraphic communication) and mailed or telegraphed or
delivered, if to Borrower or RFSP, at Xxxxxxx, Xxxxxxxxx 00000, and if to Bank,
at its address at 0000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000, Attention:
Metropolitan Department; or, as to each party, at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 8.02. All such notices and
communications shall, when mailed or telegraphed, be effective when deposited in
the mails or delivered to the telegraph company,
32
38
respectively, addressed as aforesaid, except that notices to Bank pursuant to
the provisions of Article II shall not be effective until received by Bank.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of Bank to
exercise, and no delay in exercising, any right, power, or remedy under any Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Documents preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.
SECTION 8.04. SUCCESSOR AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that neither Borrower, RFSP nor RFS may assign or
transfer, any of their rights under any Loan Document to which they are a party
without the prior written consent of Bank.
SECTION 8.05. COSTS, EXPENSES, AND TAXES. Borrower and RFSP agree to
pay on demand all costs and expenses in connection with the preparation,
execution, delivery, filing, recording, and administration of any of the Loan
Documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for Bank, and local counsel who may be retained by said
counsel, with respect thereto and with respect to advising Bank as to its rights
and responsibilities under any of the Loan Documents, and all costs and
expenses, if any, in connection and the enforcement of any of the Loan
Documents. In addition, Borrower and RFSP shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing, and recording of any of the Loan Documents and the
other documents to be delivered under any such Loan Documents, and agrees to
save Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
Borrower and RFSP shall also pay all costs associated with the appraisals,
engineering inspections, inspections of Hotel Properties by officers or
employees of Bank, surveys and title insurance to be furnished Bank as provided
herein; and all costs, including attorney fees, associated with modification of
the Loan Documents and endorsements to title policies resulting from exercise by
Borrower of the Term Loan Option or substitution of collateral.
SECTION 8.06. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, Bank is hereby authorized at any time and
from time to time, without notice to Borrower or RFSP (any such notice being
expressly waived), to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Bank to or for the credit or the account of
Borrower against any and all of the obligations of Borrower now or hereafter
existing under this Agreement or the Note or any other Loan Document,
irrespective of whether or not Bank shall have made any demand under this
Agreement or the Note or such other Loan Document and although such obligations
may be unmatured. Bank agrees promptly to notify Borrower after any such setoff
and application, provided that the failure to give such notice shall not affect
the validity of such
33
39
setoff and application. The rights of Bank under this Section 8.06 are in
addition to other rights and remedies (including, without limitation, other
rights or setoff) which Bank may have.
SECTION 8.07. WAIVER OF RIGHT TO JURY TRIAL. BORROWER AND RFSP JOINTLY
AND SEVERALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY IN THE FUTURE BE
DELIVERED) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT. THE UNDERSIGNED AGREE(S) THAT SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 8.08. GOVERNING LAW. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of
Tennessee, except with respect to interest which may be governed by applicable
federal law in effect from time to time.
SECTION 8.09. SEVERABILITY OF PROVISION. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 8.10. HEADINGS. Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
SECTION 8.11. JOINDER BY RFSP. RFSP joins in the execution hereof for
the purpose of consenting to the provisions contained herein applicable to it
and its properties and of agreeing to comply with all such applicable
provisions.
SECTION 8.12. JURISDICTION AND VENUE. The parties agree that the sole
proper venue for the determination of any litigation commenced by Borrower or
RFSP against Bank on any basis shall be in a court of competent jurisdiction
which is located in Shelby County, Tennessee and the parties hereby expressly
declare that any other venue shall be improper and Borrower and RFSP expressly
waive any right to a determination of any such litigation against Bank by a
court in any other venue. Borrower and RFSP further agree that service of
process by any judicial officer or by registered or certified U.S. Mail, as
specified in Section 8.02 on Notices, shall establish personal jurisdiction over
Borrower and RFSP and Borrower and RFSP waive any rights under the laws of any
state to object to jurisdiction within the State of Tennessee. Borrower and RFSP
acknowledge that this Agreement was negotiated, executed and delivered in the
State of Tennessee and shall be governed and construed in accordance with the
laws thereof. Provided, however, nothing contained in this Section 8.12 shall
prevent Bank from bringing any action or
34
40
exercising any rights against any security or against Borrower or RFSP
personally, and any of their property, within any other state. Initiating such
proceedings or taking such action in any other state shall in no event
constitute a waiver of the agreement contained herein that the laws of the State
of Tennessee shall govern the rights and obligations of the parties hereunder or
of the submission herein made by Borrower and RFSP to personal jurisdiction
within the State of Tennessee. The aforesaid means of obtaining personal
jurisdiction and perfecting service of process are not intended to be exclusive,
but are cumulative and in addition to all other means of
obtaining personal jurisdiction and perfecting service of process now or
hereafter provided by the laws of the State of Tennessee.
SECTION 8.13. NO THIRD PARTY BENEFICIARIES. All conditions of the
obligations of any party hereunder, including the obligation of Bank to make
advances, are imposed solely and exclusively for the benefit of the other
parties and Bank's successors and assigns and any permitted assigns of Borrower
or RFSP. No other person or entity shall have standing to require satisfaction
of such conditions in accordance with the terms or, with respect to Borrower or
RFSP, be entitled to assume that Bank will refuse to make advances in the
absence of strict compliance with any or all thereof, and no other person or
entity shall, under any circumstances, be deemed to be a beneficiary of such
conditions, any and all of which may be freely waived in whole or in part by the
respective party to whom the performance of any such condition shall run at any
time if in the sole discretion of such party it deems it desirable to do so.
SECTION 8.14. NO AGENCY. Bank is not the agent or representative of
Borrower or RFSP, and neither Borrower nor RFSP is the agent or representative
of Bank, and nothing in this Agreement shall be construed to make Bank liable to
anyone for goods delivered to or services performed with respect to the Hotel
Properties or Collateral or for debts or claims accruing against Borrower or
RFSP. Nothing herein nor the acts of the parties hereto shall be construed to
create a partnership or joint venture between Bank, Borrower and RFSP, or any
other relationship except as debtor and creditor.
SECTION 8.15. BANK APPROVALS. Each and every provision of this
Agreement providing for the approval or consent of Bank, permitting inspection
or review by Bank, providing the submission of any items in form or content
acceptable to Bank or otherwise relating to the review and approval by Bank
shall, at the discretion of Bank, include such approval, consent, acceptance or
review, as applicable, of the Participants, all of which shall be conclusively
determined by Bank.
SECTION 8.16. LENDING LIMITATION; PARTICIPATION. Notwithstanding any
other provision to the contrary contained herein, in the Commitment, or in any
other document, Borrower expressly understands and agrees that Bank's obligation
to lend under the Commitment and this Agreement is limited to the maximum amount
under any circumstances of Twenty-five Million and no/100 Dollars
($25,000,000.00), and that pursuant to the Participation Agreement, such
Participants have agreed to fund their respective Percentage Interests of the
Commitment and all Loans made thereunder, which, in the aggregate participation,
may total up to fifty percent (50%) of the Commitment, or Twenty-five Million
and no/100 Dollars ($25,000,000.00), subject to the
35
41
terms of the Participation Agreement concerning the rights of Bank and the
Participants to fund more than their original Percentage Interests. It is
expressly understood and agreed that if, for any reason, any of said
Participants should fail or refuse to fund its Percentage Interest of the Loan,
neither Bank nor any other Participant shall have any liability or obligation to
Borrower to fund such unfunded portion of the Loan. In such event, Bank and each
of the other Participants shall have the right, but not the obligation, to fund
the Percentage Interest of the defaulting Participant or may cause such
Percentage Interest to be purchased and funded by a substituted participant.
It is also understood and agreed that the Participants may require certain
additional documents and/or amendments to this Agreement and/or any of the other
Loan Documents, including, without limitation, the possible request for Borrower
to execute multiple notes evidencing each Participant's respective Percentage
Interest in the Loans. In such event, Borrower and RFSP agree to execute such
additional documents and/or amendments as Bank and/or the Participants may
reasonably request in order to fully evidence and secure, to Bank's and/or the
Participants' reasonable satisfaction, Bank's and the Participants' Percentage
Interests in the Loans.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
"BORROWER"
RFS HOTEL INVESTORS, INC.
BY: /s/
------------------------------------
TITLE:
---------------------------------
"RFSP"
RFS PARTNERSHIP, L.P.
BY: RFS HOTEL INVESTORS, INC.
ITS GENERAL PARTNER
BY: /s/
------------------------------
TITLE:
---------------------------
"BANK"
BOATMEN'S BANK OF TENNESSEE
BY: /s/
------------------------------------
TITLE:
---------------------------------
36
