Exhibit 10.13
THE BORROWERS NAMED
HEREIN
and
XXXXXX BROTHERS HOLDINGS INC.
D/B/A XXXXXX CAPITAL, A DIVISION
OF XXXXXX BROTHERS HOLDINGS INC.
__________________________
LOAN AGREEMENT
__________________________
Dated: As of August 12, 1999
THIS LOAN AGREEMENT made as of the 12th day of August, 1999 between
the undersigned borrowers listed on the signature pages hereto, (hereinafter
referred to, individually and collectively, as the context may require, as a
"Borrower" or "Borrowers"), each of the foregoing having an office at 1010
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Xxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000 and XXXXXX BROTHERS HOLDINGS INC.
D/B/A XXXXXX CAPITAL, A DIVISION OF XXXXXX BROTHERS HOLDINGS INC., a Delaware
corporation, having an office at Three World Financial Center, New York, New
York 10285 (hereinafter referred to, together with its successors and/or
assigns, as "Lender");
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W I T N E S S E T H :
WHEREAS, at the request of Borrower, Lender has agreed to fund to
Borrower a loan in the principal amount of $330,000,000 (the "Loan") pursuant to
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the terms of this Agreement;
WHEREAS, the Loan is evidenced by that certain note of even date
herewith in the original principal amount of $301,250,000 ("Note One"), made by
certain of the Borrowers, as set forth on Schedule 1 attached hereto (the "Note
One Borrowers"), to Lender, and that certain note of even date herewith in the
original principal amount of $28,750,000 ("Note Two"), made by certain of the
Borrowers, as set forth on Schedule 2 attached hereto (the "Note Two
Borrowers"), to Lender (Note One and Note Two, collectively, together with all
extensions, renewals, substitutions, modifications, amendments and restatements
thereof, the "Note");
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WHEREAS, Note Two is secured by, among other things, two (2)
mortgages, deeds of trust, deeds to secure debt and other real estate security
instruments, as the case may be, each of even date herewith, made by the Note
Two Borrowers to and for the benefit of Lender (the "Note Two Security
Instruments"), but not by the Note One Security Instruments (defined below); and
Note One is secured by, among other things, (i) the Note Two Security
Instruments and (ii) seventeen (17) mortgages, deeds of trust, deeds to secure
debt and other real estate security instruments, as the case may be, each of
even date herewith, made by the Note One Borrowers to and for the benefit of
Lender (the "Note One Security Instruments" and, together with the Note Two
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Security Instruments, collectively, the "Security Instruments");
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NOW, THEREFORE, in consideration of ten dollars ($10) and other good
and valuable consideration, the receipt of which is hereby acknowledged, Lender
and Borrower hereby covenant and agree as follows:
1. The Note and the Security Instruments. The indebtedness of Borrower shall
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be: (i) evidenced by the Note, and (ii) secured by, among other things, (a)
the Security Instruments covering the fee interest of the applicable
Borrower in the property described therein (individually, a "Property" and
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collectively, the "Properties"), (b) assignments of leases and rents each
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given by Borrower to Lender dated the date hereof and covering the
Properties (the "Assignments of Rents"), (c) the Assignments of
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Agreements, Permits and Contracts given by Borrower to Lender dated the
date hereof and (d) the Conditional Assignment of Management Agreement and
Subordination of Management Fees dated the date hereof given by Borrower
and the Manager to Lender (as defined in the Security Instrument).
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2. Loan Documents. The term "Loan Documents" as used in this Agreement shall
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collectively mean the Note, the Security Instruments, the Assignments of
Rents, the Assignments of Agreements, Permits and Contracts, the
Environmental Indemnity Agreement, and the Conditional Assignment of
Management Agreement and Subordination of Management Fees, the Guaranty of
Recourse Obligations, the Subordination, Non-Disturbance and Attornment
Agreements, each dated the date hereof, this Agreement and all other
documents and instruments of any nature whatsoever executed or delivered in
connection with the Loan.
3. Loan Repayment and Defeasance
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3.1 Prepayment and Repayment. Borrower shall repay any outstanding
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principal indebtedness of the Loan in full on the Maturity Date (as defined in
the Note) of the Loan, together with all accrued and unpaid interest thereon to
(but excluding) the date of repayment and all other amounts due to Lender in
connection with the Loan. Other than as required or permitted pursuant hereto
in connection with a casualty or condemnation, Borrower shall have no right to
prepay all or any portion of Loan.
3.2 Voluntary Defeasance of the Note.
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(a) On or after the Optional Defeasance Date (defined below) subject
to the terms and conditions set forth in this Section 3.2, Borrower may defease
all or any portion of the Loan evidenced by the Note (a "Defeasance") with
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Defeasance Collateral (defined below); provided that a partial defeasance of the
Note shall be permitted only in connection with the release of one or more
Properties in accordance with Section 4. Defeasance shall be subject, in each
case, to the satisfaction of the following conditions precedent:
(1) Borrower shall provide not less than thirty (30) days' prior
written notice to Lender specifying the date (the "Defeasance
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Date") on which the Defeasance Collateral is to be delivered and
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on which the Defeasance is to occur, as well as the anticipated
outstanding principal balance of the Note as of the Defeasance
Date.
(2) Borrower shall pay to Lender all accrued and unpaid interest on
the principal balance of the Note to but not including the
Defeasance Date (and if the Defeasance Date is not a Payment
Date, the Defeasance Collateral shall take into account the
interest that would have accrued on the Note to but not including
the next Payment Date).
(3) Borrower shall pay to Lender all other sums, not including
scheduled interest or principal payments, then due and payable
under the Loan Documents.
(4) No Event of Default shall exist on the Defeasance Date, except in
the event of (A) a Defeasance of the entire outstanding principal
balance of the Note prior to the Maturity Date or (B) an for an
Event of Default relating solely to a Property that will be
released from the lien of the Security Instrument thereon
pursuant to Section 4 hereof in connection with such Defeasance.
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(5) Borrower shall deliver to Lender on the Defeasance Date the
required Defeasance Collateral for the Defeasance, which Lender
shall hold as security for the defeased portion of the Loan in
accordance with the terms of this Agreement.
(6) Borrower shall execute and deliver one or more security
agreements, in form and substance satisfactory to Lender (in its
reasonable judgment), creating a first priority lien on the
Defeasance Collateral in accordance with the provisions of this
Section 3.2 (the "Security Agreement").
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(7) Borrower shall deliver to Lender an opinion of counsel for
Borrower in form and substance satisfactory to Lender (in its
reasonable discretion) stating, among other things, that Lender
has a perfected first priority security interest in the
Defeasance Collateral.
(8) If a Securitization has occurred, Borrower shall deliver to
Lender an opinion of counsel for Borrower in form and substance
satisfactory to Lender (in its reasonable discretion) and the
applicable Rating Agency (in their sole discretion) that the
transfer of the Defeasance Collateral in exchange for a release
of the Lien on the Property or Properties securing the Note does
not constitute a "significant modification" of the Loan under
Section 1001 of the Code or cause the REMIC Trust to fail to
qualify as a REMIC or otherwise cause a tax to be imposed on the
REMIC Trust and that such transfer will not adversely affect the
continued availability of any exemption relied upon in connection
with the securitization from the prohibited transaction rules of
ERISA and section 4975 of the Code.
(9) Borrower shall deliver or cause to be delivered a
nonconsolidation opinion with respect to the Successor Borrower
(defined below), if any, in form and substance reasonably
satisfactory to Lender and satisfactory to the applicable Rating
Agency in their sole discretion.
(10) Borrower shall deliver to Lender an Officer's Certificate
certifying that the requirements set forth in this Section 3.2
have been satisfied.
(11) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request in connection with
the satisfaction of the terms and conditions of this Section 3.2.
(12) Borrower shall pay all revenue, documentary stamp or intangible
taxes or any other tax or charge due in connection with the
transfer of the Note, the creation of one or more Defeased Notes
and Undefeased Notes, the transfer of one or more Defeased Notes
or Undefeased Notes, or otherwise required to accomplish the
Defeasance, together with all reasonable costs and expenses of
Lender incurred in connection with the Defeasance, including any
costs and expenses associated with the release of one or more
Liens as provided in Section 4 hereof and reasonable attorneys'
fees and expenses.
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(13) Borrower shall deliver to Lender a confirmation, in form and
substance reasonably satisfactory to Lender, by a "Big Five"
independent certified public accounting firm selected by
Borrower, that the Defeasance Collateral shall generate monthly
amounts sufficient to pay all Scheduled Defeasance Payments
(defined below) and other amounts required to be paid by the
Borrower hereunder in connection with the proposed Defeasance.
(14) Borrower shall deliver to Lender a Rating Confirmation (defined
below) with respect to such Defeasance.
(15) In the event only a portion of the Loan evidenced by the Note is
the subject of the Defeasance in connection with the release of
any Lien of any Security Instrument on one or more Properties in
accordance with the terms of Section 4 below (including, without,
limitation, delivery of Defeasance Collateral sufficient to
defease such Property or Properties based on the Release Amount
of 125% of the Allocated Loan Amount for such Property or
Properties) Borrower shall execute and deliver all necessary
documents to amend and restate such Note and issue two substitute
notes for each Note: one note having a principal balance equal to
the defeased portion of the original Note (the "Defeased Note")
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and one note having a principal balance equal to the undefeased
portion of the original Note (the "Undefeased Note"). The
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Defeased Note and the Undefeased Note shall have identical terms
as the original of each Note (and the Defeased Note or Defeased
Notes and the Undefeased Note or Undefeased Notes shall be cross-
defaulted with each other), except for the principal balance. A
Defeased Note cannot be the subject of any further Defeasance.
An Undefeased Note may be the subject of a further Defeasance in
accordance with the terms of this clause (xv) (the term "Note",
as used above in this clause (xv) for these purposes, being
deemed to refer to the Undefeased Note that is the subject of
further defeasance) and the other provisions of this Section 3.2;
provided, however, that no such partial defeasance shall take
place unless the conditions outlined in Section 4 are satisfied.
(b) The Defeasance Collateral shall generate payments on or prior to,
but as close as possible to, all successive Payment Dates after the Defeasance
Date (including the Maturity Date) including the outstanding principal balance
of either the Loan or the Defeased Note or Defeased Notes on the Maturity Date,
and in amounts equal to the Debt Service due on such dates under the Note or
Notes or Defeased Note or Defeased Notes, as applicable (the "Scheduled
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Defeasance Payments"). Each of the obligations of the United States of America
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that is part of the Defeasance Collateral shall be duly endorsed by the holder
thereof as directed by Lender or accompanied by a written instrument of transfer
in form and substance wholly satisfactory to Lender (including, without
limitation, such instruments as may be required by the depository institution
holding such securities or by the issuer thereof, as the case may be, to
effectuate book-entry transfers and pledges through the book-entry facilities of
such institution) in order to perfect upon the delivery of the Defeasance
Collateral a first priority security interest therein in favor of the Lender in
conformity with all applicable state and federal laws governing the granting of
such security interests. Borrower, pursuant to the Security Agreement or other
appropriate document, shall irrevocably authorize and direct that the payments
received from the Defeasance Collateral shall be made
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directly to Lender and applied to satisfy the obligations of Borrower under the
Note or Notes or Defeased Note or Defeased Notes, as applicable.
(c) Upon compliance with the requirements of this Section 3.2, Lender
shall designate a successor entity (other than Lender or an affiliate of
Borrower) (the "Successor Borrower") to which Borrower shall transfer and assign
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all obligations, rights and duties under and to the Note or Notes or, with
respect to the portion of the Note subject to such Defeasance, the Defeased
Note, with respect to the together with the pledged Defeasance Collateral (and
the obligation of the Lender named herein to designate a Successor Borrower
shall be retained by such Person notwithstanding the sale or transfer of the
Loan unless such obligation is specifically assumed by a transferee of the
Loan). The Successor Borrower shall assume the obligations under the Note or
Notes or, as applicable, the Defeased Note and the Security Agreement. The
Borrower shall pay $1,000 to any such Successor Borrower as consideration for
assuming the obligations under the Note or Notes or, as applicable, the Defeased
Note and the Security Agreement. Notwithstanding anything herein or in the Loan
Documents that may be construed to the contrary, no other assumption fee shall
be payable to the Successor Borrower upon or in consideration for its assumption
of the Note or Notes or, as applicable, the Defeased Note and the Security
Agreement in accordance with this a Defeasance hereunder, but Borrower shall pay
all reasonable out-of-pocket costs and expenses incurred by Lender, including
Lender's reasonable attorneys' fees and expenses, incurred in connection
therewith.
3.3 Default Prepayment. If all or any part of the principal amount of the
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Loan is prepaid upon acceleration of the Loan following the occurrence of an
Event of Default at any time prior to the Maturity Date, Borrower shall be
required to make a payment (the "Yield Maintenance Payments") in an amount equal
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to the greater of (a) three (3%) of such prepaid principal balance and (b) the
excess, if any, of (i) the sum of (A) the aggregate respective present values of
all scheduled interest payments in respect of the Loan (or the portion of all
such interest payments corresponding to the portion of the principal of the Loan
to be prepaid upon acceleration) for the period from the date of such prepayment
upon acceleration to (and including) the Maturity Date, discounted monthly at a
rate equal to the Treasury Constant Yield, such yield equivalent to a percentage
expressed on the basis of a 360 day year of twelve 30 day months and (B) the
aggregate respective present values of all scheduled principal payments in
respect of the Loan (or the then unpaid portion thereof to be prepaid upon
acceleration), assuming for these purposes that the entire outstanding scheduled
principal amount of the Loan as of the Maturity Date were to be paid in full on
such Payment Date, discounted monthly at a rate equal to the Treasury Constant
Yield, such yield equivalent to a percentage expressed on the basis of a 360 day
year of twelve 30 day months over (ii) the then current outstanding principal
amount of the Loan (or the then unpaid portion thereof to be prepaid upon
acceleration). If the Yield Maintenance Payments as calculated pursuant to this
clause (b) would not be a positive number, then the number yielded by such
calculation shall be zero. For purposes of this Section 3.3, the amount of the
Loan on the date of prepayment shall be determined after giving effect to any
payment of scheduled amortization made on such date. The determination of the
Yield Maintenance Payments by Lender shall be conclusive and binding on Borrower
in the absence of manifest error.
3.4 Involuntary Prepayment. Following a casualty or condemnation, in the
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event that Lender elects, pursuant to the terms of the Loan Documents, to apply
casualty proceeds or a condemnation award to the Debt, no prepayment premium
shall be due in connection therewith, provided that (i) no Event of Default
exists, (ii) no other sums (including interest) are due hereunder
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or under any of the other Loan Documents and (iii) no amount may be prepaid in
excess of the amount of casualty proceeds or condemnation award, as the case may
be. Any proceeds or awards applied pursuant to this Section 3.4 shall be applied
to the reduction of the then outstanding principal balance of the Note in the
inverse order in which principal payments are due thereunder.
4. Release of the Property.
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4.1 No Release. Except as set forth in this Section 4, no repayment,
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prepayment or Defeasance of all or any portion of any Note shall cause, give
rise to a right to require, or otherwise result in, the release of the Lien of
any Security Instrument on any of the Properties.
4.2 Release of all Properties. (a) If Borrower has elected to defease
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the Note in its entirety, and the requirements of Section 3 have been satisfied,
all of the Properties shall be released from the Liens of their respective
Security Instruments and the Defeasance Collateral, pledged pursuant to the
Security Agreement, shall be the sole source of collateral securing the Notes
and Borrower and the Guarantors shall be released from their obligations under
the Loan Documents (other than those arising under the Environmental Indemnity,
the Cooperation Agreement or which otherwise survive by their express terms).
(b) In connection with the release of the Liens contemplated in this
Section 4, Borrower shall submit to Lender, not less than fifteen (15) days
prior to the Defeasance Date, a release of Liens (and related Loan Documents)
for each Property (for execution by Lender) in a form appropriate in the
applicable state and otherwise satisfactory to Lender in its reasonable
discretion and all other documentation Lender reasonably requires to be
delivered by Borrower in connection with such release (collectively, "Release
Instruments"), together with an Officer's Certificate certifying that such
documentation is in compliance with all Legal Requirements. Lender shall execute
such Release Instruments on or prior to the Defeasance Date if all of the
conditions herein to such release of Liens have been satisfied, and promptly
upon such Defeasance, Lender shall transfer to Borrower any funds in the
Collateral Accounts with respect the Property or Properties which are the
subject of such Defeasance.
4.3 Partial Releases. In connection with a Defeasance of a portion but
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less than all of the Note, and subject to the terms and conditions set forth
herein, Borrower shall have the right, from time to time, on any Payment Date
(as defined in the Note), or on any Business Day (as defined in the Note), to
obtain a release (a "Property Release") of a Property from the lien on the
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related Security Instrument provided that (I) no default under this Agreement,
the Note, the Security Instruments or any other Loan Document has occurred and
is continuing (except for a default which relates solely and specifically to the
Property or Properties proposed to be released, and which release would cure
such default in respect of the Loan) and (II) subject to compliance with the
provisions set forth below in this Section 4.3, legal, record, economic and
beneficial ownership of the Property for which a Property Release is being
requested (the "Release Premises") is simultaneously with the granting of the
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Property Release transferred (a "Release Premises Transfer") to and shall be
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owned immediately after such Property Release by a person(s), party(ies) or
entity(ies) other than Borrower, or, except as provided below, any Affiliate of
Borrower ("Release Premises Transferee"). In the event that the Borrower seeks
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to release a Property from the lien of the related Security Instrument, Lender
shall release such Property from the lien of the related Security Instrument and
the Loan Documents, but only compliance with the following conditions:
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(a) Borrower shall (on or after the Optional Defeasance Date),
defease the portion of the Note equal to the Release Amount (defined below) of
the Property being released (together with all accrued and unpaid interest on
the principal amount being so defeased), and such defeasance shall be undertaken
pursuant to the terms and conditions of Section 3, and all of such terms and
conditions shall be satisfied, including, without limitation, Section 3.2(a)
(xv) and Section 3.2(c).
(b) Borrower shall submit to Lender, not less than twenty (20) days
prior to the date of such release, all the Release Instruments together with an
Officer's Certificate certifying that such documentation (i) is in compliance
with all Legal Requirements and (ii) will not impair or otherwise adversely
affect the Liens, security interests and other rights of Lender under the Loan
Documents not being released (or as to the parties to the Loan Documents and
Properties subject to the Loan Documents not being released). In the event that
an Affiliate of Borrower is to be the Release Premises Transferee, such
Officer's Certificate shall also certify that the aggregate Allocated Loan
Amounts applicable to the total number of Release Premises which have been
transferred to Affiliates of Borrower (including the proposed transfer) shall
not exceed 30% of the original principal balance of the Note.
(c) With respect to any release of one or more Properties, after
giving effect to such release, the Debt Service Coverage Ratio for all of the
Properties then remaining subject to the Liens of the Security Instruments shall
be not less than the greater of (x) the Debt Service Coverage Ratio immediately
preceding the proposed release of a Property (for purposes of this calculation,
the income derived from the Defeasance Collateral delivered to Lender in
connection with a partial Defeasance occurring prior to the partial Defeasance
in question shall be included in the numerator of the Debt Service Coverage
Ratio to the extent that the amount of the income derived from such Defeasance
Collateral exceeds the debt service with respect to the applicable Defeased
Note) and (y) the Origination Debt Service Coverage Ratio; provided, however,
that in order to meet the test set forth in this clause (c), Borrower shall be
permitted to defease that portion of the Loan in addition to the applicable
Release Amount sufficient to increase the Debt Service Coverage Ratio to the
required level.
(d) If the Operating Lease (as defined in the Security Instruments)
for the Release Premises proposed to be released has been terminated pursuant to
Section 36.1 of the Operating Lease, and, after giving effect to such release,
the Borrower that owned the Release Premises prior thereto (the "Release
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Premises Transferor") is the owner of a Property that remains encumbered by the
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lien of the Security Instruments, Borrower shall deliver an estoppel certificate
from the Operating Tenant (as defined in the Security Instrument) in form
satisfactory to Lender stating that the Operating Lease has been terminated and
that the Operating Tenant has released the Release Premises Transferor from all
liability and obligation to the Operating Tenant in connection with the
Operating Lease and that the Release Premises Transferor has no further
liability or obligation in connection with said Operating Lease or, if the
Operating Lease on the Release Premises has not been terminated, Borrower shall
deliver an estoppel certificate from the Operating Tenant in form satisfactory
to Lender that such Operating Lease, as it relates to the Release Premises, is
and will remain in full force and effect following the Release Premises Transfer
and that the Release Premises Transferor has no liability or obligation to the
Operating Tenant in connection with the Operating Lease.
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(e) The Property located in Philadelphia, Pennsylvania (the
"Philadelphia Property") may not be the subject of a Property Release unless
either (i) the Property located in Austin, Texas (the "Austin Property") is
released simultaneously pursuant to and in compliance with this Section 4.3,
including the requirement to deliver Defeasance Collateral, or (ii) the interest
in BA Parkway Associates II. L.P. held by CapStar AP Partners, L.P. is
simultaneously transferred to an entity other than one of the Borrowers. The
Property located in Madison, Wisconsin (the "Madison Property") may not be the
subject of a Property Release unless either (i) all of the Properties owned by
Meristar Secured Holdings LLC are released simultaneously pursuant to and in
compliance with this Section 4.3, including the requirement to deliver
Defeasance Collateral, or (ii) the interest in the Borrower which owns the
Madison Property held by Meristar Secured Holdings LLC is simultaneously
transferred to an entity other than one of the Borrowers.
4.4 Release of Lien. Lender shall, upon the written request and at the
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expense of Borrower, upon payment in full of all of the Debt in accordance with
the terms of the Loan Documents, release the Liens of the Security Instruments
and other Loan Documents not theretofore released and transfer to Borrower all
sums then on deposit in the Collateral Accounts.
4.5 Disclosed Partial Releases. Notwithstanding anything to the contrary
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contained in this Section 4 and provided that no default under this Agreement,
the Note, the Security Instruments or any other Loan Document has occurred and
is continuing, Borrower may request a release of a portion of the Mortgaged
Property upon which no improvements have been erected from the lien of the
Security Instrument for the Mortgaged Property (the "San Xxxx Security
Instrument") known as the Crowne Plaza, San Jose, California (the "San Xxxx
Crowne Plaza") upon the following terms and conditions:
(a) the term "Release Parcel" as used in this Subsection shall mean
that portion of unimproved land which Borrower may seek to release from the
lien of the San Xxxx Security Instrument pursuant to this Section as more
particularly described on Schedule 3 attached hereto;
(b) Borrower shall submit to Lender not less than 15 days prior to
the date of such release along with that notice attached hereto as Exhibit
A an Officer's Certificate certifying to Lender that (A) the balance of the
Property shall continue to be subject to the lien of the San Xxxx Security
Instrument and will not be divided or affected in any way which would have
a materially adverse effect on the operation, use or value of the San Xxxx
Crowne Plaza or on the Borrowers ability to timely pay the Debt or
adversely affect the security position of Lender under the San Xxxx
Security Instrument, (B) ingress and egress to and from the portion of the
San Xxxx Crowne Plaza remaining subject to the lien of the San Xxxx
Security Instrument will not be terminated or restricted as a result of any
such release, (C) such release shall not cause or result in a violation of
any of the other provisions of the San Xxxx Security Instrument or any
other Loan Documents, and (D) any parking spaces that are lost will
promptly be replaced if necessary to comply with the requirements of any
applicable laws or agreements pertaining to the San Xxxx Crowne Plaza;
(c) if requested by Lender, Borrower shall provide Lender with an
endorsement to Lender's title insurance policy insuring that the priority
of the lien of the San Xxxx Security Instrument is unaffected as to the San
Xxxx Crowne Plaza remaining encumbered by the lien
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of the San Xxxx Security Instrument by reason of the fact that the Release
Parcel has been released from the lien hereof, and Borrower shall pay for
the cost of such endorsement;
(d) all instruments of release shall contain such covenants,
conditions and restrictions and shall reserve such rights and easements
with respect to the Release Parcel as are necessary to protect and preserve
Lender's interests in the portion of the San Xxxx Crowne Plaza remaining
subject to the lien of such Security Instrument after any such release;
(e) Borrower shall provide Lender with such surveys, descriptions,
title insurance endorsements, computations of acreage and other information
as Lender may in its reasonable discretion require in connection with any
release made pursuant to this Subsection;
(f) Borrower shall obtain all subdivisions and zoning approvals with
respect to the Release Parcel and the portion of the San Xxxx Crowne Plaza
remaining subject to the lien of the San Xxxx Security Instrument as may
reasonably be required by Lender to insure that the Release Parcel and the
portion of the San Xxxx Crowne Plaza remaining subject to the lien of such
Security Instrument shall be independent of each other for all zoning,
subdivision and taxing purposes and to insure that the ability of Lender to
foreclose the San Xxxx Security Instrument shall not be hindered or
compromised in any manner whatsoever as a result of any such release;
(g) Borrower shall pay all of Lender's reasonable costs and expenses,
including reasonable counsel fees and disbursements incurred in connection
with the release of the Release Parcel from the lien of the San Xxxx
Security Instrument, the review and approval of the documents and
information required to be delivered in connection therewith and all
recording fees and title charges;
(h) Borrower shall certify to Lender that the release of the Release
Parcel shall have no adverse effect on either the then current Debt Service
Coverage Ratio or the then current NOI; and
(i) Borrower shall provide evidence reasonably satisfactory to Lender
that title to the Release Parcel has been transferred to a Release Premises
Transferee excluding an Affiliate of Borrower.
5. Substitution of Properties. Prior to the ninth anniversary of the date
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hereof, provided that no Event of Default has occurred and is continuing,
Borrower shall have the right to obtain a release of one or more of the
Properties from the lien of the related Security Instrument and Loan
Documents (a "Substitution Release") upon (i) substitution (a
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"Substitution") of another fully licensed and operating hospitality
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property of comparable type and quality as the Property being released in
the place of the Release Premises (a "Substitute Property") owned in fee
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simple (or leasehold) by a Borrower and leased to the Operating Tenant
pursuant to an operating lease, substantially in the same form and content
as the Operating Lease, which Substitute Property is subjected to the lien
of a new mortgage, deed of trust, deed to secure debt or similar security
instruments, in the same form and substance as the Security Instruments
("Substitute Security Instrument") and to the lien of the Loan Documents,
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as a first lien thereon and managed by Manager (or an affiliate of Manager
as provided for in the
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Management Agreement) pursuant to the terms of the Management Agreement or
a Replacement Management Agreement (as defined in the Security Instruments)
and, subject to a Franchise Agreement in compliance with the terms and
conditions of Section 3.13 of the Security Instruments and (ii) compliance
with and subject to the conditions set forth in this Section 5; provided,
however, that Borrower's rights to such release and substitution shall be
conditioned on receipt by Lender of the following:
(1) receipt of a copy of a deed conveying all of the applicable Borrower's
right, title and interest in and to the Substitute Property to a Release
Premises Transferee and a letter from such Borrower countersigned by a title
insurance company acknowledging receipt by such title insurance company of such
deed of assignment and assumption, as applicable, and agreeing to record such
deed or assignment and assumption, as applicable, in the real estate records for
the county in which the Substitute Property is located.
(2) evidence which would be satisfactory to a prudent institutional
mortgage lender that (i) the Substitute Property is fully operational and is of
similar or higher quality and value (including, without limitation, with respect
to physical condition and amenities) to the Release Premises and (ii) the
Properties, including the Substitute Property, will comply with both the
Geographic Diversity Threshold and the Franchise Diversity Threshold (each as
defined on Schedule 4 attached hereto).
(3) a current Appraisal of the Substitute Property prepared by an MAI
appraiser acceptable to Lender and to the Rating Agency within sixty (60) days
prior to the release and substitution (1) showing an appraised value equal to or
greater than the appraised value of the Release Premises as of the date hereof;
and (2) which supports an aggregate loan-to-value ratio with respect to the
Substitute Property and the Properties remaining subject to the lien of the
Security Instruments after the Substitution Release not greater than the ratio
equal to the lesser of (A) the aggregate loan-to-value ratio as of the date
hereof with respect to the Properties as set forth on Schedule A attached hereto
and (B) the aggregate loan-to-value ratio with respect to the Properties
remaining subject to the lien of the Security Instruments immediately prior to
the proposed Substitution Release.
(4) an opinion or opinions, as necessary, of the related Borrower's
counsel which would be satisfactory to a prudent institutional mortgage lender
that (i) the Substitute Security Instrument and the Loan Documents by which the
Substitute Property will be encumbered have been duly authorized, executed and
delivered by such Borrower and are valid and enforceable in accordance with
their terms, including, without limitation, with respect to the remedies
available to Lender by virtue of the cross-collateralization of the Loans,
subject to bankruptcy and equitable principles, (ii) the related Borrower and
Operating Tenant are qualified to do business and in good standing under the
laws of the jurisdiction where the Substitute Property is located, or that such
Borrower, are not required by any Legal Requirement to qualify to do business in
such jurisdiction, (iii) based on a certificate of the related Borrower the
encumbrance of the Substitute Property with the lien of the Substitute Security
Instrument and the Loan Documents shall not cause a breach of, or a default
under any agreement, document or instrument to which such Borrower is a party or
to which it or its properties are bound or affected, (iv) the Substitution
(including such Substitute Borrower and Substitute Property) does not affect the
opinions or assumptions set forth in the non-consolidation opinion delivered in
connection with the closing of the Loan; (v) if a Securitization has occurred,
the Substitution does not constitute a "significant modification" of the Loan
under Section 1001 of the Code or cause the REMIC Trust to fail to qualify as a
REMIC or otherwise cause a tax to be imposed on the REMIC Trust; and (vi) if a
Securitization has occurred, the Substitution will not
9
adversely affect the continued availability of any exemption relied upon in
connection with the Securitization from the prohibited transaction rules of
ERISA and section 4975 of the Code.
(5) a certification by the related Borrower that (x) the certificates,
opinions and other instruments which have been or are therewith delivered to or
deposited with Lender in connection with such release and substitution conform
to the requirements of this Agreement and the Security Instruments, (y) all
conditions precedent herein have been complied with and (z) all conditions
precedent to the delivery of the Substitute Security Instrument and Loan
Documents contained in this Agreement have been fulfilled.
(6) original executed counterparts of the Substitute Security Instrument
and the Loan Documents encumbering the Substitute Property and the related
operating lease and related collateral, including without limitation, any
financing statements or other documents necessary to grant or perfect Lender's
first priority security interest in the Personal Property (defined in the
Security Instruments) located thereon and the Rents and Accounts Receivable
derived therefrom; the principal amount of such Substitute Security Instrument
shall equal the face amount of the Note, provided that in the event that the
jurisdiction in which the Substitute Property is located imposes a mortgage
recording intangibles or similar tax, and does not permit the allocation of
indebtedness for the purpose of determining the amount of such tax payable, the
principal amount of such Substitute Security Instrument shall equal 125% of the
Substitute Allocated Loan Amount (defined below).
(7) a title insurance policy issued by a title insurance company
satisfactory to the Rating Agency (or, if a Securitization has not occurred, to
Lender) insuring the lien of the Substitute Security Instrument on the
Substitute Property(ies), in form and substance which would be satisfactory to a
prudent institutional mortgage lender insuring that the Substitute Security
Instrument is a valid and enforceable first lien on the good and marketable fee
simple or leasehold estate, title of the related Borrower to the Substitute
Property in an amount equal to the amount of the Loan allocated to the
Substitute Property (the "Substitute Allocated Loan Amount"), subject only to
--------------------------------
standard and customary exceptions and such other exceptions that would be
approved by a prudent institutional mortgage lender, together with such
affirmative insurance and other endorsements customarily required by a prudent
institutional mortgage lender, including, without limitation, a "tie-in" and
first loss endorsement satisfactory to Lender, or, if such endorsement is not
available in the state in which the Substitute Property is located, insurance in
an amount equal to the greater of one hundred twenty five percent (125%) of the
Substitute Allocated Loan Amount or the amount on which mortgage or intangibles
tax was paid with respect to the Security Instrument for the Substitute
Property, together with a "last dollar endorsement". Such title insurance
policy shall not contain any exception for any state of facts that an accurate
survey might show or that a survey made after the date of the survey referred to
in Section 5(l) might show.
(8) If the Operating Lease for the Release Premises has been terminated
pursuant to Section 36.1 of the Operating Lease, and, after giving effect to
such Release, the Release Premises Transferor is the owner of a Property that
remains encumbered by the lien of the Security Instruments, an estoppel
certificate from the Operating Tenant in form satisfactory to Lender stating
that the Operating Lease has been terminated and that the Operating Tenant has
released the Release Premises Transferor from all liability for the payment of
any and all termination payments or any other payments due to the Operating
Tenant pursuant to the terms of the Operating Lease and that the Release
Premises Transferor has no further liability or obligation in connection with
said Operating Lease or, if the Operating Lease on the Release Premises has not
been terminated, an estoppel
10
certificate from the Operating Tenant in form satisfactory to Lender that such
Operating Lease, as it relates to the Release Premises, is and will remain in
full force and effect following the Substitution Release and that the Release
Premises Transferor has no liability for the payment of any termination payments
or any other payments due to the Operating Tenant pursuant to the terms of the
Operating Lease and that the Release Premises Transferor has no further
liability or obligation in connection with said Operating Lease.
(9) evidence which would be satisfactory to a prudent institutional
mortgage lender that the Substitute Property and the use thereof are in
substantial compliance with the applicable zoning, subdivision, and all other
applicable federal, state or local laws and ordinances affecting the Substitute
Property, and that all material building and operating licenses and permits
necessary for the use and occupancy of the Substitute Property as a hospitality
property or hotel including, but not limited to, valid certificates of
occupancy, have been obtained and are in full force and effect.
(10) an environmental report dated within six (6) months prior to delivery
which states that the applicable Substitute Property (A) does not contain any
Hazardous Materials (1) in material violation of Environmental Laws, (2)
reasonably anticipated to give rise to Remedial Work (as defined in the
Environmental Indemnity Agreement) or (3) reasonably anticipated to cause
diminution in value of the Substitute Property, and (B) is not subject to any
risk of material contamination from any off-site Hazardous Material.
(11) evidence of payment of all costs and expenses incurred by Lender
including reasonable counsel fees and disbursements in connection with the
release of any Release Premises and the inclusion of the Substitute Property as
collateral, all recording charges, filing fees, taxes, or other expenses,
including but not limited to intangibles taxes and documentary stamp taxes in
connection with the recording of the Substitute Security Instruments and the
lien necessary to grant and perfect Lender a first priority lien on and security
interest in the Substitute Property, the Personal Property located therein and
the Rents derived therefrom.
(12) a recent survey of the Substitute Property(ies) prepared by a land
surveyor licensed in the state where the Substitute Property is located pursuant
to the then current American Land Title Association/American Congress of
Surveying and Mapping standards for title surveys and which would be otherwise
satisfactory to a prudent institutional mortgage lender, provided that no
structural additions to the improvements shown on such survey or new structures
have been made or built since the date of such survey and that there has been no
change in the legal description of the Substitute Property since the date of
such survey, whether due to sales, transfers, condemnation or otherwise.
(13) evidence indicating whether the Substitute Property is located within
a flood plain.
(14) a property inspection report dated within six (6) months of delivery
prepared by an independent licensed engineer approved by Lender, prepared in
accordance with standards employed by prudent institutional mortgage lenders
stating, among other things, that the Substitute Property is in good condition
and repair and free of material damage or waste and complies in all material
respects with the Americans with Disabilities Act, or which otherwise reveals a
state of fact that would be satisfactory to a prudent institutional mortgage
lender and provided that adequate reserves satisfactory to Lender and the Rating
Agency are established.
11
(15) annual operating statements and occupancy statements for the
Substitute Property for the most recent fiscal year of the owner thereof,
together with a year to date operating statement, current occupancy statements,
and a budget for the current fiscal year, each certified by the related
Borrower, and a certificate of no adverse change since the date thereof executed
by the related Borrower, in each case in a form and substance which would be
satisfactory to a prudent institutional mortgage lender.
(16) original certificates and copies of policies of insurance required by
Lender under the terms of the Substitute Security Instrument for the Substitute
Property.
(17) evidence of the qualification and good standing of the related
Borrower and Operating Tenant (and the principals, if necessary) in the state
where the Substitute Property is located unless such qualification is not
required in such state by any Legal Requirement.
(18) certified copies of all Leases (as defined in the Substitute Security
Instrument) with respect to the Substitute Property and tenant estoppel
certificates from tenants under Material Leases, as required by Lender, all in a
form and substance which would be satisfactory to a prudent institutional
mortgage lender.
(19) certified copies of all material contracts and agreements relating to
the management, leasing and operation of the Substitute Property, including,
without limitation, the Franchise Agreement, each of which shall be in a form
and substance which would be satisfactory to a prudent institutional mortgage
lender in a transaction of similar type.
(20) certified copies of all material consents, licenses and approvals, if
any, required in connection with the substitution of a Substitute Property,
including liquor licenses and evidence that such consents, licenses and
approvals are in full force and effect or, in the event that a liquor license
cannot be issued to Borrower until Borrower has acquired title to the Substitute
Property or to the Operating Tenant until the Operating Tenant has taken
possession of the Substitute Property under the related Operating Lease,
certified copies of a temporary liquor license or concession arrangement that is
in full force and effect that permits the sale and consumption of liquor and
alcoholic beverages at the Substitute Property.
(21) a certificate by the related Borrower and the other Borrowers
certifying that all of the representations and warranties contained in the
Security Instruments and in the other Loan Documents, after giving effect to the
substitution of the Substitute Property, are true, accurate and correct in all
respects with respect to the Substitute Property and that there is no Event of
Default hereunder.
(22) a certificate of the related Borrower and the other Borrowers
certifying, together with other evidence that would be satisfactory to a prudent
institutional mortgage lender that, after the substitution of a Substitute
Property and the release of the Release Premises, (i) the Debt Service Coverage
Ratio for the Properties for the twelve (12) month period immediately preceding
the second calendar month prior to the date of the Substitution Release with
respect to all Properties remaining subject to the lien of the Security
Instruments shall be equal to or greater than the greater of (A) the Origination
Debt Service Coverage Ratio, and (B) the Debt Service Coverage Ratio immediately
prior to the Substitution and (ii) the Debt Service Coverage Ratio for the
twelve month period immediately preceding the second calendar month prior to the
Substitution Release with respect to the Substitute
12
Property is equal to or greater than the greater of (A) the Debt Service
Coverage Ratio at origination with respect to the Release Premises being
replaced by the Substitute Property and (B) the Debt Service Coverage Ratio
immediately prior to the Substitution with respect to the Release Premises being
replaced by the Substitute Property.
(23) current UCC, judgment, bankruptcy and pending litigation searches with
respect to the Substitute Property and the related Borrower in the state where
the Substitute Property is located and the jurisdictions where such person has
its principal place of business.
(24) a franchisor estoppel and recognition letter from the franchisor under
the Franchise Agreement for the Substitute Property in a form and substance
which would be satisfactory to a prudent institutional mortgage lender.
(25) a certified copy of (i) the operating lease for the Substitute
Property between the related Borrower and Operating Tenant or (ii) an amendment
to the Operating Lease to include the Substitute Property, in either case in a
form and substance which would be satisfactory to a prudent institutional
mortgage lender, together with a Subordination, Non-Disturbance and Attornment
Agreement with respect to such operating lease.
(26) a certified copy of (i) the management agreement for the Substitute
Property between Operating Tenant and Manager or (ii) an amendment to the
Management Agreement to include the Substitute Property, in either case in a
form and substance which would be satisfactory to a prudent institutional
mortgage lender together with an Assignment of Management Agreement and
Subordination of Management Fees in the same form and substance as with respect
to the Release Premises and which comply with the terms of Section 3.13 of the
Security Instruments.
(27) a certificate of the related Borrower dated the date of the
substitution, certifying (i) the names and true signatures of the incumbent
officers of such person authorized to sign the applicable Loan Documents, (ii)
the by-laws of such person as in effect on the date of the substitution of the
Substitute Property, (iii) the resolutions of such person's board of directors
approving and authorizing the execution, delivery and performance of all Loan
Documents executed by such person, and (iv) that there have been no changes in
the certificate of incorporation of such person since the date of the most
recent certification thereof by the appropriate Secretary of State.
(28) certified copies of the most recent quality assurance reports or
similar reports of inspection or compliance from the franchisor under any
Franchise Agreement or Management Agreement (the "Quality Assurance Reports"),
-------------------------
if any.
(29) if the related Borrower owns a leasehold estate in the Substitute
Property, (i) a certified copy of the ground lease for the Substitute Property,
together with all amendments and modifications thereto and a recorded memorandum
thereof, which would be satisfactory to a prudent institutional mortgage lender
and which contains customary leasehold mortgagee provisions and protections, and
which shall provide, among other things, (A) for a remaining term of no less
than 25 years from the Maturity Date, (B) that the ground lease shall not be
terminated until Lender has received notice of a default thereunder and has had
a reasonable opportunity to cure or complete foreclosure, and fails to do so in
a diligent manner, (C) for a new lease on the same terms to the Lender as tenant
if the ground lease is terminated for any reason, (D) the non-merger of fee and
leasehold interests, and (E) that insurance proceeds and condemnation awards
(from the fee interest
13
as well as the leasehold interest) will be applied pursuant to the terms of the
Substitute Security Instrument, and (ii) a ground lease estoppel executed by the
fee owner and ground lessor of the Substitute Property, acceptable to Lender.
(30) such other certificates, opinions, documents and instruments relating
to the substitution reasonably requested by Lender, its counsel or the Rating
Agency, and all corporate and other proceedings and all other documents
(including, without limitation, all documents referred to herein and not
appearing as exhibits hereto) and all legal matters in connection with the
substitution shall be satisfactory in form and substance to Lender in its
reasonable discretion.
(31) if a Securitization has occurred, a Rating Confirmation.
(32) an Officer's Certificate certifying that the aggregate Allocated Loan
Amounts applicable to the total number of Release Premises which shall be the
subject of any Substitution Release pursuant to this Section shall not exceed
30% of the original principal balance of the Note.
(33) if a Low NOI Period exists, evidence satisfactory to Lender in its
sole discretion that, on the first Payment Date after giving effect to the
Substitution (the "Substitution Date"), the aggregate NOI and the Debt Service
Coverage Ratio would be greater than they were prior to such Substitution.
(34) if Borrower owns a leasehold rather than fee interest in the
Substitute Property, evidence of compliance with Lender's customary terms with
respect to leasehold mortgages, including, without limitation, the inclusion of
ground rents in the Escrow Fund pursuant to Section 3.5 of the Security
Instruments, which shall be incorporated into the Security Instrument
encumbering such Substitute Property.
(35) in the event that the jurisdiction in which a Substitute Property is
located imposes a mortgage recording, intangibles or similar tax and does not
permit the allocation of indebtedness for the purpose of determining the amount
of such tax payable, confirmation that the Note and other Loan Documents shall
be modified to reflect that the Loan shall be fully recourse to the Borrower
owning such Substitute Property.
(36) if, as a result of a Substitution, the Philadelphia Property will be
released from the lien of the applicable Security Instrument, evidence that (i)
the Austin Property must be released simultaneously from the lien of the
applicable Security Instrument (in accordance with the terms of Section 4.3 or
Section 5 hereof, as applicable) or (ii) the interest in BA Parkway Associates
II. L.P. held by CapStar AP Partners, L.P. must be simultaneously transferred to
an entity other than one of the Borrowers.
(37) if, as a result of a Substitution, the Madison Property will be
released from the lien of the applicable Security Instrument, evidence that (i)
all of the Properties owned by Meristar Secured Holdings LLC must be released
simultaneously from the lien of the applicable Security Instrument (in
accordance with the terms and subject to compliance with the requirements of
Section 5 hereof, as applicable) or (ii) the interest in the Borrower which owns
Madison Property held by Meristar Secured Holdings LLC must be simultaneously
transferred to an entity other than one of the Borrowers.
14
Simultaneously with compliance of the conditions set forth above in
this Section 5, Lender shall (i) release the lien of the related Security
Instrument with respect to the Release Premises being replaced with the
Substitute Property, and (ii) adjust the Allocated Loan Amounts as Lender deems
reasonably necessary to incorporate the Substitute Allocated Loan Amount.
Upon the substitution of a Substitute Property in accordance with the
terms and conditions of this Section 5, such Substitute Property shall be deemed
a Property, and the Substitute Allocated Loan Amount shall be deemed an
Allocated Loan Amount for all purposes under this Agreement.
6. Accounts and Reserves; Letter of Credit.
---------------------------------------
6.1 Property Accounts
-----------------
(1) Operating Tenant shall establish and maintain with respect to each
Property, an account or accounts for the receipt of all cash, receivables,
including without limitation credit card receivables and other revenues of any
kind derived from the operation of the Property (each, a "Property Account").
----------------
Each Property Account shall be an Eligible Account (defined below) in the name
of Operating Tenant as debtor and Borrower as secured party pursuant to the
Operating Lease Security Agreement (as defined in the Security Instruments).
Operating Tenant shall cause such depository institutions to deliver to Lender
quarterly statements of such accounts to Lender. Funds in the Property Accounts
shall not be commingled with any other monies at any time.
(2) So long as no default exists under the Operating Lease, the Property
Accounts shall be under the sole dominion and control of the Operating Tenants
which may use the same in its sole discretion.
(3) Pursuant to the Security Instruments, Borrower has pledged and/or
assigned to Lender, as additional security for the Loan, all of its right, title
and interest in and to the Property Accounts and the Operating Lease Security
Agreement.
(e) In the event that an Operating Lease is terminated for any reason
whatsoever and not immediately replaced with a Replacement Operating Lease (as
defined in the Security Instruments), in accordance with the terms of Section
3.7 of the Security Instruments, the Borrowers shall immediately establish and
maintain with respect to each Property, an account for the receipt of all cash,
receivables, including without limitation credit card receivables and other
revenues of any kind derived from the operation of the Property (each, a " Post-
-----
Termination Property Account"). Each Post-Termination Property Account shall be
----------------------------
an Eligible Account in the name of Lender as secured party. Borrower hereby
covenants and agrees that it shall (i) immediately upon the termination of the
Operating Lease, issue direction letters to all tenants, credit card companies
and other accounts receivable counterparties to make all payments directly to
the Deposit Account (ii) direct the Manager of the Property to immediately
transfer to the Post-Termination Property Account any funds received by Manager
in respect of the Property (iii) immediately transfer to the Post-Termination
Property Account any funds received by Borrower in respect of the Property and
(iv) on the last Business Day of each month, transfer all funds on deposit in
the Post-Termination Property Accounts to the Deposit Account.
6.2 Deposit Account.
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15
(1) Borrower shall establish and thereafter maintain with a financial
institution reasonably acceptable to Lender (the "Deposit Account Bank") an
--------------------
operating account (the "Deposit Account"), which shall be an Eligible Account in
---------------
the name of Lender as secured party and under the sole dominion and control of
Lender. Borrower shall have no right to make withdrawals from the Deposit
Account. The Deposit Account Bank and Borrower shall execute and deliver to
Lender on the Closing Date a Deposit Account Agreement which provides, inter
alia, that no party other than Lender shall have the right to withdraw funds
from the Deposit Account.
(2) (i) Borrower and Operating Tenant hereby acknowledge and agree that,
without prior written direction from Lender to the contrary, all rents and other
sums due under the Operating Lease shall be paid by Operating Tenant directly to
the Deposit Account.
(ii) Borrower hereby acknowledges that Lender shall transfer, on a
daily basis or otherwise in Lender's sole discretion, all sums on deposit
in the Post-Termination Property Accounts to the Deposit Account.
(3) On each Payment Date (as defined in the Note) or on such prior date as
the Deposit Account contains the sum applicable to such month of the amounts set
forth in subsections (i) through (x) below (any such prior date, an "Early
-----
Payment Date"), provided no Event of Default has occurred and is continuing,
------------
Lender shall transfer from the Deposit Account, to the extent available therein,
the following payments in the following order of priority (the "Waterfall
---------
Payments"); and provided, further, that any sums on deposit in the Deposit
--------
Account from the Early Payment Date up to but not including the next succeeding
Payment Date, after the Waterfall Payments are made, shall be distributed on a
daily basis to Borrower, provided no Event of Default has occurred and is
continuing and provided that a Low NOI Period does not exist (in which case such
amounts shall be distributed to the Reserve Account):
(2) to the Tax, Insurance and Ground Rents Escrow Account, the
amounts then required to be reserved pursuant to Section 3.5 of
the Security Instruments;
(3) to Lender, the Monthly Debt Service Payment Amount (as defined in
the Note);
(4) in the event that an Operating Lease is terminated, canceled or
surrendered and is not replaced with a Replacement Operating
Lease in accordance with the terms of Section 3.7 of the Security
Instruments, or in the event that the Operating Tenant is in
default under an Operating Lease and so long as a Low NOI Period
exists, to Borrower, an amount equal to the operating
expenditures approved by Lender in the applicable Annual Budget
(the "Budget Operating Amount") for the month immediately prior
-----------------------
to the month in which such Payment Date occurs, exclusive of any
Management Fees and Franchise Fees payable to Affiliates of the
REIT, but inclusive of amounts necessary to reimburse actual
third-party costs of such Property Managers, provided that (a) no
claims are then outstanding against any Borrower for the payment
of money which are delinquent for more than 60 days (in the event
that such claims are outstanding, Lender shall not be obligated
to disburse to Borrower the Budget Operating Amount)(except for
claims such Borrower is both contesting in good faith and as to
which such Borrower has escrowed 125%
16
of the amount thereof with Lender), and (b) the amounts disbursed
to a Borrower pursuant to this clause (iii) shall be used by such
Borrower solely to pay operating expenses properly allocable to
such month (the receipt by a Borrower on a Payment Date of funds
pursuant to this clause (iii) shall constitute a representation
and covenant by Borrower that the foregoing subclauses (a) and
(b) are true, accurate and complete, unless Borrower shall have
notified Lender of any inaccuracy therein prior to such Payment
Date). Cost savings from one line item in such Annual Budget may
be reallocated to other line items in such budget, provided that
without the consent of Lender, no such reallocation shall cause
an overall variance in the budget of more than 5%;
(5) in the event that an Operating Lease is terminated, canceled or
surrendered and is not replaced with a Replacement Operating
Lease in accordance with the terms of Section 3.7 of the Security
Instruments, or in the event that the Operating Tenant is in
default under an Operating Lease and so long as a Low NOI Period
exists, to Borrower, an amount equal to the Capital Expenditures
(as approved by Lender in the Annual Budget) for the month
immediately prior to the month in which such Payment Date occurs
(the "Budget Capital Amount"), to the extent that such Capital
---------------------
Expenditures exceed amounts required then to be on deposit in the
FF&E Reserve Account pursuant to Section 6(e) hereof, provided
that (a) no claims are then outstanding against a Borrower for
the payment of money which are delinquent for more than 60 days
(in the event that such claims are outstanding, Lender shall not
be obligated to disburse to Borrower the Budget Capital
Amount)(except for claims such Borrower is both contesting in
good faith and as to which such Borrower has escrowed 125% of the
amount thereof with Lender), and (b) the amounts disbursed to a
Borrower pursuant to this clause (iv) shall be used by such
Borrower solely to pay Capital Expenditures properly allocable to
such month (the receipt by such Borrower on a Payment Date of
funds pursuant to this clause (iv) shall constitute a
representation and covenant by Borrower that the foregoing
subclauses (a) and (b) are true, accurate and complete, unless
Borrower shall have notified Lender of any inaccuracy therein
prior to such Payment Date). Cost savings from one line item in
such budget may be reallocated to other line items in such
budget, provided that without the consent of Lender, no such
reallocation shall cause an overall variance in the budget of
more than 5%;
(6) to the FF&E Reserve Account, the amount described in Section 6.5;
(7) following the occurrence of any earthquake with respect to any
Property or Properties for which earthquake insurance is carried
pursuant to Article 3 of the Security Instruments, to the
Earthquake Deductible Account, an amount equal to the deductible
on such insurance policies applicable to such Property or
Properties;
(8) to Lender, an amount equal to all interest, costs, expenses, fees
and other amounts then due and payable under the Loan Documents,
other than amounts
17
paid to Lender pursuant to clause (ii) above or which would be
payable to Lender pursuant to clause (x) below;
(9) to any Property Managers which are not Affiliates of the REIT an
amount equal to the Management Fee then payable to each such
Manager, unless the payment of such Management Fee is the
obligation of the Operating Tenant;
(10) so long as no Event of Default exists, but if a Low NOI Period
exists, to the Reserve Account;
(11) so long as an Event of Default exists, to Lender, an amount equal
to interest accrued and unpaid under the Note at the excess of
the Default Rate over the Interest Rate;
(12) so long as no Event of Default or Low NOI Period exists, to a
single account of Borrower as Borrower may direct, from which
account Borrower shall first make payments to any Property
Managers which are Affiliates of the REIT, in an amount equal to
the Management Fee then payable to each such Property Manager and
to any Franchisors which are Affiliates of the REIT, in an amount
equal to the Franchise Fee then payable to each such Franchisor.
Notwithstanding anything herein to the contrary, the failure of Borrower to make
any of the payments required hereunder shall constitute an Event of Default. In
the event that on any Payment Date the amount in the Deposit Account shall be
insufficient to make all of the transfers described in Section 6.2(c)(i)-(x)
above, Borrower shall deposit into the Deposit Account on such Payment Date the
amount of such deficiency (without the need for any notice or demand from
Lender), and if Borrower shall fail to make such deposit, the same shall
constitute an Event of Default and, in addition to all other rights and remedies
provided for under the Loan Documents, Lender may disburse and apply the amounts
in the Deposit Account in such manner as Lender may determine. If on any
Payment Date the amount in the Deposit Account shall be sufficient to make all
of the transfers described in Section 6.2(c)(i)-(x), Borrower shall be deemed to
have paid such amounts on such Payment Date unless Lender is legally constrained
from transferring such amounts in accordance with such Section by reason of any
insolvency related to Borrower or any other event.
(d) Lender shall have the right to replace the Deposit Account Bank with
any other financial institution reasonably satisfactory to Borrower which will
promptly execute and deliver to Lender a Deposit Account Agreement (and Borrower
shall cooperate with Lender in connection with such transfer) in the event that
(i) at any time the short-term debt obligations of the Deposit Account Bank are
rated below "A-1" (or the equivalent) by any of the Rating Agencies or the long-
term debt obligations of the Deposit Account Bank are rated below "AA" by any of
the Rating Agencies, (ii) Lender reasonably determines that use of another
financial institution as the Deposit Account Bank would be advisable or
convenient in connection with a Securitization, or (iii) the Deposit Account
Bank fails to execute and deliver, or to comply with, the Deposit Account
Agreement.
6.3 Reserve Account.
---------------
18
(1) On or prior to the Closing Date, Borrower shall establish and
thereafter maintain with the Deposit Account Bank an account (the "Reserve
-------
Account") which shall be an Eligible Account in the name of Lender as secured
-------
party and under the sole dominion and control of Lender for the deposit of
amounts required to be deposited therein in accordance herewith. Borrower shall
have no right to make withdrawals from the Reserve Account. Funds in the
Reserve Account shall not be commingled with any other monies at any time.
(2) Lender shall release to the Deposit Account all amounts contained in
the Reserve Account on the first Payment Date after Borrower delivers to Lender
evidence reasonably satisfactory to Lender establishing that a Low NOI Period no
longer exists.
6.4 Tax, Insurance and Ground Rents Escrow Account.
----------------------------------------------
The provisions concerning the Escrow Fund (as defined in Section 3.5 of the
Security Instruments) for taxes, insurance and, if applicable, ground rents, are
set forth in such Section 3.5 of the Security Instruments.
6.5 FF&E Reserve Account.
--------------------
(1) Borrower shall establish and thereafter maintain with the Deposit
Account Bank an account (the "FF&E Reserve Account") which shall be an Eligible
--------------------
Account in the name of Lender as secured party and under the sole dominion and
control of Lender and into which Borrower shall (A) deposit on the Closing Date,
from the proceeds of the Loan or otherwise, an amount equal to the initial FF&E
Required Reserve Amount and (B) maintain thereafter, an amount equal to the
applicable FF&E Required Reserve Amount in each case as determined in accordance
with Section 6.5(b). In no event shall the amount on deposit in the FF&E
Reserve Account be less than the then applicable FF&E Required Reserve Amount at
any time during the term of the Loan.
(2) The FF&E Required Reserve Amount shall be reset on each Reference Date.
Beginning on each Reference Date, Borrower shall, to the extent the amount on
deposit in the FF&E Reserve Account is less than the then applicable FF&E
Required Reserve Amount, deposit into the FF&E Reserve Account an amount equal
to the positive difference between the then applicable FF&E Required Reserve
Amount and the FF&E Required Reserve Amount relating to the prior Reference
Date. To the extent the amount on deposit in the FF&E Reserve Account exceeds
the then applicable FF&E Required Reserve Amount, such excess shall be advanced
to Borrower to pay the costs of FF&E Expenditures for the subsequent Quarterly
Period, upon delivery by Borrower to Lender of an Officer's Certificate
certifying as to the amount of FF&E Expenditures (with, upon Lender's request,
copies of invoices and receipts attached to such certification) actually paid
during the previous Quarterly Period and that the FF&E Items and Work (defined
below) for which prior Quarterly FF&E Shortfall Amounts have been deposited into
the FF&E Reserve Account has been completed or can be completed with the funds
(not inclusive of the then applicable FF&E Required Reserve Amount) which remain
in the FF&E Reserve Account.
(3) (i) During each Quarterly Period, Borrower shall be required to (i)
make FF&E Expenditures in respect of the items and work (the
"FF&E Items and Work") generally described in the Annual Budget
-------------------
applicable to the calendar year containing such Quarterly Period
in an amount at least equal to the then applicable Quarterly FF&E
Reserve Amount less the FF&E Credit Xxxxxx,
00
if any, and (ii) deliver an Officer's Certificate to Lender no
later than the last day of such Quarterly Period certifying as
to (a) the amount of FF&E Expenditures (with copies of invoices
and receipts, with respect to invoices in excess of $25,000 from
any single contractor or trade, attached to such certification)
actually paid during such Quarterly Period and (b) the amount of
any Quarterly FF&E Credit Amount or any Quarterly FF&E Shortfall
Amount, as applicable, relating to such Quarterly Period.
(ii) To the extent there is a Quarterly FF&E Shortfall Amount with
respect to a Quarterly Period, then, beginning on the Payment
Date immediately following such Quarterly Period, Borrower shall
deposit into the FF&E Reserve Account an amount equal to such
Quarterly FF&E Shortfall Amount.
(iii) Borrower shall have no right to make withdrawals from the FF&E
Reserve Account. Funds in the FF&E Reserve Account shall not be
commingled with any other monies at any time.
(4) Borrower hereby agrees that the items and work described on Schedule 5
attached hereto shall be completed within the time periods set forth on such
schedule as part of the FF&E Items and Work for such time periods.
6.6 Deferred Maintenance and Environmental Compliance Reserve Account.
-----------------------------------------------------------------
(1) Borrower shall establish and thereafter maintain with the Deposit
Account Bank an account (the "Deferred Maintenance and Environmental Compliance
-------------------------------------------------
Reserve Account") which shall be an Eligible Account in the name of Lender as
---------------
secured party and under the sole dominion and control of Lender and into which
Borrower shall deposit on the Closing Date, from the proceeds of the Loan, an
amount equal to the Deferred Maintenance and Environmental Compliance Reserve
Amount. Borrower shall have no right to make withdrawals from the Deferred
Maintenance and Environmental Compliance Reserve Account. Funds in such Account
shall not be commingled with any other monies at any time.
(2) Borrower shall have the right to obtain disbursements from time to time
(but no more than once per calendar month) from the Deferred Maintenance and
Environmental Compliance Reserve Account, to reimburse Borrower for, or to pay
expenses incurred by any Borrower in remediating any Deferred Maintenance
Condition or Environmental Compliance, in each case on the following terms and
conditions:
(2) disbursements shall be made only to pay to contractors or vendors
or to other parties to whom funds are owing in connection with
such work or to reimburse Borrower in respect of any actual costs
of the work itemized in Schedule 6 attached hereto;
(3) each request for disbursement from the Deferred Maintenance and
Environmental Compliance Reserve Account shall specify the work
for which the disbursement is requested and shall include an
Officer's Certificate certifying that (i) all funds previously
disbursed from the Deferred Maintenance and Environmental
Compliance Reserve Account have been
20
applied by the applicable Borrower toward the expenses for which
they were disbursed and the Borrower has paid their remaining
share of all such expenses, and (ii) the funds being requested
will be applied to pay or reimburse for materials or work
permitted hereunder and done in accordance herewith;
(4) Lender shall have received from Borrower evidence reasonably
satisfactory to Lender, including lien waivers, if required by
Lender, that such Borrower has incurred such expenses and that
either (A) the materials for which the request is made are on
site at the applicable Property and are properly secured or have
been installed in the Property or (B) such request is in
connection with a deposit required pursuant to the terms of the
contract or contracts under which remediation work with respect
to a Deferred Maintenance Condition or Environmental Compliance
is being performed; and funds remaining in the Deferred
Maintenance and Environmental Compliance Reserve Account after
such disbursements will be, in Lender's reasonable judgment,
sufficient to pay the balance of the items contemplated to be
funded therefrom when required to be so paid, and, with respect
to invoices in excess of $25,000 from any single contractor or
trade, Lender shall receive copies of partial lien releases and
waivers from contractors, subcontractors and others with respect
to amounts for which Borrower have previously received
disbursements under this Section;
(5) Lender shall disburse from the Deferred Maintenance and
Environmental Compliance Reserve Account, or authorize such
disbursement, within five (5) Business Days after the receipt of
Borrower's request for such disbursement and the satisfaction of
the other conditions set forth above in this Section, the amount
requested by Borrower for such expenses.
(c) Borrower shall complete lien free and in a good and workmanlike
manner, all of the work itemized on Schedule 6 attached hereto within one (1)
year of the date hereof.
6.7 Earthquake Deductible Account.
-----------------------------
Borrower shall establish and thereafter maintain with the Deposit
Account Bank an account (the "Earthquake Deductible Account") which shall be an
-----------------------------
Eligible Account in the name of Lender and under the sole dominion and control
of Lender and into which shall be deposited, within thirty (30) days following
the occurrence of any earthquake which damages any Property or Properties for
which earthquake insurance is carried pursuant to Article III of the Security
Instruments (an "Earthquake Insurance Property"), amounts pursuant to Section
-----------------------------
6.2(c) above equal to the lesser of (i) the deductible on such insurance
policies applicable to such Property or Properties and (ii) the replacement cost
with respect to the actual damages to the Earthquake Insurance Property from
such earthquake. Borrower shall have no right to make withdrawals from the
Earthquake Deductible Account. Funds in the Earthquake Deductible Account shall
not be commingled with any other monies at any time.
At any time that an earthquake occurs with respect to an Earthquake
Insurance Property, the amounts in the Earthquake Deductible Account shall be
applied in accordance with the
21
terms of Section 4.3 of the Security Instruments with respect to such Property
or Properties at which such earthquake damage has occurred.
6.8 Account Collateral.
------------------
(1) Borrower hereby grants a perfected first-priority security interest in
favor of Lender in and to the Account Collateral as security for the Debt,
together with all rights of a secured party with respect thereto. Borrower
shall execute any additional documents that Lender in its reasonable discretion
may require and shall provide all other evidence reasonably requested by Lender
to evidence or perfect its first-priority security interest in the Account
Collateral.
(2) So long as no Event of Default shall be continuing, Borrower shall be
permitted to direct the investment of the funds from time to time held in the
Collateral Accounts in Permitted Investments and to sell and reinvest proceeds
from the sale or liquidation of Permitted Investments in other Permitted
Investments, with all such proceeds and reinvestments to be held in the
applicable Collateral Account; provided, however, that the maturity of an
adequate portion of the Permitted Investments on deposit in the Collateral
Accounts shall be no later than the Business Day immediately preceding the date
on which such funds are required to be withdrawn therefrom pursuant to this
Agreement. All income and gains from the investment of funds in the Collateral
Accounts shall be credited to the Collateral Accounts from which they were
derived. As between Borrower and Lender, Borrower shall treat all income, gains
and losses from the investment of amounts in the Collateral Accounts as its
income or loss for federal, state and local income tax purposes and Borrower
shall receive all benefit from such income.
(3) After the Loans and all other Debt have been paid in full, or in the
event of a Defeasance of the entire outstanding principal balance of the Note,
the Collateral Accounts shall be closed and the balances, if any, therein shall
be disbursed to Borrower.
6.9 Remedies. (a) In addition to other rights and remedies provided
--------
Lender elsewhere in this Agreement and the other Loan Documents, upon the
occurrence and during the continuance of an Event of Default, Lender may, in its
sole discretion, without notice or liability to Borrower, apply any or all
Account Collateral for any of the following purposes relating to the Properties,
the Loan or Borrower's obligations hereunder or under any other Loan Document,
in the following or any other order:
First: reimbursement of Lender for all losses and expenses (including
reasonable legal fees) actually suffered or incurred by such persons as a result
of such Event of Default;
Second: payment of any amount expended in exercising rights and remedies
available to Lender at law or in equity or under this Agreement or under any of
the other Loan Documents;
Third: payment of any other portion or portions of the Debt other than
principal and interest;
Fourth: payment of interest then due and payable on the Loans; and
Fifth: prepayment of the unpaid principal amount of the Loans and payment
of interest accrued thereon and any applicable Yield Maintenance Payments.
22
Notwithstanding the foregoing, after the occurrence and during the
continuation of an Event of Default, Lender may, in its sole discretion, cause
all or a portion of the Account Collateral to be applied toward payment of
operating expenses and/or Capital Expenditures.
(b) During a Low NOI Period, Lender may undertake, at Borrower's sole cost
and expense, property audits and inspections in addition to any such audits or
inspections otherwise permitted under the Loan Documents and to the extent any
such audits or inspections shall be consistent with Borrower's rights to conduct
same under the Operating Lease.
(c) During a Low NOI Period caused by a Bankruptcy Event with respect to
the Operating Tenant, Lender may, in addition to any other remedies available to
Lender, draw down on the Letter of Credit (defined below).
6.1 Letter of Credit.
----------------
(1) Borrower shall at all times maintain with Lender a Letter of Credit
(defined below) in an amount equal to the Letter of Credit Amount (defined
below). Borrower shall deliver to Lender (i) on the Closing Date, a Letter of
Credit in the Letter of Credit Amount and (ii) on the first Business Day of each
Letter of Credit Year (defined below), a Letter of Credit in an amount equal to
the Letter of Credit Amount, as the same may be adjusted pursuant to this
Section 6.10. Lender shall notify Borrower of any adjustment to the Letter of
Credit Amount forty-five (45) days prior to the commencement of each Letter of
Credit Year. The term "Letter of Credit" shall mean a transferable, clean,
----------------
irrevocable, unconditional standby letter of credit in form and substance
satisfactory to Lender in its sole discretion in the amount of the Letter of
Credit Amount, issued by a commercial bank (the "Issuing Bank") having a long-
------------
term credit rating of "AA" (or its equivalent) or better assigned by each of the
Rating Agencies (the "Minimum L/C Rating") and otherwise satisfactory to Lender
------------------
in its sole discretion. The Letter of Credit shall be payable upon presentation
of a sight draft only to the order of Lender at a New York City location and
shall have an initial expiration date not earlier than one (1) year from the
date of its issuance and shall provide for multiple draws. The Letter of Credit
shall be automatically renewed for successive twelve (12) month periods for the
term of the Loan. The Issuing Bank shall be obligated to deliver to Lender
forty-five (45) days' prior written notice of the expiration of such Letter of
Credit to the extent that such Letter of Credit is not renewed.
(2) Lender shall be entitled to draw immediately on the Letter of Credit
(i) if the Letter of Credit is not renewed forty-five (45) days prior to its
expiration date, (ii) if, in the event that the long-term credit rating of the
Issuing Bank falls below the Minimum L/C Rating, Borrower fails to deliver to
Lender within ten (10) Business Days thereof a Letter of Credit in an amount
equal to the Letter of Credit Amount from an Issuing Bank having a credit rating
of no less than the Minimum L/C Rating, (iii) upon the occurrence of a
Bankruptcy Event (as defined in the Loan Agreement) with respect to the
Operating Tenant, (iv) upon an Event of Default or (v) as described in Section
6.9(c) above, during a Low NOI Period caused by a Bankruptcy Event with respect
to the Operating Tenant.
(3) In addition to the rights of Lender set forth in the preceding
paragraph, in the event that Lender draws on a Letter of Credit, Borrower shall
deliver to Lender, within ten (10) Business Days of such draw, a new Letter of
Credit in an amount equal to the Letter of Credit Amount (unless a draw by
Lender is for less than the Letter of Credit Amount, in which case such new
Letter of Credit shall be in the amount of the amount of such draw by Lender)
issued by an Issuing Bank with the Minimum L/C Rating. Failure by Borrower to
do so shall constitute an Event of Default.
23
(4) Upon a draw by Lender of the Letter of Credit, all funds therefrom
shall be deposited into the Deposit Account and disbursed in accordance with the
terms and conditions of Section 6 of the Loan Agreement.
(5) So long as the rating assigned to Societe Generale, Southwest Agency
by each of the Rating Agencies does not fall below "AA-" (by Standard & Poor's)
and "Aa3" (by Moody's), Societe Generale, Southwest Agency shall constitute an
acceptable Issuing Bank for purposes of issuing the Letter of Credit.
"Letter of Credit Amount" shall mean, for any Letter of Credit Year
-----------------------
(defined below), the sum, of (i) the Monthly Debt Service Payment Amount (as
defined in the Note) for the first three (3) months of such Letter of Credit
Year and (ii) three (3) times the amount required to be escrowed for Taxes and
Insurance Premiums (each as defined in the Security Instruments) and ground
rents, if any, for the first month of such Letter of Credit Year. The Letter of
Credit Amount for the Letter of Credit Year commencing on the date hereof shall
be $9,750,000.
"Letter of Credit Year" shall mean the twelve (12) month period following
---------------------
the date hereof and each twelve (12) month period thereafter.
(f) If, in accordance with the terms of the Security Instruments, the
Operating Leases are terminated and either Replacement Operating Leases are
executed or the Properties are self-operated by the Borrowers, then provided
that the Borrowers and the Properties are in compliance with the terms of
Section 3.7 of the Security Instruments, no Event of Default exists and upon
delivery of a Rating Confirmation, Lender shall release and return the Letter of
Credit to the Borrowers.
7. Events of Default. The term "Event of Default" as used in this Agreement
----------------- ----------------
shall have the meaning ascribed to such term in the Note and the Security
Instruments. Notwithstanding any provision to the contrary contained herein
or in the other Loan Documents, the occurrence of a Low NOI Period shall
not, of itself, constitute an Event of Default.
8. Incorporation of Provisions. The Note, the Security Instruments and the
---------------------------
other Loan Documents are subject to the conditions, stipulations, agreements
and covenants contained herein to the same extent and effect as if fully set
forth therein until this Agreement is terminated by the payment in full of
the Debt.
9. Further Assurances. Borrower shall on demand of Lender do any act or
------------------
execute any additional documents reasonably required by Lender to confirm
the lien of the Security Instruments.
10. Representations and Warranties. Borrower represents and warrants to Lender
------------------------------
as follows:
(1) Borrower is duly qualified to do business in the States in which the
respective Properties are located unless such qualification is not necessary
pursuant to the applicable laws of the States.
24
(2) Borrower (and the undersigned representative, if any, of Borrower) has
the full power and authority to execute and deliver this Agreement and the Loan
Documents, and the same constitute the legal, valid and binding obligations of
Borrower.
(3) Borrower is not contemplating either the filing of a petition by it
under any state or federal bankruptcy or insolvency laws or the liquidation of
all or a major portion of such individual Borrower's assets or property, and no
individual Borrower has knowledge of any person contemplating the filing of any
such petition against it. For purposes of this provision, any knowledge of any
officer or director of (i) Borrower, (ii) the managing member (or general
partner, as the case may be) of Borrower, (iii) the REIT (as defined in the
Security Instruments), (iv) the Operating Partnership (as defined in the
Security Instruments) or (v) any other affiliate of Borrower shall be imputed to
Borrower.
(4) No statement of fact made by Borrower in this Agreement or in any of
the other Loan Documents contains any untrue statement of a material fact or
omits to state any material fact known to Borrower necessary to make statements
contained herein or therein not misleading. There is no fact presently known to
Borrower which has not been disclosed to Lender which materially and adversely
affects, nor as far as Borrower can foresee, would materially and adversely
affect, any of the Properties or the business prospects, operations or condition
(financial or otherwise) of Borrower.
(5) No part of the proceeds of the Loan will be used for the purpose of
purchasing or acquiring any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or for any other purpose
which would be inconsistent with such Regulation U or any other Regulations of
such Board of Governors, or for any purposes prohibited by Legal Requirements or
by the terms and conditions of this Agreement or the other Loan Documents.
11. Construction of Agreement. The titles and headings of the paragraphs of
-------------------------
this Agreement have been inserted for convenience of reference only and are
not intended to summarize or otherwise describe the subject matter of such
paragraphs and shall not be given any consideration in the construction of
this Agreement. Any of the schedules attached hereto which are not
referenced herein are referenced in the Security Instruments.
12. Parties Bound, Etc. The provisions of this Agreement shall be binding
------------------
upon and inure to the benefit of Borrower, Lender and their respective
heirs, executors, legal representatives, successors and assigns (except as
otherwise prohibited by this Agreement).
13. Waivers. Lender may at any time and from time to time waive any one or
-------
more of the conditions contained herein, but any such waiver shall be
deemed to be made in pursuance hereof and not in modification thereof, and
any such waiver in any instance or under any particular circumstance shall
not be considered a waiver of such condition in any other instance or any
other circumstance.
14. Governing Law. (i) This Agreement shall be deemed to be a contract entered
-------------
into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with
the laws of the State of New York, provided however, that with respect to
the creation, perfection, priority and enforcement of the lien of the
Security Instruments, and the determination of deficiency judgments, the
laws of the State where the related Property is located shall apply.
25
(ii) Any legal action or proceeding with respect to this Agreement or
any other Loan Document and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, Borrower hereby accepts, each for
itself and in respect of its property, generally and unconditionally, the non-
exclusive jurisdiction of the aforesaid courts and appellate courts from any
thereof. Borrower irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to Borrower at
its address set forth in Article 15 of the Security Instruments. Borrower hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement or any other Loan Document brought in the
courts referred to above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum. Nothing herein shall
affect the right of Lender, to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against Borrower in
any other jurisdiction.
15. Severability. If any term, covenant or provision of this Agreement shall
------------
be held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such term, covenant or provision.
16. Notices. All notices required to be given under the terms of this
-------
Agreement shall be given in accordance with and to the addresses set forth
in Article 15 of the Security Instruments.
17. Fees and Expenses. Borrower shall pay to Lender, upon demand, all
-----------------
expenses incurred by Lender in connection with the collection of the Debt,
the enforcement of the Loan Documents, and in curing any defaults under the
Loan Documents (including, without limitation, reasonable attorneys' fees,
which shall include attorney's fees incurred in any trial, appellate or
bankruptcy proceeding), with, if any such expenses are past due, interest
thereon at a rate per annum equal to the rate of interest payable pursuant
to the Note, provided that such interest rate shall in no event exceed the
maximum interest rate which Borrower may by law pay, from the date of
payment by Lender to the date of payment to Lender, which sums and interest
shall be secured by the Security Instruments.
18. Modification. This Agreement may not be modified, amended or terminated,
------------
except by an agreement in writing executed by the parties hereto.
19. No Oral Agreements. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND
------------------
CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES
TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU
(BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT,
ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS
WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN US, EXCEPT AS WE MAY AGREE IN WRITING TO MODIFY IT.
20. Contribution.
------------
26
(a) As a result of the transactions contemplated by this Agreement, each
Borrower will benefit, directly and indirectly, from the Obligations (as defined
in the Security Instruments) and in consideration therefor desire to enter into
an allocation and contribution agreement among themselves as set forth in this
Section 20 to allocate such benefits among themselves and to provide a fair and
equitable agreement to make contributions among each of the Borrowers in the
event any payment is made by any individual Borrower hereunder to the Lender
(such payment being referred to herein as a "Contribution," and for purposes of
------------
this Section 20, includes any exercise of recourse by the Lender against any
Collateral of a Borrower and application of proceeds of such Collateral in
satisfaction of such Borrower's obligations, to the Lender under the Loan
Documents).
(b) Each Borrower shall be liable hereunder with respect to the Obligations
only for such total maximum amount (if any) that would not render its
Obligations hereunder or under any of the Loan Documents subject to avoidance
under Section 548 of the Bankruptcy Code or any comparable provisions of any
state law.
(c) In order to provide for a fair and equitable contribution among the
Borrowers in the event that any Contribution is made by an individual Borrower
(a "Funding Borrower"), such Funding Borrower shall be entitled to a
----------------
reimbursement Contribution ("Reimbursement Contribution") from all other
--------------------------
Borrowers for all payments, damages and expenses incurred by that Funding
Borrower in discharging any of the Obligations, in the manner and to the extent
set forth in this Section. The amount of any Reimbursement Contribution
hereunder shall be equal to the payment made by the Funding Borrower to the
Lender or any other beneficiary pursuant to this Agreement and shall be
determined as of the date on which such payment is made.
(d) For purposes hereof, the "Benefit Amount" of any individual Borrower as
--------------
of any date of determination shall be the net value of the benefits to such
Borrower and its affiliates from extensions of credit made by the Lender to (a)
such Borrower and (b) to the other Borrowers hereunder and the Loan Documents to
the extent such other Borrowers have guaranteed or mortgaged their Properties to
secure the Obligations of such Borrower to the Lender.
(e) Each Borrower shall be liable to a Funding Borrower in an amount equal
to the greater of (A) the (i) ratio of the Benefit Amount of such Borrower to
the total amount of Obligations, multiplied by (ii) the amount of Obligations
paid by such Funding Borrower, or (B) 95% of the excess of the fair saleable
value of the property of such Borrower over the total liabilities of such
Borrower (including the maximum amount reasonably expected to become due in
respect of contingent liabilities) determined as of the date on which the
payment made by a Funding Borrower is deemed made for purposes hereof (giving
effect to all payments made by other Funding Borrowers as of such date in a
manner to maximize the amount of such Contributions).
(f) In the event that at any time there exists more than one Funding
Borrower with respect to any Contribution (in any such case, the "Applicable
----------
Contribution"), then Reimbursement Contributions from other Borrowers pursuant
------------
hereto shall be allocated among such Funding Borrowers in proportion to the
total amount of the Contribution made for or on account of the other Borrowers
by each such Funding Borrower pursuant to the Applicable Contribution. In the
event that at any time any Borrower pays an amount hereunder in excess of the
amount calculated pursuant to Section 20(c) above, that Borrower shall be deemed
to be a Funding Borrower to the extent of such
27
excess and shall be entitled to a Reimbursement Contribution from the other
Borrowers in accordance with the provisions of this Section.
(g) The Borrowers acknowledge that the right to Reimbursement Contribution
hereunder shall constitute an asset in favor of the Borrower to which such
Reimbursement Contribution is owing.
(h) No Reimbursement Contribution payments payable by a Borrower pursuant
to the terms of this Section 20 shall be paid until all amounts then due and
payable by all of the Borrowers to the Lender, pursuant to the terms of the Loan
Documents, are paid in full in cash. Nothing contained in this Section 20 shall
limit or affect in any way the Obligations of any Borrower to Lender under this
Note or any other Loan Documents.
21. Definitions. Capitalized terms not defined herein shall have the meaning
-----------
set forth in the Security Instruments. In addition to the foregoing, the
word "person" shall include an individual, corporation, partnership,
limited liability company, trust, unincorporated association, government,
governmental authority and any other entity.
"Account Collateral" means, collectively, the Collateral Accounts and
------------------
all sums at any time held, deposited or invested therein, together with any
interest or other earnings thereon, and all proceeds thereof (including, without
limitation, proceeds of sales and other dispositions), whether accounts, general
intangibles, chattel paper, deposit accounts, instruments, documents or
securities.
"Affiliate" shall mean a Person or Persons directly or indirectly,
---------
through one or more intermediaries, Controlling, Controlled by or under common
Control with the Person or Persons in question.
"Allocated Loan Amount" Means, with respect to any Property, the
---------------------
portion of the Loan allocated thereto, as set forth on Schedule A hereto.
"Bankruptcy Event" shall mean (i) the commencement by Operating Tenant
----------------
of any case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or if Operating Tenant shall make a general assignment for the benefit
of its creditors; or (ii) if there shall be commenced against Operating Tenant
any case, proceeding or other action of a nature referred to in clause (i) above
which results in the entry of an order for relief or any such adjudication or
appointment and is not dismissed within sixty (60) days of the entry of such
order.
"Capital Expenditures" means, with respect to each Property, hard and
--------------------
soft costs incurred by the related Borrower with respect to replacements and
capital repairs made to such Property (including, without limitation, repairs
to, and replacements of, the structural components, roofs, building systems,
parking garages and parking lots, and additions to, and replacements of, FF&E),
in each case to the extent such items are capitalized in accordance with GAAP.
28
"Code" means the United States Internal Revenue Code of 1986, as
----
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"Collateral Accounts" means, collectively the Post-Termination
-------------------
Property Accounts, the Deposit Account, the Tax, Insurance and Ground Rents
Escrow Account, the FF&E Reserve Account, the Deferred Maintenance and
Environmental Compliance Reserve Account, the Reserve Account, the Personal
Property Account (as defined in the Security Instruments) and Borrower's
interest in the Property Accounts,
"Control" shall mean, with respect to a Person that is a corporation,
-------
the right to exercise, directly or indirectly, more than fifty percent (50%) of
the voting rights attributable to the shares of the controlled corporation,
including the ability to exercise a veto, and, with respect to a Person that is
not a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the controlled
Person. "Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Closing Date" shall mean August 12, 1999.
------------
"Cooperation Agreement" shall mean that certain Mortgage Loan
---------------------
Cooperation Agreement dated as of the date hereof among, inter alia, Borrower
----- ----
and Lender.
"Debt Service Coverage Ratio" shall mean, as of any Payment Date, a
---------------------------
ratio in which (a) the numerator is the NOI for the Properties for the complete
12-month period immediately preceding the first day of the second calendar month
prior to such Payment Date multiplied by the remaining term of the Loan
(expressed in terms of the number of years and partial years until the Maturity
Date(as defined in the Note)) and (b) the denominator is the sum of all payments
of interest and principal due under the Note for the remaining term of the Loan
(exclusive of (i) any balloon payment due on the Maturity Date pursuant to the
amoritzation schedule attached to the Note and (ii) any debt service with
respect to any Defeased Note or Defeased Notes) prior to the Maturity Date. The
"Origination Debt Service Coverage Ratio" shall be 2.34x.
"Defeasance Collateral" shall mean non-callable securities evidencing
---------------------
an obligation to pay principal and interest in a full and timely manner that are
(i) direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person Controlled
or supervised by and acting as an agency or instrumentality of and guaranteed as
a full faith and credit obligation by the United States of America, which in
either case are not callable or redeemable at the option of the issuer thereof
(including a depository receipt issued by a bank (as defined in Section 3(a)(2)
of the Securities Act) as custodian with respect to any such securities or a
specific payment of principal of or interest on any such securities held by such
custodian for the account of the holder of such depository receipt; provided
--------
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the securities or the
specific payment of principal of or interest on the securities evidenced by such
depository receipt).
"Deferred Maintenance and Environmental Compliance Reserve Amount"
----------------------------------------------------------------
shall mean $2,761,599.
29
"Eligible Account" shall mean (i) an account or account maintained
----------------
with a federal or state-chartered depository institution or trust company which
complies with the definition of Eligible Institution, or (ii) a segregated trust
account or accounts maintained with the corporate trust department of a federal
depository institution or state-chartered depository institution subject to
regulations regarding fiduciary funds on deposit similar to Title 12 of the Code
of Federal Regulations Section 9.10(b) which, in either case, has corporate
trust powers, acting in its fiduciary capacity.
"Eligible Institution" shall mean an institution whose (i) short-term
--------------------
debt obligations are rated at least "A-1+" (or the equivalent) by each Rating
Agency, if the deposits are to be held in the account for thirty (30) days or
less, or (ii) long-term senior unsecured debt obligations are rated at least
"AA" (or the equivalent) by each Rating Agency, if the deposits are to be held
in the account for more than thirty (30) days.
"Environmental Indemnity" shall mean that certain Environmental
-----------------------
Indemnity Agreement delivered to Lender in connection with the closing of the
Loan.
"Expenses" shall mean, for purposes of calculating NOI with respect to
--------
any Property, for any given period (and shall include the pro rata portion for
such period of all such expenses attributable to, but not paid during, such
period), all expenses, as determined in accordance with the Uniform System of
Accounts, during that period in connection with the operation of such Property
for which it is to be determined, including without limitation (and without
duplication):
1. expenses for cleaning, repair, maintenance, decoration and
painting of the Property (including, without limitation, parking lots and
roadways), net of any insurance proceeds in respect of any of the foregoing;
2. wages (including overtime payments), benefits, payroll taxes and
all other related expenses for Borrower's on-site personnel, up to and including
(but not above) the level of the on-site manager, engaged in the repair,
operation and maintenance of the Property and service to tenants and on-site
personnel engaged in audit and accounting functions performed by Borrower;
3. management fees equal to the greater of (i) the management fee
pursuant to the Management Agreement (as defined in the Security Instruments)
and (ii) four percent (4%) of Gross Income. Such fees shall include all fees for
management services whether such services are performed at such Property or off-
site;
4. franchise fees, reservation fees, national sales and marketing
fees and other royalties or similar payments equal to the greater of (i) such
fees and payments due under the Franchise Agreement (as defined in the Security
Instruments) and (ii) five percent (5%) of Gross Income;
5. the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, utility or similar item and
the cost of building and cleaning supplies;
6. the cost of any leasing commissions and tenant concessions and
improvements payable by Borrower pursuant to any Leases which are in effect for
such Property during such period as such amounts are recognized in accordance
with the Uniform System of Accounts, provided
30
however that in no event less than on a straight line basis during the remaining
respective base term (excluding extension, renewal or other option);
7. Insurance Premiums (as defined in the Security Instruments);
8. legal, accounting and other professional fees and expenses;
9. the cost of all equipment to be used in the ordinary course of
business, which is not capitalized in accordance with the Uniform System of
Accounts;
10. Taxes and Other Charges (as such terms are defined in the
Security Instruments);
11. advertising and other marketing costs and expenses;
12. casualty losses to the extent not reimbursed by a third party;
13. all amounts that are reserved for hereunder and the Security
Instruments, including those funds which are deposited into the FF&E Reserve
Account or would be required to be deposited in the FF&E Reserve Account in the
event the FF&E Reserve Account is not yet established;
14. all amounts that are required to be reserved for under the
Operating Lease, including the Capital Expenditure Reserve (as defined in the
Operating Lease), to the extent such amounts are not duplicative of the amounts
set forth in clause (M) above; and
15. a furniture, fixtures and equipment reserve equal to the greater
of (i) such reserves required under the Management Agreement and the Franchise
Agreement and (ii) five percent (5%) of Gross Income, to the extent such amounts
are not duplicative of the amounts set forth in clause (M) above.
Notwithstanding the foregoing, Expenses shall not include (i) depreciation
or amortization or any other non-cash item of expense unless approved by Lender;
(ii) interest, principal, fees, costs and expense reimbursements of Lender in
administering the Loan but not in exercising any of its rights under this
Agreement or the other Loan Documents; or (iii) any expenditure (other than
leasing commissions, tenant concessions and improvements and replacement
reserves) which is properly treatable as a capital item under the Uniform System
of Accounts.
"FF&E" shall mean fixtures, furniture and Personal Property (as
----
defined in the Security Instruments).
"FF&E Credit Amount" shall mean, with respect to any Quarterly Period,
------------------
the amount by which (a) the FF&E Expenditures during such Quarterly Period
exceeds (a) the Quarterly FF&E Reserve Amount applicable to such Quarterly
Period.
"FF&E Expenditures" shall mean, with respect to any period, the
-----------------
amounts spent by Borrower in respect of FF&E for the Properties but shall in no
event include amounts spent in respect of Deferred Maintenance and Environmental
Remediation Conditions.
31
"FF&E Required Reserve Amount" shall mean an amount equal to the
----------------------------
product of (x) one twelfth (1/12) and (y) four percent (4%) and (z) gross income
derived from the operation of the Properties, including, without limitation,
rents and accounts receivable during the twelve-month period immediately
preceding the first day of the second month immediately preceding the Payment
Date for which such amount is calculated.
"Franchise Fee" shall mean the fee payable to a Franchisor pursuant to
-------------
a Franchise Agreement.
"Guarantors" shall mean the guarantors pursuant to that certain
----------
Guaranty of Recourse Obligations dated as of the date hereof.
"Gross Income" shall mean, for purposes of calculating NOI with
------------
respect to any Property for any given period, the gross income derived from the
operation of such Property for such period.
"Legal Requirements" shall mean:
------------------
(a) all governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental
Authorities (including, without limitation, Environmental Laws)
affecting an Borrower or a Property or any part thereof or the
construction, ownership, use, alteration or operation thereof, or any
part thereof (whether now or hereafter enacted and in force),
(b) all permits, licenses and authorizations and regulations
relating thereto, and
(c) all covenants, conditions and restrictions contained in any
instruments at any time in force (whether or not involving
Governmental Authorities) affecting a Property or any part thereof
which, in the case of this clause (iii), require repairs,
modifications or alterations in or to a Property or any part thereof,
or in any material way limit or restrict the existing use and
enjoyment thereof.
"Lien" shall mean any mortgage, deed of trust, security title and/or
----
security interest through a security deed, lien (statutory or other), pledge,
hypothecation, assignment, preference, priority, security interest, or any other
encumbrance or charge on or affecting a Property or any portion thereof or an
Borrower, or any interest therein (including, without limitation, any
conditional sale or other title retention agreement, any sale-leaseback, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement or similar instrument under the
Uniform Commercial Code or comparable law of any other jurisdiction, domestic or
foreign, and mechanics', materialmen's and other similar liens and
encumbrances).
"Low NOI Period" shall mean a period (i) beginning with a Payment Date
--------------
(the "Commencement Date") with respect to which (A)(I) NOI has been less than
$57,032,913 (the "Low NOI Amount") or (II) the Debt Service Coverage Ratio is
less than 1.5x (the "Low Debt Service Threshold") for the NOI/DS Test Period
ending on the second Payment Date preceding such Commencement Date or (B) a
Bankruptcy Event has occurred with respect to the Operating Tenant
32
since the immediately preceding Payment Date, and (ii) ending on, as applicable,
(A) the first Payment Date immediately following the last day of the NOI/DS Test
Period coinciding with the second consecutive fiscal quarter following the
applicable Commencement Date for which (I) Borrower can demonstrate to the
satisfaction of Lender that NOI has been greater than the Low NOI Amount or (II)
the Debt Service Coverage Ratio is greater than the Low Debt Service Threshold,
or (B) the last day of the calendar month in which a Bankruptcy Event no longer
exists with respect to the Operating Tenant.
"Management Fee" shall mean the fee payable to a Manager pursuant to
--------------
the terms of a Management Agreement.
"Mortgage Loan Borrowers" shall mean all of the Borrowers.
-----------------------
"NOI" as used herein shall mean, with respect to any Property, for any
---
given period, the Gross Income for such Property for such period less Expenses
attributable to such Property for such period, as more particularly described on
the operating statements for the Property delivered by Borrower or Operating
Tenant to Lender pursuant to the Security Instruments. NOI shall include only
Rents and Accounts Receivable actually earned by the applicable Operating Tenant
in accordance with the Uniform System of Accounts (as defined in the Security
Instruments) and such other income, including any rent loss or business
interruption insurance proceeds, laundry, parking, vending or concession income,
late fees, forfeited security deposits and other miscellaneous tenant charges
and Expenses actually paid or payable on an accrual basis attributable to such
Property on an annualized basis during the applicable period ending on the last
day of the month that is two calendar months prior to the month during which the
NOI is being calculated, as set forth on operating statements satisfactory to
Lender. NOI shall be calculated on an accrual basis in accordance with the
Uniform System of Accounts. Notwithstanding the foregoing, NOI shall not include
(a) condemnation or insurance proceeds (excluding rent or business interruption
insurance proceeds); (b) any proceeds from the sale, exchange, transfer,
financing or refinancing of all or any portion of the Property for which it is
to be determined, (c) amounts received from tenants as security deposits; or (d)
any other type of income otherwise includible in NOI but paid directly by any
tenant to a person or entity other than Borrower or Operating Tenant or their
respective agents or representatives, unless such amounts are included as an
Expense.
"NOI/DS Test Period" shall mean, with respect to any Payment Date
------------------
commencing with respect to the third Payment Date during the term of the Loan,
each successive twelve month period ending on a Payment Date.
"Officer's Certificate" shall mean a certificate made by an individual
---------------------
authorized to act on behalf of a Borrower pursuant to the organizational
documents of such Borrower.
"Optional Defeasance Date" means the earlier of (a) the third
------------------------
anniversary of the Closing Date and (b) the day after the second anniversary of
the "start-up day" (within the meaning of Section 860G(a)(9) of the Code) of the
REMIC Trust.
"Permitted Investments" shall mean the following, subject to
---------------------
qualifications hereinafter set forth:
33
1. Obligations of, or obligations guaranteed as to principal and
interest by, the U.S. government or any agency or instrumentality
thereof, when such obligations are backed by the full faith and
credit of the United States of America. These obligations
include, but are not limited to:
Treasury obligations (all direct or fully guaranteed US
obligations)
Farmers Home Administration Certificates of beneficial ownership
General Services Administration Participation certificates
Maritime Administration Guaranteed Title XI financing
Small Business Administration Guaranteed participation
certificates Guaranteed pool certificates
Department of Housing and Urban Development Local authority bonds
Washington Metropolitan Area Transit Authority Guaranteed transit
bonds
2. Obligations of government-sponsored agencies that are not backed
by the full faith and credit of the U.S., where the obligation is
limited to those instruments that have a predetermined fixed
dollar amount of principal due at maturity that cannot vary or
change. These obligations are limited to:
Federal Home Loan Mortgage Corp. (FHLMC)Debt obligations
Farm Credit System (formerly: Federal Land Banks, Federal
Intermediate Credit Banks, and Banks for
Cooperatives)Consolidated system wide bonds and notes
Federal Home Loan Banks (FHL Banks)Consolidated debt obligations
Federal National Mortgage Association (FNMA)Debt obligations
Student Loan Marketing Association (SLMA)Debt obligations
Financing Corp. (FICO)Debt obligations
Resolution Funding Corp. (REFCORP)Debt obligations.
3. Federal funds, unsecured certificates of deposit, time deposits,
banker's acceptances, and repurchase agreements having maturities
of not more than 365 days of any bank, the short-term debt
obligations of which are rated "A-1+" (or the equivalent) by each
Rating Agency.
4. Deposits that are fully insured by the Federal Deposit Insurance
Corp. (FDIC).
5. Debt obligations maturing in 365 days or less that are rated AAA
or higher (or the equivalent) by each Rating Agency.
6. Commercial paper rated "A-1+" (or the equivalent) by each Rating
Agency and maturing in 365 days or less.
7. Investments in certain short-term debt of issuers rated "A-1+"
(or the equivalent) by each Rating Agency may be permitted with
certain restrictions. The total amount of debt from "A-1+"
issuers must be limited to the investment of an amount equal to
Monthly Debt Service Payment Amount. The total amount of "A-1+"
investments should not represent more than twenty percent (20%)
of the rated issue's outstanding principal amount and each
investment should not mature beyond thirty (30) days. Investment
in "A-1+" (or the equivalent) rated securities
34
are not eligible for reserve accounts, cash collateral accounts,
or other forms of credit enhancement. Short-term debt for
purposes of this definition includes: commercial paper, federal
funds, repurchase agreements, unsecured certificates of deposit,
time deposits, and banker's acceptances.
8. Investment in money market funds rated "AAAm" or "AAAm-G" (or the
equivalent) by the Rating Agency.
9. Such other investments as shall be approved in writing by means
of a Rating Confirmation.
Notwithstanding the foregoing, "Permitted Investments": (i) shall exclude any
security with the Standard & Poor's "r" symbol (or any other Rating Agency's
corresponding symbol) attached to the rating (indicating high volatility or
dramatic fluctuations in their expected returns because of market risk), as well
as any mortgage-backed securities and any security of the type commonly known as
"strips"; (ii) shall not have maturities in excess of one year; (iii) as to the
investments described in (1), (2), (3), (4), (5), (6) and (7): the obligations
shall be limited to those instruments that have a predetermined fixed dollar of
principal due at maturity that cannot vary or change; interest may either be
fixed or variable; and any variable interest should be tied to a single interest
rate index plus a single fixed spread (if any), and move proportionately with
that index; and (iv) shall exclude any investment where the right to receive
principal and interest derived from the underlying investment provide a yield to
maturity in excess of 120% of the yield to maturity at par of such underlying
investment. No investment shall be made which requires a payment above par for
an obligation if the obligation may be prepaid at the option of the issuer
thereof prior to its maturity. All investments, other than those payable on
demand, shall mature or be redeemable upon the option of the holder thereof on
or prior to the earlier of (x) three (3) months from the date of their purchase
or (y) the Business Day preceding the day before the date such amounts are
required to be applied hereunder.
"Person" shall mean any individual, sole proprietorship, corporation,
------
general partnership, limited partnership, limited liability company or
partnership, joint venture, association, joint stock company, bank, trust,
estate, unincorporated organization, any federal, state, county or municipal
government (or any agency or political subdivision thereof), endowment fund or
any other form of entity.
"Property Manager" shall mean, with respect to any Property, the
----------------
Person named in the definition of "Qualified Manager" appointed in accordance
with Section 3.12 of the Security Instruments.
"Quarterly FF&E Credit Amount" shall mean, with respect to any
----------------------------
Quarterly Period, the amount by which (a) the amount of FF&E Expenditures during
such Quarterly Period exceeds (b) the Quarterly FF&E Reserve Amount applicable
to such Quarterly Period.
"Quarterly FF&E Reserve Amount" shall mean three times the applicable
-----------------------------
FF&E Required Reserve Amount.
"Quarterly Period" means, for each calendar year, each successive
----------------
three month period beginning on (and including) the Payment Date in October,
1999, provided, however, that the period from the date of closing through
September 30, 1999 shall be deemed to be a Quarterly Period for
35
purposes of Section 6.5 hereof and any calculations with respect to such
Quarterly Period shall be on a prorated basis.
"Quarterly FF&E Shortfall Amount" means, with respect to any Quarterly
-------------------------------
Period, the amount by which (a) the Quarterly FF&E Reserve Amount applicable to
such Quarterly Period exceeds (b) the amount of FF&E Expenditures during such
Quarterly Period plus any Quarterly FF&E Credit Amount applicable to such
period.
"Rating Agency (or, as the context requires, "Rating Agencies")" shall
--------------------------------------------------------------
mean each of Standard & Poor's Ratings Services, a division of the XxXxxx-Xxxx
Companies, Inc. ("Standard & Poor's"), Xxxxx'x Investors Service, Inc.
-----------------
("Moody's"), and any other nationally-recognized statistical rating agency from
-------
time to time selected by Lender and rating the Certificates issued in connection
with the Securitization.
"Rating Confirmation" With respect to the matter in question, shall
-------------------
mean that as a condition precedent thereto the Rating Agency shall have
confirmed in writing that (i)such investment, replacement, action or inaction
shall not result, in and of itself, in a downgrade, withdrawal or qualification
of any rating then assigned to any outstanding Certificates (if the
Securitization has occurred), or (ii)such investment, replacement, action or
inaction would not result, in and of itself, in a downgrade, withdrawal or
qualification of any rating for proposed Certificates then under consideration
by the Rating Agency (if the Securitization has not yet occurred).
"Reference Date" shall mean January 1, 2000 and the 1/st/ day of each
--------------
July and January thereafter.
"Release Amount" shall mean, for each Property, 125% of the Allocated
--------------
Loan Amount relating to such Property.
"REMIC" shall mean a "real estate mortgage investment conduit" within
-----
the meaning of Section 860D of the Code.
"REMIC Trust" shall mean a REMIC which holds any Note or Notes.
-----------
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time.
"Securitization" shall have the meaning set forth in the Cooperation
--------------
Agreement.
"Treasury Constant Yield" shall mean the arithmetic mean of the rates
-----------------------
published as "Treasury Constant Maturities" as of 5:00 p.m., New York time, for
the five Business Days preceding the date on which acceleration has been
declared, as shown on the USD screen of the Telerate service, or if such service
is not available, the Bloomberg service, or if neither the Telerate nor the
Bloomberg service is available, under Section 504 in the weekly statistical
release designated H.15519 (or any successor publication) published by the Board
of Governors of the Federal Reserve System, for "On the Run" U.S. Treasury
obligations corresponding to the Payment Date occurring on the Maturity Date; if
no such maturity shall so exactly correspond, yields for the two most closely
corresponding published maturities shall be calculated pursuant to the foregoing
sentence and the
36
Treasury Constant Yield shall be interpolated or extrapolated (as applicable)
from such yields on a straightline basis (rounding, in the case of relevant
periods, to the nearest month).
[NO FURTHER TEXT ON THIS PAGE]
IN WITNESS WHEREOF, Borrower and Lender have duly executed this
Agreement the day and year first above written.
BORROWERS
EQUISTAR IRVINE COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
CAPSTAR SACRAMENTO COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
MERISTAR DEL REY, L.L.C., a Delaware limited liability
company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
CAPSTAR SAN FRANCISCO COMPANY, L.L.C., a Delaware
limited liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
MERISTAR SECURED HOLDINGS LLC, a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
CAPSTAR ENGLEWOOD COMPANY, L.L.C, a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation., a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
EQUISTAR COLORADO COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
CAPSTAR LAFAYETTE COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
EQUISTAR SOMERSET COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
CAPSTAR ALBUQUERQUE COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
EQUISTAR CHARLOTTE COMPANY, L.L.C., a Delaware limited
liability company
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its managing
member
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
BA PARKWAY ASSOCIATES II, L.P., a Delaware limited
partnership
By: MeriStar PA SPE LLC, a Delaware limited liability
company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
An Xxxxx
Assistant Treasurer
EQUISTAR ARLINGTON PARTNERS, L.P., a Delaware limited
partnership
By: MeriStar SPE LLC, a Delaware limited liability
company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
An Xxxxx
Assistant Treasurer
CAPSTAR AP PARTNERS, L.P., a Delaware limited
partnership
By: MeriStar Austin SPE LLC, a Delaware limited
liability company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
An Xxxxx
Assistant Treasurer
CAPSTAR WESTCHASE PARTNERS, L.P., a Delaware limited
partnership
By: Westchase SPE LLC, a Delaware limited liability
company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
An Xxxxx
Assistant Treasurer
MERISTAR WEST LOOP, L.P., a Delaware limited
partnership
By: MeriStar SPE LLC, a Delaware limited liability
company, its general partner
By: MeriStar Hospitality Operating Partnership,
L.P., a Delaware limited partnership, its
managing member
By: MeriStar Hospitality Corporation, a
Maryland corporation, its general
partner
By: ___________________________________
An Xxxxx
Assistant Treasurer
MADISON MOTEL ASSOCIATES, LLP, a Wisconsin limited
liability partnership
By: MeriStar Hospitality Operating Partnership, L.P.,
a Delaware limited partnership, its limited
liability partner
By: MeriStar Hospitality Corporation, a Maryland
corporation, its general partner
By: ________________________________________
An Xxxxx
Assistant Treasurer
LENDER:
XXXXXX BROTHERS HOLDINGS, INC. d/b/a Xxxxxx Capital, a
division of Xxxxxx Brothers Holdings, Inc.
By: __________________________________________________
Name:
Title:
SCHEDULE A
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Property Borrower Allocated Loan Loan-to-Value
Amount Ratio
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1. Hilton Hotel Orange County EquiStar Irvine $18,010,000 53.8%
Airport Company, L.L.C.
Irvine, California
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2. Hilton Sacramento Arden CapStar Sacramento $18,810,000 53.7%
West Company, L.L.C.
Sacramento, California
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3. Courtyard by Marriott MeriStar Del Rey, L.L.C. $17,630,000 53.8%
Marina Del Rey, California
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4. Sheraton at Fisherman's CapStar San Francisco $53,380,000 53.8%
Wharf Company, L.L.C.
San Francisco, California
-----------------------------------------------------------------------------------------------------
5. Crowne Plaza MeriStar Secured $15,980,000 53.8%
San Jose, California Holdings LLC
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6. Embassy Suites Denver South CapStar Englewood $14,620,000 44.1%
Denver, Colorado Company, L.L.C.
-----------------------------------------------------------------------------------------------------
7. Sheraton Colorado Springs Equistar Colorado $14,510,000 53.7%
Colorado Springs, Company, L.L.C.
Colorado
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8. Holiday Inn Select New MeriStar Secured $13,060,000 53.7%
Orleans Airport Holdings LLC
Kenner, Louisiana
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9. Hilton & Towers CapStar Lafayette $11,400,000 53.8%
Lafayette, Louisiana Company, L.L.C.
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10. Hilton Hotel MeriStar Secured $ 8,920,000 53.7%
Grand Rapids, Michigan Holdings LLC
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11. Marriott Somerset EquiStar Somerset $31,290,000 53.8%
Somerset, New Jersey Company, L.L.C.
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12. Double Tree CapStar Albuquerque $10,370,000 53.7%
Albuquerque, New Mexico Company, L.L.C.
-----------------------------------------------------------------------------------------------------
13. Sheraton Airport Plaza Hotel EquiStar Charlotte $11,290,000 53.8%
Charlotte, North Carolina Company, L.L.C.
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14. Embassy Suites BA Parkway Associates
-----------------------------------------------------------------------------------------------------
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Property Borrower Allocated Loan Loan-to-Value
Amount Ratio
-----------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania II, L.P. $15,610,000 44.1%
-----------------------------------------------------------------------------------------------------
15. Hilton EquiStar Arlington $13,710,000 53.8%
Arlington, Texas Partners, L.P.
-----------------------------------------------------------------------------------------------------
16. Doubletree Austin CapStar AP Partners, L.P. $13,140,000 44.1%
Austin, Texas
-----------------------------------------------------------------------------------------------------
17. Hilton Inn Westchase & CapStar Westchase $18,600,000 53.8%
Towers Partners, L.P.
Houston, Texas
-----------------------------------------------------------------------------------------------------
18. Marriott Houston West Loop MeriStar West Loop, L.P. $20,960,000 53.7%
Houston, Texas
-----------------------------------------------------------------------------------------------------
19. Crowne Plaza Madison East Madison Motel $ 8,710,000 53.8%
Towne Associates, LLP
Madison, Wisconsin
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Total
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SCHEDULE 1
Note One Borrowers
EquiStar Irvine Company, L.L.C.
CapStar Sacramento Company, L.L.C.
MeriStar Del Rey, L.L.C.
CapStar San Francisco Company, L.L.C.
MeriStar Secured Holdings LLC
CapStar Englewood Company, L.L.C.
EquiStar Colorado Company, L.L.C.
CapStar Lafayette Company, L.L.C.
EquiStar Somerset Company, L.L.C.
CapStar Albuquerque Company, L.L.C.
EquiStar Charlotte Company, L.L.C.
EquiStar Arlington Partners, L.P.
CapStar Westchase Partners, L.P.
MeriStar West Loop, L.P.
Madison Motel Associates, LLP
SCHEDULE 2
Note Two Borrowers
BA Parkway Associates II, L.P.
CapStar AP Partners, L.P.
The Properties owned by the foregoing Note Two Borrowers are sometimes referred
to in the Loan Documents as the JV Properties.
SCHEDULE 3
San Xxxx Release
SCHEDULE 4
Diversity
"Geographic Diversity Threshold" shall mean that (i) the percentage of the
total net cash flow (on a trailing 12 month basis) of all of the Properties
which is derived from the Properties located in the State of California shall
not exceed __% [origination plus 5%], (ii) the percentage of the total net cash
flow (on a trailing 12 month basis) of all of the Properties which is derived
from the Properties located in the State of Texas shall not exceed __%
[origination plus 5%], and (iii) the percentage of the total net cash flow (on a
trailing 12 month basis) of all of the Properties which is derived from the
Properties located in any one State (other than California or Texas) shall not
exceed 15%.
"Franchise Diversity Threshold" shall mean that (i) there shall not be less than
the Minimum Number of Flags (defined below) represented among the Properties,
(ii) with respect to Properties operated under a Hilton Hotel franchise license,
the underwritten net cash flow, as determined be Lender, with respect to such
Properties shall not exceed 40% of such net cash flow of the Properties, (iii)
with respect to Properties operated under a Sheraton Hotel franchise license,
the underwritten net cash flow, as determined be Lender, with respect to such
Properties shall not exceed 37% of such net cash flow of the Properties, (iv)
with respect to Properties operated under a Marriott Hotel franchise license,
the underwritten net cash flow, as determined be Lender, with respect to such
Properties shall not exceed 29% of such net cash flow of the Properties, and
(v) with respect to Properties operated under any franchise license other than
Hilton or Sheraton, the underwritten net cash flow, as determined be Lender,
with respect to such Properties shall not exceed 15.5% of such net cash flow of
the Properties.
"Minimum Number of Flags" shall mean, in terms of actual flags rather than
franchise operators, the lesser of (i) six and (ii) the number of flags defined
as either "luxury" or "upscale" pursuant to Xxxxx Travel Reports.
SCHEDULE 5
PIPs
Schedule begins on next page.
SCHEDULE 6
Deferred Maintenance and Environmental Compliance
Schedule begins on next page.
SCHEDULE 7
Operating Tenants and Franchisors
(The following property nos. correspond to the property nos. on Schedule A)
------------------------------------------------------------------------------
Property Operating Tenants Franchisors
No.
------------------------------------------------------------------------------
1 MeriStar H&R Operating Hilton Inns, Inc.
Company, L.P. (the "MeriStar
Tenant")
------------------------------------------------------------------------------
2. MeriStar Tenant Hilton Inns, Inc.
------------------------------------------------------------------------------
3. AGH Leasing, L.P. (the "AGH Marriott International, Inc.
Tenant")
------------------------------------------------------------------------------
4. MeriStar Tenant ITT Sheraton Corporation
------------------------------------------------------------------------------
5. AGH Tenant Holiday Inns Franchising, Inc.
------------------------------------------------------------------------------
6. MeriStar Tenant Promus Hotels, Inc.
------------------------------------------------------------------------------
7. MeriStar Tenant ITT Sheraton Corporation
------------------------------------------------------------------------------
8. AGH Tenant Holiday Inns Franchising, Inc.
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9. MeriStar Tenant Hilton Inns, Inc.
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10. AGH Tenant Hilton Inns, Inc.
------------------------------------------------------------------------------
11. MeriStar Tenant Marriott International, Inc.
------------------------------------------------------------------------------
12. MeriStar Tenant Doubletree Systems, Inc.
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13. MeriStar Tenant ITT Sheraton Corporation
------------------------------------------------------------------------------
14. MeriStar Tenant Promus Hotels, Inc.
------------------------------------------------------------------------------
15. MeriStar Tenant Hilton Inns, Inc.
------------------------------------------------------------------------------
16. MeriStar Tenant Doubletree Hotel Systems, Inc.
------------------------------------------------------------------------------
17. MeriStar Tenant Marriott International, Inc.
------------------------------------------------------------------------------
18. AGH Tenant Hilton Inns, Inc.
------------------------------------------------------------------------------
19. AGH Tenant Holiday Inns Franchising, Inc.
------------------------------------------------------------------------------
EXHIBIT A
NOTICE OF REQUEST FOR RELEASE
[BORROWER]
______________________, 19_____
[LENDER]
Ladies and Gentlemen:
We refer to that certain mortgage loan made by [Lender] to us in the
original principal sum of $___________ secured by premises known as
____________________________, [City], [State], [_____________________________,
---- -----
[City], [State], and ________________________, [City], [State] evidenced by a
Note (the "Note") and secured by a [those certain] Mortgage(s)/Deed(s) of Trust
covering said premises ([collectively] the "Security Instruments") and Loan
Agreement made by and between us and Lender, each dated as of ________, 1999
(the "Loan"). All capitalized terms used herein shall have the same meanings
herein as they have in the Loan Agreement.
On or about ___________ ____, 19___ (the "Release Date"), we shall deliver
to you $__________, together with all other sums required under the Loan
Agreement.
In connection with the defeasance, we also request a Property Release of
the premises known as ________________________, [City], [State] (the "Release
Premises") pursuant to Section 3 of the Loan Agreement covering the Release
Premises. In order to induce you to make a Property Release of the Release
Premises from the lien of the related Security Instruments, the undersigned
hereby represents and certifies as follows:
20. No Event of Default has occurred and is continuing.
21. The Debt Service Coverage Ratio (as defined in the Loan Agreement) for the
Properties, after giving effect to the Property Release, shall be equal to
or greater than greater of (i) the Origination Debt Service Coverage Ratio
and the (ii) Debt Service Coverage Ratio for the Properties immediately
prior to the Property Release.
22. All legal, record, beneficial and economic interests of the Release
Premises shall, on the Release Date, simultaneously with the Property
Release, be transferred and conveyed to a Release Premises Transferee.
Borrower hereby request a Property Release of the Release Premises from the
lien of the Security Instrument and related Loan Documents.
[BORROWER]
