Exhibit 10.8
================================================================================
LOAN AGREEMENT
($220,000,000 Fixed Rate Public Company Loan)
Dated as of June __, 2004
between
THE BORROWERS NAMED HEREIN,
as Borrowers,
and
GERMAN AMERICAN CAPITAL CORPORATION
as Lender
Secured by:
The Properties Identified on Schedule B Hereto
================================================================================
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1. Definitions....................................................................................5
Section 1.2. Principles of Construction....................................................................36
ARTICLE II GENERAL
Section 2.1. The Loan .....................................................................................37
Section 2.2. Interest .....................................................................................39
Section 2.3. Loan Repayment................................................................................42
Section 2.4. Prepayment....................................................................................43
Section 2.5. Release of Properties.........................................................................48
ARTICLE III CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to the Loan..............................................................50
Section 3.2. Reliance Language.............................................................................54
ARTICLE IV REPRESENTATIONS AND WARRANTIES
Section 4.1. Borrowers' Representations....................................................................54
Section 4.2. Survival of Representations...................................................................70
ARTICLE V AFFIRMATIVE COVENANTS
Section 5.1. Covenants of the Borrowers....................................................................70
ARTICLE VI NEGATIVE COVENANTS
Section 6.1. Negative Covenants of the Borrowers...........................................................80
ARTICLE VII ALTERATIONS AND EXPANSIONS; LEASING
Section 7.1. Alterations and Expansions....................................................................88
Section 7.2. Leasing.......................................................................................91
ARTICLE VIII CASUALTY AND CONDEMNATION
Section 8.1. Insurance; Casualty and Condemnation..........................................................91
ARTICLE IX ACCOUNTS AND RESERVES
Section 9.1. Establishment and Maintenance of Cash Management Deposit Account.............................101
Section 9.2. Reserve Accounts.............................................................................102
Section 9.3. Tax and Insurance Escrow Account.............................................................110
i
Section 9.4. Disbursements from the Deposit Account and the Holding Account; Borrowers' Obligation
to Fund Deposit Account......................................................................112
Section 9.5. No Release if Event of Default Exists........................................................114
Section 9.6. Grant of Security Interest; Rights upon Default..............................................114
Section 9.7. Lender Not Responsible.......................................................................114
Section 9.8. Inspections; Undertaking of Work.............................................................115
Section 9.9. Bankruptcy...................................................................................115
ARTICLE X DEFAULTS
Section 10.1. Events of Default............................................................................116
Section 10.2. Remedies.................................................................................... 119
Section 10.3. Remedies Cumulative..........................................................................119
ARTICLE XI PROPERTY MANAGEMENT
Section 11.1. Property Management..........................................................................121
ARTICLE XII MISCELLANEOUS
Section 12.1. Survival.....................................................................................120
Section 12.2. Permitted Investments; Eligible Accounts; Eligible Institutions..............................121
Section 12.3. Governing Law; Consent to Jurisdiction.......................................................121
Section 12.4. Modification, Waiver in Writing..............................................................122
Section 12.5. Delay Not a Waiver...........................................................................122
Section 12.6. Notices......................................................................................123
Section 12.7. Trial by Jury................................................................................124
Section 12.8. Headings.....................................................................................124
Section 12.9. Severability.................................................................................124
Section 12.10. Preferences..................................................................................124
Section 12.11. Waiver of Notice.............................................................................124
Section 12.12. Remedies of Borrowers........................................................................124
Section 12.13. Expenses; Indemnity..........................................................................125
Section 12.14. Exhibits and Schedules Incorporated..........................................................126
Section 12.15. Offsets, Counterclaims and Defenses..........................................................126
Section 12.16. No Joint Venture or Partnership..............................................................126
Section 12.17. Publicity....................................................................................126
Section 12.18. Waiver of Marshalling of Assets..............................................................126
Section 12.19. Waiver of Counterclaim.......................................................................127
Section 12.20. Conflict; Construction of Documents..........................................................127
Section 12.21. Brokers and Financial Advisors...............................................................127
Section 12.22. No Third Party Beneficiaries.................................................................127
Section 12.23. Prior Agreements.............................................................................127
Section 12.24. Exculpation..................................................................................127
Section 12.25. Loan Assignability...........................................................................130
Section 12.26. Exculpation of Lender........................................................................130
ii
Section 12.27. Contribution Among Borrowers.................................................................130
Section 12.28. Joint and Several Obligations................................................................131
Section 12.29. Lender's Rights..............................................................................132
ARTICLE XIII SERVICE PROVIDERS
Section 13.1. Retention of Servicer, Securitization Trustee................................................132
Section 13.2. Rating Surveillance..........................................................................132
ARTICLE XIV SECURITIZATION
Section 14.1. Sale of Note and Securitization..............................................................135
Section 14.2. Cooperation with Rating Agencies.............................................................136
Section 14.3. Securitization Financial Statements..........................................................136
Section 14.4. Securitization Indemnification...............................................................137
iii
SCHEDULES
Schedule A - Borrowers
Schedule A-1 - Operating Lessees
Schedule B-1 - B-3 - Description of Mortgaged Premises
Schedule C - Allocated Loan Amounts
Schedule D - Property Managers and Brands
Schedule E - Intentionally Omitted
Schedule F - Material Agreements
Schedule G - Property Management Agreements
Schedule H - Unfunded Obligations
Schedule I - Form of Monthly Officer Certificate
Schedule 1.1 - Deferred Maintenance
Schedule 1.2 - Environmental Conditions
Schedule 3.1(o) - Schedule of Financial Statements and Operating Statements
Schedule 4.1(v) - Schedule of Temporary Certificates of Occupancy
Schedule 4.1(w) - Schedule of Properties in Flood Zones
Schedule 4.1(x) - Schedule of Engineering Reports, Environmental Reports and Seismic Reports
Schedule 4.1(ee) - Breaches of Material Agreements and Property Management Agreements
Schedule 4.1(gg) - Schedule of Occupancy Reports, Delinquency Reports, Tenant Security
Deposits and Letters of Credit and Tenant Arrearages
Schedule 4.1(ss) - Schedule of Sharing Agreements
Schedule 4.1(uu) - Schedule of Liquor Licenses
Schedule 4.1(ddd) - Corporate Structure
Schedule 6.1(g) - Zoning Exceptions
EXHIBITS
Exhibit A - Form of Disbursement Request
Exhibit B - Waiver of Prepayment Rights
Exhibit C - Pre-approved Transferees
iv
LOAN AGREEMENT, dated as of June __, 2004 (as amended,
restated, replaced, supplemented or otherwise modified from time to time in
accordance with the terms hereof, this "Agreement"), between EACH OF THE PARTIES
IDENTIFIED ON SCHEDULE A HERETO, as borrowers, and GERMAN AMERICAN CAPITAL
CORPORATION, as lender.
All capitalized terms used herein shall have the respective
meanings set forth in Section 1.1 hereof.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrowers desire to obtain the Loan from Lender and
secure the same by, among other things, each Borrower's interest in the real
property identified on Schedule B hereto;
WHEREAS, Lender is willing to make the Loan to the Borrowers,
subject to and in accordance with the terms of this Agreement and the other Loan
Documents;
NOW, THEREFORE, in consideration of the making of the Loan by
Lender and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:
ARTICLE I
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
---------------------------------------
Section 1.1. Definitions.
For all purposes of this Agreement, except as otherwise
expressly provided herein:
"Acceleration Prepayment Premium" shall mean an amount equal
to 1.0% of the Loan Amount prepaid, to be paid in accordance with Section 2.4.3
hereof.
"Acceptable Property Management Agreement" shall mean, with
respect to any Property, a new or amended Property Management Agreement with the
Property Manager of such Property as of the date hereof (as indicated on
Schedule D hereto) which agreement shall be upon terms and conditions no less
favorable to the applicable Borrower, Operating Lessee and Lender than those
contained in the Property Management Agreement with respect to such Property in
effect as of the Closing Date (provided, that Borrowers' and/or Operating
Lessees' entitlement to, and the timing of the receipt of, cash flows from such
Property and the cash management procedures with respect thereto shall not be
adversely affected) or any new or amended Property Management Agreement entered
into by any Borrower and/or Operating Lessee with respect to any Property in
accordance with the terms of Article XI hereof.
"Acceptable Property Manager" shall mean (i) with respect to
each Property, the current Property Manager and current brand as of the Closing
Date for such Property as indicated on Schedule D hereto and, at any time prior
to two years after the Closing Date, the property managers and brands listed
under "Acceptable Property Manager" for such Property on Schedule D hereto,
provided (x) each such property manager or brand continues to be Controlled by
substantially the same Persons Controlling such property manager or brand as of
the Closing Date (or if such Property Manager is a publicly traded company, such
Property Manager continues to be publicly traded on an established securities
market), and (y) such property manager has under management, at the time of its
engagement as Property Manager, not fewer than 20 first class full service
resort or business hotel properties (excluding the Properties) containing not
fewer than 5,000 hotel rooms in the aggregate; (ii) during such two-year period,
any Close Affiliate of any of the foregoing Persons with respect to a Property
(provided that such Close Affiliate continues to manage the same Property as the
Acceptable Property Manager of which it is a Close Affiliate (as indicated in
clause (i) above) and so long as such Affiliate continues to be Controlled by
substantially the same Persons Controlling such Close Affiliate as of the
Closing Date (or if such Close Affiliate is a publicly traded company, such
Close Affiliate continues to be publicly traded on an established securities
market)); or (iii) any other reputable and experienced professional hotel
management company (A) which, or a Close Affiliate of which, shall have at least
five years' experience in the management of hotel properties substantially
similar to the Properties, (B) which, or a Close Affiliate of which, shall have
under management, at the time of its engagement as Property Manager, not fewer
than 20 first class full service resort or business hotel properties (excluding
the Properties) containing not fewer than 5,000 hotel rooms in the aggregate,
and (C) with respect to which a Rating Confirmation has been obtained.
"Adjusted Operating Income" shall mean, for any specified
period, all income received by Borrowers and/or Operating Lessee (or by a
Property Manager for the account of a Borrower and/or an Operating Lessee) from
any Person during such period in connection with the ownership or operation of
the Properties, determined on an accrual basis of accounting determined in
accordance with GAAP, including the following:
(i) all revenues derived from rooms, food and
beverage, telecommunications, garage and parking, other operating
departments, services and rentals and other;
(ii) all amounts payable to any Borrower and/or any
Operating Lessee (or to a Property Manager for the account of any
Borrower and/or any Operating Lessee) pursuant to Operating Agreements
relating to any one or more of the Properties;
(iii) condemnation awards to the extent that such
awards are compensation for lost rent allocable to such specified
period;
(iv) business interruption and loss of "rental value"
insurance proceeds to the extent such proceeds are allocable to such
specified period; and
(v) all investment income with respect to the Reserve
Accounts.
Notwithstanding the foregoing clauses (i) through (iv),
Adjusted Operating Income shall not include (A) any condemnation or insurance
proceeds (other than of the types described in clauses (iii) and (iv) above),
(B) any proceeds resulting from the sale, exchange, transfer, financing or
refinancing of all or any part of any Property (other than of the types
described in clause (iii) above), (C) any repayments received from Tenants of
principal loaned or
6
advanced to Tenants by Borrowers, (D) any type of income that would otherwise be
considered Adjusted Operating Income pursuant to the provisions above but is
paid directly by any Tenant to a Person other than any Borrower, Operating
Lessee or Property Manager or its agent, and (E) any fees or other amounts
payable by a Tenant or another Person that are reimbursable to Tenant or such
other Person.
"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.
"Aggregate DSCR" shall mean, with respect to a particular
period, the ratio of Net Operating Income to Debt Service in respect of such
period (except that no principal payment shall be included in such calculation),
as computed by Lender from time to time, using in all cases an assumed loan
constant equal to the Interest Rate (which constant shall be calculated at all
times using a 30/360 accrual convention). If no such period is specified, then
the period shall be deemed to be the immediately preceding full 12 months.
"Aggregate Monthly FF&E Reserve Amount" shall mean, as of any
specified date the sum of the Monthly FF&E Reserve Amounts as of such date for
all of such Properties then subject to the Lien of the Mortgage.
"Aggregate Monthly Incentive Fee Reserve Amount" shall mean,
as of any specified date, the sum of the Monthly Incentive Fee Reserve Amounts
as of such date for all of the Properties then subject to the Lien of the
Mortgage.
"Agreements with Managers" shall mean, collectively, each of
those certain Agreements and Estoppels entered into as of the Closing Date by
each of the Property Managers, Lender and Borrowers.
"ALTA" shall mean American Land Title Association, or any
successor thereto.
"Allocated Loan Amount" shall mean the principal amount of the
Loan allocated to each Property as set forth on Schedule C hereto.
"Alteration" shall mean any demolition, alteration,
installation, improvement or decoration of or to a Property or any part thereof
or the Improvements (including FF&E) thereon (other than any of the foregoing
that (i) is permitted to be done and actually is done by or on behalf of the
applicable Property Manager without the consent of the applicable Borrower (it
being the intent of the parties that for this purpose amounts expended by a
Property Manager in respect of FF&E in the ordinary course of business from
amounts reserved for FF&E under the applicable Acceptable Property Management
Agreement shall be deemed not to be an Alteration), or (ii) is paid for out of
any Reserve Account described in Section 9.2.1(a), (f) or (h)).
"Annual Budget" shall mean the annual operating and capital
budget for each Property for any Fiscal Year setting forth, in reasonable
detail, (i) the relevant Borrower's good faith estimates of all Adjusted
Operating Income, (ii) all Operating Expenses, (iii) Management Fees and (iv)
Capital Expenditures.
7
"Appraisal" means an as-is MAI appraisal of a Property,
prepared not more than ninety (90) days (or such longer period as shall be
acceptable to Lender) prior to the Closing Date by (a) Hospitality Valuation
Services or (b) another member of the American Institute of Real Estate
Appraisers selected by Lender (or, if such appraiser is selected by Borrowers,
such appraiser shall be acceptable to Lender and shall have at least ten (10)
years' experience in evaluating and appraising properties similar in type and
geographic location as such Property), which appraisal shall meet the minimum
appraisal standards for national banks promulgated by the Comptroller of the
Currency pursuant to Title XI of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989, as amended (FIRREA).
"Approved Banks" shall mean banks or other financial
institutions which have (a) a minimum net worth of $500,000,000 or (b) total
assets of $5,000,000,000.
"Assignment of Agreements" shall mean each first priority
Assignment of Agreements, Licenses, Permits and Contracts dated as of the
Closing Date, from the applicable Borrower and Operating Lessee, as assignor, to
the Lender, as assignee, assigning to the Lender as security for the Loan, to
the extent assignable under law, all of such Borrower's and Operating Lessee's
interest in and to the Property Management Agreements, Operating Agreements,
Operating Leases, Material Agreements, including, without limitation, all other
licenses, permits and contracts necessary or desirable for the use and operation
of each of the Properties, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time pursuant to the provisions
thereof or of the other Loan Documents, in each case to the extent legally
assignable.
"Assignment of Leases" shall mean each Assignment of Leases,
Rents and Revenues, dated as of the Closing Date, from the applicable Borrower
and Operating Lessee, as assignor, to the Lender, as assignee, together with any
amendments thereto pursuant to the provisions thereof, assigning all the Leases
and Rents with respect to each Property.
"Bankruptcy Code" shall mean Title 11 of the United States
Code entitled "Bankruptcy" as the same may be amended, modified, succeeded or
replaced, from time to time.
"Basic Carrying Costs" shall mean the sum of the following
costs associated with the Properties: Taxes, Other Charges and Insurance
Premiums.
"Beneficial" when used in the context of beneficial ownership
has the analogous meaning to that specified in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended.
"Borrower" shall mean each of the parties identified on
Schedule A hereto, together with its successors and assigns as permitted
hereunder and which shall be collectively referred to herein as "Borrower" or
"Borrowers," but excluding any Borrower, all of the real property of which has
been released from the Lien of the Loan Documents pursuant to the provisions
thereof.
"Business Day" means any day other than (i) a Saturday and a
Sunday and (ii) a day on which federally insured depository institutions in the
State of New York or the state in which the offices of Lender, or any master
servicer, special servicer or trustee in connection with a Securitization are
located are authorized or obligated by law, governmental decree or executive
order to be closed.
8
"Capital Expenditures" means the hard and soft costs incurred
by the Borrowers with respect to replacements and capital repairs made to the
Properties (including, without limitation, repairs to, and replacements of, the
structural components, roofs, building systems, parking garages and parking
lots, but excluding additions to, and replacements of, FF&E) that are permitted
to be done and actually are directed to be done or done by the applicable
Property Manager without the consent of the applicable Borrower, unless the same
shall have been carried out or directed to have been carried out by the
applicable Property Manager at the request or upon the direction of a Borrower
or pursuant to items specifically provided for in a budget with respect to a
Property approved by a Borrower.
"Cash" shall mean coin or currency of the United States of
America or immediately available federal funds, including such funds delivered
by wire transfer.
"Cash and Cash Equivalents" shall mean (i) Cash, (ii) U.S.
Government Securities, (iii) interest bearing or discounted obligations of
federal agencies and government sponsored entities or pools of such instruments
offered by Approved Banks and dealers, including, without limitation, Federal
Home Loan Mortgage Corporation participation sale certificates, Government
National Mortgage Association modified pass-through certificates, Federal
National Mortgage Association bonds and notes, Federal Farm Credit System
securities (provided all of the obligations described in this clause (iii) shall
have a long-term unsecured debt rating of "AAA" by the Rating Agencies or backed
by the full faith and credit of the United States government for full and timely
payment), (iv) time deposits, domestic and Eurodollar certificates of deposit,
bankers acceptances or commercial paper rated at least A-1+ (or its equivalent)
by the Rating Agencies, and/or guaranteed by an entity having a long-term rating
at least equal to the Required Rating, (v) floating rate notes and other money
market instruments each issued by Approved Banks having a minimum long-term
senior unsecured debt rating from each of the Rating Agencies at least
equivalent to the Required Rating, (vi) obligations issued by state and local
governments or their agencies, carrying a rating at least equal to the Required
Rating and/or guaranteed by an irrevocable letter of credit of an Approved Bank
having a long-term senior unsecured debt rating of at least AA- from each of the
Rating Agencies (provided that if the scheduled maturity of any such obligation
is more than six (6) months after the date of purchase by Borrowers or Lender
and such obligation is guaranteed by a letter of credit, the letter of credit
guaranteeing such obligation must be issued by an Approved Bank having a
long-term senior unsecured debt rating of at least AA- from each of the Rating
Agencies), (vii) repurchase agreements with major banks and primary government
securities dealers fully secured by U.S. government or agency collateral with a
value equal to or exceeding the principal amount on a daily basis and held in
safekeeping (provided that at the time of purchase the counterparty to such
repurchase agreement must have a long-term senior unsecured debt rating at least
equal to the Required Rating), and (viii) investments in money market funds and
money market mutual funds all the assets of which are comprised of investments
described in clauses (i) through (vii) above, and (ix) any other investment
which the Rating Agencies confirm in writing will not in and of itself result in
a downgrading or withdrawal of any of the ratings then assigned to any Notes.
Except as otherwise provided in this definition, Cash and Cash Equivalents shall
not include any investments commonly known as "derivatives", any investments
requiring a payment above par for an obligation, and under no circumstances
shall Cash and Cash Equivalents include interest-only strips. Any investment in
Cash and Cash Equivalents shall have a maturity date not later than one Business
Day prior to the date that the proceeds therefrom are required hereunder.
9
"Casualty" means a fire, explosion, flood, collapse,
earthquake or other casualty affecting any Property.
"Close Affiliate" shall mean with respect to any Person (the
"First Person") any other Person (each, a "Second Person") which is an Affiliate
of the First Person and in respect of which any of the following are true: (a)
the Second Person owns, directly or indirectly, at least 75% of all of the
legal, Beneficial and/or equitable interest in such First Person, (b) the First
Person owns, directly or indirectly, at least 75% of all of the legal,
Beneficial and/or equitable interest in such Second Person, or (c) a third
Person owns, directly or indirectly, at least 75% of all of the legal,
Beneficial and/or equitable interest in both the First Person and the Second
Person.
"Closing Date" shall mean the date of the funding of the Loan
Amount.
"Closing Date DSCR" shall mean [___________].
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"Condemnation" shall mean a taking or voluntary conveyance
during the term hereof of all or any part of any Property or any interest
therein or right accruing thereto or use thereof, as the result of, or in
settlement of, any condemnation or other eminent domain proceeding by any
Governmental Authority, whether or not the same shall have actually been
commenced.
"Consumer Price Index" shall mean the Consumer Price Index for
All Urban Consumers published by the United States Department of Labor, national
index (all items) (base year 1982-84 = 100), or any successor index thereof as
such successor index may be appropriately adjusted to establish substantial
equivalence with the Consumer Price Index. If the Consumer Price Index is
converted to a different standard reference base or otherwise revised, then
whenever the determination of a CPI Increase figure is called for herein, the
Consumer Price Index shall be converted in accordance with the conversion
factors published by the United States Department of Labor, Bureau of Labor
Statistics, or, if said Bureau shall not publish the same, as the same may be
published by Xxxxxxxx-Xxxx, Inc. or any other nationally recognized publisher of
similar statistical information selected by Lender (in its reasonable
discretion). If the Consumer Price Index ceases to be published and there is no
successor thereto, such other index as Lender shall reasonably select shall be
substituted for the Consumer Price Index.
"Control" shall mean, with respect to a Person that is a
corporation, the right to exercise, directly or indirectly, fifty one percent
(51%) or more of the voting rights attributable to the shares of the controlled
corporation 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.
10
"CPI Increase" shall mean, when used to qualify a fixed dollar
amount set forth herein at the date in question, such fixed dollar amount, as
increased by the percentage by which the Consumer Price Index at the time of
such measurement shall have increased over such Consumer Price Index for
December 2003.
"Credit Facility" shall mean a clean, irrevocable,
unconditional transferable letter of credit, payable on sight draft only, in
respect of which a Borrower has no reimbursement obligation and such
reimbursement obligation is not secured by any Property or any other property
pledged to secure the Loan, in favor of Lender and entitling Lender to make
multiple draws thereon (which in the aggregate of all such draws do not exceed
the aggregate face value thereof) in New York City, in such other city as
Lender's corporate trust office may be located at the time of the issuance of
such letter of credit or in any city in which the issuing bank shall have a
branch or office, issued by either (i) a domestic bank or the U.S. agency or
branch of a foreign bank, in each case, having a long-term senior unsecured debt
rating from the Rating Agencies which at the time such letter of credit is
delivered and throughout the term of such letter of credit is at least equal to
"AA," and a short-term unsecured debt rating at least equal to A-1+ or (ii) any
other bank approved by Lender in its sole discretion, and as to which Borrowers
shall have obtained a Rating Confirmation. Such Credit Facility shall provide
that (x) it will automatically renew unless the issuer of such Credit Facility
delivers written notice to Lender, as beneficiary, and Borrowers, as account
party, at least thirty (30) days prior to its expiration, that such Credit
Facility will not be renewed, (y) in such case, Lender, as beneficiary, shall be
entitled to draw upon the full amount of such Credit Facility and (z) such
Credit Facility is freely transferable by Lender without the payment of any
imposition or fee by Lender. Without in any way limiting the generality of the
foregoing, if any Credit Facility is not renewed or replaced with another Credit
Facility prior to the date that is thirty (30) days prior to its expiration, it
is hereby agreed that Lender shall be entitled to draw upon the full amount of
such Credit Facility.
"Current Debt Service Reserve Account" shall have the meaning
set forth in Section 9.2.1(g) hereof.
"Debt" shall mean the outstanding principal amount set forth
in, and evidenced by, the Notes, together with all interest accrued and unpaid
thereon and all other sums due to Lender in respect of the Loan, and any sums
due under the Notes, this Agreement, the Mortgage or in any other Loan Document.
"Debt Securities" shall mean debt obligations, other than U.S.
Government Securities, of any Person, whether evidenced by bonds, notes,
debentures, certificates, book entry deposits, certificates of deposit,
commercial paper, bankers acceptances, reinvestment letters, funding agreements
or other instruments, which (i) are not subject to prepayment or redemption
prior to maturity and (ii) are rated not less than the then Required Rating; or
any combination of the foregoing. Any Debt Securities delivered to Lender as
collateral for an obligation shall mature not less than one (1) Business Day
prior to the due date of such obligation.
11
"Debt Service" shall mean, with respect to any specified date
or a particular period of time, principal and interest payments under the Notes
due as of such date or payable with respect to or during such period (including
the last day thereof), as applicable and repayment in full of the principal
balance of the Notes at the maturity of the Loan or upon the earlier
acceleration of the Loan.
"Debt Service Amount" shall have the meaning set forth in
Section 9.2.15(a)(iii) hereof.
"Default" shall mean the occurrence of any event hereunder or
under any other Loan Document which, but for the giving of notice or passage of
time, or both, would be an Event of Default.
"Default Rate" shall mean a rate per annum equal to 300 basis
points (3.0%) in excess of the Interest Rates for the Notes (but in no event
shall the Default Rate be less than the Prime Rate from time to time plus one
percent (1%)).
"Defeasance" shall have the meaning set forth in Section 2.4.5
hereof.
"Defeasance Collateral Account" shall have the meaning set
forth in Section 2.4.5 hereof
"Defeasance Date" shall have the meaning set forth in Section
2.4.5 hereof.
"Defeasance Deposit" shall mean an amount equal to the sum of
(i) a sufficient amount so that, inclusive of interest earned thereon, all
Scheduled Defeasance Payments may be paid therefrom, (ii) without duplication,
any costs and expenses incurred or to be incurred in the purchase of U.S.
Government Securities necessary to pay the Scheduled Defeasance Payments, and
(iii) any revenue, documentary stamp or intangible taxes in connection with the
transfer of the Notes.
"Defeasance Lockout Period" shall mean the period commencing
on the date hereof and expiring on the earlier to occur of (i) two years after
the "startup day," within the meaning of Section 860G(a)(9) of the Code, of a
"real estate mortgage investment conduit," ("REMIC") within the meaning of
Section 860D of the Code, with respect to the last portion of the debt evidenced
by the Notes and the Mortgage and (ii) three (3) years after the Closing Date.
"Deferred Maintenance Conditions" shall mean, collectively,
the deferred maintenance conditions and near-term capital requirements described
on Schedule 1.1 attached hereto and made a part hereof.
"Deferred Maintenance and Environmental Conditions Reserve
Account" shall have the meaning set forth in Section 9.2.1(a) hereof.
"Deficiency Payment" shall have the meaning set forth in
Section 9.2.11 hereof.
"Deficiency Reserve Account" shall have the meaning set forth
in Section 9.2.1(d) hereof.
12
"Deposit Account" shall have the meaning given such term in
Section 9.1 hereof.
"Deposit Account Agreement" shall mean the Deposit Account
Agreement, dated as of the Closing Date, among Borrowers, Operating Lessees, the
Lender, and the Depositary Bank, for the Deposit Account, relating to the
collection and application of disbursements and other payments from the Property
Managers and/or Operating Lessees pursuant to the applicable Property Management
Agreements and/or Operating Lease.
"Depositary Bank" shall mean the depositary bank under the
Deposit Account Agreement.
"Disqualified Transferee" shall mean any Person that, or any
Person that Controls, is Controlled by, or is under common Control with, a
Person that, (i) has (within the past ten (10) years) defaulted, or is now in
default, beyond any applicable cure period, of its material obligations, under
any written agreement with Lender or any Affiliate of Lender; (ii) has been
convicted in a criminal proceeding for a felony or a crime involving moral
turpitude or that is an organized crime figure or is reputed (as determined by
Lender in its sole discretion) to have substantial business or other
affiliations with an organized crime figure; (iii) has at any time filed a
voluntary petition under the Bankruptcy Code or any other federal or state
bankruptcy or insolvency law; (iv) as to which an involuntary petition has at
any time been filed under the Bankruptcy Code or any other federal or state
bankruptcy or insolvency law; (v) has at any time filed an answer consenting to
or acquiescing in any involuntary petition filed against it by any other Person
under the Bankruptcy Code or any other federal or state bankruptcy or insolvency
law; (vi) has at any time consented to or acquiesced in or joined in an
application for the appointment of a custodian, receiver, trustee or examiner
for itself or any of its property; (vii) has at any time made an assignment for
the benefit of creditors, or has at any time admitted its insolvency or
inability to pay its debts as they become due; or (viii) has been found by a
court of competent jurisdiction or other Governmental Authority in a comparable
proceeding to have violated any federal or state securities laws or regulations
promulgated thereunder.
"Downgrade" shall have the meaning as set forth in Section
2.7(b) hereof.
"Earthquake Deductible Reserve Account" shall have the meaning
set forth in Section 9.2.1(b).
"Earthquake Deductible Reserve Amount" shall mean an amount
equal to the deductible amount of the earthquake insurance policy relating to a
Property or Property at which an Earthquake Reserve Event shall have occurred.
"Earthquake Reserve Event" shall mean the occurrence of an
earthquake or other casualty covered under an earthquake insurance policy
relating to one or more of the Properties located in the state of California
which causes damage or destruction in an amount in excess of the deductible
amount of the earthquake insurance policy on such Property or Properties.
"Eligibility Requirements" means, with respect to any Person,
that such Person (i) has total assets (in name or under management) in excess of
$600,000,000 and (except with respect to a pension advisory firm or similar
fiduciary) capital/statutory surplus or shareholder's equity of $250,000,000 and
(ii) is regularly engaged in the business of making or owning commercial real
estate loans or operating commercial mortgage properties.
13
"Eligible Account" shall mean an identifiable account separate
from all other funds held by the holding institution that is either (i) an
account or accounts 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 a
federal or state-chartered depository institution or trust company acting in its
fiduciary capacity, and which, in the case of a state-chartered depository
institution or trust company is subject to regulations substantially similar to
12 C.F.R. ss.9.10(b), and has a combined capital and surplus of at least
$500,000,000 and is subject to supervision or examination by federal or state
authority. An Eligible Account will not be evidenced by a certificate of
deposit, passbook or other instrument.
"Eligible Collateral" shall mean U.S. Government Securities,
Debt Securities, Credit Facilities or Cash and Cash Equivalents, or any
combination thereof.
"Eligible Institution" shall mean (1) LaSalle Bank National
Association (provided that the rating by Standard & Poors and Moody's for
LaSalle Bank National Association's short term unsecured debt obligations or
commercial paper and long term unsecured debt obligations does not decrease
below its current ratings) or (2) any other federal or state-chartered
depository institution or trust company insured by the Federal Deposit Insurance
Corporation and (i) in the case of accounts in which funds are held for thirty
(30) days or less, the short term unsecured debt obligations or commercial paper
of which are rated A-1 by Standard & Poors, P-1 by Moody's, or (ii) in the case
of accounts in which funds are held for more than thirty (30) days, the long
term unsecured debt obligations of which are rated at least "AA-" by Standard &
Poors and "Aa3" by Moody's.
"Employee Benefit Plan" shall mean any employee pension
benefit plan subject to the provisions of Title IV of ERISA or subject to the
minimum funding standards under Part 3 of Title I of ERISA or Section 412 of the
Code or Section 302 of ERISA, and in respect of which each Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Engineering Report" means the structural engineering report
or reports with respect to each Property prepared by an Independent Engineer and
delivered to Lender in connection with the Loan, and any amendments or
supplements thereto delivered to Lender.
"Environmental Auditor" means an independent environmental
auditor reasonably approved by Lender.
"Environmental Claim" means any written notice, claim,
proceeding, investigation, demand or other communication by any Person or
Governmental Authority alleging or asserting liability with respect to any
Borrower or any Property arising out of, based on or resulting from (i) the
presence, use or Release of any Hazardous Substance, (ii) any fact,
circumstance, condition or occurrence forming the basis of any violation, or
alleged violation, of any Environmental Law, or (iii) any alleged injury or
threat of injury to property, health or safety or to the environment caused by
Hazardous Substances.
"Environmental Conditions" shall mean those matters which are
the subject of environmental and seismic remediation described on Schedule 1.2
attached hereto.
14
"Environmental Indemnity" shall mean that certain
Environmental Indemnity Agreement, dated as of the Closing Date, executed by
Borrowers and Sponsor in connection with the Loan for the benefit of Lender.
"Environmental Laws" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the pollution, protection or cleanup of
the environment, the impact of Hazardous Substances on property, health or
safety, or the use or Release of Hazardous Substances.
"Environmental Reports" means a "Phase I Environmental Site
Assessment" as referred to in the ASTM Standards on Environmental Site
Assessments for Commercial Real Estate, E 1527-94 (and, if necessary, a "Phase
II Environmental Site Assessment"), prepared by an Environmental Auditor and
delivered to Lender and any amendments or supplements thereto delivered to
Lender, and shall also include any other environmental reports delivered to
Lender pursuant to this Agreement and the Environmental Indemnity.
"Equipment" shall have the meaning set forth in the Mortgage.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.
"ERISA Affiliate" at any time, means each trade or business
(whether or not incorporated) that would, at the time, be treated together with
any Borrower as a single employer under Title IV or Section 302 of ERISA or
Section 412 of the Code.
"Event of Default" shall have the meaning set forth in Section
10.1(a) hereof.
"Existing Debt" shall mean any indebtedness assigned to Lender
as of the date hereof and amended, restated and/or consolidated pursuant to any
Mortgage.
"Existing Note" shall mean any promissory notes or other
instruments evidencing indebtedness assigned to Lender as of the date hereof and
amended, restated and/or consolidated pursuant to any Notes.
"Expansion" shall mean any expansion of any Property or any
portion thereof or the Improvements thereon.
"FF&E" for each of the Properties, shall have the meaning set
forth in the applicable Property Management Agreement for such Property. In the
event the term "FF&E" is not used in any one or more of the Property Management
Agreements, "FF&E" shall be deemed to refer to whatever term is used in the
applicable Property Management Agreement to describe the furniture, fixtures and
Equipment for the applicable Property.
"FF&E Reserve Account" has the meaning set forth in Section
9.2.1(h) hereof.
15
"FF&E Reserve Sub-Accounts" shall have the meaning set forth
in Section 9.2.16(a)(i) hereof.
"Final Completion" shall mean, with respect to any specified
work, the final completion of all such work, including the performance of all
"punch list" items, as confirmed by an Officer's Certificate and, with respect
to any Material Alteration or Material Expansion, a certificate of the
Independent Architect, if applicable.
"Fiscal Year" shall mean the period commencing on the Closing
Date and ending on and including December 31 of the calendar year in which the
Closing Date occurs and thereafter each twelve month period commencing on
January 1 and ending on December 31 until the Debt is repaid in full, or such
other common fiscal year of Borrowers as Borrowers may select from time to time
with the prior consent of Lender, such consent not to be unreasonably withheld.
"Fitch Ratings" shall mean Fitch, Inc., its successors and/or
assigns.
"Form W-8 BEN" shall have the meaning set forth in Section
2.2.2(d)(v)(1) hereof.
"Form W-8 ECI" shall have the meaning set forth in Section
2.2.2(d)(v)(1) hereof.
"Funding Borrower" shall have the meaning set forth in Section
12.27 hereof.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as of the relevant date in question (as
supplemented by the Uniform System of Accounts for the Lodging Industry, current
edition), consistently applied.
"Governmental Authority" means any national or federal
government, any state, regional, local or other political subdivision of the
United States of America thereof with jurisdiction and any Person with
jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government or quasi-governmental
issues (including, without limitation, any court).
"Hazardous Substance" means, collectively, (i) any petroleum
or petroleum products or waste oils, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"),
and lead-based paint, (ii) any chemicals or other materials or substances which
are now or hereafter become defined as or included in the definitions of
"hazardous substances", "hazardous wastes", "hazardous materials", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic
pollutants", "contaminants", "pollutants" or words of similar import under any
Environmental Law, (iii) toxic mold and (iv) any other chemical or any other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Law.
"Holding Account" shall have the meaning given such term in
Section 9.1 hereof.
16
"Hotel Operating Accounts" shall mean those accounts
maintained by the applicable Borrower or Property Manager pursuant to the
Property Management Agreements into which all Rents from the applicable Property
are deposited.
"Improvements" shall have the meaning set forth in the
Mortgage.
"Incentive Fee" shall mean: (a) for the Property known as the
Hyatt Regency La Jolla, San Diego, California, the "Incentive Fee" as defined in
the applicable Property Management Agreement; (b) for the Property known as the
Hyatt Regency Phoenix, the "Incentive Fee" as defined in the applicable Property
Management Agreement; and (c) for the New Orleans Property, the "Incentive
Management Fee" as defined in the applicable Property Management Agreement.
"Incentive Fee Sub-Account" shall have the meaning set forth
in Section 9.2.13(a) hereof.
"Incentive Management Fee Reserve Account" shall have the
meaning set forth in Section 9.2.1(e) hereof.
"Increased Cost" shall have the meaning set forth in Section
2.2.2(c) hereof.
"Independent Architect" shall mean any reputable architecture
or construction management firm that is licensed or registered in the
jurisdiction where a Property is located, if required by the laws of such
jurisdiction, and not affiliated with any Borrower.
"Independent Director" means a duly appointed member of the
board of directors or board of managers reasonably satisfactory to Lender who
shall not have been at the time of such individual's appointment and while
serving as an Independent Director, and who may not have been at any time during
the preceding five years (i) an equity holder, member, partner or director
(other than an independent director or manager of an Affiliate of any Borrower
that is required to be a single purpose bankruptcy remote entity) of, or an
officer or employee of, any Borrower, Sponsor, or any of their respective
equityholders or Affiliates (except in the context of this transaction), (ii)
based on information provided by such individual and reasonably believed by
Borrowers, a creditor or customer of, or supplier or service provider (including
a provider of professional services) to, any Borrower, Sponsor, or any of their
respective equityholders, members or Affiliates (other than a company that
provides professional independent managers and which also provides other
services to a Borrower or such Borrower's equityholders, members or Affiliates
in the ordinary course of business), (iii) a member of the immediate family of
any such equityholder, member, partner, officer, employee, creditor, supplier,
service provider or customer or a member of the immediate family of any other
director of such entity or (iv) under common control with the Persons in (i) -
(iii) above.
"Independent Engineer" means such engineer as shall be
reasonably approved by Lender.
"Initial Payment Date" shall mean August 11, 2004.
17
"Initial Tax and Insurance Escrow Amount" has the meaning set
forth in Section 9.3.1 hereof.
"Initial Tax and Insurance Sub-Account Amount" has the meaning
set forth in Section 9.3.3(a) hereof.
"Insurance Premiums" shall have the meaning set forth in
Section 8.1(d) hereof.
"Insurance Requirements" shall mean all terms of any insurance
policy required hereunder covering or applicable to any Property or any part
thereof, all requirements of the issuer of any such policy, and all orders,
rules, regulations and other requirements of the National Board of Fire
Underwriters (or any other body exercising similar functions) applicable to or
affecting a Property or any part thereof or any use of any Property or any part
thereof.
"Interest Accrual Period" means, in connection with the
calculation of interest accrued with respect to any specified Payment Date, with
respect to the Notes, the period from and including the eleventh (11th) day of a
calendar month to but excluding the eleventh (11th) day of the immediately
following month; provided, however, that the first Interest Accrual Period with
respect to such Notes shall be from the Closing Date to but excluding July 11,
2004.
"Interest Rate" shall mean, with respect to each Interest
Accrual Period, a rate per annum equal to [____]%.
"knowledge" or words of similar import shall mean the actual
or constructive knowledge of a Person or, if such Person is not an individual,
of such Person's representatives, agents, employees, officers or directors who
would be likely to have actual or constructive knowledge of the relevant subject
matter, provided, however, that such term shall not include knowledge of any
Property Manager or its representatives, agents, employees, officers or
directors which has not been communicated to Borrowers.
"Lease" shall mean any lease, Operating Lease, sublease,
sub-sublease, license, letting, concession, occupancy agreement or other
agreement (whether written or oral and whether now or hereafter in effect),
existing as of the Closing Date or hereafter entered into by a Borrower or any
Property Manager, pursuant to which any Person is granted a possessory interest
in, or right to use or occupy all or any portion of any space in any Property,
and every modification, amendment or other agreement relating to such lease,
sublease, sub-sublease, or other agreement entered into, in accordance with the
terms of the Loan Documents, in connection with such lease, sublease,
sub-sublease, or other agreement and all agreements related thereto, and every
guarantee of the performance and observance of the covenants, conditions and
agreements to be performed and observed by the other party thereto.
Notwithstanding the foregoing, Leases shall exclude the Property Management
Agreements.
18
"Legal Requirements" shall mean:
(i) all governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental
Laws) affecting any Borrower or any 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),
(ii) all permits, licenses and authorizations and
regulations relating thereto, and
(iii) all covenants, conditions and restrictions
contained in any instruments at any time in force (whether or not
involving Governmental Authorities) affecting any 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.
"Lender" shall mean German American Capital Corporation.
"Lender Cost and Expense Amount" shall have the meaning set
forth in Section 9.2.15(a) hereof.
"Lender Expenses" shall mean all reasonable origination costs
and all reasonable out-of-pocket expenses and costs incurred by the Lender (or
any of Affiliate of Lender) with respect to the making of the Loan, including
for preparation of audits, reasonable costs of agreed-upon-procedures,
reasonable travel expenses, reasonable costs of preparation of environmental,
seismic and engineering reports, reasonable costs of credit reports, reasonable
costs of appraisals, reasonable costs of preparation, negotiation, execution and
delivery of the Term Sheet, this Agreement and the other Loan Documents and the
reasonable costs of consummation of the transactions contemplated hereby and
thereby (including reasonable attorneys' fees and disbursements in connection
therewith and in connection with the Lender's due diligence), mortgage recording
taxes and other document filing fees and any other reasonable out-of-pocket
expenses relating to credit and collateral evaluations.
"Licenses" shall have the meaning set forth in Section 4.1(v)
hereof.
"Lien" shall mean any mortgage, deed of trust, lien (statutory
or other), pledge, hypothecation, assignment, preference, priority, security
interest, or any other encumbrance or charge on or affecting the interest of a
Borrower in a Property or any portion thereof or any 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).
"Liquidity Reserve Account" shall have the meaning set forth
in Section 9.2.1(c) hereof.
19
"Loan" shall mean the loan made to the Borrowers by Lender
pursuant hereto and the other Loan Documents in the original principal amount of
the Loan Amount, and evidenced by the Notes and secured by the Mortgage and the
other Loan Documents.
"Loan Amount" shall mean $220,000,000.
"Loan Documents" shall mean, collectively, this Agreement, the
Notes, the Mortgage, the Assignment of Agreements, the Assignment of Leases, the
Environmental Indemnity, the Deposit Account Agreement, the Sponsor Indemnity
Agreement, the Operating Lease Subordination Agreement, each Agreement with
Managers and any other document executed by Borrower, Operating Lessee or their
respective Affiliates in connection with the Loan, as well as all other
documents executed and/or delivered in connection with the Loan or hereafter
delivered by or on behalf of any Borrower and Operating Lessee pursuant to the
requirements hereof or of any other Loan Document.
"Lockout Period" shall mean the period beginning on the
Closing Date through but not including the Permitted Prepayment Date.
"Long-Term Agreement" means any contract or agreement with an
unexpired term (inclusive of extension periods) in excess of one year; provided
that any contract or agreement which may be terminated by the applicable
Borrower without cause and without penalty on sixty (60) days' advance notice or
less shall not be a Long-Term Agreement for purposes hereof.
"Management Control" shall mean, with respect to any direct or
indirect interest in a Borrower or a Property, the power and authority to make
and implement or cause to be made and implemented all material decisions with
respect to the operation, management, financing and disposition of the specified
interest.
"Management Fees" shall mean all fees, commissions, expenses
and other compensation (including, without limitation, any incentive management
fees) payable by any Borrower or Operating Lessee to any Property Manager.
"Material Adverse Effect" shall mean any material adverse
effect upon (i) the business operations, economic performance, Properties,
assets or condition (financial or otherwise) of the Borrowers, taken as a whole
(or as specifically indicated herein, for a Property), (ii) the ability of the
Borrowers to perform, in all material respects, their obligations under each of
the Loan Documents, (iii) the enforceability or validity of any Loan Document or
the perfection or priority of any Lien on any material asset created under any
Loan Document, (iv) the value of, or cash flow from, the Properties, taken as a
whole (or as specifically indicated herein, for a Property), or the operations
thereof or (v) the ability of Lender to enforce or collect the Debt.
"Material Agreements" means the agreements listed on Schedule
F hereto and each contract and agreement relating to the ownership, management,
development, use, operation, leasing, maintenance, repair or improvement of any
Property or portion thereof, or otherwise imposing obligations on any Borrower,
(a) which has an unexpired term of one year or less and under which a Borrower
would have the obligation to pay more than $100,000 or (b) is a
20
Long-Term Agreement requiring any Borrower to pay more than $50,000 in any
twelve-month period or more than $200,000 in the aggregate during the term
thereof; provided, however, that Material Agreements shall include any Long-Term
Agreement not identified on Schedule F and under which (1) the aggregate
payments required to be made by the applicable Borrower exceed $25,000, and (2)
the aggregate payments required to be made by the applicable Borrower, when
aggregated with all the payments required to be made by such Borrower under all
such other Long-Term Agreements not included on Schedule F, would exceed for any
Property either (x) $250,000 in any twelve-month period or (y) $500,000 in the
aggregate. Notwithstanding the foregoing, Material Agreements shall not include
the Property Management Agreements.
"Material Alteration" shall mean any Alteration to be
performed by or on behalf of a Borrower at any Property the cost of which
(including, without limitation, construction costs and costs of architects,
engineers and other professionals) as reasonably estimated by an Independent
Architect, exceeds the Threshold Amount.
"Material Casualty" shall mean a Casualty where the loss (i)
is in an aggregate amount equal to or in excess of thirty percent (30%) of the
outstanding principal amount of the Allocated Loan Amount for the subject
Property or (ii) has caused thirty percent (30%) or more of the hotel rooms or
common areas (including banquet and conference facilities) in the applicable
Property to be unavailable for its applicable use.
"Material Condemnation" shall mean a Condemnation where the
loss (i) is in an aggregate amount equal to or in excess of thirty percent (30%)
of the outstanding principal amount of the Allocated Loan Amount for the subject
Property or (ii) has caused thirty percent (30%) or more of the hotel rooms or
common areas (including banquet and conference facilities) in the applicable
Property to be unavailable for its applicable use.
"Material Expansion" shall mean any Expansion to be performed
by or on behalf of a Borrower at any Property or Properties, the total cost of
which, as reasonably estimated by an Independent Architect, exceeds the
Threshold Amount.
"Maturity Date" shall mean July 11, 2011.
"Monthly Debt Service Payment Amount" shall have the meaning
set forth in Section 2.3.2 hereof.
"Monthly FF&E Reserve Amount" shall mean, for any Property, as
of any specified date, the excess, if any, of (a) 4.0% of gross revenues of each
Property other than the Property known as the Hyatt Regency Phoenix, and 3% of
gross revenues for the Hyatt Regency Phoenix Property, for the calendar month
then most recently ended, as such gross revenues are computed in accordance with
the applicable Property Management Agreement, over (b) the amount paid, reserved
or withheld by the applicable Property Manager in accordance with the terms of
the applicable Property Management Agreement for capital expenditures in respect
of FF&E for the same calendar month (it being expressly agreed by the parties
hereto for purposes hereof that a mere book entry of an amount shall not be
deemed to be the payment, reserve or withholding of such amount).
21
"Monthly Incentive Fee Reserve Amount" shall mean, for any
Property, as of any specified date, the excess, if any, of (a) the Incentive
Fees owed to the applicable Property Manager accruing for the previous calendar
month (computed in accordance with the applicable Property Management Agreement
on the basis of budgeted annual operating performance, as reasonably modified by
Lender from time to time on the basis of actual operating performance), over (b)
the amount paid, reserved or withheld by the applicable Property Manager in
accordance with the terms of the applicable Property Management Agreement for
Incentive Fees for the same calendar month (it being expressly agreed by the
parties hereto for purposes hereof that a mere book entry of an amount shall not
be deemed to be the payment, reserve or withholding of such amount).
"Moody's" shall mean Xxxxx'x Investors Service, Inc., its
successors and/or assigns.
"Mortgage" shall mean, collectively, each of the first
priority: (A) Deed of Trust, Security Agreement, Assignment of Leases, Rents and
Revenues and Fixture Filing (California); (B) Deed of Trust, Security Agreement,
Assignment of Leases, Rents and Revenues and Fixture Filing (Phoenix); and (C)
Mortgage, Security Agreement, Assignment of Leases, Rents and Revenues and
Fixture Filing (Louisiana) (each dated as of the Closing Date, executed and
delivered by the applicable Borrower or Borrowers as security for the Loan and
encumbering one or more of the Properties, as the same may be amended, restated,
replaced, supplemented, consolidated or otherwise modified from time to time
pursuant to the provisions thereof or of the other Loan Documents).
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to which any Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions or has
within any of the preceding five plan years made or accrued an obligation to
make contributions.
"Net Operating Income" means, for any specified period, the
excess of Adjusted Operating Income over Operating Expenses for the trailing
twelve (12) month period.
"Net Worth" shall have the meaning set forth in Section 12.24
hereof.
"New Orleans Borrower" shall mean SHC New Orleans, L.L.C., a
Delaware limited liability company.
"New Orleans FF&E Loan" shall mean all loans made by Hyatt
Corporation to Affiliates of the Borrowers from the FF&E Reserve Account in
respect of the New Orleans Property.
"New Orleans Property" means that certain property known as
Hyatt Regency New Orleans located in New Orleans, Louisiana.
"Non-Hotel Space" means any portion of any Property which is
used or intended to be used primarily for retail purposes.
22
"Notes" shall mean that certain Amended and Restated
Promissory Note, dated of even date hereof, in an amount equal to the Loan
Amount, made payable by Borrower, as maker to the order of Lender, which note
amends and restates the Existing Note, as the same may be amended, restated,
severed, substituted, replaced (including, without limitation, replacement with
multiple promissory notes), supplemented, consolidated or otherwise modified
from time to time pursuant to the provisions hereof.
"OFAC List" shall mean the list of specially designated
nationals and blocked persons subject to financial sanctions that is maintained
by the U.S. Treasury Department, Office of Foreign Assets Control and accessible
through the internet website xxx.xxxxx.xxx/xxxx/x00xxx.xxx.
"Officer's Certificate" shall mean a certificate made by an
individual authorized to act on behalf of a Borrower and, to the extent
applicable, any constituent Person with respect to such Borrower. Without
limiting the foregoing, if the individual signing the certificate is doing so on
behalf of a corporation, then such individual shall hold the office of
President, Vice President or Chief Financial Officer (or the equivalent) with
respect to such corporation.
"Operating Agreements" shall mean reciprocal easement and/or
operating agreements; covenants, conditions and restrictions; condominium
documents; and similar agreements affecting any Property and binding upon and/or
benefiting Borrowers and other third parties, but specifically excluding the
Property Management Agreements.
"Operating Expenses" shall mean, for any specified period, on
an accrual basis, all expenses incurred by or on behalf of a Borrower and/or an
Operating Lessee (or by a Property Manager for the account of a Borrower and/or
an Operating Lessee) during such period in connection with the ownership or
operation of a Property, including costs (including labor) of providing services
including rooms, food and beverage, telecommunications, garage and parking and
other operating departments, as well as real estate and other business taxes,
rental expenses, insurance premiums, ground rent, utilities costs,
administrative and general costs, repairs and maintenance costs, franchise fees,
Management Fees and other costs and expenses relating to such Property, amounts
deposited into the applicable Hotel Operating Account for FF&E expenditures and
legal expenses incurred in connection with the operation of a Property,
determined, in each case (other than with respect to FF&E expenditures), in
accordance with GAAP. "Operating Expenses" shall not include (i) depreciation or
amortization or other noncash items, (ii) the principal and interest on the
Notes, (iii) income taxes or other taxes in the nature of income taxes, (iv) the
cost of any FF&E expenditures (other than amounts deposited into the applicable
Hotel Operating Account for FF&E expenditures, which shall be considered an
"Operating Expense" as used herein) or any other capital expenditures, (v)
distributions to the members in a Borrower, or (vi) the excess of insurance
premiums over $[TBD] (per annum) incurred by Borrower solely in connection with
the purchase of terrorism insurance pursuant to Section 8.1(b)(xi). Expenses
that are accrued as Operating Expenses during any period shall not be included
in Operating Expenses when paid during any subsequent period.
"Operating Lease" shall mean each Lease Agreement, dated as of
the Closing Date, from by and between the applicable Borrower and the applicable
Operating Lessee with respect to each Property, together with any amendments
thereto pursuant to the provisions thereof.
23
"Operating Lease Subordination Agreement" shall mean each
Operating Lease Subordination Agreement, dated as of the Closing Date, by and
among the applicable Borrower and the applicable Operating Lessee with respect
to each Property and Lender, together with any amendments thereto pursuant to
the provisions thereof, subordinating the Operating Lease to the Loan.
"Operating Lessee" shall mean each of the parties identified
on Schedule A-1 hereto with respect to each Property, together with its
successors and assigns as permitted hereunder and which shall be collectively
referred to herein as "Operating Lessee" or "Operating Lessees," but excluding
any Operating Lessee, all of the real property of which has been released from
the Lien of the Loan Documents pursuant to the provisions thereof.
"Other Charges" shall mean all ground rents, maintenance
charges, charges associated with any condominium or similar association,
impositions other than Taxes, and any other charges, including vault charges and
license fees for the use of vaults and similar areas adjoining any Property, now
or hereafter levied or assessed or imposed against any Property or any part
thereof and payable by Borrowers.
"Other Taxes" shall have the meaning set forth in Section
2.2.2(d)(ii) hereof.
"Payment Date" shall mean the eleventh (11th) day of each
calendar month or, if in any month the eleventh (11th) day is not a Business
Day, then the Payment Date for such month shall be the first Business Day
immediately prior to such eleventh (11th) day.
"Permits" means all licenses, permits, variances and
certificates used in connection with the ownership, operation, use or occupancy
of any one or more of the Properties (including, without limitation, business
licenses, state health department licenses, licenses to conduct business,
licenses to own and operate the Properties as hotel properties, licenses to sell
and serve alcoholic beverages at the Properties and all such other permits,
licenses and rights, obtained from any Governmental Authority or private Person
concerning ownership, operation, use or occupancy of any one or more of the
Properties).
"Permitted Borrower Transferee" shall mean any entity (i) that
is experienced in owning and operating properties similar to the Properties,
(ii) (a) with a net worth, as of a date no more than six (6) months prior to the
date of the transfer of at least $1 Billion and (b) who, immediately prior to
such transfer, controls, together with its Close Affiliates real estate equity
assets of at least $1 Billion, (iii) which, together with its Close Affiliates
own or have under management or act as the exclusive fund manager or investment
advisor, at the time of the transfer, not fewer than 20 first class full service
resort or business hotel properties (excluding the Properties) containing not
fewer than 5,000 hotel rooms in the aggregate and (iv) that is not a
Disqualified Transferee.
"Permitted Encumbrances" shall mean, collectively, (i) the
Liens and security interests created by the Loan Documents, (ii) all Liens,
encumbrances and other matters disclosed in the Qualified Title Policy, (iii)
Liens, if any, for Taxes or Other Charges not yet due
24
and payable or delinquent or which are being diligently contested in good faith
in accordance with Section 5.1(b)(ii) hereof, (iv) Liens in respect of property
or assets imposed by law which were incurred in the ordinary course of business,
such as carriers', warehousemen's, landlord's, mechanic's, materialmen's,
repairmen's and other similar Liens arising in the ordinary course of business,
and Liens for workers' compensation, unemployment insurance and similar
programs, in each case arising in the ordinary course of business which are
either not yet due and payable or being diligently contested in good faith in
accordance with Section 5.1(b)(ii) hereof, (v) Leases and Property Management
Agreements, (vi) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances (including any
of such matters incurred or entered into by any Borrower in the ordinary course
of business) which in each case could not be reasonably expected to have a
Material Adverse Effect, do not diminish in any material respect the value of
the Properties or affect in any material respect the validity, enforceability or
priority of the Liens created by the Loan Documents, (vii) Liens securing
permitted indebtedness of the type described in clause (iii) of the definition
of Permitted Indebtedness so long as such Lien is only in respect of the
specific property relating to such obligation, (viii) deposits securing or in
lieu of surety, appeal or custom bonds in processing to which Borrower is a
party, (ix) any judgment Lien provided that the judgment it secures shall have
been discharged of record or the execution thereof stayed pending appeal within
thirty (30) days after entry thereof or within thirty (30) days after the
expiration of any stay, as applicable in either case provided there is no
imminent risk of forfeiture during such thirty (30) day period, (x) Liens
securing the Revolver Loan and (xi) such other title and survey exceptions as
Lender has approved or may approve in writing in Lender's reasonable discretion.
"Permitted Fund Manager" means any Person that on the date of
determination is (i) a nationally-recognized manager of investment funds
investing in debt or equity interests relating to commercial real estate, (ii)
investing through a fund with committed capital of at least $250,000,000 and
(iii) not subject to a bankruptcy proceeding.
"Permitted Indebtedness" shall mean (i) the Debt, (ii) Trade
Payables incurred in the ordinary course of any Borrower's business, paid by
such Borrower within sixty (60) days of incurrence and in fact not more than
sixty (60) days outstanding (subject to such Borrower's right to contest the
same in accordance with Section 5.1(b)(ii) hereof) provided that in no event
shall the aggregate amount of such Trade Payables incurred by all of the
Borrowers exceed three and one-half percent (3.5%) of the aggregate Allocated
Loan Amounts of those Properties still subject to the Lien of the Mortgage,
(iii) purchase money indebtedness and capital lease obligations incurred in the
ordinary course of business but in no event shall the annual scheduled debt
service on such indebtedness or obligations exceed the aggregate amount of
$600,000 for the Properties then subject to the Lien of the Mortgage (which
amount shall, in connection with a permitted partial Defeasance where a Property
is released from the Mortgage, be reduced by Lender on a ratable basis equal to
an amount determined by applying a fraction, the numerator of which is the
Allocated Loan Amount for the Property or Properties which are released from the
Mortgage and the denominator of which is the aggregate original amount of the
Loan on the Closing Date), (iv) any Management Fees not yet due and payable
under any Property Management Agreement, (v) Taxes or Other Charges not yet due
and payable or delinquent or which are being diligently contested in good faith
in accordance with Section 5.1(b)(ii) hereof, (vi) indebtedness relating to
Liens in respect of property or assets imposed by law which were incurred in the
ordinary course of business, such as carriers', warehousemen's, landlord's,
25
mechanic's, materialmen's, repairmen's and other similar Liens arising in the
ordinary course of business, and Liens for workers' compensation, unemployment
insurance and similar programs, in each case arising in the ordinary course of
business which are either not yet due and payable or being diligently contested
in good faith in accordance with Section 5.1(b)(ii) hereof, (vii) the Revolver
Loan, (viii) amounts payable in the ordinary course of business (and not as a
result of Borrower's delinquency or default) pursuant to Permitted Encumbrances
of the type described in clauses (ii) or (xi) of the definition of Permitted
Encumbrances and (ix) such other unsecured indebtedness approved by Lender in
its sole discretion and with respect to which Borrowers have received a Rating
Confirmation.
"Permitted Investments" shall mean the following, subject to
qualifications hereinafter set forth:
(i) 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:
(a) Treasury obligations, all direct or fully guaranteed
obligations
(b) Farmers Home Administration Certificates of beneficial
ownership
(c) General Services Administration Participation
certificates
(d) U.S. Maritime Administration Guaranteed Title XI
financing
(e) Small Business Administration Guaranteed participation
certificates Guaranteed pool certificates
(f) U.S. Department of Housing and Urban Development Local
authority bonds
(g) Washington Metropolitan Area Transit Authority guaranteed
transit bonds
(ii) 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:
(a) Federal Home Loan Mortgage Corp. (FHLMC) Debt obligations
(b) Farm Credit System (formerly: Federal Land Banks, Federal
Intermediate Credit Banks, and Banks for Cooperatives)
Consolidated system wide bonds and notes
(c) Federal Home Loan Banks (FHL Banks) consolidated debt
obligations
(d) Federal National Mortgage Association (FNMA) Debt
obligations
(e) Student Loan Marketing Association (SLMA) Debt
obligations
(f) Financing Corp. (FICO) Debt obligations
(g) Resolution Funding Corp. (REFCORP) Debt obligations.
(iii) 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
of the Rating Agencies.
26
(iv) Deposits that are fully insured by the Federal
Deposit Insurance Corp. (FDIC).
(v) Debt obligations maturing in 365 days or less
that are rated AAA or higher (or the equivalent) by each of the Rating
Agencies.
(vi) Commercial paper rated "A-1+" (or the
equivalent) by each of the Rating Agencies and maturing in 365 days or
less.
(vii) Investments in certain short-term debt of
issuers rated "A-1+" (or the equivalent) by each of the Rating Agencies
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 the 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 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.
(viii) Investment in money market funds rated "AAAm"
or "AAAm-G" (or the equivalent) by each of the Rating Agencies.
(ix) Such other investments as shall be approved in
writing by means of a Rating Confirmation.
Notwithstanding the foregoing, "Permitted Investments": (A) shall exclude any
security with any Rating Agency's 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"; (B) shall not have maturities in excess of one year;
(C) as to the investments described in (i), (ii), (iii), (iv), (v), (vi) and
(vii): 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 (D) 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 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.
"Permitted Prepayment Date" shall mean the Payment
Date in April 2011.
"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.
27
"Plan" means an employee benefit plan other than a
Multiemployer Plan, (i) which is maintained for employees of any Borrower or any
ERISA Affiliate and which is subject to Title IV of ERISA or (ii) with respect
to which any Borrower or any ERISA Affiliate could be subjected to any liability
under Title IV of ERISA (including Section 4069 of ERISA).
"Plan Assets" means assets of any Employee Benefit Plan
subject to Part 4, Subtitle A, Title I of ERISA.
"Policies" shall have the meaning specified in Section 8.1(c)
hereof.
"Pre-approved Transferee" shall mean any of the entities set
forth on Exhibit C hereof, or any Close Affiliates thereof, provided any of the
foregoing entities or their Close Affiliates shall only be a "Pre-approved
Transferee" if (i) such entity continues to be Controlled by substantially the
same Persons Controlling such entity as of the Closing Date or if such
Pre-approved Transferee is a publicly traded company, such Pre-approved
Transferee continues to be publicly traded on an established securities market,
(ii) there has been no material adverse change in the financial condition or
results of operations of such entity since the Closing Date and (iii) such
entity and its Close Affiliates together own, have under management or act as
the exclusive fund manager or investment advisor, at the time of the transfer,
not fewer than twenty (20) first class full service resort or business hotel
properties (excluding the Properties) containing not fewer than 5,000 hotel
rooms in the aggregate.
"Prepayment" shall have the meaning specified in Section 2.4.2
hereof.
"Prepayment Date" shall have the meaning specified in Section
2.4.2 hereof.
"Prepayment Notice" shall have the meaning specified in
Section 2.4.2 hereof.
"Prime Rate" shall mean the annual rate of interest published
in The Wall Street Journal from time to time as the "Prime Rate". If more than
one "Prime Rate" is published in The Wall Street Journal for a day, the average
of such "Prime Rates" shall be used, and such average shall be rounded up to the
nearest one-eighth of one percent (0.125%). If The Wall Street Journal ceases to
publish the "Prime Rate", the Lender shall select an equivalent publication that
publishes such "Prime Rate", and if such "Prime Rates" are no longer generally
published or are limited, regulated or administered by a governmental or
quasi-governmental body, then Lender shall select a comparable interest rate
index.
"Proceeds" shall mean amounts, awards or payments payable to
Borrowers (including, without limitation, amounts payable under any title
insurance policies covering Borrowers' ownership interests in the Properties) or
Lender in respect of all or any part of a Property in connection with a Casualty
or Condemnation thereof (after the deduction therefrom and payment to Borrowers
and Lender, respectively, of any and all reasonable expenses incurred by
Borrowers and Lender in the recovery thereof, including all attorneys' fees and
disbursements, the fees of insurance experts and adjusters and the costs
incurred in any litigation or arbitration with respect to such Casualty or
Condemnation).
28
"Prohibited Person" shall mean any Person identified on the
OFAC List or any other Person with whom a U.S. Person may not conduct business
or transactions by prohibition of Federal law or Executive Order of the
President of the United States or America.
"Property" shall mean each parcel or group of parcels of land
described on one of the Schedules B-1 through B-3, and the improvements thereon
owned or leased by the Borrowers, and "Properties" shall mean such parcels and
improvements, collectively, less, however, any Property (or portion thereof)
released from the Lien of the Mortgage in accordance with the terms hereof.
"Property Management Agreement" shall mean the hotel operating
agreements entered into by a Borrower and/or Operating Lessee and the applicable
Property Manager (including any amendments, supplements or modifications
thereof, and including related franchise and licensing agreements) in effect as
of the Closing Date as described on Schedule G hereto and previously provided to
Lender and each hotel operating agreement, operating lease or other similar
agreement entered into by a Borrower and/or Operating Lessee and the applicable
Property Manager pursuant to Article 11 hereof, pursuant to which such Property
Manager or an Affiliate is to provide hotel management and other services with
respect to a Property or pursuant to which a Property Manager leases all or a
portion of a Property.
"Property Manager" shall mean any Person identified as a
current Property Manager on Schedule D hereto or any replacement "Property
Manager" appointed in accordance with Article 11 hereof.
"Property Worth" shall mean, with respect to each Borrower,
the fair market value of the Property or Properties owned by such Borrower as of
the Closing Date.
"Qualified Survey" shall mean a current title survey of each
Property, certified to the title company and Lender and their successors and
assigns, that (i) is in form and content satisfactory to Lender, (ii) is
prepared by a professional and properly licensed land surveyor satisfactory to
Lender in accordance with the 1992 Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys, (iii) meets the classification of an "Urban
Survey", and the following additional items from the list of "Optional Survey
Responsibilities and Specifications" (Table A) should be added to each survey:
2, 3, 4, 6, 7, 8, 9, 10, 11 and 13, (iv) reflects the same legal description
contained in the Qualified Title Policy relating to the applicable Property, (v)
includes, among other things, a metes and bounds description of the real
property comprising part of the applicable Property satisfactory to Lender and
(vi) contains a certification in form and substance acceptable to Lender.
"Qualified Title Policy" shall mean an ALTA title insurance
policy (1970 unmodified form, where issuable or, if not issuable, 1992
unmodified form so long as the creditors' rights exception is omitted from the
issued policy) issued by one or more title companies acceptable to Lender, with
ALTA facultative reinsurance and direct access agreements acceptable to Lender,
which title insurance policy shall (i) provide blanket coverage
29
in an aggregate amount equal to the Loan Amount (as of the Closing Date), (ii)
insure Lender that the Mortgage creates a valid first mortgage lien on the
applicable Property, free and clear of all exceptions from coverage other than
Permitted Encumbrances and such standard exceptions and exclusions from coverage
as Lender shall approve, (iii) contain such endorsements and affirmative
coverages as Lender may reasonably request, (iv) name Lender as the insured and
(v) be assignable by its terms with a transfer of the Loan.
"Qualified Transferee" shall mean one or more of the
following:
(i) a real estate investment trust, bank, saving and
loan association, investment bank, insurance company, trust company,
commercial credit corporation, pension plan, pension fund or pension
advisory firm, mutual fund, government entity or plan that satisfies
the Eligibility Requirement
(ii) an investment company, money management firm or
"qualified institutional buyer" within the meaning of Rule 144A under
the Securities Act of 1933, as amended, or an institutional "accredited
investor" within the meaning of Regulation D under the Securities Act
of 1933, as amended, that satisfies the Eligibility Requirements;
(iii) an institution substantially similar to any of
the foregoing entities described in clauses (i) or (ii) that satisfies
the Eligibility Requirements;
(iv) any entity Controlled (and only so long as such
entity continues at all times to be Controlled) by any of the entities
described in clauses (i) or (iii) above; or
(v) an investment fund, limited liability company,
limited partnership or general partnership where a Permitted Fund
Manager or an entity that is otherwise a Qualified Transferee under
clauses (i), (ii), (iii) or (iv) of this definition acts as the general
partner, managing member or fund manager and at least 50% of the equity
interests in such investment vehicle are owned, directly or indirectly,
by one or more entities that are otherwise Qualified Transferees under
clauses (i), (ii), (iii) or (iv) of this definition.
"Rating Agency" shall mean any one or more of Standard &
Poor's, Moody's, Fitch, Inc., and any other nationally recognized statistical
rating agency, as selected by Lender and which rate the Notes, and their
respective successors.
"Rating Agency Securitization Amount" shall have the meaning
set forth in Section 9.2.15(a) hereof.
"Rating Confirmation", with respect to the matter in question,
shall mean that as a condition thereto the Rating Agencies shall have confirmed
in writing that (i) such investment, replacement, action or inaction shall not
result, in and of itself, in a reduction, withdrawal or qualification of any
rating then assigned to any outstanding Notes (if a Securitization has
occurred), or (ii) such investment, replacement, action or inaction would not
result, in and of itself, in a reduction, withdrawal or qualification of any
rating for proposed Notes then under consideration by the Rating Agencies (if a
Securitization has not yet occurred); provided that if a Securitization has not
taken (or as certified by Lender, will not take) the form of a transaction
30
rated by the Rating Agencies, then "Rating Confirmation" shall instead mean that
the matter in question shall be subject to the prior approval of the Lender,
which approval shall be granted by Lender to the extent Lender believes in its
reasonable discretion a Rating Confirmation would have been granted with respect
to such matter had a Securitization been in effect at such time.
"Reference Banks" means four (4) major banks in the London
interbank market selected by the Lender.
"Register" shall have the meaning provided in Section
2.1.3(b).
"Regulatory Change" means any change after the date of this
Agreement in federal, state or foreign laws or regulations or the adoption or
the making, after such date, of any interpretations, directives or requests
applying to a class of banks or companies controlling banks, including Lender,
of or under any federal, state or foreign laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without limitation,
the movement of Hazardous Substances through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata).
"Release Amount" means with respect to each Property, an
amount equal to 120% of such Property's Allocated Loan Amount.
"Release Instruments" shall have the meaning set forth in
Section 2.5.1 herein.
"Rent Roll Date" shall mean December 31, 2003.
"Rents" shall mean all rents, rent equivalents, moneys payable
as damages pursuant to a Lease or in lieu of rent or rent equivalents, royalties
(including all oil and gas or other mineral royalties and bonuses), income,
receivables, receipts, revenues, deposits (including security, utility and other
deposits), accounts, cash, issues, profits, charges for services rendered, and
other consideration of whatever form or nature received by or paid to or for the
account of or benefit of any Borrower and/or any Operating Lessee or its agents
or employees from any and all sources arising from or attributable to the
Properties and/or the use and occupancy thereof, including, without limitation,
all room rents related to overnight occupancy of guests at the Properties, all
banquet, conference or other room rentals, all greens fees for the use of golf
courses, fees or considerations of any sort, credit card receivables, and all
deposits of money as advance rent, for security or as xxxxxxx money or as down
payment or deposit for the reservation of rooms or other facilities in any of
the Properties and any obligations now existing or hereafter arising or created
out of the sale, lease, sublease, license, concession or other grant of the
right of the use and occupancy of property or rendering of services by any
Borrower and/or any Operating Lessee and proceeds, if any, from business
interruption or other loss of income insurance.
31
"Required Loan-to-Value Ratio" shall mean that the principal
amount of the Loan is not more than fifty-nine percent (59%) of the appraised
value of the Properties as of the Closing Date based on the Appraisals.
"Required Rating" shall mean the higher of (i) the highest
rating then assigned by the Rating Agencies to any of the Notes, and (ii) "AA"
(or its equivalent) by each of the Rating Agencies.
"Required Records" shall have the meaning set forth in Section
5.1(j)(x) hereof.
"Reserve Accounts" shall have the meaning set forth in Section
9.2.1 hereof.
"Restoration" shall have the meaning set forth in Section
8.1.2(b) hereof.
"Revolver Loan" shall mean that certain revolving credit
facility from Deutsche Bank Trust Company Americas to Strategic Hotel Funding,
L.L.C., evidenced by that certain Revolving Credit Agreement, dated as of the
date hereof.
"Scheduled Defeasance Payments" shall have the meaning set
forth in Section 2.4.5 hereof.
"Security Agreement" shall have the meaning set forth in
Section 2.4.5 hereof.
"Securities Act" the Securities Act of 1933, as amended, and
the rules and regulations of the United States Securities and Exchange
Commission promulgated thereunder from time to time.
"Securitization" shall mean, collectively, any transaction or
transactions pursuant to which the Loan is either syndicated or participated or
pursuant to which securities are issued or pursuant to which securities are
issued that are backed in whole or in part by the Loan, which securities may be
offered and sold to institutional investors in transactions whether or not
required to be registered under the Securities Act provided that none of
Borrowers, Operating Lessees, Sponsor or any Affiliate of Borrowers, Operating
Lessees, or Sponsor shall be a registrant, co-registrant or have any reporting
obligations with respect to any such transactions.
"Servicer" shall mean Midland Loan Services, Inc. or such
other Person designated in writing with an address for such Person by Lender, in
its sole discretion, to act as Lender's agent hereunder with such powers as are
specifically delegated to the Servicer by Lender, whether pursuant to the terms
of this Agreement, the Account Agreement or otherwise, together with such other
powers as are reasonably incidental thereto.
"Single Purpose Entity" shall mean a Person which:
(a) is formed solely for the purpose of acquiring and directly
holding an ownership interest in or leasing one or more of the Properties or an
ownership interest in a Borrower or Operating Lessee,
32
(b) does not engage in any business unrelated to the
Properties or the ownership of a Borrower,
(c) does not have any assets other than those related to its
interest in the Properties or a Borrower, as the case may be, or any
indebtedness other than Permitted Indebtedness,
(d) has books, records, accounts, financial statements,
stationery, invoices and checks which are separate and apart from those of any
other Person,
(e) is subject to and complies with all of the limitations on
powers and separateness requirements set forth in Section 4.1(bb) hereof and in
the organizational documentation of the applicable Borrower or the applicable
Borrower's SPE Member (if any), as the case may be, as of the Closing Date,
(f) holds itself out as being a Person separate and apart from
each other Person, conducts its business in its own name and exercises
reasonable efforts to correct any known misunderstanding actually known to it
regarding its separate identity,
(g) pays its own liabilities out of its own funds and
reasonably allocates any overhead for shared office space,
(h) maintains a sufficient number of employees in light of its
contemplated business operations, and
(i) in the case of a limited partnership, observes all
applicable limited partnership formalities in all material respects, has at all
times a corporate general partner that is a Single-Purpose Entity, and has a
limited partnership agreement which provides that for so long as the Loan is
outstanding and the limited partnership's assets shall continue to be subject to
the Liens securing the Debt, the limited partnership shall not take any of the
following actions:
(i) to the fullest extent permitted by law, the
dissolution, liquidation, consolidation, merger or sale of all or
substantially all of the assets of any Borrower, except in connection
with the sale of any Property as permitted hereunder,
(ii) the engagement by any Borrower in any business
other than the ownership, maintenance and operation of the Properties,
(iii) the filing, or consent to the filing, of a
bankruptcy or insolvency petition, any general assignment for the
benefit of creditors or the institution of any other insolvency
proceeding, or the seeking or consenting to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any
similar official for a Borrower or a substantial portion of its
properties, without the unanimous vote of all partners of the limited
partnership, and
(iv) the amendment or modification of any provision
of its limited partnership agreement or certificate of limited
partnership that adversely affects any of the requirements for
qualifying as a "Single-Purpose Entity" (except as required by law); or
33
(j) in the case of a corporation, observes all applicable
corporate formalities in all material respects, has at all times at least two
(2) Independent Directors on its Board of Directors, and has a Certificate of
Incorporation which provides that for so long as the Loan is outstanding and the
corporation's assets continue to be subject to the Liens securing the Debt, the
corporation shall not take or consent to, as the case may be, any of the
following actions:
(i) to the fullest extent permitted by law, the
dissolution, liquidation, consolidation, merger or sale of all or
substantially all of its assets or the assets of any Borrower, except
in connection with the sale of any Property as permitted hereunder,
(ii) the engagement by any Borrower in any business
other than the ownership, maintenance and operation of the Properties
or the engagement by it in any business other than the ownership of a
membership interest in a Borrower,
(iii) the filing, or consent to the filing, of a
bankruptcy or insolvency petition, any general assignment for the
benefit of creditors or the institution of any other insolvency
proceeding, or the institution of any other insolvency proceeding, or
the seeking or consenting to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official, in
each case with respect to it or any Borrower without the unanimous vote
of all members of its board of directors, and
(iv) the amendment or modification of any provision
of its certificate of incorporation or, if such corporation is the SPE
Member or general partner of a Borrower, such Borrower's limited
liability company agreement or limited partnership agreement, as
applicable, or certificate of formation or certificate of limited
partnership, as applicable, that adversely affects any of the
requirements for qualifying as a "Single-Purpose Entity" (except as
required by law); or
(k) in the case of a limited liability company, observes all
applicable limited liability company formalities in all material respects, has
at all times either (A) a corporate member that is a Single-Purpose Entity or
(B) two (2) Independent Directors, and has a limited liability company agreement
which provides that for so long as the Loan is outstanding and the limited
liability company's assets continue to be subject to the Liens securing the
Debt, (1) the bankruptcy of any member (including the sole economic member) will
not result in a dissolution of such Single-Purpose Entity, and (2) the limited
liability company shall not take any of the following actions:
(i) to the fullest extent permitted by law, the
dissolution, liquidation, consolidation, merger or sale of all or
substantially all of the assets of any Borrower or Operating Lessee,
except in connection with the sale of any Property as permitted
hereunder,
(ii) the engagement by any Borrower or Operating
Lessee in any business other than the ownership, maintenance and
operation of the Properties,
34
(iii) the filing, or consent to the filing, of a
bankruptcy or insolvency petition, any general assignment for the
benefit of creditors or the institution of any other insolvency
proceeding, or the seeking or consenting to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any
similar official for a Borrower or Operating Lessee or a substantial
portion of their properties, without the unanimous vote of all members
of the limited liability company's board of directors (including the
members who are Independent Directors, if applicable), and
(iv) the amendment or modification of any provision
of its limited liability company agreement or certificate of formation
that adversely affects any of the requirements for qualifying as a
"Single-Purpose Entity" (except as required by law).
"SPE Member" shall have the meaning set forth in Section
4.1(bb) hereof.
"Sponsor" shall mean Strategic Hotel Funding, L.L.C., a
Delaware limited liability company.
"Sponsor Indemnity Agreement" shall mean that certain Sponsor
Indemnity Agreement, dated as of the Closing Date, by Sponsor in favor of
Lender.
"Standard & Poor's" shall mean Standard & Poor's Ratings
Services, a division of The XxXxxx-Xxxx Companies, Inc. and its successors
and/or assigns.
"STAR Report" shall mean (a) a quarterly Xxxxx Travel
Accommodations Report compiled by Xxxxx Travel Research, or (b) should Xxxxx
Travel Research cease to compile such reports, a quarterly report containing
similar data compiled by a nationally-recognized lodging industry information
source which is reasonably acceptable to Lender and (except during any period
following the occurrence and during the continuation of an Event of Default)
Borrowers.
"Stub Interest" shall mean $[___________].
"Tax and Insurance Escrow Account" shall have the meaning set
forth in Section 9.3.1 hereof.
"Tax and Insurance Incremental Amount" shall have the meaning
set forth in Section 9.3.3(b) hereof.
"Tax and Insurance Sub-Account" shall have the meaning set
forth in Section 9.3.3(a) hereof.
"Taxes" shall mean all real estate and personal property
taxes, assessments, fees, taxes on rents or rentals, water rates or sewer rents,
and other governmental charges now or hereafter levied or assessed or imposed
against any Borrower or any Property or rents therefrom or which may become
Liens.
35
"Tenant" shall mean any Person liable by contract or otherwise
to pay monies (including a percentage of gross income, revenue or profits)
pursuant to a Lease.
"Term Sheet" shall mean that certain letter agreement, dated
February 20, 2004, between Lender and Strategic Hotel Capital, Inc.
"Third Party Securitization Amount" shall have the meaning set
forth in Section 9.2.15(a) hereof.
"Threshold Amount" shall mean (i) $3 million in the case of
the New Orleans Property and (ii) in the case of any other Property, the lesser
of 5% of the Allocated Loan Amount for such Property or $3 million.
"Trade Payables" shall mean unsecured amounts payable by or on
behalf of any Borrower for or in respect of the operation of the Properties in
the ordinary course and which would under GAAP be regarded as ordinary expenses,
including amounts payable to suppliers, vendors, contractors, mechanics,
materialmen or other Persons providing property or services to any Property or
any Borrower (other than compensation payable to Property Managers, exclusive of
reimbursements).
"UCC" or "Uniform Commercial Code" shall mean the Uniform
Commercial Code as in effect in the state in which a Property is located.
"Unfunded Obligations" shall mean, collectively, the unfunded
obligations described on Schedule H attached hereto and made a part hereof.
"Unfunded Obligations Account" shall have the meaning set
forth in Section 9.2.1(f) hereof.
"U.S. Government Securities" shall mean 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).
"U.S. Taxes" shall have the meaning set forth in Section
2.2.2(d)(i) hereof.
"Year-to-Date Period" shall mean the period commencing on
January 1, 2004 and ending on May 31, 2004.
36
Section 1.2. Principles of Construction. All references to
sections, schedules and exhibits are to sections, schedules and exhibits in or
to this Agreement unless otherwise specified. Unless otherwise specified, the
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The words "includes", "including" and
similar terms shall be construed as if followed by the words "without
limitation". The terms "Property" or "Properties" shall be construed to be
followed by the phrase "or any part or portion thereof". The term "Borrowers"
shall be construed to be followed by the phrase "or any of them". Unless
otherwise specified, all meanings attributed to defined terms herein shall be
equally applicable to both the singular and plural forms of the terms so
defined. All accounting terms not specifically defined herein shall be construed
in accordance with GAAP, as may be modified herein. As a matter of convenience
herein, rating categories are generally stated in the nomenclature of Standard &
Poor's Ratings Group, it being understood that unless otherwise expressly stated
to the contrary, reference to such category shall also be deemed to be a
reference to the comparable category of each other Rating Agency; provided that
if a specified rating (or its equivalent) from any of the Rating Agencies is
required hereunder with respect to an issuer or a security (other than the
Notes), and one of the Rating Agencies in connection with a Securitization does
not rate the issuer or security in question, then such requirement hereunder
shall nevertheless be deemed satisfied so long as such Rating Agency has issued
a Rating Confirmation with respect thereto. For purposes of any representation,
warranty or covenant herein relating to one or more Operating Lessee, including
without limitation Section 4.1(bb) hereof, all defined terms and sections used
in or referred to therein or in any defined terms used therein shall, to the
extent not expressly provided for in such definitions or sections, be deemed to
refer to Operating Lessees in addition to Borrowers.
ARTICLE II
GENERAL
-------
Section 2.1. The Loan.
2.1.1 Commitment. Each of the parties hereto agrees and
acknowledges that the Borrowers received the proceeds of the Loan on the Closing
Date and that the Loan shall mature on the Maturity Date. Each Borrower hereby
confirms its acceptance of the Loan, subject to and upon the terms and
conditions set forth herein.
2.1.2 Disbursement to Borrowers and Use of Loan Proceeds.
Borrowers are permitted to request and receive only one disbursement hereunder
in respect of the Loan, which disbursement was made on the Closing Date. The
parties hereto acknowledge that, on the Closing Date, Borrowers received the
proceeds of the Loan in an aggregate principal amount equal to the Loan Amount,
subject to payment from Loan proceeds of the Lender Expenses and subject to
funding from Loan proceeds of (i) the Tax and Insurance Escrow Account and Tax
and Insurance Sub-Account, (ii) the Deferred Maintenance and Environmental
Reserve Account, (iii) the Liquidity Reserve Account, (iv) the FF&E Reserve
Account (v) the Unfunded Obligations Reserve Account and (vi) Stub Interest
(covering the period ending July 10, 2004), which have been escrowed with
Lender, all in accordance with the provisions of this Agreement. Any amount
borrowed and repaid hereunder in respect of the Loan may not be reborrowed.
37
2.1.3 The Notes. (a) The Loan shall be evidenced by the Notes,
in the aggregate original principal amount of the Loan Amount. Each Note shall
bear interest at the Interest Rate through and including the Interest Accrual
Period in which occurs the Maturity Date. The Notes shall be subject to
repayment as provided in Section 2.3 hereof, shall be entitled to the benefits
of this Agreement and shall be secured by a Mortgage granting a first mortgage
Lien on each Property and by certain of the other Loan Documents.
(b) The Borrower shall maintain, or cause to be maintained, a
register (the "Register") at the address to which notices to the Borrower are to
be sent hereunder, on which it shall enter the name or names of the registered
owner or owners from time to time of the Notes. The Notes (or, if applicable,
each Note) may be independently assigned or otherwise transferred in whole or in
part (including, without limitation, the sale of any participation interests in
the Notes by Lender) by registration of such assignment or transfer on the
Register (and the Notes shall expressly so provide). Any assignment or transfer
on the Register (and the Notes evidencing the same) may be effected by
registration of such assignment or transfer on the Register. At the request of
Lender or any designated assignee or transferee of any of the Notes, Borrowers
shall (i) issue to Lender or the designated assignee or transferee one or more
new Notes in the same aggregate principal amount of the Notes (which Notes may
contain components and/or subcomponents of the debt evidenced by such Notes) so
assigned or transferred upon delivery to Borrowers of the Notes so assigned or
transferred and (ii) reasonably cooperate with Lender in connection with
Lender's assignment of any interest in the Loan. The Register shall be available
for inspection by Lender at any reasonable time upon reasonable prior notice.
(c) Borrower agrees that it shall, upon request, reasonably
cooperate with Lender in connection with any request by Lender to sever the Note
into two (2) or more separate substitute notes in an aggregate principal amount
equal to the Loan Amount and to reapportion the Loan among such separate
substitute notes, including, without limitation, by executing and delivering to
Lender new substitute notes to replace the Note, amendments to or replacements
of existing Loan Documents to reflect such severance and/or legal opinions with
respect to such substitute notes, amendments and/or replacements.
Notwithstanding the foregoing, Borrower shall not be required to incur any
post-closing costs or expenses relating to the severance of the Note, other than
(i) Borrower's internal costs and expenses and the fees and disbursements of
Borrower's counsel with respect to the issuance of a new enforceability opinion
in connection with any such substitute notes and (ii) Lender's out-of-pocket
costs and expenses relating to the severance of the Note, including, without
limitation, Lender's counsel's costs and expenses. Any such substitute notes may
as among themselves be pari passu, senior and subordinate and/or otherwise have
varying principal amounts and economic terms, provided, however, subject to the
effect of any prepayments of such substitute notes after an Event of Default,
(i) the weighted average spread applicable to the substitute notes shall not
exceed the Interest Rate, (ii) the economics of the Loan (or severed portions
thereof) and other terms of the Loan, taken as a whole, shall not be modified by
such fractionalization in a manner which is in any material respect adverse to
Borrower (except any increase in the weighted average spread applicable to the
substitute notes that may result after prepayments of the Loan have been made
after an Event of Default) and (iii) all voluntary principal prepayments shall
be applied ratably among the securities issued in connection with a
Securitization and any other interests in the Loan held outside the
Securitization. Upon the occurrence and during the continuance of an Event of
Default, Lender may apply payment of all sums due Notes in such order and
priority as Lender shall elect in its sole and absolute discretion.
38
Section 2.2. Interest.
2.2.1 Generally. Interest on the Notes shall accrue at the
Interest Rate and shall be calculated on the basis of a 360-day year and charged
for the actual number of days elapsed in the Interest Accrual Period in
question; provided, however, that, after any Securitization, interest on the
Notes referenced in Section 2.1.3(c) shall accrue at a rate described in such
Notes which rate shall be consistent, and determined in accordance, with the
provisions of such Section.
2.2.2 Determination of Interest Rate.
(a) Intentionally Deleted.
(b) Interest shall be charged and payable on the outstanding
principal amount of the Notes at a rate per annum equal to the Interest Rate,
but in no event to exceed the maximum rate permitted under applicable law.
Subject to the terms and conditions of this Section 2.2.2, Borrowers shall pay
interest on the outstanding principal amount of the Notes at the Interest Rate
for the applicable Interest Accrual Period. Borrower hereby agrees that at any
time prior to a Securitization and provided that there is no material adverse
economic impact on Borrower, Lender may change the Interest Accrual Period upon
ten (10) days prior written notice to Borrower.
(c) If, at any time prior to the completion of the first
Securitization of the Loan, as a result of any Regulatory Change:
(i) the basis of taxation of payments to Lender of
the principal of or interest on the Loan is changed or Lender or the
Person controlling Lender shall be subject to any tax, duty, charge or
withholding of any kind with respect to this Agreement (excluding
federal taxation of the overall net income of Lender); or
(ii) any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of Lender is imposed,
modified or deemed applicable to Lender; or
(iii) any other condition affecting the Loan is
imposed on Lender;
and Lender or any Person controlling Lender reasonably determines that, by
reason thereof, the cost to Lender or any Person controlling Lender of
maintaining or extending the Loan is increased, or any amount receivable by
Lender or any Person controlling Lender hereunder in respect of any portion of
the Loan is reduced, in each case by an amount deemed by Lender to be material
(such increases in cost and reductions in amounts receivable being herein called
"Increased Costs"), then Borrowers shall pay to Lender such additional amount or
amounts as will compensate Lender or any Person controlling Lender for such
Increased Costs to the extent Lender reasonably determines that such Increased
Costs are allocable to the Loan. Lender will notify Borrowers of any event
occurring after the date hereof which will entitle Lender to compensation
pursuant to this subsection (c) as promptly as practicable after it obtains
39
knowledge thereof and determines to request such compensation; provided,
however, that, if Lender fails to deliver a notice within 180 days after the
date on which an officer of Lender responsible for overseeing this Agreement
knows or has reason to know of its right to additional compensation under this
Section 2.2.2(c), Lender shall only be entitled to additional compensation for
any such Increased Costs incurred from and after the date that is 180 days prior
to the date Borrowers received such notice. If Lender requests compensation
under this Section 2.2.2(c), Borrowers may, by notice to Lender, require that
Lender furnish to Borrowers a reasonably detailed statement setting forth the
basis for requesting such compensation and the method for determining the amount
thereof.
(d) (i) At all times for all amounts payable that accrue
during periods prior to the first Securitization of the Loan, Borrowers shall,
to the extent permitted by law, make all payments hereunder free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, or any liabilities with respect thereto,
including those arising after the date hereof as a result of the adoption of or
any change in law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or any change in the interpretation or application
thereof by a Governmental Authority but excluding, in the case of the Lender,
such taxes (including income taxes, franchise taxes and branch profit taxes) as
are imposed on or measured by Lender's net income by the United States of
America or any Governmental Authority of the jurisdiction under the laws of
which Lender is organized or maintains a lending office (all such non-excluded
taxes, levies, imposts, deduction, charges, withholdings and liabilities with
respect thereto which Lender determines to be applicable to this Agreement, the
other Loan Documents and the Loan being hereinafter referred to as "U.S.
Taxes"). If, at any time prior to the first Securitization of the Loan the
Borrowers shall be required by law to deduct any U.S. Taxes from or in respect
of any sum payable hereunder or under any other Loan Document to Lender, (A) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.2.2(d)) the Lender receives an amount equal to the sum it
would have received had no such deductions been made, (B) the Borrowers shall
make such deductions, and (C) the Borrowers shall pay the full amount deducted
to the relevant Governmental Authority in accordance with applicable law. If a
withholding tax of the United States of America or any other Governmental
Authority shall be or become applicable after the date of this Agreement, to
such payments by the Borrowers made to the lending office or any other office,
Lender shall use reasonable efforts to make, fund and maintain its Loan through
another lending office of Lender in another jurisdiction so as to reduce the
Borrowers' liability hereunder, if the making, funding or maintenance of such
Loan through Lender's such other lending office does not, in the judgment of
Lender, otherwise adversely affect the Loan.
(ii) In addition, for all amounts payable that accrue
during period prior to the first Securitization of the Loan, each
Borrower agrees to pay any present or future stamp or documentary taxes
or other excise or property taxes, charges, or similar levies which
arise from any payment made hereunder, or from the execution, delivery
or registration of, or otherwise with respect to, this Agreement, the
other Loan Documents, or the Loan (hereinafter referred to as "Other
Taxes").
40
(iii) The Borrowers shall indemnify Lender for all
periods prior to the first Securitization of the Loan the full amount
of U.S. Taxes and Other Taxes (including any U.S. Taxes or Other Taxes
imposed by any Governmental Authority on amounts payable under this
Section 2.2.2(d)) paid by Lender and any liability (including
penalties, interest, additions thereto, and expenses) arising therefrom
or with respect thereto, whether or not such U.S. Taxes or Other Taxes
were correctly or legally asserted. This indemnification shall be made
within thirty (30) days after the date Lender makes written demand
therefore.
(iv) Without prejudice to the survival of any other
agreement of the Borrowers and Lender hereunder, the agreements and
obligations of the Borrowers contained in Section 2.2.2(c) and this
Section 2.2.2(d)) shall survive the payment in full of principal and
interest hereunder, and the termination of this Agreement.
(v) Prior to the first Securitization of the Loan, if
Lender or any of its successors or assigns is a foreign person (i.e., a
person other than a United States person for United States federal
income tax purposes), Lender shall:
(1) not later than the Closing Date (or, in
the case of a successor or assign of Lender, the date
such successor or assign becomes a successor or
assign) deliver to Borrowers one accurate and
complete signed original of Internal Revenue Service
Form W-8 ECI or any successor form ("Form W-8 ECI"),
or one accurate and complete signed original of
Internal Revenue Service Form W-8 BEN or any
successor form ("Form W-8 BEN"), as appropriate, in
each case indicating that Lender (or such successor
or assign, as applicable) is on the date of delivery
thereof entitled to receive payments of principal,
interest and fees under this Agreement free from
withholding of United States federal income tax;
(2) if at any time it makes any changes
necessitating a new Form W-8 ECI or Form W-8 BEN,
with reasonable promptness deliver to Borrowers in
replacement for, or in addition to, the forms
previously delivered by it hereunder, one accurate
and complete signed original of Form W-8 ECI or Form
W-8 BEN, as appropriate, in each case indicating that
it is on the date of delivery thereof entitled to
receive payments of principal, interest and fees
under this Agreement free from withholding of United
States federal income tax; and
(3) promptly upon Borrowers' reasonable
request to that effect, deliver to Borrowers such
other forms or similar documentation as may be
required from time to time by applicable law, treaty,
rule or regulation in order to establish its tax
status for United States federal tax withholding
purposes.
(vi) Borrowers will not be required to pay any
additional amounts in respect of United States federal income tax
pursuant to this Section 2.2.2(d) to Lender if the obligation to pay
such additional amounts would not have arisen but for a failure by
Lender to comply with its obligations under Section 2.2.2(d)(v) above.
41
(e) Intentionally Deleted.
(f) Lender shall use reasonable good faith efforts to avoid or
mitigate any increased cost or reduced receivable under Section 2.2.2(c) or (d)
to the greatest extent practicable (including transferring the Loan to another
lending office or Affiliate of Lender) unless, in the opinion of Lender, such
efforts would be likely to have any material adverse effect upon it.
(g) In the event that Lender makes a request to the Borrowers
for compensation in accordance with Section 2.2.2(c) or (d), then, provided that
no Event of Default has occurred and is continuing at such time, the Borrowers
may, at their option, request that Lender use its reasonable efforts (consistent
with legal and regulatory restrictions) to avoid the need for paying such
compensation or such inability, including changing the jurisdiction of its
applicable lender office; provided, however, that the taking of such action
would not, in the sole judgment of such Lender, be disadvantageous to such
Lender.
2.2.3 Default Rate. If an Event of Default shall have occurred
and is continuing (including the failure of Borrowers to make a payment of
principal or interest on the Payment Date therefor), Borrowers shall pay
interest at the Default Rate on the outstanding amount of the Loan and due but
unpaid interest thereon, upon demand from time to time (which interest is
payable both before and after Lender has obtained a judgment with respect to the
Loan), to the extent permitted by applicable law. Payment or acceptance of the
increased rates provided for in this subsection is not a permitted alternative
to timely payment or full performance by Borrowers and shall not constitute a
waiver of any Default or Event of Default or an amendment to this Agreement or
any other Loan Document and shall not otherwise prejudice or limit any rights or
remedies of Lender.
Section 2.3. Loan Repayment.
2.3.1 Payments at Closing. On the Closing Date, Borrowers paid
an installment of interest in an amount equal to Stub Interest as provided in
Section 2.1.2(vi).
2.3.2 Monthly Debt Service Payments. Commencing with the
Initial Payment Date, and on each and every Payment Date thereafter until but
excluding the Maturity Date, Borrowers shall pay Lender monthly installments in
the amount of $[________] (the "Monthly Debt Service Payment Amount")
representing interest payable on the Notes at the Interest Rate for and through
the end of the applicable Interest Accrual Period and scheduled payments of
principal based on a thirty (30) year amortization schedule.
2.3.3 Payment on Maturity Date. Borrowers shall repay any
outstanding principal indebtedness of the Loan in full on the Maturity Date of
the Loan, together with all accrued and unpaid interest thereon through the end
of the Interest Accrual Period during which such Maturity Date occurs (even if
such period extends beyond the Maturity Date) and all other amounts which are
then due and payable to Lender hereunder or under the Notes, the Mortgage, and
the other Loan Documents.
42
2.3.4 Making of Payments. Each payment by Borrowers hereunder
or under the Notes shall be made in funds settled through the New York Clearing
House Interbank Payments System or other funds immediately available to Lender
by 11:00 a.m. New York City time, on the date such payment is due and shall be
made in lawful money of the United States of America by wire transfer in federal
or other immediately available funds to the Deposit Account, or such other
account pursuant to such other wiring instructions as provided by Lender. Any
funds received by Lender after such time shall, for all purposes hereof, be
deemed to have been paid on the next succeeding Business Day. Lender shall
notify Borrowers in writing of any changes in the account to which payments are
to be made. Except as otherwise provided herein, whenever any payment hereunder
or under the Notes shall be stated to be due on a day which is not a Business
Day, such payment shall be made on the first Business Day immediately prior
thereto.
2.3.5 Intentionally Deleted.
2.3.6 No Setoffs. All amounts due hereunder or under the Notes
or the other Loan Documents shall be payable without setoff, counterclaim or any
other deduction whatsoever.
2.3.7 Loan Account. Lender shall maintain a loan account on
its books in the name of Borrowers in which will be recorded the Loan and all
payments, defeasance and prepayments of principal of and interest on the Loan
(provided that any error in such loan account shall not in any manner affect the
obligations of Borrowers to repay the Loan in accordance with the terms of this
Agreement, the Notes and the other Loan Documents). In addition to the rights of
Borrowers to have informational computer access to the Deposit Account, the
Holding Account, the Tax and Insurance Escrow Account and any other Reserve
Accounts, Lender shall, upon the written request of Borrowers, not more often
than monthly, provide such information as it has in its possession regarding the
records maintained in accordance with the first sentence hereof and information
regarding funds on deposit in the Holding Account. In addition, Lender shall (or
shall direct any servicer in connection with a Securitization), to provide to
Borrowers, within five (5) Business Days of the end of each month, monthly
reports showing deposits into and disbursements, transfers or credits, as the
case may be, from the Tax and Insurance Escrow Account and each other Reserve
Account, and setting forth, as of the end of each month, a schedule of the
Permitted Investments contained in each such account and schedules of all
transactions involving Permitted Investments during the month.
Section 2.4. Prepayment.
2.4.1 No Prepayment. Other than as set forth in Sections 2.4.2
and 10.1(d) below, or as required or permitted pursuant hereto in connection
with a Casualty or Condemnation, Borrowers shall have no right to prepay all or
any portion of the Loan prior to the Permitted Prepayment Date.
2.4.2 Permitted Prepayment. A. From and after the Permitted
Prepayment Date and subject to the terms and conditions set forth in this
Section 2.4.2, the Borrowers may prepay the Loan at any time in whole or in part
(hereinafter, a "Prepayment"), provided that (a) the Borrowers shall provide not
less than 30 days' and not more than 120 days' prior written notice (a
"Prepayment Notice") to Lender specifying the date on which the Prepayment is
scheduled to
43
occur and such scheduled payment date shall not be the last day of an Interest
Accrual Period (such scheduled date, the "Prepayment Date"), which notice shall
indicate the principal amount of the Notes to be so prepaid and the specific
Property to be released from the Lien of the Loan Documents pursuant to such
Prepayment and (b) the Borrowers shall have paid Debt Service (i.e., accrued and
unpaid interest on the principal amount being repaid) upon making such
Prepayment through the end of the Interest Accrual Period in which the
Prepayment is to occur (even if such period extends beyond the scheduled
prepayment date). It is the intention and agreement of the parties that, subject
to the requirements and limitations set forth in the previous sentence, any
Property may, from and after the Permitted Prepayment Date, be the subject of a
Prepayment and simultaneous release of the Liens of the Loan Documents; provided
(i) the amount of the Prepayment equals or exceeds the Release Amount for the
Property, and (ii) the provisions of Section 2.5.2 (other than clause (a)
thereof) are complied with. On the Prepayment Date, Borrowers shall pay to
Lender the amount of the Prepayment specified in the notice, all accrued and
unpaid interest on the principal balance of the Notes being so repaid through
and including the date that is the last day of the Interest Accrual Period in
which such Prepayment occurs (or, if prohibited by law, through the Prepayment
Date), all other sums then due under the Notes, this Agreement, the applicable
Mortgage and the other Loan Documents, and all reasonable costs and expenses of
Lender incurred in connection with the Prepayment, including reasonable
attorneys' fees and disbursements. Lender shall not be obligated to accept any
Prepayment of the principal balance of the Notes, or any portion thereof, unless
it is accompanied by the prepayment consideration due in connection therewith
pursuant to the terms hereof.
B. Notwithstanding anything to the contrary herein, if a
Prepayment Notice has been sent in good faith and no Event of Default is then
continuing, such Prepayment Notice may be rescinded or deferred by Borrowers
upon delivery of written notice to Lender (specifying, in the case of a
deferral, the new Prepayment Date for such Prepayment) at least five Business
Days prior to the Prepayment Date specified in the applicable Prepayment Notice
(provided that Borrowers shall compensate Lender for any and all reasonable
costs and expenses incurred by Lender and/or its agents resulting from such
rescission or deferral).
2.4.3 Repayment upon Default. If all or any part of the
principal amount of the Loan is prepaid upon acceleration of the Loan following
the occurrence of an Event of Default, Borrowers shall be obligated to pay all
amounts that would be payable in connection with a Prepayment under Section
2.4.2A, including (1) all accrued and unpaid interest on the principal balance
of the Notes through the date that is the final day of the applicable Interest
Accrual Period or, if prohibited by law, through the date of repayment
(including interest owed at the Default Rate), (2) in the event the Loan is
accelerated during the Lockout Period, the greater of (i) the Acceleration
Prepayment Premium and (ii) an amount which would be sufficient to purchase
securities meeting the requirements of Section 2.4.5(b) below, (3) all other
sums then due under the Notes, this Agreement, the Mortgage and the other Loan
Documents, and (4) all costs and expenses of Lender incurred in connection with
such Event of Default, including reasonable attorneys' fees and disbursements.
2.4.4 Waiver of Prepayment Rights. Each Borrower acknowledges
that the inclusion of the waiver of prepayment rights and the agreement to pay
any amounts necessary in connection with the right to prepay the Notes as set
forth in this Section 2.4, as applicable, as well as the other agreements set
forth herein in respect of prepayment, were separately negotiated with Lender,
that the economic value of the various elements of this waiver and agreement was
discussed, that the consideration given by Borrowers for the Loan was adjusted
to reflect the specific waiver and agreement negotiated between Borrowers and
Lender and contained herein.
44
2.4.5 Voluntary Defeasance of the Loan. (a) At any time after
the Defeasance Lockout Period, and subject to the other terms and conditions set
forth in this Section 2.4.5, Borrowers may defease all or any portion of the
Loan with U.S. Government Securities in connection with the release of a
Property pursuant to Section 2.5 (a "Defeasance"). No Defeasance shall be
permitted upon or after the expiration of the Lockout Period. Each Defeasance
shall be subject, in each case, to the satisfaction of the following conditions
precedent:
(i) Borrowers shall provide not less than thirty (30)
days' and not more than one-hundred-and-twenty (120) days' prior
written notice to Lender specifying the date (the "Defeasance Date") on
which the Defeasance Deposit is to be made and on which the Defeasance
is to occur. Such notice shall indicate the principal amount of the
Loan to be defeased and the specific Property to be released from the
Lien of the Loan Documents pursuant thereto. Notwithstanding anything
to the contrary herein, if a notice of defeasance of the type described
in the previous sentence has been sent in good faith and no Event of
Default is then continuing, such notice may be rescinded or deferred by
Borrowers upon delivery of written notice to Lender (specifying, in the
case of a deferral, the new Defeasance Date for such Defeasance) at
least five (5) Business Days prior to the Defeasance Date specified in
the applicable notice (provided that Borrowers shall compensate Lender
for any and all reasonable costs and expenses incurred by Lender and/or
its agents resulting from such rescission or deferral).
(ii) Borrowers shall pay to Lender all accrued and
unpaid interest on the principal amount of the portion of the Loan that
is to be defeased to but not including the Defeasance Date (and if the
Defeasance Date is not a Payment Date, the Defeasance Deposit shall
take into account the interest that would have accrued on the portion
of the Loan that is to be defeased through and including the last day
of the Interest Accrual Period in which such Defeasance occurs).
(iii) Borrowers shall pay to Lender all other sums,
including any scheduled interest then due under the Notes, this
Agreement, the Mortgages and the other Loan Documents.
(iv) No Event of Default shall exist on the
Defeasance Date (except as otherwise provided in Section 10.1(d)).
(v) Borrower shall have established the Defeasance
Collateral Account pursuant to Section 2.4.5(c) hereof
(vi) Borrower shall deliver or cause to have been
delivered to Lender the Defeasance Deposit in order to enable Lender to
purchase U.S. Government Securities and deposit such securities into
the Defeasance Collateral Account, and such U.S. Government Securities,
if in registered form, shall be registered in the name of the Borrower
for the benefit of Lender or its nominee (and, if registered in nominee
name endorsed to Lender or in blank) and, if issued in book-entry form,
the name of Lender or its nominee shall appear as the owner of such
securities on the books of the Federal Reserve Bank or other party
maintaining such book-entry system.
45
(vii) Borrowers shall execute and deliver a
defeasance note (the "Defeasance Note"), in form and substance
reasonably acceptable to Lender, dated as of the date of the
Defeasance, payable to Lender, in an amount equal to the Defeasance
Deposit.
(viii) Borrowers shall execute and deliver a security
agreement, in form and substance satisfactory to Lender (in its
reasonable judgment), creating a first priority lien on the Defeasance
Deposit and the U.S. Government Securities purchased with the
Defeasance Deposit in accordance with the provisions of this Section
2.4.5 (the "Security Agreement").
(ix) Borrowers shall deliver to Lender an opinion of
counsel for Borrowers in form and substance reasonably satisfactory to
Lender stating, among other things, (x) Lender has a perfected first
priority security interest in the U.S. Government Securities purchased
with the Defeasance Deposit and that the Security Agreement is
enforceable in accordance with its terms and (y) that any trust formed
as a REMIC pursuant to a securitization will not fail to maintain its
status as a REMIC as a result of such defeasance.
(x) Borrowers shall deliver to Lender an Officer's
Certificate certifying that the requirements set forth in this Section
2.4.5 have been satisfied.
(xi) Borrowers shall deliver such other certificates,
documents or instruments as Lender may reasonably request.
(xii) Borrowers shall pay all reasonable costs and
expenses of Lender incurred in connection with the Defeasance,
including, any costs and expenses associated with a release of the
Mortgage as provided in Section 2.5 hereof and reasonable attorneys'
fees and expenses.
(xiii) Borrowers shall deliver to Lender a
confirmation, in form and substance reasonably satisfactory to Lender,
by a "Big Four" independent certified public accounting firm, that the
Defeasance Deposit is sufficient to pay all Scheduled Defeasance
Payments in a timely manner as contemplated in this Section 2.4.5.
(xiv) Borrowers shall deliver to Lender a Rating
Confirmation from the applicable Rating Agencies with respect to the
proposed Defeasance (it being hereby agreed by the parties hereto that
such Rating Confirmation shall be required with respect to the adequacy
of the Defeasance and not with respect to the effect of releasing the
Lien of the Loan Documents).
46
(b) In connection with the conditions set forth above in
Section 2.4.5(a), Lender shall use the Defeasance Deposit in accordance with
Borrowers' express instructions to purchase U.S. Government Securities which
provide for (i) payments on or prior to, but as close as possible to, all
successive Payment Dates after the Defeasance Date through and including the
Permitted Prepayment Date and in amounts equal to the Debt Service due on such
Payment Dates under the Notes (in the case of a Defeasance for the entire
outstanding principal balance of the Loan) or the portion of the Loan that is
subject to the Defeasance (in case of a Defeasance of a portion of the
outstanding principal balance of the Loan) calculated at the Interest Rate and
(ii) one payment on the Permitted Prepayment Date in the amount of (y) in the
case of a total Defeasance of the Loan, the entire outstanding principal balance
of the Loan or (z) in the case of a partial Defeasance of the Loan, in the
amount of the portion of the Loan that was subject to the Defeasance (the
"Scheduled Defeasance Payments"). Borrowers, pursuant to the Security Agreement
or other appropriate document, shall irrevocably authorize and direct that the
payments received from the U.S. Government Securities may be made directly to
Lender and applied to satisfy the obligations of Borrowers under the Notes or,
if issued, the Defeasance Note. In connection with a total Defeasance of the
Loan, any portions of the Defeasance Deposit in excess of the amount necessary
to purchase the U.S. Government Securities required by this Section 2.4.5 and
satisfy the obligations of the Borrowers under Section 2.3 shall be remitted to
Borrowers. In connection with any partial Defeasance of the Loan, any portion of
the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Government Securities required by this Section 2.4.5 and satisfy the obligations
of the Borrowers under Section 2.3 shall be retained by Lender in an Eligible
Account as additional collateral for the Loan, and shall be invested in
Permitted Investments, each Borrower hereby granting to Lender a security
interest in such account and in such Permitted Investments. In addition, any
portion of a Scheduled Defeasance Payment in excess of the Debt Service
attributable to the principal amount Defeased which is due on such Payment Date
calculated at the Interest Rate for the related Interest Accrual Period shall
(1) in the case of a total Defeasance, be remitted to the Borrowers, or (2) in
the case of a partial Defeasance, be applied together with funds in the Holding
Account as provided in Section 9.4.1 hereof.
(c) On or before the date on which Borrower delivers
Defeasance Deposit to Lender pursuant to Section 2.4.5(a) hereof, Borrower shall
open at any Eligible Institution (or other bank subject to the next sentence
hereof) at the time and acting as custodian for Lender, a defeasance collateral
account (the "Defeasance Collateral Account") which shall at all times be an
Eligible Account, in which Borrower shall grant to Lender or reconfirm the grant
to Lender of a security interest. The Defeasance Collateral Account shall
contain (i) all U.S. Government Securities purchased with the Defeasance Deposit
delivered by Borrower pursuant to Section 2.4.5(b) hereof, (ii) all payments
received on the U.S. Government Securities purchased with the Defeasance Deposit
held in the Defeasance Collateral Account and (iii) all income or other gains
from investment of moneys or other property deposited in the Defeasance
Collateral Account. All such amounts, including all income from the investment
or reinvestment thereof, shall be held by Lender, subject to withdrawal by
Lender for the purposes set forth in Section 2.4.5(d). Borrower shall be the
owner of the Defeasance Collateral Account and shall report all income accrued
on Defeasance Collateral for federal, state and local income tax purposes in its
income tax return.
47
(d) Lender shall withdraw, draw on or collect and apply the
amounts that are on deposit in the Defeasance Collateral Account to pay when due
the principal and all installments of interest and principal on the Defeasance
Note. Funds and other property in the Defeasance Collateral Account shall not be
commingled with any other monies or property of Borrower or any Affiliate of
Borrower. Lender shall not in any way be held liable by reason of any
insufficiency in the Defeasance Collateral Account except to the extent caused
by the gross negligence, willful misconduct, fraud or illegal acts of Lender.
(e) Borrower and Lender shall enter into any appropriate
amendments to the Loan Documents necessitated by a Defeasance of the Loan, such
amendments to be in form and substance reasonably acceptable to both Borrower
and Lender.
Section 2.5. Release of Properties. Except as set forth in
this Section 2.5, no repayment, prepayment, or Defeasance of all or any portion
of the Loan shall cause, give rise to a right to require, or otherwise result
in, the release of the Lien of any Mortgage on any Property.
2.5.1 Release upon Payment or Defeasance in Full. (a) Lender
shall, at the expense of Borrowers, upon payment in full of all principal and
interest on the Loan and all other amounts due and payable under the Loan
Documents in accordance with the terms and provisions of the Notes and this
Agreement, release or assign (at Borrowers' cost and expense) the Lien of the
Mortgage and related Loan Documents with respect to all of the Properties;
provided, however, that defeasance and any related releases of Properties from
the Lien of the Mortgage will be subject to the conditions set forth in Sections
2.4 and 2.5.
(b) In connection with the release of the Lien contemplated in
Section 2.5.1(a), Borrowers shall submit to Lender, not less than ten (10) days
prior to the date of such release, a release of Liens (and related Loan
Documents) for each applicable 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 Borrowers in connection with such release (collectively,
"Release Instruments"), together with an Officer's Certificate certifying that
such documentation (i) is in compliance with all Legal Requirements, and (ii)
will effect such releases in accordance with the terms of this Agreement.
2.5.2 Release of Individual Properties. On one or more
occasions, subject to satisfaction of each of the conditions set forth in
paragraphs (a) through (e) below and the terms of Section 2.4.2 hereof, the
Borrowers may obtain (i) the release of any Property or Properties from the Lien
of the Mortgage thereon and related Loan Documents, (ii) the release of the
obligations of the Borrowers under the Loan Documents with respect to such
released Property or Properties (other than those expressly stated to survive)
and (iii) the remittance to Borrowers of any amounts held in any Reserve
Accounts specifically relating to the subject Property or Properties:
(a) Borrowers shall have Defeased a portion of the principal
balance of the Loan equal to the Release Amount for such Property pursuant to
Section 2.4.5.
48
(b) Borrowers shall submit to Lender not less than ten (10)
days prior to the date of such release, all Release Instruments for each
applicable Property (for execution by Lender) together with an Officer's
Certificate certifying that (i) the Release Instruments are in compliance with
all Legal Requirements, (ii) the release to be effected will not violate the
terms of this Agreement, (iii) the release to be effected 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)
and (iv) the requirement described in paragraph (c) below is satisfied in
connection with such Release (together with calculations demonstrating the same
in reasonable detail).
(c) With respect to any release of a Property, after giving
effect to such release, the Aggregate DSCR as of the date of the proposed
release, for all of the Properties then remaining subject to the Liens of the
Mortgages shall not be less than the greater of (A) the Closing Date DSCR and
(B) the Aggregate DSCR for the Properties subject to the Lien of the Mortgage
immediately prior to the release in question; provided, however, that this
subsection 2.5.2(c) shall not be applicable in connection with a partial
prepayment of any of the Loan required to be made in connection with a Casualty
or Condemnation. Borrowers shall have the right to repay a portion of the Loan
in excess of the applicable Release Amount that is necessary to comply with the
requirement in this Section 2.5.2(c).
(d) Intentionally Omitted.
(e) Notwithstanding anything to the contrary contained herein,
provided no Event of Default has occurred and is continuing, at Borrowers'
request and at Borrowers' sole cost and expense, in lieu of applying any monies
as a prepayment of the Loan along with a release of the Lien of the Mortgage and
the other Loan Documents with respect to any Property released in accordance
with the terms hereof from and after the Permitted Prepayment Date, Lender
agrees that it shall, in consideration of an amount equal to the Release Amount
for such Property and any additional amount paid pursuant to Section 2.5.2(c),
sever the Note in two, with one Note in the amount of the Release Amount and any
additional amount paid pursuant to Section 2.5.2(c) and the other Note in the
amount of the remaining principal amount of the Loan, endorse the Note in the
amount of the Release Amount and any additional amount paid pursuant to Section
2.5.2(c), and assign the Mortgage and other Loan Documents with respect to such
Property, to a lender designated by Borrower, and Lender shall execute and
deliver to Borrower such instruments and other documents as shall be necessary
or appropriate to evidence any such assignment of the Loan Documents and that
portion of the Loan.
(f) No Event of Default shall exist on the date the Defeasance
is made (except as otherwise provided in Section 10.1(d)).
(g) Provided the Aggregate DSCR requirement in Section
2.5.2(c)(B) is satisfied and subject to the provisions of the next sentence,
Borrower shall not be obligated to defease the Loan by more than 100% of the net
sale proceeds received from a bona-fide third party purchaser in connection with
a sale and permitted release of an individual Property or group of Properties.
Notwithstanding the foregoing, in no event shall the principal amount of the
Loan defeased be less than the applicable Release Amount with respect to an
individual Property or group of Properties, as applicable.
49
2.5.3 Further Assurances. To the extent any Release Instrument
executed and delivered under Section 2.5.2(b), is insufficient to effect the
release to be effected in accordance with the terms hereof, Lender (and any
servicer in connection with a Securitization) shall remain obligated to execute
and deliver, at the expense of the Borrowers, such further Release Instruments
as Borrowers may reasonably request and submit to Lender, together with an
Officer's Certificate covering the matters to be covered in the Officer's
Certificate described in Section 2.5.2(b).
In addition to the foregoing, the Borrower which as of the
Closing Date was the owner of a Property being released from the Lien of the
Mortgage pursuant to any provision of Section 2.5 hereof, shall be released from
all liability with respect to the Loan, the Notes and all other Loan Documents
with the express exception that such Borrower shall continue to be jointly and
severally liable for and with respect to any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever which (and to the extent)
have become due and payable under Section 12.13 prior to the date of the release
of such Property.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
Section 3.1. Conditions Precedent to the Loan. The obligation
of Lender to make the Loan is subject to the fulfillment by Borrowers or waiver
by Lender of the following conditions precedent no later than the Closing Date;
provided, however, that unless a condition precedent shall expressly survive the
Closing Date pursuant to a separate agreement, by funding the Loan, Lender shall
be deemed to have waived any such conditions not theretofore fulfilled or
satisfied:
(a) Representation and Warranties; Compliance with Conditions.
Each of the representations and warranties of Borrowers contained in this
Agreement or any other Loan Document shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made as of
such date, and no Default or Event of Default shall have occurred and be
continuing; and Borrowers shall be in compliance in all respects with all terms
and conditions set forth in this Agreement and in each other Loan Document on
its part to be observed or performed.
(b) Loan Agreement and Note. Lender shall have received an
original of this Agreement and the Notes, in each case, duly executed and
delivered on behalf of each Borrower.
(c) Delivery of Loan Documents; Title Insurance; Reports;
Leases.
(i) Mortgage, Assignments of Agreements. Lender shall
have received from Borrowers fully executed and acknowledged
counterparts of each Mortgage, Assignment of Leases and the appropriate
UCC financing statements, each in form satisfactory for recording or
filing in the appropriate public records, and evidence
50
that counterparts of each Mortgage, Assignment of Leases and UCC
financing statements shall have been delivered to the title company for
recording or filing, so as to effectively create upon such recording a
valid and enforceable Lien upon each Property, of first lien priority,
in favor of Lender (or a deed trustee if required or desired under
local law), subject only to the Permitted Encumbrances and such other
Liens as are permitted pursuant to the Loan Documents. Lender shall
have also received fully executed counterparts of each of the
Agreements with Managers, each Assignment of Agreements, the
Environmental Indemnity and each of the other Loan Documents.
(ii) Title Insurance. Lender shall have received a
Qualified Title Policy with respect to each Property and evidence that
all premiums in respect thereof have been paid.
(iii) Survey. Lender shall have received a Qualified
Survey with respect to each Property, subject to the terms of Section
4.1(z) hereof.
(iv) Insurance. Lender shall have received valid
certificates of insurance for the policies of insurance required
hereunder, satisfactory to Lender in its reasonable discretion, and
evidence of the payment of all premiums then due and payable for the
existing policy period.
(v) Environmental Reports. Lender shall have received
Phase I environmental reports (and, where recommended by such Phase I
environmental reports, Phase II environmental reports) in respect of
each Property that are satisfactory to Lender.
(vi) Zoning. Lender shall have received, at Lender's
option, letters or other evidence with respect to each Property from
the appropriate authorities (or other Persons) concerning applicable
zoning and building laws, or zoning endorsements in the Qualified Title
Policy, if available.
(vii) Encumbrances. Borrowers shall have taken or
caused to be taken such actions in such a manner so that Lender has a
valid and perfected first priority Lien as of the Closing Date with
respect to the Mortgage on each Property, subject only to the Permitted
Encumbrances and such other Liens as are permitted pursuant to the Loan
Documents, and evidence thereof satisfactory to Lender shall have been
received thereby.
(viii) Engineering Reports. Lender shall have
received engineering reports in respect of each Property satisfactory
to Lender.
(ix) Material Agreements; Operating Lease: Property
Management Agreements. Lender shall have received true and complete
copies of all Material Agreements, Operating Leases and all of the
Property Management Agreements.
(x) Operating Agreements. Lender shall have received
true and complete copies of all Operating Agreements and any ground
leases with respect to any Property.
51
(d) Related Documents. Each additional document not
specifically referenced herein, but relating to the transactions contemplated
herein, shall have been duly authorized, executed and delivered by all parties
thereto and Lender shall have received and approved certified copies thereof.
(e) Delivery of Organizational Documents. On or before the
Closing Date, Borrowers shall deliver or cause to be delivered to Lender copies
certified by an officer of the managing member of each Borrower and/or Operating
Lessee of all organizational documentation related to such Borrower and/or
Operating Lessee and/or the formation, structure, existence, good standing
and/or qualification to do business as Lender may request in its reasonable
discretion, including good standing certificates, qualifications to do business
in the appropriate jurisdictions, resolutions authorizing the entering into of
the Loan and incumbency certificates as may be requested by Lender.
(f) Opinions of Counsel to the Borrowers. Lender shall have
received legal opinions of Borrowers' counsel reasonably satisfactory to Lender
(i) with respect to the non-consolidation of each Borrower in the event of an
insolvency proceeding being brought against, or the bankruptcy of certain
Beneficial owners of such Borrower, (ii) with respect to due execution,
delivery, authority, enforceability of this Agreement, each Mortgage and each of
the other Loan Documents and (iii) with respect to each Borrower's continued
existence as a limited liability company under the laws of the State of Delaware
and such other matters as Lender may require, all such opinions in form, scope
and substance satisfactory to Lender and Lender's counsel in their sole
discretion.
(g) Budgets. Borrowers shall have delivered the Annual Budget
for the Properties for 2004.
(h) Completion of Proceedings. All corporate, partnership or
limited liability company and other proceedings taken or to be taken in
connection with the transactions contemplated by this Agreement and other Loan
Documents and all documents incidental thereto shall be satisfactory in form and
substance to Lender, and Lender shall have received all such counterpart
originals or certified copies of such documents as Lender may reasonably
request.
(i) Intentionally Deleted.
(j) Photographs. If Lender shall have so requested, Lender
shall have received photographs of the interior and exterior of each Property.
(k) No Material Adverse Change. On the Closing Date, Lender
shall be satisfied that since December 31, 2003, there shall have been no
circumstances or conditions with respect to the Properties, any Borrower, any
Single Purpose Entity (including SPE Member), Sponsor or the Property Managers
that can reasonably be expected to cause the Loan to become delinquent or be in
default, adversely affect the value or marketability of the Loan or Properties,
or cause institutional investors to regard the Loan or any security derived in
whole or in part from the Loan as an unacceptable investment. In addition, there
shall not have occurred or be continuing on or after December 31, 2003 any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a general
52
moratorium on commercial banking activities declared by either Federal or New
York State authorities or any material adverse change in the liquidity in the
fixed income market and/or condition of the commercial mortgage-backed
securities or whole loan market as determined by Lender in its sole discretion;
or (iii) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if the
effect of any such event specified in this clause (iii) in the sole discretion
of Lender makes it impracticable or inadvisable to proceed with the funding of
the Loan on the terms and in the manner contemplated herein and in the Term
Sheet.
(l) Intentionally Deleted.
(m) Operating Agreement Estoppels. Lender shall have received
an executed estoppel letter from each party to an Operating Agreement, which
shall be in form and substance satisfactory to Lender.
(n) Appraisals. Lender shall have received an Appraisal for
each Property satisfactory to Lender evidencing that the Required Loan-to-Value
Ratio has been satisfied.
(o) Financial Statements. Borrowers shall have provided
operating statements for the Properties described in Schedule 3.1(o) together
with operating statements for each Property for the Year-to-Date Period (which
statements are either audited, combined or prepared in accordance with agreed
upon procedures which are mutually acceptable to the Borrowers and the Lender,
all as specified in such Schedule 3.1(o)), and, to the extent that such
Year-to-Date Period statements show material changes to the operating results of
any Property since the most recent operating statements relating to such
Property, a letter from a "Big Four" accounting firm verifying Year-to-Date
Period expenses and revenues for the Properties if requested by the Lender in
its sole discretion. Each of the operating statements and financial statements
described in the previous sentence shall be satisfactory to Lender and shall be
accompanied by an Officer's Certificate certifying that each such financial
statement presents fairly the financial condition or operating results, as
applicable, of each Borrower and Property in question and, if such statement is
audited, has been prepared in accordance with GAAP with respect to the accounts
presented therein, as applicable.
(p) Seismic Reports. Lender shall have received seismic
reports in respect of the Properties located in the State of California
satisfactory to Lender (which reports shall include, without limitation,
calculations of probable maximum losses for such Properties).
(q) Deposit Account Agreement. Lender shall have received the
Deposit Account Agreement duly executed by Borrowers and the depository
institutions party thereto.
(r) Property Management Agreement; Agreements with Managers.
Lender shall have received a copy of (i) each Property Management Agreement duly
executed by Borrowers and the applicable Property Manager certified as true and
correct pursuant to an Officer's Certificate and (ii) each Agreement with
Manager in form and substance satisfactory to Lender duly executed by each
Property Manager.
53
(s) Certified Rent Rolls. Lender shall have received a rent
roll for each Property, dated as of the Rent Roll Date, accompanied by an
Officer's Certificate certifying that such rent roll is true, complete and
correct as of its date.
(t) Consents, Licenses, Approvals, Etc. Lender shall have
received copies or other evidence of all material consents, licenses and
approvals, if any, required in connection with the execution, delivery and
performance by each Borrower and each Property Manager, and the validity and
enforceability, of the Loan Documents, and such consents, licenses and approvals
shall be in full force and effect.
(u) Closing Statement. Lender shall have received a detailed
closing statement from Borrowers in a form acceptable to Lender, which includes
a complete description of Borrowers' sources and uses of funds on the Closing
Date, together with a fully executed counterpart of the Loan Closing Statement
prepared by Lender.
(v) No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any Governmental Authority shall have
been issued, and no litigation shall be pending or threatened, which in the good
faith judgment of Lender would enjoin, prohibit or restrain, or impose or result
in the imposition of any material adverse condition upon, the making or
repayment of the Loan or the consummation of the transactions contemplated
hereby.
(w) Payments by Borrowers. Borrowers shall have paid all
Lender Expenses.
(x) Additional Information. Lender shall have received such
other information and documentation with respect to Borrowers and its
Affiliates, Sponsor, the Properties and the transactions contemplated herein as
Lender may reasonably request (including, without limitation, such information
as is necessary for the determination of coverage amounts under the Policies
required pursuant to Sections 8.1(b)(i) and (ix)), such information and
documentation to be satisfactory in form and substance to Lender.
Section 3.2. Reliance Language. All third party reports
delivered to Lender pursuant to Section 3.1 shall contain reliance language
satisfactory to Lender in its sole discretion.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1. Borrowers' Representations. Each Borrower
represents and warrants that, as of the Closing Date:
(a) Organization. Each of Borrower and Operating Lessee has
been duly organized and is validly existing and in good standing with requisite
limited liability company power and authority to own its properties and to
transact the businesses in which it is now engaged. Each of Borrower and
Operating Lessee is duly qualified to do business and is in good standing in
each jurisdiction where it is required to be so qualified in connection with its
properties, businesses and operations. Each of Borrower and Operating Lessee
possesses all rights, licenses, permits and authorizations, governmental or
otherwise, necessary to entitle it to own its properties and to transact the
businesses in which it is now engaged, and its sole business has been and is the
ownership, management and operation of one or more of the Properties.
54
(b) Proceedings. Each of Borrower and Operating Lessee has
taken all necessary action to authorize the execution, delivery and performance
of this Agreement and the other Loan Documents to which it is a party. This
Agreement and such other Loan Documents have been duly executed and delivered by
it and constitute legal, valid and binding obligations of such Borrower and
Operating Lessee enforceable against such Borrower and Operating Lessee in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally and general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law) without offset, defense or counterclaim.
(c) No Conflicts. The execution, delivery and performance of
this Agreement and the other Loan Documents by each of Borrower and Operating
Lessee will not conflict with or result in a material breach of any of the terms
or provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance (other than pursuant to the Loan
Documents) upon any of its properties or assets pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, License, partnership
agreement, Property Management Agreement, Operating Lease or other Material
Agreement to which it is a party or to which any of its properties or assets is
subject nor will such action result in any violation of the provisions of any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over it or any of its properties or assets, and any
consent, approval, authorization, order, registration or qualification of or
with any court or any such regulatory authority or other governmental agency or
body required for the execution, delivery and performance by it of this
Agreement or any other Loan Documents to which it is a party has been obtained
and is in full force and effect except where the failure to obtain the same
could not reasonably be expected to have a Material Adverse Effect.
(d) Litigation. There are no actions, suits or proceedings at
law or in equity by or before any Governmental Authority or other agency now
pending and to the best of its knowledge there are no such actions, suits or
proceedings threatened against or affecting each of Borrower and Operating
Lessee or a Property, which actions, suits or proceedings, alone or in the
aggregate, if determined against it or a Property, are likely to have a Material
Adverse Effect.
(e) Agreements. Each of Borrower and Operating Lessee is not a
party to any agreement which is likely to have a Material Adverse Effect. Each
of Borrower and Operating Lessee is not in default in any material respect in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any Permitted Encumbrance or any other agreement or
instrument to which it is a party or by which it or a Property is bound.
(f) Title. It has good, marketable and indefeasible title in
fee to the real property comprising part of each Property, and Borrower or
Operating Lessee has good and marketable title to the balance of each Property,
in each case free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to the Loan Documents
and the Liens created by the Loan Documents. Each Mortgage, when properly
recorded in the appropriate records, together with the Assignment of Leases and
any
55
Uniform Commercial Code financing statements required to be filed in connection
therewith, will create (i) a valid, perfected first priority lien on the
Properties or its leasehold interest therein, as the case may be, subject only
to Permitted Encumbrances and (ii) perfected security interests in and to, and
perfected collateral assignments of, all personalty (including the Leases), all
in accordance with the terms thereof, in each case subject only to any
applicable Permitted Encumbrances, such other Liens as are permitted pursuant to
the Loan Documents and the Liens created or permitted by the Loan Documents. The
Permitted Encumbrances do not and will not materially adversely affect or
interfere with the value, or current use or operation, of any Property, or the
security intended to be provided by the Mortgage or Borrowers' ability to repay
the Notes or any other Loan Document in accordance with the terms of the Loan
Documents. Except as indicated in and insured over by a Qualified Title
Insurance Policy issued as of the Closing Date, there are no claims for payment
for work, labor or materials affecting any Property which are or may become a
lien prior to, or of equal priority with, the Liens created by the Loan
Documents (other than mechanics' or materialmen's liens for work or materials
performed or supplied the costs for which are not yet past due or which are
being contested in accordance with Section 5.1(b)(ii) hereof). Nothing in this
paragraph may be relied on by the title insurance company issuing a policy
covering any Property. Each Assignment of Leases, when properly recorded in the
appropriate records, creates a valid first priority assignment of, or a valid
first priority security interest in, certain rights under the related Leases and
the Rents, subject only to the terms of such Assignments of Leases, including a
license granted to the applicable Borrower or Operating Lessee to exercise
certain rights and to perform certain obligations of the lessor under such
Leases, including the right to operate the applicable Property. Except as set
forth in the Property Management Agreements, no Person other than the applicable
Borrower and/or Operating Lessee owns any interest in any payments due under
such Leases that is superior to or of equal priority with the Lender's interest
therein.
(g) No Bankruptcy Filing. Each of Borrower and Operating
Lessee is not contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation of its assets
or property, and it has no knowledge of any Person contemplating the filing of
any such petition against it.
(h) Intentionally Deleted.
(i) No Plan Assets. It is not an Employee Benefit Plan subject
to Title I of ERISA, and none of its assets constitutes or will constitute Plan
Assets.
(j) Compliance. Except as set forth on Schedule 6.1(g), each
of Borrower and Operating Lessee and each Property and the use thereof comply in
all material respects with all applicable Legal Requirements, including building
and zoning ordinances and codes. Except as set forth on Schedule 6.1(g), each
Property is not a non-conforming use or legal non-conforming use (except to the
extent that the same would not affect in any material respect the operation,
maintenance, value or use of the Property in question or the ability to
reconstruct such Property). Each of Borrower and Operating Lessee is not in
default or violation of any order, writ, injunction, decree or demand of any
Governmental Authority (including laws and regulations concerning facility
licensing and operation and certificate of need), the violation of which could
have a Material Adverse Effect. There has not been committed by or on behalf of
each of Borrower and Operating Lessee or, to the best of its knowledge, any
other person in occupancy of or involved with the operation or use of any
Property any act or omission affording the federal government or any state or
local government the right of forfeiture as against any Property or any part
thereof or any monies paid in performance of its obligations under any of the
Loan Documents. Each of Borrower and Operating Lessee hereby covenants and
agrees not to commit, and to use all reasonable efforts not to permit or suffer
to exist any act or omission affording such right of forfeiture.
56
(k) Contracts. Except as disclosed in Schedule F, there are no
Material Agreements. Each contract, other than the Operating Lease, affecting
each Property has been entered into at arm's length in the ordinary course of
business by or on behalf of the applicable Borrower or its predecessors in
interest and provides for the payment of fees in amounts and upon terms not less
favorable to the applicable Borrower than market rates and terms.
(l) Financial Information. All financial statements described
in Schedule 3.1(o) were prepared by or on behalf of Borrowers and delivered to
Lender prior to the date hereof, (i) are true, complete and correct in all
respects, to the extent not subsequently corrected in a written document
delivered to Lender, (ii) accurately represent in all respects the financial
condition or operating results, as applicable, of the Properties and/or the
Borrowers as of the date of such reports, and (iii) to the extent that such
financial statements are audited financial statements, such financial statements
have been prepared in accordance with GAAP with respect to the accounts
presented therein. Borrowers do not have any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, that are known to it and
reasonably likely to have a materially adverse effect on any Property or the
operation thereof, except as referred to or reflected in said financial
statements and operating statements and except for other contingent liabilities
not prohibited by Section 6.1(h) hereof. Except as set forth in the certified
information delivered to Lender pursuant to Section 3.1(o) hereof, since the
Closing Date, there has been no change in the financial condition, operations or
business of Borrowers from that set forth in said financial statements and
operating statements that could reasonably be expected to have a Material
Adverse Effect.
(m) Condemnation. No Condemnation or other proceeding has been
commenced or, to its best knowledge, is contemplated with respect to all or any
portion of any Property or for the relocation of roadways providing access to
any Property.
(n) Federal Reserve Regulations. 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.
(o) Utilities and Public Access. Each Property has rights of
access to dedicated public ways (and makes no material use of any means of
access or egress that is not pursuant to such dedicated public ways or recorded,
irrevocable rights-of-way or easements) and is served by water, sewer, sanitary
sewer and storm drain facilities adequate to service such Property for its
current uses. All public utilities necessary for the full use and enjoyment of
each
57
Property are located in the public right-of-way abutting the applicable
Property or in or through a recorded irrevocable easement in favor of such
Property, and all such utilities are connected so as to serve the applicable
Property without passing over other property, except to the extent that such
utilities are accessible to the applicable Property by virtue of a recorded
irrevocable easement or similar agreement or right. All roads necessary for the
use of each Property for its current purposes have been completed and are either
part of the applicable Property (by way of deed or recorded easement) or
dedicated to public use and accepted by all relevant Governmental Authorities.
(p) Not a Foreign Person. Each Borrower, or if any such
Borrower is classified as a "disregarded entity" for United States federal
income tax purposes (a "DRE"), the owner of such Borrower (and, if such owner is
a DRE, the first upper-tier entity that is not a DRE), is not a "foreign person"
within the meaning of ss. 1445(f)(3) of the Code.
(q) Separate Lots. Each Property is comprised of one (1) or
more parcels which constitute one or more separate tax lots which do not include
any property not a part of the applicable Property.
(r) Basic Carrying Costs; Assessments. Except for Basic
Carrying Costs deposited with Lender in accordance with this Agreement or
deposited in the applicable Hotel Operating Account pursuant to the applicable
Property Management Agreement, it has paid all Basic Carrying Costs due and
payable as of the Closing Date. To the best of its knowledge there are no
pending or proposed special or other assessments for public improvements or
other matters affecting any Property (except as shown in the financial
statements described in clause (l) above), nor, to the best of its knowledge,
are there any contemplated improvements to any Property that are likely to
result in such special or other assessments.
(s) Enforceability. The Loan Documents are not subject to any
right of rescission, set-off, counterclaim or defense by any Borrower and/or
Operating Lessee, including the defense of usury, nor would the operation of any
of the terms of the Loan Documents, or the exercise of any right thereunder,
render the Loan Documents unenforceable, subject to laws affecting the
enforcement of the rights or remedies of creditors generally and/or equitable
principles of general application, and no Borrower has asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.
(t) No Prior Assignment. There are no prior assignments of the
Leases or any portion of the Rents due and payable or to become due and payable
which are presently outstanding, except in connection with indebtedness either
to be repaid in full from the proceeds of the Loan or secured by Liens which
have been released concurrently with the Closing Date.
(u) Insurance. It has obtained and has delivered to Lender
insurance policies reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement. All premiums on such insurance
policies required to be paid as of the date hereof have been paid for the
current policy period. No claims have been made under any such policy that would
have a material adverse effect with respect to any Property, and no Person,
including any Borrower, has done, by act or omission, anything which would
impair the coverage of any such policy.
58
(v) Certificate of Occupancy; Licenses. Except as disclosed in
Schedule 4.1(v), Borrowers have obtained, or have caused each of the Property
Managers to obtain pursuant to the Property Management Agreements, all material
certifications, permits, licenses, approvals registrations, authorizations,
accreditations or consents (collectively, the "Licenses"), including
certificates of completion and occupancy permits (or other local equivalent),
required by, and accomplished all filings, notifications, registrations and
qualifications with (or obtained exemptions from any of the foregoing from), any
federal, state, or local government or government department, agency, board,
commission, bureau or instrumentality (i) to properly and legally own, manage
and operate the Properties after any restructuring that will occur in connection
with the Loan and (ii) which are necessary for the conduct of its business. Each
License has been duly obtained, is valid and in full force and effect, and is
not subject to any pending or, to the knowledge of any Borrower, threatened
administrative or judicial proceeding to revoke, cancel or declare such License
invalid in any respect. No Borrower is in default or violation with respect to
any of the Licenses in a manner that would have a Material Adverse Effect, and
no event has occurred which constitutes, or with due notice or lapse of time or
both may constitute, a default by any Borrower under, or a violation of, any
License that would have a Material Adverse Effect. Each Property has a
certificate of occupancy or other local equivalent (where required by applicable
Legal Requirements) and the use being made of each Property is in conformity
with such applicable certificate of occupancy.
(w) Flood Zone. Except as may be disclosed in Schedule 4.1(w),
none of the Improvements on any Property is located in an area as identified by
the Federal Emergency Management Agency or the Federal Insurance Administration
as an area having special flood hazards (Zone A), and, to the extent that any
part of any Property is located in an area identified by the Federal Emergency
Management Agency as an area federally designated a "100 year flood plain," such
Property is covered by flood insurance meeting the requirements set forth in
Section 8.1(b)(i) hereof.
(x) Physical Condition. Except as disclosed in the engineering
reports listed on Schedule 4.1(x), each Property, including all buildings,
improvements, parking facilities, sidewalks, storm drainage systems, roofs,
plumbing systems, HVAC systems, fire protection systems, electrical systems,
equipment, elevators, exterior sidings and doors, landscaping, irrigation
systems and all structural components, are in good condition, order and repair
in all respects material to the use, operation or value of the applicable
Property. There exists no structural or other material defects or damages in any
Property, whether latent or otherwise (except for such matters as are expressly
referred to in Section 9.2, for which reserves are being established), after
taking into account in making such determination remedial efforts being taken by
any Borrower to correct such defect or damages following discovery thereof. It
has not received written notice and is not otherwise aware from any insurance
company or bonding company of any defects or inadequacies in any Property, or
any part thereof, which would, alone or in the aggregate, adversely affect in
any material respect the insurability of the same or cause the imposition of
extraordinary premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.
(y) Leases. No person has any possessory interest in any
Property or right to occupy the same except under and pursuant to the provisions
of the Leases, and true and complete copies of all Leases executed and delivered
on or before the Rent Roll Date have been delivered to Lender (and any Leases
executed and delivered since such date shall be delivered promptly after the
Closing Date). As to all present Leases and (upon execution thereof) all future
Leases relating to each Property, the applicable Borrower will be the sole owner
of the lessor's interest. As to all Leases:
59
(i) There are no outstanding landlord obligations
with respect to tenant allowances or free rent periods or tenant
improvement work; all of the obligations and duties of landlord under
the Leases that are due or are to be performed (as applicable) on or
prior to the date hereof have been fulfilled, and there are no pending
claims asserted by any Tenant for offsets or abatements against rent or
any other monetary claim;
(ii) All of the Leases are free and clear of any
right or interest of any real estate broker or any other person
(whether or not such brokers or other persons have negotiated the
Leases or have contracted with Borrowers for the collection of the
rents thereunder), and no brokerage or leasing commission or other
compensation is or will be due or payable to any person, firm,
corporation or other entity with respect to or on account of any of the
Leases;
(iii) Schedule 4.1(gg) sets forth all security
deposits and letters of credit held by or on behalf of the lessor under
the Leases. All security deposits have been held in accordance with law
and the terms of the applicable Leases, and no security deposits have
been applied, or letters of credit drawn upon, following a default by a
Tenant still in possession;
(iv) A Borrower is the sole owner of the lessor's
interest in all of the Leases and no Borrower has given or suffered any
other assignment, pledge or encumbrance in respect of any of the Leases
or its interests thereunder, and the applicable Borrower or Property
Manager has the sole right to collect rents and other amounts due under
the Leases;
(v) Except as disclosed on Schedule 4.1(gg), no
Tenant (i) is more than thirty (30) days in arrears on its rent or
other amounts due to the landlord under its Lease and (ii) no Borrower
has accepted Rent under any Lease or Operating Agreement for more than
one month in advance, except for security deposits, which on the
Closing Date have been deposited with the Lender in accordance with the
provisions hereof relating to security deposits received from and after
the date hereof; and
(vi) None of the Leases contains any option to
purchase, any right of first refusal to purchase or any right to
terminate the lease term (except in the event of the destruction of all
or substantially all of the applicable Property).
(z) Survey. Except as disclosed in writing to Lender, the
survey for each Property delivered to Lender in connection with this Agreement
is a Qualified Survey. Except as may be shown on the Qualified Survey, all of
the improvements relating to each Property lie wholly within the boundaries and
building restriction lines of the applicable Property, and no improvements on
adjoining properties encroach upon such Property, and no easements or other
encumbrances upon such Property encroach upon any of the improvements, so as, in
either case,
60
to materially adversely affect the value or marketability of the Property in
question except Permitted Encumbrances and those which are insured against by a
Qualified Title Insurance Policy. Since the date of the Qualified Survey
relating to each Property referenced in the applicable Qualified Title Insurance
Policy, no new improvement has been constructed on such Property and there has
been no alteration to the exterior of any existing improvement on such Property
(other than routine repair and replacements of roofs, walls or windows).
(aa) Filing and Recording Taxes. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements currently
in effect in connection with the transfer of any of a Property to any Borrower
have been paid in full or deposited with the issuer of a Qualified Title
Insurance Policy for payment upon recordation of the deeds effecting such
transfer. All mortgage, mortgage recording, stamp, intangible or other similar
tax required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the execution, delivery, recordation,
filing, registration, perfection or enforcement of any of the Loan Documents,
including the Mortgage, and the Liens intended to be created thereby, have been
paid or deposited with the issuer of a Qualified Title Insurance Policy for
payment upon recordation of the Mortgage.
(bb) Single-Purpose. Each Borrower and Operating Lessee hereby
represents and warrants to, and covenants with, Lender that, as of the date
hereof, at all times prior hereto and until such time as the Debt shall be paid
in full or its property is no longer subject to the Lien securing the Debt:
(i) It has not owned and will not own any property or
any other assets other than (A) with respect to the Borrower, the
Properties currently owned by it, and (B) with respect to the Borrower
and the Operating Lessee, incidental personal and intangible property
relating to the ownership, leasing or operation of the Properties;
(ii) It was formed solely for the purpose of engaging
in, and has not engaged and will not engage in, any business other than
the ownership, leasing, management, financing and operation of the
Properties;
(iii) It has not entered and will not enter into any
contract or agreement with any of its Affiliates (other than the Loan
Documents and the Operating Leases), any of its constituent parties or
any Affiliate of any constituent party, except contracts or agreements
that are upon terms and conditions that are substantially similar to
those that would be available on an arm's-length basis with third
parties;
(iv) It will not incur any indebtedness, secured or
unsecured, direct or indirect, absolute or contingent (including
guaranteeing any obligation), other than the Permitted Indebtedness.
Except as set forth in the immediately preceding sentence, no
indebtedness other than the Debt may be secured (subordinate or pari
passu) by any Property and no indebtedness other than the Debt and the
indebtedness described in clauses (iii) and (vi) of the definition of
Permitted Indebtedness may be secured (subordinate or pari passu) by
any personal property;
61
(v) Other than as provided in the Loan Documents, it
will not make any loans or advances to, and it will not pledge its
assets for the benefit of, any other Person (including any Affiliate or
constituent party or any Affiliate of any constituent party), and shall
not acquire obligations or securities of any Affiliate or constituent
party or any Affiliate of any constituent party;
(vi) It is and will remain solvent and it will pay
its debts and liabilities (including employment and overhead expenses)
from its assets as the same shall become due;
(vii) It has done or caused to be done and will do
all things necessary to observe limited liability company formalities
(in all material respects), as the case may be, and preserve its
existence, and it will not, nor will it permit or suffer any
constituent party to amend, modify or otherwise change its partnership
certificate, partnership agreement, certificate of formation (except as
required by law), limited liability company agreement, articles of
incorporation and bylaws, trust or other organizational documents or
those of such constituent party in a manner which would adversely
affect its existence as a Single Purpose Entity;
(viii) It has and will maintain books and records,
financial statements and accounts separate and apart from those of any
other Person and it will file its own tax returns (except to the extent
consolidation is required under GAAP, permitted for tax purposes or as
a matter of law, provided that any consolidated financial statements
contain a note indicating that it and its Affiliates are separate legal
entities and maintain records, books of account and accounts separate
and apart from any other Person);
(ix) It has and will be, and at all times has held
and will hold itself out to the public as, a legal entity separate and
distinct from any other entity (including any of its Affiliates, any of
its constituent parties or any Affiliate of any constituent party), has
and shall conduct business in its own name, has and shall exercise
reasonable efforts to correct any known misunderstanding actually known
to it regarding its separate identity, and has and shall maintain and
utilize separate stationery, invoices and checks and it will reasonably
allocate any overhead that is shared with any Affiliate, including, but
not limited to, paying for shared office space and services performed
by any officer or employee of an Affiliate;
(x) It has and will maintain adequate capital for the
normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations;
(xi) To the fullest extent permitted by law, neither
it nor any constituent party has nor will seek any Borrower's or
Operating Lessee's dissolution or winding up, in whole or in part;
(xii) It does not and will not commingle its funds
and other assets with those of any Affiliate or constituent party or
any Affiliate of any constituent party or any other Person except that
each Borrower and Operating Lessee may commingle its funds with the
funds of the other Borrowers and Operating Lessees in the Deposit
Account, in the Holding Account, in the Tax and Insurance Escrow
Account and in each of the other Reserve Accounts;
62
(xiii) It has and will maintain its assets in such a
manner that it will not be costly or difficult to segregate, ascertain
or identify its individual assets from those of any Affiliate or
constituent party or any Affiliate of any constituent party or any
other Person;
(xiv) Except in its capacity as a co-obligor under
the Notes together with the other Borrowers, if applicable, it does not
and will not hold itself or its credit out to be responsible for or
available to satisfy, and it has not guaranteed or otherwise become
liable for, and has not and will not guarantee or otherwise become
liable for, the debts, securities or obligations of any other Person;
(xv) If it is a limited liability company, either (a)
at least one of its members is and shall be a Single Purpose Entity
(the "SPE Member") whose sole assets are its interest in the applicable
Borrower or Operating Lessee and that has no less than a one percent
(1%) membership interest in the applicable Borrower or Operating
Lessee, and such Borrower or Operating Lessee shall be deemed hereby to
have made each of the representations, warranties and covenants
contained in this Section 4.1(bb) with respect to the SPE Member, and
the SPE Member shall have two (2) Independent Directors as duly
appointed members of its board of directors or (b) it shall have two
(2) Independent Directors on its board of managers or board of
directors (as applicable);
(xvi) It has and shall, at all times, have a limited
liability company agreement which provides that, for so long as the
Loan is outstanding and the applicable Borrower's Property remains
subject to the Lien securing the Debt, its board of directors (or (a)
if such Borrower or Operating Lessee is a limited liability company
with a managing member SPE Member, the board of directors of the SPE
Member or (b) if such Borrower or Operating Lessee is a board managed
limited liability company with two (2) Independent Directors on its
board of directors) will not be permitted to take any action which,
under applicable law or the terms of any certificate of incorporation
or certificate of formation, limited liability company agreement,
by-laws or any voting trust agreement with respect to any common stock,
requires the vote of its board of directors, unless at the time of such
action there shall be at least two members of such board who are
Independent Directors; provided, however, that, subject to any
applicable Legal Requirement, its board of directors (or if such
Borrower or Operating Lessee is a limited liability company and is not
self managed, the board of directors of its SPE Member) may, at its
discretion, be permitted to take any action without regard to the
preceding clause of this sentence other than the following actions,
which actions may not be taken: (A) to the fullest extent permitted by
law, dissolve or liquidate, in whole or in part; (B) consolidate or
merge with or into any other entity or convey or transfer all or
substantially all of its properties and assets to any entity unless the
applicable Borrower is releasing that Property from the Lien of the
Mortgage or paying off the Loan in accordance with the terms herein;
(C) engage in any business other than the ownership, maintenance and
operation of the Properties or, with respect to the SPE Member (if
applicable), acting as a
63
member of a Borrower or Operating Lessee; (D) institute any proceeding
to be adjudicated as bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against it, or file
a petition or answer or consent seeking reorganization or relief under
the Bankruptcy Code or consent to the filing of any such petition or to
the appointment of a receiver, rehabilitator, conservator, liquidator,
assignee, trustee, custodian or sequestrator (or other similar
official) of its SPE Member or any Borrower or Operating Lessee or of
any substantial part of their property, or ordering the winding up or
liquidation of its affairs, or make or consent to an assignment for the
benefit of creditors, or admit in writing its inability to pay its
debts generally as they become due, or take any action in furtherance
of any of the foregoing; (E) except as required by law, amend its SPE
Member's certificate of incorporation (if applicable) or the limited
liability company agreement of the applicable Borrower or Operating
Lessee, but only to the extent such amendment impacts the Company's
status as a Single Purpose Entity; (F) enter into any transaction with
an Affiliate not in the ordinary course of the applicable Borrower's or
Operating Lessee's business; or (G) withdraw the SPE Member, if
applicable, or remove the two (2) Independent Directors of a Borrower
or Operating Lessee; provided, however, clause (D) above may be taken
with the affirmative consent of the two (2) Independent Directors;
(xvii) It has no liabilities, contingent or
otherwise, other than those normal and incidental to the ownership,
operation and leasing of the Properties;
(xviii) Each Borrower and Operating Lessee shall
conduct its business so that the assumptions made with respect to such
Borrower or Operating Lessee in that certain opinion letter dated the
date hereof delivered by Xxxxxxxxx Xxxxxxx, LLP addressing substantive
non-consolidation and other matters in connection with the Loan shall
at all times be true and correct in all respects;
(xix) No Borrower or Operating Lessee will permit any
Affiliate or constituent party independent access to its bank accounts
except that each Borrower and Operating Lessee may commingle its funds
with the funds of the other Borrowers and Operating Lessees in the
Deposit Account, in the Holding Account, in the Tax and Insurance
Escrow Account and in each of the other Reserve Accounts;
(xx) Each Borrower and Operating Lessee has and shall
pay the salaries of its own employees, if any, and maintain a
sufficient number of employees in light of its contemplated business
operations;
(xxi) Each Borrower and Operating Lessee has and
shall compensate each of its consultants and agents from its funds for
services provided to it and pay from its own assets all obligations of
any kind incurred. Upon the withdrawal or the disassociation of the
Independent Director from any constituent entity of any Borrower or
Operating Lessee (or from a Borrower or Operating Lessee directly),
such Borrower or Operating Lessee shall immediately appoint a new
director or special member or cause such entity to appoint a new
director or special member that satisfies the requirements of an
Independent Director under this Agreement; and
64
(xxii) Each Borrower and Operating Lessee is subject
to and complies with all of the limitations on powers and separateness
requirements set forth in its organizational documentation as of the
Closing Date.
(cc) Investment Company Act. Each of Borrower and Operating
Lessee is not (i) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended; or (ii) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company" or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended. Its sole business is the ownership, operation, maintenance, repair,
financing, refinancing and disposition of the Properties and such matters as are
incidental to the foregoing.
(dd) Fraudulent Transfer. Each of Borrower and Operating
Lessee (i) has not entered into the Loan, the Operating Leases, or any Loan
Document with the actual intent to hinder, delay, or defraud any creditor and
(ii) has received reasonably equivalent value in exchange for its obligations
under the Loan Documents and the Operating Leases. Giving effect to the
transactions contemplated by the Loan Documents, the fair saleable value of each
of Borrower's and Operating Lessee's assets exceeds and will, immediately
following the execution and delivery of the Loan Documents, exceed its total
liabilities, including subordinated, unliquidated, disputed or contingent
liabilities. The fair saleable value of its assets is and will, immediately
following the execution and delivery of the Loan Documents, be greater than each
of its probable liabilities, including the maximum amount of its contingent
liabilities or its debts as such debts become absolute and matured. Each of
Borrower's and Operating Lessee's assets do not and, immediately following the
execution and delivery of the Loan Documents will not, constitute unreasonably
small capital to carry out its business as conducted or as proposed to be
conducted. Each of Borrower and Operating Lessee does not intend to, and does
not believe that it will, incur debts and liabilities (including contingent
liabilities and other commitments) beyond its ability to pay such debts as they
mature (taking into account the timing and amounts to be payable on or in
respect of its obligations).
(ee) Material Agreements, Operating Leases and Property
Management Agreements. Each of the Material Agreements, the Operating Leases and
each Property Management Agreement is in full force and effect and is valid and
enforceable in all material respects, subject in each case to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles; there are no defaults, breaches or violations thereunder by
any Borrower or Operating Lessee, and neither Borrower nor Operating Lessee has
given written notice of any defaults, breaches or violations by any other party
thereto except as have already been cured or as are disclosed on Schedule
4.1(ee) hereto, where with respect to any such Agreement the effect of one or
more of any such defaults would have a Material Adverse Effect. Neither the
execution and delivery of the Loan Documents, the performance of the Borrowers
or Operating Lessees thereunder, the recordation of each Mortgage, nor the
exercise of any remedies by Lender, will adversely affect any Borrower's or
Operating Lessee's rights under any of the Material Agreements, the Operating
Leases or Property Management Agreements.
65
(ff) Employees. Each of Borrower and Operating Lessee either
has no employees or has no material liability which has been incurred by it and
remains unsatisfied for any taxes or penalties with respect to (i) any Employee
Benefit Plan established, sponsored, maintained or contributed to by it on
behalf of its employees at any Property or (ii) any Multiemployer Plan as to
which it is making or has an obligation to make contributions or (iii) any lien
which has been imposed on its assets pursuant to Section 412 of the Code or
Sections 302 or 4068 of ERISA.
(gg) Rent Roll. The Leases reflected in the most recent
occupancy reports described in Schedule 4.1(gg) are in full force and effect,
and are valid and enforceable in all material respects, subject in each case to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles and (ii) except as set forth in Schedule
4.1(gg), the Leases are in full force and effect, there are no material defaults
thereunder by any Borrower or, to the best of each Borrower's knowledge, the
other party thereto, and to the best of each Borrower's knowledge, there are no
conditions (other than payments that are due but not yet delinquent and other
non-delinquent executory obligations) that, with the passage of time or the
giving of notice, or both, would constitute a material default thereunder.
(hh) Legal Compliance. To its best knowledge, neither any
Property, nor any portion thereof, is on the date hereof in violation of any
Legal Requirement or any Insurance Requirement (including, without, limitation
all Legal Requirements relating to all security deposits with respect to any
Property), in a manner that is likely to have a Material Adverse Effect.
(ii) No Change in Facts or Circumstances; Disclosure. All
information submitted by Borrowers to Lender and in all financial statements,
rent rolls, reports, certificates and other documents submitted in connection
with the Loan or in satisfaction of the terms thereof and all statements of fact
made by any Borrower in this Agreement or in any other Loan Document, are, or
with respect to any such documents or information that were prepared by a
third-party, are to best of Borrower's knowledge, accurate, complete and correct
in all material respects. There has been no material adverse change in any
condition, fact, circumstance or event that would have a Material Adverse
Effect. Each Borrower has disclosed to Lender all material facts to which such
Borrower has knowledge and has not failed to disclose any material fact of which
it has knowledge that would have a Material Adverse Effect.
(jj) Illegal Activity. No Borrower has purchased any portion
of any Property with proceeds of any illegal activity.
(kk) Loans to Related Parties. There are no loans payable by
any Borrower (a) to any member of such Borrower or to any other lender which is
an Affiliate or subsidiary entity of such Borrower or of any such member of such
Borrower; (b) to any stockholder, officer, director, member, or general or
limited partner of any member of any Borrower or to any other lender which is an
Affiliate or subsidiary entity of any such stockholder, officer, director,
member, or general or limited partner of any member of such Borrower; (c) to any
stockholder, officer, director, member, or general or limited partner of any
member of any Borrower or to any other lender which is an Affiliate or
subsidiary entity of any such stockholder, officer, director, member, or general
or limited partner of any member of such Borrower; or (d) to any stockholder,
officer, director, member, or general or limited partner of any stockholder,
officer or director of any member of any Borrower or to any other lender which
is an Affiliate or subsidiary entity of any such stockholder, officer, director,
member, or general or limited partner of any stockholder, officer or director of
any member of such Borrower.
66
(ll) Compliance with Anti-Terrorism, Embargo and Anti-Money
Laundering Laws. (i) None of Borrower, Operating Lessee Sponsor or any Person
who Controls Borrower or Sponsor is currently identified on the OFAC List or
otherwise qualifies as a Prohibited Person, and Borrower has implemented
procedures to ensure that no Person who now or hereafter owns any direct equity
interest in Borrower is a Prohibited Person or Controlled by a Prohibited
Person, and (ii) none of Borrower, Operating Lessee or Sponsor is in violation
of any Legal Requirements relating to anti-money laundering or anti-terrorism,
including, without limitation, Legal Requirements related to transacting
business with Prohibited Persons or the requirements of the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related
regulations issued thereunder, including temporary regulations, all as amended
from time to time. To the best of Borrower's knowledge, no Manager or tenant at
any of the Properties is currently identified on the OFAC List or otherwise
qualifies as a Prohibited Person, and no Manager or tenant at any of the
Properties is owned or Controlled by a Prohibited Person. Borrower has
determined that Manager has implemented procedures, to ensure that no tenant at
any of the Properties is a Prohibited Person or owned or Controlled by a
Prohibited Person.
(mm) Breach by Affiliate. The breach by an Affiliate of any
agreement to which any Borrower and its Affiliates are parties shall not affect
the enforceability of the terms hereof or of any Loan Document against
Borrowers.
(nn) Consents. No consent, approval, authorization or order
of, or qualification with, any court or Governmental Authority is required in
connection with the execution, delivery or performance by any Borrower of this
Agreement or the other Loan Documents which has not been obtained.
(oo) Environmental Matters. Except for matters set forth in
the Environmental Reports delivered to Lender prior to the date hereof:
(i) Each Property is in compliance with all
applicable Environmental Laws (which compliance includes, but is not
limited to, the possession by the applicable Borrower or the applicable
Property Manager of all environmental, health and safety permits,
approvals, licenses, registrations and other governmental
authorizations required in connection with the ownership and operation
of each Property under all Environmental Laws) except where the failure
to comply with such laws is not reasonably likely to result in a
Material Adverse Effect.
(ii) There is no Environmental Claim pending or, to
the actual knowledge of any Borrower, threatened, except as is not
reasonably likely to result in a Material Adverse Effect.
(iii) There are no present, or to the knowledge of
any Borrower, past Releases of any Hazardous Substance that are
reasonably likely to form the basis of any Environmental Claim except
as is not reasonably likely to result in a Material Adverse Effect.
67
(iv) Without limiting the generality of the
foregoing, there is not present at, on, in or under any Property,
PCB-containing equipment, asbestos or asbestos containing materials,
underground storage tanks or surface impoundments for Hazardous
Substances, lead in drinking water (except in concentrations that
comply with all Environmental Laws), or lead-based paint, except as is
not reasonably likely to result in a Material Adverse Effect.
(v) No Liens are presently recorded with the
appropriate land records under or pursuant to any Environmental Law
with respect to any Property and, to each Borrower's actual knowledge,
no Governmental Authority has been taking or is in the process of
taking any action to subject any Property to Liens under any
Environmental Law.
(vi) There have been no material environmental
investigations, studies, audits, reviews or other analyses conducted by
or that are in the possession of any Borrower in relation to any
Property which have not been made available to Lender.
(pp) Adequate Parking. Except as set forth on Schedule 6.1(g)
hereto, each Property has available to it adequate parking to comply with all
Legal Requirements and to permit the operation of the Property as a first class
full service resort or business hotel, operated in compliance with the standards
set forth in the applicable Property Management Agreement.
(qq) Rooms in Service. All of the rooms at each Property are
in service, except for rooms that are temporarily out of service for remodeling
in the ordinary course of business or routine maintenance and repair.
(rr) Funds for Capital Expenditures and FF&E Expenses. It has
or anticipates that it will have sufficient funds available to it for
implementing its reasonable anticipated Capital Expenditures and FF&E
expenditures.
(ss) Sharing Agreements. Other than as set forth on Schedule
4.1(ss) hereto, there are no joint services, reciprocal easement or other
similar sharing agreements relating to any of the Properties.
(tt) Labor Matters. No Borrower is a party to any collective
bargaining agreements.
(uu) Liquor Licenses. The legal arrangements for service of
alcoholic beverages at the Properties are as identified on Schedule 4.1(uu).
(vv) Intentionally Deleted.
(ww) Intentionally Deleted.
68
(xx) Hyatt Regency La Jolla. All loans made by Hyatt
Corporation to Affiliates of the Borrowers in connection with the construction
of the Hyatt Regency La Jolla, San Diego, California have been repaid in full,
together with all interest accrued thereon.
(yy) Office of Foreign Asset Control. Neither Borrower,
Operating Lessee nor Sponsor shall (a) be or become subject at any time to any
law, regulation, or list of any government agency (including, without
limitation, the OFAC List) that prohibits or limits any Lender from making any
advance or extension of credit to Borrower or from otherwise conducting business
with Borrower, Operating Lessee and/or Sponsor, or (b) fail to provide
documentary and other evidence of Borrower's identity as may be requested by any
Lender at any time to enable any Lender to verify Borrower's identity or to
comply with any applicable law or regulation, including, without limitation,
Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 0000 (xxx "Xxxxxxx
Xxx"). In addition, Borrower hereby agrees to provide to Lender with any
additional information that Lender deems reasonably necessary from time to time
in order to ensure compliance with all Legal Requirements concerning money
laundering and similar activities.
(zz) New Orleans FF&E Loan. The New Orleans FF&E Loan has been
repaid and no other amounts shall be owed by the New Orleans Borrower to the
Property Manager at the New Orleans Property or any account in respect of the
New Orleans Property with respect to the New Orleans FF&E Loan.
(aaa) Intentionally Deleted.
(bbb) Intentionally Deleted.
(ccc) Common Charges. All amounts owed to date by owners of
the Properties in the nature of common area maintenance expenses, parking fees,
common association dues, assessments and similar charges have been paid in full.
(ddd) Corporate Structure. Schedule 4.1(ddd) contains a true
and complete diagram showing all direct and indirect ownership interests of the
Sponsor in the Borrowers and Operating Lessees upon the funding of the Loan.
Except as set forth on Schedule 4.1(ddd), Sponsor owns, directly or indirectly,
100% of the legal, beneficial and equitable interests in the Borrowers and
Operating Lessees.
(eee) Non-Consolidation. None of the Borrowers or Operating
Lessees is a party to any agreements with either any Sponsor or any other
Affiliate of Sponsor, pertaining to allocation and reimbursement of general
overhead expenses.
(fff) Outstanding Debts. Except with respect to $5,317,913 (as
of April 30, 2004) for amounts due to Property Managers and their affiliates on
account of Management Fees and payments for centralized services paid by
Borrowers in the ordinary course under the Property Management Agreements, there
are no outstanding loans, advances or other indebtedness of any kind owing by
any of the Borrowers to any Property Manager or Affiliate of any Property
Manager.
69
Section 4.2. Survival of Representations. Each Borrower agrees
that all of the representations and warranties of each Borrower set forth in
Section 4.1 hereof and elsewhere in this Agreement and in the other Loan
Documents shall survive for so long as any portion of the Debt is outstanding
(it being acknowledged by Lender that such representations and warranties have
been made as of the Closing Date). All representations, warranties, covenants
and agreements made in this Agreement or in the other Loan Documents by any
Borrower shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5.1. Covenants of the Borrowers. Each Borrower hereby
covenants and agrees with Lender that:
(a) Existence; Compliance with Legal Requirements; Insurance.
Each of Borrower and Operating Lessee shall do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its existence,
rights, licenses, permits and franchises and comply in all material respects
with all Legal Requirements applicable to it and each Property. Each of Borrower
and Operating Lessee shall at all times maintain and preserve each Property and
shall keep each Property in good working order and repair, reasonable wear and
tear excepted, and from time to time make, or cause to be made, all reasonably
necessary and desirable repairs, renewals, replacements, betterments and
improvements thereto except as would not have a Material Adverse Effect with
respect to any Property. Each of Borrower and Operating Lessee will operate,
maintain, repair and improve each Property, or will cause each Property to be
operated, maintained, repaired or improved in compliance with all Legal
Requirements, and will not cause or allow the same to be misused or wasted or to
deteriorate.
(b) Taxes and Other Charges; Contest for Taxes and Other
Charges, Legal Requirements and Liens.
(i) Subject to the provisions of Section 5.1(b)(ii)
hereof, Borrowers shall pay, or cause to be paid, all Taxes and Other
Charges now or hereafter levied or assessed or imposed against any
Property or any part thereof prior to the date on which such sums
become delinquent. Borrowers will deliver, or cause to be delivered, to
Lender, upon request, receipts for payment or other evidence
satisfactory to Lender that the Taxes and Other Charges have been so
paid (provided, however, that Borrowers shall not be required to
furnish such receipts for payment of Taxes in the event that such Taxes
have been paid by Lender pursuant to Section 9.3.2 hereof). Subject to
the provisions of Section 5.1(b)(ii) hereof and other than Permitted
Encumbrances, Borrowers shall not suffer and shall promptly cause to be
paid and discharged any lien or charge whatsoever which may be or
become a lien or charge against any Property, and shall promptly pay
for or cause to be paid all utility services provided to each Property.
Subject to Section 5.1(b)(ii) hereof, Borrowers shall pay, bond or
otherwise discharge, or cause to be paid, bonded or otherwise
discharged, from time to time when the same shall become due, all
claims and demands of mechanics, materialmen, laborers and others that,
if unpaid, might result in, or permit the creation of, a lien or
encumbrance on any Property (as defined in the Mortgage), or on the
Rents arising therefrom.
70
(ii) Notwithstanding the foregoing, after prior
written notice to Lender, a Borrower, at its own expense, may contest
by appropriate legal, administrative or other proceeding, promptly
initiated and conducted in good faith and with due diligence, the
amount or validity or application in whole or in part of any Taxes or
Other Charges or Lien therefor or any Legal Requirement or Insurance
Requirement or the application of any instrument of record affecting a
Property or any part thereof (other than the Loan Documents) or any
claims or judgments of mechanics, materialmen, suppliers, vendors or
other Persons or any Lien therefor, and may withhold payment of the
same pending such proceedings if permitted by law; provided that (A) no
Event of Default has occurred and remains uncured, except for, prior to
acceleration, a Default caused by the matter being contested, (B) such
proceeding shall suspend any collection of the contested Taxes, Other
Charges or Liens from the applicable Property, Borrowers or Lender, (C)
neither the applicable Property nor any part thereof or interest
therein will be in danger of being sold, forfeited, terminated,
canceled or lost, (D) to the extent not already reserved with the
Property Manager or the Lender under Section 9.3 hereof or bonded or
otherwise deposited or paid in connection with such proceedings,
Borrowers shall have furnished Lender with security (in an amount
approved by Lender) to insure the payment of any such Taxes or Other
Charges, or the cost of the contested Legal Requirement or Insurance
Requirement or the removal of the Lien, in each case together with all
reasonably anticipated interest and penalties thereon, (E) in the case
of an Insurance Requirement, the failure of Borrowers to comply
therewith shall not impair the validity of any insurance required to be
maintained by the Borrowers hereunder or the right to full payment of
any claims thereunder, (F) in the case of any essential or significant
service with respect to any Property, any contest or failure to pay
will not result in a discontinuance of any such service except to the
extent such service is replaced, (G) in the case of any instrument of
record affecting a Property or any part thereof, the contest or failure
to perform under any such instrument shall not result in the placing of
any Lien on such Property or any part thereof (except if such Lien
would be removed upon completion of such proceedings and the compliance
by the parties with the terms of the resulting order, decision or
determination and the removal costs for such Lien have been escrowed
with Lender or in the proceeding or bonded or otherwise deposited or
paid in connection with such proceedings), (H) neither the failure to
pay or perform any obligation which a Borrower is permitted to contest
under this Section nor an adverse determination of any such contest
could reasonably be expected to have a Material Adverse Effect, and (I)
Borrowers shall promptly upon final determination thereof pay the
amount of any such Taxes, Other Charges or Liens, together with all
costs, interest and penalties which have been determined to be due and
payable in connection therewith. Lender may pay over any such cash
deposit or part thereof held by Lender to the claimant entitled thereto
at any time when, in the reasonable judgment of Lender, the entitlement
of such claimant is finally determined, and Lender shall otherwise
remit any remaining such amounts to the Borrowers. Lender shall give
Borrowers written notice of any such payments promptly following the
making thereof. Subject to the foregoing, upon the timely request from
the Borrowers, Lender shall not pay from the Tax and Insurance Escrow
Account the contested Taxes or Other Charges being contested.
71
(c) Litigation. Each Borrower shall give prompt written notice
to Lender of any litigation or governmental proceedings pending or threatened in
writing against any Borrower, Operating Lessee or against or affecting any
Property which, if determined adversely to any Borrower, Operating Lessee or any
Property, could be reasonably expected to result in a Material Adverse Effect.
(d) Inspection. Borrowers and Operating Lessees shall permit
agents, representatives and employees of Lender (including any servicer and/or
special servicer in connection with a Securitization) to inspect a Property on
any Business Day at reasonable hours upon reasonable advance notice.
(e) Notice of Default. Borrowers shall promptly advise Lender
of any change in any Borrower's or Operating Lessee's condition (financial or
otherwise) that could be expected to materially impair the ability of any
Borrower or Operating Lessee to comply with its obligations hereunder, or of the
occurrence of any Default or Event of Default of which any Borrower has
knowledge.
(f) Cooperate in Legal Proceedings. Borrowers shall cooperate
fully in good faith with Lender with respect to any proceedings before any
court, board or other Governmental Authority which may in any way affect the
rights of Lender hereunder or any rights obtained by Lender under any of the
other Loan Documents and, in connection therewith, permit Lender, at its
election, to participate in any such proceedings.
(g) Intentionally Omitted.
(h) Insurance Benefits. Borrowers shall cooperate in good
faith with Lender in obtaining for Lender the benefits of any insurance proceeds
lawfully or equitably payable in connection with any Property, and Lender shall
be reimbursed for any out-of-pocket expenses reasonably incurred in connection
therewith (including reasonable attorneys' fees and disbursements, and, if
reasonably necessary to collect such proceeds, the expense of an appraisal on
behalf of Lender in case of a fire or other Casualty affecting a Property or any
part thereof) out of such insurance proceeds.
(i) Further Assurances. Each Borrower shall, at such
Borrower's sole (but reasonable) cost and expense:
(i) furnish to Lender all instruments, documents,
boundary surveys, footing or foundation surveys, certificates, plans
and specifications, appraisals, title and other insurance reports and
agreements, and each and every other document, certificate, agreement
and instrument required to be furnished by Borrowers pursuant to the
terms of the Loan Documents or, without additional material expense to
Borrowers, reasonably requested by Lender in connection therewith;
(ii) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such
other acts necessary or desirable, to evidence, preserve and/or protect
the Lien of the Lender at any time securing or intended to secure the
obligations of Borrowers under the Loan Documents, as Lender may
reasonably require;
72
(iii) be responsible for, and shall pay within thirty
(30) days after demand therefore all Lender Expenses; and
(iv) do and execute all and such further lawful and
reasonable acts, conveyances and assurances for the better and more
effective carrying out of the intents and purposes of this Agreement
and the other Loan Documents, as Lender shall reasonably require from
time to time.
(j) Financial Reporting and Other Information.
(i) Borrowers will keep and maintain or will cause to
be kept and maintained on a Fiscal Year basis, in accordance with GAAP,
to the extent applicable, proper and accurate books, records and
accounts reflecting all of its financial affairs and all items of
Adjusted Operating Income, Operating Expenses and Capital Expenditures.
Lender shall have the right from time to time at all times during
normal business hours upon reasonable notice to examine such books,
records and accounts at the office of Borrowers or subject to the
Property Management Agreements, such other Person maintaining such
books, records and accounts and to make such copies or extracts
thereof, as Lender shall desire. After the occurrence of an Event of
Default, Borrowers shall pay any costs and expenses incurred by Lender
to examine its accounting records with respect to the Properties, as
Lender shall determine to be necessary or appropriate.
(ii) Borrowers shall furnish to Lender within ninety
(90) days following the end of each Fiscal Year (A) a complete copy of
the annual financial statements of the Borrowers in the aggregate,
audited by a "Big Four" accounting firm or another independent
certified public accounting firm acceptable to Lender (which audit
report may rely on the report of another independent certified public
accounting firm provided such other independent certified public
accounting firm is also a "Big Four" accounting firm or other
independent certified public accounting firm acceptable to Lender), in
accordance with GAAP, for such Fiscal Year and containing a balance
sheet, a statement of operations and (B) unaudited annual income
statements with respect to each Borrower, including a statement of
operations for each Borrower. The annual financial statements of the
Borrowers in the aggregate and each Borrower's annual financial
statements shall be accompanied by (i) an Officer's Certificate
certifying that each such annual financial statement presents fairly,
in all material respects, the financial condition and results of
operation of the Property or Properties being reported upon and has
been prepared in accordance with GAAP and (ii) a management report, in
form and substance reasonably satisfactory to Lender, discussing the
reconciliation between the financial statements for such Fiscal Year
and the most recent Annual Budget. Together with such Borrower's annual
financial statements, the applicable Borrower shall furnish to Lender
(A) an Officer's Certificate certifying as of the date thereof whether,
to Borrowers' knowledge, there exists a Default or Event of Default,
and if such Default or Event of Default exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy
the same; and (B) an annual report, for the most recently completed
fiscal year, containing:
73
(1) Capital Expenditures (including for this
purpose any and all additions to, and replacements of, FF&E,)
made in respect of any Property, including separate line items
with respect to any project costing in excess of $500,000;
(2) occupancy levels at each Property and
for the Properties for such period; and
(3) average daily room rates at each
Property and for the Properties for such period.
(iii) Intentionally Omitted.
(iv) Borrowers will furnish, or cause to be
furnished, to Lender on or before the forty-fifth (45th) day after the
end of each fiscal quarter or, if unable to provide the same on or
before the forty-fifth (45th) day, shall use their best efforts to
provide as promptly thereafter as possible, the following items,
accompanied by an Officer's Certificate, certifying that such items are
true, correct, accurate and complete and fairly present the financial
condition and results of the operations of Borrowers and the Properties
in a manner consistent with GAAP (subject to normal year end
adjustments), to the extent applicable:
(A) quarterly and year to date financial
statements prepared for such fiscal quarter with respect to
the Borrowers in the aggregate, including a balance sheet and
operating statement for such quarter, and with respect to each
Borrower, including a balance sheet and operating statement
for each Borrower for such quarter;
(B) a comparison of the budgeted income and
expenses and the actual income and expenses for such quarter
for the Properties, together with a detailed explanation of
any variances of five percent (5%) or more between budgeted
and actual amounts in the aggregate and on a line-item basis
for such period and year to date; provided, however, that
Borrowers shall not be obligated to provide such detailed
explanation for line items the actual amounts for such quarter
of which are less than $100,000;
(C) to the extent available from the
Property Managers, occupancy levels at the Properties for such
period, including average daily room rates and the average
revenue per available room;
(D) concurrently with the provision of such
reports, each Borrower shall also furnish a report of Adjusted
Operating Income and Operating Expenses (as well as a
calculation of Net Operating Income based thereon) with
respect to each Property, and for the Borrowers and the
Properties in the aggregate, in each case for the most
recently completed quarter;
74
(E) a STAR Report for the most recently
completed quarter and, to the extent available from the
Property Managers, PACE Report as of the most recently
completed quarter;
(F) to the extent available from the
Property Managers, a report of aged accounts receivable
relating to each Property as of the most recently completed
quarter; and
(G) a statement that the representations and
warranties of Borrowers set forth in Section 4.1(bb)(iv)
hereof are true and correct as of the date of such
certificate.
(v) Borrowers shall furnish to Lender, within
twenty-five days after the end of each calendar month, unaudited
operating statements, aged accounts receivable reports, rent rolls,
STAR Reports and PACE Reports; occupancy and ADR reports, in each case,
for each Property and for the Properties in the aggregate and
accompanied by an Officer's Certificate, certifying that (i) with
respect to the operating statements, that such statements are true,
correct, accurate and complete and fairly present the results of the
operations of Borrowers and the Properties, (ii) with respect to the
aged accounts receivable reports, rent rolls, occupancy and ADR
reports, that such items are to the best of Borrowers' knowledge true,
correct and accurate and fairly present the results of the operations
of Borrowers and the Properties (provided that Borrowers shall not be
required to (x) furnish to Lender any information which Borrowers have
been unable to obtain from the applicable Property Manager after using
reasonable efforts to do so or (y) provide the certification in clauses
(i) or (ii) above solely with respect to the monthly Star Reports and
Pace Reports and (iii) a calculation of Aggregate DSCR for the trailing
twelve (12) month period ending with such month. Borrowers shall also
furnish to Lender, within twenty-five days after the end of each
calendar month, a certificate in the form of Schedule I to this
Agreement;
(vi) Borrowers shall furnish to Lender, within ten
(10) Business Days after request, such further detailed information
with respect to the operation of any Property and the financial affairs
of Borrowers as may be reasonably requested by Lender; provided that
Borrowers shall not be required to furnish to Lender any information
which Borrowers can only obtain from the applicable Property Manager if
either (i) Borrowers are not entitled to such information under the
applicable Property Management Agreement, or (ii) Borrowers have been
unable to obtain such information from the applicable Property Manager
after using reasonable efforts to do so.
(vii) Borrowers shall furnish to Lender, promptly
after receipt, a copy of any notice received by or on behalf of any
Borrower from any Governmental Authority having jurisdiction over any
of the Properties with respect to a condition existing or alleged to
exist or emanate therefrom or thereat.
(viii) Borrowers will, at any and all times, within a
reasonable time after written request by Lender, furnish or cause to be
furnished to Lender, in such manner and in such detail as may be
requested by Lender, such information as may be necessary to permit
Lender to comply with any request for information made by an investor
or prospective investor in the Notes and to be furnished under Rule
144A(d) under the Securities Act.
75
(ix) Intentionally Deleted
(x) If any Borrower fails to provide to Lender or its
designee any of the financial statements, certificates, reports or
information (the "Required Records") required by this Section 5.1(j) on
the date upon which such Required Record is due, the same shall become
an Event of Default; provided that Lender shall have given to Borrowers
at least thirty (30) days' prior written notice of such failure by
Borrowers to timely submit the applicable Required Records and
Borrowers shall not have delivered such Required Records within such 30
day notice period. Notwithstanding anything to the contrary contained
herein, if, following written notice from Borrowers to Lender of
Lender's failure (or the failure of any servicer in connection with a
Securitization) to provide any financial information pursuant to
Section 2.3.7 hereof, Borrowers are unable to include certain financial
information required to be included in such Required Record or to make
certain calculations required therefor, due to the failure of Lender
(or any servicer in connection with a Securitization) or either of
their agents, representatives or employees to deliver such financial
information, Borrowers shall prepare and deliver to Lender the Required
Records without such information, and calculations to the extent
feasible (and, to the extent feasible, with good faith estimates with
respect to such missing information, clearly stated as estimates);
provided, further, that Borrowers shall deliver revised financial
reports or statements promptly following receipt of the necessary
financial information from Lender (or any servicer in connection with a
Securitization) or other sources.
(xi) The information required to be furnished by
Borrowers to Lender under this Section 5.1(j) shall be provided in both
hard copy format and electronic format; provided that Borrowers shall
only be required to provide the information required under this Section
5.1(j) in electronic format if such information is so available in the
ordinary course of the operations of the Borrowers and Property
Managers and without significant expense.
(xii) Lender shall have the right at any time and
from time to time to audit the financial information provided by
Borrowers pursuant to the terms of this Agreement in accordance with
the then customary audit policies and procedures of Lender. Lender
shall pay for the costs of its auditors, provided, however, if such
audit shall have been commenced during an Event of Default, Borrowers
shall pay the cost and expenses of such audit.
(k) Business and Operations; Material Agreements; Operating
Leases; Property Management Agreements. Each Borrower and Operating Lessee will
continue to engage in the businesses currently conducted by it as and to the
extent the same are necessary for the ownership, maintenance, management and
operation of each Property. Each Borrower and Operating Lessee will qualify to
do business and will remain in good standing under the laws of each jurisdiction
as and to the extent the same are required for the ownership, maintenance,
76
management and operation of each Property. Borrowers shall at all times (i)
maintain each Property or cause each Property to be maintained at a standard at
least equal to that maintained by prudent owners of similar facilities or land
in the region where the applicable Property is located and as required under the
Property Management Agreements; (ii) maintain or cause to be maintained
sufficient inventory and Equipment of types and quantities at each Property to
enable the operation of each Property and as required under the Property
Management Agreements; (iii) maintain such licenses and permits, or arrangements
in connection therewith so as to permit each of the Properties to be maintained
at a standard at least equal to that maintained by prudent owners of similar
hotel properties located near any Property and as required under the Property
Management Agreements; (iv) promptly perform and/or observe in all material
respects all of the covenants and agreements required to be performed and
observed by the Borrowers and Operating Lessee under each Property Management
Agreement and any Material Agreement, and do all things necessary to preserve
and to keep unimpaired the rights of the Borrowers thereunder; (v) promptly
notify Lender in writing of the giving of any notice of any default by any party
under any Material Agreement of which it is aware, each Property Management
Agreement and Operating Lease; and (vi) promptly enforce in a commercially
reasonable manner the performance and observance of all of the material
covenants and agreements required to be performed and/or observed by the other
party under each Material Agreement, Operating Lease and each Property
Management Agreement.
(l) Title to the Properties. Each Borrower will warrant and
defend against the claims of all Persons whomsoever (i) with respect to its
title to each Property and every part thereof and (ii) the validity and priority
of the Lien of the Mortgage, subject only in each case to Liens permitted under
the Loan Documents (including Permitted Encumbrances) and will provide notice to
Lender of any title defects or claims made under any title insurance policy
insuring Borrowers' interests in the Properties.
(m) Costs of Enforcement. In the event (i) that any Mortgage
is foreclosed in whole or in part or any of the Notes, or any Loan Document,
including any Mortgage, is put into the hands of an attorney for collection,
suit, action or foreclosure, (ii) of the foreclosure of any Lien or mortgage
prior to or subsequent to any Mortgage in which proceeding Lender is made a
party, (iii) of the bankruptcy, insolvency, rehabilitation or other similar
proceeding in respect of any Borrower or an assignment by any Borrower for the
benefit of its creditors, or (iv) Lender shall attempt to remedy any Event of
Default hereunder, Borrowers and their successors or assigns shall be chargeable
with and agree to pay all reasonable costs incurred by Lender as a result
thereof, including costs of collection and defense (including reasonable
attorneys', experts', consultants' and witnesses' fees and disbursements) in
connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, which shall be due and payable together
with all required service or use taxes.
(n) Estoppel Statement.
(i) After written request by Lender, Borrowers shall
within fifteen (15) Business Days furnish Lender with a statement, duly
acknowledged and certified, setting forth (A) the unpaid principal
amount of the Notes, (B) the Interest Rates, (C) the date installments
of interest and/or principal were last paid, (D) any offsets or
defenses to the payment of the Debt, (E) that the Notes, this
Agreement, each Mortgage and the other
77
Loan Documents are valid, legal and binding obligations and have not
been modified or if modified, giving particulars of such modification,
and (F) such other matters as Lender may reasonably request. Any
prospective purchaser of any interest in the Loan shall be permitted to
rely on such certificate.
(ii) Borrowers shall request and use all reasonable
efforts to obtain for Lender, upon request, Tenant estoppel
certificates from each Tenant; provided that Borrowers shall not be
required to deliver such certificates more frequently than once in any
calendar year (including estoppel certificates obtained in connection
with the origination of the Loan); provided, however, that there shall
be no limit on the number of times Borrowers may be required to obtain
such certificates if a Default hereunder or under any of the Loan
Documents has occurred and is continuing.
(o) Intentionally Omitted.
(p) Performance by Borrowers. Borrowers shall (i) cure the
Deferred Maintenance Conditions on or prior to the first anniversary of the
funding of the Loan, and (ii) remediate Environmental Conditions in a reasonably
diligent manner, in each case in the manner set forth in Section 7.1(g) herein.
In addition, each Borrower shall observe, perform and satisfy in a commercially
reasonable manner or cause the applicable Property Manager to observe, perform
and satisfy in a commercially reasonable manner all of the terms, provisions,
covenants and conditions required to be observed, performed or satisfied by it
or the applicable Property Manager, and shall pay when due all costs, fees and
expenses required to be paid by it and/or the applicable Property Manager under
the applicable Property Management Agreement subject, in each case, to any
applicable cure periods provided therein.
(q) Annual Budget. Not later than March 1 of each Fiscal Year
hereafter, Borrowers shall prepare or cause to be prepared and deliver to
Lender, for informational purposes only, an Annual Budget in respect of the
Properties for the Fiscal Year in which such delivery date falls. If Borrowers
subsequently amend the Annual Budget, Borrowers shall promptly deliver the
amended Annual Budget to Lender.
(r) No Joint Assessment. Borrowers shall not suffer, permit or
initiate the joint assessment of any Property (i) with any other real property
constituting a tax lot separate from such Property, and (ii) unless required by
applicable law, with any portion of such Property which may be deemed to
constitute personal property, or any other procedure whereby the lien of any
taxes which may be levied against such personal property shall be assessed or
levied or charged to the applicable Property.
(s) Leasing Matters.
(i) Borrowers shall not, and shall not permit the
applicable Property Manager to, amend or modify any existing Lease or
Leases or enter into any new Lease or Leases if the same would have a
Material Adverse Effect.
(ii) Borrowers shall furnish Lender with an executed
copy of each Lease within thirty (30) days after execution thereof.
78
(iii) All new Leases entered into from and after the
date hereof shall be the result of arm's-length negotiations, shall
provide for "market" rental rates and other market terms and shall not
contain any terms which would adversely affect Lender's rights under
the Loan Documents; provided that the rent payable under a new Lease
may be below market rate if the rent from the space leased under the
new Lease was, immediately prior to the entry into that new Lease,
below market rate and such new Lease was given in exchange for the
surrender of the prior Lease.
(iv) All Leases shall provide that they are
subordinate to the Mortgage and, subject to Lender entering into a
Subordination, Non-Disturbance and Attornment Agreement satisfactory to
Lender, that the lessee thereunder agrees to attorn to Lender at
Lender's request.
(v) Borrowers (A) shall observe and perform the
obligations imposed upon the lessor under the Leases in a commercially
reasonable manner; (B) shall enforce the terms, covenants and
conditions contained in the Leases on the part of the lessee thereunder
to be observed or performed in a commercially reasonable manner; (C)
shall not collect any of the base or minimum rents more than one (1)
month in advance (other than security deposits) and (D) shall not
execute any assignment of lessor's interest in the Leases or the Rents
(except for the Assignment of Leases).
(vi) Any proposed Lease in excess of 20,000 square
feet shall be subject to Lender's prior written consent (not to be
unreasonably withheld). Any proposed Lease submitted to Lender for
Lender's approval shall be accompanied by a summary of the terms of
such proposed Lease and (including the economic terms and any
termination options) shall be deemed approved if Lender shall have not
notified Borrowers in writing of its disapproval (together with a
statement of the grounds of such disapproval) within ten (10) Business
Days after Borrowers shall have given Lender written notice confirming
that at least two (2) Business Days have elapsed since such submission.
(vii) Borrowers shall not enter into a Lease of all
or substantially all of any one or more of the Properties except after
having received a Rating Confirmation as to such Lease and the Tenant
thereunder, and otherwise in compliance with all terms and conditions
hereof and the other Loan Documents. Any such Lease shall (A) not
result in a decrease in Borrowers' Net Operating Income of each
affected Property from the Net Operating Income of such Property
immediately prior to the effective date of such Lease or, if higher,
the Net Operating Income of such Property as of the Closing Date, (B)
be subject and subordinate to the Lien of the Mortgage and Lender shall
not be obligated to deliver a nondisturbance agreement in favor of the
Tenant thereunder, and (C) impose on the Tenant thereunder all the
obligations of Borrowers hereunder in respect of each affected
Property.
(t) Security Deposits. Borrowers shall, immediately upon
receipt, deliver (and with respect to security deposits, letters of credit or
other collateral already paid or delivered to any Borrower or its predecessor in
interest, Borrowers are concurrently herewith delivering) to Lender all security
deposits, letters of credit or other collateral that it receives (or has
received)
79
from time to time from any Tenant as security for the performance by such Tenant
of its obligations under its Lease (1) the cash portion of which exceeds
$100,000, or (2) the aggregate amount of which (both cash and non-cash portions)
exceeds $185,000. Lender shall deposit (or shall direct the applicable Borrowers
to deposit directly) any cash to be delivered by any Borrower pursuant to the
preceding sentence in an escrow account in the name of Lender and, except to the
extent required by law or the applicable Lease, such account shall be maintained
in accordance with the terms of Section 12.2 hereof. Lender shall make such
security available to Borrowers or the applicable Tenant on or prior to the
tenth (10th) Business Day after notice from Borrowers to the extent required to
comply with obligations owed to such Tenant under the terms of its Lease or to
Borrowers, in the event of such Tenant's default under its Lease, subject to
Lender's approval, which approval shall not be unreasonably withheld (based on,
among other things, the intended use of such deposit and whether a replacement
Lease has been executed). Lender may commingle funds deposited hereunder and
Lender shall not be obligated to segregate, designate or separately account for
any specific security deposit, except to the extent that any Borrower notifies
Lender in writing at or prior to the time of any deposit that such deposit is
required to be segregated by the applicable Lease or under applicable law.
Notwithstanding the foregoing, (x) Lender shall not acquire a security interest
or Lien in respect of security deposits to the extent that such acquisition
would be prohibited by applicable law and (y) to the extent required by law,
security deposits shall be maintained within the state in which the Property in
question is situate and, if permitted by law, shall be transferred to escrow
accounts in the name of Lender within the applicable states (which escrow
accounts shall be maintained in accordance with the terms of Section 12.2
hereof).
(u) Plan Assets. Each Borrower will do, or cause to be done,
all things necessary to ensure that it will not be deemed to hold Plan Assets at
any time.
ARTICLE VI
NEGATIVE COVENANTS
------------------
Section 6.1. Negative Covenants of the Borrowers. Each
Borrower and Operating Lessee covenants and agrees with Lender that it will not,
directly or indirectly, violate any of the following (except that, following a
Defeasance with respect to, and release of the Lien of the Mortgage on, any
Property, the following paragraphs (c), (f), (h) and (j) shall continue to apply
to such Borrower or Operating Lessee corresponding to such Property):
(a) Operation of Property. Each of Borrower and Operating
Lessee shall not, without Lender's prior consent (except as elsewhere herein
expressly provided): (i) surrender or terminate any Material Agreement or
Operating Lease unless the other party thereto is in material default and the
termination of such agreement would be commercially reasonable, (ii) surrender
or terminate any Property Management Agreement (unless such Property Manager is
being replaced with an Acceptable Property Manager pursuant to an Acceptable
Property Management Agreement), or permit or suffer any significant delegation
or contracting of the applicable Property Manager's duties unless the applicable
Property Manager has the right to do so under the applicable Property Management
Agreement without the consent of the applicable Borrower and/or the applicable
Operating Lessee or unless such delegation or contracting would not constitute a
Material Agreement if entered into by the applicable Borrower or the applicable
80
Operating Lessee itself, (iii) increase or consent to the increase of the amount
of any charges under any Material Agreement, except as provided therein or on an
arm's-length basis and commercially reasonable terms; or (iv) otherwise modify,
change, supplement, alter or amend, or waive or release any of its rights and
remedies under any Material Agreement in any material respect, except on an
arm's-length basis and commercially reasonable terms.
(b) Liens. Subject to Section 5.1(b)(ii) hereof, no Borrower
or Operating Lessee shall, without the prior written consent of Lender, create,
incur, assume, permit or suffer to exist any Lien on any portion of any
Property, except (i) Permitted Encumbrances, (ii) Liens created by or permitted
pursuant to the Loan Documents and (iii) Liens for Taxes or Other Charges not
yet delinquent.
(c) Dissolution. Each of Borrower and Operating Lessee shall
not dissolve, terminate, liquidate, merge with or consolidate into another
Person. Each of Borrower and Operating Lessee shall not, prior to the release of
its Property from the Lien of the Mortgage, (i) except as expressly permitted in
Sections 2.5 and 6.1(i) hereof, transfer, lease or sell, in one transaction or
any combination of transactions, the assets or all or substantially all of its
properties or assets, or (ii) cause any other member of any Borrower or
Operating Lessee to (A) dissolve, wind up or liquidate or take any action, or
omit to take any action, as a result of which such Borrower or Operating Lessee
would be dissolved, wound up or liquidated in whole or in part, or (B) amend,
modify, waive or terminate the limited liability company agreement of any
Borrower or Operating Lessee, without, in each instance, obtaining the prior
written consent of Lender or Lender's designee.
(d) Change in Business. No Borrower or Operating Lessee shall
enter into any line of business other than the ownership, maintenance,
financing, refinancing and operation of the Properties (in each case subject to
the terms hereof), or make any material change in the scope or nature of its
business objectives or purposes, or undertake or participate in activities other
than the continuance of its present business.
(e) Debt Cancellation. No Borrower or Operating Lessee shall
cancel or otherwise forgive or release any claim or debt owed to such Borrower
or Operating Lessee by any Person, including any arising under any of the
Leases, the Property Management Agreements and Material Agreements except (i)
with respect to the Leases, the Property Management Agreements and Material
Agreements, in accordance with and subject to the terms of this Agreement, (ii)
with respect to other matters, for adequate consideration in the ordinary course
of such Borrower's or Operating Lessee's business and on commercially reasonable
terms, subject to other restrictions contained herein or in any other Loan
Document.
(f) Affiliate Transactions. No Borrower or Operating Lessee
shall enter into, or be a party to, any transaction with an Affiliate of such
Borrower or Operating Lessee or any of the members of such Borrower or Operating
Lessee except in the ordinary course of business and on terms which are fully
disclosed to Lender in advance and, for any transaction entered into on or after
the Closing Date, are no less favorable to such Borrower or Operating Lessee or
such Affiliate than would be obtained in a comparable arm's-length transaction
with an unrelated third party, provided, however, that the foregoing shall not
prohibit any transfer permitted by the terms of Section 6.1(i) hereof.
81
(g) Zoning and Uses. Except as disclosed on Schedule 6.1(g)
hereto, no Borrower or Operating Lessee shall (i) initiate or support any
limiting change in the permitted uses of any Property (or to the extent
applicable, zoning reclassification of any Property) or any portion thereof,
seek any variance under existing land use restrictions, laws, rules or
regulations (or, to the extent applicable, zoning ordinances) applicable to any
Property or use or permit the use of any Property in a manner that would result
in such use becoming a non-conforming use under applicable land-use restrictions
(and, if any, zoning ordinances) or that would violate the terms of the Loan
Documents or of any Lease, Legal Requirements or any Permitted Encumbrance, (ii)
modify, amend or supplement any of the terms of any Permitted Encumbrance in a
manner adverse to the interests of Lender or that could reasonably be expected
to have a Material Adverse Effect with respect to such Property, (iii) modify,
amend or supplement any of the terms of any other Permitted Encumbrance in a
manner adverse to the interest of Lender or that could reasonably be expected to
have a Material Adverse Effect, (iv) impose or permit or suffer the imposition
of any restrictive covenants, easements or encumbrances upon any Property in any
manner that could reasonably be expected to have a Material Adverse Effect, (v)
execute or file any subdivision plat affecting a Property, institute, or permit
the institution of, proceedings to alter any tax lot comprising any Property or
(vi) permit or suffer a Property to be used by the public or any Person in such
manner as might make possible a claim of adverse usage or possession or of any
implied dedication or easement.
(h) Debt. Other than the Permitted Indebtedness, no Borrower
or Operating Lessee shall create, incur or assume any of the following: (i)
indebtedness for borrowed money or for the deferred purchase price of property
or services; (ii) indebtedness evidenced by a note, bond, debenture or similar
instrument; (iii) any letter or letters of credit issued for the account of a
Borrower or Operating Lessee to the extent there are unreimbursed amounts drawn
thereunder; (iv) indebtedness secured by a Lien on any property owned by any
Borrower or Operating Lessee (whether or not such indebtedness has been assumed)
except obligations for impositions which are not yet due and payable; (v) any
obligation of any Borrower or Operating Lessee directly or indirectly
guaranteeing any indebtedness or other obligation of any other Person in any
manner; (vi) any payment obligations of any Borrower or Operating Lessee under
any interest rate protection agreement (including, without limitation, any
interest rate swaps, caps, floors, collars or similar agreements) and similar
agreements; or (vii) any contractual indemnity obligations of any Borrower or
Operating Lessee other than as set forth in (A) the Property Management
Agreements or (B) any other normal and customary agreements entered into in the
ordinary course of business.
(i) Transfers.
(i) General Limitation. Unless such action is
permitted by the subsequent provisions of this Section 6.1(i), is a
Lease which complies with Section 5.1(s) or is a sale of a Property
upon or after its release from the Lien of the Loan Documents in
accordance with Sections 2.4.5 or 2.5 hereof (or is a sale of ownership
interests in a Borrower or Operating Lessee after such release of the
Property of such Borrower or Operating Lessee), Borrowers and Operating
Lessees will not, without Lender's consent and a Rating Confirmation
with respect to the transfer or other matter in question, (A) sell,
assign, convey, transfer or otherwise dispose of or encumber (except as
otherwise provided herein or in connection with the Revolver Loan)
legal, Beneficial or direct or
82
indirect equitable interests in all or any part of any Property, any
Borrower, any Operating Lessee or any SPE Member, (B) permit or suffer
any owner, directly or indirectly, of a legal, Beneficial or equitable
interest in any Property, any Borrower, any Operating Lessee or any SPE
Member to transfer such interest, whether by transfer of stock or other
legal, Beneficial or equitable interest in any of Borrower, Operating
Lessee or SPE Member (except in connection with the Revolver Loan), (C)
mortgage, hypothecate or otherwise encumber or grant a security
interest in all or any part of the legal, Beneficial or equitable
interests in all or any part of any Property, any Borrower any
Operating Lessee or any SPE Member (except in connection with the
Revolver Loan), or (D) file a declaration of condominium with respect
to any Property. Except as provided in this Section 6.1(i) Sponsor may
not sell, assign, convey, transfer, mortgage, hypothecate, encumber or
otherwise dispose of any legal, Beneficial or equitable interests held
by Sponsor directly or indirectly in any Borrower.
(ii) Sale of the Properties. In addition to any
transfer of a Property after it has been released from the Lien of the
Loan Documents pursuant to the provisions of Sections 2.4.5 and 2.5
(which transfers are permitted hereunder without restriction),
Borrowers and Operating Lessees shall have the one-time-right to sell,
assign, convey or transfer (but not mortgage, hypothecate or otherwise
encumber or grant a security interest in) legal or equitable title to
all (but not fewer than all) of the Properties only if:
(A) after giving effect to the proposed
transaction:
(1) the Properties will be owned by
one or more Single Purpose Entities wholly owned by a
Permitted Borrower Transferee, Pre-approved Transferee or such
other entity (specifically approved in writing by both Lender
and each Rating Agency) which will be in compliance with the
representations, warranties and covenants contained in Section
4.1(bb) hereof (as if such transferee shall have remade all of
such representations, warranties and covenants as of, and
after giving effect to, the proposed transaction), and which
shall have executed and delivered to Lender an assumption
agreement and such other agreements as Lender may reasonably
request (collectively, the "Assumption Agreement") in form and
substance acceptable to Lender, evidencing the proposed
transferee's agreement to abide and be bound by all the terms,
covenants and conditions set forth in this Agreement, the
Notes, the Mortgages and the other Loan Documents and all
other outstanding obligations under the Loan, together with
such legal opinions and title insurance endorsements as may be
reasonably requested by Lender;
(2) one or more Acceptable Property
Managers with respect to each Property shall continue to act
as Property Manager for that Property pursuant to the existing
Property Management Agreements or Acceptable Property
Management Agreements; and
(3) no Event of Default shall have
occurred and be continuing;
83
(B) the Assumption Agreement shall state the
applicable transferee's agreement to abide by and be bound by
the terms in the Notes (or such other promissory notes to be
executed by the transferee, such other promissory note or
notes to be on the same terms as the Notes), the Mortgage,
this Agreement (or such other loan agreement to be executed by
such transferee, which shall contain terms substantially
identical to the terms hereof) and such other Loan Documents
(or other loan documents to be delivered by such transferee,
which shall contain terms substantially identical to the terms
of the applicable Loan Documents) whenever arising, and
Borrowers, and/or such transferee shall deliver such legal
opinions and title insurance endorsements as may reasonably be
requested by Lender;
(C) upon execution of a contract for the
sale of the Properties and not less than thirty (30) days
prior to the date of such sale, Borrowers shall submit notice
of such sale to Lender. Borrowers shall submit to Lender, not
less than ten (10) days prior to the date of such sale, the
Assumption Agreement for the Properties subject to the
proposed transfer for execution by Lender. Such documents
shall be in a form appropriate for the jurisdictions in which
the Properties are located and shall be reasonably
satisfactory to Lender. In addition, Borrowers shall provide
all other documentation Lender reasonably requires to be
delivered by Borrowers and Operating Lessees in connection
with such assumption, together with an Officer's Certificate
certifying that (i) the assumption to be effected will be
effected in compliance with the terms of this Agreement and
(ii) will not impair or otherwise adversely affect the
validity or priority of the Lien of the Mortgages;
(D) prior to any such transaction, the
proposed transferee shall deliver to Lender an Officer's
Certificate stating that either (x) such transferee is an
employee pension plan or other retirement arrangement or
account that is subject to Title I of ERISA or is a Plan and
the obligations under this Agreement are not, and the exercise
of rights under this Agreement will not, constitute a
non-exempt prohibited transaction; or (y) the transferee is a
"governmental plan" (as defined in Section 3(32) of ERISA),
and the obligations under this Agreement, and the exercise of
rights under this Agreement, do not and will not violate any
applicable state statutes regulating investments by or
fiduciary obligations with respect to governmental plans; or
(z) the proposed transferee is not an Employee Benefit Plan or
a "governmental plan" or a Plan, and (i) such proposed
transferee is not subject to state statutes regulating
investments by or fiduciary obligations with respect to
"governmental plans" and (ii) the underlying assets of the
proposed transferee do not, for purposes of ERISA, constitute
assets of the Employee Benefit Plans holding an equity
interest in such proposed transferee;
(E) if the transfer is to an entity other
than a Pre-approved Transferee, a Rating Confirmation shall
have been received in respect of such proposed transfer (or,
if the proposed transfer shall occur prior to a
Securitization, such transfer shall be subject to Lender's
consent in its sole discretion); provided, however,
notwithstanding the foregoing, each of Borrower and Operating
Lessee
84
hereby agrees that if such proposed transfer is to a
Pre-approved Transferee and such transfer will occur
subsequent to the Payment Date in June 2006, such transfer
shall also require Borrower and/or Operating Lessee to deliver
to Lender a Rating Confirmation in respect of such transfer;
(F) the terms of Section 6.1(i)(v) shall be
complied with and Borrower shall cause the transferee to
deliver to Standard & Poor's and to any other Rating Agency
Lender requests its organizational documents solely for the
purpose of Standard & Poor's and any other Rating Agency
Lender requests confirming that such organizational documents
comply with the single purpose bankruptcy remote entity
requirements set forth herein; and
(G) Lender shall have received the payment
of, or reimbursement for, all reasonable costs and expenses
incurred by Lender (and any servicer in connection with a
Securitization) in connection therewith (including, without
limitation, reasonable attorneys' fees and disbursements).
(iii) Transfers of Interests in any Borrower and/or
Operating Lessee. The holders of any direct or indirect interest in any
Borrower and/or Operating Lessee shall have the one-time-right to
simultaneously transfer (but not pledge, hypothecate or encumber) an
identical portion of its equity interest in all Borrowers and/or all
Operating Lessees to a Permitted Borrower Transferee without Lender's
consent or a Rating Agency Confirmation if Section 6.1(i)(v) is
complied with and, after giving effect to such transfer:
(A) (i) the Properties will be directly
owned by one or more Single Purpose Entities in compliance
with the representations, warranties and covenants in Section
4.1(bb) hereof (as if each Borrower and/or Operating Lessee
shall have remade all of such representations, warranties and
covenants as of, and after giving effect to, the transfer),
and which shall have executed and delivered to Lender an
assumption agreement in form and substance acceptable to
Lender, evidencing the continuing agreement of the Borrowers
and/or Operating Lessees to abide and be bound by all the
terms, covenants and conditions set forth in this Agreement,
the Notes, the Mortgage and the other Loan Documents and all
other outstanding obligations under the Loan, together with
such legal opinions and title insurance endorsements as may be
reasonably requested by Lender;
(B) one or more Acceptable Property Managers
with respect to each Property shall continue to act as
Property Manager for that Property pursuant to the existing
Property Management Agreements or Acceptable Property
Management Agreements;
(C) Sponsor or a Close Affiliate of Sponsor
owns directly or indirectly at least fifty-one percent (51%)
of the equity interests in each of the Borrowers and/or
Operating Lessees and the Person that is the proposed
transferee is not a Disqualified Transferee; provided that,
after giving effect to any such transfer, in no event shall
any Person other than Sponsor or a Close Affiliate of Sponsor
exercise Management Control over the Borrowers and/or
85
Operating Lessees. In the event that Management Control shall
be exercisable jointly by Sponsor or a Close Affiliate of
Sponsor with any other Person or Persons, then Sponsor or such
Close Affiliate shall be deemed to have Management Control
only if Sponsor or such Close Affiliate retains the ultimate
right as between the Sponsor or such Close Affiliate and the
transferee to unilaterally make all material decisions with
respect to the operation, management, financing and
disposition of the Property subject to the rights and
entitlements of the Property Managers;
(D) if there has been a transfer of
forty-nine percent (49%) or more of the direct membership
interests, stock or other direct equity ownership interests in
any Borrower and/or Operating Lessee or a transfer of any
portion of any SPE Member's interest in any Borrower and/or
Operating Lessee, Borrowers and/or Operating Lessees shall
have first delivered to Lender (and, after a Securitization,
the Rating Agencies) an Officer's Certificate and legal
opinion of the types described in clause 6.1(i)(v) below;
(E) Borrower shall cause the transferee, if
Lender so requests, to deliver to Standard & Poor's and to any
other Rating Agency Lender requests its organizational
documents solely for the purpose of Standard & Poor's and such
other Rating Agency Lender requests confirming that such
organizational documents comply with the single purpose
bankruptcy remote entity requirements set forth herein; and
(F) without limiting the generality of the
introductory phrase of this clause Subsection 6.1(i) , if
there has been a transfer of any direct interest in the SPE
Member, such transfer will require an Officer's Certificate
and legal opinion of the types described in clause 6.1(i)(v)
below.
(iv) Intentionally Omitted.
(v) Notice Required; Legal Opinions. Not less than
five (5) Business Days prior to the closing of any transaction
permitted under the provisions of this Section 6.1(i) (other than a
transfer permitted pursuant to clause (vii) of this Section 6.1(i)),
Borrowers and/or Operating Lessees shall deliver or cause to be
delivered to Lender (A) an Officer's Certificate describing the
proposed transaction and stating that such transaction is permitted
hereunder and under the other Loan Documents, together with any
documents upon which such Officer's Certificate is based, and (B) a
legal opinion of counsel to Borrowers or the transferee selected by
either of them (to the extent approved by Lender and the Rating
Agencies), in form and substance consistent with similar opinions then
being required by the Rating Agencies and acceptable to the Rating
Agencies, confirming, among other things, that the assets of each
Borrower, and of its managing general partner or SPE Member, as
applicable, will not be substantively consolidated with the assets of
such owners or Controlling Persons of the applicable Borrower and/or
Operating Lessee as Lender or the Rating Agencies may specify, in the
event of a bankruptcy or similar proceeding involving such owners or
Controlling Persons.
86
(vi) Sale of Equipment. Notwithstanding the above
provisions of this Section 6.1(i) and to the extent permitted to be
carried out by the Property Managers without the consent of the
applicable Borrower, Borrowers may transfer or dispose of Equipment
that is either being replaced or that is no longer necessary in
connection with the operation of any Property free from the interest of
Lender under this Agreement or any other Loan Document, provided that
such transfer or disposal (when compared to the non-transfer or
non-disposal of such Equipment) will not materially adversely affect
the value of any Property, will not impair the utility thereof and
(except where the same would not have a Material Adverse Effect), will
not result in a reduction or abatement of, or right of offset against,
the rentals or other amounts payable under any Lease or any Operating
Agreement, in either case as a result thereof, provided that any new
Equipment acquired by any Borrower (and not so disposed of) shall be
subject to the interest of Lender under this Agreement and the other
Loan Documents unless leased to Borrowers (in which event, Lender shall
be made a collateral assignee of the applicable Borrower's interest in
such lease (but, unless expressly subsequently assumed by Lender,
Lender shall have no obligations under the applicable Borrower's
interest therein)).
(vii) Notwithstanding any provision of this Agreement
(including the other provisions of this Section 6.1(i) or the
provisions of any other Loan Document), there shall be no restriction
or limitation in any respect to (and no Default or Event of Default
shall result or arise from) the sale, assignment, conveyance, transfer,
mortgage, hypothecation or other disposition of or encumbering of any
direct or indirect legal, Beneficial or direct or indirect equitable
interest in Sponsor or any Person owning a direct or indirect interest
therein.
(j) Nonexempt ERISA Transactions. No Borrower and/or Operating
Lessee shall engage in a nonexempt prohibited transaction described in Section
406 of ERISA or Section 4975 of the Code, as such sections relate to any
Borrower or Operating Lessee, or in any transaction that would cause any
obligation or action taken or to be taken hereunder (or the exercise by Lender
of any of its rights under the Notes, this Agreement, any Mortgage or any other
Loan Document) to be a non-exempt prohibited transaction under ERISA.
(k) Misapplication of Funds. No Borrower or Operating Lessee
shall distribute any Adjusted Operating Income from any Property or any Proceeds
in violation of the provisions of this Agreement, fail to remit amounts to the
Deposit Account, the Holding Account or any of the Reserve Accounts if and as
required under this Agreement, or misappropriate any security deposits or
portion thereof.
(l) Assignment of Licenses and Permits. Except in connection
with a transfer permitted under Section 2.5 or Section 6.1(i) hereof, no
Borrower or Operating Lessee shall assign or transfer any of its interest in any
Permits pertaining to any Property, or assign, transfer or remove or permit any
other Person to assign, transfer or remove any records pertaining to any
Property.
(m) Place of Business. No Borrower or Operating Lessee shall
change its chief executive office or its principal place of business without
giving Lender at least thirty (30) days' prior written notice thereof and
promptly providing Lender such information as Lender may reasonably request in
connection therewith.
87
ARTICLE VII
ALTERATIONS AND EXPANSIONS; LEASING
-----------------------------------
Section 7.1. Alterations and Expansions. No Borrower or
Operating Lessee will perform or undertake or consent to the performance or
undertaking of (including, without limitation, the approval of any budget with
respect to a Property which includes) any Alteration or Expansion, except in
accordance with the following terms and conditions:
(a) The Alteration or Expansion shall be undertaken in
accordance with the applicable provisions of this Agreement, the other Loan
Documents, the Property Management Agreements, the Operating Agreements and the
Leases, and all Legal Requirements.
(b) No Event of Default shall have occurred and be continuing
or shall occur as a result of such action.
(c) A Material Alteration or Material Expansion, to the extent
architects are customarily used for alterations or expansions of those types,
but including any structural change to any of the Properties or the
Improvements, shall be conducted under the supervision of an Independent
Architect and shall not be undertaken until ten (10) Business Days after there
shall have been filed with Lender, for information purposes only and not for
approval by Lender, detailed plans and specifications and cost estimates
therefor, prepared and approved in writing by such Independent Architect. Such
plans and specifications may be revised at any time and from time to time,
provided that revisions of such plans and specifications shall be filed with
Lender, for information purposes only.
(d) The Alteration or Expansion may not in and of itself,
either during the Alteration or Expansion or upon completion, be reasonably
expected to have a Material Adverse Effect with respect to a Property or
adversely affect the annual Net Operating Income, taking into account the
required escrows (or completion bond) provided under Section 7.1(h)(i) below;
provided that if, as reasonably determined by the Lender, such Alteration or
Expansion would adversely affect the annual Net Operating Income, then in order
to proceed with the Alteration or Expansion the Borrowers shall deliver to
Lender Eligible Collateral in the total amount of the estimated reduction in Net
Operating Income resulting from the Alteration or Expansion as additional
security for the Debt. On each Payment Date during the period in which such
Alteration or Expansion is being performed, Lender shall release a portion of
such Eligible Collateral to Borrower in an amount equal to the estimated
reduction in the Net Operating Income resulting from the Alteration or Expansion
for the month in which the Payment Date occurs. Any remaining Eligible
Collateral shall be returned to Borrowers after completion of the Alteration or
Expansion if the reduction in Net Operating Income has been restored and no
Event of Default has occurred and is continuing.
88
(e) All work done in connection with any Alteration or
Expansion shall be performed with due diligence to Final Completion in a good
and workmanlike manner, all materials used in connection with any Alteration or
Expansion shall be not less than the standard of quality of the materials
generally used at the applicable Property as of the date hereof (or, if greater,
the then-current customary quality in the submarket in which such Property is
located) and all work shall be performed and all materials used in accordance
with all applicable Legal Requirements and Insurance Requirements.
(f) The cost of any Alteration or Expansion shall be promptly
and fully paid for by Borrowers, subject to the next succeeding sentence. No
payment made prior to the Final Completion of an Alteration or Expansion or
Restoration to any contractor, subcontractor, materialman, supplier, engineer,
architect, project manager or other Person who renders services or furnishes
materials in connection with such Alteration shall exceed ninety percent (90%)
(other than with respect to FF&E for which Borrower may make payments in full
prior to Final Completion if it has received delivery of such items and
otherwise has complied with the terms of Section 9.2.16) of the aggregate value
of the work performed by such Person from time to time and materials furnished
and incorporated into the Improvements.
(g) All work performed in connection with the (i) cure of the
Deferred Maintenance Conditions and (ii) remediation of the Environmental
Conditions shall be performed in accordance with the terms and conditions set
forth in clauses (a), (c), (e) and (f) of this Section 7.1. Subject to Section
7.1(f) above, from time to time as the cure or remediation of any particular
Deferred Maintenance Condition or Environmental Condition progresses, Lender
shall, subject to and upon the satisfaction of the terms and conditions set
forth in Section 9.2.2 herein, disburse to Borrowers from the Deferred
Maintenance and Environmental Conditions Reserve Account, amounts incurred by
Borrowers in connection with the cure or remediation of the Deferred Maintenance
Condition or Environmental Condition in question.
(h) With respect to any Material Alteration or Material
Expansion:
(i) Borrowers shall have delivered to Lender Eligible
Collateral in an amount equal to at least the total estimated remaining
unpaid costs of such Material Alteration or Material Expansion which
Eligible Collateral shall be held by Lender as security for the Debt
and released to the applicable Borrower as such work progresses in
accordance with Section 7.1(h)(iii) hereof; provided, however, in the
event that any Material Alteration or Material Expansion shall be made
in conjunction with any Restoration with respect to which a Borrower
shall be entitled to withdraw Proceeds pursuant to Section 8.1.2(b)
hereof (including any Proceeds remaining after completion of such
Restoration), the amount of the Eligible Collateral to be furnished
pursuant hereto need not exceed the aggregate cost of such Restoration
and such Material Alteration or Material Expansion (in either case, as
estimated by the Independent Architect) less the sum of the amount of
any Proceeds which any Borrower is entitled to withdraw pursuant to
Section 8.1 hereof;
(ii) Prior to commencement of construction of such
Material Alteration or Material Expansion, Borrowers shall deliver to
Lender a schedule (with the concurrence of the Independent Architect)
setting forth the projected stages of completion of such Alteration or
Expansion and the corresponding amounts expected to be due and payable
by or on behalf of Borrowers in connection with such completion, such
schedule to be updated quarterly by Borrowers (and with the concurrence
of the Independent Architect) during the performance of such Alteration
or Expansion.
89
(iii) Any Eligible Collateral that a Borrower
delivers to Lender pursuant hereto (and the proceeds of any such
Eligible Collateral) shall be invested (to the extent such Eligible
Collateral can be invested) by Lender in Permitted Investments for a
period of time consistent with the date on which such Borrower notifies
Lender that such Borrower expects to request a release of such Eligible
Collateral in accordance with the next succeeding sentence. From time
to time as the Alteration or Expansion progresses, the amount of any
Eligible Collateral so furnished may, upon the written request of any
Borrower to Lender, be withdrawn by Borrowers and paid or otherwise
applied by or returned to Borrowers in an amount equal to the amount
Borrowers would be entitled to so withdraw if Section 8.1.2(e) hereof
were applicable, and any Eligible Collateral so furnished which is a
Credit Facility may be reduced by Borrowers in an amount equal to the
amount Borrowers would be entitled to so reduce if Section 8.1.2(e)
hereof were applicable, subject, in each case, to the satisfaction of
the conditions precedent to withdrawal of funds or reduction of the
Credit Facility set forth in Section 8.1.2(e) hereof, provided however
that, notwithstanding the terms of Section 8.1.2(e), instead of
reimbursing Borrowers for amounts already paid in respect of such
Alteration or Expansion, Eligible Collateral shall be disbursed to
Borrower or, at Lender's election, the applicable contractor upon
presentation to Lender of a draw request together with copies of
invoices for the amounts to be withdrawn. In connection with the
above-described quarterly update of the projected stages of completion
of the Material Alteration or Material Expansion (as concurred with by
an Independent Architect), Borrowers shall increase (or be permitted to
decrease, as applicable) the Eligible Collateral then deposited with
Lender as necessary to comply with Section 7.1(h)(i) hereof.
(iv) At any time after Final Completion of such
Alterations or Expansions, the whole balance of any Cash deposited with
Lender pursuant to Section 7.1(h) hereof then remaining on deposit may
be withdrawn by Borrowers and shall be paid by Lender to Borrowers, and
any Eligible Collateral so deposited shall, to the extent it has not
been called upon, reduced or theretofore released, be released by
Lender to Borrowers, within ten (10) days after receipt by Lender of an
application for such withdrawal and/or release together with an
Officer's Certificate, and as to the following clauses (A) and (B) of
this clause also a certificate of the Independent Architect, setting
forth in substance as follows:
(A) that such Alteration(s) or Expansion(s)
has been completed in all material respects in accordance with
any plans and specifications therefor previously filed with
Lender under Section 7.1(c) hereof;
(B) that to the knowledge of the certifying
Person, (x) such Alteration(s) or Expansion(s) has been
completed in compliance with all Legal Requirements, and (y)
to the extent required for the legal use or occupancy of the
portion of the Property affected by such Alteration(s) or
Expansion(s), the applicable Borrower has obtained a temporary
or permanent certificate of occupancy (or similar certificate)
or, if no such certificate is required, a statement to that
effect;
90
(C) that to the knowledge of the certifying
Person, all amounts that a Borrower is or may become liable to
pay in respect of such Alteration(s) or Expansion(s) through
the date of the certification have been paid in full or
adequately provided for and, to the extent that such are
customary and reasonably obtainable by prudent property owners
in the area where the applicable Property is located, that
Lien waivers have been obtained from the general contractor
and subcontractors performing such Alteration(s) or
Expansion(s) or at its sole cost and expense, Borrowers shall
cause a nationally recognized title insurance company to
deliver to Lender an endorsement to the Qualified Title
Policy, updating such policy and insuring over such Liens
without further exceptions to such policy other than Permitted
Encumbrances, or shall, at its sole cost and expense, cause a
reputable title insurance company to deliver a lender's title
insurance policy, in such form, in such amounts and with such
endorsements as the Qualified Title Policy, which policy shall
be dated the date of completion of the Material Alteration and
shall contain no exceptions other than Permitted Encumbrances;
provided, however, that if, for any reason, Borrowers are
unable to deliver the certification required by this clause
(C) with respect to any costs or expenses relating to the
Alteration(s) or Expansion(s), then, assuming Borrowers are
able to satisfy each of the other requirements set forth in
clauses (A) and (B) above, Borrowers shall be entitled to the
release of the difference between the whole balance of such
Eligible Collateral and the total of all costs and expenses to
which Borrowers are unable to certify; and
(D) that to the knowledge of the certifying
Person, no Event of Default has occurred and is continuing.
Section 7.2. Leasing. Each Borrower shall observe the
covenants set forth in Section 5.1(s) hereof.
ARTICLE VIII
CASUALTY AND CONDEMNATION
-------------------------
Section 8.1. Insurance; Casualty and Condemnation.
(a) Borrowers, at their sole cost and expense, for the mutual
benefit of Borrowers and Lender, shall keep each Property insured and obtain and
maintain policies of insurance insuring against loss or damage by standard
perils included within the classification "All Risks of Physical Loss" including
earthquake damage to the extent required by Section 8.1(b)(viii) hereof. Such
insurance (other than earthquake insurance) (i) shall be in an aggregate amount
equal to the then full replacement cost of each Property and the Equipment
(without deduction for physical depreciation), or such lesser amounts approved
by Lender in its sole discretion (or after a Securitization, upon receipt of a
Rating Confirmation), and (ii) shall have deductibles no greater than $100,000
(as escalated by the CPI Increase) (or, with respect to
91
windstorm insurance, deductibles no greater than 5% of the full replacement cost
of each Property, and, with respect to earthquake insurance, deductibles no
greater than 5.0% of the full replacement cost of each Property). The policies
of insurance carried in accordance with this paragraph shall be paid annually in
advance and shall contain a "Replacement Cost Endorsement" with a waiver of
depreciation.
(b) Borrowers, at their sole cost and expense, for the mutual
benefit of Borrowers and Lender, shall also obtain and maintain the following
policies of insurance:
(i) Flood insurance if any part of any Property is
located in an area identified by the Federal Emergency Management
Agency as an area federally designated a "100 year flood plain" (an
"Affected Property" and collectively the "Affected Properties") and (A)
flood insurance is generally available at reasonable premiums and in
such amount as generally required by institutional lenders for similar
properties or (B) if not so available from a private carrier, from the
federal government at commercially reasonable premiums to the extent
available. In either case, the flood insurance shall be in an amount at
least equal to the aggregate principal amount of the Loan outstanding
from time to time or the maximum limit of coverage available with
respect to the applicable Property under said program, whichever is
less; provided, however, notwithstanding the foregoing, Borrowers
hereby agree to maintain at all times flood insurance in an amount
equal to at least $[25,000,000] (per occurrence) for the Affected
Properties;
(ii) Commercial general liability insurance,
including broad form property damage, blanket contractual and personal
injuries (including death resulting therefrom) coverages and containing
minimum limits per occurrence of $1,000,000 with a $2,000,000 general
aggregate for any policy year. In addition, at least $100,000,000
excess and/or umbrella liability insurance shall be obtained and
maintained for claims, including legal liability imposed upon Borrowers
and all related court costs and attorneys' fees and disbursements;
(iii) Rental loss and/or business interruption
insurance in an amount sufficient to avoid any co-insurance penalty and
equal to the greater of (A) the estimated gross revenues from the
operation of the applicable Property (including (x) the total payable
under the Leases and all Rents and (y) the total of all other amounts
to be received by Borrowers or third parties that are the legal
obligation of the Tenants), net of non-recurring expenses, for a period
of up to the next succeeding eighteen (18) months, or (B) the projected
Operating Expenses (including debt service) for the maintenance and
operation of the applicable Property for a period of up to the next
succeeding eighteen (18) months as the same may be reduced or increased
from time to time due to changes in such Operating Expenses. The amount
of such insurance shall be increased from time to time as and when the
Rents increase or the estimates of (or the actual) gross revenue, as
may be applicable, increases or decreases to the extent Rents or the
estimates of gross revenue decrease;
92
(iv) Insurance against loss or damage from (A)
leakage of sprinkler systems and (B) explosion of steam boilers, air
conditioning equipment, high pressure piping, machinery and equipment,
pressure vessels or similar apparatus now or hereafter installed in any
of the Improvements (without exclusion for explosions) and insurance
against loss of occupancy or use arising from any breakdown, in such
amounts as are generally available at reasonable premiums and are
generally required by institutional lenders for properties comparable
to the Properties;
(v) Worker's compensation insurance with respect to
all employees of Borrowers as and to the extent required by any
Governmental Authority or Legal Requirement and employer's liability
coverage of at least $2,000,000 which is scheduled to the excess and/or
umbrella liability insurance as referenced in clause (ii) above;
(vi) During any period of repair or restoration,
completed value (non-reporting) builder's "all risk" insurance in an
amount equal to not less than the full insurable value of the
applicable Property against such risks (including fire and extended
coverage and collapse of the Improvements to agreed limits) as Lender
may request, in form and substance acceptable to Lender;
(vii) Coverage to compensate for the cost of
demolition and the increased cost of construction for the applicable
Property;
(viii) With respect to the Property known as the
Hyatt Regency La Jolla, San Diego, California, earthquake insurance in
an amount equal to twice the probable maximum loss (as determined by
Lender in its sole discretion) of the applicable Property, provided
that (A) any credit enhancement proposed to be provided by or on behalf
of Borrowers in connection with the deductible on such earthquake
insurance shall be subject to the prior receipt of a Rating
Confirmation, and (B) in the event that such earthquake insurance shall
not be available for any reason, Borrowers shall have the right,
subject to a Rating Confirmation, to deliver to Lender in lieu of such
insurance coverage Eligible Collateral or a guarantee from an entity
acceptable to Lender (prior to a Securitization) and each of the Rating
Agencies in such amount and in such form and substance as shall be
approved by Lender (prior to a Securitization) and each of the Rating
Agencies in their sole discretion (provided that such Eligible
Collateral or guarantee will not be required to exceed the amount of
coverage that would have been required if earthquake insurance were
still available under this subsection (viii));
(ix) Windstorm insurance in an amount equal to the
probable maximum loss (as determined by Lender in its sole discretion)
of the applicable Property provided, that any credit enhancement
proposed to be provided by or on behalf of Borrowers in connection with
the deductible on such windstorm insurance shall be subject to the
prior receipt of a Rating Confirmation;
(x) Law and ordinance insurance coverage in an amount
no less than that set forth in the insurance policies covering the
Properties as of the date hereof;
93
(xi) Provided that insurance coverage relating to the
acts of terrorist groups or individuals is available at commercially
reasonable rates, Borrower shall be required to carry terrorism
insurance throughout the term of the Loan in an amount equal to
$[________] (per occurrence) (the "Initial Terrorism Coverage
Amount"). Lender agrees that terrorism insurance coverage may be
provided under a blanket policy that is acceptable to Lender.
Notwithstanding the foregoing, Borrower agrees at all times to maintain
terrorism insurance coverage throughout the term of the Loan in an
amount not less than that which can be purchased for a sum equal to
$[___________] (the "Maximum Premium Amount") in any single policy
year, provided, that under no circumstance shall terrorism coverage in
excess of the Initial Terrorism Coverage Amount (per occurrence) of
coverage be required hereunder. However, from and after the date any
Property is released from the lien of the Mortgage in accordance with
the terms hereof, the amount of terrorism insurance coverage thereafter
required hereunder shall be adjusted (in each case, a "Terrorism
Adjustment") to be in an amount equal to the lesser of (x)
$[_________] and (y) 150% of the greatest Allocated Loan Amount (per
occurrence) applicable to any Property that continues, from time to
time to be secured by the Mortgage (the "Adjusted Terrorism Coverage
Amount"), per occurrence. In the event of any Terrorism Adjustment, the
parties hereby agree that the Maximum Premium Amount shall also be
ratably reduced from time to time based on the ratio that the (1) then
applicable Adjusted Terrorism Coverage Amount bears to (2) the Initial
Terrorism Coverage Amount; and
(xii) Such other insurance as may from time to time
be reasonably required by Lender in order to protect its interests.
(c) All policies of insurance (the "Policies") required
pursuant to this Section 8.1 shall be issued by companies approved by Lender and
licensed or authorized to do business in the state where the applicable Property
is located. Further, unless otherwise approved by Lender in its reasonable
discretion (prior to a Securitization) and the Rating Agencies in writing, the
issuer(s) of the Policies required under this Section 8.1 shall have a claims
paying ability rating of "AA-" or better by Standard & Poor's and "Aa2" or
better by Moody's, except that the issuer(s) of the Policies required under
Section 8.1(b)(viii) hereof shall have a claims paying ability rating of "A" or
better by Standard & Poor's and "A2" or better by Moody's; provided, however, if
the insurance provided hereunder is procured by a syndication of more then five
(5) insurers then the foregoing requirements shall not be violated if at least
(i) sixty percent (60%) of the coverage is with carriers having a claims paying
ability rating of "AA" or better by Standard & Poor's and "Aa2" or better by
Moody's and (ii) each other carrier providing coverage has a claims paying
ability rating of "BBB-" or better by Standard & Poor's and Fitch Ratings and
"Baa3" or better by Moody's. The Policies (i) shall name Lender (or an agent on
Lender's behalf) and its successors and/or assigns as their interest may appear
as an additional insured or as a loss payee (except that in the case of general
liability insurance, Lender (or an agent on Lender's behalf) shall be named an
additional insured and not a loss payee); (ii) shall contain a Non-Contributory
Standard Lender Clause and, except with respect to general
94
liability insurance, a Lender's Loss Payable Endorsement, or their equivalents,
naming Lender as the Person to which all payments made by such insurance company
shall be paid; (iii) shall include effective waivers by the insurer of all
claims for insurance premiums against all loss payees, additional insureds and
named insureds (other than Borrowers) and all rights of subrogation against any
loss payee, additional insured or named insured; (iv) shall be assigned to
Lender; (v) except as otherwise provided above, shall be subject to a
deductible, if any, not greater in any material respect than the deductible for
such coverage on the date hereof; (vi) shall contain such provisions as Lender
deems reasonably necessary or desirable to protect its interest, including
endorsements providing that neither Borrowers, Lender nor any other party shall
be a Contributor-insurer under said Policies and that no material modification,
reduction, cancellation or termination in amount of, or material change (other
than an increase) in, coverage of any of the Policies shall be effective until
at least thirty (30) days after receipt by each named insured, additional
insured and loss payee of written notice thereof or ten (10) days after receipt
of such notice with respect to nonpayment of premium; (vii) shall permit Lender
to pay the premiums and continue any insurance upon failure of Borrowers to pay
premiums when due, upon the insolvency of Borrowers or through foreclosure or
other transfer of title to the applicable Property (it being understood that
Borrowers' rights to coverage under such policies may not be assignable without
the consent of the insurer); and (viii) shall provide that any proceeds shall be
payable to Lender and that the insurance shall not be impaired or invalidated by
virtue of (A) any act, failure to act, negligence of, or violation of
declarations, warranties or conditions contained in such policy by any Borrower,
Lender or any other named insured, additional insured or loss payee, except for
the willful misconduct of Lender knowingly in violation of the conditions of
such policy, (B) the occupation, use, operation or maintenance of the applicable
Property for purposes more hazardous than permitted by the terms of the Policy,
(C) any foreclosure or other proceeding or notice of sale relating to the
applicable Property, or (D) any change in the possession of the applicable
Property without a change in the identity of the holder of actual title to such
Property (provided that with respect to items (C) and (D), any notice
requirements of the applicable Policies are satisfied). Notwithstanding the
foregoing, for purposes hereof, Lender hereby approves the existing blanket
insurance policy.
(d) Insurance Premiums; Certificates of Insurance.
(i) Borrowers shall pay the premiums for such
Policies (the "Insurance Premiums" ) as the same become due and payable
and shall furnish to Lender the receipts for the payment of the
Insurance Premiums or other evidence of such payment reasonably
satisfactory to Lender (provided, however, that Borrowers are not
required to furnish such evidence of payment to Lender if such
Insurance Premiums are to be paid by Lender pursuant to the terms of
this Agreement). Within thirty (30) days after request by Lender,
Borrowers shall obtain such increases in the amounts of coverage
required hereunder as may be reasonably requested in writing by Lender
or as may be requested in writing by the Rating Agencies, taking into
consideration changes in liability laws, changes in prudent customs and
practices, and the like. In the event Borrowers satisfy the
requirements under this Section 8.1 through the use of a Policy
covering properties in addition to the Properties (a "Blanket Policy"),
then (unless such policy is provided in substantially the same manner
as it is as of the date hereof), Borrowers shall provide evidence
satisfactory to Lender that the Insurance Premiums for the applicable
Property or Properties are separately allocated under such Policy to
the applicable
95
Property or Properties and that payment of such allocated amount (A)
shall maintain the effectiveness of such Policy as to such Property or
Properties and (B) shall otherwise provide the same protection as would
a separate policy that complies with the terms of this Agreement as to
such Property or Properties, notwithstanding the failure of payment of
any other portion of the insurance premiums. If no such allocation is
available, Lender shall have the right to increase the amount required
to be deposited into the Tax and Insurance Escrow Account in an amount
sufficient to purchase a non-blanket Policy covering the applicable
Property or Properties from insurance companies which qualify under
this Agreement.
(ii) Borrowers shall deliver to Lender on or prior to
the Closing Date certificates setting forth in reasonable detail the
material terms (including any applicable notice requirements) of all
Policies from the respective insurance companies (or their authorized
agents) that issued the Policies, including that such Policies may not
be canceled or modified in any material respect without thirty (30)
days' prior notice to Lender, or ten (10) days' notice with respect to
nonpayment of premium. Borrowers shall deliver to Lender, concurrently
with each change in any Policy, a certificate with respect to such
changed Policy certified by the insurance company issuing that Policy,
in substantially the same form and containing substantially the same
information as the certificates required to be delivered by Borrowers
pursuant to the first sentence of this clause (d)(ii) and stating that
all premiums then due thereon have been paid to the applicable insurers
and that the same are in full force and effect (or if such certificate
and/or other information described in clause (d)(ii) shall not be
obtainable by Borrowers, Borrowers may deliver an Officer's Certificate
to such effect in lieu thereof).
(e) Renewal and Replacement of Policies.
(i) Not less than fifteen (15) Business Days prior to
the expiration, termination or cancellation of any Policy, Borrowers
shall renew such policy or obtain a replacement policy or policies (or
a binding commitment for such replacement policy or policies), which
shall be effective no later than the date of the expiration,
termination or cancellation of the previous policy, and shall deliver
to Lender a certificate in respect of such policy or policies (A)
containing the same information as the certificates required to be
delivered by Borrowers pursuant to clause (d)(ii) above, or a copy of
the binding commitment for such policy or policies and (B) confirming
that such policy complies with all requirements hereof.
(ii) If Borrowers do not furnish to Lender the
certificates as required under clause (e)(i) above, Lender may procure,
but shall not be obligated to procure, such replacement policy or
policies and pay the Insurance Premiums therefor, and Borrowers agree
to reimburse Lender for the cost of such Insurance Premiums promptly on
demand.
96
(iii) Concurrently with the delivery of each
replacement policy or a binding commitment for the same pursuant to
this clause (e), Borrowers shall deliver to Lender a report or
attestation from a duly licensed or authorized insurance broker or from
the insurer, setting forth the particulars as to all insurance obtained
by Borrowers pursuant to this Section 8.1 and then in effect and
stating that all Insurance Premiums then due thereon have been paid in
full to the applicable insurers, that such insurance policies are in
full force and effect and that, in the opinion of such insurance broker
or insurer, such insurance otherwise complies with the requirements of
this Section 8.1 (or if such report shall not be available after
Borrowers shall have used reasonable efforts to provide the same,
Borrowers will deliver to Lender an Officer's Certificate containing
the information to be provided in such report).
(f) Separate Insurance. Borrowers will not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained pursuant to this Section 8.1 unless such insurance
complies with clause (c) above.
(g) Securitization. Following any Securitization, Borrowers
shall name any trustee, servicer or special servicer designated by Lender as a
loss payee, and any trustee, servicer and special servicer as additional
insureds, with respect to any Policy for which Lender is to be so named
hereunder.
8.1.2 Casualty; Application of Proceeds.
(a) Right to Adjust.
(i) If any Property is damaged or destroyed, in whole
or in part, by a Casualty, Borrowers shall give prompt written notice
thereof to Lender, generally describing the nature and extent of such
Casualty. Following the occurrence of a Casualty, Borrowers, regardless
of whether proceeds are available, shall in a reasonably prompt manner
proceed to restore, repair, replace or rebuild the affected Property to
the extent practicable to be of at least equal value and of
substantially the same character as prior to the Casualty, all in
accordance with the terms hereof applicable to Alterations.
(ii) Subject to clause (v) below, in the event of a
Casualty where the loss does not exceed $500,000, Borrowers may settle
and adjust such claim; provided that such adjustment is carried out in
a competent and timely manner. In such case, Borrowers are hereby
authorized to collect and receipt for Lender any Proceeds.
(iii) Subject to clause (v) below, in the event of a
Casualty where the loss exceeds $500,000, Borrowers may settle and
adjust such claim only with the consent of Lender (which consent shall
not be unreasonably withheld or delayed) and Lender shall have the
opportunity to participate, at Borrowers' cost, in any such
adjustments.
(iv) The proceeds of any Policy shall be due and
payable solely to Lender and held and applied in accordance with the
terms hereof (or, if mistakenly paid to any Borrower, shall be held in
trust by such Borrower for the benefit of Lender and shall be paid over
to Lender by such Borrower within one (1) Business Day of receipt).
(v) Notwithstanding the terms of clauses (ii) and
(iii) above, Lender shall have the sole authority to adjust any claim
with respect to a Casualty and to collect all Proceeds if an Event of
Default shall have occurred and is continuing.
97
(b) Right of the Borrowers to Apply to Restoration. In the
event of (i) a Casualty that does not constitute a Material Casualty, or (ii) a
Condemnation that does not constitute a Material Condemnation, Lender shall
permit the application of the Proceeds (after reimbursement of any expenses
incurred by Lender) to reimburse Borrowers for the cost of restoring, repairing,
replacing or rebuilding or otherwise curing title defects at the applicable
Property (the "Restoration"), in the manner required hereby, provided and on the
condition that (1) no Event of Default shall have occurred and be then
continuing and (2) in the reasonable judgment of Lender:
(i) the applicable Property can be restored to an
economic unit not less valuable (taking into account the effect of the
termination of any Leases or Material Agreements and the proceeds of
any rental loss or business interruption insurance which any Borrower
receives or is entitled to receive, in each case, due to such Casualty
or Condemnation) and not less useful than the same was prior to the
Casualty or Condemnation,
(ii) the applicable Property, after such Restoration
and stabilization, will adequately secure the outstanding balance of
the Loan,
(iii) the Restoration can be completed by the
earliest to occur of:
(A) the 180th day following the receipt of
the Proceeds (or if earlier, the 365th day after the Casualty
or Condemnation, as applicable), or, with Rating Confirmation,
such longer period as may reasonably be required;
(B) the 180th day prior to the Maturity
Date, and
(C) with respect to a Casualty, the
expiration of the payment period on the rental loss or
business interruption insurance coverage in respect of such
Casualty; and
(iv) after receiving reasonably satisfactory evidence
to such effect, during the period of the Restoration, the sum of (A)
income derived from the applicable Property, plus (B) proceeds of
rental loss insurance or business interruption insurance, if any,
payable together with such other monies as Borrowers may irrevocably
make available for the Restoration, will equal or exceed 105% of the
sum of (1) Operating Expenses and (2) the Debt Service.
Notwithstanding the foregoing, if any of the conditions set forth in sub-clauses
(1) and (2) of the proviso in this clause (b) is not satisfied, then, unless
Lender shall otherwise elect, at its sole option, the Proceeds shall be applied
in the following order of priority: (A) first, to prepay the principal of the
Loan in an amount up to the Release Amount of the Property which suffered the
Casualty or Condemnation; (B) second, to pay the amount of (1) all accrued and
unpaid interest in respect of the principal amount of the Debt so prepaid
through the date which is the final day of the Interest Accrual Period in which
such prepayment is made or, if prohibited by law, through the date of repayment
(including, if an Event of Default has occurred and is then continuing, interest
owed at the Default Rate), and (2) all other sums then due and owing under the
Loan Documents; and (C) third, to reimburse Lender for any fees and expenses of
Lender incurred in connection therewith (it being agreed that, upon satisfaction
in full of the entitlements under clauses (A), (B) and (C) of this sentence,
Borrowers shall be entitled to receive a release of the Lien of the Mortgage and
the other Loan Documents with respect to the affected Property in accordance
with and subject to the terms of Section 2.5 hereof).
98
(c) Material Casualty or Condemnation and Lender's Right to
Apply. In the event of a Material Casualty or a Material Condemnation or any
title claim or defect, then Lender shall have the option to (i) apply the
Proceeds hereof in the following order of priority: (A) first, to prepay the
principal of the Loan in an amount up to the Release Amount of the Property
which suffered the Casualty or Condemnation or title claim; (B) second, to pay
the amount of (1) all accrued and unpaid interest in respect of the principal
amount of the Debt so prepaid through the date which is the final day of the
Interest Accrual Period in which such prepayment is made or, if prohibited by
law, through the date of repayment (including, if an Event of Default has
occurred and is then continuing, interest owed at the Default Rate), and (2) all
other sums then due and owing under the Loan Documents; and (C) third, to
reimburse Lender for any fees and expenses of Lender incurred in connection
therewith (it being agreed that, upon satisfaction in full of the entitlements
under clauses (A), (B) and (C) of this sentence, Borrowers shall be entitled to
receive a release of the Lien of the Mortgage and the other Loan Documents with
respect to the affected Property in accordance with and subject to the terms of
Section 2.5 hereof), or (ii) make such Proceeds available to reimburse Borrowers
for the cost of any Restoration or curing of such title defect in the manner set
forth below in Section 8.1.2(e) hereof; provided, however, that, if the
applicable Property Management Agreement provides that the applicable Borrower
is required to use the Proceeds to restore the Property in question and such
Borrower does not have the right to terminate the applicable Property Management
Agreement pursuant to the terms of the applicable Property Management Agreement
as a result of such Casualty or Condemnation or otherwise, then Lender shall be
obligated to make such Proceeds available to such Borrower for the Restoration
of such Property pursuant to clause (e) below. Notwithstanding anything to the
contrary contained herein, in the event of a Material Casualty or a Material
Condemnation or title defect, where the applicable Borrower cannot restore,
repair, replace or rebuild the affected Property to be of at least equal value
and of substantially the same character as prior to the Material Casualty or
Material Condemnation or title defect because the affected Property is a legally
non-conforming use or as a result of any other Legal Requirement, Borrower
hereby agrees that Lender may apply the Proceeds payable in connection therewith
in accordance with clauses (A), (B), (C) and (D) above.
(d) Intentionally Omitted.
(e) Manner of Restoration and Reimbursement. If a Borrower is
entitled pursuant to Section 8.1.2(b) or (c) above to reimbursement out of
Proceeds (and the conditions specified therein shall have been satisfied), such
Proceeds shall be disbursed on a monthly basis upon Lender's being furnished
with (i) such architect's certificates, waivers of lien, contractor's sworn
statements, title insurance endorsements, bonds, plats of survey and such other
evidences of cost, payment and performance as Lender may reasonably require and
approve, and (ii) all plans and specifications for such Restoration, such plans
and specifications to be approved by Lender prior to commencement of any work
(such approval not to be unreasonably withheld or delayed). In addition, no
payment made prior to the Final Completion of the Restoration shall exceed
ninety percent (90%) of the aggregate value of the work performed from time to
time;
99
funds other than Proceeds shall be disbursed prior to disbursement of such
Proceeds; and at all times, the undisbursed balance of such Proceeds remaining
in the hands of Lender, together with funds deposited for that purpose or
irrevocably committed to the satisfaction of Lender by or on behalf of Borrowers
for that purpose, shall be at least sufficient in the reasonable judgment of
Lender to pay for the cost of completion of the Restoration, free and clear of
all Liens or claims for Lien. Prior to any disbursement, Lender shall have
received evidence reasonably satisfactory to it of the estimated cost of
completion of the Restoration (such estimate to be made by Borrowers' architect
or contractor and approved by Lender in its reasonable discretion), and
Borrowers shall have deposited with Lender Eligible Collateral in an amount
equal to the excess (if any) of such estimated cost of completion over the net
Proceeds. Any surplus which may remain out of Proceeds received pursuant to a
Casualty shall be paid to Borrowers after payment of such costs of Restoration.
Any surplus which may remain out of Proceeds received pursuant to a Condemnation
shall be delivered to Lender for deposit into the Deposit Account to be held and
disbursed in accordance with the terms of this Agreement.
8.1.3 Condemnation.
(a) Borrowers shall promptly give Lender written notice of the
actual or threatened commencement of any Condemnation and shall deliver to
Lender copies of any and all papers served in connection with such Condemnation.
Following the occurrence of a Condemnation, Borrowers, regardless of whether
Proceeds are available, shall promptly proceed to restore, repair, replace or
rebuild the same to the extent practicable to be of at least equal value and of
substantially the same character as prior to such Condemnation, all to be
effected in accordance with the terms hereof applicable to Alterations.
(b) Lender is hereby irrevocably appointed as each Borrower's
attorney-in-fact, coupled with an interest, with exclusive power to collect,
receive and retain any Proceeds in respect of a Condemnation and to make any
compromise or settlement in connection with such Condemnation, subject to the
provisions of this Section. Provided no Event of Default has occurred and is
continuing, (x) in the event of a Condemnation where the loss does not exceed
$250,000, Borrowers may settle and compromise such Proceeds; provided that the
same is effected in a competent and timely manner, and (y) in the event of a
Condemnation, where the loss exceeds $250,000, Borrowers may settle and
compromise the Proceeds only with the consent of Lender (which consent shall not
be unreasonably withheld or delayed) and Lender shall have the opportunity to
participate, at Borrowers' cost, in any litigation and settlement discussions in
respect thereof. Notwithstanding any Condemnation by any public or quasi-public
authority (including any transfer made in lieu of or in anticipation of such a
Condemnation), Borrowers shall continue to pay the Debt at the time and in the
manner provided for in the Notes, this Agreement and the other Loan Documents,
and the Debt shall not be reduced unless and until any Proceeds shall have been
actually received and applied by Lender to discharge the Debt, pay required
interest and pay any other required amounts, in each case, pursuant to the terms
of Sections 8.1.2(b) and (c) above. Lender shall not be limited to the interest
paid on the Proceeds by the condemning authority but shall be entitled to
receive out of the Proceeds interest at the rate or rates provided in the Notes.
Borrowers shall cause any Proceeds that are payable to Borrowers to be paid
directly to Lender to be held and applied in accordance with the terms hereof.
100
ARTICLE IX
ACCOUNTS AND RESERVES
---------------------
Section 9.1. Establishment and Maintenance of Cash Management
Deposit Account.
(a) On or prior to the Closing Date, Borrowers and Operating
Lessees shall establish with Lender, or if Lender is not a depository
institution or if Lender shall otherwise elect, with one or more depository
institutions selected by Lender, a separate deposit account (the "Deposit
Account") which has been established as a deposit account and a separate holding
account (the "Holding Account") which has been established as a securities
account. Both the Deposit Account and the Holding Account shall be in the name
of and under the sole dominion and control of Lender, subject only to Lender's
obligations hereunder to advance funds therefrom in accordance with this
Agreement and the other Loan Documents, and no Borrower or Operating Lessee
shall have the authority or power to make withdrawals from either the Deposit
Account or the Holding Account. Funds in either the Deposit Account or the
Holding Account shall not be commingled with any other monies. Pursuant to the
Deposit Account Agreement, Depositary Bank on a daily basis shall transfer all
collected and available funds as determined by Depositary Bank's then current
funds availability schedule received in the Deposit Account to the Holding
Account. In recognition of Lender's security interest in the funds deposited
into the Deposit Account and the Holding Account, Borrower and Operating Lessee
shall identify both the Deposit Account and the Holding Account with the name of
Lender, as secured party. The Deposit Account shall be named as follows:
"Strategic Hotel Fixed Rate Public Portfolio f/b/o German American Capital
Corporation, as Secured Party Deposit Account". The Holding Account shall be
named as follows: " Strategic Hotel Fixed Rate Public Portfolio f/b/o German
American Capital Corporation, as Secured Party Holding Account". Without
limiting the foregoing, all deposits into either the Deposit Account or the
Holding Account shall be applied and disbursed in accordance with the terms and
provisions of Section 9.4 hereof and the Deposit Account Agreement.
(b) Intentionally Deleted.
(c) On or prior to the date hereof, (x) Operating Lessees
shall notify each of the Property Managers to make all payments due to a
Operating Lessee under the applicable Property Management Agreement and/or
Operating Lease or otherwise payable directly to the Deposit Account (the form
of such notice shall be subject to the approval of Lender and, shall be
irrevocable without the consent of Lender until the Debt has been paid in full,
it being understood that the notice contained in the Agreements with Managers
was previously approved by Lender), and (y) Borrowers shall notify Operating
Lessees to make all payments due to Borrowers under the Operating Leases (but
only to the extent amounts received under the Operating Lease were not paid from
amounts received by the Operating Lessee pursuant to Sections 9.4.1(x), 9.2 or
9.3 hereof) directly into the Deposit Account (the form of such notice shall be
subject to the approval of Lender and, shall be irrevocable without the consent
of Lender until the Debt has been paid in full, it being understood that the
notice contained in the Agreements with Managers was previously approved by
Lender). If the Deposit Account is changed, a comparable notice shall be sent to
each Property Manager and Operating Lessee. If,
101
notwithstanding the provisions of this Section 9.1(c), a Borrower or Operating
Lessee receives any sums due under a Property Management Agreement, Operating
Lease (but only to the extent amounts received under the Operating Lease were
not paid from amounts received by the Operating Lessee pursuant to Sections
9.4.1(x), 9.2 or 9.3 hereof) or other amount (including any "key" or similar
funds paid by any Property Manager or Affiliate thereof to Borrower) otherwise
payable to such Borrower or Operating Lessee (except for amounts payable to such
Borrower or Operating Lessee pursuant to Section 9.4.1(x) or amounts otherwise
permitted to be paid or distributed to or on behalf of Borrowers or Operating
Lessees under Section 9.2 or Section 9.3 hereof), then the applicable Borrower
or Operating Lessee (x) shall be deemed to hold such amounts in trust for Lender
and (y) shall deposit any such sums in the Deposit Account within one Business
Day of receipt thereof. Borrowers or Operating Lessees agree to provide Lender
with written notice of any amounts reimbursed to Sponsor pursuant to this
Section within ten (10) Business Days from the date of such reimbursement. If
and to the extent Sponsor or any affiliate (other than a Borrower or an
Operating Lessee) makes a capital expenditure with respect to a Property that is
provided for in an Annual Budget, provided no Event of Default has occurred and
is continuing, Borrower will be entitled to receive reimbursement from the
applicable Property Manager from the FF&E reserve account established under the
applicable Property Management Agreement.
Section 9.2. Reserve Accounts.
9.2.1 Establishment and Maintenance of Reserve Accounts. At
the respective times set forth below in subsections (a) though (h) of this
Section 9.2.1, Borrower and Operating Lessee shall establish with Lender, or if
Lender is not a depository institution or if Lender shall otherwise elect, a
depository institution designated by Lender, the following subaccounts of the
Holding Account which shall be maintained on a ledger entry basis:
(a) on or before the date hereof, an account (the "Deferred
Maintenance and Environmental Conditions Reserve Account") in the initial amount
of the $1,125 for the payment of the cost of remediating the Deferred
Maintenance Conditions and the Environmental Conditions; which shall be
maintained in accordance with Sections 9.2.2 and 9.2.3 hereof;
(b) subsequent to the Closing Date, at any time after the
occurrence of an Earthquake Reserve Event, an account (the "Earthquake
Deductible Reserve Account") which shall be maintained in accordance with
Section 9.2.8 hereof;
(c) on or before the date hereof, an account (the "Liquidity
Reserve Account") in an amount equal to $________, which shall be maintained in
accordance with Section 9.2.19 hereof;
(d) subsequent to the Closing Date, an account (the
"Deficiency Reserve Account"), which shall be maintained in accordance with
Section 9.2.11 hereof;
(e) on or before the Closing Date, an account (the "Incentive
Management Fee Reserve Account"), which shall be maintained in accordance with
Section 9.2.13 hereof;
102
(f) on or before the date hereof, an account (the "Unfunded
Obligations Account"), in an amount equal to $0, which shall be maintained in
accordance with Section 9.2.14 hereof;
(g) on or before the date hereof, an account (the "Current
Debt Service Reserve Account"), which shall be maintained in accordance with
Section 9.2.15 hereof; and
(h) on or before the date hereof, an account (the "FF&E
Reserve Account"), which shall be maintained in accordance with Section 9.2.16
hereof.
In addition, Borrowers shall establish the Tax and Insurance
Escrow Account as provided in Section 9.3 below.
Each of the Deposit Account, the Holding Account, the Deferred Maintenance and
Environmental Conditions Reserve Account, the FF&E Reserve Account, the
Liquidity Reserve Account, the Deficiency Reserve Account, the Incentive
Management Fee Reserve Account, the Unfunded Obligations Account, the Current
Debt Service Reserve Account, the Earthquake Deductible Reserve Account and the
Tax and Insurance Escrow Account (except for the Deposit Account, each, a
"Reserve Account" and collectively, the "Reserve Accounts") shall be in the name
of and under the sole dominion and control of Lender, subject only to Lender's
obligations hereunder to advance or otherwise disburse or apply funds therefrom
in accordance with this Agreement, and no Borrower or Operating Lessee shall
have the authority or power to make withdrawals from the Reserve Accounts. The
amount required in each Reserve Account as of the Closing Date may, at Lender's
election, be deposited on Borrowers' behalf by Lender's funding said amount out
of the Loan proceeds. Funds in each Reserve Account shall not be commingled with
any other monies. Borrowers shall pay the costs of establishing and maintaining
any Reserve Account and shall pay the costs to maintain and shall maintain all
Reserve Accounts throughout the term of the Loan.
9.2.2 Periodic Disbursements from the Deferred Maintenance and
Environmental Conditions Reserve Account. Borrowers shall have the right to
obtain disbursements from time to time with respect to the Deferred Maintenance
and Environmental Conditions Reserve Account, in accordance with Sections
7.1(g), 9.2.3 and 9.2.5, on the following terms and conditions:
(a) disbursements shall be made only to pay or to reimburse
Borrowers in respect of actual costs of the work, which costs were (i) approved
by Lender (such approval not to be unreasonably withheld or delayed), (ii) set
forth on Schedule 1.1 or Schedule 1.2, as the case may be, or (iii) made in
accordance with Section 7.1 hereof;
(b) each request for disbursement from the Deferred
Maintenance and Environmental Conditions Reserve Account shall be substantially
in a form attached hereto as Exhibit A, shall specify the work for which the
disbursement is requested and shall include an Officer's Certificate certifying
that such funds will be applied to pay or reimburse for materials or work
permitted hereunder and done in accordance herewith, and copies of invoices for
all items or materials purchased and all contracted labor or services shall be
provided;
103
(c) Lender shall have received from Borrowers evidence
reasonably satisfactory to Lender that Borrowers have incurred such expenses and
that the materials for which the request is made are on site at the applicable
Property and are properly secured or have been installed in such Property, funds
remaining in the Deferred Maintenance and Environmental Conditions Reserve
Account are, 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
Lender shall receive any Lien waivers or other releases which would customarily
be obtained with respect to the work in question;
(d) Lender shall disburse from the Deferred Maintenance and
Environmental Conditions Reserve Account, or authorize such disbursement, within
five (5) Business Days after the receipt of Borrowers' request for such
disbursement and the satisfaction of the other conditions set forth above in
this Section, but in no event more often than once in any 30-day period, the
amount requested by Borrowers for such expenses, provided, however, that the
Borrowers shall be permitted to make one additional disbursement request in any
given 30-day period in an amount in excess of $250,000 and provided, further in
no event shall the amount so disbursed exceed the amount set forth in Schedule
1.1 attached hereto for the remediation of the item in question.
9.2.3 Final Disbursements from Deferred Maintenance and
Environmental Conditions Reserve Account and Unfunded Obligations Account upon
Completion or Determination. Upon the completion of, as applicable, the
remediation of all of the Deferred Maintenance Conditions and the Environmental
Conditions or all of the Unfunded Obligations, in each case to the reasonable
satisfaction of Lender, Lender shall disburse to Borrowers from the Deferred
Maintenance and Environmental Conditions Reserve Account (in the case of the
completion of the remediation of all of the Deferred Maintenance Conditions and
the Environmental Conditions) or the Unfunded Obligations Account (in the case
of the completion of the remediation of all of the Unfunded Obligations) any
amounts remaining therein. In addition, if Lender shall determine in its
discretion, reasonably exercised, and concurred in by a Rating Confirmation,
that one or more Deferred Maintenance Conditions, Environmental Conditions or
Unfunded Obligations do not in fact require remediation, then Lender shall
disburse from, as applicable, the Deferred Maintenance and Environmental
Conditions Reserve Account or the Unfunded Obligations Reserve Account the
amount reserved for such work (i.e., 125% of the originally estimated cost of
such work).
9.2.4 Intentionally Omitted.
9.2.5 Release of Reserve Accounts upon Repayment.
Notwithstanding anything to the contrary contained herein:
(a) Lender shall pay to Borrowers and Operating Lessees, on
the date that the Debt shall be paid in full by Borrowers, all amounts remaining
in the Holding Account, the Reserve Accounts and the Deposit Account (or at the
option, and written direction, of the Borrowers and Operating Lessees, Lender
shall apply such amounts to the full payment of the Debt on such date).
104
(b) In the event of any prepayment or defeasance of the Loan
by the Borrowers that is permitted or required under this Agreement (whether or
not such prepayment or defeasance is accompanied by the release of any
Property), the Lender shall, provided no Event of Default has occurred and is
continuing, disburse to the Borrowers and Operating Lessees funds from the
Liquidity Reserve Account and Current Debt Service Reserve Account (or, at the
option and written direction of Borrowers, Lender shall apply such amounts to
such Prepayment and/or Defeasance and provide Borrowers and Operating Lessees a
credit against any amounts due in connection with such Prepayment and/or
Defeasance), representing the same proportion of the total amount deposited in
such accounts immediately prior to such disbursement as the amount of the Loan
prepaid or defeased by the Borrowers bears to the total Debt outstanding
immediately prior to such Prepayment and/or Defeasance.
(c) In the event of any prepayment or defeasance of the Loan
by the Borrowers that is permitted or required under the Loan Agreement which
prepayment or defeasance includes a release of a Property pursuant to the
provisions hereof, (i) the Lender shall, provided no Event of Default has
occurred and is continuing, disburse to the Borrowers and Operating Lessees
funds from each of the Reserve Accounts (and subaccounts thereof) (or, at the
option and written direction of Borrowers and Operating Lessees, Lender shall
apply such amounts to such Prepayment and/or Defeasance and provide Borrowers a
credit against any amounts due in connection with such Prepayment and/or
Defeasance) which are allocable hereunder to the applicable Property, and (ii)
thereafter, the on-going amounts which are required to be deposited into each of
the Reserve Accounts (and subaccounts thereof) shall be reduced accordingly to
reflect the release of such Property and such Prepayment and/or Defeasance.
9.2.6 Obligations Unaffected. The insufficiency of any balance
in any Reserve Account shall not relieve any Borrower from its obligation to
fulfill all preservation and maintenance covenants in the Loan Documents.
9.2.7 Intentionally Deleted.
9.2.8 Earthquake Deductible Reserve Account. (a) After the
occurrence of an Earthquake Reserve Event, by no later than the Payment Date
immediately following the occurrence of such Earthquake Reserve Event, and by no
later than each Payment Date thereafter to the extent necessary, Borrowers shall
be required to make deposits or monies shall be transferred in accordance with
Section 9.4 hereof from the Holding Account into the Earthquake Deductible
Reserve Account in an amount up to the applicable Earthquake Deductible Reserve
Amount; provided, however, that if an Earthquake Event occurs within 10 Business
Days prior to any Payment Date, Borrower shall make the required deposits within
10 Business Days after such Earthquake Event.
(b) Borrowers and Operating Lessees shall have the right to
obtain disbursements from the Earthquake Deductible Reserve Account within five
(5) Business days after Lender's receipt of Borrowers' or Operating Lessees'
request for such disbursement; provided that (i) such request shall set forth
Borrowers' or Operating Lessees' good faith estimate of the amounts required to
be disbursed in connection with the Restoration of the damaged Property (or
Properties) together with reasonable evidence supporting such amounts and (ii)
any
105
amounts so disbursed by Lender shall be applied by Borrowers or Operating
Lessees only to the Restoration of such Property (or Properties). Upon the
completion of the Restoration of the Property (or Properties) subject to the
Earthquake Reserve Event in question to Lender's reasonable satisfaction, any
amounts remaining on deposit in the Earthquake Deductible Reserve Account shall
be disbursed to Borrowers and Operating Lessees.
9.2.9 Funding of Certain Reserve Accounts. (a) Notwithstanding
any other provisions in this Section 9.2 to the contrary, Borrowers and
Operating Lessees may satisfy the obligation to fund each or any of the Reserve
Accounts (or subaccounts thereof) other than the Current Debt Service Reserve
Account by delivering to Lender, a Credit Facility pledged to Lender permitting
the drawing thereunder by Lender upon presentation to the issuing bank of a
notice from Lender that it is entitled to draw on such Credit Facility pursuant
to this Agreement and otherwise in form and substance acceptable to Lender in
the total amount of the sum required to be maintained in such Reserve Account
(or any subaccount thereof), provided that, if the sum required to be maintained
in such Reserve Account (or any subaccount thereof) should change, the Borrowers
or Operating Lessees as applicable shall immediately change the total amount of
such Credit Facility to reflect the same. In addition, at any time subsequent to
the Closing Date, Borrowers and Operating Lessees may also satisfy the
obligation to fund each or any of the Reserve Accounts (or subaccounts thereof)
other than the Current Debt Service Reserve Account by delivering to Lender a
Credit Facility pledged to Lender permitting the drawing thereunder by Lender
upon presentation to the issuing bank of a notice from Lender that it is
entitled to draw on such Credit Facility pursuant to this Agreement and
otherwise in form and substance acceptable to Lender in the total amount of the
sum required to be maintained in each Reserve Account (or any subaccount
thereof), provided that, if the sum required to be maintained in such Reserve
Account (or any subaccount thereof) should change, the Borrowers or Operating
Lessees as applicable shall immediately change the total amount of such Credit
Facility to reflect the same. Upon the issuance of a Credit Facility as
described in the previous sentence, all funds on deposit in the applicable
Reserve Account (or subaccount thereof) shall be released to Borrowers and
Operating Lessees.
(b) Notwithstanding anything to the contrary contained herein,
to the extent funds deposited in any Reserve Account have not been utilized
during any Fiscal Year, such funds shall not be released to the Borrowers and
Operating Lessees and shall continue to remain in such Reserve Account, provided
that, other than with respect to the FF&E Reserve Accounts, such remaining funds
shall be credited against future amounts required to be deposited into such
Reserve Account pursuant to the terms hereof.
9.2.10 Intentionally Deleted
9.2.11 Deficiency Reserve Account. If at any time any Property
Manager makes any payment on behalf of Borrower or Operating Lessee pursuant to
any Property Management Agreement for such Property (any such payments, a
"Deficiency Payment") on account of any working capital advance, shortfall or
deficiency at any such Property or Properties, then, by no later than the
Payment Date immediately following such payment or payments, and by no later
than each Payment Date thereafter to the extent necessary, Borrowers and
Operating Lessees shall be required to make cash deposits into the Deficiency
Reserve Account until such time as the aggregate amount on deposit in the
Deficiency Reserve Account shall equal the sum of all such payments. Provided no
Default shall have occurred and be continuing, Lender shall disburse to
Borrowers and Operating Lessees from the Deficiency Reserve Account an amount
equal to the sum of any amounts required to be paid and actually paid by the
Borrowers or Operating Lessees to the Property Manager for such Property under
the currently existing Property Management Agreement for such Property.
106
9.2.12 Intentionally Omitted.
9.2.13 Incentive Management Fee Reserve Account. (a) The
Incentive Management Fee Reserve Account shall consist of three (3) sub-accounts
(each, an "Incentive Fee Sub-Account"), one corresponding to each Property. The
funds in each Incentive Fee Sub-Account shall not be commingled with any other
monies.
(b) By no later than each Payment Date, the Borrowers and
Operating Lessees shall deposit or monies shall be transferred in accordance
with Section 9.4 hereof from the Holding Account into the Incentive Management
Fee Reserve Account in an amount equal to the Aggregate Monthly Incentive Fee
Reserve Amount, and such amount shall be allocated on each Payment Date to the
Incentive Fee Reserve Sub-Accounts such that an amount equal to the Monthly
Incentive Fee Reserve Amount for the corresponding Property shall be deposited
into the respective Sub-Account.
(c) Upon the request of Borrowers or Operating Lessees, Lender
will, within five (5) Business Days after the receipt of such request and the
satisfaction of the other conditions set forth in this Section, cause
disbursements to the respective Borrowers or Operating Lessees from the
applicable Incentive Fee Sub-Accounts to pay or to reimburse Borrowers or
Operating Lessees for actual costs incurred in connection with Incentive Fees at
the applicable Property (to the extent such Incentive Fees are required under
the applicable Property Management Agreement), provided that (A) Lender has
either received evidence of payment of Incentive Fees or received invoices
evidencing that the Incentive Fees for which such disbursements are requested
are due and payable, are in respect of Incentive Fees at the applicable
Property, and have not been previously paid; (B) any amounts previously
disbursed pursuant to this paragraph have been properly applied; and (C) Lender
has received an Officer's Certificate confirming that the conditions in the
foregoing clauses (A) and (B) have been satisfied and that the copies of
invoices (to the extent required above) attached to such Officer's Certificate
are true, complete and correct.
(d) The parties hereby expressly agree that, under no
circumstance, shall funds in any Incentive Fee Sub-Account be used to fund
expenses of any kind incurred at any Property other than the Property to which
such Sub-Account corresponds.
9.2.14 Unfunded Obligations Account. Borrowers shall have the
right to obtain disbursements from time to time with respect to Unfunded
Obligations on the following terms and conditions:
(a) disbursements shall be made only to pay or to reimburse
Borrowers in respect of actual costs incurred in connection with Unfunded
Obligations set forth on Schedule H;
107
(b) each request for disbursement from the Unfunded
Obligations Account shall be substantially in a form attached hereto as Exhibit
A, shall specify the work for which the disbursement is requested and shall
include an Officer's Certificate certifying that such funds will be applied to
pay or reimburse the Borrowers for materials or work relating to Unfunded
Obligations Account permitted hereunder and done in accordance herewith which
the Borrowers are required to fund, and copies of invoices relating thereto
shall be provided;
(c) Lender shall have received from Borrowers evidence
reasonably satisfactory to Lender that Borrowers have incurred such expenses and
that any materials relating to such request are on site at the applicable
Property and are properly secured or have been installed in such Property, funds
remaining in the Unfunded Obligations Account are, 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 Lender shall receive any Lien waivers
or other releases which would customarily be obtained with respect to the work
in question;
(d) Lender shall disburse from the Unfunded Obligations
Account, or authorize such disbursement, within five (5) Business Days after the
receipt of Borrowers' request for such disbursement and the satisfaction of the
other conditions set forth above in this Section, but in no event more often
than once in any 30-day period, the amount requested by Borrowers for such
expenses, provided, however, that the Borrowers shall be permitted to make one
additional disbursement request in any given 30-day period in an amount in
excess of $250,000 and provided, further in no event shall the amount so
disbursed exceed the amount set forth in Schedule H attached hereto for the
funding of the item in question.
9.2.15 Current Debt Service Reserve Account. (a) By no later
than each Payment Date, the Borrowers shall deposit or monies shall be
transferred in accordance with Section 9.4 hereof from the Holding Account into
the Current Debt Service Reserve Account in an amount equal to the sum of: (i)
the amount necessary to pay any fees and expenses which will be due and payable
as of such Payment Date to any trustee, fiscal agent, servicer and/or special
servicer, including without limitations, any master servicing fees, special
servicing fees and servicer advances ("Third Party Securitization Amount"); plus
(ii) following any Securitization, the amount necessary to pay any costs which
will be due and payable as of such Payment Date and which were incurred in
connection with the ongoing rating surveillance being provided by the Rating
Agencies in connection with such Securitization ("Rating Agency Securitization
Amount"); plus (iii) (a) the amount of all scheduled or past due Debt Service,
(b) all amounts paid on account of any prepayment and/or defeasance of the Loan,
including, without limitation, all Acceleration Prepayment Premiums, if any made
by the Borrowers pursuant to Section 2.4.3 hereof and (c) all Proceeds required
to be paid to the Lender pursuant to Sections 8.1.2 or 8.1.3 hereof (other than
Proceeds to be applied to the restoration or repair of a related Property)
(collectively, the "Debt Service Amount"); plus (iv) the amount of all interest,
costs, expenses, fees and other amounts which will be due and payable under the
Loan Documents as of such Payment Date, other than Debt Service Amounts ("Lender
Cost and Expense Amount").
9.2.16 Disbursements from the FF&E Reserve Account. (a) The
FF&E Reserve Account shall consist of three sub-accounts (such three
sub-accounts, which shall each correspond to one Property, each being, a "FF&E
Reserve Sub-Account"). The funds in each FF&E Reserve Sub-Account shall not be
commingled with any other monies.
108
(i) By no later than each Payment Date, the Borrowers
and Operating Lessees shall deposit or monies shall be transferred in
accordance with Section 9.4 hereof from the Holding Account into the
FF&E Reserve Account in an amount equal to the Aggregate Monthly FF&E
Reserve Amount, and such amount shall be allocated on each Payment Date
to the FF&E Reserve Sub-Accounts such that an amount equal to the
Monthly FF&E Reserve Amount for the corresponding Property shall be
deposited into the corresponding Sub-Account.
(ii) Upon the request of Borrowers and Operating
Lessees, Lender will, within five (5) Business Days after the receipt
of such request and the satisfaction of the other conditions set forth
in this clause (ii), cause disbursements to Borrowers and Operating
Lessees from the applicable FF&E Reserve Sub-Account to pay or to
reimburse Borrowers and Operating Lessees for actual costs incurred in
connection with capital expenditures relating to FF&E at the applicable
Property (to the extent such expenditures are not prohibited hereunder
and under the applicable Property Management Agreement), provided that
(A) Lender has received invoices evidencing that the costs for which
such disbursements are requested are due and payable and are in respect
of capital expenditures relating to FF&E at the applicable Property,
(B) Borrowers and Operating Lessees have applied any amounts previously
received by them in accordance with this Section 9.2.16(a) for the
expenses to which specific draws made hereunder relate and received any
Lien waivers or other releases which would customarily be obtained with
respect to the work in question, (C) the applicable Property Manager
has theretofore disbursed for capital expenditures relating to FF&E at
the applicable Property all amounts it originally reserved in the
applicable Hotel Operating Account (or otherwise withheld from
disbursement to the Operating Lessees) for such purpose pursuant to the
related Property Management Agreement; and (D) Lender has received an
Officer's Certificate confirming that the conditions in the foregoing
clauses (A) through (C) have been satisfied and that the copies of
invoices and evidence of Lien waivers (to the extent required above)
attached to such Officer's Certificate are true, complete and correct.
9.2.17 Intentionally Deleted.
9.2.18 Intentionally Deleted.
9.2.19 Disbursements from the Liquidity Reserve Account. On
the Closing Date, Borrowers shall deposit to the Liquidity Reserve Account as
additional collateral for the Loan an amount equal to $_________ (the "Initial
Liquidity Reserve Amount"). Subsequent to February 11, 2005, Lender shall, until
exhausted, release (or authorize the release of) 1/6 of the Initial Liquidity
Reserve Amount to Borrowers on a monthly basis if the Aggregate DSCR (tested for
the most recent trailing twelve (12) month period based upon the most recent
monthly financial information delivered by Borrowers to Lender pursuant to the
terms of Section 5.1(j)(v) hereof) (which, for purposes hereof shall be
calculated after deducting any amounts that have been deposited into the FF&E
Reserve Account) exceeds Closing Date DSCR. From and after the occurrence and
continuation of an Event of Default, Lender shall have the right to apply any
amounts then remaining in the Liquidity Reserve Account to repay the Debt or any
other amounts due hereunder or under the other Loan Documents in such order,
manner and amount as Lender shall determine in its sole discretion.
109
Section 9.3. Tax and Insurance Escrow Account.
9.3.1 Establishment. On the Closing Date, Borrowers and
Operating Lessees shall establish and maintain with Lender, or if Lender is not
a depository institution or if Lender shall otherwise elect, with one or more
depository institutions selected by Lender, a separate account (the "Tax and
Insurance Escrow Account") and, by no later than each Payment Date, Borrowers
and Operating Lessees shall deposit or monies shall be transferred in accordance
with Section 9.4 hereof from the Holding Account into the Tax and Insurance
Escrow Account:
(a) one-twelfth (1/12) of the Taxes and Other Charges that are
payable by a Borrower or Operating Lessee (except to the extent that such
amounts are paid, reserved or set aside for such purpose by the applicable
Property Manager) (plus any deficiency in any amounts required to be deposited
into a tax and insurance premiums reserve account each month by a Property
Manager pursuant to the Agreements with Managers) that Lender reasonably
estimates will be payable during the twelve (12) months next ensuing after such
Payment Date in order to accumulate with Lender sufficient funds to pay all such
Taxes and Other Charges at least thirty (30) days prior to their respective past
due dates, and
(b) at any time when the insurance required to be maintained
pursuant to this Agreement is not provided under a Blanket Policy in accordance
with Article VIII hereof and the premiums in respect of such Blanket Policy are
not paid or caused to be paid at least 3 months before such premiums become due
and payable, one-twelfth (1/12) of the Insurance Premiums that are paid by a
Borrower or Operating Lessees (except to the extent that such amounts are paid,
reserved or set aside for such purpose by the applicable Property Manager)
pursuant to any Property Management Agreement or otherwise (plus any deficiency
in any amounts required to be deposited into a tax and insurance premiums
reserve account each month by a Property Manager pursuant to the Agreements with
Managers) that Lender estimates will be payable for the renewal of the coverage
afforded by the Policies upon the expiration thereof in order to accumulate with
Lender sufficient funds to pay all such Insurance Premiums at least thirty (30)
days prior to the expiration of the Policies.
The Tax and Insurance Escrow Account shall be in the name of and under the sole
dominion and control of Lender, subject only to Lender's obligations hereunder
to advance funds therefrom in accordance with this Agreement, and no Borrower or
Operating Lessee shall have the authority or power to make withdrawals from the
Tax and Insurance Escrow Account. Funds in the Tax and Insurance Escrow Account
shall not be commingled with any other monies. Borrowers shall pay the costs of
establishing and maintaining the Tax and Insurance Escrow Account. On the
Closing Date, Borrowers and Operating Lessees shall deposit to the Tax and
Insurance Escrow Account an amount (the "Initial Tax and Insurance Escrow
Amount") equal to (i) the product of the next installment of Taxes and Other
Charges that are payable by a Borrower or Operating Lessee (rather than the
applicable Property Manager) times a fraction, the numerator of which is the
number of months in the installment period for such Taxes and Other Charges
elapsed as of the Closing Date (rounded up to the nearest integer) and the
denominator of which is the number of months in such installment period, and
(ii) the product of the next installment of Insurance Premiums that are payable
by a Borrower or Operating Lessee (rather than the applicable Property Manager)
times a fraction, the numerator of which is the number of months in the
installment period for such premiums elapsed as of the Closing Date (rounded up
to the nearest integer) and the denominator of which is the number of months in
such installment period; provided that if Borrowers and Operating Lessees have a
Blanket Policy that covers properties in addition to the Properties, Lender
shall have the right to increase the amount required to be deposited into the
Tax and Insurance Escrow Account in an amount sufficient to purchase a
non-blanket Policy in accordance with the terms of Section 8.1(d)(i) hereof.
110
9.3.2 Application Generally. To the extent required to be paid
by a Borrower with respect to a Property, Lender will apply amounts in the Tax
and Insurance Escrow Account either: (x) to pay Taxes and Other Charges and
Insurance Premiums required to be paid by Borrowers or Operating Lessees
hereunder (and so long as the Tax and Insurance Escrow Account shall have a
balance at least equal to the then-payable Taxes, Other Charges and Insurance
Premiums, Borrowers shall not be in default hereunder if Lender shall have not
so applied such balance to the payment of such Taxes, Other Charges and
Insurance Premiums, unless Lender shall have not so applied such balance at the
request of Borrowers or Operating Lessees) or (y) to reimburse Borrowers or
Operating Lessees for such amounts upon presentation of evidence of payment and
an Officer's Certificate in form and substance satisfactory to Lender, subject,
however, to Borrowers' and Operating Lessees' right to contest Taxes and Other
Charges in accordance with the terms hereof. In making any payment from or to
the Tax and Insurance Escrow Account, Lender may do so according to any xxxx,
statement or estimate procured from the appropriate public office (with respect
to Taxes and Other Charges) or insurer or agent (with respect to Insurance
Premiums), without inquiry into the accuracy of such xxxx, statement or estimate
or into the validity of any tax, assessment, sale, forfeiture, tax lien or title
or claim thereof unless given written notice by Borrowers or Operating Lessees
of such inaccuracy, invalidity or other contest, in each case in accordance with
Section 5.1(b)(ii) hereof. If the amount in the Tax and Insurance Escrow Account
shall exceed the amounts due for Taxes and Other Charges and Insurance Premiums,
Lender shall, at its option, return any excess to Borrowers and Operating
Lessees or credit such excess against future payments to be made to the Tax and
Insurance Escrow Account. Provided no Event of Default has occurred and is
continuing, Borrowers and Operating Lessees shall have the right to have Lender
apply amounts deposited in the Tax and Insurance Escrow Account on account of
Taxes and Other Charges toward the payment of such Taxes and Other Charges prior
to their delinquent dates for the purpose of achieving a discount on such Taxes
and Other Charges. If at any time Lender determines that the amount in the Tax
and Insurance Escrow Account is not or will not be sufficient to pay the items
set forth in Sections 9.3.1(a) and 9.3.1(b) above, Lender shall notify Borrowers
of such determination and Borrowers and Operating Lessees shall increase their
monthly payments to Lender by the amount that Lender estimates is sufficient to
make up the deficiency at least thirty (30) days prior to delinquency of the
Taxes and Other Changes and/or expiration of the Policies, as the case may be.
9.3.3 Tax and Insurance Sub-Account. (a) On the Closing Date,
Borrowers and Operating Lessees shall establish and maintain with Lender, or, if
Lender is not a depository institution or if Lender shall otherwise elect, with
one or more depository institutions selected by Lender, a separate sub-account
of the Tax and Insurance Escrow Account (the "Tax and Insurance Sub-Account").
On the Closing Date, Lender shall deposit into the Tax and Insurance Sub-Account
an amount equal to $0 (the "Initial Tax and Insurance Sub-Account Amount")
111
(b) The parties hereby agree that, if, at any time, the
aggregate Taxes, Other Charges and (at any time when insurance required
hereunder is not provided under a Blanket Policy) Insurance Premiums estimated
by Lender to be payable by or on behalf of the Borrowers and Operating Lessees
in respect of the Properties during the ensuing twelve months increases over
such aggregate as of the Closing Date, then, in the event of such an increase,
by no later than the first Payment Date following such an increase, the
Borrowers and Operating Lessees shall deposit, or monies shall be transferred in
accordance with Section 9.4 hereof from the Holding Account, into the Tax and
Insurance Sub-Account, in an amount equal to the Tax and Insurance Incremental
Amount at such time. The "Tax and Insurance Incremental Amount" at any time
means the positive excess (if any) of (i) an amount equal to one-twelfth of the
aggregate Taxes, Other Charges and (at any time when insurance required
hereunder is not provided under a Blanket Policy) Insurance Premiums estimated
by Lender to be payable by or on behalf of the Borrowers and Operating Lessees
in respect of the Properties during the ensuing twelve months, over (ii) the
amount then on deposit in the Tax and Insurance Sub-Account.
Section 9.4. Disbursements from the Deposit Account and the
Holding Account; Borrowers' Obligation to Fund Deposit Account.
9.4.1 Disbursements. On each Business Day the Depositary Bank
shall transfer all collected and available funds in the Deposit Account to the
Holding Account and on each Business Day (or as otherwise provided for in the
Deposit Account Agreement), provided no Event of Default has occurred and is
continuing, and subject to Section 9.4.2 hereof, Lender shall transfer from the
Holding Account (or authorize such transfer) in accordance with the terms of the
Deposit Account Agreement, to the extent available therein, the following
payments in accordance with the following priorities:
(i) First, to the Tax and Insurance Escrow Account,
payment of all amounts in the Holding Account until the amounts
required to be deposited in the Tax and Insurance Escrow Account by the
next Payment Date (or if such Business Day is a Payment Date, by such
Payment Date) pursuant to Section 9.3 hereof (other than Section
9.3.3(b)) have been so deposited;
(ii) Second, to the Tax and Insurance Sub-Account,
payment of all amounts in the Holding Account until the Tax and
Insurance Incremental Amount, if any, required to be deposited in the
Tax and Insurance Sub-Account by the next Payment Date (or if such
Business Day is a Payment Date, by such Payment Date) pursuant to
Section 9.3.3(b) hereof have been so deposited;
(iii) Third, to the Current Debt Service Reserve
Account, payment of all amounts in the Holding Account until the Third
Party Securitization Amount and the Rating Agency Securitization Amount
required to be deposited in the Current Debt Service Reserve Account by
the next Payment Date (or if such Business Day is a Payment Date, by
such Payment Date) pursuant to Section 9.2.15 hereof have been so
deposited;
112
(iv) Fourth, to the Current Debt Service Reserve
Account, payment of all amounts in the Holding Account until the Debt
Service Amount required to be deposited in the Current Debt Service
Reserve Account by the next Payment Date (or if such Business Day is a
Payment Date, by such Payment Date) pursuant to Section 9.2.15 hereof
has been so deposited;
(v) Fifth, after the occurrence of an Earthquake
Reserve Event, payment of all amounts in the Holding Account until the
amounts required to be deposited in the Earthquake Deductible Reserve
Account by the next Payment Date (or if such Business Day is a Payment
Date, by such Payment Date) pursuant to Section 9.2.8 hereof have been
so deposited.
(vi) Sixth, after the occurrence of a Deficiency
Payment, payment of all amounts in the Holding Account until the
amounts required to be deposited in the Deficiency Reserve Account by
the next Payment Date (or if such Business Day is a Payment Date, by
such Payment Date) pursuant to Section 9.2.11 hereof have been so
deposited;
(vii) Seventh, to the Current Debt Service Reserve
Account, payment of all amounts in the Holding Account until the Lender
Cost and Expense Amount required to be deposited in the Current Debt
Service Reserve Account by the next Payment Date (or if such Business
Day is a Payment Date, by such Payment Date) pursuant to Section 9.2.15
hereof has been so deposited;
(viii) Eighth, to the FF&E Reserve Account, payment
of all amounts in the Holding Account until the amounts required to be
deposited in the FF&E Reserve Account by the next Payment Date (or if
such Business Day is a Payment Date, by such Payment Date) pursuant to
Section 9.2.16 hereof have been so deposited;
(ix) Ninth, to the Incentive Management Fee Reserve
Account, payment of all amounts in the Holding Account until the
amounts required to be deposited in the Incentive Management Fee
Reserve Account by the next Payment Date (or if such Business Day is a
Payment Date, by such Payment Date) pursuant to Section 9.2.13 hereof
have been so deposited; and
(x) Tenth, if no monetary Default or Event of Default
is then continuing to such accounts of Borrowers and Operating Lessees
as Borrowers and Operating Lessees may direct, all amounts remaining in
the Holding Account.
9.4.2 Obligation to Fund; Deemed Payment. In the event that on
any Payment Date the amount in the Holding Account shall be insufficient to make
all of the transfers described in Sections 9.4.1(i) through and including (ix)
as applicable, Borrowers 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 (but subject to the terms of the Deposit Account Agreement)), and if
Borrowers shall fail to make such deposit, the same shall be an Event of Default
and, in addition to all other rights and remedies provided for hereunder, Lender
may disburse and apply the amounts in the Holding Account in such order as
Lender may determine. If on any Payment Date the amount in the Holding Account
shall be sufficient to make all of the transfers described in Sections 9.4.1(i)
through and including (ix) as applicable, Borrowers shall be deemed to have paid
the Monthly Debt Service Payment Amount unless Lender is legally constrained
from transferring such amount as aforesaid by reason of any insolvency related
to any Borrower or any other event.
113
Section 9.5. No Release if Event of Default Exists.
Notwithstanding the terms hereof, in no event shall Lender have any obligation
to disburse funds from the Deposit Account, the Holding Account, the Tax and
Insurance Escrow Account or any other Reserve Account for so long as an Event of
Default shall have occurred and be continuing.
Section 9.6. Grant of Security Interest; Rights upon Default.
(a) Each Borrower and Operating Lessee hereby pledges, assigns
and grants a security interest to Lender, as security for payment of all sums
due in respect of the Loan and the performance of all other terms, conditions
and covenants of this Agreement and any other Loan Document on such Borrower's
part to be paid and performed, in all of such Borrower's and Operating Lessee's
right, title and interest in and to the Deposit Account, the Holding Account and
each Reserve Account (including, without limitation, the Tax and Insurance
Escrow Account), together with the deposits therein, including all interest
earned thereon and Permitted Investments held therein. No Borrower or Operating
Lessee shall, without obtaining the prior written consent of Lender, further
pledge, assign or grant any security interest in the Deposit Account, the
Holding Account or any Reserve Account (including, without limitation, the Tax
and Insurance Escrow Account), or permit any Lien or encumbrance to attach
thereto, or any levy to be made thereon, or any UCC-1 Financing Statements or
any other notice or instrument as may be required under the UCC, as appropriate,
except those naming Lender as the secured party, to be filed with respect
thereto.
(b) Upon the occurrence and continuation of an Event of
Default, Lender may apply amounts in the Deposit Account, the Holding Account
and any Reserve Account (including the Tax and Insurance Escrow Account) (or any
portion thereof) for any of the following purposes relating to the Loan or
Borrowers' or Operating Lessees' obligations hereunder or under any other Loan
Document, and in any order, as Lender shall elect in its sole discretion: (i)
Taxes and Other Charges; (ii) Insurance Premiums; (iii) interest on the unpaid
principal balance of the Notes; (iv) amortization of the unpaid principal
balance of the Notes; (v) completion of all work required to be performed
hereunder; (vi) reimbursement of Lender for all losses and expenses (including
reasonable legal fees and disbursements) suffered or incurred by Lender as a
result of such Event of Default; (vii) the cost of any necessary or reasonable
repair or replacement to any Property; (viii) 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; (ix) Operating
Expenses; or (x) any other portion of the Debt.
Section 9.7. Lender Not Responsible. Nothing in this Article
IX or elsewhere in the Loan Documents shall make Lender responsible for making
or completing any work in respect of any Property, or obligate Lender to demand
from any Borrower additional sums to make or complete any work.
114
Section 9.8. Inspections; Undertaking of Work.
(a) Subject to the applicable Property Management Agreement,
Borrowers and Operating Lessees shall permit Lender and Lender's agents and
representatives (including any servicer or special servicer in connection with a
Securitization or Lender's engineer, architect or inspector) to enter onto the
applicable Property during normal business hours after reasonable notice
(subject to the rights of Tenants under the Leases other than the Operating
Leases) to inspect the progress of any work being performed by or on behalf of
any Borrower or Operating Lessee, including any Alterations, and all materials
being used in connection therewith, to examine all plans and shop drawings
relating thereto and, upon the occurrence and during the continuance of an Event
of Default, to undertake and complete any work required to be undertaken in
accordance with the terms hereof. Borrowers shall cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or such
other persons described above in connection with inspections described in this
Section 9.8 or the undertaking or completion of work pursuant to this Section
9.8.
(b) Subject to the applicable Property Management Agreement,
Lender may inspect the applicable Property in connection with any work
undertaken by or on behalf of any Borrower or Operating Lessee at such Property
(subject to the limitations set forth in Section 9.8(a) above) prior to
disbursing funds, from any Reserve Account or otherwise, for such work. Lender,
at Borrowers' expense, may require that such inspection be conducted by an
appropriate independent qualified professional selected by Lender and/or may
require a copy of a certificate of completion by an independent qualified
professional acceptable to Lender prior to the disbursement of any amounts
therefor. Borrowers shall pay a reasonable inspection fee for each inspection
conducted by a third party.
(c) Borrowers and Operating Lessees shall collaterally assign
to Lender, as additional security for the Loan, to the extent permitted, all
rights and claims any Borrower or Operating Lessee may have against all Persons
supplying labor or materials in connection with any Alterations; provided,
however, Lender may not pursue any such right or claim unless an Event of
Default has occurred and remains uncured.
Section 9.9. Bankruptcy. Each Borrower, Operating Lessee and
Lender hereby acknowledge and agree that upon the filing of a bankruptcy
petition by or against any Borrower or Operating Lessee under the Bankruptcy
Code, the Reserve Accounts and the Adjusted Operating Income (whether then
already in the Reserve Account, or then due or becoming due thereafter) shall be
deemed not to be property of the applicable Borrower's or Operating Lessee's
bankruptcy estate within the meaning of Section 541 of the Bankruptcy Code. In
the event, however, that a court of competent jurisdiction determines that,
notwithstanding the foregoing characterization of the Reserve Accounts and the
Adjusted Operating Income by each Borrower, Operating Lessee and Lender, the
Reserve Accounts and/or the Adjusted Operating Income do constitute property of
the applicable Borrower's or Operating Lessee's bankruptcy estate, then each
Borrower, Operating Lessee and Lender hereby further acknowledge and agree that
all such Adjusted Operating Income, whether due and payable before or after the
filing of the petition, are and shall be cash collateral of Lender. Each
Borrower and Operating Lessee acknowledges that Lender does not consent to any
Borrower's or Operating Lessee's use of such cash collateral and that, in the
event Lender elects (in its sole discretion) to give such consent,
115
such consent shall only be effective if given in writing signed by Lender.
Except as provided in the immediately preceding sentence, no Borrower or
Operating Lessee shall have the right to use or apply or require the use or
application of such cash collateral (i) unless the applicable Borrower or
Operating Lessee shall have received a court order authorizing the use of the
same, and (ii) the applicable Borrower or Operating Lessee shall have provided
such adequate protection to Lender as shall be required by the bankruptcy court
in accordance with the Bankruptcy Code.
ARTICLE X
DEFAULTS
--------
Section 10.1. Events of Default. (a) Each of the following
events shall constitute an event of default hereunder (each, an "Event of
Default"):
(i) Payment. If any portion of the Debt is not paid
when due (subject to the final sentence of Section 9.4.2 hereof);
(ii) Taxes and Other Charges. If any of the Taxes or
Other Charges are not paid prior to the date when the same become
delinquent, subject to Borrowers' right to contest Taxes in accordance
with Section 5.1(b)(ii) hereof and subject to Section 9.3.2(x) hereof;
(iii) Insurance Policies. (x) If the Policies are not
kept in full force, or (y) if the Policies or insurance certificates or
other evidence of insurance acceptable to Lender are not delivered to
Lender within ten (10) days after written notice thereof from Lender;
(iv) Transfers. If (A) any Borrower or Operating
Lessee transfers or encumbers all or any portion of any Property,
except as permitted herein, (B) any direct or indirect interest in any
Borrower or Operating Lessee is transferred or assigned, other than, in
each case, for Permitted Encumbrances or as is permitted in Section
6.1(i) hereof, or (C) Sponsor shall make any transfer in violation of
Section 6.1(i) or otherwise violate the provisions of Section 6.1(i);
(v) Representations. If any representation or
warranty made by any Borrower or any Operating Lessee herein or in any
other Loan Document shall be false in any material respect as of the
date the representation or warranty was made and, with respect to any
such false statement that is reasonably susceptible to cure and does
not have a material adverse effect with respect to any Property, the
Liens intended to be created by the Loan Documents thereon or any other
collateral or the Single Purpose Entity structure of any Borrower is
not cured within thirty (30) days after receipt by Borrower of notice
thereof;
(vi) Inability to Pay Debts. If any Borrower or any
Operating Lessee shall make an assignment for the benefit of creditors,
or if any Borrower shall generally not be paying its debts as they
become due or has admitted in writing its inability to pay its debts;
116
(vii) Bankruptcy. If a receiver, liquidator or
trustee shall be appointed for any Borrower or Operating Lessee or if
any Borrower or Operating Lessee shall be adjudicated a bankrupt or
insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal
or state law, shall be filed by or against, consented to, or acquiesced
in by, any Borrower or Operating Lessee, or if any proceeding for the
dissolution or liquidation of any Borrower shall be instituted;
provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by such Borrower or
Operating Lessee, upon the same not being discharged, stayed or
dismissed within sixty (60) days;
(viii) Prohibited Assignment. If any Borrower or any
Operating Lessee attempts to assign its respective rights under this
Agreement or under any other Loan Document or any interest herein or
therein in contravention of this Agreement or any of the Loan
Documents;
(ix) Breach of Covenant. If any Borrower or Operating
Lessee breaches any of its negative covenants contained in Section 6.1
hereof or if any Borrower or Operating Lessee breaches any covenant
contained in Section 4.1(bb) hereof and, if the same is susceptible of
cure, the same is not cured within fifteen (15) days after written
notice thereof from Lender; provided that no cure of a breach of any
covenant contained in Section 4.1(bb) hereof shall be effective unless
Borrowers cause to be delivered to Lender an opinion as to
non-consolidation in form and substance and from counsel reasonably
satisfactory to Lender, which opinion takes into account such breach;
(x) Default under Other Loan Documents. If an Event
of Default as defined or described in any of the other Loan Documents
occurs, or if any other event shall occur or condition shall exist, if
the effect of such event or condition is to accelerate the maturity of
any portion of the Debt or to permit Lender to accelerate the maturity
of all or any portion of the Debt in accordance with the terms of any
such Loan Document;
(xi) Failure to Deposit Reserve Payments. Subject to
the final sentence of Section 9.4.2 hereof, if any Borrower shall be in
default of its obligations to make deposits into the Tax and Insurance
Escrow Account, or any of the other Reserve Accounts or in any other
reserve or escrow account required hereunder; or
(xii) Covenant Defaults. If any Borrower or Operating
Lessee shall continue to be in default under any of the other terms,
covenants or conditions of this Agreement not specified in subsections
(i) to (xi) above, for ten (10) days after notice to Borrowers from
Lender, in the case of any Default which can be cured by the payment of
a sum of money, or for thirty (30) days after notice from Lender in the
case of any other Default; provided, however, that if such non-monetary
Default is susceptible of cure but cannot reasonably be cured within
such 30-day period and Borrowers or Operating Lessees shall have
commenced to cure such default within such 30-day period and thereafter
diligently and expeditiously proceeds to cure the same, such 30-day
period shall be extended for an additional period of time as is
reasonably necessary for Borrowers or Operating Lessees in the exercise
of due diligence to cure such Default, but the aggregate cure period
under this subsection (xii) shall not exceed one hundred and twenty
(120) days.
117
(xiii) Property Management Agreements; Management
Agreements; Material Agreements; Operating Leases. (a) If any Borrower
shall be in default in any material respect under any Property
Management Agreement, Hotel Operating Agreement, Operating Lease or
Material Agreements to which it is party, subject to any applicable
cure periods set forth therein or (b) if any Property Management
Agreement or Hotel Operating Agreement shall be terminated and an
Acceptable Property Manager is no longer managing the Property pursuant
to an Acceptable Property Management Agreement, unless, subject to
Section 6.1(a), contemporaneously with such termination the applicable
Borrower enters into an Acceptable Property Management Agreement with
an Acceptable Property Manager.
(b) Upon the occurrence and during the continuation of an
Event of Default and at any time thereafter, Lender may, in addition to any
other rights or remedies available to it pursuant to this Agreement or any other
Loan Document, or at law or in equity, take such action, without notice or
demand, that Lender deems advisable to protect and enforce its rights against
any Borrower and in and to all or any part of a Property, including, without
limitation, declaring the Debt to be immediately due and payable (provided,
however, with respect to an Event of Default described in clause (vi), (vii) or
(viii) above, the Debt and all other obligations of any Borrower hereunder and
under the other Loan Documents shall immediately and automatically become due
and payable, without notice or demand, and each Borrower hereby expressly waives
any such notice or demand, anything contained herein or in any other Loan
Document to the contrary notwithstanding), and Lender may enforce or avail
itself of any or all rights or remedies provided in the Loan Documents against
any Borrower and all or any portion of a Property, including all rights or
remedies available at law or in equity.
(c) Upon the occurrence and during the continuation of any
Event of Default, Lender may, but without any obligation to do so and without
notice to or demand on any Borrower and without releasing any Borrower from any
obligation hereunder, take any action to cure such Event of Default. Lender may
enter upon any Property upon reasonable notice to Borrowers for such purposes or
appear in, defend, or bring any action or proceeding to protect their interests
and the interests of Lender in such Property or to foreclose the applicable
Mortgage or collect the Debt. The costs and expenses incurred by Lender in
exercising rights under this paragraph (including reasonable attorneys' fees to
the extent permitted by law), with interest at the Default Rate for the period
after notice from the Lender that such costs or expenses were incurred to the
date of payment to Lender, shall constitute a portion of the Debt, shall be
secured by the Mortgages and the other Loan Documents and shall be due and
payable to Lender upon demand therefor.
(d) Notwithstanding anything contained herein or in the other
Loan Documents, if an Event of Default is caused by a Default in respect of a
Property (such as, without limitation, a Default arising from an inability to
maintain a material license for the operation of a Property), then, provided (i)
Lender shall have not accelerated the Loan, and (ii) the elimination of such
Property from the collateral securing the Loan and from the ownership of
Borrowers would eliminate the condition or circumstance giving rise to the Event
118
of Default, then Borrowers may, by notice to Lender, elect to prepay, following
the expiration of the Lockout Period, a portion of the Loan in the manner
provided in (and subject to the requirements of) Section 2.4 in an amount equal
to the Release Amount of such Property or after the expiration of the Defeasance
Lockout Period and during the Lockout Period, the Borrowers may Defease a
portion of the Loan in the manner provided in (and subject to the requirements
of) Section 2.4.5 in the amount of such Release Amount, in either case so as to
obtain the release thereof from the Lien of the applicable Mortgage pursuant to
Section 2.5, together with accrued interest in respect of such amount through
the end of the applicable Interest Accrual Period. Upon such prepayment (or
defeasance) and release, such Event of Default shall be deemed cured hereunder.
Section 10.2. Remedies. Upon the occurrence and during the
continuation of an Event of Default, all or any one or more of the rights,
powers, privileges and other remedies available to Lender against any Borrower
under this Agreement or any of the other Loan Documents executed and delivered
by, or applicable to, any Borrower or at law (including, without limitation, an
action for collection) or in equity may be exercised by Lender at any time and
from time to time, whether or not all or any of the Debt shall be declared due
and payable, and whether or not Lender shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies under
any of the Loan Documents with respect to all or any portion of a Property. Any
such actions taken by Lender shall be cumulative and concurrent and may be
pursued independently, singly, successively, together or otherwise, at such time
and in such order as Lender may determine in its sole discretion, to the fullest
extent permitted by law, without impairing or otherwise affecting the other
rights and remedies of Lender permitted by law, equity or contract or as set
forth herein or in the other Loan Documents. Without limiting the generality of
the foregoing, each Borrower agrees that if an Event of Default is continuing
(i) Lender is not subject to any "one action" or "election of remedies" law or
rule, and (ii) all liens and other rights, remedies or privileges provided to
Lender shall remain in full force and effect until Lender has exhausted all of
its remedies against each Property and each Mortgage has been foreclosed, sold
and/or otherwise realized upon in satisfaction of the Debt or the Debt has been
paid in full.
Section 10.3. Remedies Cumulative. The rights, powers and
remedies of Lender under this Agreement shall be cumulative and not exclusive of
any other right, power or remedy which Lender may have against any Borrower
pursuant to this Agreement or the other Loan Documents, or existing at law or in
equity or otherwise. Lender's rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender's sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon the occurrence and during the continuation
of an Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as may be deemed expedient. A waiver of
one Default or Event of Default with respect to a Borrower shall not be
construed to be a waiver of any subsequent Default or Event of Default with
respect to any Borrower or to impair any remedy, right or power consequent
thereon.
119
ARTICLE XI
PROPERTY MANAGEMENT
-------------------
Section 11.1. Property Management
(a) Each Borrower or Operating Lessee represents, warrants and
covenants that each Property shall at all times be managed by an Acceptable
Property Manager pursuant to an Acceptable Property Management Agreement.
(b) Notwithstanding any provision to the contrary contained
herein or in the other Loan Documents, except as provided in this Section
11.1(b), no Borrower or Operating Lessee may amend, modify, supplement, alter or
waive any right under any Property Management Agreement without the receipt of a
Rating Confirmation. Without the receipt of a Rating Confirmation, a Borrower or
Operating Lessee shall be permitted to make any nonmaterial modification,
change, supplement, alteration or amendment to any Property Management Agreement
and to waive any nonmaterial rights thereunder, provided that no such
modification, change, supplement, alteration, amendment or waiver shall affect
the cash management procedures set forth in the Property Management Agreements
or the Loan Documents, decrease the cash flow of the applicable Property covered
thereunder, adversely affect the marketability of the applicable Property
covered thereunder, change the definitions of "default" or "event of default,"
change the definitions of "operating expense" or words of similar meaning to add
additional items to such definitions, change the definitions of "owner's
distribution" or "owner's equity" or "debt service amount" or words of similar
meaning so as to reduce the payments due the related Borrower thereunder, change
the timing of remittances to the related Borrower or Operating Lessee
thereunder, increase or decrease reserve requirements, change the term of such
Property Management Agreement or increase any Management Fees payable under such
Property Management Agreement.
(c) A Borrower or Operating Lessee may enter into a new
Property Management Agreement with an Acceptable Property Manager upon receipt
of a Rating Confirmation with respect to such Property Management Agreement.
(d) Borrower and Operating Lessee hereby agrees that subject
to the terms of the respective Property Management Agreement (as modified by any
agreement with Managers) or Acceptable Property Management Agreements, Lender
shall have the right to terminate and replace property managers subsequent to
(i) an Event of Default under this Agreement and (ii) an acceleration of the
Loan.
ARTICLE XII
MISCELLANEOUS
-------------
Section 12.1. Survival. This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the making by Lender of the Loan and the
execution and delivery to Lender of the Notes, and shall continue in full force
and effect so long as all or any of the Debt of Borrowers is
120
outstanding and unpaid. Whenever in this Agreement any Person is referred to,
such reference shall be deemed to include the legal representatives, successors
and assigns of such Person (provided that the foregoing shall not be deemed to
permit any transfer of any ownership interest that is otherwise prohibited
hereunder). All covenants, promises and agreements in this Agreement contained,
by or on behalf of any Borrower, shall inure to the benefit of the respective
legal representatives, successors and assigns of Lender.
Section 12.2. Permitted Investments; Eligible Accounts;
Eligible Institutions. Lender shall invest any amounts to be held by Lender in
accordance with the terms of this Agreement or any other Loan Document (other
than amounts held in the Deposit Account, which may be an interest bearing
account), pending the application of such amounts to the purposes herein or
therein provided, in one of the Permitted Investments as directed by Borrowers
from time to time (provided no Event of Default has occurred and is continuing);
or Lender from time to time (if any Event of Default has occurred and is
continuing). Lender shall not be responsible for its inability to invest funds
received after 1:30 p.m. New York City time, but shall invest such sums on the
following Business Day. After application to the purposes for which any amounts
invested pursuant to this Section 12.2 are held and so long as no Event of
Default has occurred and is continuing hereunder, any investment income earned
from such investments shall be paid to Borrowers. All accounts maintained
hereunder, including the Deposit Account, the Holding Account, the Tax and
Insurance Escrow Account and the other Reserve Accounts, shall, at Lender's
election, be Eligible Accounts. No Eligible Account shall be evidenced by a
certificate of deposit, passbook or other instrument. Each Eligible Account (A)
shall be a separate and identifiable account from all other funds held by the
holding institution, (B) shall be established and maintained in the name of the
Lender (and subsequent to any Securitization, shall bear a designation clearly
indicating that the funds deposited therein are held for the benefit of the
holders of the Notes), (C) shall be under the sole dominion and control of
Lender, and should contain only funds held for its benefit. Following a rating
downgrade, withdrawal, qualification or suspension of an Eligible Institution
which maintains an Eligible Account each such Eligible Account must promptly
(and in any case within not more than thirty (30) calendar days) be moved to a
qualifying Eligible Institution. The out-of-pocket costs reasonably incurred in
establishing and maintaining any account or reserve held by Lender pursuant to
this Agreement or any other Loan Document shall be borne by Borrowers.
Section 12.3. Governing Law; Consent to Jurisdiction.
(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK,
AND MADE BY LENDER AND ACCEPTED BY BORROWERS IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THE NOTES DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND
THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTES, AND THIS AGREEMENT AND
THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK PURSUANT TO ss. 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.
121
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR ANY
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY
FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO ss. 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW, AND EACH BORROWER WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH BORROWER DOES HEREBY
DESIGNATE AND APPOINT Corporation Service Company, WITH OFFICES AT 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, OR AT SUCH OTHER OFFICE IN NEW
YORK, NEW YORK, AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT
SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID
SERVICE OF ANY BORROWER MAILED OR DELIVERED TO ANY BORROWER IN THE MANNER
PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS
UPON SUCH BORROWER, IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW
YORK. EACH BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED
ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO
TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW
YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS),
AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT
CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A
SUCCESSOR.
Section 12.4. Modification, Waiver in Writing. No
modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement, or of the Notes, or of any other Loan Document, nor
consent to any departure by any Borrower therefrom, shall in any event be
effective unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to, or demand on any Borrower,
shall entitle a Borrower to any other or future notice or demand in the same,
similar or other circumstances.
Section 12.5. Delay Not a Waiver. Neither any failure nor any
delay on the part of Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under the Notes or under any other Loan Document, or any
other instrument given as security therefor, shall operate as or
122
constitute a waiver thereof, nor shall a single or partial exercise thereof
preclude any other future exercise, or the exercise of any other right, power,
remedy or privilege. In particular, and not by way of limitation, by accepting
payment after the due date of any amount payable under this Agreement, the Notes
or any other Loan Document, Lender shall not be deemed to have waived any right
either to require prompt payment when due of all other amounts due under this
Agreement, the Notes or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
Section 12.6. Notices. All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing and shall be effective for all purposes if hand delivered or
sent by (a) certified or registered United States mail, postage prepaid, or (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, addressed as follows (or at such
other address and person as shall be designated from time to time by any party
hereto, as the case may be, in a written notice to the other parties hereto in
the manner provided for in this Section):
If to Lender:
German American Capital Corporation
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
If to any Borrower:
c/o Strategic Hotel Funding, L.L.C.
00 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer and
General Counsel
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day.
123
Section 12.7. Trial by Jury. LENDER AND EACH BORROWER EACH
HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY
JURY, WHETHER IN CONTRACT OR IN TORT, AND WAIVES ANY RIGHT TO TRIAL BY JURY
FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD
TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND VOLUNTARILY BY EACH OF LENDER AND EACH BORROWER AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LENDER AND EACH BORROWER ARE HEREBY AUTHORIZED TO
FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER.
Section 12.8. Headings. The Article and/or Section headings
and the Table of Contents in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
Section 12.9. Severability. Wherever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
Section 12.10. Preferences. Subject to Article IX hereof,
Lender shall have the continuing and exclusive right to apply or reverse and
reapply any and all payments by Borrowers to any portion of the obligations of
Borrowers hereunder. To the extent any Borrower makes a payment or payments to
Lender, which payment or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the obligations hereunder or part thereof intended
to be satisfied shall be revived and continue in full force and effect, as if
such payment or proceeds had not been received by Lender.
Section 12.11. Waiver of Notice. No Borrower shall be entitled
to any notices of any nature whatsoever from Lender except with respect to
matters for which this Agreement or the other Loan Documents specifically and
expressly provide for the giving of notice by Lender to Borrowers and except
with respect to matters for which Borrowers are not, pursuant to applicable
Legal Requirements, permitted to waive the giving of notice. Each Borrower
hereby expressly waives the right to receive any notice from Lender with respect
to any matter for which this Agreement or the other Loan Documents do not
specifically and expressly provide for the giving of notice by Lender to
Borrowers.
Section 12.12. Remedies of Borrowers. In the event that a
claim or adjudication is made that Lender or its agents, including any servicer
or special servicer in
124
connection with a Securitization, have acted unreasonably or unreasonably
delayed (or refrained from), acting in any case where by law or under this
Agreement or the other Loan Documents, Lender or such agent, as the case may be,
has an obligation to act reasonably or promptly, each Borrower agrees that
neither Lender nor its agents, including any servicer and special servicer in
connection with a Securitization, shall be liable for any monetary damages, and
Borrowers' sole remedies shall be limited to commencing an action seeking
injunctive relief or declaratory judgment, except in any instance in which it
has been finally determined that Lender's action, delay or inaction has
constituted gross negligence, fraud, willful misconduct or an illegal act. The
parties hereto agree that any action or proceeding to determine whether Lender
has acted reasonably shall be determined by an action seeking declaratory
judgment.
Section 12.13. Expenses; Indemnity. (a) Each Borrower
covenants and agrees to reimburse Lender upon receipt of written notice from
Lender for all (i) Lender Expenses; (ii) costs and expenses reasonably incurred
by Lender in connection with (A) Borrowers' ongoing performance of and
compliance with Borrowers' respective agreements and covenants contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date, including confirming compliance with environmental
and insurance requirements; (B) the negotiation, preparation, execution,
delivery and administration of any consents, amendments, waivers or other
modifications to this Agreement and the other Loan Documents and any other
documents or matters requested by any Borrower or by Lender; (C) filing and
recording fees and expenses, title insurance and reasonable fees and
disbursements of counsel for providing to Lender all required legal opinions,
and other similar expenses incurred in creating and perfecting the Liens in
favor of Lender pursuant to this Agreement and the other Loan Documents; (D)
enforcing or preserving any rights, in response to third party claims or the
prosecuting or defending of any action or proceeding or other litigation, in
each case against, under or affecting Borrowers, this Agreement, the other Loan
Documents or any other security given for the Loan or the Properties; and (E)
enforcing any obligations of or collecting any payments due from any Borrower
under this Agreement, the other Loan Documents or with respect to the Properties
or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or of
any insolvency or bankruptcy proceedings; provided , however, that Borrowers
shall not be liable for the payment of any such costs and expenses to the extent
the same arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct of Lender. Any costs and expenses due and payable to Lender hereunder
which are not paid by Borrowers within thirty (30) days after demand may be paid
from any amounts in the Holding Account, with notice thereof to Borrowers.
Notwithstanding the foregoing, except as provided in Section 2.1.3(c) and
Article XIII herein, Borrower shall not be required to pay (and Lender shall
promptly reimburse Borrower for) any costs or expenses relating to the
securitization, syndication or sale of participation interests in the Loan,
other than Borrower's internal costs and expenses and the fees and disbursements
of Borrower's counsel with the review of any documentation related to such
transactions and the delivery of legal opinions (other than a 10(b)(5) opinion)
in connection with any such securitization, syndication or sale or participation
interests in the Loan, provided Borrower shall not be required to incur
unreimbursed third party costs and expenses in excess of $10,000.
125
(b) Borrowers shall indemnify and hold harmless Lender from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the reasonable fees and
disbursements of counsel for Lender in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
Lender shall be designated a party thereto), that may be imposed on, incurred
by, or asserted against Lender in any manner relating to or arising out of any
breach by any Borrower of its obligations under, or any misrepresentation by any
Borrower contained in, this Agreement or the other Loan Documents; provided,
however, no Borrower shall be liable for the payment of any such costs and
expenses to the extent the same arise by reason of the gross negligence, illegal
acts, fraud or willful misconduct of Lender. Any costs and expenses due and
payable to Lender hereunder which are not paid by Borrowers within ten (10) days
after demand may be paid from any amounts in the Holding Account, with notice
thereof to Borrowers.
Section 12.14. Exhibits and Schedules Incorporated. The
Exhibits and Schedules annexed hereto are hereby incorporated herein as a part
of this Agreement with the same effect as if set forth in the body hereof.
Section 12.15. Offsets, Counterclaims and Defenses. Any
assignee of Lender's interest in and to this Agreement, the Notes and the other
Loan Documents shall take the same free and clear of all offsets, counterclaims
or defenses which are unrelated to such documents which any Borrower may
otherwise have against any assignor of such documents, and no such unrelated
counterclaim or defense shall be interposed or asserted by a Borrower in any
action or proceeding brought by any such assignee upon such documents and any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by each
Borrower.
Section 12.16. No Joint Venture or Partnership. Borrowers and
Lender intend that the relationships created hereunder and under the other Loan
Documents be solely that of borrower and lender. Nothing herein or therein is
intended to create a joint venture, partnership, tenancy-in-common, or joint
tenancy relationship between Borrowers and Lender nor to grant Lender any
interest in the Properties other than that of mortgagee or lender.
Section 12.17. Publicity. All news releases, publicity or
advertising by any Borrower or its Affiliates through any media intended to
reach the general public which refers to the Loan Documents or the financing
evidenced by the Loan Documents, to Lender, the Loan purchaser, the servicer or
the trustee in a Securitization shall be subject to the prior written approval
of Lender.
Section 12.18. Waiver of Marshalling of Assets. To the fullest
extent Borrowers may legally do so, each Borrower waives all rights to a
marshalling of the assets of Borrowers, Borrowers' partners, if any, and others
with interests in Borrowers, and of the Properties, or to a sale in inverse
order of alienation in the event of foreclosure of the interests hereby created,
and agrees not to assert any right under any laws pertaining to the marshalling
of assets, the sale in inverse order of alienation, homestead exemption, the
administration of estates of decedents, or any other matters whatsoever to
defeat, reduce or affect the right of Lender under the Loan Documents to a sale
of any one or more of the Properties for the collection of the related Debt
without any prior or different resort for collection, of the right of Lender or
any deed of trust trustee to the payment of the related Debt out of the net
proceeds of the Properties in preference to every other claimant whatsoever. In
addition, each Borrower, for itself and its successors and assigns, waives in
the event of foreclosure of any or all of the Mortgage, any equitable right
otherwise available to any Borrower which would require the separate sale of
portions of a Property.
126
Section 12.19. Waiver of Counterclaim. Each Borrower hereby
waives the right to assert a counterclaim, other than a compulsory counterclaim,
in any action or proceeding brought against it by Lender or its agents,
including any servicer and special servicer in connection with a Securitization.
Section 12.20. Conflict; Construction of Documents. In the
event of any conflict between the provisions of this Agreement and any of the
other Loan Documents, the provisions of this Agreement shall control. The
parties hereto acknowledge that they were represented by counsel in connection
with the negotiation and drafting of the Loan Documents and that such Loan
Documents shall not be subject to the principle of construing their meaning
against the party which drafted same.
Section 12.21. Brokers and Financial Advisors. Each Borrower
hereby represents that it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. Borrowers hereby indemnify Lender
and hold Lender harmless from and against any and all claims, liabilities, costs
and expenses of any kind in any way relating to or arising from a claim by any
Person that such Person acted on behalf of any Borrower in connection with the
transactions contemplated herein. The provisions of this Section 12.21 shall
survive the expiration and termination of this Agreement and the repayment of
the Debt.
Section 12.22. No Third Party Beneficiaries. This Agreement
and the other Loan Documents are solely for the benefit of Lender and the
Borrowers, and nothing contained in this Agreement or the other Loan Documents
shall be deemed to confer upon anyone other than Lender and Borrowers any right
to insist upon or to enforce the performance or observance of any of the
obligations contained herein or therein. All conditions to the obligations of
Lender to make the Loan hereunder are imposed solely and exclusively for the
benefit of Lender, and no other Person shall have standing to require
satisfaction of such conditions in accordance with their terms or be entitled to
assume that Lender will refuse to make the Loan in the absence of strict
compliance with any or all thereof and no other Person shall under any
circumstances be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by Lender if, in Lender's sole
discretion, Lender deems it advisable or desirable to do so.
Section 12.23. Prior Agreements. This Agreement and the other
Loan Documents contain the entire agreement of the parties hereto and thereto in
respect of the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties, whether oral or written, between any
Borrower and Lender are superseded by the terms of this Agreement and the other
Loan Documents.
Section 12.24. Exculpation. Anything contained herein, in the
Notes or in any other Loan Document to the contrary notwithstanding (except as
set forth in the balance of this
127
Section or in the Environmental Indemnity), no recourse shall be had for the
payment of the principal or interest on the Notes or for any other portion of
the Debt hereunder or under the other Loan Documents against (i) any Affiliate,
parent company, trustee or advisor of any Borrower or owner of a direct or
indirect Beneficial or equitable interest in a Borrower or Sponsor, any member
in any Borrower, or any partner, shareholder or member therein (other than
against Sponsor pursuant to the Sponsor Indemnity Agreement); (ii) any legal
representative, heir, estate, successor or assign of any thereof; (iii) any
corporation (or any officer, director, employee or shareholder thereof),
individual or entity to which any ownership interest in any Borrower shall have
been transferred; (iv) any purchaser of any asset of any Borrower; or (v) any
other Person (except Borrowers), for any deficiency or other sum owing with
respect to the Notes or the Debt. It is understood that the Notes and the Debt
(except as set forth in the balance of this Section 12.24 and in the
Environmental Indemnity) may not be enforced against any Person described in
clauses (i) through (v) above (other than against Sponsor pursuant to the
Sponsor Indemnity Agreement as set forth in clause (i) above) and Lender agrees
not to xxx or bring any legal action or proceeding against any such Person in
such respect. Notwithstanding the foregoing, the foregoing shall not: (a)
prevent recourse to the Borrowers or the assets of any Borrower, or enforcement
of the Mortgages or other instrument or document by which Borrowers are bound
pursuant to the Loan Documents; (b) estop Lender from instituting or prosecuting
a legal action or proceeding or otherwise making a claim against Borrower as a
result of any of the following or against the Person or Persons committing any
of the following: (i) fraud or intentional misrepresentation by any Borrower or
Operating Lessee in connection with the Loan, (ii) the misappropriation by any
Borrower, Operating Lessee or any Affiliate of Borrower or Operating Lessee of
any Proceeds (including, without limitation, any Rents and any security
deposits), (iii) the breach of any representation, warranty, covenant or
indemnification provision in the Environmental Indemnity, (iv) any transfer in
violation of Section 6.1(i) or otherwise violate the provisions of such Section
6.1(i); (v) any loss, damage, cost or expense incurred by or on behalf of Lender
by reason of all or any part of the Property, the Deposit Account, the Holding
Account or the Reserve Accounts being encumbered by a Lien (other than pursuant
to the Loan Documents in favor of Lender) in violation of the Loan Documents,
(vi) physical damage to any Property from intentional waste committed by any
Borrower, Operating Lessee or any Affiliate of any Borrower or Operating Lessee,
(vii) any loss, damage, cost or expense incurred by or on behalf of Lender by
reason of the failure of any Borrower and/or any Operating Lessee to comply with
any of the provisions of Article XIV hereof, (viii) any and all liabilities,
obligations, losses, damages, costs and expenses (including, without limitation,
reasonable attorneys' fees, causes of action, suits, claims, demands and
adjustments of any nature or description whatsoever) which may at any time be
imposed upon, incurred by or awarded against Lender, in the event (and arising
out of such circumstances) that (x) any Borrower or Operating Lessee should
raise any defense, counterclaim and/or allegation in any foreclosure action by
Lender relative to the Property, the Deposit Account, the Holding Account or the
Reserve Accounts or any part thereof which is found by a court to have been
raised by any Borrower or Operating Lessee in bad faith or to be wholly without
basis in fact or law, or (y) an involuntary case is commenced against any
Borrower or Operating Lessee under the Bankruptcy Code with the collusion of any
Borrower, Operating Lessee, Sponsor or any of their Affiliates or (z) an order
for relief is entered with respect to any Borrower or Operating Lessee under the
Bankruptcy Code through the actions of any Borrower, Operating Lessee, Sponsor
or any of their Affiliates, (ix) to the extent of the Existing Debt, any loss or
damage actually incurred by Lender
128
by reason of any previous assignment, transfer, encumbrance or satisfaction (in
whole or in part) of any Existing Notes prior to the date hereof, (x) any loss,
damage, cost or expense incurred by or on behalf of Lender (including, by (i)
any successor and or assign of Lender or (ii) any nominee, designee or purchaser
of any portion of the Loan or Properties in connection with a foreclosure or
deed in lieu of foreclosure transaction) by reason of the failure of any
Borrower to complete and pay for the work set forth on Exhibit A to the Sponsor
Indemnity Agreement at the Properties; or (xi) attorney's fees, costs and
expenses incurred by Lender, its agent or any servicer of the Loan in connection
with any successful suit by Lender to enforce the terms of the Loan Documents;
or (c) estop Lender from enforcing its rights under the indemnity agreement
being executed concurrently herewith by the Sponsor in favor of the Lender, for
losses caused by any of the foregoing items set forth in section (b) above.
Borrower hereby agrees that notwithstanding any provision to the contrary herein
or in any other Loan Document, to the extent otherwise permitted by law, its
obligations pursuant to clause (b)(x) of this Section shall survive the full
repayment of the Loan and/or the passage of title to all or any portion of the
Properties to Lender.
Notwithstanding the foregoing, (i) Lender agrees that its sole
recourse against any Operating Lessee for such Operating Lessee's obligations
hereunder or under the other Loan Documents shall be to the collateral owned by
such Operating Lessee and pledged to Lender pursuant to the terms of the Loan
Documents and (ii) the total liability of any Borrower under this Agreement, the
Notes, the Mortgages or any of the other Loan Documents shall not:
(i) at any time during the period from the Closing
Date to a date one year and a day after the Closing Date exceed the sum
of (A) the Allocated Loan Amount for the Property or Properties as
being owned by such Borrower plus (B) such Borrower's Net Worth on the
date hereof, less (C) $1,000, and
(ii) at any time after the period referred to in
clause (i) above exceed the sum of (A) the Allocated Loan Amount for
the Properties as being owned by such Borrower plus (B) the greater of
such Borrower's Net Worth on the date hereof and such Borrower's Net
Worth on the date such determination is being made (it being understood
that for purposes of determining such Borrower's Net Worth on any date
subsequent to the date that is one year and a day after the Closing
Date, such Borrower's liabilities shall only include liabilities that
are permitted under the terms of the Loan Documents), less (C) $1,000.
For purposes of the foregoing, "Net Worth" of a Borrower shall
mean the positive net worth of such Borrower, based on the sum of (x) the fair
saleable value of its assets (determined after giving effect to distributions,
if any, by such Borrower to such Borrower's partners, members or other equity
investors, as applicable, of the proceeds of the Loan received by such Borrower
on account of the issuance of the Notes and determined in accordance with
applicable laws governing determinations of the insolvency of debtors), less (y)
its liabilities (determined as in clause (x) above), including a portion of the
Loan (as applicable) equal to the Allocated Loan Amount for the Property or
Properties identified on Schedule A as being owned by such Borrower, but
excluding amounts payable under this Agreement, the Loan Documents, the Notes,
the Mortgages and any other Loan Documents in excess of such Allocated Loan
Amount.
129
Section 12.25. Loan Assignability. The Loan, and each Lender's
rights, remedies and privileges hereunder and the other Loan Documents, shall be
assignable by each Lender at any time and from time to time, in whole or in
part, in such Lender's discretion. In addition, Lender may participate to one or
more Persons all or any portion of its rights and obligations hereunder and the
other Loan Documents (including without limitation, all or a portion of the
Notes) utilizing such documentation to evidence such participation and the
parties' respective rights thereunder as Lender, in its sole discretion, shall
elect. Each assignee pursuant to this Section may sell participations to one or
more Persons (other than Borrower or any of its Affiliates) in or to all or a
portion of its rights and obligations hereunder and the other Loan Documents
(including, without limitation, all or a portion of the Notes held by it);
provided, however, that (i) such assignee's obligations hereunder and the other
Loan Documents shall remain unchanged, (ii) such assignee shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such assignee shall remain the holder of any such Notes for all purposes
of hereunder and the other Loan Documents, and (iv) Borrower, Lender and the
assignees pursuant to this Section shall continue to deal solely and directly
with such assignee in connection with such assignee's rights and obligations
hereunder and the other Loan Documents. In the event that more than one (1)
party comprises Lender, Lender shall designate one party to act on the behalf of
all parties comprising Lender in providing approvals and all other necessary
consents under the Loan Documents and on whose statements Borrower may rely.
Prior to the transfer of any interest in the Loan to any Person, such Person
shall be required by the transferor of such interest to deliver to such
transferor a certificate executed by an authorized signatory for such Person
making a representation that such transfer will not result in a prohibited
transaction under Section 406(a) of ERISA or Section 4975 of the Code for which
no exemption is available. Except as expressly set forth in Section 6.1(i)(ii),
no Borrower may sell, assign or transfer any interest in the Loan Documents or
any portion thereof (including, without limitation, any Borrower's rights,
title, interests, remedies, powers and duties hereunder and thereunder).
Section 12.26. Exculpation of Lender. Lender neither
undertakes nor assumes any responsibility or duty to any Borrower or any other
party to select, review, inspect, examine, supervise, pass judgment upon or
inform any Borrower or any third party of (a) the existence, quality, adequacy
or suitability of appraisals of any Property or any other collateral, (b) any
environmental report, or (c) any other matters or items, including, but not
limited to, engineering, soils and seismic reports which are contemplated in the
Loan Documents. Any such selection, review, inspection, examination and the
like, and any other due diligence conducted by Lender, is solely for the purpose
of protecting Lender's rights under the Loan Documents, and shall not render
Lender liable to any Borrower or any third party for the existence, sufficiency,
accuracy, completeness or legality thereof.
Section 12.27. Contribution Among Borrowers.
(a) Contribution. To provide for just and equitable
contribution among Borrowers, if any payment is made by a Borrower (a "Funding
Borrower") hereunder or under the Notes or any other Loan Document in respect of
the Obligations such Funding Borrower shall be entitled to a contribution from
other Borrowers for all payments, damages and expenses incurred by such Funding
Borrower under or in connection with such Obligations, such contributions to be
made in the manner and to the extent set forth below. Any amount payable as a
contribution under this Agreement shall be determined as of the date on which
the related payment is made by a Funding Borrower.
130
(b) Calculation of Contributions. Each Borrower shall be
liable for contribution to each Funding Borrower in respect of all payments,
damages and expenses incurred by such Funding Borrower hereunder or under the
Notes or any other Loan Document in an aggregate amount, subject to Section
12.27(c) below, equal to (i) the ratio of (x) the Property Worth of the Property
owned by such Borrower to (y) the Property Worth of the Properties owned by all
Borrowers, multiplied by (ii) the aggregate amount of such payments, damages and
expenses incurred by such Funding Borrower under or in connection with the
Obligations.
(c) Rights to Contribution Subordinated. Each Borrower agrees
that all of its rights to receive contribution under this Section 12.27 (whether
for payments, damages, expenses or otherwise) and all of its rights, if any, to
be subrogated to any of the rights of Lender shall be subordinated in right of
payment (in liquidation or otherwise) to the prior payment in full in cash of
all of the obligations of the Borrowers in respect of the Debt (whether for
principal, interest, premium or otherwise). If any amount shall at any time be
paid to a Borrower on account of such rights of contribution or subrogation, or
in contravention of the provisions of this Section 12.27(c) at any time, such
amount shall be held in trust, segregated from the other assets of such
Borrower, for the benefit of the Lender and shall promptly be paid to the
Lender. The foregoing shall constitute a continuing offer to, and agreement
with, all persons that from time to time may become holders of, or continue to
hold, obligations under this Agreement, and the provisions of the foregoing
sentence are made for the benefit of such holders and such holders, as third
party beneficiaries hereunder, are entitled to enforce such provisions.
Section 12.28. Joint and Several Obligations.
(a) Notwithstanding anything to the contrary set forth in this
Agreement or any of the other Loan Documents, the obligations of the Borrowers
hereunder shall be joint and several.
(b) Each Borrower's obligations hereunder shall remain
outstanding until all Debt has been paid in full.
(c) No payment or payments with respect to the obligations of
any Borrower hereunder made by any other Borrower or any other Person or
received or collected by the Lender from such other Borrower or such other
Person by virtue of any action or proceeding or any setoff or appropriation or
application, at any time or from time to time, in reduction of or in payment of
the Debt or any release of security hereunder shall be deemed to modify, reduce,
release or otherwise affect the primary liability of such Borrower in respect
thereof.
(d) If any amount shall at any time be paid to a Borrower on
account of such rights of contribution or subrogation, in contravention of the
provisions of this Section 12.28 at any time, such amount shall be held in
trust, segregated from the other assets of such Borrower, for the benefit of the
Lender and shall promptly be paid to the Lender.
131
Section 12.29. Lender's Rights. The rights of "Lender" under
this Agreement with respect to any time shall mean the rights of each and every
Lender at such time.
ARTICLE XIII
SERVICE PROVIDERS
-----------------
Section 13.1. Retention of Servicer, Securitization Trustee.
Lender reserves the right to retain a servicer (as well as a special servicer)
prior to or in connection with any Securitization to act as its agent with
respect to the Loan and the Loan Documents with such powers as are specifically
delegated to the servicer (or such special servicer) by Lender, whether pursuant
to this Agreement, a servicing agreement, the Deposit Account Agreement or
otherwise, together with such other powers as are reasonably incidental thereto.
Borrowers shall be responsible for the payment of such servicer's fees and
expenses for servicing, master servicing or subservicing, including, without
limitation, any fee or expense for any special servicing Lender reasonably deems
to be required and any fees and expenses of such servicer, including, without
limitation, in connection with a release of any Property, satisfaction of any
Mortgage, assumption of the Loan, modification of the Loan made at Borrowers'
request, any requests by Borrowers for waivers or consents, protective advances,
and the enforcement of the Loan Documents. Borrowers shall have the right to
rely on any notices given by any servicer with the same force and affect as if
Lender had given such notices. In addition, in connection with a Securitization,
Lender reserves the right to retain a Securitization trustee for the benefit of
the holders of the Notes. Borrowers shall pay all costs associated with the
retention and ongoing services provided by the Securitization trustee pursuant
to any indenture or similar document.
Section 13.2. Rating Surveillance. Lender will have the right
to retain the Rating Agencies to provide rating surveillance services in
connection with or prior to a Securitization and the annual cost of such ongoing
surveillance will be at the expense of the Borrowers.
ARTICLE XIV
SECURITIZATION
--------------
Section 14.1. Sale of Note and Securitization. At the request
of Lender and, to the extent not already required to be provided by Borrowers
and Operating Lessees under this Agreement, Borrowers or Operating Lessees shall
use reasonable efforts to satisfy the market standards which may be reasonably
required in the marketplace or by the Rating Agencies in connection with the
Securitization of rated single or multi-class securities (the "Securities")
secured by or evidencing ownership interests in the Note and this Agreement,
including using reasonable efforts to do (or cause to be done) the following
(but Borrowers and Operating Lessees will not in any event be required to incur,
suffer or accept (except to a de minimis extent) (i) any lesser rights or
greater obligations than as currently set forth in the Loan Documents and (ii)
except as set forth in Section 12.13 or Article XIII, any expense or any
liability:
132
14.1.1 Provided Information. (i) Provide such non-confidential
financial and other information (but not projections) with respect to the
Property, Borrowers, Operating Lessees and Property Managers to the extent such
information is reasonably available to Borrowers, Operating Lessees or Property
Managers, (ii) provide business plans (but not projections) and budgets relating
to the Property, to the extent prepared by the Borrowers, Operating Lessees or
Property Managers and (iii) cooperate with the holder of the Note (and its
representatives) in obtaining such site inspection, appraisals, market studies,
environmental reviews and reports, engineering reports and other due diligence
investigations of the Property, as may be reasonably requested by the holder of
the Note or reasonably requested by the Rating Agencies (all information
provided pursuant to this Section 14.1 together with all other information
heretofore provided to Lender in connection with the Loan, as such may be
updated, at Borrower's or Operating Lessee's request, in connection with a
Securitization, or hereafter provided to Lender in connection with the Loan or a
Securitization, being herein collectively called the "Provided Information");
14.1.2 Updates to Opinions of Counsel. Shall use reasonable
efforts to cause to be rendered such customary updates or customary
modifications to the opinions of counsel delivered at the closing of the Loan as
may be reasonably requested by the holder of the Note or the Rating Agencies in
connection with the Securitization (it being agreed that in no event shall
Borrower or Operating Lessee be obligated to deliver an opinion of counsel with
respect to "true sale", " or no fraudulent conveyance" matters). Borrowers' or
Operating Lessees' failure to use reasonable efforts to deliver or cause to be
delivered the opinion updates or modifications required hereby within twenty
(20) Business Days after written request therefor shall constitute an "Event of
Default" hereunder.
14.1.3 Modifications to Loan Documents. Execute such
amendments to the Mortgage and Loan Documents as may be reasonably requested by
Lender or the Rating Agencies in order to achieve the required rating or to
effect the Securitization (including, without limitation, modifying the Payment
Date to a date other than as originally set forth in this Agreement), provided,
that nothing contained in this Section 14.1.3 shall result in any economic or
other material adverse change in the transaction contemplated by the Loan
Documents (unless Borrowers and Operating Lessees are made whole by the holder
of Note) or result in any operational changes that are unduly burdensome to the
Properties, Borrowers or Operating Lessees.
Notwithstanding anything to the contrary contained herein,
neither Borrower nor Operating Lessee shall be required to modify any Loan
Document or organizational document in a manner which would increase Borrower's
or Operating Lessee's obligations or have adverse effect whatsoever on Borrowers
or Operating Lessees (other than to a de-minimis extent).
Section 14.2. Cooperation with Rating Agencies. Borrowers and
Operating Lessees shall (i) at Lender's request, meet with representatives of
such Rating Agencies at reasonable times to discuss the business and operations
of the Property, and (ii) cooperate with the reasonable requests of the Rating
Agencies in connection with the Property and (iii) gather any reasonable
environmental information reasonably required by the Rating Agencies in
connection with the Securitization.
133
Section 14.3. Securitization Financial Statements. Borrowers
and Operating Lessees acknowledge that all such financial information delivered
by Borrowers or Operating Lessees to Lender pursuant to Section 5.1(j) may, at
Lender's option, be delivered to the Rating Agencies.
Section 14.4. Securitization Indemnification.
14.4.1 Disclosure Documents. Each of Borrowers and Operating
Lessees understands that certain of the Provided Information may be included in
disclosure documents in connection with the Securitization, including a
prospectus or private placement memorandum or a public registration statement
(each, a "Disclosure Document") and may also be included in filings with the
Securities and Exchange Commission pursuant to the Securities Act or the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or
provided or made available to investors or prospective investors in the
Securities, the Rating Agencies, and service providers relating to the
Securitization. In the event that the Disclosure Document is required to be
revised prior to the sale of all Securities, upon request, each of Borrowers and
Operating Lessees will reasonably cooperate with the holder of the Note in
updating the Provided Information for inclusion or summary in the Disclosure
Document by providing all current information pertaining to Borrowers, Operating
Lessees and the Properties necessary to keep the Disclosure Documents accurate
and complete in all material respects with respect to such matters.
14.4.2 Indemnification Certificate. In connection with each of
(x) a preliminary and a private placement memorandum, or (y) a preliminary and
final prospectus, as applicable, each of Borrowers and Operating Lessees agree
to provide, at Lender's reasonable request, an indemnification certificate:
(i) certifying that each of Borrowers and Operating
Lessees have carefully examined those portions of such memorandum or
prospectus, as applicable, reasonably designated in writing by Lender
for Borrowers' or Operating Lessees' review pertaining to Borrowers,
Operating Lessees, the Properties, the Loan and/or the Provided
Information) and insofar as such sections or portions thereof
specifically pertain to Borrowers, Operating Lessees, the Properties,
the Provided Information or the Loan, (the "Relevant Portions"), the
Relevant Portions do not (except to the extent specified by Borrowers
or Operating Lessees if Borrowers or Operating Lessees do not agree
with the statements therein), as of the date of such certificate, to
Borrowers' and Operating Lessees' actual knowledge, contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in the light of the circumstances
under which they were made, not misleading; and
(ii) indemnifying Lender, Deutsche Bank Securities,
Inc., and the Affiliates of Deutsche Bank Securities, Inc.
(collectively, "DBS") that have filed the Disclosure Document relating
to the Securitization, each of its directors, each of its officers who
have signed the Disclosure Document and each person or entity who
controls DBS within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (collectively, the "DBS Group"), and
DBS, together with the DBS Group, each of their respective directors
and each person who controls DBS or the DBS Group, within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
134
Act (collectively, the "Underwriter Group") for any actual,
out-of-pocket losses, third party claims, damages (excluding lost
profits, diminution in value and other consequential damages) or
liabilities arising out of third party claims (the "Liabilities") to
which any member of the Underwriter Group may become subject to the
extent such Liabilities arise out of or are based upon any untrue
statement of any material fact contained in the Relevant Portions or
arise out of or are based upon the omission by Borrower or Operating
Lessee to state therein a material fact required to be stated in the
Relevant Portions in order to make the statements in the Relevant
Portions or in light of the circumstances under which they were made,
not misleading (except that (x) Borrowers' and Operating Lessees'
obligation to indemnify in respect of any information contained in a
preliminary or final registration statement, private placement
memorandum or preliminary or final prospectus that is derived in part
from information provided by Borrowers or Operating Lessees and in part
from information provided by others unrelated to or not employed by
Borrowers or Operating Lessees shall be limited to any untrue statement
or omission of material fact therein known to Borrowers or Operating
Lessees that results directly from an error in any information provided
(or which should have been provided) by Borrowers or Operating Lessees
which either of Borrowers or Operating Lessees have been given the
opportunity to examine and reasonably and promptly approve and (y)
Borrowers and Operating Lessees shall have no responsibility for the
failure of any member of the Underwriting Group to accurately
transcribe written information supplied by Borrowers or Operating
Lessees or to include such portions of the Provided Information).
(iii) Each of Borrowers' and Operating Lessees'
liability under clauses (a) and (b) above shall be limited to
Liabilities arising out of or based upon any such untrue statement or
omission by Borrowers or Operating Lessees made therein in reliance
upon and in conformity with information furnished to Lender by, or
furnished at the direction and on behalf of Borrowers or Operating
Lessees in connection with the preparation of those portions of the
registration statement, memorandum or prospectus pertaining to
Borrowers, Operating Lessees, the Properties or the Loan, including
financial statements of Borrowers or Operating Lessees and operating
statements with respect to the Properties. This indemnity agreement
will be in addition to any liability which Borrowers or Operating
Lessees may otherwise have.
(iv) Promptly after receipt by an indemnified party
under this Article XIV of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Article XIV, notify the
indemnifying party in writing of the commencement thereof, but the
omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability which the indemnifying party may
have to any indemnified party hereunder except to the extent that
failure to notify causes prejudice to the indemnifying party. In the
event that any action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent that it
(or they) may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. After notice from
the
135
indemnifying party to such indemnified party under this Article XIV of
its assumption of such defense, the indemnifying party shall not be
liable for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof; provided,
however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there are any legal defenses
available to it and/or other indemnified parties that are different
from or in conflict with those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or
parties at the expense of the indemnifying party. The indemnifying
party shall not be liable for the expenses of separate counsel unless
an indemnified party shall have reasonably concluded that there may be
legal defenses available to it that are different from or in conflict
with those available to another indemnified party
(v) In order to provide for just and equitable
contribution in circumstances in which the indemnity provided for in
this Article XIV is for any reason held to be unenforceable by an
indemnified party in respect of any actual, out-of-pocket losses,
claims, damages or liabilities relating to third party claims (or
action in respect thereof) referred to therein which would otherwise be
indemnifiable under this Article XIV, the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such actual, out of pocket losses, third party claims,
damages or liabilities (or action in respect thereof) (but excluding
damages for loss profits, diminution in value of the Property and
consequential damages); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution for Liabilities
arising therefrom from any person who was not guilty of such fraudulent
misrepresentation. In determining the amount of contribution to which
the respective parties are entitled, the following factors shall be
considered: (i) the DBS Group's and Borrower's or Operating Lessee's
relative knowledge and access to information concerning the matter with
respect to which claim was asserted; (ii) the opportunity to correct
and prevent any statement or omission; (iii) the limited
responsibilities and obligations of Borrower and Operating Lessee as
specified herein; and (iv) any other equitable considerations
appropriate in the circumstances.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
136
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
LENDER:
GERMAN AMERICAN CAPITAL CORPORATION,
a Maryland corporation
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
BORROWERS:
SHC NEW ORLEANS LLC, a Delaware limited
liability company
By: ____________________________
Name:
Title:
NEW AVENTINE, L.L.C., a Delaware limited
liability company
By: ____________________________
Name:
Title:
SHC PHOENIX III, L.L.C., a Delaware limited
liability company
By: ____________________________
Name:
Title:
137
By signing below, Operating Lessee agrees, in consideration of
the substantial benefit that it will receive from Lender making the Loan to
Borrower, to comply (or permit Borrower to take such action necessary to comply)
with all of the terms, conditions, obligations and restrictions expressly
applicable to Operating Lessee as set forth herein:
OPERATING LESSEES:
DTRS NEW ORLEANS, L.L.C., a Delaware limited
liability company
By: ____________________________
Name:
Title:
DTRS LA JOLLA, L.L.C., a Delaware limited
liability company
By: ____________________________
Name:
Title:
DTRS PHOENIX, L.L.C., a Delaware limited
liability company
By: ____________________________
Name:
Title:
138
