BEAR, XXXXXXX FUNDING, INC.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
COMMITMENT LETTER
December 6, 2001
Mr. Xxxxx Xxxxxx
Triod LLC
c/o Xxxx X. Xxxxxxx & Company, LLC
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Re: Miraval Spa & Resort, Tucson, Arizona (the "Property")
Loan No: 32942
Dear Sirs:
Reference is made to that certain Letter of Application (the "Application")
dated as of August 9, 2001 between Triod LLC and Bear Xxxxxxx Commercial
Mortgage, Inc. ("BSCMI"). All capitalized terms not defined herein shall have
the meanings ascribed to them in the Application. All references herein to
"Borrower" shall mean Sierra Health Styles, LLC which will be a wholly-owned
subsidiary of a wholly owned subsidiary of Triod LLC, and which will be a Single
Purpose Entity (hereinafter defined).
This Commitment (the "Commitment") shall confirm the agreement of Bear,
Xxxxxxx Funding, Inc. ("Lender") to provide, and Xxxxxxxx to accept, the
financing contemplated by the Application on the terms and conditions set forth
in the Application, as modified by substituting the terms and conditions set
forth on Schedule 1 attached hereto and constituting a part hereof (the
financing, as so modified, is hereinafter referred to as the "Loan"). The terms
set forth on Schedule 1 are not intended to be all-inclusive. The Loan Amount
set forth in Schedule 1 is a maximum Loan Amount and may be reduced in
connection with the determination of the interest rate (the "Rate") for the Loan
to the extent necessary to satisfy the Minimum Debt Service Coverage Ratio set
forth in Schedule 1 as a result of Lender's determination of increases in the
One Month LIBOR and/or reductions in sustainable net operating income, as
determined by Lender, adjusted for applicable reserves ("Lender Net Operating
Income") resulting from Xxxxxx's completion of its due diligence, including
third party reports.
This Commitment has been issued on the basis of certain information
supplied by you to Lender (including, but not limited to, the description of the
Property set forth on Schedule 2) and Xxxxxx's initial underwriting, market due
diligence and site inspection. This Commitment supersedes any prior commitments
issued by Lender in connection with the Loan.
A. Closing Requirements
-----------------------
This Commitment and the consummation of the Loan transaction are
conditioned upon (i) the completion by Xxxxxx and Xxxxxx's Counsel (hereinafter
defined) of such due diligence investigations with respect to Borrower, its
principals and the Property as Lender and Xxxxxx's Counsel shall deem
appropriate (which investigations Borrower acknowledges have been commenced, but
not completed as of the date hereof), (ii) the execution and delivery by
Borrower of definitive Documentation relating to the Loan acceptable to Lender
and (iii) the absence of any development which could adversely affect the
proposed Loan. All such conditions must be satisfied in a manner acceptable to
Lender.
B. Due Diligence
----------------
Lender's due diligence investigations shall include, but not be limited
to, such inspections of the Property as Lender shall deem necessary and the
receipt and review of the following items, each of which will be obtained at the
expense of Borrower and submitted to Lender in sufficient time for Lender to
adequately evaluate its acceptability, and each of which shall be in form and
substance satisfactory to Lender: (i) such financial statements, rent rolls,
occupancy reports, tenant sales reports (if a retail property), operating and
capital budgets, leasing plans, bank statements, pay-off letters, tax returns
and other reports regarding Borrower, its principals and the Property as Lender
shall deem appropriate; (ii) such references, resumes and credit and other
background reports (including public record searches) regarding Borrower and its
principals as Lender may request (which reports may be obtained by Lender, at
its option); (iii) a current title report for the Property and a UCC, judgment
and lien search with respect to Borrower and the Property (each of which shall
include copies of all exceptions and other items referred to therein); (iv) a
current survey for the Property certified to Lender and such other persons or
entities as Lender shall direct by a licensed surveyor acceptable to Lender; (v)
a current rent roll for the Property; (vi) all leases and occupancy agreements
(or, if the Property is a multi-family, self-storage project or hotel, a
standard form of lease or occupancy agreements) and reciprocal operating
agreements for the Property (including all amendments and guarantees thereof);
(vii) unless the Property is a multi-family or self-storage project or hotel,
estoppel certificates and subordination agreements from each tenant under the
leases and, as designated by Lender, each other party under any reciprocal
casement agreements; (viii) if all or any portion of the Property is affected by
a ground lease, the ground lease together with an estoppel certificate from the
landlord under the ground lease and, if required by Lender, an agreement from
such landlord affording Lender certain protections with respect to the ground
lease; (ix) evidence of property, casualty and liability insurance with respect
to the Property and Borrower (including, if required, flood and earthquake
insurance); (x) evidence of the compliance of the Property with applicable law;
(xi) copies of all organizational documents of Borrower and certificates of good
standing from applicable governmental authorities with respect to Borrower;
(xii) evidence of the availability of all utility service at the Property;
(xiii) opinions of Xxxxxxxx's counsel with respect to Xxxxxxxx, the Property and
the loan documentation; (xiv) evidence of the absence of material litigation
affecting Borrower or the Property; and (xv) certificates and affidavits of
Borrowers, Indemnitors
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(as defined below) and/or its principals with respect to certain of the above
items and (xvi) such other items as Lender may reasonably request. In addition,
Borrower shall, at its expense, cause Lender to receive, at the closing of the
Loan, a lender's title insurance policy, in form and substance and from the
title insurance company set forth in the Application, or if not set forth in the
Application, from a title insurance company satisfactory to Lender, in the
amount of the Loan.
Xxxxxxxx acknowledges that Xxxxxx's due diligence investigations are
intended to proceed simultaneously with Xxxxxx's Counsel's preparation and
scheduling for closing of the Loan, and that Xxxxxx's Counsel's activities in
this regard shall not be construed as evidence of the waiver or satisfactory
completion of such investigations.
C. Single Purpose Entity
------------------------
Xxxxxxxx and the general partner/managing member of Borrower shall each be
a "Single Purpose Entity." For the purposes hereof, a Single Purpose Entity
shall mean a United States corporation, partnership or other legal business
organization which does not and cannot by virtue of its organizational documents
engage in any business other than owning or operating the Property or acquire or
own material assets other than the Property and incidental personal property,
and which (a) maintains its assets in a way which segregates and identifies such
assets separate and apart from the assets of any other person or entity, (b)
holds itself out to the public as a separate legal entity from any other person
or entity, (c) conducts business solely in its name, (d) shall not have any
indebtedness other than the Loan and the Mezzanine Loan from Apollo Real Estate
Advisors of $1.4 million and other indebtedness incurred in the ordinary course
of business, provided such other indebtedness is not evidenced by a note or
similar instrument and (e) otherwise complies with rating agency standards for a
single-purpose entity.
D. Loan Documentation
---------------------
The definitive documentation for the Loan shall include a promissory note,
first deed of trust or mortgage and security agreement, an assignment of leases
and rents, UCC financing statements, an assignment of agreements, permits and
contracts, a conditional assignment of management agreement (which will also be
executed by the property manager for the Property), a replacement reserve and
security agreement, if required by Xxxxxx, a lead-based paint acknowledgment and
indemnification and, if required by Lender, an asbestos operations and
maintenance agreement (collectively, the "Loan Documents").
X. Xxxxxx's Counsel
-------------------
The Loan documentation shall be prepared, and certain of the due diligence
investigations outlined above shall be conducted, by Xxxxxxx, Xxxxxxxx & Xxxx,
special counsel for Lender ("Xxxxxx's Counsel") and, to the extent deemed
necessary and proper by Xxxxxx and Xxxxxx's Counsel, local counsel in the State
in which the Property is located.
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F. Non-Recourse; Indemnity
--------------------------
Each of the Loan Documents will be non-recourse to Borrower, subject to
Lender's standard carve-outs and limitations. One or more financially secure
persons or entities satisfactory to Lender (individually, an "Indemnitor" and
collectively, the "Indemnitors") shall execute an indemnity agreement
indemnifying and holding Lender harmless from any and all loss, cost, or expense
arising from (i) fraud or intentional misrepresentation, (ii) misapplication,
conversion or misappropriation of property and/or funds, (iii) willful
misconduct, (iv) unauthorized secondary financing, (v) unauthorized transfers of
interests in Borrower and/or the Property (unauthorized transfers are described
in Exhibit B attached hereto) (vi) voluntary bankruptcy or collusive involuntary
bankruptcy, and (vii) environmental matters. As a condition to the closing of
the Loan, Xxxxxx shall have received financial statements of such Indemnitors
satisfactory to Lender.
G. Default Rate
---------------
The Loan Documents shall provide that upon the occurrence of any default,
the Loan shall bear interest at a default rate equal to the lesser of the
maximum rate permitted by law and 5% in excess of the stated interest rate for
the Loan.
H. Assignment by Lender
-----------------------
Borrower acknowledges that Lender may assign all or any part of its
interest hereunder and its rights granted herein. The Loan Documents will
include provisions permitting Lender to freely transfer the servicing for, or
all or a portion of its rights in, the Loan and shall require Borrower to
cooperate in connection with any such transfer. Borrower acknowledges that,
without limiting the circumstances in which Xxxxxx may transfer the Loan,
Xxxxxx may transfer the Loan in connection with a securitization involving the
Loan and other assets.
I. No Assignment by Borrower
----------------------------
Borrower may not assign, transfer or encumber any of its rights pursuant to
this Commitment, directly or indirectly. Any attempt to make such an assignment,
transfer or encumbrance shall render such assignment, transfer or encumbrance
null and void ab initio.
J. Representations and Warranties
---------------------------------
1. Leases and Rent Rolls
------------------------
Borrower represents to Lender that (i) it has previously provided to Lender
(a)(except for multi-family, self-storage tenants or hotel, if applicable) true,
correct and complete counterpart executed copies of all leases with tenants at
the Property (and all amendments and supplements thereto and agreements
collateral thereto including, but not limited to, any guarantees
thereof)(collectively, the "Leases"),(b) a standard form of lease for the
Property, and (c) a true, complete and correct rent roll of the Property as of
the date set forth thereon (the "Rent Roll"), (ii) the information set forth in
the Rent Roll remains true, complete and correct as of the date hereof.
-4-
(iii) it has neither provided nor received any notices of default with respect
to the Leases, (iv) except as noted on the Rent Roll, it knows of no default of
the landlord or the tenants under the Leases, and (v) it has not been notified,
in writing or otherwise, by any tenant of the discontinuance of or intent to
discontinue its operations at the Property. The standard form of lease must be
satisfactory to Lender. All Leases and the identity of all tenants and
guarantors thereunder must be consistent with the information set forth in the
Rent Roll and satisfactory to Lender. The Loan Documents shall also provide that
all security deposits under all leases shall be segregated.
Borrower shall promptly notify Lender of any facts or circumstances which
result in a change to the information set forth in the Rent Roll. At the closing
of the Loan, Borrower shall deliver to Lender (i) a rent roll for the Property
dated as of the Closing Date (the "Closing Rent Roll") which shall be consistent
in form to the Rent Roll and (ii) a certification of Borrower that the Closing
Rent Roll and all Leases theretofore provided to Lender by Borrower are true,
correct and complete in all respects. All changes shown on the Closing Rent Toll
to the facts and circumstances shown on the Rent Roll must be satisfactory to
Lender.
2. Operating Statements
-----------------------
Borrower represents that all operating statements, balance sheets and
profit and loss statements, federal and state income tax returns, tenant sales
figures, budgets, site plans and leasing plans, and all other statements,
reports and information regarding the Property previously delivered to Lender
are true, complete and correct in all material respects.
3. No Litigation
----------------
Borrower represents to Lender that there is no action, suit or proceeding,
or any governmental investigation or any arbitration, in each case pending or,
to the knowledge of Borrower, threatened against Borrower, any Indemnitor, any
principal of Borrower or the Property before any governmental or administrative
body, agency or official.
4. No Adverse Change
--------------------
On the Closing Date, Borrower shall certify to Lender whether and to which
extent there has been an adverse change in the occupancy of the Property or the
business, financial condition or results of operations of Borrower, any
principal of Borrower and/or the Property from that shown on the rent rolls,
financial statements and reports referred to above. Any such adverse change must
be acceptable to Lender.
5. ERISA
--------
Borrower represents, warrants and covenants that as of the date hereof and
throughout the term of the Loan (i) Borrower is not and will not be an "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or other retirement arrangement,
which is subject to Title I of ERISA or Section 4975 of the
-5-
Internal Revenue Code of 1986, as amended (the "Code"), (ii) the assets of
Borrower do not and will not constitute "plan assets" of one or more such plans
or arrangements for purposes of Title I of ERISA or Section 4975 of the Code,
(iii) Borrower is not and will not be a "governmental plan" within the meaning
of Section 3(32) of ERISA and (iv) transactions by or with Borrower are not and
will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.
The Loan Documents shall contain provisions wherein, among other things,
Borrower will agree that it (1) shall not engage in any transaction which would
cause any obligation, or action taken or to be taken under the Loan Documents
(or the exercise by Lender of any of its rights under the Loan Documents) to be
a non-exempt (under a statutory or administrative class exemption) prohibited
transaction under ERISA or Section 4975 of the Code, and (2) will deliver to
Lender such certifications or other evidence from time to time throughout the
term of the Loan, as requested by Xxxxxx in its sole discretion, that (a)
Borrower is not an "employee benefit plan" (as defined in Section 3(3) of ERISA)
or other retirement arrangement, which is subject to Title 1 of ERISA or Section
4975 of the Code, or a "governmental plan" within the meaning of Section 3 (32)
of ERISA; (b) Borrower is not subject to state statutes regulating investments
and fiduciary obligations with respect to governmental plans and (c) one or more
of the following circumstances is true: (A) equity interests in Borrower are
publicly offered securities, within the meaning of 29 C.F.R. (S)2510.3
101(b)(2); (B) less than 25 percent of each outstanding class of equity
interests in Borrower is held by "benefit plan investors" within the meaning of
29 C.F.R. (S)2510.3-101(f)(2); or (C) Borrower qualifies as an "operating
company" or a "real estate operating company" within the meaning of 29 C.F.R.
(S)2510.3-101(c) or (e) or an investment company registered under The Investment
Company Act of 1940.
K Costs
-------
Borrower shall, as a condition to the effectiveness of this Commitment,
deposit with Lender simultaneously herewith the amount indicated on Schedule 1
hereof as the Expense Deposit. By countersigning below, Xxxxxxxx agrees to pay
on demand and in any event prior to closing all recording fees and taxes and
other customary closing costs and all out-of-pocket costs and expenses
(including, but not limited to, legal fees and disbursements and, if set forth
on Schedule 2, the cost of any Third Party Reports) incurred by Lender in
connection with the proposed Loan, to the extent they are estimated by Xxxxxx to
exceed the sums paid by Xxxxxxxx on the date hereof or have not otherwise been
paid by Borrower on or before the date hereof. Lender estimates that these costs
will not exceed $75,000 exclusive of the Appraisal, the engineering and
environmental reports, which will be paid for directly by the Borrower.
X. Xxxxxx's Discretion
----------------------
Whenever pursuant to this Commitment unless otherwise specifically provided
(a) Lender exercises any right given to it to approve or disapprove, (b) any
arrangement or term is to be satisfactory to Lender or (c) any other decision or
determination is to be made by Lender, the decision of Lender to approve or
disapprove, all decisions that arrangements or terms are satisfactory or not
satisfactory and all other decisions and determinations made by Lender shall,
unless otherwise expressly provided herein,
-6-
he in the sole and absolute discretion of Lender and shall be final and
conclusive. All approvals of or waivers by Xxxxxx in respect of any of the
terms, conditions or requirements of this Commitment must be in writing. No
waiver with respect to any condition, breach or other matter shall extend to or
be taken in any manner whatsoever to affect any other condition, breach or
matter or affect Lender's rights resulting therefrom.
M. Brokers
----------
By countersigning below, Xxxxxxxx agrees to pay, and to indemnify and hold
Xxxxxx harmless from any and all loss, cost or expense arising from, the claims
of any brokers or anyone claiming a right to any fees in connection with the
financing of the Property. Borrower represents to Lender that it has not
contracted with, nor does it know of, any broker other than the broker(s) set
forth on Schedule 1 (if any) who has participated in the application for the
Loan or the transactions contemplated by this Commitment. The provisions of this
paragraph shall survive the closing of the Loan and/or the termination of this
Commitment.
N. Termination
--------------
Lender may, at its option exercised by written notice to Borrower at its
address shown above, terminate this Commitment if any of the following events
occurs;
(a) any sale, transfer, pledge, encumbrance or assignment of the
Borrower's interest in the Property or of any equitable or beneficial
ownership interests of the Borrower;
(b) the occupancy of the Property or the business, financial
condition or results of operations of Borrower, any principal of
Borrower, the Property or any tenant of the Property suffers any
material adverse change;
(c) whether or not covered by insurance, any damage, destruction
or alteration occurs with respect to the improvements located upon the
Property;
(d) Borrower breaches any material provision contained in this
Commitment (as determined by Xxxxxx);
(e) Borrower has made any representation or warranty to Lender
which was untrue or false when made in a material respect or which
becomes untrue or false in a material respect;
(f) any material condemnation proceedings are pending or threatened
against any part of the Property (as determined by Xxxxxx);
(g) any petition of bankruptcy, insolvency or reorganization is
filed by or against Borrower;
-7-
(h) the failure of any condition precedent to the consummation of the
Loan; or
(i) any material adverse change in the hotel or tourism industry.
Delay in the exercise of Xxxxxx's right to terminate this Commitment upon
the occurrence of any of the above events shall not be construed as a waiver of
such right. The failure of Lender to act in any such event shall not be
construed as a waiver of its right to act with respect to any subsequent event
of a similar nature. Upon termination as set forth above, all of Lender's
obligations pursuant to this Commitment shall cease and be of no further force
and effect whatsoever.
O. Miscellaneous
----------------
Borrower hereby waives any right which it may have to a trial by jury in
any action brought on this Commitment or in any way connected with or related to
the Loan. Each of Lender and Borrower hereby agrees that any legal proceeding
relating to this Commitment or the transactions contemplated hereby (including
determination of the Floating Rate) shall be maintained in a state or United
States court of competant jurisdiction sitting in the City, State and County of
New York, as Lender shall elect. Xxxxxx and Borrower hereby consent and submit
themselves to the jurisdiction of the state and United States courts of New York
for the purposes of the adjudication of such legal proceedings. The
interpretation and enforcement of the parties' rights and obligations under this
Commitment and the Loan Documents shall be governed by New York law without
giving effect to principles of conflicts of law.
Time shall be of the essence with respect to all dates and time periods set
forth in this Commitment.
This Commitment may be signed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. By countersigning below, Xxxxxxxx agrees
that the terms of this Commitment shall supersede any and all terms of the
Application as issued and Lender shall be released from any conditions and
obligations to close the Loan except as contemplated in this Commitment.
For the purposes hereof, (i) the term "Business Day" shall mean any day
other than a Saturday or Sunday or any other day on which banks are required or
authorized to close in New York City, (ii) the singular case shall include the
plural and the plural the singular and (iii) the terms "include(s)" and
"including" shall mean "include(s), without limitation," and "including, without
limitation," respectively.
P. Expiration; Extension
------------------------
Notwithstanding anything contained herein to the contrary, this Commitment
shall terminate on and be of no further force and effect at 2:00 p.m. on March
31, 2002.
-8-
The expiration date of this Commitment may only be extended by a written
instrument executed by Xxxxxx and Borrower specifically providing for such
extension. Xxxxxxxx acknowledges and agrees that no course of dealing among
Xxxxxx, Xxxxxxxx and their respective counsel (including due diligence
investigations or the negotiation or exchange of draft or final executed loan
documents) prior to or after such expiration date shall constitute an extension
of such expiration date or otherwise form the basis of any claim against Xxxxxx.
Q. Acceptance
-------------
If the above terms and conditions are acceptable to you, please sign this
Commitment in the space provided below and return the same to Lender together
with your check for the Expense Deposit and any other sums set forth on Schedule
I due and payable at Commitment prior to 5:00 p.m. on the date which is seven
(7) days from the date of this letter. Your failure to comply with the
instructions set forth in the preceding sentence shall result in this Commitment
becoming null and void and of no further force or effect.
Very truly yours,
BEAR, XXXXXXX FUNDING, INC.
By: /s/ X. XXXXXXXXXXX XXXXXXX
-------------------------------
Name: X. XXXXXXXXXXX XXXXXXX
Title: VICE PRESIDENT
AGREED TO AND ACCEPTED THIS
___ DAY OF ________, 2001
TRIOD, LLC.
By: /s/ XXXXXX XXXX
------------------------
Name: XXXXXX XXXX
Title: VP
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SCHEDULE 1
----------
Loan Amount: $12,600,000.
Security: To include First Mortgage/Deed of Trust and Security
Agreement, and Assignment of Leases and Rents.
Floating Rate Term: An "Initial Term" of Two years. In addition, Borrower
shall have two (2) options to extend the Term for up to
six (6) additional months per extension (the "Extended
Term") upon (A) payment to Lender of an extension fee
equal to 0.25% of the Loan Amount per extension, (B)
satisfaction of a debt service coverage test, as
calculated by Lender in its sole discretion, equal to
the Minimum DSCR set forth below, based on the higher of
(i) the actual annualized debt service constant at the
closing of the Loan, or (ii) a debt service constant of
8.00%, (C) reappraisal, at Borrower's cost, confirming
an LTV less than or equal to the Maximum LTV at closing,
assuming a cap rate not greater than 11.0%.
Amortization: Interest only, subject to the requirement to apply
"Excess Cash Flow" (defined below) to pay down the
outstanding Loan Amount in accordance with the Cash
Management Account Section below.
Floating Rate: Floating Rate shall equal the sum of 375 basis points
(the "Floating Spread") and the "One-Month LIBOR". The
One-Month LIBOR shall mean the one month London
Interbank Offering Rate for deposits in United States
dollars as indicated on the Telerate Page 3750 as of
11:00 a.m. London time, on the related determination
date, in Xxxxxx'x determination. The Floating Rate is
payable interest only on a monthly basis based on a 360-
day year and the actual number of days elapsed. The
Floating Rate shall be adjusted monthly. Notwithstanding
the above, the Rate shall not be less than 7.00%.
Required Payments: Interest shall be calculated by multiplying the actual
number of days elapsed in the period for which interest
is being calculated by a daily rate based on a 360 day
year. All principal, interest and other sums payable
with respect to the Loan shall be due at maturity.
1
Initial Floating Rate
Determination: The initial Floating Rate will be set upon
completion satisfactory to Lender of third party
reports, other material due diligence
investigations and substantial completion of loan
documentation. Closing will occur within 3 business
days of Initial Rate Determination ("Closing").
Interest Rate Protection: Lender will require Borrower to purchase an
interest rate cap at Closing. The Cap will be
structured to have a LIBOR strike of 4.25%.
Borrower has the option of purchasing an Interest
rate cap with a LIBOR strike of less than 4.25%.
Commitment Fee: 1.0% of the Loan Amount. One-half of the Commitment
Fee (which shall include a credit for the Good-
Faith Deposit (defined below)) shall be payable
simultaneously with acceptance of this Commitment
as a condition precedent to the effectiveness
hereof, and the balance shall be payable at Loan
Closing, or if the Loan fails to close other than
due to Xxxxxx's willful default, upon Commitment
expiration or termination. If the Loan fails to
close due to Xxxxxx's willful default, or
Xxxxxxxx's failure to satisfy a condition precedent
to Xxxxxx's obligation to fund by reason of
circumstances not within the control of Borrower,
the Commitment Fee will be refunded to Borrower.
Otherwise, the Commitment Fee shall be retained by
Lender as liquidated damages to Lender for its
losses and damages related to the failure of the
Loan to close. Borrower and Xxxxxx acknowledge and
agree that such losses and damages are difficult,
if not impossible, to ascertain and that the amount
of the Commitment Fee constitutes a reasonable
estimate thereof.
Exit Fee: 1.0% of the unpaid Loan Amount. The Exit Fee shall
be waived if Lender provides permanent securitized
financing for the Property for term of 3 years or
longer. In addition, Borrower will be responsible
for any Breakage Charges described below.
Expense Deposit: The $15,000 "Good Faith Deposit will be used as an
initial retainer for the fees and disbursements to
be incurred by Xxxxxx's Counsel. As a result, the
Good Faith Deposit will no longer be refunded upon
the closing of the loan.
Closing Date: Presently assumed to be March 31, 2002, but in no
case sooner than the achievement of all conditions
noted in this
2
Commitment (including Xxxxxx's review and
approval of, and November 2001, December 2001,
January 2002 and February 2002 operating and
financial statements) and no later than March
31, 2002, unless extended by mutual consent
provided that Xxxxxxxx uses good faith efforts.
Prepayment: The Loan may be prepaid in whole or in part at
any time during the Term without penalty or
premium, provided there is no event of default,
subject to the requirement to pay the applicable
portion of the Exit Fee and LIBOR Breakage
Charges described herein.
Breakage Charges: Borrower will be responsible for any losses of
Lender associated with the maintenance of any
interest rate hedging transaction entered into
by Lender in connection with the determination
of the Floating Rate including LIBOR Breakage
Charges (as defined below). LIBOR Breakage
Charges shall mean any and all costs associated
with prepayment as follows: any prepayment not
made on the first day of a month shall be
accompanied with a payment of all interest
scheduled to accrue on the prepaid amount during
the related month.
Fixed Rate: Borrower may request from Lender a fixed rate
loan during the Floating Rate Term. Any approval
of a fixed rate loan by Lender shall be subject
to completion satisfactory to Lender of any new
third party reports, other due diligence
investigations and loan documentation required
by Xxxxxx and at a spread and Loan Amount,
determined by Xxxxxx.
Minimum DSCR: 1.68% based on the ratio of (a) Lender's
determination of sustainable net operating
income, adjusted for applicable reserves for the
trailing 12 month period ending October 31,
2001, to (b) the debt service under the Loan
assuming an interest rate of 8.00%. Lender will
reduce the Loan Amount if (i) yields on the One-
Month LIBOR exceed 4.00% at Initial Rate
Determination in order to maintain a Minimum
DSCR or 1.68%, or (ii) Lender determination of
sustainable net operating income is reduced.
(For informational purposes only, One-Month
LIBOR is approximately 2.10% on the date of this
Commitment.)
Maximum LTV: Not greater than 60%, based on Lender
underwriting and an appraisal cap rate of no
greater than 11.0%.
Equity Contribution: Triod LLC, NextHealth, Inc., or the current
parent company
3
of Xxxxxxxx has engaged Xxxxx & Xxxxx ("E&Y") to
provide an audit of Nexthealth, Inc. and to
create a post closing pro-forma balance sheet for
Borrower. Lender has approved E&Y. The Loan is
subject to Xxxxxx's review and acceptance of the
audit and the equity allocation attributed to
Xxxxxxxx in the E&Y audit and pro-forma balance
sheet, it being understood that the allocation of
at least $27 million will be acceptable. Review
and acceptance of the E&Y reports will be made at
the sole discretion of Lender.
Borrower represents that its parent(s) is/are
purchasing the total assets of Next Health, Inc.
through a series of transactions for
approximately $78.371 million or $5.10 per share.
As a result of such transaction, Borrower will
become a wholly owned subsidiary of a wholly
owned subsidiary of Triod LLC. In addition,
Borrower represents that the STAC Building, which
has an estimated market value of $5,000,000, will
be contributed by ODE, LLC to Triod, LLC and
added to the capitalization of Triod, LLC.
Xxxxxxxx currently anticipates senior debt to
account for $42.6 million of the aquisition
capitalization. The Borrower currently
anticipates that the Mezzanine Debt (likely to be
provided by Charlesbank and Appollo Real Estate
Advisors) will account for $19.5 million of the
total acquisition capitalization. Borrower
represents that the combination of the senior
debt and the mezzanine debt will not exceed $62.1
million or 74.5% of combination of the
acquisition price for Nexthealth, Inc. (estimated
to be $78.371 million) and the market value of
the STAC Building (estimated to be $5 million).
The loan is subject to Xxxxxx's review and
acceptance of the final capital structure.
Net Cash Flow: Defined as total gross revenues from the spa and
resort ("TGR") less operating expenses, as
determined by Lender, including, but not limited
to, a 3.0% deduction from TGR for management
fees, a 9.0% deduction from total gross revenue
for marketing and franchise fees and a 4%
deduction from TGR for an FF&E Reserve. Such Net
Cash Flow shall be calculated on a trailing
twelve month basis unless otherwise specified.
Property Manger/
Termination: The property manager retained by Xxxxxxxx (the
"Property Manager") may be removed by Xxxxxx in
its sole discretion
4
upon an event of default under the Loan
Documents or if, (i) for the preceding twelve
(12) months, the ratio of (1) Net Cash Flow, to
(2) debt service for the corresponding period
payable on the Loan, falls below 1.10x or (ii)
upon the insolvency, voluntary or involuntary
bankruptcy of the Property Manager. Borrower
will select a new manager based on a series of
three or more management companies that have
been pre-approved by Lender at its sole
discretion.
Cash Management Account: At closing, Borrower shall establish a clearing
account ("Clearing Account") at a bank
acceptable to Borrower. All revenue, rents, and
other cash flows of the Property will be
deposited daily into the Clearing Account and
shall be swept into a Cash Management Account
controlled by and in the name of the Lender upon
the commencement and during the continuation of
a Sweep Period (defined below). Funds in the
Cash Management Account shall be applied by
Lender to the following payments: (a) payment of
real property taxes, insurance premiums, and
ground rent, if any, (b) debt service payments
due under the Loan, (c) seasonality reserve if
applicable, (d) the required FF&E Reserve and
(e) debt service payments due in relation to the
$1.4 million mezzanine loan made by Apollo Real
Estate Advisors. Excess cash flow shall be
disbursed to Borrower, only to the extent
necessary to reimburse Borrower for approved
operating expenses, and all remaining cash flow
shall be applied to pay down the outstanding
principal balance of the Loan. For purposes
hereof the term "Sweep Period" shall mean the
period commencing on and after the occurrence of
any one of the following: (a) if for the
preceding twelve (12) months (provided that for
results for September 2001, October 2001 and
November 2001 will be replaced by numbers from
September 2000, October 2000 and November 2000
for the purpose of such calculation), the ratio
of (1) Net Cash Flow (as defined above) to (2)
the debt service payable on the Loan for the
corresponding period assuming a debt service
constant of 8.00% falls below 1.15x, or (b) upon
the insolvency, voluntary or involuntary
bankruptcy of the Borrower or (c) upon an Event
of Default of the Loan, or (d) during the
Extended Term if the ratio of (i) Net Cash Flow
for the trailing 6 month period to (ii) debt
service for the corresponding period based upon
a debt service constant of 8.00% is 1.70x or
less. Notwithstanding the foregoing, following a
lockbox event not more than once during the Loan
Term, if
5
for a period of 6 consecutive months (i) there
are no events of default, (ii) Borrower is not
insolvent, and (iii) for the preceding twelve
(12) months the ratio of (1) Net Cash Flow to
(2) the debt service payable on the Loan for the
corresponding period assuming a debt service
constant of 8.00% is above 1.80x, the sweep from
the clearing account will cease.
If the "Sweep Period" occurs during the first 5
months of the loan, and (i) there are no events
of default, (ii) Borrower is not insolvent, and
(iii) for the preceding twelve (12) months the
ratio of (1) Net Cash Flow to (2) the debt
service payable on the Loan for the
corresponding period assuming a debt service
constant of 8.00% is above 1.25x, the sweep from
the clearing account will cease.
Third Party Reports: Xxxxxx has, at Xxxxxxxx's expense, commissioned
and received a Phase I environmental report and
an engineering report by the environmental
consultant (the "Environmental Consultant") and
the engineer (the "Engineer") selected by
Xxxxxx. If recommended by the Environmental
Consultant in the Phase I report, Lender shall
require that a Phase II environmental
investigation be performed at Borrower's expense
and that the results thereof be submitted to
Lender in a written report. All investigations
and reports of the Environmental Consultant and
the Engineer must be acceptable to Xxxxxx.
Xxxxxx has also commissioned and received, at
Xxxxxxxx's expense, a full narrative appraisal
of the Property (the "Appraisal") by an
appraiser (the "Appraiser") selected by Xxxxxx.
It shall be a condition to Rate Lock and the
making of the Loan that the Appraisal indicate a
current fair market value of the Property of no
less than the minimum amount necessary to
satisfy the loan to value constraint set forth
in this Schedule 1 and otherwise be satisfactory
to Lender in all respects.
Xxxxxxxx has authorized Lender to engage the
Appraiser, the Environmental Consultant and
Engineer for the purposes described herein and
(a) had authorized the Environmental Consultant,
the Engineer and the Appraiser to perform such
investigations, contact such persons, entities
or governmental authorities and to perform such
non-intrusive and intrusive investigations of
the Property as
6
they shall deem appropriate, and (b) agrees that
Borrower shall not have any claim against Lender
relating to the conduct by such persons of such
activities or the willful misconduct or
negligence of such persons in connection with
such activities.
Financial Reporting: Borrower shall be required to provide certain
financial reporting, including without
limitation, within ninety (90) days after the
end of each fiscal year, annual financial and
operating statements prepared by a CPA,
acceptable to Lender, and within thirty (30)
days after the end of each month, monthly
operating statements in accordance with (GAAP)
or on an accrual basis following standard hotel
chart of accounts, or such other accounting
basis reasonably acceptable to Lender and
certified as true and correct by Borrower's CFO.
In addition, Borrower shall include monthly ADR,
occupancy, and REVPAR statistics, and quarterly
Xxxxx Travel Research reports for the
competitive set (to be defined).
Operating Escrows: A monthly escrow for taxes, insurance, ground
rents (if applicable), water rents and other
special assessments will be required.
FF&E Reserve: A monthly escrow deposit will be required in an
amount equal to 1/12 of an annual FF&E reserve
amount of 4% of total revenues, which may be
increased based upon the engineer's report. In
no event shall the FF&E reserve for any year
during the Term be less than the amount required
during the first year of the Loan.
Seasonality Reserve: At closing, Borrower must deposit with Lender
$1,000,000 as a Seasonality Reserve. In
addition, Borrower shall deposit into the
Seasonality Reserve $250,000 with each monthly
payment of debt service that is due in each
February, March, and April during the Term of
the Loan, and $125,000 with each monthly payment
of debt service that is due in each October and
November during the Term of the Loan as a
Seasonality Reserve. The Seasonality Reserve
will be available for use to cover shortfalls in
operating income to pay for debt service, other
required reserves, and operating expenses
approved by Lender. The seasonality reserve will
be capped at $1,500,000.
Deferred Maintenance Reserve: Borrower shall deposit with Lender $81,480 as a
reserve for the performance of certain deferred
maintenance work
7
recommended by the engineering report for the
Property delivered to Lender.
Debt Service Reserve: At closing, Borrower must deposit with Lender
cash, or a sight-draft letter of credit in form
and substance acceptable to Lender and drawn on
a commercial bank rated at least "A" by
Standard & Poor's and "A2" by Moody's, in the
amount of $1,000,000. The Debt Service Reserve
shall be held by Xxxxxx as additional security
for the Loan.
Nonconsolidation Opinion: Lender shall receive an opinion in form and
from a counsel acceptable to Lender that (i)
the assets of Borrower should not be
consolidated with the assets of the Controlling
Party or any other persons or entities owning
directly or indirectly more than a 49% interest
in the Borrower in the event of a bankruptcy or
insolvency of the Controlling Party or such
other persons or entities and (ii) the assets
of the Controlling Party should not be
consolidated with the assets of any persons or
entities owning directly or indirectly more
than 49% of the Controlling Party in the event
of a bankruptcy or insolvency of such person or
entities.
Independent Director: The Loan Documents and the organizational
documents of Xxxxxxxx and Xxxxxxxx's general
partner(s) and managing member(s), as the case
may be ("Controlling Party"), will require the
appointment of one independent director for
Xxxxxxxx and/or the Controlling Party (as
applicable), acceptable to Xxxxxx and require
the unanimous vote of directors of Borrower
and/or Controlling Party in connection with
bankruptcy or insolvency matters.
Assumability: Only with Xxxxxx's consent which may be
withheld in Xxxxxx's sole discretion, and
payment of an assumption fee to be determined
in Xxxxxx's sole discretion.
Additional Encumbrances: None during the term of the Loan, except as
provided herein.
Transferability
of the Loan: Lender shall have the right to freely transfer
all or any portion of its interest in the Loan
or the servicing for the Loan.
Late Charge: In the event any payment under the Loan becomes
overdue for a period of five (5) days or more,
a late charge of five
8
cents ($.05) for each dollar of the amount
overdue shall become due and payable to Lender.
Borrower Cooperation: Borrower shall, upon request and at no material
cost to Borrower, provide Lender with such
information (in order for Lender to sell the
Loan or participation interests thereof)
regarding the Property, the Borrower, the
Property Manager and their respective affiliates
as Lender may reasonably request in order to (i)
comply with the disclosure laws, (ii) satisfy
rating agency inquiries and reasonable investor
requests for information and (iii) provide the
marketplace with such information as is
customarily provided in similar transactions. If
necessary, Xxxxxxxx agrees to execute additional
documents in connection to the Loan, or loans
made to affiliates of Borrower, which have no
material economic effect on Borrower or
affiliates thereof with respect to the loans.
Asbestos Operations and
Maintenance Plan: Prior to or at closing, Borrower must implement
an asbestos operations and maintenance plan for
the Property. Lender shall commission such
plan at Xxxxxxxx's expense.
Noncompetition: Xxxxxx's obligations hereunder are conditioned
upon receipt of adequate assurance from Borrower
and its affiliates that no competing facility
will be developed on the "North Campus" acreage
that is adjacent to the Property.
Mezzanine Financing: Xxxxxx's obligations hereunder are conditioned
upon review and approval of the terms,
conditions, and documentation for any mezzanine
loan to Borrower's parent company or the
Borrower.
Principal Litigation: Xxxxxx's obligations hereunder are conditioned
upon review and approval of explanations of
litigation that is currently pending against
Xxxxxxx X'Xxxxxxx.
Broker: None.
Title Company: Borrower shall select one of the Title Companies
set forth on Exhibit A attached hereto to
provide the Title Insurance required by this
Commitment. If Xxxxxxxx wishes to use a local
agent, Xxxxxxxx's order for title insurance
must nevertheless be placed with one of the
Title Companies set forth on Exhibit A, with a
request made for the
9
listed Title Company to engage the local agent.
The Title Company will order the transaction and
compile all costs associated with the work, once
the attached Exhibit A is completed and signed.
The Title Company may ask the Borrower to verify
acceptance of the title order. The Title Company
will initiate the title insurance and, if
requested, the survey process. Note: All title
orders are to be placed with a representative
listed on the attached title order form (Exhibit
A) at the National Office listed. Failure to do
so may result in additional costs or delays in
your closing.
Notwithstanding the foregoing, the Title Company
is merely to expedite the closing of the Loan
and Lender is not responsible for the
performance of the Title Company. Borrower
acknowledges and agrees that the Title Company
will provide its services directly to Borrower
and Lender is not responsible for any fees,
costs or expenses of the Title Company.
Management Fees: During the Term of the Loan, Borrower shall not
enter into any management agreement for the
management of the Property without Xxxxxx's
prior written consent. In no event shall
Borrower be permitted to pay a management fee
(or other similar fees, e.g. asset management
fees, franchise fees, etc.) in excess of 3% of
gross income from the Property, and in any
event, such fees must be fully subordinate to
the Loan.
Additional Conditions: Xxxxxx's obligations hereunder are subject to
Xxxxxx's review and approval in its sole
discretion of the November 2001, December 2001,
January 2002 and February 2002 operating
statements for the Property.
10
SCHEDULE 2
----------
The Property shall consist of the land and improvements known as Miraval
Resort & Spa, 00000 Xxxxx Xxxx xxx Xxx Xxxxxxx, Xxxxxxxx, Xxxxxxx, which
property Borrower represents is comprised of 106 hotel units and related
amenities in 33 buildings, all constructed in 1995, and all of which is upon 130
acres of land (collectively, the "Property"). As a condition to Xxxxxx's
obligations hereunder, the Property shall be satisfactory to Lender.
1
EXHIBIT A
BEAR, XXXXXXX COMMERCIAL MORTGAGE, INC.
TITLE SERVICES ORDER FORM
Please complete and sign this form and designate which Title Company you wish to
use; the selected Title Company will then contact your correspondent directly
concerning costs and requirements.
We hereby request you use the below title companies through their National
Office:
Chicago Title Insurance Company First American Title Insurance Company
000 Xxxxx Xxxxxx, 0xx Xxxxx xx Xxx Xxxx -- National Office
New York, NY 10017 000 Xxxxx Xxxxxx
Attn: Xxxxx Xxxxxxx Xxx Xxxx, XX 00000
Phone: (000) 000-0000 Attn: Xxxxxxxxx Xxxxxxx
Phone: (000) 000-0000 x0000
Fax: (000) 000-0000 (000) 000-0000
Fax: (000) 000-0000
Lawyers Title Insurance Corporation Commonwealth Land Title
000 Xxxxx Xxxxxx Xxxxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000 National Title Services Division
Attn: Xxxxx Xxxxx 000 Xxxxx Xxxxxx, 00xx Floor
Phone: (000) 000-0000 New York, NY 10017
Fax: (000) 000-0000 Attn: Xxxxx Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Xxxxxxx Title Guaranty
301 So. XxXxxxxx Xxxxxx #000
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
2
BEAR, XXXXXXX COMMERCIAL MORTGAGE, INC.
TITLE SERVICES ORDER FORM
EXHIBIT A (continued)
---------------------
Name of Title Company:________________________________________________________
______________________________________________________________________________
Borrower:_____________________________________________________________________
Address:______________________________________________________________________
______________________________________________________________________________
Phone:________________________________________________________________________
Fax:__________________________________________________________________________
Borrower's Counsel:___________________________________________________________
Firm:_________________________________________________________________________
Address:______________________________________________________________________
______________________________________________________________________________
Phone:________________________________________________________________________
Fax:__________________________________________________________________________
1. Type of Transaction:____________ New Mortgage
_______ Refinance or ________ Acquisition
2. Requested Loan Amount: $_______________ Estimated Closing Date:_________
3. Record Title Holder:_______________________________________________________
4. Property Address:__________________________________________________________
County:_______________ State:________________ Tax Parcel No.___________
5. Property Type: _______ Office _______ Industrial ______ Multifamily
_____ Shopping Center _____ Hotel _____ Warehouse ____ Healthcare
3
EXHIBIT B
---------
Unauthorized transfers are any sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer which shall be deemed to include,
but not limited to:
(a) an installment sales agreement wherein Xxxxxxxx agrees to sell the Property
or any part thereof for a price to be paid in installments;
(b) an agreement by Borrower leasing all or a substantial part of the Property
for other than actual occupancy by a space tenant thereunder or a sale,
assignment or other transfer of, or the grant of a security interest in,
Xxxxxxxx's right, title and interest in and to any Leases or any Rents;
(c) if Borrower or any general partner of Borrower is a corporation, the
voluntary or involuntary sale, conveyance, transfer or pledge of such
corporation's stock or the creation or issuance of new stock by which an
aggregate of more than 49% of the ownership of such corporation's stock
shall be vested in or pledged to a party or parties who are not now
stockholders;
(d) if Borrower or any general partner of Borrower is a limited liability
company, the voluntary or involuntary sale, conveyance, transfer or pledge
of membership interests in the capital or profits of such company or the
creation or issuance of new membership interests by which an aggregate of
more than 49% of the ownership of such company's membership interests shall
be vested in or pledged to a party or parties who do not now hold
membership interests in such company;
(e) if Borrower or any general partner of Xxxxxxxx is a limited or general
partnership or joint venture, (i) the change, removal or resignation of a
general partner or managing partner, (ii) the transfer or pledge of the
partnership interest of any general partner or managing partner or any
profits or proceeds relating to such partnership interest, (iii) the
transfer or pledge of more than 49% of the capital or profits of the
partnership or (iv) the creation or issuance of new partnership interests
by Borrower or its general partner which an aggregate of more than 49% of
the ownership of partnership interests in such partnership shall be vested
in a party or parties who do not now hold partnership interests in such
partnership or joint venture; and
(f) other than in accordance with the foregoing, any voluntary or involuntary
sale, transfer, conveyance or pledge by any person or entity which directly
or indirectly controls Borrower (by operation or law or otherwise)(a
"Principal") of its direct or indirect controlling interest in Borrower,
other than in connection with certain mezzanine debt of Triod, LLC to be
approved by Lender prior to closing.
Notwithstanding the foregoing, the following transfers shall be permitted: (A)
transfer by devise or descent or by operation of law upon the death of a
partner, member or stockholder of Borrower or any general partner thereof, and
(B) a sale, transfer or hypothecation of a partnership, shareholder or
membership interest in Borrower, whichever the case may be, by the
4
current partner(s), shareholder(s) or member(s), as applicable, to an immediate
family member (i.e., parents, spouses, siblings, children or grandchildren) of
such partner, or shareholder or member or to a Principal (i.e., person currently
owning 20% or more of Borrower), or a trust for the benefit of any such persons.
5
