EXHIBIT 10.20
SECOND AMENDMENT OF
LOAN AGREEMENT
THIS SECOND AMENDMENT OF LOAN AGREEMENT ("Amendment") is made this 9th day
of June, 2005 by Summit Hotel Properties, LLC, a South Dakota limited liability
company ("Borrower") and First National Bank of Omaha, a national banking
association ("Bank") and amends that certain Loan Agreement dated July 20, 2004
between Borrower and Bank ("Loan Agreement").
WHEREAS, pursuant to the Loan Agreement and the other Loan Documents, Bank
extended to Borrower a Line of Credit in the maximum principal amount of
$18,000,000.00 more fully described in the Loan Agreement;
WHEREAS, pursuant to that certain First Amendment of Loan Agreement dated
October 1, 2004 and under the terms and conditions thereof, Borrower requested
and Bank advanced the Boise Acquisition Advance; and
WHEREAS, under the terms of this Amendment, Borrower has requested that
Bank increase the maximum principal amount available under the Line of Credit to
$25,000,000.00, allow Borrower to use Advances to construct improvements to
Property acquired by Borrower, and under the terms and conditions of this
Amendment, Bank has agreed to allow Borrower to increase the maximum principal
amount available under the Line of Credit to $25,000,000.00 and to permit
Borrower to use Advances to construct improvements to Property.
NOW, THEREFORE, in consideration of the amendments to the Loan Agreement
provided for below, the mutual covenants herein and other good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged, the
parties agree to amend the Loan Agreement as follows:
1. Capitalized terms used herein shall have the meaning given to such terms
in the Loan Agreement, unless specifically defined herein.
2. The recital and Section 1.1 of the Loan Agreement are hereby amended to
delete the reference to Eighteen Million and No/100 Dollars ($18,000,000.00) as
the maximum principal amount of the Line of Credit and inserting in lieu thereof
Twenty-Five Million and No/100 Dollars ($25,000,000.00).
3. Section 1.2 of the Loan Agreement shall be deleted in its entirety and
inserting the following in lieu thereof:
"1.2. Purpose. Company shall use the Advances for the following
purposes: (i) to finance Company's purchase of a limited service hotel(s)
(an Advance used for such purpose shall be hereinafter referred to as an
"Acquisition Advance"); (ii) to finance the equity to be raised by Company
from investors in connection with the purchase of a limited service hotel,
with the remainder of the purchase price for the limited service hotel
financed through other financial accommodations obtained by Company (an
Advance used for such purpose shall be hereinafter referred to as an
"Equity Advance"); (iii) to finance Company's working capital needs (an
Advance used for working capital needs shall be hereinafter referred to as
a "Working Capital Advance"); and (iv) to fund the construction of a
limited service hotel and related improvements on real property acquired by
Company (an Advance to construct a limited service hotel and related
improvements on Property shall be hereafter referred to as a "Construction
Advance" and
the limited service hotel and related improvements to be financed with each
Construction Advance shall be referred to as a "Project"). As used in this
Agreement, the term "Property" shall mean a limited service hotel and all
assets related thereto purchased by Company and financed with Lender with
an Acquisition Advance or with the equity financed with an Equity Advance.
The term Advance shall refer collectively to Acquisition Advances, Equity
Advances, Working Capital Advances and Construction Advances (including a
Construction Advance converted to a Construction Term Note as provided for
below). The term Equity Investor shall mean a person or entity who
contributes cash capital as part of the equity raised to purchase a
Property. The term Investor Equity shall mean the cash capital contributed
to a Property by an Equity Investor.
An initial Advance in the amount of $9,952,000.00 will be used to
refinance Company's existing indebtedness to Lender evidenced by that
certain Term Note in the principal amount of $3,000,000.00 dated February
12, 2004 executed and delivered by Company to Lender and the indebtedness
owed to the other Equity Lenders on the Hotels described in and as such
terms are defined in that certain Loan Agreement dated February 12, 2004
between Company and Lender. Such Advance shall be an Equity Advance and
shall be evidenced by a Term Note in the form of the Term Note form
attached hereto as Exhibit A."
4. Section 1.3 of the Loan Agreement shall be amended by inserting the
following at the end thereof:
"Construction Advances in the aggregate shall at no time exceed
$12,000,000.00 outstanding at any time, and each Construction Advance
individually shall not exceed 15% of the Total Project Cost. Total Project
Cost shall mean the total cost (including hard and soft costs) of
constructing a Project as set forth in a Project Budget to be provided to
Lender by Company and approved by Lender. Project Budget shall mean the
project budget showing the total cost (including hard and soft costs) of a
Project as approved by Lender. No Construction Term Note (as defined in
Section 1.5 below) shall exceed sixty-five percent (65%) of the lesser of
(i) the appraised value of such Property or (ii) the Total Project Costs
for such Property."
5. Section 1.4 of the Loan Agreement shall be amended by inserting the
following at the end thereof as a new paragraph:
"Each Construction Advance shall be evidenced by a Construction Note
in the maximum principal amount of the Construction Advance to be executed
and delivered by Company to Lender prior to any advances being made under
such Construction Note. Advances under a Construction Note shall be made in
accordance with the applicable provisions of this Agreement and the terms
of such Construction Note. The availability for Advances under the Line of
Credit shall be reduced by the maximum principal amount of the Construction
Note as of the date of such Construction Note. Each Construction Note
evidencing a Construction Advance shall have a term not to exceed eighteen
(18) months from the date of the Construction Note evidencing such
Construction Advance."
Each Construction Note shall be substantially in the form of the
Construction Note attached to this Amendment as Exhibit A and incorporated
herein by reference.
6. Section 1.5 of the Loan Agreement shall be amended by inserting the
following at the end thereof as a new paragraph:
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"Each Construction Note shall be payable as follows: (i) interest only
shall be payable monthly, in arrears on the dates specified in the
applicable Construction Note; and (ii) the principal balance together with
accrued and unpaid interest shall be due and payable in full on the
Maturity Date provided for in each Construction Note; provided, however,
that subject to the terms of this Agreement and provided that no Event of
Default has occurred, Company may, on the Maturity Date of such
Construction Note, convert the principal amount outstanding on a
Construction Note to either (i) an Equity Advance or (ii) a "Construction
Term Note" described below. If Company elects to convert the principal
amount outstanding on a Construction Note to an Equity Advance, then such
Equity Advance shall be evidenced by a Term Note in the principal amount of
the of the principal amount of the Construction Advance being converted,
shall accrue interest as provided for in Section 1.6 below and shall be
payable as provided for in this Section 1.5 above with respect to interest
on and repayment of Equity Advances. If Company elects to convert the
principal amount outstanding on a Construction Note to a Construction Term
Note, then such Construction Term Note shall be evidenced by a Construction
Term Note in the principal amount of the principal amount outstanding on
the Construction Advance being converted executed by Company in favor of
Lender, shall bear interest at a variable per annum rate equal to one
quarter of one percent (1/4%) below the National Base Rate, and shall be
payable as follows: (i) interest only shall be paid monthly, in arrears and
(ii) the principal balance together with accrued and unpaid interest shall
be due and payable in full on the first anniversary date of the
Construction Term Note. In addition, on each Construction Term Note,
Company shall apply and pay on such Construction Term Note the Investor
Equity raised for the applicable Project as and when the Investor Equity
collected by Company from each Equity Investor is funded and subsequently
released pursuant to the Escrow Account created under the Escrow Agreement,
net of reasonable expenses of raising and collecting the Investor Equity.
Company shall cause such Investor Equity to be deposited into the Escrow
Account. The principal balance outstanding together with accrued and unpaid
interest shall be due and payable in full on the first anniversary date of
such Construction Term Note whether or not Investor Equity has been
committed and/or funded."
7. Section 1.6 of the Loan Agreement shall be amended by inserting the
following between the third and fourth sentences of such Section:
"The principal balance of each Construction Advance shall bear interest at
a variable per annum rate equal to one quarter of one percent (1/4%) below
the National Base Rate."
8. Article I of the Loan Agreement shall be amended by inserting the
following new Sections:
"1.10. Construction Loan Advances. Subject to compliance by Company
with the terms and conditions of this Agreement, Lender shall make advances
under a Construction Note to Company according to the applicable Loan
Budget for the Project financed with the Construction Note (i) for direct
construction costs provided for in the Project Budget incurred by Company
in connection with the construction of the Project, and (ii) for costs,
other than such direct construction costs, incurred by Company in
connection with the Construction Advance or the construction of the Project
and approved by Lender in the Loan Budget (hereinafter referred to as
"Other Project Costs"), as itemized in an Application for Certificate for
Payment, AIA Document G702, together with continuation sheets, AIA Document
G703, as the same may be revised from time to time after the date hereof
with the approval of Lender. Loan Budget shall mean the budget for the
Construction Advance proceeds approved by Lender and otherwise in form,
detail and substance satisfactory to Lender. Lender shall not be required
to make an advance under a Construction Note to Company in an amount in
excess of that set forth in the Loan Budget for any item set forth therein.
The Loan Budget may be amended during the course of construction
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of a Project to reallocate funds from a budget category in which the full
budgeted amount is not required to another budget category provided that
any such reallocation which results in a variance over five percent (5%)
and greater than $5,000.00 as to any such budget category shall be subject
to the prior written approval of Lender. Lender shall not be obligated to
make aggregate advances under a Construction Note in excess of the amount,
from time to time, of Total Project Costs, unless Lender in its sole
discretion, deems it advisable to do so. Each request by Company to Lender
for an advance under a Construction Note shall be on AIA Documents G702 and
G703 and a certificate of payment in form and substance satisfactory to
Lender and signed by the Company's chief financial officer (any such
request being hereinafter referred to as a "Request for Construction
Advance"). Each Request for Construction Advance shall be delivered to
Lender not less than seven (7) business days prior to the date upon which
an advance under a Construction Note is requested and shall be based upon
the items and descriptions shown in the continuation sheets, and shall be
accompanied by (i) lien waivers or paid invoices in form and content
acceptable to Lender, Lender's architect engaged to inspect the
construction of the Project (the "Inspecting Architect") and, if
applicable, the title company, executed by each and every individual
supplier of labor or material for all contracts greater than $10,000.00 in
the aggregate for all the costs of labor and material provided on a timely
basis for the immediately preceding disbursement (execution of lien waivers
are to be by proper party or parties so authorized to execute on behalf of
the supplier or contractor and shall clearly identify the party executing
the waiver, the date, the amount, the item of labor or materials supplied,
the name of the firm, and address of the property and such other documents
as may be required to induce the title company to insure each advance under
a Construction Note made hereunder against all future mechanics' and
materialmen's liens for labor furnished and material supplied in connection
with the construction of the Project); (ii) the requisitions for payment
from subcontractors and materialmen engaged in the construction of the
Project; and (iii) such other information and documents as may be
reasonably requested or required by Lender. All requests and requisitions
for payment shall be approved by Company's chief financial officer or other
officer acceptable to Lender. Advances under a Construction Note shall be
disbursed by Lender, and each advance under a Construction Note shall be
made, in whole or in part, (i) by crediting the amount thereof to an
account of Company to be maintained with Lender and designated for the
applicable Project, (ii) at the discretion of Lender, by paying the general
contractor on the Project (the "General Contractor") of a subcontractor or
materialmen engaged in the construction of the Project, or (iii) in such
other manner as shall be mutually agreed upon by the title company and
Lender. Lender shall not be obligated to make advances under a Construction
Note more frequently than once every thirty (30) days. Lender shall not be
obligated to make an advance under a Construction Note unless Lender is
satisfied, in its sole discretion, and the Inspecting Architect is
satisfied, that the conditions precedent to the making of such advance have
been satisfied by Company. Anything in this Agreement or any other
agreement made with respect to a Construction Advance to the contrary
notwithstanding, any advance under a Construction Note or approval given by
Lender or the Inspecting Architect, whether or not before or after an
inspection of the Project by Lender, the Inspecting Architect or otherwise,
shall not be deemed to be an approval by Lender of any work performed
thereon or approval or acceptance by Lender of any work done or materials
furnished with respect thereto or a representation by Lender as to the
fitness of such work or materials. All disbursements by Lender shall create
an indebtedness under the applicable Construction Note.
1.11. Advances for Stored Materials. Notwithstanding anything to the
contrary contained in this Agreement, Lender may make advances under a
Construction Note to pay for Stored materials required in connection with
the construction of the Project, provided that (i) such materials are in
accordance with the Plans and Specifications approved by Lender for the
Project, (ii) such materials are securely stored and properly inventoried,
(iii) such materials, if stored off-
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site, are stored in a bonded warehouse or with a contractor, materialman or
fabricator who bears the risk of loss until delivery and installation of
such materials in the Project as part of the work in place, and who has
supplied a bond securing such contractor's, materialman's or fabricator's
obligation to so deliver and install, such bond shall be issued by a
company, shall be in an amount and shall be in form and substance
satisfactory to Lender and shall name Lender as a dual obligee, (iv) the
bills of sale and contracts under which such materials are being provided
shall be in form and substance satisfactory to Lender, (v) such materials
are insured against casualty, loss and theft in a manner satisfactory to
Lender, (vi) Company owns such materials free and clear of all liens and
encumbrances of any nature whatsoever and establishes such ownership by
evidence satisfactory to Lender, (vii) Company executes and delivers to
Lender such additional security documents as Lender shall deem necessary to
create and perfect a first lien in such materials as additional security
for the payment of the Construction Advance, (viii) the aggregate amount of
such disbursements for such materials is verified by Lender pursuant to the
provisions of this Agreement, and (ix) the aggregate amount of such
disbursements for such materials which are stored shall in no event exceed
Fifty Thousand Dollars ($50,000.00).
1.12. Additional Conditions to Advances under a Construction Note. The
obligation of Lender to make any advances under a Construction Note
pursuant to this Agreement (including, but not limited to the initial
advance if applicable) is subject to the following additional conditions
precedent:
(a) Each Request for Advance shall be accompanied by a certificate of
the Inspecting Architect in the form attached to the Request for Advance
based upon an on-site inspection of the Project made by the Inspecting
Architect not more than seven (7) days prior to the date of such Request
for Advance, in which the Inspecting Architect shall (i) certify that the
portion of the Project completed as of the date of such inspection has been
completed in accordance with the Plans and Specifications approved by
Lender, and (ii) state its estimate of (aa) the percentage of construction
of the Project completed as of the date of such inspection on the basis of
work in place as part of the Project and the continuation sheets of the
Request for Advance, (bb) direct construction costs actually incurred for
work in place as part of the Project as of the date of such inspection,
(cc) the actual sum necessary to complete construction of the Project in
accordance with the approved Plans and Specifications, and (dd) the amount
of time from the date of such inspection which will be required to complete
construction of the Project in accordance with the approved Plans and
Specifications.
(b) Prior to each advance under a Construction Note, the title company
shall have issued (i) an endorsement to the Title Policy reflecting the
amount of all previous advances, insuring the continued priority of the
deed of trust or mortgage applicable to the Project over mechanic's liens
and showing no exceptions to the title of the property encumbered thereby
other than those exceptions previously approved by Lender, and (ii) a
commitment to issue an endorsement insuring the priority of the lien of the
deed of trust or mortgage applicable to the Project, subject only to
exceptions previously approved by Lender in writing, for the full amount of
each such advance under such Construction Note and all previous advances
under such Construction Note made by Lender to Company pursuant to this
Agreement. Such continuation of title shall contain affirmative insurance
that covenants and restrictions, if any, reported against the fee or
leasehold estate have not been violated by the Project.
(c) Prior to each advance under a Construction Note, Company shall,
upon request of Lender, furnish Lender, the title company and the
Inspecting Architect with evidence satisfactory to Lender, the title
company and the Inspecting Architect, showing payment of all bills and
charges for which advances under such Construction Note have been
previously made pursuant to
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this Agreement. Company shall also deliver to Lender, upon request, such
bills, receipts, invoices and other evidence as may reasonably be required
by Lender, the title company and/or the Inspecting Architect.
(d) Construction of the Project shall comply with all applicable laws,
rules, restrictions, orders and regulations of all governmental authorities
with jurisdiction over the Project, and Company shall have delivered to
Lender all necessary certificates, authorizations, permits and licenses
which are required to permit the construction and completion of the
Project, as issued by the appropriate governmental authorities. Company, to
the extent Company may lawfully do so, hereby assigns to Lender all of
Company's right, title and interest in and to such certificates,
authorizations, permits and licenses, as security for the payment of the
applicable Construction Note and the observance and performance by Company
of the terms, covenants and provisions of the Loan Documents.
(e) Company shall have submitted to Lender and the Inspecting
Architect the Plans and Specifications. Company shall have submitted the
Plans and Specifications to the General Contractor and the General
Contractor shall have agreed to perform its obligations under the General
Construction Contract in a manner consistent with the requirements of the
Plans and Specifications and to keep the Project within budget. The General
Construction Contract and all major subcontracts shall include a provision
for retainage of not more than ten percent (10%) of all amounts due, which
retainage shall be disbursed only upon substantial completion of the
Project and satisfaction of all final disbursement and certification
requirements, except as otherwise approved by Lender in writing. Each
material addition or modification to the Plans and Specifications shall be
approved in writing by Lender, and, to the extent required by law, by the
appropriate governmental authorities. Company shall construct and equip the
Project in accordance with the Plans and Specifications approved by Lender
free and clear of all liens, encumbrances and security instruments (other
than the deed of trust or mortgage encumbering the Project and the other
Loan Documents and the permitted encumbrances set forth therein). The Plans
and Specifications as approved by Lender shall become the property of
Lender upon the occurrence of an Event of Default. The Project shall be
constructed and equipped in compliance with the requirements of
governmental authorities including, without limitation, zoning, building
codes, and laws relating to disabled persons, endangered species, and the
environment. Lender and/or its representatives (including, without
limitation, the Inspecting Architect) shall have the right of entry and
free access to the Project to inspect the Project during normal business
hours upon reasonable notice. Company shall make available to the
Inspecting Architect and Lender, upon request and at the location where the
same are kept, all shop and related drawings used in connection with the
Plans and Specifications and the construction of the Project, and shall
provide copies of such drawings and documents to Lender and the Inspecting
Architect promptly upon request.
(f) The Inspecting Architect shall be of the opinion that the Project
can be completed by its completion date within budget.
(g) Company shall have delivered to Lender and the Inspecting
Architect a copy of the Architect Contract for the Project, which Architect
Contract shall be in form and substance satisfactory in all respects to
Lender and to the Inspecting Architect. Company shall not agree to any
material modification or termination of the Architect Contract without the
prior approval of Lender. Company hereby assigns to Lender all of Company's
right, title and interest in and to the Architect Contract, as security for
the payment of the Construction Note and the observance and performance by
Company of the terms, covenants and provisions of the Loan Documents.
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(h) Company shall have delivered to Lender a copy of the General
Construction Contract, which General Construction Contract shall be in form and
substance satisfactory in all respects to Lender. Company shall not agree to any
material modification or termination of the General Construction Contract
without the prior approval of Lender. Company hereby assigns to Lender all of
Company's right, title and interest in and to the General Construction Contract,
as security for the payment of the Construction Note and the observance and
performance by Company of the terms, covenants and provisions of the Loan
Documents.
(i) All major subcontracts shall be submitted to Lender and the Inspecting
Architect before any such major subcontracts are awarded by Company or the
General Contractor, and each major subcontract shall be in form and substance
satisfactory in all respects to Lender. A subcontract shall be deemed major if
the amount due thereunder is $75,000.00 or more. Neither Company nor General
Contractor shall agree to any material modification or termination of any major
subcontract without the prior approval of Lender. Company hereby assigns to
Lender all of Company's right, title and interest in and to the major
subcontracts, as security for the payment of the Construction Note and the
observance and performance by Company of the terms, covenants and provisions of
the Loan Documents.
(j) Company shall make available for inspection at all times by Lender and
the Inspecting Architect copies of all subcontracts other than the major
subcontracts, and shall furnish to Lender and the Inspecting Architect, upon
request, copies of the same. Neither Company nor General Contractor shall agree
to any material modification or termination of such subcontracts without the
prior approval of Lender. Company hereby assigns to Lender all of Company's
right, title and interest in and to such subcontracts, as security for the
payment of the Construction Note and the observance and performance by Company
of the terms, covenants and provisions of the Loan Documents.
(k) The major subcontracts shall be awarded in accordance with the
timetable approved by Lender and the Inspecting Architect, as the same may be
revised from time to time with the approval of Lender. If requested by Lender,
Company shall cause the Architect, the General Contractor and the major
subcontractors to respectively execute and deliver to Lender, contemporaneously
with the execution and delivery of their respective contracts, consents or
letter agreements pursuant to the provisions of which the Architect, the General
Contractor and the major subcontractors shall agree to perform their respective
contracts at no additional cost or expense for the benefit of Lender, in the
Event of Default or a foreclosure of the deed of trust or mortgage applicable to
the Project, which consent or letter agreement shall be in form and substance
satisfactory to Lender.
(l) Lender shall not be obligated to make an advance under a Construction
Note with respect to any subcontractor or materialman providing work or
materials with respect to the Project unless such subcontractor or materialman
is providing such work or materials under a signed contract or purchase order.
(m) Company shall observe and perform all of the terms, covenants and
conditions of the Architect Contract, the General Construction Contract, the
subcontracts and any other contracts relating to the Project on Company's part
to be observed or performed.
(n) Company shall be in compliance with all environmental laws which are
applicable to the property encumbered by the applicable deed of trust or
mortgage and their use, and shall have submitted an environmental assessment in
form and content satisfactory to Lender prepared by a firm approved by Lender.
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(o) Lender and/or the Inspecting Architect shall have made such site
inspection of the Project site as it deems necessary.
(p) Lender shall have received the following, in addition to all other
conditions to the initial advance set forth in this Agreement, from Company on
or before the date of the initial advance hereunder:
(1) the applicable Construction Note, duly executed by Company;
(2) the applicable deed of trust or mortgage, duly executed by
Company, constituting a valid and perfected first lien on the Project;
(3) Uniform Commercial Code financing statements, in form and
substance satisfactory to Lender, duly authorized and describing the
equipment, machinery, furniture and fixtures and any personal property
collateral covered by the applicable deed of trust or mortgage;
(4) Any other applicable Loan Documents duly executed by Company and
any other person or entity required by the applicable Loan Document;
(5) a duly certified ALTA/ACSM survey showing the boundaries of the
land and all improvements thereon comprising the Project, with flood zone
and wetlands certification, of date satisfactory to Lender (upon request,
Company will supply successive surveys as construction progresses);
(6) evidence of zoning and construction permits;
(7) a complete copy of the Plans and Specifications along with any
changes or amendments thereto;
(8) an MAI Appraisal Report of the Project meeting FIRREA guidelines
and acceptable to Lender,
(9) A Phase I environmental site assessment meeting current ASTM
Standards and otherwise in form and scope satisfactory to Lender and such
other reports or studies of the Project as may be reasonably required by
Lender, performed by an environmental consultant or engineer acceptable to
Lender, which establishes the environmental condition of the Project as
satisfactory to Lender;
(10) A soil survey or study performed by engineers acceptable to
Lender which establishes that the soil condition of the Project is suitable
for the construction of the Project thereon;
(11) the Project Budget and Loan Budget, in form and substance
satisfactory to Lender and the Inspecting Architect;
(12) Evidence satisfactory to Lender that all installments of general
real estate taxes, special assessments and other levies against the Project
have been paid in full;
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(13) Evidence satisfactory to Lender that the construction of the
Project and the operation thereof are in compliance with all governmental
requirements and that all utilities necessary or desirable for the
operation of the Project are available to the Project; and
(14) Payment of all of Lender's costs and expenses incurred in
underwriting, documenting, closing and disbursing the Construction Advance,
including, but not limited to, Lender's attorneys' fees and costs.
All conditions and requirements of this Agreement relating to the obligations of
Lender to make advances under a Construction Note are for the sole benefit of
Lender and no other person or party (including, without limitation, the General
Contractor, major subcontractors, and other subcontractors and materialmen
engaged in the construction of the Project) shall have the right to rely on the
satisfaction of such conditions and requirements by Company as a condition
precedent to Lender making an advance under a Construction Note. Lender shall
have the absolute right, in its sole discretion, to waive any such condition or
requirement as a condition precedent to making an advance under a Construction
Note.
As used in this Section 1.12, a modification or change shall be material if
it results in a deviation from the original intent and/or expectations of
Company and Lender.
1.13. Advances Without Receipt of a Draw Request. Notwithstanding anything
to the contrary, Lender shall have the irrevocable right at any time and from
time to time to apply funds which it agrees to advance hereunder to pay interest
on the Construction Note as and when interest becomes due, and to pay any and
all reasonable actual costs of Lender in connection with a Construction Advance
which shall include all abstracting and recording fees, site inspection
expenses, reasonable attorneys' fees for preparation and review of documents,
and expenses related to the closing of the Construction Advance.
1.14. Deficiency: Company will submit to Lender and the Inspecting
Architect the Project Budget detailing by line item the estimated cost of
constructing each phase of the applicable Project, and the Loan Budget prepared
by Company which details the application of the Construction Note proceeds to
each phase of the Project Lender shall not be obligated to make any advance
under a Construction Note to Company if, in the reasonable opinion of Lender or
the Inspecting Architect, at any time, the balance of the Construction Note yet
to be advanced by Lender is less (the amount by which it is less being
hereinafter referred to as the "Deficiency") than the actual sum, as estimated
by Lender or the Inspecting Architect, which will be required to complete
construction of the Project in accordance with the Plans and Specifications and
this Agreement and all costs and expenses of any nature whatsoever which will be
incurred in connection with the completion of construction of the Project and
all operating deficits of the Project (including debt service on the
Construction Note). Company shall, within ten (10) days after being notified by
Lender that there is or will be a Deficiency, either (i) invest Company's own
funds in the Project in a manner satisfactory to Lender an amount equal to the
Deficiency and deliver to Lender evidence satisfactory to Lender of such
investment, which investment shall remain invested in the Project until the
Construction Advance has been paid in full, or (ii) deposit with Lender an
amount sufficient to eliminate the Deficiency. Any amounts deposited by Company
with Lender to pay the Deficiency shall not bear interest, may be held separate
or co-mingled with other funds of Lender, and shall be applied by Lender, as
Lender shall direct to pay costs as construction of the Project progresses
before any further advances are made on the Construction Note. Company's failure
to invest in the Project or deposit the funds necessary to eliminate the
Deficiency within five (5) days following notice from Lender shall constitute an
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Event of Default hereunder entitling Lender to exercise, at its option, any and
all remedies provided for in this Agreement, otherwise available at law or in
equity or in any other Loan Documents. Any determination of a Deficiency by
Lender or the Inspecting Architect shall be deemed conclusive. If an Event of
Default shall occur and be continuing, Lender, in addition to all other rights
and remedies which it may have, shall have the unconditional right, at its
option, to apply, in whole or in part, any amounts deposited by Company with
Lender with respect to the Deficiency, to the payment of the Advances in such
order and priority as Lender shall deem appropriate.
1.15. Specific Additional Covenants of Company. Company shall comply with
each of the following terms and condition:
(a) Company shall obtain and furnish to Lender within thirty (30) days
after the completion of the Project the originals or copies of all permanent
certificates of occupancy and all other certificates, licenses, consents and
other approvals of the governmental authorities which are required for the use
and occupancy of the Project; and a certificate of completion from the Architect
and General Contractor certifying that work on the Project has been completed in
accordance with the Plans and Specifications and any and all change orders as
permitted under this Agreement, and that all labor, services, materials and
supplies used in such work have been paid for and that the completed Project
conforms with all applicable zoning, land use and planning, building and
environmental laws and regulations of the governmental authorities having
jurisdiction over the Project. In no event shall Lender be required to make the
last advance under a Construction Note pursuant to this Agreement until all such
certificates, licenses, consents and approvals have been obtained and delivered
to and approved by Lender and the Inspecting Architect.
(b) Company shall furnish to Lender from time to time upon request (i) the
names of all persons with whom Company or the General Contractor has contracted
or intends to contract for the construction of the Project or the furnishing of
labor or materials in connection therewith along with the tax identification
numbers for all such persons, (ii) a list of all unpaid bills for labor and
materials with respect to construction of the Project, (iii) the Project Budget
and Loan Budget and revisions thereof showing estimated direct construction
costs and other costs and expenses to be incurred in connection with the
completion of construction of the Project, (iv) lien waivers, receipted bills or
other evidences of payment of all direct construction costs and other costs and
expenses incurred in connection with the construction of the Project and any
other costs and expenses relating thereto, and (v) such other information
relating to Company, the Project, any guarantor or indemnitor or other person or
party connected with Company, the construction of the Project or any collateral
for the Advances or other source of repayment of the Advances as Lender may
reasonably request.
(c) Company shall pay when due all direct construction costs and other
costs and expenses incurred by Company in connection with the construction of
the Project or any repair and restoration of the Project.
(d) Company shall pay all reasonable fees and charges incurred in the
procuring, making and administrating of a Construction Advance and any Equity
Advance or Construction Term Note converted therefrom, including, without
limitation, fees, expenses and attorneys fees incurred by Lender, fees of the
Inspecting Architect, appraisal fees, and fees and expenses relating to
examination of title, title insurance premiums, environmental assessments and
surveys.
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(e) Company shall execute and/or enter into any easements which Lender may
determine are necessary to obtain ingress and egress to the Project or for the
use thereof.
(f) Company shall comply with all governmental requirements with respect to
the construction, ownership and operation of a Project, and shall pay all taxes
and assessments, general and special, and all other levies or impositions on the
Project prior to delinquency; provided, however, that Company may contest the
amount or validity of any taxes, assessments, levies or impositions on the
Project by appropriate legal proceedings, diligently pursued, provided that (i)
Company shall first make all contested payments, under protest if it desires,
but if payment under protest is not permitted by the taxing authority, such
contested payment need not be made, (ii) neither the Project, any part thereof,
nor any interest therein shall be in any danger of being sold, forfeited, lost
or interfered with, (iii) Company shall have furnished such security, if any, as
may be required in the proceedings or reasonably requested by Lender, and (iv)
all expenses incurred in connection with such proceedings shall be paid by
Company.
1.16. Change Orders. Notwithstanding anything to the contrary contained in
this Agreement, Company shall have the right to enter into or to authorize the
entering into of change orders with respect to a Project without obtaining
Lender's prior written consent, provided that no such change order will change
the gross square feet to be contained in the Project, the basic layout of the
Project, the number of parking spaces to be contained in the Project, involve
the use of materials, fixtures or equipment which will not be at least equal in
quality to the materials, fixtures and equipment originally specified in or
required by the Plans and Specifications, as approved by Lender and the
Inspecting Architect, or increase the Total Project Cost by more than $50,000.00
in the aggregate with all other change orders.
1.17. Inspecting Architect. Company will only be responsible for payment of
the Inspecting Architect's fees for services as specifically required in the
Amendment. Inspecting Architect will limit fees to rates reasonable within the
local market.
1.18. Title Insurance. As a condition precedent to the obligation of Lender
to make the initial advance under a Construction Note, Company shall deliver to
Lender a construction lender's title policy (the "Title Policy") in form
satisfactory to Lender from a title company acceptable to Lender, with
authorization for the title company to insure all Construction Note advances by
endorsements to the Title Policy or otherwise, covering the Project and insuring
against mechanics lien(s). The Title Policy shall insure in the amount of the
Construction Advance that the deed of trust or mortgage encumbering the Project
is a valid and subsisting first priority mortgage on the Project and all
appurtenant easements, if any, subject only to exceptions acceptable to Lender,
and containing such endorsements required by Lender. Company shall deliver to
Lender an ALTA/ACSM Survey of the Project acceptable to Lender.
1.19. Conversion of a Construction Advance. Subject to the terms of this
Agreement, and provided that no Event of Default has occurred, on the Maturity
Date of a Construction Note, Company may convert to an Equity Advance or a
Construction Term Note upon the following terms and conditions precedent:
(1) delivery by Company of a Term Note or a Construction Term
Note, as applicable, duly executed by Company in an amount equal to
the outstanding principal balance on the Construction Note, but not to
exceed the maximum amount of an Equity Advance or Construction Term
Note as provided for in this Agreement unless approved in writing by
Lender;
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(2) Company has accomplished satisfactory delivery of all items
under Section 7.2 below or this Article I;
(3) delivery of evidence of substantial completion of the Project
in accordance with the approved plans and specifications, as
determined by: (a) Lender and the Inspecting Architect, (b) an
As-Built, ALTA/ACSM Class A Urban Survey of the Project and
appurtenant easements from a surveyor satisfactory to Lender and the
title company and certified to both of them; and (c) issuance of a
certificate of occupancy from the applicable governmental authority;
(4) delivery of all other documentation required by Lender, in
the exercise of its reasonable judgment otherwise affecting the
Project and the applicable Equity Advance or Construction Term Note;
and
(5) payment by Company to Lender of all of Lender's costs and
expenses relating to the closing of the Equity Advance or Construction
Term Note, including, but not limited to, attorneys' fees and costs."
9. Section 2.1 of the Loan Agreement shall be deleted in its entirety and
replaced with the following:
"2.1. Real Property. Contemporaneously with the issuance of a Term
Note evidencing an Acquisition Advance or a Construction Note, Company
shall grant and execute in favor of Lender a first priority deed of trust
or mortgage and assignment of rents and leases on the Property acquired
with the Acquisition Advance or the Project financed by such Construction
Note, with such deed of trust or mortgage in form and substance acceptable
to Lender. Thereafter, such deed of trust or mortgage and assignment of
rents and leases shall secure the Advances."
10. Except as modified and amended herein, all other terms, provisions,
conditions and obligations imposed under the terms of the Loan Agreement and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and affirmed by Borrower. To the extent necessary, the other Loan
Documents are hereby amended to be consistent with the terms of this Amendment.
11. Borrower certifies and reaffirms by its execution hereof that the
representations and warranties set forth in the Loan Agreement and the other
Loan Documents are true as of this date, and that no Event of Default under the
Loan Agreement or any other Loan Document, and no event which, with the giving
of notices or passage of time or both, would become such an Event of Default,
has occurred as of execution hereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
on the date first written above.
FIRST NATIONAL BANK OF OMAHA
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Title: Commercial Loan Officer
SUMMIT HOTEL PROPERTIES, LLC, a South
Dakota limited liability company, by its
Company Manager, THE SUMMIT GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxxxxx, President
Acknowledged, accepted and consented to this 9 day of June, 2005 by:
THE SUMMIT GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxx
---------------------------------
Xxxxx X. Xxxxxxxxxxx, President
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EXHIBIT A
(FORM OF CONSTRUCTION NOTE)
CONSTRUCTION NOTE
$_______________ _________, 200_
Maximum Amount Omaha, Nebraska
FOR VALUE RECEIVED, the undersigned, SUMMIT HOTEL PROPERTIES, LLC, a South
Dakota limited liability company ("Borrower"), promises to pay to the order of
FIRST NATIONAL BANK OF OMAHA, a national banking association ("Bank") at its
designated office in Omaha, Nebraska, or at such other place as may be
designated in writing by the holder of this Note, the principal sum of
$_____________________________________ or the aggregate principal amount then
advanced and outstanding on or before the Maturity Date (as hereinafter
defined), together with interest on said principal sum from the date of each
Advance (as hereinafter defined) until this Construction Note ("Note") is paid
in full, at the rate and at the times hereinafter described.
1. Definitions. As used in this Note, the following terms shall have the
following definitions:
A. "Advance or Advances" shall mean disbursements or advances of
proceeds of the Construction Advance made by Bank pursuant to, and in
accordance with, the terms and provisions of the Loan Agreement (as
hereinafter defined).
B. "Business Date" shall mean any day other than a Saturday, Sunday or
legal holiday on which Bank is authorized or required to be closed.
C. "Default Rate" shall mean the lesser of that interest rate which is
four percent (4%) above the then applicable Interest Rate or the highest
rate allowed by applicable law.
D. "Interest Rate" shall mean the per annum rate of interest equal to
one-quarter of one percent (%%) below Bank's National Base Rate, until an
Event of Default when the Interest Rate shall equal the Default Rate. No
representation is made that the National Base Rate is the lowest, the best,
or a favored rate of interest. The rate of interest charged on this Note,
as related to such National Base Rate, shall change with, and be effective
on the date of each change in the National Base Rate.
E. "Loan Agreement" shall mean that certain Loan Agreement, dated
July____________________________________, 2004, as amended by that certain
First Amendment of Loan Agreement dated
___________________________________________, 2004 and Second Amendment of
Loan Agreement dated ____________________________________________, 2005
pursuant to which Bank has agreed to make the Construction Advance to the
Borrower evidenced hereby.
F. "Maturity Date" shall mean the earlier to occur of (i)
________________________________________________, 200______, or (ii) the
date on which the entire principal amount evidenced by this Note and all
accrued interest thereon shall be paid or be required to be paid in full,
whether by prepayment, acceleration or otherwise.
G. All other capitalized terms used in this Note, which are not
expressly defined herein, shall have the meaning assigned to such terms in
the Loan Agreement.
2. Disbursement Request. During the term of the Construction Advance, the
Borrower shall make a request for each Advance in accordance with the terms,
provisions and conditions set forth in the Loan Agreement. 3. Payments of
Principal and Interest During the Term of the Construction Loan. The principal
sum of the Construction Loan together all accrued and unpaid interest shall be
due in full on the Maturity Date. Accrued interest on the Construction Loan
shall be paid monthly, in arrears,
commencing_____________________________________________, 200_____and continuing
on the same day of each month thereafter until the Maturity Date.
4. Prepayment. The Borrower shall be permitted to make prepayment of the
indebtedness evidenced by this Note, in whole or part, at any time without
premium or penalty. The Borrower may not reborrow any prepaid or repaid
principal.
5. Payments and Computations. All payments on account of the indebtedness
evidenced by this Note shall be made not later than 11:00 A.M. (Omaha, Nebraska
time) on the day when due in lawful money of the United States and shall be
first applied to interest on the unpaid principal balance of the Construction
Advance and the remainder to principal. All computations of interest shall be
made by Bank on the actual days outstanding on the basis of a three hundred
sixty (360) day calendar year. Said payments are to be made at such place as
Bank or the legal holders of this Note may, from time to time, in writing
appoint. Unless otherwise specified herein, all interest payable under this Note
is paid in arrears.
6. Applicable Laws. This Note shall be construed and enforced in accordance
with the laws of the State of Nebraska and shall be conclusively deemed for all
purposes to have been executed an4 delivered in the State of Nebraska for
performance therein. This Note is given for an actual loan of money for business
purposes and is not for agricultural, consumer, personal or residential
purposes.
7. Collateral Security. Borrower and Bank have executed, and this Note is
issued pursuant to, the Loan Agreement. The payment of this Note, and all
obligations of the Borrower under the Loan Agreement, are secured by the
collateral described in or required by the Loan Agreement, including, but not
limited to, a first priority lien on the Project financed with the Construction
Advance evidenced by this Note.
8. Event of Default. An "Event of Default" hereunder shall be deemed to
have occurred upon the occurrence of an Event of Default (as defined in the Loan
Agreement or any other Loan Document). It is agreed that at the election of Bank
or the holder or holders hereof, and in addition to any other rights or remedies
set forth herein, in the Loan Agreement or the other Loan Documents, upon the
occurrence of an Event of Default, the principal sum remaining unpaid hereof,
together with all accrued and unpaid interest thereon, shall become immediately
due and payable. If the Maturity Date is accelerated by Bank as a consequence of
an Event of Default, then Bank shall have all the rights and remedies provided
for in the Loan Agreement, the other Loan Documents or otherwise available at
law or in equity. The rights, powers, privileges, options and remedies of Bank
provided in the Loan Agreement, the other Loan Documents or otherwise available
at law or in equity shall be
2
