SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 33-96716
ESSEX HOSPITALITY ASSOCIATES IV L.P.
(Exact name of registrant as specified in charter)
New York 16-1485632
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Corporate Woods
Rochester, New York 14623
(Address of principal executive office)
Registrant's telephone number, including area code: (716) 272-2300
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10- KSB or any
amendment to this Form 10-KSB [X]
State issuer's revenues for its most recent fiscal year: $1,858,000
As of February 28, 1998, a total of 2,932 Limited Partnership Units were held by
non-affiliates who purchased the Units from the issuer at an aggregate offering
price of $2,841,000. There is no trading market for the Units and none is
expected to develop.
Documents incorporated by reference: NONE
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PART I
Certain of the information contained in this Form 10-KSB, including the
Management's Discussion and Analysis or Plan of Operation found in Item 6 of
this Report, contains forward-looking statements. A number of important factors
including, but not limited to actions of competitors and franchisors, adverse
changes in general economic conditions and adverse local conditions, increases
in real estate taxes and operating costs and adverse changes in real estate
zoning, health, safety, environmental and other laws and regulations, could
cause actual results to differ materially from the forward-looking statements.
Item 1. Business
Essex Hospitality Associates IV L.P. is a New York limited partnership, (the
"Partnership") formed on August 30, 1995 whose principal business is to
construct, own and operate two hotels on its properties located in Solon, Ohio
and Erie, Pennsylvania.The Partnership operates through three New York limited
liability companies. Solon Hotel LLC was formed in June 1997, solely to
construct, own and operate a 103-room Hampton Inn in Solon, Ohio, which opened
August 1, 1997. The Partnership owns 99% of the membership interests in Solon
Hotel LLC. The remaining 1% is owned by Essex Hotels LLC whose sole member is
the Partnership. The Solon Hampton Inn is being operated pursuant to a license
agreement obtained from Promus Hotel Corporation, the franchisor of Hampton Inn,
Hampton Inn & Suites and Homewood Suites hotels ("Promus"). Erie Hotel LLC was
formed in June 1997, solely to construct, own and operate a 101-room Hampton Inn
in Erie, Pennsylvania, which is currently under construction. The Partnership
owns 99% of the membership interests in Erie Hotel LLC. The remaining 1% is
owned by Essex Hotels II LLC whose sole member is the Partnership. It is
expected that the Erie Hampton Inn will be operated pursuant to a license
agreement obtained from Promus. The Partnership also owns a 49.8% limited
partnership interest in Essex Glenmaura L.P. ("Glenmaura") a New York limited
partnership which constructed, and currently owns and operates a Courtyard by
Marriott near Scranton, Pennsylvania. The General Partner of the Partnership is
Essex Partners Inc., a New York corporation (the "General Partner").
The Partnership owns three properties. In December 1995, the Partnership
acquired a 2.28 acre site in Solon, Ohio outside Cleveland, which was assigned
to Solon Hotel LLC in June 1997. Construction of a 103 room Hampton Inn started
in the fall of 1996 (the "Solon Hampton Inn"). The Solon Hampton Inn opened
August 1, 1997. A 2.5 acre site in Erie, Pennsylvania was acquired by Erie Hotel
LLC in June, 1997. Construction of a 101 room Hampton Inn started in the fall,
1997 (the "Erie Hampton Inn"). The Erie Hampton Inn is expected to open in the
summer, 1998. The Partnership also acquired a 2.54 acre site in Warwick, Rhode
Island in December, 1995, for a 80-92 room Homewood Suites. The site was
assigned to Warwick Hotel LLC in December 1997. The sole member of Warwick Hotel
LLC is the Partnership. Subsequent to the purchase of the site, the Partnership
learned that additional new hotels were planned for the Warwick area which would
be directly competitive with the Partnership's proposed hotel and has decided to
sell the site.
The Partnership's public offering of subordinated notes (the "Subordinated
Notes") and limited partnership units (the "Units") was completed on November
24, 1997 (the "Public Offering"). The Partnership raised gross offering proceeds
of $8,289,000 consisting of $5,413,000 in Subordinated Notes and $2,876,000 in
Units. The ratio of equity to total proceeds is .35 to 1.
In 1996, the Partnership acquired 12.5 limited partnership units in Glenmaura,
for $100,000 per unit for a total investment of $1,250,000, an equity interest
of approximately 54%. As a condition of obtaining a first mortgage on the Solon
Hampton Inn, the Partnership was required to reduce its holding in Glenmaura.
See Item 2. Solon Property - Financing. In June 1997, the Partnership sold a
1.05 limited partnership units to the General Partner, which reduced its equity
interest to 49.8%. The Partnership's financial statements for 1997 account for
its investment in Glenmaura under the equity method as of the the date its
holdings were reduced. Prior to that date, the Partnership's consolidated
financial statements include the accounts of the Partnership and Glenmaura. All
significant intercompany transactions and balances have been eliminated in
consolidation. The general partner of Glenmaura is the General Partner.
Glenmaura opened a 120-room, three story Courtyard by Marriott hotel in the
Glenmaura Corporate Center in the Borough of Moosic, Pennsylvania, just
southeast of the City of Scranton in September, 1996. The hotel is operated
under
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a Courtyard by Marriott franchise, and has a restaurant and lounge, meeting
room, indoor pool and spa, and exercise room.
DESCRIPTION OF THE HAMPTON INN HOTEL CONCEPT
The General Partner believes good investment opportunities exist in the limited
service segment of the lodging industry and that the Hampton Inn franchise has
certain competitive advantages that should position it for better than average
performance.
Hampton Inn hotels are high quality hotels with limited amenities and moderate
prices. Hampton Inn hotels are designed primarily to accommodate business
travelers with limited expense accounts, non-destination business and pleasure
travelers and value-conscious vacationers. Hampton Inn hotels are generally two
to six stories with 50 to 150 rooms and are located in high-visibility, high
traffic areas, typically near full-service restaurants.
Hampton Inn hotels have a strong commitment to guest satisfaction. According to
Promus, the Hampton Inn hotel was the first national hotel to offer an
unconditional 100% Satisfaction Guarantee. A toll-free number provides access to
a nationwide reservation system. Hampton Inn hotels offer a national advertising
and marketing program and are widely promoted on television, in magazines and
trade publications and through direct mail, which increases travelers' awareness
and trial usage. Major emphasis is also placed on corporate and travel agent
markets.
Hampton Inn hotels offer selected services and amenities, including a free,
self-serve continental breakfast in the lobby, free local telephone calls, a
free in-room movie channel and senior citizens' and frequent travelers' discount
programs. Most hotels offer a lobby/breakfast area and a variety of room types:
rooms with one or two double beds and rooms with king bed configurations. Most
Hampton Inn hotels offer a swimming pool and a hospitality suite, a
multi-purpose room that doubles as a guest room or a small gathering facility.
Started in 1984, there were 728 Hampton Inn hotels in operation throughout the
United States at the end of 1997. Promus has advised the Partnership that
system-wide occupancy rates averaged 70.5% in 1997 as compared to 72.1% in 1996,
with an average daily rate of approximately $64.60 in 1997 compared to $60.84 in
1996. The Hampton Inn hotel franchise started in the upper economy segment, but
over time, as its average daily rate has crossed over into the mid-scale segment
without food and beverage, the franchise has repeatedly exceeded the industry
averages for the mid-scale segment without food and beverage. For 1997 the
mid-scale segment without food and beverage reported an average occupancy rate
of 64.6% and an average daily rate of $68.04.
PROMUS HOTEL CORPORATION - LICENSE AGREEMENTS
The following is a summary of some of the principal terms of License Agreement
currently being used by Promus .
Under the License Agreement, Promus provides the Partnership certain prototype
plans and specifications, operations manuals and consulting and advisory
services in connection with the construction and operation of the hotel. The
Partnership is also granted a license during the term of such License Agreement
to use the service marks designated by Promus. The License Agreement does not
grant to the Partnership an exclusive territory. There can be no assurance,
therefore, that Promus will not operate or license others to operate one or more
competing hotels in the vicinity of either the Solon Hampton Inn or the Erie
Hampton Inn or both.
In addition to initial license application fees, the Partnership is required to
pay continuing monthly royalty fees of 4%, of gross room revenues. A monthly
marketing fee of an additional 4% of gross room revenues is also required. The
License Agreement requires the Partnership to maintain certain insurance
coverage, to meet certain standards of Promus with respect to furniture,
fixtures, maintenance and repair and to refurbish and upgrade the hotel to
conform to Promus's then-current standards. Under the current Hampton Inn
License Agreement, the Partnership is required to purchase and install Promus's
computer software business system and pay a software license fee of $3,000 plus
$85 per guest room, and monthly maintenance ranging from $300 per month to $450
per month. The fees summarized herein are subject
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to change by Promus.
The term of the current Hampton Inn License Agreement is 21 years from the date
of approval (the License Agreement for the Solon Hampton Inn is 20 years from
August 1, 1997, the date of opening), and is not renewable. The License
Agreement may not be voluntarily terminated by the Partnership without incurring
substantial liquidated damages, payable in a lump sum equal to the amount of
monthly fees paid during the preceding 36 months.
All rights of the Partnership under the License Agreement automatically
terminate upon the happening of certain events, which include: (i) bankruptcy,
insolvency or dissolution of the Partnership, (ii) commencement of an action
against the Partnership seeking reorganization, liquidation or dissolution
resulting in the entry of an order for relief that is not fully stayed within
seven business days after entry of the order which is not dismissed within 45
days, (iii) loss of possession of the hotel by the Partnership, (iv) conviction
of a felony by the Partnership or any of its principals or the maintenance of
false books and records by the Partnership or (v) breach of the provisions in
the License Agreement which restrict transfers of interests in the Partnership
(including a change in the identity of the General Partner).
Promus has the option to terminate a License Agreement upon the happening of
certain other events, which include: (i) failing to complete construction of the
hotel within a specified period after the commencement of construction; (ii)
unauthorized disclosure of Promus's proprietary information or the misuse or
unauthorized use of Promus's trademarks; (iii) failing to pay any amounts owed
to Promus; (iv) ceasing to do business at any hotel location for any reason,
including condemnation, fire or other casualty provided that the Partnership
shall have a period of 12 months in which relocate or reconstruct the hotel; and
(v) failing to comply with all governmental requirements, failing to pay all
taxes, or failing to maintain all governmental licenses and permits necessary to
operate the hotel.
Upon termination or expiration of the License Agreement the Partnership is
required to immediately cease using Promus's service marks and all confidential
methods, procedures and techniques provided by Promus and to remove and
discontinue using all signs, fixtures, advertising materials, stationery,
supplies and other articles which could cause the hotel to be associated with
Promus. In addition, if the termination occurs for reasons other than
condemnation, the Partnership may be required to pay a termination fee in a lump
sum equal to the amount of monthly fees paid during the preceding 36 months.
Promus has historically agreed that trustees under indentures shall have a
period of 30 days after receipt of notice in which to cure any default under its
License Agreement, and the General Partner believes it will agree in connection
with any additional license granted to the Partnership. If the Partnership loses
possession of the hotel, however, the License Agreement will be terminated and
the hotel may no longer be operated as a Hampton Inn hotel unless the trustee
locates a purchaser and the purchaser applies for and obtains a new License
Agreement (and pays a new initial license fee) from Promus. The effect of this
provision may be to cause the Trustee to delay commencement of foreclosure
proceedings until a qualified purchaser can be located.
The License Agreement restricts the transfer of any interest in the License, the
Partnership, including the transfer of limited partnership interests and the
General Partner. The License Agreement does, however, provide that for "publicly
traded equity interests," no consent of Promus is required with respect to any
transfers of less than a 25% interest in the Partnership unless the transferee
owns, or would own after the transfer is completed, an interest in the
Partnership of 25% or more. Promus has advised the Partnership that, solely for
purposes of the License Agreement, the Units would be considered "publicly
traded equity interests" since they will have been sold in a large real estate
syndication transaction.
CONSTRUCTION OF THE HOTELS
The Solon Hampton Inn was constructed and the Erie Hampton Inn is being
constructed by the Partnership in accordance with plans and specifications
provided by Promus. The Solon Hampton Inn consists of 103 rooms within a
four-story, interior corridor building situated on approximately 2.28 acres. The
Solon Hampton Inn was constructed of reinforced concrete with masonry and metal
stud walls, with brick and stucco-like exterior. It has 96 standard guest
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rooms and 7 two-room suites. The suites have separate living and sleeping areas
and small kitchen areas. The hotel has an expanded lobby/breakfast area, where a
daily complimentary continental breakfast is served, an exercise room, an indoor
pool and two meeting rooms. The total costs of the Solon Hampton Inn were
approximately $7 million, or approximately $68,000 per room. The costs of land,
site developments, building construction and fixtures, furniture and equipment
were approximately $6.1 million, or approximately $59,300 per room.
The Erie Hampton Inn is being constructed and equipped similarly to the Solon
Hampton Inn. It will have 101 rooms within a four-story building and be
constructed on a parcel of approximately 2.5 acres. Unlike the Solon Hampton Inn
which has a partial brick facade, the Erie Hampton Inn will only have a
stucco-like exterior. The Erie Hampton Inn will have 97 standard guest rooms and
4 deluxe rooms. The deluxe rooms are slightly larger and have a refrigerator,
microwave and wet bar. It also will have an expanded lobby/breakfast area, an
exercise room, an indoor pool and two meeting rooms. Based on the construction
of the Solon Hampton Inn, the General Partner estimates that construction of the
Erie Hampton Inn will be completed in the summer, 1998. The total costs of the
Erie Hampton Inn are estimated to be approximately $7.7 million or approximately
$79,000 per room. The costs of land, site developments, building construction
and fixtures, furniture and equipment, are estimated to be approximately $7.0
million, or approximately $71,000 per room.
The General Partner has hired an unaffiliated general contractor to provide an
on-site supervisor who is responsible for selecting and supervising
subcontractors to complete various portions of the construction of the Erie
Hampton Inn. The general contractor has entered into a standard A.I.A. contract
and is receiving a competitive fee for its services and may receive additional
compensation at stated rates in the event that additional services are
requested. There can be no assurance that the amount of time actually required
to complete construction of the Erie Hampton Inn or the actual cost of
construction will not exceed the above estimates.
OPERATION OF THE HOTELS
The Partnership has entered into a Management Agreement with respect to the
Solon Hampton Inn, and is expected to enter into a Management Agreement upon
completion of the Erie Hampton Inn, with Essex Partners or its assigns
(collectively "Essex Partners"). The Management Agreement provides that Essex
Partners will investigate, hire, pay, supervise and discharge the personnel
necessary to properly maintain and operate the hotels. All such personnel will
be employees of the Partnership and compensation of such personnel will be an
expense of the Partnership.
The Management Agreement requires Essex Partners to maintain the building and
grounds, to pay insurance premiums with respect to the hotel, to apply for,
obtain and maintain all required licenses and permits, to pay certain expenses
on behalf of the Partnership, to maintain a comprehensive system of office
records and books and to annually prepare an operating budget. In addition,
Essex Partners has the authority to enter into service contracts and other
contracts reasonably necessary or desirable in connection with the operation of
the hotels, with the approval of the Partnership in some cases. As compensation
for these services, Essex Partners receives from the Solon Hampton Inn, and will
receive from the Erie Hampton Inn, a fee equal to 4.5% of the gross revenues
from the hotels, consisting of room rentals, telephone charges, cable charges
and any other miscellaneous charges collected from guests. Essex Partners also
receives from the Solon Hampton Inn, and will receive from the Erie Hampton Inn,
an accounting fee equal to $800 per month, per hotel.
Each Management Agreement has an initial term of five years with a series of one
(1) year renewal terms. The Management Agreement may be earlier terminated (i)
by either the Partnership or Essex Partners in the event of a default under the
Management Agreement which is not cured within 60 days after written notice
thereof, (ii) by Essex Partners, upon the failure of the Partnership to pay
compensation due to Essex Partners, (iii) by either party upon the bankruptcy or
insolvency of the other party, (iv) by either party upon the Partnership's
failure to repair or restore the subject hotel within 120 days after all or any
portion of such hotel is damaged or destroyed by fire or other casualty, or (v)
by either party if all or any portion of the subject hotel is condemned and the
remaining facilities are insufficient for the efficient and profitable operation
of such hotel. During any renewal term the Management Agreement may be
terminated at any time on 120 days written notice.
Each Management Agreement requires Essex Partners to devote such of its time as
it deems necessary to manage the subject hotel; however, it does not impose any
limitations on Essex Partners's other business activities, including other
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commercial and residential real estate ventures which may compete with such
hotel. Pursuant to the Management Agreement, all expenses incurred thereunder
shall be obligations of the Partnership and Essex Partners will receive its
management fee notwithstanding that the Partnership may not have earned a profit
or may be operating at a loss and that the limited partners may not have
received any distributions.
The Partnership has agreed to a broad indemnity of Essex Partners from
liabilities it may incur in connection with its services under the Management
Agreement.
COMPETITION
The operation of hotels is a highly competitive business. Competition in the
lodging industry is primarily based on price, location, quality of facilities
and overall range of services. The Hampton Inn hotel franchise, with its
selected services and amenities, targets the mid-scale without food and beverage
segment of the lodging industry's limited service sector. Hampton Inn hotels are
typically located in areas that contain other competitive limited service
lodging facilities. Competitors in the overall limited service lodging area
include: Fairfield Inn by Marriott, Courtyard by Marriott, Days Inn, Comfort
Inn, Holiday Inns, LaQuinta, Red Roof Inn, EconoLodge, Super 8, Motel 6 and
Travelodge. These national chains have name recognition and operating advantages
like reservation systems, and typically have significant financial resources;
characteristics shared by Hampton Inn hotels.
Some of these hotels/motels in the limited service segment could have services
and architectural features similar to the Partnership's hotels, and may offer
rates comparable to or lower than those estimated by the Partnership.
Furthermore, there can be no assurance that, after the construction and
successful operation of a hotel, competitors will not offer lower room rates or
that additional hotels which offer similar rooms, services and rates in
competition with the hotels will not be developed near the hotels and that such
development will not have an adverse effect on occupancy rates and
profitability.
The hotel industry was negatively impacted by the recession of the early 1990's.
Occupancies and rates dropped significantly. According to published reports,
occupancies began to improve in 1993. Occupancies and rates continued to
increase in 1995, producing the strongest year in five years, but room supply
increased at the greatest level since 1991. According to published reports,
since 1996, the increase in the supply of hotel rooms has exceeded the increase
in demand. This produced a decrease in average occupancy in both 1996 and 1997.
For 1997, the increase in demand was strongest in the luxury, upscale and
midprice rate segments, with the economy and budget segments experiencing weak
or reduced demand. The Hampton Inn Hotels are considered to be in the midprice
rate segment. According to published reports, the average daily rate continued
to increase in both 1996 and 1997, which has compensated for the decreased
demand such that the hotel industry has continued to experience increasing
revenues. The reports anticipate that supply growth will continue to exceed
growth in demand for the next few years. The reports predict the hotel industry
will continue to experience increases in annual revenues, but at a reduced
growth rate. According to the reports, industry profits have grown along with
revenues, and are expected to continue to grow, but at a reduced rate.
There are various marketing activities utilized to promote the Hampton Inn
Hotels. Hampton Inn Hotels have a full-time sales manager, responsible for
keeping in touch with current customers and promoting the hotel throughout the
community. Radio and print advertising are used year-round, some in conjunction
with advertising being placed by promus and some specifically for a partnership
property. Special rates are available for corporate customers with high usage.
Direct mail campaigns are utilized, targeting selected travelers. Brochures
describing the property are distributed locally. Local businesses are visited by
both the hotel manager and the sales manager, as well as marketing personnel
from the property manager.
ENVIRONMENTAL COMPLIANCE
The partnership is not aware that it will have to make any unusual efforts in
order to comply with federal, state or local provisions which have been enacted
or adopted regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment. Accordingly, it does
not believe that any such efforts will
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have any material effect upon capital expenditures, earnings or the competitive
position of the partnership.
EMPLOYEES
As of March 15, 1998, the Partnership had approximately 15 full and 20 part-time
employees, all employed at the Solon Hampton Inn.
Item 2. Properties
SOLON PROPERTY
GENERAL. The Partnership acquired the Solon Property in December 1995 and began
construction of a 103-room Hampton Inn hotel in the fall of 1996. The Solon
Hampton Inn hotel opened August 1, 1997. The Partnership had originally intended
to build a Hampton Inn & Suites hotel on the Solon Property, however, the
construction costs associated with a Hampton Inn & Suites hotel were determined
to be too high relative to the room rates that could be charged in the Solon
market. Therefore, based on its knowledge of the Solon market, the General
Partner determined that a Hampton Inn hotel could be built and operated more
successfully in the Solon market. Accordingly, the General Partner secured the
approval of Promus to change brand designations. Total costs associated with the
Solon Property were approximately $7.0 million, including the cost of the land,
cost of construction, cost of furnishings, construction period interest,
financing costs (debt and equity) and all soft costs, such as architectural,
engineering and franchise fees and working capital.
Solon, Ohio is a southeast suburb of Cleveland, Ohio. Cleveland is located in
northeastern Ohio on the shore of Lake Erie. The city and surrounding area are
served by an extensive transportation network including highway, water, rail and
an international airport. Cleveland is the largest city in Ohio and is located
in the Cleveland/Lorain/Elyria MSA. In 1995 the MSA had a population of
approximately 2.0 million of which 1.4 million resided in Cuyahoga County in
which the Cities of Cleveland and Solon are located. The Cleveland economy has
rebounded from the smoke stack industry decline of the 1970's. Despite problems
which are common to many large urban areas, the Cleveland economy has benefited
from a diversified employment base bolstered by the continuing presence of a
number of Fortune 500 corporations, including Eaton Industries, American
Greetings, Sherwin Williams, Parker Hanefin, NAACO Industries, Ferro Corporation
and Standard Products.
The image of Cleveland and its desirability as a place to visit have been
enhanced by a series of development and redevelopment projects including the
construction of Jacobs Field, the new home of the Cleveland Indians; the
redevelopment of The Flats along the Cuyahoga River into a first class
entertainment district; the redevelopment of the Terminal Tower/ Tower City Rail
Station into The Avenues Shopping Mall which is connected to the Gund Arena,
home of the Cleveland Cavaliers; the Rock and Roll Hall of Fame, which opened in
September 1995; and a number of other projects that are currently underway,
including redevelopment of Cleveland's Warehouse District.
THE SOLON PROPERTY. The Solon Property was acquired from a non-affiliated
limited liability company and contains approximately 2.28 acres. The purchase
price of the Solon Property was $590,600, plus closing costs of approximately
$6,000. The Partnership also acquired legal title to half of a lake adjacent to
the site (approximately 1.25 acres) at no additional cost. The lake is fed
continuously throughout the year by a stream that also serves as a detention
area for storm water run off from the Solon Commons (as herein described). The
Partnership is responsible for half the costs of maintenance of the lake,
however, these costs are not expected to be material.
FINANCING. On July 7, 1997, GMAC loaned Solon Hotel LLC $4.5 million. Solon
Hotel LLC was formed in June 1997 as a special purpose entity as a condition to
GMAC's agreement to provide permanent financing of the construction costs
associated with the Solon Hampton Inn hotel. The GMAC-Solon Loan is secured by,
among other things, a first mortgage lien on the Solon Property and any
improvements thereon, including the Solon Hampton Inn hotel. The term of the
first mortgage loan is for a period of four years with a one year extension upon
the payment of an extension fee
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and the satisfaction of a specified debt service coverage ratio. Monthly
payments of interest only are required during the first year. Thereafter,
beginning August 1, 1998 monthly payments of principal and interest are due
based on a 25 year amortization and an assumed 10% fixed interest rate. Interest
actually accrues at a rate of 3.25% over the 30-day LIBOR index. Upon payment of
the loan balance in full, whether prior to or at maturity, Solon Hotel LLC is
required to pay a deferred financing fee equal to 1% of the loan balance. The
loan may be prepaid in part, in minimum increments of $100,000, without premium
or penalty. Starting in the second year of the loan, Solon Hotel LLC will be
required to maintain a replacement reserve escrow of 2% of gross revenues, and
after the second year that percentage increases to 4% of gross revenues. The
General Partner provided a guaranty of completion, a guaranty of payment and a
guaranty of nonrecourse exceptions in connection with the loan. The guaranty of
payment was reduced to 30% of the principal balance of the loan when
construction of the Solon Hampton Inn hotel was completed and will terminate
upon the satisfaction of a specified debt-service coverage ratio by Solon Hotel
LLC. The General Partner and Solon Hotel LLC have also agreed to indemnify GMAC
for any environmental liabilities incurred by GMAC with respect to the Solon
Property. The Partnership was also required to pledge its limited partnership
interest in Glenmaura.
MARKET AND COMPETITION. The Solon Property is located in the City of Solon,
Ohio, which had an estimated population of just under 22,000 in 1995, which
represents an increase from a population of 18,548 in 1990. The Solon Property
is located in the Solon Commons, which is located just south of Route 43. The
Solon Commons is less than 1 mile from US Route 422, which is a divided limited
access freeway. US Route 422 terminates approximately 2 miles to the west at the
junction of Route I-480 and Route I-271 and provides primary access to Solon
from Cleveland and other points west. To the east, US Route 422 continues as
mostly a four-lane highway to Warren, Ohio. The General Partner has signage
advertising the Solon Hampton Inn hotel on US Route 422. The commercial area of
Solon is located approximately 1 mile to the east and can be easily accessed by
Route 43. Sea World of Ohio and Geauga Lake Amusement Park are nearby adjacent
attractions located approximately 6 miles to the southeast from the Solon
Property on Route 43. Although Sea World is the dominant attraction, both parks
constitute a major regional draw and Route 43 provides the access for a
significant number of motorists en route to the parks. Sea World of Ohio has
been particularly successful. During its months of operations, Sea World of
Ohio's attendance exceeds peak attendance at Sea World of Orlando, Sea World of
San Antonio, and Sea World of San Diego.
The Solon Commons is a 27 acre mixed use development, designed to service the
nearly 2,200 acres of business and industrial park development surrounding the
Solon Commons. The Solon Commons currently has a movie theater complex, a food
court, a Ground Round Restaurant, a Longhorn Steak House, an office of the Aetna
Health Plan, a small retail strip center, a day care center and a branch bank.
One restaurant site remains undeveloped. Only 300 acres of the 2,200 acres of
business and industrial park development surrounding Solon Commons remain
undeveloped. Solon is the United States headquarters for Nestle and the world
headquarters of its Stouffer Foods Subsidiary. Other Solon headquarters are
Agency Rent-A-Car and Renaissance Hotels. Other major employers include Matrix
Essentials, which was recently acquired by Bristol Myers, Kennametal and Antenna
Specialists among others. The City of Solon continues to aggressively pursue
employers and offers a wide range of financial incentives. An area in the
southwest portion of Solon has been designated as an urban job and enterprise
zone by the State of Ohio. In addition to the remaining undeveloped land in the
City of Solon itself, a large area of land zoned for industrial and business
park development and served by the necessary utilities is located immediately to
the south of Solon in Glen Willow less than 2 miles from the Solon Commons.
In 1994 the City of Solon voted to have all future zoning changes approved by
referendum. The General Partner believes there is no other land in Solon, other
than the Solon Property, that can currently be developed as a hotel. The only
other hotel currently in Solon is a 137-room Days Inn located near the
intersection of US Route 422 and Route 91, which is approximately 1/2 mile from
the Solon Commons. The Days Inn is a recent conversion by the Midwestern Inn.
The Days Inn is a 2-story exterior corridor motel which is approximately 17
years old and offers an outdoor pool and no meal service. The majority of the
business traveler demand and also those leisure and group travelers seeking
better accommodations migrate to Beachwood, Ohio, which is approximately six
miles from the Solon Commons. In Beachwood, at Chagrin Boulevard and I-271,
there are four lodging facilities containing an aggregate of 606 rooms with
which the Solon Hampton Inn hotel will compete. These lodging facilities consist
of a Travelodge, a Radisson Inn, a Holiday Inn, and a Courtyard by Marriott
hotel. Also located in the same area are a Marriott Hotel, a newly constructed
Residence Inn by Marriott and an Embassy Suites Hotel, however, none of these
lodging facilities is expected to compete directly with the Partnership's hotel.
The General Partner is not aware of any additional hotels contemplated
<PAGE>
for construction in Beachwood, Ohio or Solon, Ohio.
ERIE PROPERTY
GENERAL. The Partnership acquired the Erie Property in June 1997 and is
currently constructing a 101 room Hampton Inn hotel, which is expected to open
in the summer, 1998. The Erie Property is located in the Summit Township,
Pennsylvania, which is a small suburb of Erie, Pennsylvania. Erie is centrally
located on the eastern shore of Lake Erie in northwest Pennsylvania equidistant
between Pittsburgh, Buffalo and Cleveland. The region is served by Interstates
90 and 79, rail service and an international airport.
Erie is the county seat of Erie County, which also comprises the Erie
Metropolitan Statistical Area (MSA). In 1995 the Erie MSA had a population in
excess of 280,000, of which the Summit Township had a population of slightly
less than 6,000. Projected population growth in the county is estimated to be a
modest 0.1% per year through 2005. The Erie economy has been diversifying from
its manufacturing roots and has become a regional center for distribution,
retail trade and tourism, in addition to maintaining a sizable manufacturing
base. Located equidistant between Chicago and New York on a major cross country
interstate and with easy lake access to Canada, Erie has become a key
distribution point between two of the largest markets in the nation, as well as
an export center to Canada. The services sector recently supplanted
manufacturing as the area's leading industry, representing 27.6% of total jobs
in the Erie MSA. Manufacturing was second with a 26.7% share, followed by retail
and wholesale trade industry with 22.5%. Major employers include General
Electric Company, Saint Vincent Health Center, Hamot Medical Center,
International Paper Company, and local and state government. Bush Industries, a
major furniture manufacturer, has completed the first phase of construction of a
new major manufacturing complex, and is expected to add 1,100 new jobs to its
state headquarters in Erie.
Travel and tourism is Erie's second largest industry, with recent estimates
placing annual tourist expenditures at more than $173.5 million. Over four
million vacationers are attracted annually to the beaches and other water
activities of Presque Isle State Park; one million more than visit Yellowstone
National Park every year. In addition, the city's waterfront area has been
undergoing revitalization with construction of a Maritime Museum, a 187-foot
observation tower, a new Erie County library and a series of upscale housing
developments. The State of Pennsylvania has no sales tax on clothing and Erie
attracts shoppers from other states and Canada. The 1.5 million sq. ft.
Millcreek Mall, which attracts shoppers from throughout the region, including
Canada has announced plans to increase its size by one-third. A new $8 million
baseball stadium has bee completed in downtown Erie, and as a result of the
stadium's record setting attendance, Erie has been selected as the home of one
of the new AA league expansion teams that will begin playing in 1999.
City and county unemployment rates historically have remained above the national
trend, which is not unusual in regions where the economy is heavily reliant on
manufacturing. This sector was hit especially hard during the economic downturn
in the early 1990's. In January 1997 the Erie MSA unemployment rate stood at
6.1%, compared to the national rate of 5.9%. While the General Partner believes
the Erie area economy will continue to strengthen, there can be no assurance
that an economic downturn will not occur, which could negatively affect the Erie
Hampton Inn hotel's performance.
THE ERIE PROPERTY. In June 1997, the Partnership acquired three separate parcels
of land from non-affiliates containing an aggregate of approximately 2.5 acres
for an aggregate purchase price of $651,000, plus closing costs of approximately
$33,000 and demolition costs of approximately $15,000. The Partnership has
obtained a License Agreement from Promus to construct and operate a Hampton Inn
hotel on the Erie Property. The License Agreement will become effective upon
satisfactory completion of construction and the opening of the hotel by a
specified date.
The General Partner has reached agreement with a church on an adjoining parcel
for an additional access to the Erie Hampton Inn hotel site. The church has
agreed that it will dedicate a 0.7 acre parcel to Summit Township to enable a
reconfiguration of the intersection between Oliver Road and Old Oliver Road. In
exchange, the Partnership will make a $10,000 donation to the church payable
$5,000 upon the opening of the Erie Hampton Inn hotel with the remainder payable
one year thereafter. The Partnership has also agreed to provide the church with
two room nights per week at
<PAGE>
50% of the prevailing room rate, subject to availability, and if obtained by the
Partnership, space on a marquee sign at the intersection of Peach Street and
Oliver road for a period not to exceed two years. The Partnership began
construction of the Hampton Inn in October 1997.
FINANCING. So as to enable the Partnership to pursue favorable external
financing opportunities with respect to the Erie Property, in June 1997 the
Partnership transferred the Erie Property to Erie Hotel LLC, a single purpose
entity. Essex Hotels II is the managing member of Erie Hotel LLC. The membership
interests of the Erie Hotel LLC are owned 99% by the Partnership and 1% by Essex
Hotels II, whose sole member is the Partnership. The Partnership obtained a
commitment for construction financing in the amount of $4.7 million from a bank
on December 31, 1997. The term is for twelve months and requires monthly
payments of interest only at a rate of 2.5% over the LIBOR rate. The loan is
guaranteed by Essex Partners and collateralized by the Erie Hampton Inn
property. The Partnership is currently negotiating with GMAC for a first
mortgage loan in the principal amount of $4.7 million which will replace the
construction loan after construction is completed. It is anticipated that the
GMAC-Erie Loan will be secured by, among other things, a first mortgage lien on
the Erie Property and any improvements thereon, including the Erie Hampton Inn
hotel. The term is expected to be for a period of four years with a one year
extension upon the payment of an extension fee and the satisfaction of a
specified debt service coverage ratio. Monthly payments of interest only are
expected to be required during the first year at an interest rate of 3.00% over
the 30-day LIBOR index. Thereafter, monthly payments of principal and interest
are expected to be due based on a 25 year amortization. Upon payment of the loan
balance in full, whether prior to or at maturity, Erie Hotel LLC is expected to
be required to pay a deferred financing fee equal to .5% of the loan balance.
The loan may be in prepaid in whole or in part, in minimum increments of
$100,000, without premium or penalty. Starting in the second year of the loan,
Erie Hotel LLC will be required to maintain a replacement reserve escrow of 2%
of gross revenues, and after the second year that percentage increases to 4% of
gross revenues. It is anticipated that the General Partner will be required to
provide a guaranty of payment of 30% of the principal which will terminate upon
the satisfaction of a specified debt-service coverage ratio by Erie Hotel LLC
and a guaranty of nonrecourse exceptions in connection with the loan.
MARKET AND COMPETITION. The Erie Property is located on the southwest side of
Peach Street (State Route 17) just south of where Peach Street intersects with
Interstate 90 (I-90) at Exit 6. The east-bound ramp for I-90 borders to the
north, a service station borders to the east directly on Peach Street, and a
now-closed restaurant borders to the south. Except for a few residences to the
west of the site on Old Oliver Road, the neighborhood surrounding the Erie
Property is primarily commercial with services common for an interstate highway
interchange. Several hotels, restaurants and highway service facilities are
within walking distance, and a larger concentration of retail, restaurant and
entertainment businesses are located on Peach Street along a two mile stretch
north of the Erie Property. Nearly all of the recent retail construction has
occurred in this corridor, and the pace of growth is expected to continue.
Millcreek Mall is located one mile north of the Erie Property. In addition, the
Family First Sports Park, a 100-acre, indoor/outdoor multi-sports complex
located 0.25 miles west of the Erie Property, offers year-round soccer and
basketball leagues, numerous sports camps throughout the year and an
ever-increasing number of regional and collegiate tournaments. It is one of the
largest facilities of its kind in the northeastern United States and is expected
to attract as many as 28,000 players and spectators to two major soccer
tournaments in 1997 and 1998 alone.
The proposed Erie Hampton Inn hotel would be highly visible from both Peach
Street and I-90. The site has direct access from Peach Street via an easement
between a service station and a restaurant. As described above, however, the
Partnership has secured an alternate access route to the site from Peach Street
by way of Oliver Road to Old Oliver Road, accessing the Erie Hampton Inn hotel
through the back of the hotel, a distance totaling less than 0.4 miles. Because
there is a traffic light at Peach Street and Oliver Road, this route will
facilitate ingress and egress to and from the Erie Hampton Inn hotel. The
Partnership has applied for a marquee sign at the corner of Peach Street and
Oliver Road directing guests to the Erie Hampton Inn hotel. An affiliate of the
General Partner has owned and operated a 101-room Microtel approximately 0.125
miles from the Erie Property on Peach Street since 1994. As a result, the
General Partner has knowledge of the Erie market and local government, which
should prove beneficial to the Partnership in connection with its proposed
construction and operation of the Erie Hampton Inn hotel.
There are seven lodging facilities with a total of 859 guest rooms located
within two miles of the proposed Erie Hampton Inn which would compete most
directly with the hotel. Four are located within 0.5 miles of the Erie Property
at the same exit off of I-90, Exit 6, and three are located approximately two
miles east at Exit 7. The lodging properties
<PAGE>
located at Exit 6 include the following: a premium quality Comfort Inn with 110
guest rooms and suites located directly across Peach Street from the Erie
Property; a 97-room Econo Lodge located just south of the Erie Property; a
111-room poorly performing Howard Johnson Lodge located 0.5 miles northeast of
the Erie Hampton Inn hotel (this property is being renovated and reflagged as a
Motel 6); and a 101-room Microtel Inn, which is owned by an affiliate of the
General Partner, located 0.125 miles of the proposed Erie Hampton Inn. The
lodging properties located at Exit 7 include a 113-room Days Inn; a 216-room
Holiday Inn in relatively poor condition and a 111-room Red Roof Inn.
WARWICK PROPERTY
The Partnership acquired the Warwick Property in December 1995 with the
intention of constructing an 80 to 92 room Homewood Suites hotel. Warwick Hotel
LLC was formed in December 1997 as a special purpose entity as a condition of
receiving the financing from GMAC for the Solon Property and the Erie Property.
Warwick Hotel LLC has only one member which is the Partnership. The Warwick
Property is situated on approximately 2.54 acres and is owned in fee by the
Partnership with no encumbrances. The purchase price for the property was
$501,400, plus closing costs of approximately $15,200. The Partnership selected
a general contractor and was prepared to start construction in the fall of 1996.
However, prior to commencing construction, the Partnership learned that
additional hotels were planned for construction near the Warwick Property which
could be competitive with the Partnership's hotel and result in an estimated 57%
potential increase in the number of hotel rooms in the area. The Partnership
elected to postpone commencement of construction until it could better assess
the effect of the additional hotel rooms on the expected performance of the
Partnership's hotel. The Partnership explored its options with respect to the
Warwick Property, including reducing the size and costs of the Homewood Suites
hotel, the development of other hotel brands, and possible sale of the property.
The Partnership received results of an updated market study which indicated that
the demand for hotel rooms had remained fairly flat in the Warwick market over
the past 18 months. Based on the results of the market study, the Partnership
concluded that the estimated 57% potential increase in the number of hotel rooms
in the area would have a significant negative impact upon the expected
performance of the Partnership's hotel. In light of these findings and the
Partnership's inability to sufficiently reduce total estimated costs of the
hotel, the Partnership elected not to proceed with development of a hotel on the
Warwick Property and is currently pursuing the sale of the Warwick Property.
Although the Partnership has received some interest in the site from potential
buyers, there can be no assurance that the Partnership will sell the Warwick
Property, or that it will be sold at a price sufficient to enable the
Partnership to recover all of the costs and expenses incurred by the Partnership
with respect to the Warwick Property. In addition to the purchase price
($501,400) and associated closing costs ($15,200), the Partnership estimates
that it has incurred an additional $165,000 in architectural, engineering and
franchise fees, and taxes, travel and legal expenses. The General Partner has
returned the Acquisition Fee in the amount of $110,000 it received with respect
to the Warwick Property.
THE GLENMAURA INVESTMENT
GENERAL. Glenmaura is a New York limited partnership formed in May 1995 for the
purpose of acquiring undeveloped land and constructing, owning, and operating a
Courtyard by Marriott hotel. The general partner of Glenmaura is the General
Partner.
In September 1996, Glenmaura completed construction and opened a 120-room, three
story Courtyard by Marriott hotel in the Glenmaura Corporate Center in the
Borough of Moosic, Pennsylvania, just southeast of the City of Scranton. The
hotel is being operated under a Courtyard by Marriott franchise. It has a
restaurant which serves a buffet breakfast, two meeting rooms, a lounge, an
indoor pool, a spa, and an exercise room.
MANAGEMENT OF GLENMAURA. The General Partner is also the general partner of
Glenmaura.
DESCRIPTION AND FINANCING OF THE HOTEL PROJECT. The total cost of the Courtyard
by Marriott hotel project was $8.7 million, including the cost of land,
construction, furnishings, construction period interest, financing costs (debt
and equity) and all associated soft costs, including architectural, engineering
and franchise fees and working capital.
<PAGE>
The project was funded with $2.3 million of Partner equity, $1.5 million of
unsecured notes and a $5.0 million first mortgage loan from GMAC. The term of
the first mortgage loan is for four years with a one year extension available if
the specified debt service coverage is attained. Interest accrues at a rate of
3% over the LIBOR rate. Monthly payments of interest only are payable for the
first year. Thereafter, principal and interest payments are due based on a 25
year loan amortization. Starting in the second year of the loan, the Glenmaura
is required to maintain a replacement reserve escrow at 4% of room revenues.
In 1996, the Partnership acquired 12.5 limited partnership units in Glenmaura
for $1.25 million (100,000 per unit) with proceeds from its public offering,
representing a total interest of 54.3%. As a condition of the GMAC-Solon Loan,
the Partnership was required to reduce its ownership interest in Glenmaura to
below 50%. Accordingly, in June 1997, the Partnership sold 1.05 limited
partnership units to the General Partner for $105,000, which is equal to the
purchase price originally paid by the Partnership for such interests. As a
result, the Partnership currently owns a 49.8% interest in Glenmaura.
In addition to the acquisition of the property upon which the Courtyard by
Marriott hotel is constructed, Glenmaura also acquired an option to purchase
approximately 3.1 acres of land adjacent to the hotel property, upon which a
second hotel or restaurant may be built. The option has expired, but Glenmaura
is currently negotiating a new option on the adjacent property.
MARKET AND COMPETITION The Scranton/Wilkes-Barre/Hazelton MSA is located in
northeastern Pennsylvania and encompasses a four county region, including
Lackawanna County. Scranton is the county seat for Lackawanna County. The area
is served by four interstate highways and the northeast extension of the
Pennsylvania Turnpike, all providing access to major markets in the United
States and Canada. Interstate 84 from the east and the Northeast Extension of
the Pennsylvania Turnpike from Philadelphia both terminate in the Scranton area.
New York City, Philadelphia and Hartford, Connecticut, are less than 2.5 hours
away. The Wilkes-Barre/Scranton International Airport is a full service facility
which provides scheduled service to the regional hubs of most domestic airline
carriers and is located nine miles south of downtown Scranton.
In addition to distribution access to major markets in the northeast, the
Scranton area offers a low cost of living, low wage rates and a highly skilled
and well-trained work force. Major employers in Lackawanna County with work
forces exceeding 1,000 include, Specialty Records Corporation Division of WEA
Manufacturing a division of Time Warner Company, Mercy Hospital, Community
Medical Center, Allied Services (a not-for-profit health care system and
rehabilitation center), Lackawanna County, Pennsylvania State Offices, Thompson
Consumer Electronics, Fleet Bank., Technagelas, University of Scranton and the
U.S. Government. Some major employment additions include Prudential Asset
Management (500 jobs with plans to expand to 800 jobs) and J.C. Penney
Telemarketing (425 jobs).
GLENMAURA COMMUNITY The Courtyard by Marriott hotel is located in the 220-acre
Glenmaura Corporate Center, which is part of the Glenmaura Community, a new
1,028-acre planned mixed use community development. The Glenmaura Community is
located five miles from downtown Scranton on Montage Mountain, just off Exit 51
of Interstate 81, near Montage Mountain Ski Resort and Lackawanna Stadium which
is the home of the Philadelphia Phillies triple A affiliate. The
Wilkes-Barre/Scranton International Airport is four miles south. At Exit 51,
I-81 has a daily count of over 70,000 vehicles. In order to handle the increased
activity at this location, the Exit 51 Interchange may be undergoing major
improvements which will significantly improve Glenmaura's access on and off
I-81.
The Glenmaura Corporate Center, the newest office park in the area, is to
contain a mix of office, hotel, restaurant and limited retail space. It is
expected to attract companies requiring headquarter and back office facilities
for credit card and data processing, telemarketing, and accounting functions.
Ultimately, the Glenmaura Corporate Center is to include 2 million square feet
of office space, in addition to attendant service facilities. The major tenant
at this point is Fleet Bank, which occupies a new $33 million, 300,000 square
foot facility.
There are five hotels containing an aggregate of approximately 659 rooms within
a 12 mile radius of Glenmaura that are considered to be competitive. These
include a 129-room Hampton Inn hotel, which is located approximately 1/2 mile
from the site of the Courtyard by Marriott hotel and is also accessible by Exit
51 on I-81. Adjacent to the Hampton Inn is a newly opened Comfort Suites with a
total of 100 rooms. There is a 140-room Holiday Inn located less than 5
<PAGE>
miles to the north in the Town of Dunmore. In addition, there is a 148-room
Radisson Lackawanna Station Hotel which is located approximately 5 miles away in
downtown Scranton. There is another lodging facility located further to the
north in Clarks Summit, which is approximately 12 miles from the Courtyard by
Marriott hotel, The Inn at Nichols Village which has 134 rooms. With the
exception of the Radisson Lackawanna Station Hotel, all of these properties can
be accessed fairly easily from exits on I-81.
INVESTMENT POLICIES
The principal investment objectives of the Partnership are to: (i) preserve,
protect and return the Partnership's invested capital and to meet debt service
requirements; (ii) provide quarterly distributions of available cash to the
limited partners in an annual amount which will equal or exceed the cumulative
return of 8% specified in the Partnership's Partnership Agreement and (iii)
provide appreciation in the market value of the hotels which may be realized
through their sale or refinancing. The hotels will be held by the Partnership
until the General Partner determines that a sale or other disposition of any or
all of the hotels would be advantageous in light of the Partnership's
objectives.
The Partnership's objective is that the ratio of gross offering proceeds from
the sale of Subordinated Notes (the "Notes"), plus the principal balance of
financing obtained from sources other than the General Partner and its
affiliates, including loans from institutional lenders, which financings are
secured by first mortgage liens on the Partnership's real properties including
improvments thereon ("External Financing") to the greater of (i) gross offering
proceeds from the sale of Notes and Units, or (ii) the aggregate fair market
value of the Partnership's hotels plus the Partnership's limited partnership
interest in Glenmaura will not be more than .85 to 1.0. This policy can only be
changed with an affirmative vote of at least a majority in interest of the
Partnership's limited partners.
The funds required to operate the hotels (except for initial working capital,
which will be provided in the Partnership' Public Offering (the "Public
Offering") and External Financing), are expected to be provided from operations.
DESCRIPTION OF REAL ESTATE AND OPERATING DATA
Included above is a detailed description of each of the Partnership's specified
investments.
OPERATIONS OF THE SOLON HAMPTON INN HOTEL
LOCATION: Solon Commons, in the City of Solon, Ohio, just southeast of
the City of Cleveland, Ohio.
NUMBER OF
GUEST ROOMS: 103 rooms.
CONSTRUCTED: Construction completed in August 1997.
SCHEDULED RENOVATION
EXPENDITURES: Under the License Agreement, Promus can require
the Solon Hampton Inn to make such renovations at
any time during the term of the License Agreement
(at the expense of Solon Hotel LLC) as Promus
deems necessary to upgrade the hotel.Partnership does not
currently anticipate any renovations to be required.
AVERAGE OCCUPANCY AVERAGE RENTAL
RATE FOR THE FISCAL RATE FOR THE FISCAL
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997: 73.9% DECEMBER 31, 1997: $77.97
- ----------------- -----------------
<PAGE>
Total Room Revenues
Per Available Rooms
for the Fiscal Year Ended
DECEMBER 31, 1997: $57.62
OPERATIONS OF THE COURTYARD BY MARRIOTT HOTEL OWNED AND OPERATED BY GLENMAURA.
LOCATION: Glenmaura Corporate Center, in the Borough of Moosic,
Pennsylvania, just southeast of the City of Scranton,
Pennsylvania.
NUMBER OF
GUEST ROOMS: 120 rooms.
CONSTRUCTED: Construction completed in September 1996.
SCHEDULED RENOVATION
EXPENDITURES: Under the franchise agreement, on the fifth, tenth and
fifteenth anniversary dates of the hotel opening the
franchisor can require Glenmaura to make such renovations
(at Glenmaura's expense) as the franchisor deems necessary
to upgrade the hotel.Partnership anticipates any required
replacements to be funded from the replacement reserve
required under the Glenmaura mortgage loan.
AVERAGE OCCUPANCY AVERAGE RENTAL
RATE FOR THE FISCAL RATE FOR THE FISCAL
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997: 63.2% DECEMBER 31, 1997: $66.21
TOTAL ROOM REVENUES
PER AVAILABLE ROOMS
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997: $41.85
SUBORDINATED NOTES
The Partnership issued $5,413,000 of Subordinated Notes (the "Notes") in the
Public Offering. The Notes require monthly payments of interest only at the rate
of 10.5%. All outstanding Notes are due and payable upon maturity on December
31, 2001, unless extended by the Partnership to December 31, 2002 with payment
of an extension fee of .5% of the principal amount of the Notes outstanding. The
Notes may be redeemed in whole or in part, at the option of the Partnership, at
any time without payment of premium or penalty, together with accrued interest
ot the redemption date.
PUBLIC OFFERING
The Partnership completed its public offering on November 24, 1997, raising
gross offering proceeds of approximately $8,289,000 from the sale of Notes and
Units. The proceeds of the public offering have been used by the Partnership to
pay offering costs, interest expense on the Subordinated Notes, development of
properties and the investment in Glenmaura.
The General Partner obtains property, liability, crime, umbrella, excess
umbrella, unowned auto and boiler insurance for each property, as well as
workers compensatiaon insurance. The amount of property insurance obtained is
based on the replacement cost of the building and its contents, plus lost
income. The liability and umbrella insurance provide converage of up to
$15,000,000. For properties under construction, the general contractor obtains
builders' risk insurance in the estimated amount of the cost of construction of
the building. This amount will vary between properties. In the opinion of the
General Partner, the properties are adequately insured.
The tax basis and depreciation of the Partnership's assets are presented on the
following table. The table presents the total amount of each type of asset owned
by the Partnership, classified by asset life. The table includes only the Solon
<PAGE>
Hampton Inn assets. The assets owned by the Erie Hampton Inn are not being
depreciated in 1997 since the property has not been completed. The investment in
Glenmaura is accounted for on the equity method, and is therefore not included
in the following information. All assets were placed in service in 1997.
LIFE TAX BASIS TAX RATE METHOD
---- --------- -------- ------
5-year FF&E 44,533 20% 200DB
7-year FF&E 900,559 14.29% 200DB
15-year land improvements 191,023 5% 150DB
39-year building 4,223,012 .963% S/L
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There is no established trading market for the Notes and Units and it is not
anticipated that any public market will exist for them. In addition, the
Partnership Agreement imposes a number of restrictions on the transferability of
the Units, including among others, the following: (i) an assignment may only be
made effective on the first day of a fiscal quarter of the Partnership; (ii) a
purported assignment of a fractional part of a Unit or less than 5 Units will
not be permitted or recognized (except in cases of inheritance and family
dissolution, and except for assignments of all of a limited partner's units);
(iii) no Units may be assigned if the proposed assignment would, in the opinion
of counsel for the Partnership, result in the termination of the Partnership or
a reclassification of the Partnership as an association taxable as an
association for federal or state tax purposes; (iv) no Units may be assigned
unless, in the opinion of counsel for the Partnership, such proposed assignment
would not result in the characterization of the Partnership as "publicly traded"
under Section 7704 of the Internal Revenue Code (dealing with transfers of 50%
or more of the outstanding interests in the Partnership).
Restrictions on the transfer of Notes and Units are also imposed under state
securities laws upon the residents of such states, including the requirement of
certain states that the suitability standards applied to initial purchasers of
the Notes and Units be applied to assignees where the assignment involves
residents of such states. In addition, the License Agreement provides
that for "publicly-traded equity interests," no consent of the franchisor is
required with respect to any transfers of less than a 25% interest in the
Partnership unless the transferee owns, or would own after the transfer is
completed, an interest in the Partnership of 25% or more. Promus has advised the
Partnership that, solely for purposes of the License Agreement, the Units would
be considered "publicly-traded equity interests" since they will have been sold
in a large real estate syndication transaction.
As of the date of this filing, there are 218 limited partners owning 2,967
Units. The limited partners received distributions of $112,500 in 1996 and
$136,400 in 1997. The Notes prohibit the Partnership from making distributions
(i) at any time when an event of default under the Notes has occurred and is
continuing or (ii) unless the Partnership has established an adequate reserve to
pay any amounts payable under the Notes during the month in which the proposed
distribution is to occur.
<PAGE>
The Public Offering was declared effective on November 24, 1995 (Commission file
number 33-96716). The Public Offering terminated two years from the effective
date on November 24, 1997. In its registration statement, the Partnership
registered 5,000 Units at $1,000 per Unit at an aggregate purchase price of
$4,900,000 of Units, $6,000,000 in the aggregate of Notes and $10,000,000 in the
aggregate of mortgage notes. The Partnership sold $5,413,000 of Notes and 2,967
Units for an aggregate purchase price of $2,876,000 in the three year period
ending December 31, 1997. No mortgage notes were sold. The Partnership intended
to sell the mortgage notes only if first mortgage financing was not available
from institutional lenders ("External Financing"). The Partnership determined,
based on the terms of available External Financing, not to offer the mortgage
notes. The Managing Dealer (and principal underwriter) of the Public Offering
was Essex Capital Markets Inc., an affiliate of the General Partner. The Notes
were sold for cash. Underwriting commissions on the Notes totalled $298,000. The
Units were sold for cash consideration of $2,698,000, and the execution of a
non-interest bearing notes (the "Partner Notes") of $178,000. The Partner Notes
were payable upon demand by the General Partner, made at least six months after
acceptance of the subscription, based on the needs of the Partnership. The
General Partner requested payment of all Partner Notes in 1997, and all payments
were received. As of December 31, 1997 there are no outstanding Partner Notes.
Underwriting commissions on the Units totalled $219,000.
Total Proceeds $8,289,000
Use of Proceeds:
Expenses incurred in connection with
the issuance or distribution of
securities:
Direct or indirect payments to directors,
officers, general partners or affiliates: 799,000
Direct or indirect payments to others 223,000
-------
1,022,000
Net offering proceeds to issuer 7,267,000
Construction of plant, building and facilities 2,495,000
Purchase and installation of machinery and equipment 89,000
Purchases of real estate 1,959,000
Acquisition of interest in Essex Glenmaura 1,145,000
Construction period interest 322,000
Interest expense 549,000
Franchise fees 125,000
Acquisition fees (paid to the General Partner) 220,000
Development fees (paid to the General Partner) 363,000
-------
Total Use of Proceeds 8,289,000
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership was formed on August 30, 1995. The Partnership completed its
public offering on November 24, 1997, raising $5,413,000 in Subordinated Notes
and $2,876,000 in Units for total offering proceeds of $8,289,000.
The following discussion analyzes the financial statements of the Partnership as
of December 31, 1997 and December 31, 1996, which are attached. Investments with
a 50% or less ownership interest are accounted for by the equity method.
Ownership interests exceeding 50% are accounted for under the consolidated
method. The Partnership had a 54.3% ownership interest in Glenmaura until June
9, 1997, at which time the Partnership's ownership interest was
<PAGE>
reduced to 49.8%. Accordingly, the financial statements for the year ended
December 31, 1997 include the accounts of the Partnership and Glenmaura through
and including June 9, 1997. For the period from June 10, 1997 to December 31,
1997, the Partnership's investment in Glenmaura is accounted for on the equity
method. The financial statements of the Partnership as of December 31, 1996 are
consolidated and include the accounts of the Partnership and Glenmaura. All
significant intercompany transactions and balances have been eliminated in
consolidation.
COMPARISON OF THE FISCAL YEAR ENDED DECEMBER 31, 1997 TO THE FISCAL YEAR ENDED
DECEMBER 31, 1996
From January 1, 1997 to December 31, 1997, the total assets of the Partnership
decreased approximately $1.7 million. The primary reason for the decrease was
the change in accounting method for Glenmaura from the consolidated to the
equity method. The investment in the Solon and Erie Properties increased by
approximately $6.7 million, due to completing construction of the Solon Hampton
Inn and acquiring the land and beginning construction of the Erie Hampton Inn.
The Partnership's unrestricted cash balance decreased from approximately $2.2
million to $284,000 from costs incurred in the acquisition and construction of
properties. Restricted cash increased $1,400,000, which is composed of $29,000
held in tax and insurance escrows with GMAC, as well as $1,327,000 of funds held
back from the GMAC-Solon first mortgage loan proceeds. The first mortgage loan
was advanced in three stages, based on the progress of construction. The final
advance was made in March 1998 upon making the final payment under the
construction contract and obtaining final lien releases from the contractor and
all subcontractors. Land held for sale increased $647,000, which represents the
costs incurred for the Warwick site, which is currently being offered for sale
by the Partnership. The assets of the Partnership at December 31, 1997 include
$348,000 of investment in partnership, which represents the Partnership's
investment in Glenmaura, net of reductions for net losses of $801,000 incurred
in 1997, the sale of 1.05 limited partnership units for $105,000 at a gain of
$40,000 and distributions of $35,400. During the period, the Partnership
incurred additional deferred costs of $427,000, representing additional debt
acquisition costs from the offering of the Subordinated Notes, costs incurred to
obtain the GMAC-Solon Loan, costs incurred to obtain the construction and
permanent financing for Erie Hotel LLC and the $45,000 franchise fee paid for
the Erie Hampton Inn hotel.
The Partnership's liabilities decreased $656,000 from January 1, 1997 to
December 31, 1997, primarily from the change to the equity method of accounting
as described above. From January 1, 1997 to December 31, 1997, the outstanding
balance of Subordinated Notes payable increased $493,000 from the issuance of
Subordinated Notes payable in the offering. Accounts payable-construction
increased approximately $300,000 from outstanding construction invoices for the
Erie Hampton Inn hotel. The construction loan payable and other notes payable of
approximately $5.8 million as of December 31, 1996 represented liabilities of
Essex Glenmaura, which no longer are presented in the Partnership's financial
statements due to the change in accounting method. In July, 1997, the
Partnership obtained a first mortgage loan on the Solon Hampton Inn in the
amount of $4,500,000. The minority interest in Glenmaura is no longer presented
in the Partnership's balance sheet due to the change in accounting method for
Glenmaura. Limited partners' equity decreased $355,000. During the year, the
Partnership received $729,000 in limited partner equity from proceeds of the
offering, incurred an additional $113,000 in syndication costs, paid $136,000 in
distributions to limited partners and collected $145,000 in promissory note
payments from limited partners. The consolidated net loss for the Partnership
from January 1, 1997 through June 9, 1997 of $260,000 and the net loss for the
Partnership of $720,000 for the period June 10, 1997 through December 31, 1997
also decreased partners' equity.
The primary revenue source for the year ended December 31, 1997 was room
revenues of $1,664,000, which is composed of $755,000 from the Glenmaura
Courtyard by Marriott hotel through June 9, 1997 and $909,000 from the Solon
Hampton Inn. Food and beverage revenue and telephone and other commission
revenue totaled $194,000 for total revenues of $1,858,000. Operating expenses
for the year ended December 31, 1997, before equity loss in partnership and
depreciation, totaled $1,530,000. The equity loss from Glenmaura for the period
June 10 through December 31, 1997 was $210,000. Depreciation and amortization of
$539,000 was recorded for a loss from operations of $422,000. Other than
depreciation, the single largest operating expense for the Partnership was rooms
expense of $518,000, followed by administrative and general expenses of
$192,000. Operating expenses for 1996 totaled $1,232,000. The largest expenses
in 1996 were depreciation of $346,000, rooms expenses of $250,000 and
administrative and general expenses of $155,000. The loss from operations in
1996 was $749,000. Other income and expense for 1997 includes net interest
expense, gain on sale of partnership interests, loss on termination of franchise
agreement and costs of researching a site not acquired. The Partnership's
interest expense, net of interest income was
<PAGE>
$646,000, representing interest incurred on the Solon Hampton Inn first
mortgage, interest on the Notes to the extent proceeds were not used to finance
construction, and interest on the notes payable and the first mortgage loan for
Glenmaura through June 9, 1997. The net interest expense for 1996 was $475,000,
representing interest on the notes payable and the first mortgage loan for
Glenmaura and interest on the Notes to the extent the proceeds were not used for
construction. The Partnership recorded a gain on the sale of the partnership
interests in Glenmaura of $40,000. During 1997, the Partnership allowed the
franchise agreement it had received for the Warwick site to expire, resulting in
expense of $40,000. In addition, the Partnership had located a potential site in
Hazleton, Pennsylvania on which $22,000 was spent in attorneys fees and other
miscellaneous costs. After researching the site, the Partnership decided to
pursue the site in Erie instead and expensed the costs incurred. The loss before
minority interest in Glenmaura for 1997 totalled $1,091,000. After allocating
$111,000 to the minority interests in Glenmaura, the Partnership's net loss for
1997 is $980,000.
The Solon Hampton Inn opened on August 1, 1997. The property achieved an average
occupancy of 74% in 1997 after five months of operation, with an average daily
rate of $77.97. The revenue per available room for 1997 was $57.62. The Solon
market is an extremely strong market. The Solon Hampton Inn has achieved even
better operating results than the General Partner expected. The strong
performance has continued into 1998 with average occupancy through February,
1998 of 72%, an average daily rate of $72.96 and revenue per available room of
$52.92.
The Courtyard by Marriott hotel opened in September 1996. The property achieved
an average occupancy of 63% for 1997, its first full year of operations, at an
average daily rate of $66.21. The revenue per available room for 1997 was
$41.85. The Courtyard by Marriott hotel has taken longer to achieve stable
operations than the General Partner had hoped. Typically, new hotels can require
from several months to a couple of years to establish a stable customer base.
The Courtyard by Marriott's occupancy continues to improve over the same period
of the prior year, The first two months of 1998 the property achieved an average
occupancy of 67%, versus average occupancy of 59% in 1997. The average daily
rate for the first two months of 1998 at $64.92 was lower than the 1997 average
daily rate of $67.20, but the combination of increased occupancy and reduced
rate in 1998 produced a $26,000 increase in room revenues.
The Solon Hampton Inn is generating sufficient funds from operations to fund all
operating expenses and debt service payments on the first mortgage loan. At the
current time, the Partnership expects that it has sufficient funds to complete
the construction of the Erie Hampton Inn hotel. However, until construction is
completed, the total cost of the project will not be known. If there are
significant unanticipated cost overruns incurred, the Partnership may not have
sufficient funds to complete construction. The Partnership will be closely
monitoring the costs of the Erie Hampton Inn in order to minimize the likelihood
of significant cost overruns. The Partnership included a working capital reserve
in its total costs for the Erie Hampton Inn hotel. The Partnership expects that
the working capital reserve will be sufficient to fund any operating deficits of
the Erie Hampton Inn hotel.
YEAR 2000 DISCLOSURE
The Partnership is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Partnership's
computerized information systems. Based on preliminary information, costs of
addressing potential problems are not currently expected to have a material
adverse impact on the Partnership's financial position, results of operations or
cash flows in future periods. However, if the Partnership, its customers or
vendors are unable to resolve such processing issues in a timely manner, it
could result in a material financial risk. Accordingly, the Partnership plans to
devote the necessary resources to resolve all significant year 2000 issues in a
timely manner.
COMPARISON OF THE FISCAL YEAR ENDED DECEMBER 31, 1996 TO THE FISCAL YEAR ENDED
DECEMBER 31, 1995.
In 1996, the Partnership purchased a 12.5 unit limited partnership interest in
Glenmaura for $1.2 million ($100,000 per unit), for an equity interest of 54.3%.
Glenmaura built a 120-room, three story Courtyard by Marriott hotel outside of
Scranton, Pennsylvania. The Courtyard by Marriott hotel opened in September
1996. For the last four months of 1996, average occupancy was 43%, with an
average daily rate of $65.00.
In 1996, consolidated total assets of the Partnership increased approximately
$10.3 million. The increase was caused by several factors. Net investment in
real estate increased $7.8 million, $7.5 million of which was from the
construction of the Courtyard by Marriott hotel by Glenmaura, and the additional
$300,000 from development activities by the Partnership. Cash and cash
equivalents increased approximately $1.9 million from proceeds of the
Partnership's
<PAGE>
offering of Notes and Units. Debt issuance costs increased $489,000, $295,000
from costs incurred in the Partnership's offering of Notes, and $194,000 of
costs associated with obtaining the financing for the Glenmaura property.
Partnership consolidated liabilities increased approximately $10.0 million for
several reasons. Subordinated Notes payable increased $3.2 million from the
issuance of Notes in the Partnership's offering. Notes payable increased $1.5
million representing the notes payable issued by Glenmaura. The construction
loan payable of $4.3 million represents construction financing on the Courtyard
by Marriott hotel, which was replaced by $5.0 million of permanent first
mortgage financing in February 1997. Accounts payable increased $440,000,
primarily from outstanding construction invoices. Since most construction
activities commenced in 1996, the accounts payable at the end of 1995 was much
smaller. As Glenmaura is consolidated with the Partnership, the $640,000 of
minority interest in the net assets of Glenmaura is presented in the balance
sheet. Partners' equity increased $287,000 in 1996 from proceeds of the
Partnership's public offering of the Units, net of syndication costs and
partners' notes, and from the consolidation of the Partnership's interest in
Glenmaura. In 1996, approximately $1.5 million of Units were issued, which is
offset by an increase of $76,000 in partners' notes, syndication costs of
$170,000 and $114,000 of partner distributions. The consolidated net loss for
the Partnership for 1996 of $867,000 also decreased partners' equity.
The Partnership incurred a consolidated net loss of $867,000 in 1996. The
primary revenue source was rooms revenue of $394,000 from Glenmaura, which is
the only hotel in operation in 1996. Expenses in 1996, before interest and
depreciation, totaled $886,000, for a loss before interest, depreciation and
amortization of $403,000.
The Partnership's consolidated interest expense for 1996, net of interest income
was $475,000, representing interest incurred by Glenmaura after opening in
September, and interest on the proceeds from the Notes which were not used for
construction in 1996. Interest on debt proceeds, primarily from the construction
loan used in construction in 1996 was capitalized. Depreciation and amortization
expenses totaled $346,000, for a net loss of $1.2 million before allocating
$357,000 of the net loss to the minority interest in Glenmaura. The consolidated
net loss for the Partnership was $867,000.
LIQUIDITY AND FINANCIAL CONDITION
As of December 31, 1997 the Partnership has $9,913,000 in outstanding long term
indebtedness comprised of Notes of $5,413,000 and first mortgage financing of
$4,500,000. In addition, the Partnership has obtained construction financing in
the amount of $4,700,000 for the Erie Hampton Inn which it expects will be
replaced by permanent first mortgage financing in the amount of $4,700,000. The
Notes are due in December 2001, unless extended by their terms for one year to
December 2002. The GMAC-Solon loan is due July, 2001, unless extended by its
terms for one year to July, 2002. The GMAC-Erie loan is expected to be due
before December, 2002, unless extended by its terms for one year to December,
2003. Once the Solon Hampton Inn and Erie Hampton Inn reach more stabilized
operations, the Partnership expects to be able to place a larger new first
mortgage on the properties, such that when it needs to refinance the total
outstanding indebtedness, which is expected to total approximately $14.3 million
in July, 2001, it can do so through a combination of retained excess working
capital, new first mortgage financing and, if necessary, new subordinated note
financing.
The Partnership believes that it has sufficient funding to complete the
construction of the Erie Hampton Inn. However, given the uncertainty of
construction, it is possible that significant unanticipated cost overruns could
occur that would cause the Partnership to not have sufficient funds to complete
construction. The Partnership intends to monitor construction costs very closely
to minimize the possibility of significant cost overruns.
The Partnership included a working capital reserve in its total costs for the
Solon Hampton Inn and has included a working capital reserve in its costs for
the Erie Hampton Inn. The Partnership expects that the working capital reserves
will be sufficient to fund any operating deficits.
The General Partner believes good investment opportunities exist in the limited
service segments of the lodging industry. The limited service segment of the
lodging industry has experienced significant growth in recent years as a greater
number of leisure travelers seek to maximize value. The General Partner believes
that the continued success of the lodging industry will depend upon, among other
things, the continued demand for lodging facilities by both business and leisure
travelers, which such demand is affected by general economic conditions,
including, costs of labor
<PAGE>
and materials, unemployment, inflation and interest rates. In addition to, but
directly affected by, economic trends, is the availability of financing on
favorable terms for the construction and operation of hotels. In recent years a
limited number of institutional lenders have been more willing to provide
financing for hotel construction and operations, and hotel franchisors or their
affiliates have established financing programs for construction and operation of
the hotel franchisors' particular hotels. In addition to these industry
considerations, the success of the Partnership's hotels will depend upon the
hotel franchises developed and operated by the Partnership, as well as the
location of the hotels.
Item 7. Financial Statements
The following Partnership financial statements are filed as part of this Report:
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Operations for years ended December 31,
1997 and 1996
Consolidated Statements of Changes in Partners' Capital for the years
ended December 31, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended December
31, 1997 and 1996
Notes to Consolidated Financial Statements
Independent Auditors' Report
The following General Partner financial statements are filed as part of this
Report:
Balance Sheets at December 31, 1997 and 1996
Statements of Operation and Changes in Retained Earnings for the
years ended December 31, 1997 and 1996 Statements of Cash Flows for
the years ended December 31, 1997 and 1996 Notes to Financial
Statements Independent Auditors' Report
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Essex Hospitality Associates IV L.P.:
We have audited the accompanying consolidated balance sheets of Essex
Hospitality Associates IV L.P. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, changes in
partners' capital and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Essex
Hospitality Associates IV L.P. and subsidiaries as of December 31, 1997 and
1996, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Rochester, New York
February 17, 1998
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
ASSETS 1997 1996
---- ----
Investment in real estate, at cost:
Land $ 1,531,644 2,492,195
Land improvements 191,023 271,348
Buildings 4,223,013 4,961,102
Furniture, fixtures and equipment 960,642 1,280,352
Construction in progress 884,630 469,487
----------- ----------
7,790,952 9,474,484
Less accumulated depreciation 195,635 231,420
----------- ----------
Net investment in real estate 7,595,317 9,243,064
Cash and cash equivalents 1,641,947 2,515,685
Land held for sale 646,981 --
Investment in partnership 348,401 --
Deferred costs:
Debt issuance 847,358 743,075
Franchise fees 85,000 128,000
----------- ----------
932,358 871,075
Less accumulated amortization 192,958 191,324
----------- ----------
Net deferred costs 739,400 679,751
----------- ----------
Other assets 42,692 229,012
----------- ----------
$11,014,738 12,667,512
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable - construction 637,059 335,914
Other accounts payable and accrued expenses 102,474 258,724
Mortgage note payable 4,500,000 --
Subordinated notes payable 5,413,000 4,920,000
Construction loan payable -- 4,294,243
Other notes payable -- 1,500,000
----------- ----------
Total liabilities 10,652,533 11,308,881
----------- ----------
Minority interest in partnership -- 641,368
----------- ----------
Commitments and contingencies (notes 5 and 6)
Partners' capital 388,746 882,514
Less notes receivable from partners 26,541 165,251
----------- ----------
Net partners' capital 362,205 717,263
----------- ----------
$11,014,738 12,667,512
=========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1997 and 1996
1997 1996
---- ----
Revenue:
<S> <C> <C>
Room $ 1,663,818 394,134
Food and beverage 95,678 54,048
Telephone and other commissions 98,246 34,880
----------- ----------
1,857,742 483,062
----------- ----------
Operating expenses:
Rooms 518,419 249,766
Administrative 191,915 155,429
Food and beverage 108,148 128,541
Marketing 128,660 89,240
Repairs and maintenance 109,732 82,573
Utilities 124,981 28,822
Management fees to affiliate 94,418 25,338
Telephone and other commissions 60,278 19,869
Royalty fees 62,543 15,766
Insurance 18,791 12,058
Property taxes 33,142 6,569
Professional fees 41,444 --
Miscellaneous 38,413 72,214
Depreciation and amortization 538,678 345,756
Equity in loss of partnership 210,482 --
----------- ----------
2,280,044 1,231,941
----------- ----------
Loss from operations (422,302) (748,879)
Interest:
Income 88,008 74,202
Expense (733,608) (548,788)
Other expense, net (22,933) --
----------- ----------
Loss before minority interest in loss of
partnership (1,090,835) (1,223,465)
Minority interest in loss of partnership 111,254 356,524
----------- ----------
Net loss$ (979,581) (866,941)
=========== ==========
Net loss allocated to:
General partners (9,796) (8,669)
Limited partners (969,785) (858,272)
----------- ----------
$ (979,581) (866,941)
=========== ==========
Net loss per limited partner unit (394) (551)
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Statements of Changes in Partners' Capital
Years ended December 31, 1997 and 1996
PARTNERS' CAPITAL NET
----------------------------------- NOTES PARTNERS'
GENERAL LIMITED TOTAL RECEIVABLE CAPITAL
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 6,574 513,321 519,895 (89,247) 430,648
Capital contributions 15,120 1,496,830 1,511,950 (76,004) 1,435,946
Syndication costs -- (168,799) (168,799) -- (168,799)
Distributions to partners (1,136) (112,455) (113,591) -- (113,591)
Net loss (8,669) (858,272) (866,941) -- (866,941)
-------- ---------- ---------- -------- ----------
Balance at December 31, 1996 11,889 870,625 882,514 (165,251) 717,263
Capital contributions 7,362 728,850 736,212 138,710 874,922
Syndication costs -- (112,637) (112,637) -- (112,637)
Distributions to partners (1,378) (136,384) (137,762) -- (137,762)
Net loss (9,796) (969,785) (979,581) -- (979,581)
-------- ---------- ---------- -------- ----------
Balance at December 31, 1997 $ 8,077 380,669 388,746 (26,541) 362,205
======== ========== ========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1997 and 1996
1997 1996
---- ----
Cash flows from investing activities:
<S> <C> <C>
Cash received from customers $ 1,830,281 444,876
Cash paid to suppliers and employees (1,595,480) (717,237)
Interest received 88,008 55,016
Interest paid (733,608) (519,717)
----------- ----------
Net cash used in operating activities (410,799) (737,062)
----------- ----------
Cash flows from investing activities:
Investment in real estate (6,462,201) (6,094,996)
Change in cash with change in controlling interest
in partnership (103,838) 248,522
Proceeds from sale of partnership interest 105,000 --
Distributions received from partnership investment 12,400 --
Franchise fee paid (45,000) --
(Increase) decrease in other assets - due from affiliates
and deposits 90,134 (34,528)
----------- ----------
Net cash used in investing activities (6,403,505) (5,881,002)
----------- ----------
Cash flows from financing activities:
Proceeds from mortgage notes payable 9,500,000 --
Proceeds from (repayment of) construction loan (4,294,243) 4,294,243
Proceeds from issuance of subordinated notes payable 493,000 3,176,000
Debt issuance costs (382,714) (418,800)
Proceeds from offering of limited partnership units 874,922 1,435,946
Proceeds from offering of subsidiary limited partnership
units, net -- 303,277
Syndication costs (112,637) (172,190)
Distributions to partners (137,762) (113,591)
----------- ----------
Net cash provided by financing activities 5,940,566 8,504,885
----------- ----------
Net increase (decrease) in cash (873,738) 1,886,821
Cash and cash equivalents - beginning of year 2,515,685 628,864
----------- ----------
Cash and cash equivalents - end of year $ 1,641,947 2,515,685
=========== ==========
</TABLE>
(Continued)
<PAGE>
<TABLE>
<CAPTION>
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
December 31, 1997 and 1996
1997 1996
---- ----
Reconciliation of net income to net cash used in operating activities:
<S> <C> <C>
Net loss $ (979,581) (866,941)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 538,678 345,756
Minority interest in partnership (111,254) (356,524)
Equity in loss of partnership 210,482 --
Gain on sale of partnership interest (39,526) --
Loss on termination of franchise agreement 40,000 --
Loss on potential site 22,459 --
Change in:
Other assets (45,923) (72,896)
Accounts payable and accrued expenses (46,134) 213,543
----------- ----------
Net cash used in operating activities $ (410,799) (737,062)
=========== ==========
Supplemental schedule of noncash investing and financing activities:
Increase (decrease) in assets and liabilities in conjunction with the
change of a controlling interest in partnership:
Investments in real estate, net $(7,373,829) 2,243,340
Deferred costs and other assets (319,195) 1,498,522
Debt (6,500,000) 518,749
Other liabilities (129,987) 1,500,000
Minority interest in partnership (519,614) 493,497
=========== ==========
Obligations incurred in connection with construction
in progress $ 597,521 180,514
=========== ==========
Notes received from general and limited partners $ 7,362 76,004
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1997 and 1996
(1) ORGANIZATION
Essex Hospitality Associates IV L.P. (the Partnership) is a New York
limited partnership formed in 1995 for the purpose of acquiring land and
constructing, owning and operating a series of hotels. The Partnership
may also invest in other partnerships that own hotels. The Partnership
financed its activities through a public offering of notes and limited
partnership units which was completed in November 1997. The Partnership's
general partner is Essex Partners Inc. (Essex Partners), a wholly-owned
subsidiary of Essex Investment Group, Inc. (Essex).
The Partnership has acquired land in order to construct and operate
hotels. A Hampton Inn hotel was constructed in Solon, Ohio and the hotel
commenced operations in August 1997. In June 1997, land was purchased in
Erie, Pennsylvania and construction of a Hampton Inn hotel has begun. In
December 1995, land was purchased in Warwick, Rhode Island in
anticipation of the construction of a Homewood Suites hotel. However, as
a result of higher than projected construction costs and a change in
market conditions, the Partnership has decided not to proceed with
development of the hotel and is now pursuing the sale of the land.
In 1997 Solon Hotel LLC, a special purpose entity was created to own the
Solon Hampton Inn. The managing member of the Solon Hotel LLC is Essex
Hotel LLC, a single purpose entity created to act as the managing member.
The membership interests in Solon Hotel LLC are owned 99% by the
Partnership and 1% by Essex Hotel LLC, whose sole member is the
Partnership.
In June 1997, the Partnership transferred the Erie property to a single
purpose entity, Erie Hotel LLC. The managing member of Erie Hotel LLC is
Essex Hotels II LLC, a single purpose entity created to act as the
managing member of Erie Hotel LLC. The membership interests in Erie Hotel
LLC are owned 99% by the Partnership and 1% by Essex Hotels II LLC, whose
sole member is the Partnership.
In January 1996, the Partnership acquired a 54.3% limited partnership
interest in Essex Glenmaura L.P. (Glenmaura) through the purchase of 12.5
limited partnership units for $1,250,000. The purchase price was equal to
the pro rata portion of the fair value of the net assets acquired.
Glenmaura owns and operates a Courtyard by Marriott hotel near Scranton,
Pennsylvania. Construction of the hotel was completed and operations
began in September 1996. In June 1997, the Partnership sold 1.05 limited
partnership units of Glenmaura to Essex Partners for $105,000, reducing
the Partnership's ownership interest to 49.8%. A gain of $39,526 was
realized on the sale and is included in other expense, net.
<PAGE>
2
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Notes to Financial Statements, Continued
(1) ORGANIZATION, CONTINUED
A general description of the allocation of Partnership income, loss, and
distributions follows. For a more comprehensive description see the
Partnership Agreement.
Allocations of income from operations will be allocated 99% to the
limited partners and 1% to the general partner until the amount allocated
to the limited partners equals the cumulative annual return of 8% of
their contribution. Any remaining income from operations is allocated 80%
to the limited partners and 20% to the general partner. Income on the
sale of any or all of the hotels is allocated 99% to the limited partners
until each limited partner has been allocated income in an amount equal
to his or her pro rata share of the nondeductible syndication expenses
and sales commissions and 1% to the general partner. Thereafter, income
on the sale of any or all the hotels is allocated in the same manner as
income from operations.
Allocations of losses from operations will be allocated 80% to the
limited partners and 20% to the general partner in the amounts sufficient
to offset all income which was allocated 80% to the limited partners.
Thereafter, operating losses are allocated 99% to the limited partners
and 1% to the general partner. Loss on the sale of any or all of the
hotels will be first allocated in the same manner as losses from
operations, except that the allocation of such loss would be made prior
to allocations of income from operations. All other losses are allocated
99% to the limited partners and 1% to the general partner.
Cash distributions will initially be made 99% to the limited partners and
1% to the general partner. After the limited partners have received a
cumulative annual return of 8% of their contribution, additional
distributions may then be made 80% to the limited partners and 20% to the
general partner. Distributions of the net proceeds of sale or refinancing
of any or all hotels will be made 1% to the general partner and 99% to
the limited partners pro rata in accordance with the number of units held
by each limited partner until the limited partners have received
distributions from sale or refinance of hotels equal to $1,000 per unit.
Thereafter, distributions shall next be made 1% to the general partner
and 99% to the limited partners until each limited partner has received
any unpaid cumulative return accrued through the date of the
distribution. Additional distributions will then be made 20% to the
general partner and 80% to the limited partners.
Essex Partners and its affiliates are receiving substantial fees in
connection with the offering of notes and limited partnership units.
Additional fees will be paid to them in connection with the acquisition,
development and operation of the hotels and management of the Partnership
(see note 6).
<PAGE>
3
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Notes to Financial Statements, Continued
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
BASIS OF ACCOUNTING
The financial statements of the Partnership were prepared on the accrual
basis of accounting in conformity with generally accepted accounting
principles.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Partnership, Solon Hotel LLC, Essex Hotel LLC, Erie Hotel LLC and Essex
Hotels II LLC. All significant inter-partnership transactions and
balances have been eliminated in consolidation.
The consolidated financial statements also include the accounts of
Glenmaura through June 9, 1997, the date at which the Partnership's
ownership interest thereon was reduced to less than 50% (see note 1). For
the period from June 10, 1997 through December 31, 1997, the
Partnership's investment in Glenmaura is accounted for under the equity
method.
INVESTMENT IN REAL ESTATE
Investment in real estate is stated at cost. Possible impairment of the
carrying value is evaluated when events or changed circumstances may
affect the underlying basis of the asset. Depreciation is calculated
using the straight-line method for buildings and accelerated methods for
land improvements, furniture, fixtures and equipment over the estimated
useful lives of the assets as each hotel commences operations:
Buildings 39 years
Land improvements 15 years
Furniture, fixtures and equipment 5 - 7 years
CASH AND CASH EQUIVALENTS
Cash investments with maturities of three months or less at the time of
purchase are considered to be cash equivalents.
DEFERRED COSTS
Costs of issuing debt are being amortized on a straight-line basis over
the terms of the debt.
Franchise fees paid for the right to own and operate the hotels are
amortized on a straight-line basis over the term of each franchise
agreement, once each hotel commences operations.
SYNDICATION COSTS
Selling commissions and legal, accounting, printing and other filing
costs totaling $418,892 related to the offering of the limited
partnership units were charged against the proceeds of the public
offering.
<PAGE>
4
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Notes to Financial Statements, Continued
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INCOME TAXES
No provision for income taxes has been provided since any liability is
the individual responsibility of the partners.
RECOGNITION OF REVENUE
Revenues are recognized as earned in accordance with contractual
arrangements for each transaction.
LIMITED PARTNERSHIP PER UNIT DATA
Net loss per limited partnership unit is calculated by dividing net loss
by the weighted average number of units outstanding during the year. The
weighted average number of units outstanding was 2,459 in 1997 and 1,557
in 1996.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the managing general partner to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ
from those estimates.
(3) INVESTMENT IN PARTNERSHIP
Summarized financial information for Glenmaura as of and for the years
ended December 31, 1997 and 1996 follows:
DECEMBER 31,
------------
1997 1996
---- ----
Net investment in real estate $7,151,000 7,505,000
Net deferred costs 144,000 124,000
Other assets 203,000 156,000
Borrowed funds 6,500,000 5,794,000
Other liabilities 300,000 588,000
Partners' capital 698,000 1,403,000
========== =========
Minority interest $ -- 641,000
========== =========
<PAGE>
5
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Notes to Financial Statements, Continued
(3) INVESTMENT IN PARTNERSHIP, CONTINUED
1997
---------------------------------
JAN. 1 - JUNE 10 -
JUNE 9 DEC. 31 TOTAL 1996
------ ------- ----- ----
Revenue $ 905,000 1,263,000 2,168,000 483,000
Operating loss (7,000) (69,000) (76,000) (652,000)
Interest expense 230,000 345,000 575,000 163,000
Net loss (243,000) (423,000) (666,000) (815,000)
========= ========== ========== ========
Minority interest in loss $ 111,000 -- 111,000 357,000
========= ========== ========== ========
The Partnership's ownership interest in Glenmaura was reduced from 54.3%
to 49.8% as of June 9, 1997. Therefore, the assets, liabilities and
results of operations of Glenmaura, and the minority interest thereon,
are only reflected in the accompanying financial statements through that
date.
(4) DEBT
MORTGAGE NOTE PAYABLE
On July 7, 1997, the Partnership obtained permanent financing from GMAC
Commercial Mortgage Corporation (GMAC) for $4,500,000 to repay the
construction loan on the Solon, Ohio hotel. As of December 31, 1997,
$1,327,000 of the loan proceeds is held in escrow until final payments
under the construction contract are made in March 1998. The loan is due
July_1, 2001 with a one year extension available upon the payment of a
fee and if certain debt service coverage is attained. Interest accrues at
3.25% over the 30-day LIBOR index (8.97% at December 31, 1997). Monthly
payments of interest only are due until August 1, 1998. Principal and
interest payments are due thereafter based on a 25-year amortization.
Starting in the second year of the loan, the Partnership will be required
to maintain a replacement reserve of 2% of monthly room revenues. The
replacement reserve payment will increase to 4% of monthly room revenues
in the third year of the loan. The loan is collateralized by the real and
personal property and certain other assets of Solon Hotel LLC. The
Partnership was also required to pledge its limited partnership interest
in Glenmaura and the loan is thirty percent guaranteed by Essex Partners.
SUBORDINATED NOTES PAYABLE
Subordinated notes payable of $5,413,000 bear interest at a rate of 10.5%
per annum, payable monthly, and mature December 31, 2001, unless extended
by the Partnership to December 31, 2002 upon payment to holders of an
extension fee equal to .5% of the principal amount of the subordinated
notes outstanding. The notes are issued as unsecured obligations of the
Partnership.
<PAGE>
6
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Notes to Financial Statements, Continued
(4) DEBT, CONTINUED
The future annual principal payments of the debt obligations outstanding
as of December 31, 1997 are estimated as follows:
1998 $ 17,500
1999 44,500
2000 49,000
2001 9,802,000
----------
$9,913,000
==========
In 1997 and 1996, interest of $202,746 and $193,354, respectively, was
capitalized in investments in real estate as the debt was used to finance
construction of hotels.
CONSTRUCTION LOAN COMMITMENT
On December 31, 1997, the Partnership received a letter of commitment
from a bank for $4,700,000 of construction financing for the Hampton Inn
in Erie, Pennsylvania. The term is for twelve months and requires monthly
payments of interest only at a rate of 2.5% over the LIBOR rate (8.22% at
December 31, 1997). The facility will be guaranteed by Essex Partners and
collateralized by the related hotel property. Additionally, covenants
require minimum net worth and limit distributions. There were no draws
outstanding on the facility at December 31, 1997. The Partnership is also
negotiating with GMAC for permanent financing of the Erie Hampton Inn
hotel.
(5) FRANCHISE FEES
The Solon, Ohio Hampton Inn is operated under a license agreement with
Promus Corporation (Promus). An initial franchise fee of $40,000 was paid
in 1995. In 1997, the Partnership entered into another license agreement
with Promus to operate the Hampton Inn in Erie, Pennsylvania. A initial
franchise fee of $45,000 was required. The term of the license agreements
is approximately twenty years from the date the hotel commences
operations. In addition, for each hotel, the Partnership will be required
to pay Promus a monthly royalty fee of an additional 4% of gross rooms
revenues, a monthly marketing/reservation fee of 4% of gross rooms
revenue, an initial software license fee of $3,000 plus $85 per guest
room with a monthly maintenance charge of $200 to $400 per month, and a
monthly amount equal to any sales tax or similar tax imposed on Promus on
payments received under the license agreement. Royalty,
marketing/reservation fees were $72,596 in 1997.
Promus requires the Partnership to establish a capital reserve escrow
account based on a percentage of gross revenues generated by each hotel
which will be used for product quality requirements of the hotel.
Cumulative funding of the reserve for the first five years increases from
1% to 5% of gross revenues and stabilizes at 5% for the term of the
agreement. The Promus franchise agreements impose certain restrictions on
the transfer of limited partnership units. Promus restricts the sale,
pledge or transfer of units in excess of 25% without their consent.
<PAGE>
7
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Notes to Financial Statements, Continued
(5) FRANCHISE FEES, CONTINUED
In 1995, the Partnership entered into a license agreement with Promus to
operate a Homewood Suites hotel in Warwick, Rhode Island for which an
initial franchise fee of $40,000 was paid. However, in 1997, the
Partnership determined that they would not build the hotel. As a result,
the franchise agreement was terminated and the franchise fee was written
off and included in other expense.
(6) RELATED PARTY TRANSACTIONS
A summary of fees earned by Essex Partners or its affiliates for the
years ended December 31, 1997 and 1996 under the terms of the Partnership
agreement follows:
<TABLE>
<CAPTION>
TYPE OF FEE AMOUNT OF FEE 1997 1996
----------- ------------- ---- ----
<S> <C> <C> <C>
Selling Commission Up to $80 per limited partnership
unit and $55 per $1,000 sold $80,685 289,063
Organization and 3.4% of the gross proceeds
Offering Fee of the offering 41,543 158,876
Offering and Up to $40,000 if proceeds of
Organization Fee the offering of limited partnership
- Glenmaura units is $4,000,000, reduced by
any selling commissions paid -- 16,000
Acquisition Fee $110,000 per hotel site 110,000 --
Development Fee $160,000 per hotel, plus 5% of the
total cost of the hotel in excess of
$2.7 million (not to exceed $325,000
per hotel) 254,500 108,000
Development Fee $285,000 (less $171,000 paid prior
- Glenmaura to the Partnership's purchase of a
controlling interest of Glenmaura) -- 114,000
Property Management 4.5% of gross operating revenues
Fee from the hotels 80,930 21,718
Partnership Management .75% to 1.25% of gross operating
Fee revenues from the hotels 13,488 3,620
Accounting Fee $800 per month 4,000 3,200
--------- --------
$585,146 714,477
======== =======
</TABLE>
<PAGE>
8
ESSEX HOSPITALITY ASSOCIATES IV L.P.
AND SUBSIDIARIES
Notes to Financial Statements, Continued
(6) RELATED PARTY TRANSACTIONS, CONTINUED
The above fees are reflected in the accompanying financial statements as
follows:
1997 1996
---- ----
Balance Sheet:
Investment in real estate $364,500 222,000
Deferred debt issuance costs 43,877 282,664
Syndication costs, charged to partners'
capital 78,351 5,275
-------- -------
$486,728 669,939
======== =======
Statements of operations:
Management fees to affiliate 94,418 25,338
Administrative expense 4,000 3,200
Partnership management fees -- 16,000
-------- -------
$ 98,418 44,538
======== =======
Organization and offering fees are allocated to syndication costs and
debt issuance costs based on the pro rata share of limited partner's
units and notes payable to the total offering.
In 1995, the Partnership paid a $110,000 acquisition fee in connection
with the Warwick, Rhode Island site. The acquisition fee was refunded to
the Partnership in 1996.
Under the terms of the Partnership agreement, Essex Partners or its
affiliates will also earn other fees as follows:
TYPE OF FEE AMOUNT OF FEE
----------- -------------
Investor Relations Fee .25% of the gross proceeds of the offering
payable annually in 1998 through 2001
Refinancing Fee 1% of the gross proceeds of refinancing any
or all of the hotels
Sales Fee 3% of the gross sale price of any or all
of the hotels
The Partnership will also be subject to a number of conflicts of interest
arising from its relationships with the general partner, its owners and
affiliates and due to other activities and entities in which the general
partner and its affiliates have or may have a direct or indirect
financial interest.
<PAGE>
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of
Essex Investment Group, Inc.)
Financial Statements
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
<PAGE>
KPMG PEAT MARWICK LLP
600 Clinton Square
Rochester, NY 14604
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Essex Partners Inc.:
We have audited the accompanying balance sheets of Essex Partners Inc. (a wholly
owned subsidiary of Essex Investment Group, Inc.) as of December 31, 1997 and
1996, and the related statements of operations and changes in retained earnings
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Essex Partners Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
Rochester, New York
February 26, 1998
<PAGE>
<TABLE>
<CAPTION>
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Balance Sheets
December 31, 1997 and 1996
ASSETS 1997 1996
------ ---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 418,458 84,643
Receivables from partnerships 452,187 815,825
Due from parent and affiliates, net 318,465 --
Other 2,630 5,682
---------- ---------
Total current assets 1,191,740 906,150
Noncurrent receivables from partnerships 186,146 533,825
Investment in real estate 132,844 --
Investments in partnerships 543,745 506,224
Deferred tax asset 56,300 48,000
Office furniture and equipment less accumulated
depreciation of $104,373 in 1997 and $74,560 in 1996 73,545 87,479
---------- ---------
$2,184,320 2,081,678
========== =========
LIABILITIES AND STOCKHOLDER'S INVESTMENT
Current liabilities:
Accounts payable and accrued expenses 301,426 40,504
Due to parent and affiliates, net -- 216,006
---------- ---------
Total current liabilities 301,426 256,510
Accrued partnership contributions 87,359 91,770
---------- ---------
388,785 348,280
---------- ---------
Contingencies (note 6)
Stockholder's investment:
Common stock, par value $.01, authorized 2,000,000
shares; 100 shares issued and outstanding 1 1
Paid-in capital 999 999
Retained earnings 1,794,535 1,732,398
---------- ---------
Total stockholder's investment 1,795,535 1,733,398
---------- ---------
$2,184,320 2,081,678
========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Statements of Operations and Changes in Retained Earnings
For the years ended December 31, 1997 and 1996
1997 1996
---- ----
Revenues:
Management and administrative fees $ 1,361,325 1,139,551
Organization, property acquisition, disposition
and development fees 960,947 652,156
----------- ---------
Total revenues 2,322,272 1,791,707
----------- ---------
Operating expenses:
Personnel 1,432,460 1,136,218
Office operations 166,720 170,883
Occupancy 145,692 143,666
Sales and marketing 38,152 51,280
Professional fees 40,086 57,594
Equity in losses of partnerships, net 85,665 11,290
Provision for losses on partnership investments
and receivables 217,246 210,653
----------- ---------
Total operating expenses 2,126,021 1,781,584
----------- ---------
Income from operations 196,251 10,123
----------- ---------
Other income (expense):
Expenses from terminated REIT transaction (200,000) --
Interest income 76,948 75,920
Interest expense (7,062) (80,743)
----------- ---------
Total other expense, net (130,114) (4,823)
----------- ---------
Income before income taxes 66,137 5,300
Income taxes 35,000 2,000
----------- ---------
Net income 31,137 3,300
Retained earnings, beginning of year 1,732,398 1,729,098
Adjustment pursuant to tax sharing arrangement 31,000 --
----------- ---------
Retained earnings, end of year $ 1,794,535 1,732,398
=========== =========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Statements of Cash Flows
For the years ended December 31, 1997 and 1996
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 31,137 3,300
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in losses of partnerships 85,665 11,290
Depreciation 29,813 25,397
Provision for losses on partnership investments
and receivables 217,246 210,653
Deferred income taxes (8,300) --
Adjustment pursuant to tax sharing arrangement 31,000 --
Cash provided (used) by changes in:
Other current assets 3,052 27,709
Accounts payable and accrued expenses 260,922 (144,876)
Accrued partnership contributions (4,411) (71,772)
------- ------
Net cash provided by operating activities 646,124 61,701
------- ------
Cash flows from investing activities:
Repayments from (advances to) partnerships, net 594,614 (1,002,829)
Purchase of real estate (132,844) --
Investments in partnerships (321,830) (242,500)
Distributions from partnerships 98,101 149,242
Purchase of office furniture and equipment (15,879) (12,410)
------- ------
Net cash provided by (used in)
investing activities 222,162 (1,108,497)
------- ------
Cash flows from financing activities -
advances (to) from parent and affiliates, net (534,471) 216,006
------- ------
Net increase (decrease) in cash and
cash equivalents 333,815 (830,790)
Cash and cash equivalents, beginning of year 84,643 915,433
------- ------
Cash and cash equivalents, end of year $ 418,458 84,643
========= ======
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 8,651 86,859
========= ======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements
December 31, 1997 and 1996
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Essex Partners Inc. (the Company) is the managing general partner of
partnerships which primarily own and operate hotels, apartment buildings
and manufactured home communities (MHCs). In addition to revenues earned as
an investor, the Company receives management, administrative, development
and other fees for services rendered to the partnerships.
The Company's parent, Essex Investment Group, Inc. (Essex), is an
integrated financial services and real estate company.
CASH EQUIVALENTS
Cash equivalents consist of money market accounts.
INVESTMENTS IN PARTNERSHIPS
Investments in partnerships are accounted for by the equity method. Any
initial partnership capital contribution required by the Company which is
payable out of future distributions to the Company is accrued.
RECOGNITION OF REVENUE
Organization, property acquisition, disposition, development, management
and administrative fees are recognized as earned in accordance with
contractual arrangements for each transaction.
INCOME TAXES
Income taxes are accounted for under the asset and liability method whereby
deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the year in
which those temporary differences are expected to be recovered or settled.
The effect of deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period which includes the enactment date.
The Company is included in the consolidated federal and combined New York
State income tax returns of Essex. Essex allocates current federal and
state income taxes on a pro rata basis to only its subsidiaries which have
taxable income. Any difference between current income taxes determined on a
separate company basis in accordance with the asset and liability method
and the amount allocated to the Company by Essex is reflected as an
adjustment of retained earnings.
<PAGE>
2
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements, Continued
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent liabilities to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ
from those estimates.
(2) PARTNERSHIP INVESTMENTS AND RECEIVABLES
INVESTMENTS
The Company's investments in partnerships as of and for the years ended
December 31, 1997 and 1996 by property type are summarized as follows:
APARTMENTS
HOTELS MHCS AND OTHER TOTAL
------ ---- --------- -----
1997
Investments at December 31 $ 180,722 304,029 58,994(1) 543,745
Equity in losses (44,289) (41,306) (70) (85,665)
Investments during the year 105,000 190,000 26,830 321,830
Distributions received 14,015 49,868 34,218 98,101
1996
Investments at December 31 $ 134,026 205,203 166,995 506,224
Equity in losses (14,211) 11,162 (8,241) (11,290)
Investments during the year -- 217,500 25,000 242,500
Distributions received 89,378 23,764 36,100 149,242
(1) In 1997, the Company wrote off $100,543 of an investment in a residential
real estate partnership.
Losses of the partnerships include amortization and depreciation of the
underlying properties.
<PAGE>
<PAGE>
3
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements, Continued
(2) PARTNERSHIP INVESTMENTS AND RECEIVABLES, CONTINUED
RECEIVABLES
The Company makes advances to investee partnerships to fund operations as
well as in connection with the acquisition and construction of real estate.
Such receivables, which are generally due on demand and unsecured, are
summarized as follows at December 31, 1997 and 1996:
Partnership 1997 1996
----------- ---- ----
Essex Geneseo Associates L.P. $ 276,232 173,293
Essex Microtel LeRay L.P. 212,995 313,084
Essex Hospitality Associates III L.P. 149,903 62,784
Essex - Ashford River Oaks L.P.:
Mortgage note -- 270,000
Advances 10,267 472,372
Others 211,936 298,117
------- -------
861,333 1,589,650
Less allowance for losses 223,000 240,000
------- -------
638,333 1,349,650
Less current portion 452,187 815,825
------- -------
$ 186,146 533,825
========== =======
Essex Microtel LeRay L.P. (LeRay) owns and operates a 100-room Microtel
hotel located in LeRay, New York. During 1996, the Company advanced
$313,084 to LeRay, primarily to reduce outstanding mortgage debt. Cash flow
from hotel operations is not anticipated to be sufficient to repay the
advances, and therefore, during 1997, the Company wrote off $100,089 of the
amount due. Summarized financial information for LeRay as of and for the
years ended December 31, 1997 and 1996 follows:
1997 1996
---- ----
Assets $2,064,000 2,170,000
Liabilities 1,581,000 1,780,000
Partners capital 483,000 390,000
Revenue 605,000 577,000
Net income (loss) 93,000 (221,000)
========== =========
<PAGE>
4
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements, Continued
(2) PARTNERSHIP INVESTMENTS AND RECEIVABLES, CONTINUED
The following table summarizes activity in the allowance for losses:
1997 1996
---- ----
Balance beginning of year $ 240,000 240,000
Provisions for losses 116,703 210,653
Charges offs, net of recoveries (133,703) (210,653)
-------- --------
Balance at end of year $ 223,000 240,000
========= =======
OPERATIONS
Fees earned in connection with providing organization, financing,
acquisition, development, management, administration and due diligence
services to the investee partnerships totaled $2,228,216 in 1997 and
$1,726,426 in 1996.
In 1997, the Company initiated development of a real estate investment
trust (REIT) for hotel properties held by certain of the investee
partnerships. The Company incurred legal, accounting and other advisory
costs in connection with that project. However, as of December 31, 1997,
the REIT offering is not expected to be completed and the Company has,
therefore, charged $200,000 of those costs to operating expense in 1997.
(3) INVESTMENT IN REAL ESTATE
In 1997, the Company purchased an 8% mortgage loan receivable with an
outstanding balance of $192,844. The Company purchased the loan at a
$60,000 discount, paying $132,844. On February 26, 1998, the Company
acquired title to the property through foreclosure sale.
(4) RELATED PARTY TRANSACTIONS
The Company provides management and administrative services under contracts
with several other entities owned by officers of Essex, earning fees of
$94,056 in 1997 and $65,281 in 1996.
(5) INCOME TAXES
The components of income tax expense are as follows:
Current Deferred Total
------- -------- -----
1997:
Federal $ 34,000 (7,000) 27,000
State 9,300 (1,300) 8,000
-------- ------ ------
$ 43,300 (8,300) 35,000
======== ====== ======
1996:
Federal 1,500 -- 1,500
State 500 -- 500
-------- ------ ------
$ 2,000 -- 2,000
======== ====== ======
<PAGE>
5
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements, Continued
(5) INCOME TAXES, CONTINUED
Income taxes differ from the amounts computed by applying the U.S. Federal
income tax rate of 34% to income before income taxes as follows:
1997 1996
---- ----
Computed "expected" tax expense $22,500 1,800
Increase (decrease) resulting from:
State taxes, net of Federal income
tax benefit 5,300 330
Meals and entertainment 2,400 --
Officers' life insurance 4,300 --
Other 500 (130)
------- -----
$35,000 2,000
======= =====
In 1997 and 1996, Essex allocated $12,300 and $2,000 of consolidated
current income tax expense to the Company pursuant to the inter-company tax
sharing arrangement. The differences between current income taxes allocated
to the Company under the tax sharing arrangement and the amounts reflected
above in accordance with the asset and liability method are reflected in
the accompanying statement of changes in retained earnings as adjustments
to retained earnings.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1997 and 1996 are presented below:
1997 1996
---- ----
Deferred tax assets - allowance for uncollectible
receivables $89,200 96,000
------- ------
Deferred tax liabilities:
Investment in partnerships 26,800 42,700
Depreciation of office furniture and
equipment 6,100 5,300
------- ------
Gross deferred tax liabilities 32,900 48,000
------- ------
Net deferred tax asset $56,300 48,000
======= ======
<PAGE>
6
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements, Continued
(5) INCOME TAXES, CONTINUED
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the projected future taxable income and tax planning strategies
in making this assessment. Based on the level of historical taxable income
and estimates of future taxable income over the periods which the deferred
tax assets are deductible, management believes it is more likely than not
that the Company will realize the benefits of these deductible differences
at December 31, 1997.
(6) CONTINGENCIES
As the general partner in several partnerships, the Company may, subject to
partnership agreement restrictions, be held liable for all recourse debt
and obligations of such partnerships to the extent that the obligations are
not otherwise funded. The amounts of such contingent liabilities include
guarantees of the following partnership obligations at December 31, 1997:
Essex Microtel Lehigh L.P.
Mortgage payable to bank, secured by a first mortgage on
the property $2,543,000
Essex Hospitality Associates IV L.P.
Mortgage payable, secured by a first mortgage on the property 1,350,000
Essex Geneseo Associates L.P.
Mortgage payable to bank, secured by mortgages on
the property 4,275,000
Essex Real Estate Partnership Notes
Mortgage notes payable to private investors, primarily
secured by first and second mortgages on certain
properties 651,000
Essex Glenmaura L.P.
Unsecured subordinated notes payable to private investors 1,500,000
Essex Mobile Home Properties IX L.P.
Unsecured subordinated notes payable to private investors 1,200,000
Greenport L.L.C
Mortgage payable to bank, secured by a first mortgage 135,000
on the property
Essex Manufactured Home Communities X L.P.
Unsecured subordinated notes payable to private investors 1,200,000
<PAGE>
7
ESSEX PARTNERS INC.
(A Wholly Owned Subsidiary of Essex Investment Group, Inc.)
Notes to Financial Statements, Continued
(6) CONTINGENCIES, CONTINUED
Although there is no current plan or intention to do so, the capital of the
Company is available for withdrawal by Essex. Summarized consolidated
financial information for Essex as of and for the years ended December 31,
1997 and 1996 follows:
1997 1996
---- ----
Assets $ 7,000,000 6,400,000
Liabilities 5,200,000 5,200,000
Total stockholders' equity 1,800,000 1,200,000
Revenue 16,700,000 13,900,000
Net income 420,000 400,000
========== ==========
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
NONE
PART III
Item 9. Directors and Executive Officers of the Registrant; Compliance with
Section 16 of the Exchange Act
The Partnership is managed by the General Partner, Essex Partners Inc. The
General Partner is a wholly-owned subsidiary of Essex Investment Group, Inc.
("Essex"). Essex was formed in January, 1987.
The directors and executive officers of the General Partner, as of March, 1998,
are as follows. Brief summaries of their business experience and certain other
information are set forth following the table.
NAME AGE POSITION
---- --- --------
John E. Mooney 53 President, Chief Executive Officer and Director
Jerald P. Eichelberger 54 Executive Vice President, Secretary and Director
Richard C. Brienzi 40 Senior Vice President, Treasurer, Chief
Operating Officer of the Multi-Family Division
and Director
Barbara J. Purvis 44 Senior Vice President and Director
James A. Young 49 First Vice President Hotel Operations
Mr. Mooney has been the President, Chief Executive Officer and a Director of the
General Partner since its formation in December, 1986. Mr. Mooney is also the
President, Chief Executive Officer and a Director of Essex, and has served in
that capacity since its formation in January, 1987. His investment experience
includes serving as an individual general partner of over 45 real estate limited
partnerships, 10 oil and gas limited partnerships, and 3 venture funds. He is
the Chairman of the Board of Moscom Corporation. In addition, he is a Director
of Performance Technologies, Inc., the Greater Rochester Housing Partnership and
the Monroe County Industrial Development Agency. He is also Chairman of the
Executive Committee of Genesee Capital, Inc., a Small Business Investment
Company in the Rochester, New York area.
Mr. Eichelberger has been the Executive Vice President and Director of the
General Partner since its formation in December, 1986. Mr. Eichelberger has also
been an Officer and Director of Essex since its formation in January, 1987. Mr.
Eichelberger has been an individual general partner in several real estate
limited partnerships, one oil and gas partnership, and one venture capital fund.
He is a Director of Genesee Capital, Inc. and St. Joseph's Villa.
Mr. Brienzi joined Essex in April of 1993, and was appointed Vice President,
Treasurer and Chief Financial Officer in September, 1993. Prior to joining
Essex, from 1988 to 1993, he was the Chief Financial Officer of DiMarco
Constructors Corporation. While at DiMarco he established Baldwin Real Estate
Corp., a subsidiary which manages the properties of the DiMarco Group. He is a
member of the American Institute of Certified Public Accountants, New York State
Society of Certified Public Accountants, and Construction Financial Management
Association.
Ms. Purvis has been a Vice President and Director of the General Partner since
December 1996 and Essex since January 1987. She is a Director of Genesee
Capital, Inc. and serves on the boards of a number of not-for-profit agencies.
Mr. Young joined Essex in August of 1993, and is responsible for hotel
management and operations. Mr. Young was appointed Vice President in September,
1993. From 1990 to 1993 he worked for the Georgetown University, first as
General Manager of the Georgetown University Hotel and Conference Center, then
as Executive Director of Auxiliary Services of Georgetown University.
Other significant employees of the General Partner, as of March, 1998, are as
follows. Brief summaries of their business experience and certain other
information are set forth following the table.
NAME AGE POSITION
---- --- --------
Lorrie L. LoFaso 41 Assistant Secretary and Vice President
Ms. LoFaso joined Essex in June, 1989, was elected a Vice President of Essex and
the General Partner in January, 1991,
<PAGE>
and appointed to the position of Assistant Secretary of the General Partner in
March, 1990. Ms. Lofaso is responsible for the financial control of the hotel
division's properties.
Each officer and director of the General Partner is elected for a one year term
and until his or her successor is elected and has qualified. There are no
arrangements between any officer or director and any other person pursuant to
which he or she was elected as an officer or director of the General Partner.
The Partnership does not have a class of equity securities registered pursuant
to Section 12 of the Exchange Act.
Item 10. Executive Compensation
The Partnership has approximately 15 fulltime and 20 parttime employees who work
at the Solon Hampton Inn. The Partnership and its hotel properties are managed
by its General Partner. The Partnership has not paid (or accrued) any cash or
other compensation to any executive officer of the General Partner for services
rendered to the Partnership during the year ended December 31, 1997. The
Partnership has no pension, option or other benefit plans and no cash or
non-cash compensation was paid or distributed, or is proposed to be paid or
distributed in the future, by the Partnership to any executive officer of the
General Partner pursuant to any benefit plan.
Item 11. Security Ownership of Certain Beneficial Owners and Management
There are no partners which own more than a 5% limited partnership interest in
the Partnership.
There are currently no limited partner interests in the Partnership held by
executive officers and directors of the General Partner.
<PAGE>
Item 12. Certain Relationships and Related Transactions
The General Partner will be the property manager for each of the Partnership's
properties and is the property manager for the Glenmaura property. The
management agreements describe the property manager's responsibilities and fees.
Under the management agreements, the General Partner receives a monthly
management fee of 4.5% of gross revenues, and a monthly accounting fee of $800
from each property. Payments made by the Partnership under the management
agreement for Solon Hampton Inn in 1997 were $47,000. Payments due to the
General Partner under the management agreement for Glenmaura were $43,000 prior
to June 9, 1997 and $105,000 for all of 1997. Payments made under the management
agreements for 1996 were less than $50,000.
The General Partner is entitled to receive a partnership management fee of 1.25%
of gross revenues under section 4.07(c) of the Partnership's Partnership
Agreement. The General Partner is entitled to receive a partnership management
fee from Glenmaura of .75% of gross revenues under the Glenmaura Partnership
Agreement. Payments under the Partnership's Partnership Agreement were less than
$20,000 for 1997. Payments due to the General Partner under the Glenmaura
Partnership Agreement were less than $20,000 for 1997. Partnership management
fees paid in 1996 were also less than $20,000.
The General Partner and Essex Capital Markets Inc., an affiliate of the General
Partner, have received (or accrued) certain fees from the Partnership for the
years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
TYPE OF FEE AMOUNT OF FEE 1997 1996
- ----------- ------------- ---- ----
<S> <C> <C> <C>
Selling commissions to Essex Up to $80 per limited partnership unit $80,685 289,063
Capital Markets Inc. and $55 per $1,000 note sold
Organization and Up to 3.4% of the gross proceeds of $41,543 158,876
Offering fee to the the offering
General Partner
Acquisition fee to the Up to $110,000 per hotel $110,000 -
General Partner
Development Fee To The Up To $160,000 Per Hotel, Plus 5% $254,500 108,000
Managing General Partner of the total cost of the hotel in
excess of $2.7 million (not to
exceed $325,000 per hotel)
Property management fee 4.5% of total revenues $43,000 -
IN addition, the General Partners and Essex Capital Markets Inc., have received
(or accrued) certain fees and reimbursements from Glenmaura for the years ended
December 31, 1997 and 1996:
TYPE OF FEE AMOUNT OF FEE 1997 1996
- ----------- ------------- ----- ----
Development fee to the $285,000 $ - 114,000
Managing General Partner
Property management fee 4.5% of total revenues $96,000 22,000
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rochester,
State of New York on March 30, 1998.
ESSEX HOSPITALITY ASSOCIATES IV L.P.
By: Essex Partners Inc.
Its: Managing General Partner
By: /s/John E. Mooney
John E. Mooney
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
Dated: March 30, 1998 Principal Executive Officer of
Managing General Partner:
/s/John E. Mooney
John E. Mooney
President and Chief
Executive Officer
Dated: March 30, 1998 Principal Financial and Accounting
Officer of Partnership
/s/Lorrie L. LoFaso
Lorrie L. LoFaso
Principal Accounting Officer
<PAGE>
The Board of Directors of Managing
General Partner:
Dated: March 30, 1998 /s/John E. Mooney
John E. Mooney, Director
Dated: March 30, 1998 /s/Jerald P. Eichelberger
Jerald P. Eichelberger, Director
Dated: March 30, 1998 /s/Barbara J. Purvis
Barbara J. Purvis, Director
Dated: March 30, 1998 /s/Richard C. Brienzi
Richard C. Brienzi, Director
<PAGE>
Part IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits and Index of Exhibits
EXHIBIT NUMBER DESCRIPTION
- --------------------------
3-1* Certificate of Limited Partnership of Essex Hospitality Associates IV
L.P. (Filed as Exhibit 3(b) to the Registration Statement on Form S-1
of Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
3-2* Articles of Organization of Solon Hotel LLC. (Filed as Exhibit 99-1
to Post-Effective Amendment No. 9 to the Registration Statement of
Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
3-3* Articles of Organization of Erie Hotel LLC . (Filed as Exhibit 99-2
to Post-Effective Amendment No. 9 to the Registration Statement of
Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
3-4* Articles of Organization of Essex Hotel LLC, as amended. (Filed as
Exhibit 99-3 to Post-Effective Amendment No. 9 to the Registration
Statement of Essex Hospitality Associates IV L.P., SEC File No.
33-96716)
3-5* Articles of Organization of Essex Hotels II LLC. (Filed as Exhibit
99-4 to Post-Effective Amendment No. 9 to the Registration Statement
of Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
3-6 Articles of Organization of Warwick Hotel LLC.
4-1* Form of Amended and Reinstated Limited Partnership Agreement of Essex
Hospitality Associates IV L.P. (Filed as Exhibit 3(a) to the
Prospectus included in the Registration Statement on Form S-1 of
Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
4-2* Escrow Agreement, dated November 24, 1995, between Essex Hospitality
Associates IV L.P. and Manufacturers and Traders Trust Company.
(Filed as Exhibit 4-2 to the 1995 Form 10KSB of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
4-3* Form of Subscription Agreement and Partner Note (Filed as Exhibit
4(a) to the Prospectus included in the Registration Statement on Form
S-1 of Essex Hospitality Associates IV L.P., SEC File No. 33- 96716)
4-4* Indenture, dated as of November 1, 1995, between the Partnership and
Manufacturers and Traders Trust Company, relating to the
Partnership's First Mortgage Notes (Filed as Exhibit 4-4 to the 1995
Form 10KSB of Essex Hospitality Associates IV L.P., SEC File No.
33-96716)
4-5* Indenture, dated as of November 1, 1995, between the Partnership and
Manufacturers and Traders Trust Company, relating to the
Partnership's Subordinated Notes (Filed as Exhibit 4-5 to the 1995
Form 10KSB of Essex Hospitality Associates IV L.P., SEC File No.
33-96716)
4-6* Form of First Mortgage Note (Filed as Exhibit 4(e) to the Prospectus
included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
<PAGE>
4-7* Form of Subordinated Note (Filed as Exhibit 4(d) to the Prospectus
included in the Registration Statement on Form S-1 of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
4-8* Form of Guaranty of Completion (Filed as Exhibit 4(i) to the
Prospectus included in the Registration Statement on Form S-1 of
Essex Hospitality Associates IV L.P., SEC File No. 33-96716)
10-1* Form of Dealer Manager Agreement between Essex Hospitality Associates
IV L.P. and Essex Capital Markets Inc. (Filed as Exhibit 1(a) to the
Registration Statement of Essex Hospitality Associates IV L.P., SEC
File No. 33-96716)
10-2* Form of Agreements - Promus Hotel Corporation to be entered into
between Essex Hospitality Associates IV L.P. and Promus Hotels (Filed
as Exhibit 28(a) to the Registration Statement of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
10-3* Form of Franchise Agreement - Marriott International, Inc. (Courtyard
by Marriott) to be entered into between Essex Hospitality Associates
IV L.P. and Marriott International, Inc. (Filed as Exhibit 28(b) to
the Registration Statement of Essex Hospitality Associates IV L.P.,
SEC File No. 33-96716)
10-4* Form of Franchise Agreement - Microtel Franchise and Development
Corporation to be entered into between Essex Hospitality Associates
IV L.P. and Marriott International, Inc. (Filed as Exhibit 28(c) to
the Registration Statement of Essex Hospitality Associates IV L.P.,
SEC File No. 33-96716)
10-5* Form of Management Agreement to be entered into between Essex
Hospitality Associates IV L.P. and Essex Partners Inc. (Filed as
Exhibit 28(d) to the Registration Statement of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
10-6* Real Estate Purchase Contract for the Warwick, Rhode Island site
dated as of June 22, 1995, between Essex Partners Inc. and Vito A.
Scola (Filed as Exhibit 10-6 to the 1995 Form 10KSB of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
10-7* Real Estate Purchase Contract for the Solon, Ohio site dated as of
June 19, 1995, between Essex Partners Inc. and Solon Office Park
L.T.D. (Filed as Exhibit 10-7 to the 1995 Form 10KSB OF Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
10-8* Construction contract for the Solon Hampton Inn dated December 17,
1996 between Essex Partners Inc. and Heffner & Weber, L.L.C. (Filed
as Exhibit 10-8 to the 1996 Form 10KSB of Essex Hospitality
Associates IV L.P., SEC File No. 33-96716)
10-9* Mortgage Note given by Solon Hotel LLC to GMAC Commercial Mortgage
Corporation, dated July 7, 1997. (Filed as Exhibit 10-1 to
Post-Effective Amendment No. 9 to the Registration Statement of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
10-10* Open-End Mortgage, Assignment of Leases and Profits, Security
Agreement and Fixture Filing given by Solon Hotel LLC to GMAC
Commercial Mortgage, dated July 7, 1997 . (Filed as Exhibit 10-2 to
Post-Effective Amendment No. 9 to the Registration Statement of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
10-11* Guaranty Agreement given by Essex Partners Inc. to GMAC Commercial
Mortgage Corporation, dated July 7, 1997. (Filed as Exhibit 10-3 to
Post-Effective Amendment No. 9 to the Registration Statement of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
<PAGE>
10-12* Pledge and Assignment of Membership Interests given by the
Partnership and Essex Hotels LLC to GMAC Commercial Mortgage
Corporation, dated July 7, 1997. (Filed as Exhibit 10-4 to
Post-Effective Amendment No. 9 to the Registration Statement of Essex
Hospitality Associates IV L.P., SEC File No. 33-96716)
10-13* Pledge and Assignment of Membership Interests given by the
Partnership to GMAC Commercial Mortgage Corporation, dated July 7,
1997. (Filed as Exhibit 10-5 to Post-Effective Amendment No. 9 to the
Registration Statement of Essex Hospitality Associates IV L.P., SEC
File No. 33-96716)
10-14 Construction contract for the Erie Hampton Inn dated October, 1997
between Essex Partners Inc. and DiMarco Constructors Corp.
10-15 Real Estate Purchase Contract for the Erie, Pennsylvania site dated
as of May 1996, between Essex Partners Inc. and Richard E. And May L.
Hess.
10-16 Real Estate Purchase Contract for the Erie, Pennsylvania site dated
as of May 1996, between Essex Partners Inc. and David A. Kellogg.
10-17 Promissory Note given by Erie Hotel LLC to Keybank National
Association dated December 31, 1997.
10-18 Building Loan Agreement given by Erie Hotel LLC to Keybank National
Association dated December 31, 1997.
10-19 Open-End Mortgage and Security Agreement given by Erie Hotel LLC to
Keybank National Association dated December 31, 1997.
10-20 Guaranty of Payment and Performance given by Essex Partners Inc. to
Keybank National Association dated December 31, 1997.
10-21 Guaranty of Completion given by Essex Partners Inc. to Keybank
National Association dated December 31, 1997.
21 Subsidiaries
27 Financial Data Schedule
(b) No Form 8-K was filed during the quarter ended December 31, 1996.
* Incorporated by reference
ARTICLES OF ORGANIZATION
OF
WARWICK HOTEL LLC
UNDER SECTION 203 OF THE LIMITED LIABILITY COMPANY LAW
The undersigned, for the purpose of forming a limited liability
company pursuant to Section 203 of the New York Limited Liability Company Law,
hereby certifies:
1. The name of the limited liability company is WARWICK HOTEL LLC (the
"Company").
2. The office of the Company shall be located in the County of Monroe,
State of New York.
3. The Company is not to have a specific date of dissolution in
addition to the events of dissolution set forth in Section 701 of the New York
Limited Liability Company Law.
4. The Secretary of State of the State of New York is hereby designated
as the agent of the Company upon whom process in any action or proceeding
against it may be served and the address to which the Secretary of State shall
mail a copy of process in any action or proceeding against the Company which may
be served upon him is: 100 Corporate Woods, Rochester, New York 14623.
5. The Company shall be managed by one or more members.
6. The Company is organized solely to acquire, own, operate, mortgage,
sell and otherwise deal in and with a single hotel property in the Warwick
Township of the State of Rhode Island, and to engage in and perform all acts and
activities required in connection with or incident to the foregoing.
IN WITNESS WHEREOF, I have signed these Articles of Organization this
12th day of December, 1997 and hereby affirm the truth of the statements
contained herein under penalties of perjury.
/S/ AMY C. ABBINK
Amy C. Abbink, Organizer
T H E A M E R I C A N I N S T I T U T E O F A R C H I T E C T S
- --------------------------------------------------------------------------------
AIA DOCUMENT A101
STANDARD FORM OF AGREEMENT BETWEEN
OWNER AND CONTRACTOR
WHERE THE BASIS OF PAYMENT IS A
STIPULATED SUM
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY
IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
THE 1987 EDITION OF AIA DOCUMENT A201, GENERAL CONDITIONS OF THE CONTRACT FOR
CONSTRUCTION, IS ADOPTED IN THIS DOCUMENT BY REFERENCE. DO NOT USE WITH OTHER
GENERAL CONDITIONS UNLESS THIS DOCUMENT IS MODIFIED. THIS DOCUMENT HAS BEEN
APPROVED AND ENDORSED BY THE ASSOCIATED GENERAL CONTRACTORS OF AMERICA.
- --------------------------------------------------------------------------------
AGREEMENT
made as of the day of October in the year of
Nineteen Hundred and Ninety-seven.
BETWEEN the Owner: Erie Hotel LLC
(NAME AND ADDRESS) c/o Essex Hospitality Associates IV L.P.
100 Corporate Woods, Suite 300
Rochester, NY 14623
and the Contractor: DiMarco Constructors Corp.
(NAME AND ADDRESS) 2595 Brighton-Henrietta Townline Road
Rochester, NY 14623
The Project is: Hampton Inn (98 Rooms)
(NAME AND LOCATION) Old Oliver Road at I-90
Erie, PA
The Architect is: Braun & Steidl
(NAME AND ADDRESS) 1041 West Market Street
Akron, OH 44313
The Owner and Contractor agree as set forth below.
- --------------------------------------------------------------------------------
Copyright 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974,
1977, (c)1987 by The American Institute of Architects, 1735 New York
Avenue, N.W., Washington, D.C. 20006. Reproduction of the material
herein or substantial quotation of its provisions without written
permission of the AIA violates the copyright laws of the United States
and will be subject to legal prosecution.
- ---------------------------------------------------------------------------
AIA DOCUMENT A101 - OWNER-CONTRACTOR AGREEMENT - TWELFTH
EDITION - AIA (r) - (c)1987 THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C.
20006 A101-1987 1
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution.
<PAGE>
ARTICLE 1
---------
THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions), Drawings, Specifications, addenda
issued prior to execution of this Agreement, other documents listed in this
Agreement and Modifications issued after execution of this Agreement; these form
the Contract, and are as fully a part of the Contract as if attached to this
Agreement or repeated herein. The Contract represents the entire and integrated
agreement between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of the
Contract Documents, other than Modifications, appears in Article 9.
ARTICLE 2
---------
THE WORK OF THIS CONTRACT
The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:
ARTICLE 3
---------
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.
(INSERT THE DATE OF COMMENCEMENT. IF IT DIFFERS FROM THE DATE OF THIS AGREEMENT
OR, IF APPLICABLE, STATE THAT THE DATE WILL BE FIXED IN A NOTICE TO PROCEED.)
October 15, 1997
Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner in writing not less than five
days before commencing the Work to permit the timely filing of mortgages,
mechanic's liens and other security interests.
3.2 The Contractor shall achieve Substantial Completion and Certificate of
Occupancy of the entire Work not later than
(INSERT THE CALENDAR DATE OR NUMBER OF CALENDAR DAYS AFTER THE DATE OF
COMMENCEMENT. ALSO INSERT ANY REQUIREMENTS FOR EARLIER SUBSTANTIAL COMPLETION OF
CERTAIN PORTIONS OF THE WORK, IF NOT STATED ELSEWHERE IN THE CONTRACT
DOCUMENTS.)
June 15, 1998
, subject to adjustments of this Contract Time as provided in the Contract
Documents.
(INSERT PROVISIONS, IF ANY, FOR LIQUIDATED DAMAGES RELATING TO FAILURE TO
COMPLETE ON TIME.)
- --------------------------------------------------------------------------------
AIA DOCUMENT A101 - OWNER-CONTRACTOR AGREEMENT - TWELFTH
EDITION - AIA (r) - (c)1987 THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C.
20006 A101-1987 2
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution.
<PAGE>
ARTICLE 4
---------
CONTRACT SUM
4.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum of Four million two hundred eighty
thousand------------------00/100 Dollars ($4,280,000.00), subject to additions
and deductions as provided in the Contract Documents.
4.2 The Contract Sum is based upon the following alternates, if any, which are
described in the Contract Documents and are hereby accepted by the Owner:
(STATE THE NUMBERS OR OTHER IDENTIFICATION OF ACCEPTED ALTERNATES. IF DECISIONS
ON OTHER ALTERNATES ARE TO BE MADE BY THE OWNER SUBSEQUENT TO THE EXECUTION OF
THIS AGREEMENT, ATTACH A SCHEDULE OF SUCH OTHER ALTERNATES SHOWING THE AMOUNT
FOR EACH AND THE DATE UNTIL WHICH THAT AMOUNT IS VALID.)
1. Construction testing will be contracted and paid for by Owner.
2. All above ground structures will be razed to foundation or pad level by
Owner. Demolition by Contractor will be foundation, pad, underground
structures and debris from the fire.
3. Undercut and structural fill is required for the building pad area..
4. Underground drainage, vent piping and small branch drains shall be PVC.
5. EIFS heavy duty mesh only at entranceways and columns of porte cochere.
6. Flat roof shall be a ballasted system with .060 EPDM.
7. Contractor to unload, store and load FF&E into hotel. Owner will distribute
and install FF&E.
8. Contractor to provide Surety Bond , if requested by owner, for an add of
$27, 000.
9. The Contract Sum is a guaranteed maximum price. There will be a 50-50 split
of cost savings realized below the Contract Sum as evidenced by Contractor's
final job cost run.
- --------------------------------------------------------------------------------
AIA DOCUMENT A101 - OWNER-CONTRACTOR AGREEMENT - TWELFTH
EDITION - AIA (r) - (c)1987 THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C.
20006 A101-1987 3
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution.
<PAGE>
ARTICLE 5
---------
PROGRESS PAYMENTS
5.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner shall
make progress payments on account of the Contract Sum to the Contractor as
provided below and elsewhere in the Contract Documents.
5.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows: The application shall
be submitted on the Twenty-fifth (25th) day of the same month with the
percentage completion projected through the last day of the month subject to
adjustment. Prior to payment, the application must be approved by the owner and
any building loan lender or the representatives of each.
5.3 Provided an Application for Payment is received by the Architect not later
than the Twenty-fifth day of a month, the Owner shall make payment to the
Contractor not later than the Twentieth day of the following month. If an
Application for Payment is received by the Architect after the application date
fixed above, payment shall be made by the Owner not later than Thirty days after
the Architect receives the Application for Payment.
5.4 Each Application for Payment shall be based upon the schedule of values
submitted by the Contractor in accordance with the Contract Documents. The
schedule of values shall allocate the entire Contract Sum among the various
portions of the Work and be prepared in such form and supported by such data to
substantiate its accuracy as the Architect may require. This schedule, unless
objected to by the Architect, shall be used as a basis for reviewing the
Contractor's Applications for Payment.
5.5 Applications for Payment shall indicate the percentage of completion of each
portion of the Work as of the end of the period covered by the Application for
Payment.
5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
5.6.1. Take that portion of the Contract Sum properly allocable to completed
Work as determined by multiplying the percentage completion of each portion of
the Work by the share of the total Contract Sum allocated to that portion of the
Work in the schedule of values, less retainage of ten percent (10%). Pending
final determination of cost to the Owner of changes in the Work, amounts not in
the dispute may be included as provided in Subparagraph 7 3.7 of the General
Conditions even though the Contract Sum has not yet been adjusted by Change
Order;
5.6.2 Add that portion of the Contract Sum properly allocable to materials and
equipment delivered and suitably stored at the site for subsequent incorporation
in the completed construction less retainage of percent (10%);
5.6.3 Subtract the aggregate of previous payments made by the Owner; and
5.6.4 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.
5.8 Reduction or limitation of retainage, if any, shall be as follows:
(IF IT IS INTENDED, PRIOR TO SUBSTANTIAL COMPLETION OF THE ENTIRE WORK, TO
REDUCE OR LIMIT THE RETAINAGE RESULTING FROM THE PERCENTAGES INSERTED IN
SUBPARAGRAPHS 5.6.1 AND 5.6.2 ABOVE, AND THIS IS NOT EXPLAINED ELSEWHERE IN THE
CONTRACT DOCUMENTS, INSERT HERE PROVISIONS FOR SUCH REDUCTION OR LIMITATION.)
Until the work is 50% complete, the Owner will retain 10% of the amount due the
Contractor on account of progress payments. At the time the work is 50% complete
and thereafter, if the manner of completion of the work and its progress are and
remain satisfactory to the Owner and in the absence of other good and sufficient
reasons, the Owner will (on presentation by the Contractor of consent of surety
for each application) authorize any remaining partial payments to be made in
full. Upon issuance of a Certificate of Occupancy, a punch list will be
established with a dollar value. The dollar value will be multiplied by 1.75 to
arrive at the monies to be held until final completion is achieved.
- --------------------------------------------------------------------------------
AIA DOCUMENT A101 - OWNER-CONTRACTOR AGREEMENT - TWELFTH
EDITION - AIA (r) - (c)1987 THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C.
20006 A101-1987 4
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution.
<PAGE>
ARTICLE 6
---------
FINAL PAYMENT
Final payment, constituting the entire unpaid balance of the Contract Sum, shall
be made by the Owner to the Contractor when (1) the Contract has been fully
performed by the Contractor except for the Contractor's responsibility to
correct nonconforming Work as provided in Subparagraph 12.2.2 of the General
Conditions and to satisfy other requirements, if any, which necessarily survive
final payment; and (2) a final Certificate for Payment has been issued by the
Architect; such final payment shall be made by the Owner not more than 30 days
after the issuance of the Architect's final Certificate for Payment, or as
follows:Contractor must also submit a final Certificate of occupancy from Summit
Township and final certificates from other Municipal or administrative agencies
which are required to allow the building to open and operate as a hotel.
Additionally, Contractor must submit final lien releases.
ARTICLE 7
---------
MISCELLANEOUS PROVISIONS
7.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.
7.2 Payments due and unpaid under the Contract shall bear interest from the date
payment is due at the rate stated below, or in the absence thereof, at the legal
rate prevailing from time to time at the place where the Project is located.
(INSERT RATE OF INTEREST AGREED UPON, IF ANY.) Prime rate as established in the
money rates section of The Wall Street Journal.
(USURY LAWS AND REQUIREMENTS UNDER THE FEDERAL TRUTH IN LENDING ACT, SIMILAR
STATE AND LOCAL CONSUMER CREDIT LAWS AND OTHER REGULATIONS AT THE OWNER'S AND
CONTRACTOR'S PRINCIPAL PLACES OF BUSINESS THE LOCATION OF THE PROJECT AND
ELSEWHERE MAY AFFECT THE VALIDITY OF THIS PROVISION. LEGAL ADVICE SHOULD BE
OBTAINED WITH RESPECT TO DELETIONS OR MODIFICATIONS, AND ALSO REGARDING
REQUIREMENTS SUCH AS WRITTEN DISCLOSURES OR WAIVERS.)
7.3 Other provisions: Contractor will cooperate with Owner and Owner's
construction and/or permanent lender regarding any requirements and/or requests
of such lender, including reasonable requests to amend this Contract to enable
them to advance progress and final payments under the terms of the loan (i.e.
monthly lien releases and final lien releases, as built drawings, proof of bond
and insurance coverage, current list of all subcontractors).
ARTICLE 8
---------
TERMINATION OR SUSPENSION
8.1 The Contract may be terminated by the Owner or the Contractor as provided in
Article 14 of the General Conditions.
8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.
- --------------------------------------------------------------------------------
AIA DOCUMENT A101 - OWNER-CONTRACTOR AGREEMENT - TWELFTH
EDITION - AIA (r) - (c)1987 THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C.
20006 A101-1987 5
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution.
<PAGE>
ARTICLE 9
---------
ENUMERATION OF CONTRACT DOCUMENTS
9.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:
9.1.1 The Agreement is the executed Standard Form of Agreement Between Owner and
Contractor, AIA Document A101, 1987 Edition.
9.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201, 1987 Edition.
9.1.3 The Supplementary and other Conditions of the Contract are those contained
in the Project Manual dated August 27, 1997 and are as follows:
Document Title Pages
See Exhibit A
The Specifications are those contained in the Project Manual dated as in
Subparagraph 9.1.3, and are as follows:
(EITHER LIST THE SPECIFICATIONS HERE OR REFER TO AN EXHIBIT ATTACHED TO THIS
AGREEMENT.)
Section Title Pages
See Exhibit A
- --------------------------------------------------------------------------------
AIA DOCUMENT A101 - OWNER-CONTRACTOR AGREEMENT - TWELFTH
EDITION - AIA (r) - (c)1987 THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C.
20006 A101-1987 6
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution.
<PAGE>
9.1.5 The Drawings are as follows, and are dated August 27, 1997 unless a
different date is shown below:
(EITHER LIST THE DRAWINGS HERE OR REFER TO AN EXHIBIT ATTACHED TO THIS
AGREEMENT.)
Number Title Date
See Exhibit B
Includes revised drawings:
CA-2 Cut-Fill Worksheet 9/16/97
A-12 Enlarged Pool/Mechanical Laundry 9/16/97
Rooms & Details
9.1.6 The addenda, if any, are as follows:
Number Date Pages
1 September 9, 1997 3
2 September 16, 1997 4
Portions of addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 9.
- --------------------------------------------------------------------------------
AIA DOCUMENT A101 - OWNER-CONTRACTOR AGREEMENT - TWELFTH
EDITION - AIA (r) - (c)1987 THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C.
20006 A101-1987 7
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution.
<PAGE>
9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows:
(LIST HERE ANY ADDITIONAL DOCUMENTS WHICH ARE INTENDED TO FORM PART OF THE
CONTRACT DOCUMENTS. THE GENERAL CONDITIONS PROVIDE THAT BIDDING REQUIREMENTS
SUCH AS ADVERTISEMENT OR INVITATION TO BID, INSTRUCTIONS TO BIDDERS, SAMPLE
FORMS AND THE CONTRACTOR'S BID ARE NOT PART OF THE CONTRACT DOCUMENTS UNLESS
ENUMERATED IN THIS AGREEMENT. THEY SHOULD BE LISTED HERE ONLY IF INTENDED TO BE
PART OF THE CONTRACT DOCUMENTS.)
Bid Letter dated August 27, 1997 including special
conditions, bid form, Letter Summit Township Sewer Authority
dated June 25, 1997, Letter Erie County Conservation
District dated July 14, 1997, Letter First Assembly of God
dated May 12, 1997, (A-1) 16 Pages
Contractor Bid dated September 19, 1997 (A-2) 2 Pages
Contractor Revised Bid dated October 13, 1997 (A-3)
Construction Schedule dated October 13, 1997 (A-4)
Developers Agreement Summit Township Water Authority dated
January 24, 1997 5 Pages
Developers Agreement Summit Township Sewer Authority dated
January 30, 1997 6 Pages
Developers Agreement Summit Township dated January 21, 1997 13 Pages
This Agreement is entered into as of the day and year first written above and is
executed in at least three original copies of which one is to be delivered to
the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.
OWNER ERIE HOTEL LLC CONTRACTOR DIMARCO CONSTRUCTORS, CORP.
/s/ Thomas W. Blank /s/ John L. DiMarco
- --------------------------- -----------------------------------------
(Signature) (Signature)
Thomas W. Blank, Senior Vice Pres. John L. DiMarco, II, Exec. Vice President
- ---------------------------------- -------------------- ----- --------------
(PRINTED NAME AND TITLE) (PRINTED NAME, AND TITLE)
CAUTION: YOU SHOULD SIGN AN ORIGINAL AIA DOCUMENT WHICH HAS THIS CAUTION PRINTED
IN RED. AN ORIGINAL ASSURES THAT CHANGES WILL NOT BE OBSCURED AS MAY OCCUR WHEN
DOCUMENTS ARE REPRODUCED.
- --------------------------------------------------------------------------------
AIA DOCUMENT A101 - OWNER-CONTRACTOR AGREEMENT - TWELFTH
EDITION - AIA (r) - (c)1987 THE AMERICAN INSTITUTE OF
ARCHITECTS, 1735 NEW YORK AVENUE, N.W., WASHINGTON, D.C.
20006 A101-1987 8
WARNING: Unlicensed photocopying violates U.S. copyright laws and is subject to
legal prosecution.
<PAGE>
EXHIBIT A
HAMPTON INN
OLD OLIVER ROAD, ERIE, PENNSYLVANIA
INDEX
BID DOCUMENTS PAGE NO.
- ------------- --------
Instructions to Bidders (AIA Document A701 1-5
General Conditions (AIA Document A201) 1-24
Supplementary Conditions 1-5
INFORMATION PROVIDED FOR BIDDERS
- --------------------------------
Section 00200 - Geotechnical Investigation and Soil Boring Logs 1-43
TECHNICAL SPECIFICATIONS
- ------------------------
DIVISION 1 - GENERAL REQUIREMENTS
- ---------------------------------
Section 01000 - Special Conditions 1-4
Section 01710 - Cleaning 1-2
DIVISION 2 - SITE WORK
- ----------------------
Not Used
DIVISION 3 - CONCRETE
- ---------------------
Section 03300 - Cast-in-Place Concrete 1-13
Section 03410 - Structural Pre-Cast Concrete 1-5
DIVISION 4 - MASONRY
- --------------------
Section 04200 - Unit Masonry 1-9
Section 04200A - Engineered Masonry 1-5
DIVISION 5 - METALS
- -------------------
Section 05120 - Structural Steel 1-7
Section 05210- Steel Joists 1-4
Section 05300 - Metal Decking 1-4
Section 05400 - Cold Formed Metal Framing 1-3
Section 05500 - Metal Fabrications 1-7
Section 05520 - Handrails and Railings 1-7
DIVISION 6 - CARPENTRY
- ----------------------
Section 061 00 - Rough Carpentry 1-4
Section 06200 - Finish Carpentry 1-4
Section 06410 - Casework 1-4
DIVISION 7 - THERMAL AND MOISTURE PROTECTION
- --------------------------------------------
Section 07210 - Building Insulation 1-5
Section 07241 - Exterior Insulation and Finish System - Class PB 1-4
Section 07270 - Fire Barrier Systems 1-8
Section 07410 - Manufactured Roof and Wall Systems 1-5
Section 07530 - Single-Ply Membrane Roofing 1-5
Section 07620 - Sheet Metal Flashing and Trim 1-5
Section 07724 - Roof Hatches 1-2
Section 07900 - Joint Sealers 1-3
96066
TABLE OF CONTENTS
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<PAGE>
DIVISION 8 - DOORS AND WINDOWS
- ------------------------------
Section 08110 - Steel Doors and Frames 1-4
Section 08210 - Wood Doors 1-4
Section 08305 - Access Doors 1-2
Section 08410 - Aluminum Entrances and Storefronts 1-4
Section 08460 - Automatic Entrance Doors 1-2
Section 08520 - Aluminum Windows 1-3
Section 08700 - Finish Hardware 1-11
Section 08800 - Glass and Glazing 1-5
Section 08960 - Sloped Glazing System 1-7
DIVISION 9 - FINISHES
- ---------------------
Section 09260 - Gypsum Wallboard Systems 1-10
Section 09300 - Tile 1-4
Section 09510 - Suspended Acoustical Ceiling 1-2
Section 09650 - Resilient Flooring 1-4
Section 09680 - Carpeting 1-4
Section 09800 - Special Coatings 1-5
Section 09900 - Painting 1-5
Section 09955 - Wall Covering 1-3
DIVISION 10 -SPECIALTIES
- ------------------------
Section 10350 - Flagpoles 1-3
Section 10522 - Fire Extinguishers, Cabinets, and Accessories 1-2
Section 10800 - Toilet and Bath Accessories 1-3
DIVISIONS 11 - 12
- -----------------
Not Used
DIVISION 13 - SPECIAL CONSTRUCTION
- ----------------------------------
Section 13152 - Swimming Pools 1-5
DIVISION 14 - CONVEYING SYSTEMS
- -------------------------------
Section 14241 - Hydraulic Passenger Elevators 1-9
Section 14560 - Linen Chutes 1-2
DIVISION 15 - MECHANICAL
- ------------------------
Section 15010 - Basic Mechanical Requirements 1-8
Section 15030 - Electrical Requirements for Mechanical Equipment 1-2
Section 15050 - Basic Mechanical Materials and Methods 1-4
Section 15051 - Excavation, Backfill and Surface Restoration 1-2
Section 15055 - Piping Materials and Methods 1-5
Section 151 00 -Valves 1-3
Section 15125 - Piping Expansion Joints 1 Page
Section 15130 - Flexible Pipe Connectors 1 Page
Section 15135 - Gauges and Meters 1 Page
Section 15140 - Pipe Hangers and Supports 1-3
Section 15150 - Equipment Bases and Supports 1 Page
Section 15160 - Equipment Drives 1 Page
Section 15190 - Mechanical Identification 1-2
Section 15260 - Pipe Insulation 1-2
Section 15290 - Duct Insulation 1 Page
Section 1531 0 - Fire Suppression Piping 1-3
Section 15325 - Fire Control Equipment 1-2
Section 15330 - Sprinkler Systems 1-3
Section 15340 - Standpipe System and Hose 1-2
96066
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Page-2
<PAGE>
Section 15410 - Interior Domestic Water Piping 1 Page
Section 15420 - Interior Drainage and Vent Systems 1-2
Section 15430 - Plumbing Specialties 1-4
Section 15440 - Plumbing Fixtures 1-2
Section 15453 - Plumbing Pumps - Water 1 Page
Section 15454 - Plumbing Pumps - Drainage 1 Page
Section 15458 - Domestic Water Heating 1-3
Section 15488 - Interior Fuel Gas Piping 1 Page
Section 15510 - Hydronic Piping Systems 1 Page
Section 15530A - Refrigerant Piping 1-2
Section 15530B - Refrigerant Piping 1-2
Section 15575 - Breeching, Chimneys and Stacks 1 Page
Section 15675 - Air Cooled Condensing Units 1-2
Section 15743 - Air Cooled Condenser 1-2
Section 15781 - Packaged Terminal Air Conditioning Unit 1-2
Section 15788 - Pool Dehumidification Unit (AHI-1) 1-4
Section 15832 - Heat Pump Units 1-2
Section 15834 - Unit Heaters 1-2
Section 15857 - Make-Up Air Unit 1-3
Section 15860 - Fans 1-3
Section 15870 - Roof Ventilators 1 Page
Section 15891 - Ductwork 1-5
Section 15910 - Ductwork Accessories 1-2
Section 15940 - Air Outlets and Inlets 1 Page
Section 15970 - Control Wiring 1 Page
Section 15990 - Air Balancing 1-2
DIVISION 16 - ELECTRICAL
- ------------------------
Section 16010 - Basic Electrical Requirements 1-8
Section 16050 - Basic Electrical Materials and Methods 1-4
Section 16051 - Excavation, Backfill and Surface Restoration 1-2
Section 16070 - Electrical Identification 1-2
Section 16080 - Specific Wiring Applications 1-3
Section 16110 - Conduit Systems 1-8
Section 16113 - Communication Systems Conduits and Cabinets 1-2
Section 16120 - Conductors 1-3
Section 16140 - Wiring Devices and Coverplates 1-2
Section 16400 - Building Service - Secondary 1 Page
Section 16426 - Distribution Switchboard (Below 600 Volts) 1-3
Section 16433 - Surge Protective Devices 1-3
Section 16440 - Disconnect Switches 1 Page
Section 16450 - Grounding and Bonding 1-2
Section 16470 - Panelboard 1-2
Section 16477 - Fuses 1-2
Section 16480 - Motor Controllers 1-2
Section 16495 - Automatic Transfer Switch 1-2
Section 16500 - Lighting Fixtures and Lamps 1-3
Section 16520 - Exterior Area Lighting 1 Page
Section 16535 - Exit and Emergency Lighting System 1 Page
Section 16625 - Emergency Power System 1-6
Section 16670 - Lightning Protection System 1-2
Section 16720 - Fire Alarm System 1-9
96066
TABLE OF CONTENTS
Page-3
<PAGE>
EXHIBIT B
LIST OF DRAWINGS
CIVIL
- -----
C-1 EXISTING CONDITION/DEMOLITION PLAN
C-2 GRADING PLAN
C-3 SITE PLAN
C-4 NOT USED
C-5 STORMWATER MANAGEMENT PLAN
C-6 STRIPPING AND SIGNAGE PLAN
C-7 EROSION AND SEDIMENTATION CONTROL PLAN
C-8 HIGHWAY ACCESS PERMIT
C-9 DETAIL SHEET
ARCHITECTURAL
- -------------
A-1 TITLE SHEET
A-2 FIRST FLOOR PLAN
A-3 SECOND FLOOR PLAN
A-4 THIRD FLOOR PLAN
A-5 FOURTH FLOOR PLAN
A-6 ROOF PLAN AND DETAILS
A-7 DOOR SCHEDULE AND DETAILS
A-8 FINISH SCHEDULE, WINDOW SCHEDULE
A-9 ENLARGED UNIT PLANS AND WALL TYPES
A-1 0 ENLARGED LOBBY PLAN AND DETAILS
A-1 1 ENLARGED STAIR PLANS, SECTIONS AND DETAILS
A-12 ENLARGED POOL, LAUNDRY, MECHANICAL ROOMS AND DETAILS
A-13 EXTERIOR ELEVATIONS
A-14 BUILDING SECTION"A"AND SECTIONS
A-15 BUILDING SECTION "B'AND SECTIONS
A-1 6 REFLECTED CEILING PLANS
A-17 FRONT DESK DETAILS
A-18 CABINETRY DETAILS AND INTERIOR ELEVATIONS
STRUCTURAL
- ----------
S-1 GENERAL NOTES
S-2 FOUNDATION PLAN
S-3 FOUNDATION SECTIONS AND DETAILS
S-4 SECOND FLOOR FRAMING PLAN
S-5 THIRD AND FOURTH FLOOR FRAMING PLAN
S-6 ROOF FRAMING PLANS
S-7 MASONRY PIERS, PLANS, AND DETAILS
S-8 SECTIONS AND DETAILS
S-9 SECTIONS AND DETAILS
S-10 WALL REINFORCING ELEVATIONS
96066
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<PAGE>
PLUMBING
- --------
P1 LEGEND AND SCHEDULES
P2 UNDERGROUND UTILITIES PLAN
P3 FIRST FLOOR PLAN - PLUMBING
P4 SECOND FLOOR PLAN - PLUMBING
P5 THIRD FLOOR PLAN - PLUMBING
P6 FOURTH FLOOR PLAN - PLUMBING
P7 ROOF PLAN - PLUMBING
P8 DETAILS
P9 SOIL, WASTE AND VENT DIAGRAMS
P10 SOIL, WASTE AND VENT DIAGRAMS
P11 SOIL, WASTE AND VENT DIAGRAMS
MECHANICAL
- ----------
Hl- HVAC FIRST FLOOR PLAN
H2- HVAC SECOND FLOOR PLAN
H3- HVAC THIRD FLOOR PLAN
H4- HVAC FOURTH FLOOR PLAN
H5- HVAC LEGEND AND DETAILS
H6- HVAC SCHEDULES
H7- HVAC EXHAUST/SUPPLY AIR RISER DIAGRAMS AND PIPING SCHEMATICS
ELECTRICAL
- ----------
E-1 ELECTRICAL LEGEND AND SCHEDULES
E-2 ELECTRICAL SITE PLAN
E-3 ELECTRICAL FIRST FLOOR PLAN
E-4 ELECTRICAL SECOND FLOOR PLAN
E-5 ELECTRICAL THIRD FLOOR PLAN
E-6 ELECTRICAL FOURTH FLOOR PLAN
E-7 ELECTRICAL ROOF PLAN
E-8 ENLARGED LOBBY PLAN
E-9 ELECTRICAL SUITES
E-10 ELECTRICAL DETAILS
E-11 ELECTRICAL PANELBOARDS
E-12 ELECTRICAL 1-LINE AND SCHEDULES
96066
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Page-5
<PAGE>
BRAUN & STEIDL
A R C H I T E C T S
- --------------------------------------------------------------------------------
ADDDENDUM NO. 1
Hampton Inn
Erie, PA
Prepared for Essex Investment Group
Prepared by Braun & Steidl Architects
Project No. 96066
September 9, 1997
This Addendum is a modification of the Drawings and Specifications for the
referenced project dated August 27, 1997, and is hereby incorporated into and
becomes part of said Contract Documents. It is to be considered in the proposal
and covers additions and/or changes to the Drawings and Specifications.
ARCHITECTURAL
- -------------
ITEM 1 A-12 - ENLARGED POOL/MECHANICAL, LAUNDRY ROOMS, AND DETAILS
-----------------------------------------------------------
A-15 - BUILDING SECTION
-----------------------
A. As a point of clarification, the pool and all of its related
components as specified in Section 13152 - Swimming Pools, is to be
included in your bid.
ELECTRICAL
- ----------
ITEM 1. SHEET E-2
---------
A. Duct section B/E2 - Add one (1) 4" I.D. secondary duct as indicated
on revision Drawing No. E-2A.
ITEM 2. SHEET E-14
----------
A. Main distribution panel "MDP" Schedule - Change feeder to "seven (7)
sets of (4-#500 KCMIL - in 4" c.) and 2-4" c. spare."
ITEM 3. SHEET E-13
----------
A. Panelboard Schedule "LS" - Add a GFCI type circuit breaker at pole
position No. 5 serving a lighting circuit including lighting fixtures in
the swimming pool room.
96066
ADDENDUM NO. I
Page 1
- --------------------------------------------------------------------------------
1041 West Market Street Akron, Ohio 44313-7143 (330) 864-7755 FAX: (330)
864-3691
<PAGE>
B. Panelboard Schedule "LA" - Add a GFCI type circuit breaker at pole
position No. 16 and No. 18 serving lighting circuits in the swimming
pool room.
SPECIFICATIONS
- --------------
ITEM 1. 10350 - FLAG POLES
------------------
A. Revise Section 2.3 Fittings, Paragraph B and sub-paragraphs 1 and 2
to: Internal Halyard, Winch System: Manually operated winch will control
stop device and removable handle, stainless-steel cable halyard, and
concealed revolving truck assembly with plastic-coated counterweight and
sling. Provide flush access door secured with cylinder lock. Finish
truck assembly to match Flag Pole.
ITEM 2. 16400 - BUILDING SERVICE - SECONDARY
------------------------------------
A. Paragraph 1.2 Division of Work, sub-paragraph A. - delete "secondary
conductors".
B. Paragraph 1.2 Division of Work - add the following sub-paragraph "F.
The Electrical Contractor shall provide the secondary conductors from
the pad mounted transformer to the main distribution panel. The power
company will provide terminators and make secondary connections at the
transformer."
END OF ADDENDUM 1
96066
ADDENDUM NO. 1
Page 2
<PAGE>
BRAUN & STEIDL
A R C H I T E C T S
ADDENDUM NO. 2
Hampton Inn
Erie, PA
Prepared for Essex Investment Group
Prepared by Braun & Steidl Architects
Project No. 96066
September 16,1997
This Addendum is a modification of the Drawings and Specifications for the
referenced project dated August 27, 1997, and is hereby incorporated into and
becomes part of said Contract Documents. It is to be considered in the proposal
and covers additions and/or changes to the Drawings and Specifications.
ARCHITECTURAL
- -------------
ITEM 1. A-8 - FINISH SCHEDULE, WINDOW SCHEDULE, AND WINDOW DETAILS
----------------------------------------------------------
A. As a point of clarification, to coordinate with the overall floor
plans. Revised finish schedule to read: Men's Toilet #128A
Women's Toilet #128B
Storage #124
Delete linen storage #13OA.
ITEM 2. A-18 - INTERIOR ELEVATORS
-------------------------
A-9A - ENLARGED UNIT PLANS AND WALL TYPES
-----------------------------------------
A. As a point of clarification, on Deluxe King and Deluxe Double
guestrooms, an additional elevation "N" has been added to show room
cabinetry. See Sketch SK- 1 and SK-2.
ITEM 3. A-12 -ENLARGED POOL/MECHANICAL, LAUNDRY ROOM, AND DETAILS
---------------------------------------------------------
A. Refer to revised sheet which clarifies storage #124, Men's 128A, and
Women's 128B, their respective dimensions and elevations.
96066
ADDENDUM NO. 2
Page 1
- --------------------------------------------------------------------------------
1041 West Market Street Akron, Ohio 44313-7143 (330) 864-7755 FAX: (330)
864-3691
<PAGE>
SPECIFICATIONS
- --------------
ITEM 1. SECTION 08700 - FINISH HARDWARE
- ---------------------------------------
A. As a point of clarification, frame seals as manufactured by Door and
Hardware Systems should be contacted directly for national account
pricing and supply at (716) 235-8543.
ITEM 2. SECTION 10800 - TOILET AND BATH ACCESSORIES
- ---------------------------------------------------
A. 2.3 Toilet and Bath Accessories:
A. Guestrooms, revise Item 5, shower curtain rods, heavy duty: to;
Franklin Brass, Model 164, 1" satin stainless steel with E162 FLCS
flanges, concealed fasteners.
END OF ADDENDUM 2
96066
ADDENDUM NO. 2
Page 2
<PAGE>
ESSEX
PARTNERS INC.
August 27, 1997
DiMarco Constructors Corp.
2595 Brighton-Henrietta Townline Road
Rochester, NY 14623
Attention: John DiMarco, Sr.
Re: Erie Hotel LLC
c/o Essex Hospitality Associates IV L.P.
Hampton Inn
Old Oliver Road @ I-90
Summit Township, Erie County, Pennsylvania
Dear John:
We are pleased to submit these documents for the above-referenced project. Your
company will be one of up to five bidders on this project. Please note that
these documents are for bid purposes only. You will receive a set of
construction drawings, specifications and site drawings, (the "Bid Documents")
directly from the architect.
Initially you will receive the architectural, structural and civil drawings. You
will receive the mechanical and electrical drawings in about one week. Your bid
will be due two weeks following receipt of the mechanical and electrical
drawings.
The bidder acknowledges that in submitting this bid, he has received, read and
understands the Bid Documents, has visited the site and is familiar with the
local conditions under which the work is to be performed and has correlated all
observations with the requirements of the Bid Documents.
Your work as well as your subcontractors must meet all local, state, and federal
building codes and standards and your bid as submitted reflects the willingness,
ability and costs and expenses to perform at such level.
Let me provide you with information which should assist you in reviewing the
documentation and preparing your bid:
1. Project Owner: Erie Hotel LLC
c/o Essex Hospitality Associates IV L.P.
100 Corporate Woods, Suite 300
Rochester, NY 14623
Telephone: (716) 272-2300
Fax:(716) 272-2396
100 Corporate Woods
Rochester, NY 14623
716-272-2300
Fax: 716-272-2396
SECURITIES OFFERED THROUGH ESSEX CAPITALMARKETS INC.
REGISTERED BROKER/DEALER MEMBER NASD
- --------------------------------------------------------------------------------
L 0 C A L L Y B A S E D G L 0 B A L L Y C 0 N N E C T E D
<PAGE>
2. Project Location: Old Oliver Road at I-90
North Side of Oliver, South of I-90
and West of Peach Street
Summit Township
County of Erie
State of Pennsylvania
3. Project Architect: Braun & Steidl
1041 West Market Street
Akron., OH 44313
Telephone: (330) 864-7755
Fax: (330) 864-3691
Contacts: Charles Schreckenberger
and John Wheeler
Structural, Mechanical &
Electrical Engineers: Contact through Project Architect
4. Consulting Engineers:
-Civil Engineers Henry T. Welka & Associates
3200 West 32nd Street
Erie, PA 16506
Telephone: (814) 833-3900
Fax: (814) 833-9550
Contact: James T. Welka
-Environmental Engineers Andrew Martin Associates, Inc.
2700 West 21st Street
Erie, PA 16506
Telephone: (814) 838-9591
Fax: (814) 838-9628
Contact: oseph J. Pillitteri, M.A.
-Geotechnical Engineers Urban Engineers of Erie, Inc.
502 West 7th Street
Erie, PA 16502-1399
Telephone: (814) 453-5702
Fax: (814) 453-2020
Contacts: LP. Gupta, P.E., Chief Engineer
George H. Willis, P.E., Vice President
- 2 -
5. City Offices: Summit Township
8900 Old French Road
Erie, PA 16509
Telephone: (814) 868-9686
Fax: (814) 864-0013
6. Construction Consultant: Essex Partners Inc.
100 Corporate Woods, Suite 300
Rochester, NY 14623
Telephone: (716) 272-2300
Fax: (716) 272-2396
Contact: Thomas W. Blank,
Senior Vice President
7. Start Date: Upon issuance of Building Permit,
approximately October 1, 1997.
8. Completion Date: Turnover for FF&E fit-up June 1, 1998.
Adjusted based on start date.
Issuance of Certificate of Occupancy on or
before June 1, 1998. Adjusted based on
start date.
9. Bid Format: The dollar amount of your
bid should be scheduled according to the
format attached hereto. There should be a
cost allocation for each line item unless
such work is not included in this project.
No line item should include your overhead
and/or profit, which should be reflected
in your construction management fee.
A preliminary CPM Schedule should be
submitted with your bid.
Performance and Completion Bond required
covering and including labor and materials
in an amount equal to 100% of the contract
sum.
- 3 -
<PAGE>
Builder's Risk and Liability Insurance
will be provided by the Builder.
Franchisor, Project Owner, Construction
Consultant and any Construction Lender
will be added as additional insured.
No Bidder will be permitted to withdraw
his bid within 30 days after the final due
date. Owner reserves the right to extend
the bid date up to 30 days, to reject any
and all bids and to waive informalities
herein. Any bid not conforming to this
format will be rejected.
10.Special Conditions: See Addendum attached.
11.Bid Date: All bids are to be received by September
18, 1997 at 5:00 P.M. at the offices of
Essex Partners Inc., 100 Corporate
Woods, Suite 300, Rochester, NY 14623
Attention: Thomas W. Blank, Senior
Vice President.
Contract will be awarded expeditiously
thereafter subject to final clarification
and negotiation and issuance of a Building
Permit.
Facsimile copies will be accepted followed
by a hard copy by overnight mail the same
day.
12.Contract Form: This contract will be awarded on a cost
plus fixed fee with a guaranteed maximum
price (AIA Form All). Change orders will
not increase the guaranteed maximum price
There will be a 50/50 split of cost
savings realized below the guaranteed
maximum price.
- 4 -
<PAGE>
Project Owner reserves the right to supply
any equipment and/or material to the job.
Installation may be by Owner or
Contractor. Full credit shall be given for
any such substitution based on the
appropriate line item value.
13.Changes: All Change Orders, Submittals, Shop
Drawings, Substitutions and Approved
Equals must be submitted to and
approved by the Project Owner,
Construction Consultant and Project
Architect.
There will be 5% overhead and/or profit
mark-up to any change orders. All change
orders will be supported by back-up
invoices, work orders, and other
documentation.
14.Bid Documents On file at:
Contact: City Blue Print Company
68 Scio Street
Rochester, NY 14604
Telephone: (716) 454-1695
Fax: (716) 232-64S2 (Please contact
City Blue Print Company directly to
obtain additional copies of plans and
specs at your cost.)
In the event of discrepancy between this letter and the Bid Documents, this
letter shall prevail.
- 5 -
<PAGE>
I trust this information is sufficient for you to complete your bid. If you have
any questions, please feel free to contact the undersigned. In my absence,
please ask for Keith Shugerts, our Projects Coordinator.
Very truly yours,
Thomas W. Blank
Senior Vice President
TWB:ah
enclosures
- 6 -
<PAGE>
SPECIAL CONDITIONS
1. Contractor will be responsible to obtain permits for demolition, secure
utility disconnects and demolish all structures on the site including the
excavation and fill of footings and/or basements and hauling and dumping
all material.
2. Contractor will be responsible to obtain permits and complete work at the
intersection of Old Oliver Road and New Oliver Road and the entry
connection to the Church pursuant to the attached letter agreement.
3. See reference letter from Summit Township Sewer Authority regarding Old
Oliver Road lift station. This work is included in the scope of your bid.
4. See reference letter Erie County Conservation District regarding notices,
permits, design, structure integrity, and installation of the control
measures. This work is included in the scope of your bid.
5. Verify with local code and include in your price if there is the necessity
for a standpipe system in the hotel and siamese connection outside the
hotel and the need for separate fire and domestic water lines and backflow
preventors. A stubout for landscape irrigation will be necessary.
6. Verify and include in your price the location, length of utility runs,
size of tap and tap fees to be paid to various municipal agencies. It will
be necessary to determine if water supply is to be looped from Peach
Street to New Oliver Road. Include all tap fees and the building permit
fee in your bid.
7. Wire for cable television and telephone (including elevator telephones)
including labor and material.
8. All guest room doors and the exercise room and meeting room doors to have
Vingcard 2100 lock sets, the door to the back office/administrative area
to have a push button combination lock, and all others to have cylinder
style lock sets. The inside (vestibule) set of the front door system to
also have 2 way voice communication and lock deactivation with the front
desk.
9. Provide panic hardware conforming with applicable local, regional and
national building codes (exterior and corridor doors), with electric
strikes and remote readers at all exterior doors (inside vestibule at the
front door).
- 7 -
<PAGE>
10. Contractor to install all vinyl wall covering. Contractor to provide take
offs for all wall covering used throughout the hotel. Owner will provide
name of the manufacturer, design number and match, if any.
11. Carpet installation price to include cutting and binding of the carpet
base to be used throughout the hotel in all areas where carpet is
installed. Contractor to provide' carpet takeoffs and seaming plans to
owner for both guest rooms and public space. Carpet not to be installed
until just prior to Owner's installation of FF&E. It will be a double
stick pad and pattern carpet with border and header.
12. Elevator doors and frames to be painted with color chosen by Owner.
13. The Contractor shall be responsible to secure plans, specifications, and
shop drawings from a qualified pool contractor to install the pool system
including but not limited to piping, filtration system, pool lighting and
all operating and safety signage and equipment. Contractor shall secure
all permits and licenses for construction and operation of the pool.
14. Contractor to provide conduit wire, circuit breakers, and conductor for
signs on the building, entryway to the site, and a pole sign. Final
locations to be selected by Owner. HOA switching should be added as needed
to the site light contractor.
15. Dumpsters will be provided by General Contractor through the opening date
of the hotel.
16. Contractor will accept delivery and distribute into the hotel the
expendables, soft goods and FF&E. Owner will be responsible for assembly
and installation of the FF&E. Washers, dryers and ice machines shall be
moved into the hotel to the areas in which they are to be installed.
General Contractor to install bolts into concrete pad to anticipate
installation of washers. Templates and bolts to be provided by Owner.
17. Contractor will install appliances in the public area and suites including
but not limited to garbage disposal, microwave, dishwasher, and coffee and
juice machine.
18. Allowances:
$75,000 landscape and irrigation
$75,000 exterior signage allowance
$ 7,500 interior signage allowance
The above costs shall be incorporated into the contractor's bid.
- 8 -
<PAGE>
19. The Bid Documents are being simultaneously delivered to the Building
Department Summit Township and Pennsylvania Department of Labor and
Industry. Any changes required by their review will be provided to you by
Addendum.
20. The Contractor shall achieve Substantial Completion and Permanent
Certificate of Occupancy on or before June 1, 1998.
- 9 -
<PAGE>
SUMMIT TOWNSHIP SEWER AUTHORITY
ERIE COUNTY
PENNSYLVANIA
1968
8890 Old French Road
Erie, Pennsylvania 16509-5459
Phone (814) 868-4495
Fax (814) 866-5821
June 25, 1997
Thomas W. Blank - Chief Operating Officer
Hotel Division
Essex Partners Inc.
100 Corporate Woods, Suite 300
Rochester, NY 14623
Re: Existing Lift Station @ Old Oliver Rd. - Hampton Inn
North Side of Oliver Road, South of I-90 and West of
Peach Street Summit Township
Dear Mr. Blank:
After a review of the existing lift station at Old Oliver Road, this letter is
to inform you of improvements that will be necessary prior to connection of the
proposed Hampton Inn. The Summit Township Sewer Authority has recently installed
a relief sewer that bypass the Old Oliver Road lift station- The relief line was
installed to make use of gravity as opposed to pumping. The lift station while
still serviceable is in need of some improvements in order to accommodate the
increased flow that you desire. The following is the minimum needed to permit
your flows to enter the lift station:
1 - 1 1/2 HP pump; Estimated Cost $ 2,300.00
1 - Low level alarm; Estimated Cost $ 300.00
1 - Bar screen manhole; Estimated Cost $ 900.00
TOTAL COST $ 3,500.00
The 1 1/2 HP pump is needed because the STSA does not have spare pump currently.
No spare pump was required with the reduced flow entering the lift station after
the relief sewer was installed. The low level alarm prevents unnecessary pump
operation when water levels are low and safeguards the pumps. The bar screen
manhole traps/collects solids/rags prior to entering the system. The bar manhole
shall be constructed on the Hampton Inn property and be maintained by Hampton
Inn. These improvements will be at no cost to the Summit Township Sewer
Authority.
Please submit your detailed site plans for Authority for review as soon as they
become available. Please feel free to call me at 868-4495 if you have any
questions or if you desire any additional information.
Sincerely,
/s/ William C. Steff, P.E.
William C. Steff, P.E.
Manager
WCS
ENCL.: Bar Screen Manhole Detail
cc: Mark Welka, Henry T. Welka and Associates
file
<PAGE>
Erie County Conservation District
12723 ROUTE 19 * P.O. BOX 801 * WATERFORD, PA 16441 * PHONE (814) 796-4203
250029797
July 14, 1997
TO: Essex Investment Group. Inc.
100 Corporate Woods, Suite 300
Rochester, NY 14623
RE: Hampton Inn, Summit Twp., Erie County
SUBJECT: SOIL EROSION & SEDIMENT POLLUTION CONTROL PLAN
The plan has been reviewed and is adequate to meet the requirements of PA TITLE
25, Chapter 102, Erosion Control.
The Conservation District has reviewed this plan solely to determine whether it
is adequate to satisfy the requirements of 25 PA Code 102.1 et. Seq., the
Erosion Control Regulations of the Department of Environmental Protection. By a
determination that the plan is adequate to meet those requirements, neither the
Conservation District nor the County assumes any responsibility for the
implementation of the plan or the proper construction and operation of the
facilities contained in the plan. The design, structure integrity, and
installation of the control measures are the responsibility of the landowner
and/or the earthmover. Before any construction or earthmoving may begin, the
appropriate and necessary local, state and federal permits must be secured from
the agency having specific permitting authority.
A copy of the Soil Erosion and Sediment Pollution Control Plan must be available
at the site of the earthmoving activity during construction and until the site
is stabilized.
Comments on the plan are enclosed (See page 2).
Your Conservation District stands ready to assist you in solving your
conservation problems. If you have any questions regarding this or any other
projects, please contact our office at the above address and telephone number.
Sincerely,
s/s Gene R. Clemente
Gene R. Clemente
District Technician
ERIE CO. CONSERVATION DISTRICT
CC: Henry T. Welka & Assoc.
CONSERVATION * DEVELOPMENT * SELF GOVERNMENT
<PAGE>
COMMENTS
1. This approval does not give any property rights, either in real estate or
material nor any exclusive privileges, nor shall it be construed to grant
or confer any right, title, easement, or interest in, to, or over any land
belonging to the Commonwealth of Pennsylvania; neither does it authorize
any injury to private property or invasion of private rights, nor any
infringement of Federal, State, or Local laws or regulations; nor does it
obviate the necessity of obtaining Federal assent when necessary.
2. A copy of the approval letter and the Soil Erosion & Sediment Pollution
Control Plan must be kept on site at all times during construction.
3. You must notify the Conservation District (in writing) five days prior to
the start of earthmoving project.
4. The Soil Erosion & Sediment Pollution Control Plan must be made available
upon request of an inspector from the Department of Environmental
Resources, Conservation District, or the Fish Commission.
<PAGE>
ESSEX
PARTNERS INC.
May 12, 1997
Leroy W. Gross
Church Council Secretary
First Assembly of God
8150 Oliver Road
Erie, PA 16509
RE: Intersection of Oliver Road and Old Oliver Road
Dear Leroy:
Thank you for the time we spent on Wednesday May 7, 1997. Based on our meeting,
I agreed to put in writing our agreement regarding the Church's conveyance of a
piece of land to Summit Township in order to reconfigure the above-referenced
intersection. The agreement is as follows:
1. The Church agrees to convey and/or dedicate the referenced piece of land
up to 7,000 square feet to Summit Township as such piece is shown on an
instrument survey map entitled Oliver Road Improvements dated March 13,
1997 by Henry T. Welka Associates.
2. Essex Hospitality Associates IV L.P. ("Essex") will pay the sum of $10,000
in consideration for conveyance of the land to Summit Township; $5,000
will be paid on the first day of the month following opening of its hotel
(Hampton Inn developed at Old Oliver Road and Route 19) and the remaining
$5,000 one year thereafter. A promissory note evidencing this obligation
will be executed at the time of the conveyance.
3. Essex will provide a curb cut and paved access road (approximately 100
feet long and 22 feet wide) from the improved Old Oliver Road to the
eastern most point of the Church parking lot.
4. Essex will provide a maximum of two room nights per week (non-cumulative)
on an as available basis for speakers and special guests of the Church at
one half the prevailing rate for such room. This consideration will run
for a period of five years from the hotel opening date or until the sale
of the hotel to a third party, whichever first occurs.
5. Essex will make application to place a marque directional sign at the
corner of Oliver Road and Peach Street, and will provide and pay for a
position for the Church on the sign as long as it is approved by Summit
Township.
100 Corporate Woods
Rochester, NY 14623
SECURITIES OFFERED THROUGH ESSEX CAPITALMARKETS INC. 716-272-2300
REGISTERED BROKER/DEALER MEMBER NASD Fax: 716-272-2396
L 0 C A L L Y B A S E D G L 0 B A L L Y C 0 N N E C T E D
<PAGE>
Leroy W. Gross
May 12, 1997
Page 2
6. This letter is intended to bind the parties hereto, however, in the event
of a written request by either party, the terms hereof shall be embodied
in a definitive agreement approved by legal counsel for both sides.
Leroy, I appreciate your willingness to act quickly on this matter since we hope
to have all contingencies resolved next week. This will allow us to seek
subdivision approval with Summit Township prior to the end of May.
I trust this meets with your approval. If you have any questions, please feel
free to contact me. I hope to receive this executed letter following your
Wednesday, May 14, 1997 meeting.
Sincerely
ESSEX HOSPITALITY ASSOCIATES IV LP.
by: Essex Partners, Inc., General Partner
/s/ Thomas W. Blank
Thomas W. Blank
Chief Operating Officer
Hotel Division
TWB:ah
Accepted and Agreed to by the
First Assembly of God
this 14th day of May, 1997
/s/ Leroy W. Gross
Leroy W. Gross, Church Council Secretary
<PAGE>
DiMarco Constructors Corp.
2595 Brighton Henrietta Town Line Road
Rochester, Now York 14823
To: Tom Blank
Company: Essex Investment Group
Phone:
Fax: 272-2396
From: Hal Smallwood
Company: DIMARCO CONSTRUCTORS, CORP.
Phone: (716) 272-7760
Fax: (716) 272-1860
Date: 9/19/97
Pages Including this cover page: 2
Comments:
Tom,
Attached is the breakdown of our quote for the Hampton Inn, Erie, Pa.
Thank you.
Hal Smallwood
<PAGE>
<TABLE>
<CAPTION>
DIMARCO CONSTRUCTORS CORP.
BID FORMAT
Hampton Inn, Erie, Pa
<S> <C> <C> <C>
GENERAL CONDITIONS: FINISHES:
Supervision $95,000 Gypsum Drywall $475,000
Temporary Toilets $1,800 Tile $68,000
Temporary Phones $3,500 Cultured Marble $83,000
Temporary Office Trailer $5,700 Acoustic Ceilings Included
Temporary Electric $9,500 Acoustic Insulation Included
Temporary Water $1,700 Resilient Flooring $37,000
Construction Testing $6,000 Painting $98,000
Equipment Rental $8,500 Wall covering - install Included
Site Engineering $2,100 Carpet Base - install Included
Insurance Included TOTAL FINISHES $761,000
Project Service Included
Winter Protection $83,000 SPECIALTIES:
Other $73,403 Miscellaneous Specialties
TOTAL GENERAL CONDITIONS $290,603 Louvers and Vents Included
Wall and Corner Guards $2,500
SITE WORK: Flagpole $2,700
Site Preparation $37,000 Fire Extinguishers, Cab & Access. $4,200
Earthwork $62,000 Toilet & Bath Accessories $25,600
Trenching/Backfilling/Compacting $31,000 TOTAL SPECIALTIES $35,000
Termite Protection $4,500
Select Foundation Bedding & Backfill $17,000 EQUIPMENT
Wood Fences & Gates Chutes $4,900
Asphalt Concrete Paving $130,000 TOTAL EQUIPMENT $4,900
Portland Cement Concrete Paving $14,000
Piped Utilities $49,000 FURNISHINGS
Water System $6,000 Rugs & Mats $4,500
TOTAL SITE WORK $351,000 TOTAL FURNISHINGS $4,500
CONCRETE CONVEYING SYSTEM
Cast-in-Place Concrete $183,315 Hydraulic Passenger Elevator $78,000
Precast Concrete Deck $318,500 TOTAL CONVEYING SYSTEM $78,000
TOTAL CONCRETE $501,815
MECHANICAL
MASONRY Plumbing $295,000
Mortar Included Fire Protection $63,545
Masonry Accessories Included Heating, Ventilating, A/C $280,000
Concrete Unit Masonry $207,800 Air Distribution Included
TOTAL MASONRY $207,800 Controls Included
TOTAL MECHANICAL $638,545
METALS
Structural Steel $95,300 ELECTRICAL
Steel Joists Included Electrical-General Provisions $395,000
Metal Decking Included Basic Materials & Methods Included
Cold-Formed Metal Framing In Drywall Service & Distribution Included
Metal Fabrications Included Lighting Fixtures Included
Metal Stairs Included Emergency Generator Included
TOTAL METALS $95,300 Fire Alarm Voice Communications System Included
Conduit System & Pull Wire for Telephone Included
WOOD AND PLASTIC Conduit System & Pull Wire for Television $0
Rough Carpentry $35,000 TOTAL ELECTRICAL $395,000
Finish Carpentry $26,000
Architectural Woodwork $74,000
TOTAL WOOD AND PLASTIC $135,000
THERMAL/MOISTURE PROTECT OTHER
Waterproofing Included FF&E (Install Owner Supplied Eq.) $16,000
Dampproofing Included Swimming Pool $30,000
Plastic Vapor Banter Included Building Permit Included
Building Insulation $43,000 Performance Bond Not Included
Roof Insulation Included Permit Included
Exterior Insul and Finish System $148,000 Construction Management Fee $0
Firestopping Included TOTAL OTHER $46,000
Preformed Metal Roofing $46,000
Elastic Sheet Roofing $127,000 ALLOWANCES
Flashing and Sheet Metal Included Interior Signage Allowance $7,500
Roof Accessories Included Exterior Signage Allowance $75,000
Sealants and Caulking $16,000 Landscape & Irrigation Allowance $75,000
TOTAL THERMAL/MOISTURE $380,000 TOTAL ALLOWANCE $157,500
DOORS & WINDOWS
Metal Doors & Frames $100,900
Wood Doors $12,100
Access Doors $1,600
Mirrored Doors $12,000
Aluminum Entrances & Storefronts $97,000
Structured Windows Included
Finish Hardware $16,700
Electronic Locks $32,500
Automatic Door Equipment $11,000
Glasing/Sloped $71,000
TOTAL DOORS AND WINDOWS $354,800
TOTAL BID AMOUNT $4,441,863
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTRACTOR REVISED BID
October 13, 1997
CONTINUATION SHEET AIA DOCUMENT G703 Page 2 of pages 2
AIA Document G702, APPLICATION AND CERTIFICATE FOR PAYMENT, containing
Contractor's Signed Certificate is attached,
In tabulations below, amounts are stated to the nearest dollar,
Use Column I on Contracts where variable retainage for line items may apply.
APPLICATION NUMBER: 1
APPLICATION DATE: 10/31/97
PERIOD TO: 10/31/97
ARCHITECT'S PROJECT NO: 97072
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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A B C D E F G H I
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Item Description of Work Scheduled Work Completed Materials Total % Balance Retainage
No Value From This Presently Completed (G + To
Previous Period Stored And Stored C) Finish
(Not in To Date (C - G)
D or E) (D + E + F)
- ------------------------------------------------------------------------------------------------------------------------------------
1 General Conditions $230,603.00 $0.00 $0.00 $0.00 $0.00 0.00% 230,603.00 0.00
2 Site Preparation $28,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 28,000.00 0.00
3 Earthwork $62,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 62,000.00 0.00
4 Trenching/Backfilling/Compact $31,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 31,000.00 0.00
5 Paving $144,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 144,000.00 0.00
6 Select Foundation Backfill $17,500.00 $0.00 $0.00 $0.00 $0.00 0.00% 17,500.00 0.00
7 Utilities $55,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 55,000.00 0.00
8 Cast-In-Place Concrete $181,910.00 $0.00 $0.00 $0.00 $0.00 0.00% 181,910.00 0.00
9 Pre-Cast Decks $306,184.00 $0.00 $0.00 $0.00 $0.00 0.00% 306,184.00 0.00
10 Concrete Unit Masonry $207,900.00 $0.00 $0.00 $0.00 $0.00 0.00% 207,900.00 0.00
11 Structural Steel $95,300.00 $0.00 $0.00 $0.00 $0.00 0.00% 95,300.00 0.00
12 Rough Carpentry $38,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 38,000.00 0.00
13 Finish Carpentry $98,756.00 $0.00 $0.00 $0.00 $0.00 0.00% 98,756.00 0.00
14 Building Insulation $40,074.00 $0.00 $0.00 $0.00 $0.00 0.00% 40,074.00 0.00
15 E.I.F.S. $145,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 145,000.00 0.00
16 Roofing $161,500.00 $0.00 $0.00 $0.00 $0.00 0.00% 161,500.00 0.00
17 Sealants & Caulking $16,600.00 $0.00 $0.00 $0.00 $0.00 0.00% 16,600.00 0.00
18 Metal Doors & Frames $110,100.00 $0.00 $0.00 $0.00 $0.00 0.00% 110,100.00 0.00
19 Access Doors $1,513.00 $0.00 $0.00 $0.00 $0.00 0.00% 1,513.00 0.00
20 Mirrored Doors $12,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 12,000.00 0.00
21 Aluminum Entrances & Storefronts $108,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 108,000.00 0.00
22 Finish Hardware $18,700.00 $0.00 $0.00 $0.00 $0.00 0.00% 18,700.00 0.00
23 Electronic Locks $32,500.00 $0.00 $0.00 $0.00 $0.00 0.00% 32,500.00 0.00
24 Glazing/Sloped $71,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 71,000.00 0.00
25 Gypsum Drywall $475,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 475,000.00 0.00
26 Tile $68,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 68,000.00 0.00
27 Cultured Marble $82,798.00 $0.00 $0.00 $0.00 $0.00 0.00% 82,798.00 0.00
28 Resilient Flooring $35,089.00 $0.00 $0.00 $0.00 $0.00 0.00% 35,089.00 0.00
29 Painting $95,511.00 $0.00 $0.00 $0.00 $0.00 0.00% 95,511.00 0.00
30 Specialties $9,400.00 $0.00 $0.00 $0.00 $0.00 0.00% 9,400.00 0.00
31 Toilet & Bath Accessories $25,600.00 $0.00 $0.00 $0.00 $0.00 0.00% 25,600.00 0.00
32 Chutes $4,800.00 $0.00 $0.00 $0.00 $0.00 0.00% 4,800.00 0.00
33 Elevator $74,633.00 $0.00 $0.00 $0.00 $0.00 0.00% 74,633.00 0.00
34 Plumbing $270,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 270,000.00 0.00
35 Fire Protection $63,545.00 $0.00 $0.00 $0.00 $0.00 0.00% 63,545.00 0.00
36 HVAC $280,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 280,000.00 0.00
37 Electrical $395,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 395,000.00 0.00
38 FF&E $3,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 3,000.00 0.00
39 Allowance-Signage $82,500.00 $0.00 $0.00 $0.00 $0.00 0.00% 82,500.00 0.00
40 Allowance-Landscaping $75,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 75,000.00 0.00
41 Swimming Pool $27,584.00 $0.00 $0.00 $0.00 $0.00 0.00% 27,584.00 0.00
<PAGE>
CONTINUATION SHEET AIA DOCUMENT G703 Page 2 of pages 2
AIA Document G702, APPLICATION AND CERTIFICATE FOR PAYMENT, containing
Contractor's Signed Certificate is attached,
In tabulations below, amounts are stated to the nearest dollar,
Use Column I on Contracts where variable retainage for line items may apply.
APPLICATION NUMBER: 1
APPLICATION DATE: 10/31/97
PERIOD TO: 10/31/97
ARCHITECT'S PROJECT NO: 97072
- ------------------------------------------------------------------------------------------------------------------------------------
A B C D E F G H I
- ------------------------------------------------------------------------------------------------------------------------------------
Item Description of Work Scheduled Work Completed Materials Total % Balance Retainage
No Value From This Presently Completed (G + To
Previous Period Stored And Stored C) Finish
(Not in To Date (C - G)
D or E) (D + E + F)
- ------------------------------------------------------------------------------------------------------------------------------------
$0.00 $0.00 $0.00 $0.00 0.00% 0.00 0.00
$0.00 $0.00 $0.00 $0.00 0.00% 0.00 0.00
$0.00 $0.00 $0.00 $0.00 0.00% 0.00 0.00
$0.00 $0.00 $0.00 $0.00 0.00% 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
4,280,000.00 $0.00 $0.00 $0.00 $0.00 0.00% 4,280,000.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DEVELOPER'S AGREEMENT
THIS AGREEMENT, made this 24th day of January, 1997, by and between:
Essex Partners Inc.
100 Corporate Woods, Suite 300
Rochester, MY 14623
(hereinafter collectively referred to as "Developer"),
AND
SUMMIT TOWNSHIP WATER AUTHORITY, a Pennsylvania municipal authority, with
offices at 8900 Old French Road, Erie, Pennsylvania (hereinafter referred to as
the "Authority").
BACKGROUND
A. The Developer is the owner of certain real estate located in Summit
Township, Pennsylvania and bearing Erie County Tax Identification
Nos. 40-17-73-pt 2, 2.01, 2.02.
B. The Developer intends to construct a 98-room hotel on said property and
the Developer desires to serve this property with a public water supply system.
C. All parties hereto have agreed upon certain terms and conditions under
which said public water system shall be constructed.
- 1 -
<PAGE>
AGREEMENT
NOW THEREFORE: in consideration of the intention of the parties to be
legally bound hereby and other good and valuable consideration, the parties to
this Agreement hereby agree as follows:
1. The Developer shall pay all costs for the design of the contemplated
100-room hotel including obtaining all required permits. The Authority shall
review and approve the proposed design prior to start of construction. Upon
approval of such plans by the Authority, which approval shall not be
unreasonably withheld, Developer agrees to construct or cause to be constructed
the public water .system in compliance with such approved plans. Developer
further agrees that such construction shall be in accordance with general
specifications for public water mains and appurtenances.. prepared and supplied
by Hill Engineering, Inc., which specifications are likewise incorporated herein
by reference. Construction shall be subject to inspection and approval by the
Authority, or any accredited agents or representatives of the Authority.
2. Developer further understands and agrees that they will assume all costs
and expenses in connection with the construction of the System and they will
deposit $2,500 with the Authority to be applied to expenses which the Authority
will incur for engineering, administrative and legal work- performed in
relationship to such construction.
- 2 -
<PAGE>
3. Developer understands and agrees that they will assume all costs and
expenses in connection with the construction of the proposed project.
4. If the Developer undertakes to construct the water system as contractor,
Developer agrees to indemnify and save harmless the Authority and Summit
Township from any and all claims for personal injury to any person whether or
not an employee of Developer, Authority or Summit Township, and likewise for
property damage of any person including Developer, Authority, or Summit Township
arising out of or related to the construction of the water system which is the
subject of this Agreement, where the injured party alleges and proves that the
loss is attributable in whole or in part to any ant of omission or commission,
breach of duty or negligence on the part of the Developer or their agents and
servants. Such indemnity shall hold Authority and Summit Township harmless from
any and all suits, costs, expenses of defense (including attorney's fees),
judgments and decrees. In the event the Developer enters into a contract with a
third party as contractor for the construction contemplated under this
Agreement, then the Developer agrees that it will require a specific term or
condition within such agreement providing for the same manner of indemnity and
hold handless language between such contractor, the Authority and Summit
Township. The indemnification provided through this section does not extend to
liability based upon the acts, omissions, breaches of duty, or negligence of the
Authority,
- 3 -
<PAGE>
Summit Township of any of their agents, officers, servants or contractors.
5. In the event the Developer has undertaken the construction referred to herein
as contractor, Developer agrees to procure comprehensive public liability
insurance in the amount of not less than $1,000,000 for injury or death and not
less than $300,000 for property damage containing coverage for contractual
liabilities undertaken by Developer or Landowners under the indemnity provision
of this Agreement satisfactory to the Authority. In the event Developer enters
into a contract for the construction of the water system with an independent
contractor, then the Developer agrees that it will require a specific term or
condition within such agreement obligating the contractor to obtain the
insurance upon the same terms and conditions.
6. Developer hereby agrees to grant to Authority the following rights to the
property.
7. This Agreement shall be binding on all parties hereto, their assignees or
successors in title.
8. This Agreement shall be governed under and subject to the laws of the
Commonwealth of Pennsylvania.
9. This Agreement constitutes the entire agreement between the parties and may
not be altered or amended without the consent of all parties hereto.
- 4 -
<PAGE>
THIS AGREEMENT, made and executed by the undersigned parties with the intent to
be legally bound hereby.
ATTEST: SUMMIT TOWNSHIP WATER AUTHORITY
/s/ Arthur H. Kurtz By /s/ James R. Kupetz
---------------------------- -----------------------------
Arthur H. Kurtz, Secretary James R. Kupetz, Chairman
WITNESS: DEVELOPER: Essex Partners Inc.
/s/ Jerald P. Eichelberger /s/ Thomas W. Blank
--------------------------------- ----------------------------------
Jerald P. Eichelberger, Secretary Thomas W. Blank, Senior V.P.
---------------------------- ----------------------------------
---------------------------- ----------------------------------
---------------------------- ----------------------------------
- 5 -
<PAGE>
AGREEMENT
THIS AGREEMENT, made this 30th day of January, 1997, by and between ESSEX
PARTNERS, INC. (hereinafter called "Developer")
AND
SUMMIT TOWNSHIP SEWER AUTHORITY (hereinafter called "Authority").
WITNESSETH:
WHEREAS, Developer is the owner of certain real estate located in Summit
Township, Erie County, Pennsylvania, more particularly described in Exhibit "A"
attached hereto and made a part hereof; and
WHEREAS, Developer is desirous of serving this property with a sanitary
sewer system ("System") in accordance with plans to be prepared by the
Developer's Consulting Engineer; and
WHEREAS, all parties hereto have agreed upon certain terms and conditions
under which said System shall be constructed; NOW, THEREFORE, in consideration
of their intent to be legally bound hereby and other good and valuable
consideration, the parties hereto agree as follows:
1. Developer understands and agrees that it shall provide the Authority
contemporaneously with this executed Agreement a copy of the Summit Township
Developer's Agreement executed by it and Summit Township.
- 1 -
<PAGE>
2. Developer agrees that prior to commencement of construction of the
System it shall submit their plans to the Consulting Engineer for the Authority
and to the Authority. Upon approval of said plans by the Authority, which is
solely within the Authority's discretion, Developer agrees to construct the
System in compliance with said plans. Developer further agrees that such
construction shall be in accordance with general specifications for gravity
sewers, drains and appurtenances, prepared by Hill Engineering, as well as the
Township of Summit's specifications covering backfill, which specifications are
likewise incorporated herein by reference. Such construction shall be subject to
inspection and approval by Authority or any accredited agents or
representatives.
Upon the completion of the construction, the Developer shall furnish the
Authority with "As Built" plans showing actual locations of all facilities
constructed hereunder, including lateral connections. The "As Built" plans must
be similar or equal to a double matted mylar film drawing to allow subsequent
drawings by the Authority.
3. Developer further understands and agrees that it will assume all costs
and expenses in connection with the construction of the System and it will
deposit $2,500 with the Authority to be applied to expenses which the Authority
will incur for engineering, administrative and legal work performed in
relationship to such construction. Developer specifically understands and agrees
that it shall restore the surface of any public or private property or way
- 2 -
<PAGE>
through which the System shall be constructed to the condition that existed
prior thereto.
5. Upon completion of the work of construction and final inspection and
acceptance by Authority, ownership of said System, including all appurtenances
thereto shall vest in the Authority, and all right, title and interest of
Developer therein shall cease and terminate; it being the intention of Developer
to dedicate said System to public use, and the acceptance by Authority shall be
deemed to be acceptance of said dedication.
6. Developer also agrees that it will post or cause to be posted with the
Authority at the time of final acceptance a maintenance bond in an amount which
shall be equal to 100% of the cost of the construction of the System as
certified to by Developer's engineer. The bond shall be in favor of the
Authority and shall be effective for period of one (1) year beyond the date of
final acceptance by the Authority of said System. This bond is for the purpose
of protecting and holding harmless the Authority from any and all costs and
expenses occasioned by the repair or replacement of the System.
7. The Authority hereby agrees to accept into its system the effluent
generated by the Developer's use of the System provided such effluent complies
with the Authority's rules and regulations which may not be more restrictive
than the requirements of the Department of Environmental Resources,
Environmental Protection Agency, Township of Millcreek and City of Erie,
presently existing or as amended. If such effluent does not comply with such
rules
- 3 -
<PAGE>
and regulations, it shall be pre-treated to comply therewith. Further, the
Authority's rules and regulations shall be in conformity with Summit Township
Ordinance No. 72-8 adopted September 13, 1972, as it may be amended. The
Developer shall comply with the provisions of the Agreement of November, 1971
between the City of Erie, Township of Summit, Erie City Sewer Authority and
Summit Township Sewer Authority as may be amended from time to time.
8. The Developer agrees that no other connection to System or any lateral
or house branch shall be made at any time by Developer or any other party or
person without first obtaining consent, in writing, from the Authority.
9. If the Developer undertakes to construct the System as contractor,
Developer agrees to indemnify and save harmless Authority and Township of
Summit, and likewise for the death of any such person and likewise for property
damage of any person including Developer, Authority or Township of Summit
arising out of or related to the construction of the System where the injured
party alleges and proves that the loss is attributable in whole or in part to
any act of omission or commission,, breach of duty or negligence on the part of
the Developer or their agents and servants; said indemnity shall hold Authority
and Township of Summit harmless from any and all suits, costs, expenses of
defense including attorney fees, and judgments and decrees. In the event
Developer enters into a contract with a third party as contractor for the
construction of part or all of the construction of the
- 4 -
<PAGE>
System then the Developer agrees that it will require a specific term or
condition of said contract which shall indemnify and hold harmless Authority and
the Township of Summit to the same extent and with the same effect as Developer
owes indemnity to Authority and the Township of Summit when constructing without
a contractor. The indemnification provided through this section does not extend
to liability based solely and exclusively upon the acts or omissions, breaches
of duty, or negligence of the Authority, the Township of Summit, or any of their
agents, officers, servant, or contractors. The utilization by the Developer of a
separate contractor does not relieve the Developer of its indemnification and
hold harmless of the Authority and Township.
10. In the event the Developer is undertaking the construction of the
System as contractor, Developer agrees to procure comprehensive public liability
insurance in the amount of not less than $500,000 for injury or death and not
less than $100,000 property damage containing coverage for contractual
liabilities undertaken by Developer under the indemnity provisions of this
Agreement and require the contractor to have Workmen's Compensation Insurance.
Prior to the commencement of the work, Developer shall provide to Authority
proof of compliance with the insurance provisions of this Agreement satisfactory
to the Authority. In the event Developer enters into a contract for the
construction of the System, then the Developer agrees that it will require a
specific term or condition of said Agreement obligating the contractor to obtain
the same insurance and to provide proof thereof.
- 5 -
<PAGE>
11. The Developer shall be responsible to procure all permits which are
necessary for the construction, completion, approval and use of this System from
the Department of Environmental Resources or any local, state or federal
authority. Developer shall also be responsible to acquire any rights-of-way
which may be needed for the construction of the System. The Authority agrees
that they shall cooperate in every manner with the Developer in procuring said
permits or rights-of-way. Inability of Developer to procure such permits or
rights-of-way will permit Developer to void this Agreement and in the event of
such termination, Developer shall only be responsible for the costs set forth in
Paragraph 3 hereinabove.
12. This Agreement shall be binding on all parties hereto, the assignees or
successors in title. Made and executed the day and year first above written by
the undersigned parties, intending to be legally bound thereby.
WITNESS: DEVELOPER
ESSEX PARTNERS, INC.
/s/ Annette Haley /s/ Thomas W. Blank
- ----------------- -------------------
Annette Haley Thomas W. Blank, Sr., V.P.
ATTEST: SUMMIT TOWNSHIP SEWER AUTHORITY
/s/ By /s/
- ------------------------------- ---------------------------------------
Secretary Chairman
- 6 -
<PAGE>
DEVELOPER'S AGREEMENT
THIS DEVELOPER'S AGREEMENT entered into
this 30th day of January, 1997
by and between
SUMMIT TOWNSHIP
Erie County, Pennsylvania
8900 Old French Road
Erie, Pennsylvania 16509
(hereinafter "Township")
- a n d -
ESSEX PARTNERS, INC.
(hereinafter "developer")
Project Name.................. HAMPTON INN OLIVER ROAD @ I-90
Purpose....................... 100-ROOM HOTEL
County Index Number Part of... 40-17-73-2. 40-17-73-2.01,
40-17-73-2.02
Size of Development........... 2.5 ACRES
Responsible Party ............ Thomas W. Blank, COO Hotel Division
Address....................... 100 Corporate Woods, Suite 300
Rochester, NY 14623
Telephone Number.............. 716-272-2300
Date.......................... 01-21-97
RECITALS:
A. It is the function of Township to protect public and other property, to
control the development of Township under the laws of the Commonwealth of
Pennsylvania and its Ordinances, Resolutions and Regulations and to prevent the
creation of health and safety hazards or conditions; and
B. Developer desires to develop land in Summit Township for the purpose
stated on title page and to be known as the Project stated on the title page
(hereinafter referred to as "the development").
C. Developer desires to develop the aforesaid development in compliance
with all Pennsylvania law, applicable Township ordinances, resolutions and codes
and in accordance with the terms of this Agreement; and
D. Developer agrees that it will construct at its own cost and expense
including, but not limited to, engineering, inspection and legal fees incurred
by the Township, directly related to all those public and other improvements as
identified in the approved plan; and
E. Developer agrees to deposit with Township, as financial security, the
amount recommended by the Township Engineer and approved by Township Supervisors
for all improvements in the form of cash, irrevocable letter of credit escrow
account or bonds from a bonding company or lending institution authorized to
conduct such business in the Commonwealth of Pennsylvania; and
F. Developer desires, irrespective of the applicable land use or
subdivision ordinance of Township, other laws of Township, the County of Erie,
the Commonwealth of Pennsylvania and the United States of America, to be bound
by the terms of the within Agreement.
G. The parties desire to memorialize their understanding by entering into
this binding, legal agreement; and
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound hereby, the parties agree as follows:
- 2 -
<PAGE>
ARTICLE I - DEFINITIONS
Section 1.01 FINANCIAL SECURITY. Financial security will be in the form of
cash, irrevocable letter of credit, escrow account, or bonds from a bonding
company or lending institution authorized to conduct such business within the
Commonwealth of Pennsylvania, naming Summit Township, Its officers, agents and
employees as obligee in an amount equal to 110% of the cost of completion of all
public and other improvements, when such financial security is in the form of
cash and 160% of the cost of completion of all public and other improvements,
when such financial security is in the form of an Irrevocable letter of credit,
escrow account or bond.
Section 1.02 MAINTENANCE SECURITY. Maintenance security will be in the
form of cash, irrevocable letter of credit, escrow account or bonds from a
bonding company or lending institution authorized to conduct such business
within the Commonwealth of Pennsylvania, naming Summit Township, its officers,
agents and employees as obligee in an amount equal to 15% of the cost of
installation of all public improvements, when such maintenance security is in
the form of cash and 25% of the cost of installation of all public improvements,
when such maintenance security is in the form of an irrevocable letter of
credit, escrow account or bond.
Section 1.03 OTHER IMPROVEMENTS. Other improvements will be all those
improvements required by Township ordinances including, but not limited to,
planting, grading, drainage, storm water retention/detention, paving,
landscaping, fighting and traffic control signage and devices, whether such
improvements are located on developers property or on contiguous streets or
rights-of-way.
Section 1.04 PUBLIC IMPROVEMENTS. Public improvements will be all those
improvements to be conveyed or otherwise dedicated to the Township or other
public body for public use.
- 3 -
<PAGE>
ARTICLE II - PREDEVELOPMENT PHASE
Section 2.01 PRELIMINARY PLAN. Developer has heretofore, or will upon
execution of this Agreement submit a sketch or preliminary plan to Township, the
Planning Commission of Township and the Erie County Metropolitan Planning
Commission, which plan shall be attached hereto as Exhibit "A".
Section 2.02 LAND OPERATIONS PERMIT. The Developer will not start any site
preparation activities, including clearing, grubbing, grading, burning or the
like until a Land Operations Permit has been issued by Township.
Section 2.03 COMPLIANCE. Developer covenants, promises and agrees to build,
construct and install all improvements in accordance with the rules, regulations
and specifications of Summit Township in existence on the date of this
agreement.
Section 2.04 PROJECT COMPLETION. Construction of all improvements will be
completed within twelve (12) months of issuance of the Land Development and/or
building Permit. The completion date will extend automatically for an additional
twelve (12) month period, provided no uncured violations exist.
Section 2.05 SEWER PLANNING MODULE. Developer will submit to Township a
sewage facilities planning module for revision to the official sewage facilities
plan of Township, which must include at a minimum a sketch plan indicating
salient existing features of the tract and the general layout of the proposed
development. Developer will submit, at its sole cost sufficient data and
information, including a sewer facilities planning module application package,
to permit Township or its authorized representative, as permittee, to apply to
the Department of Environmental Resources, Commonwealth of Pennsylvania ("DER')
for all necessary permits and approvals for the construction of a sanitary
sewage system. Developer will not commence construction of the system until all
necessary permits and approvals have been received from DER. Developer agrees
that the final plan of development will not be approved by Township until DER
approval of such revision has been secured.
Section 2.06 WATER AUTHORITY AND SEWER AUTHORITY COMPLIANCE. Developer will
provide to Township certificates of the Sewer Authority of Township and Water
Authority of Township acknowledging compliance with all of their respective
rules and regulations, prior to the issuance of any building permit by Township.
Section 2.07 TRANSPORTATION PLAN. Developer agrees, covenants and promises
to comply with the Township's comprehensive plan and, in particular, the
- 4 -
<PAGE>
Transportation Plan in constructing the development and any future developments
on Developer's parcel, it being specifically under-stood that the proposed
development will, in all respects, be in accordance with the Transportation Plan
of Township as now existing or as may be amended pursuant to Developer's
request.
Section 2.08 GREEN SPACE. Developer agrees, covenants and promises to
comply with the Green space Ordinance of Township as now existing or as may be
amended pursuant to Developers request.
Section 2.09 STORM WATER MANAGEMENT. Developer agrees, covenants and
promises to comply with all regulations, approvals and specifications and Acts
promulgated by the United States of America, the Commonwealth of Pennsylvania,
Erie County and Township with regard to storm water management.
Section 2.10 BURNING. Developer agrees, covenants and promises to comply
with the Burning Ordinance of Township and will apply for a permit in accordance
with the terms thereof and will also be in conformity with the rules and
regulations of the Department of Environmental Resources, Bureau of Air Quality.
Permit fees for burning operations will be the responsibility of Developer in
accordance with the amounts established by the Township Fee Resolution as
amended from time to time by Township.
Section 2.11 FIRE HYDRANTS. Developer agrees that Township shall have the
sole right to determine and approve the location and number of fire hydrants it
deems necessary for the protection of development. All costs and expenses
relating to the installation of said fire hydrants will be borne by Developer.
Section 2.12 COSTS. Developer will, upon initial submission of any
application to develop property in Township but no later than upon execution of
this Agreement, deposit a sum of money in accordance with the Township Escrow
Deposit Resolution in effect at the time of application. From this amount will
be deducted any fees incurred by the Township as a result of the development
including, but not limited to, application fees, engineering or consulating
fees, engineering inspection fees and legal fees. If at any time during the
progression of development, it is determined by Township, in its sole
discretion, that the balance available is, or will be, inadequate to fully cover
anticipated costs, Developer will be notified of the amount of additional
deposit required. Developer will remit such additional deposit within ten (1 0)
days of notification. Developer's failure to pay the additional deposit within
such ten (10) day period will cause immediately suspension of review and/or
issuance of any and all permits and/or revocation of existing approvals and
permits. The balance of the deposit will be returned to Developer, upon written
request, after
- 5 -
<PAGE>
the completion of development, dedication and acceptance of all public
improvements and the release of the maintenance security required in Section
4.02.
Section 2.13 FINAL PLAN APPROVAL. Developer will submit its final plan of
development and plat for approval to Township with all the appropriate
signatures for recording with the Recorder of Deeds of Erie County,
Pennsylvania. After Township review for compliance with any and all Township
requirements and conditions of approval, the plat shall be recorded at
Developer's cost.
Prior to recording the plat, Developer will install all and other
improvements in accordance with the approved plan and all Ordinances of Township
or provide financial security for the completion thereof.
Section 2.14 FINANCIAL SECURITY. In lieu of completion of all and other
improvements as required for final approval of the plan, Developer will provide
to Township financial security in amounts sufficient to cover the cost of such
improvements, as noted in Recital E. Such financial security will be posted in
cash or with a bonding company or federal or state chartered lending institution
authorized to conduct business within the Commonwealth of Pennsylvania and in
accordance with Section 1.01 hereof. The Township may adjust the amount of
financial security by comparing the actual cost of improvements which have been
completed and the estimated costs of the completion of the remaining
improvements as of the expiration of the 90th day after either the original date
scheduled for completion or rescheduled date for completion. Subsequent to said
adjustment, Township may require Developer to post additional security in order
to insure that financial security equals 110% or 160%, as the case may be.
If Developer requires more than one (1) year from the date of posting of
financial security to complete the required improvements, the amount of
financial security may be increased by an additional 10% for each one year
period beyond the first anniversary date from posting of such financial security
or to an amount not exceeding 110% or 160%, as the case may be, of the cost of
completing the projects using the aforesaid method.
The amount of financial security required will be based upon an estimate of
the cost of completion of the improvements prepared by a professional engineer
licensed as such in the Commonwealth of Pennsylvania, retained by Developer,
certified by such engineer to be a fair and a reasonable estimate of such cost
and acknowledged as such Township's engineer. Irrespective of the above,
Township may establish the amount of financial security required, based upon the
recommendation of Township's engineer.
Financial security may be released only upon written request from Developer
upon completion of improvements, certified by Township Engineer as complete.
If Developer is unable to complete the improvements identified in the
approved plan by the date identified in the approved plan of development by the
date determined in
- 6 -
<PAGE>
accordance with Section 2.04 hereof, Township may, in its sole discretion, seize
the financial security or grant an extension thereto. If Township grants such an
extension to the time for completing such improvements, Developer will secure an
extension to the expiration of financial security, which extension will be for
not less than ninety (90) days.
- 7 -
<PAGE>
ARTICLE III - DEVELOPMENT PHASE
Section 3.01 EROSION AND SEDIMENTATION CONTROLS. All erosion and
sedimentation controls will be installed in accordance with the approved plan
prior to any other construction activities occurring at the development. The
erosion and sedimentation controls will be properly maintained throughout the
duration of the development until all disturbed areas have been stabilized to
the satisfaction of Township engineer, in his sole discretion.
Section 3.02 INSTALLATION OF UTILITIES. Developer will, in accordance with
appropriate subdivision and land development ordinances and regulations, install
all utilities, including sewer, water, gas, electric, telephone, cable t.v., if
available, and such other utilities to service the development. All utility cuts
necessary for installation of service lines within street rights-of-way must be
made prior to the installation of the base material for any such paving.
Section 3.03 CONSTRUCTION OF IMPROVEMENTS. Developer covenants, promises
and agrees to build, construct and install all improvements including, but not
limited to, paving, grading, roads, storm water facilities, sidewalks,
landscaping and lighting in accordance with the provisions adopted by Resolution
and Ordinance or accepted as commonly used guidelines or provisions of Township
in effect at the time of final plan or final phase approval. All improvements in
the development will be constructed and installed in accordance with Township
specifications and Ordinances and must be certified as such by Township
engineer.
Section 3.04 DEDICATION AND CONVEYANCE OF PUBLIC IMPROVEMENTS. Developer
will offer for dedication all proposed public improvements accompanied by legal
descriptions, as built mylars and executed deeds of dedication. The Township
will not accept a request for dedication prior to completion of the entire
development. Developer acknowledges and agrees that all costs of constructing
such dedications will be borne by Developer. Developer will submit to Township a
detailed and specific plan regarding the construction of such roadway and/or the
cul-de-sac. Said plan will address and include, by way of illustration but not
by way of limitation, provisions for storm water drainage, including surface and
subsurface, depth of road surface and subsurface and location of utility lines.
Said plan must be approved by Township prior to Developers commencement of any
work. Developer agrees to construct said roadway according to the approved plan.
Any changes to said plan must be approved by Township.
Section 3.05 DAMAGE TO EXISTING ROADWAYS. Developer, its contractors,
subcontractors and builders will keep all public roads, other drives and
highways used by
- 8 -
<PAGE>
vehicles entering and leaving the construction site in good repair and free and
clear of mud and dust. Additionally existing draining patterns on such roadways
must be maintained. If such damage occurs to such roads, drives and highways,
Developer will be responsible for the cost of any replacement, repair or
additional maintenance that may be required. Developer will, within five (5)
days after notification from Township, deposit with Township sufficient amounts
to cover the cost of such replacement, repair or additional maintenance.
Developer will keep all roads clean of mud and dirt. After notification the
Developer will clean roads immediately. If Public roadways are not kept clean
Developer will pay penalty of $100.00 per day after written notification is
given. All penalties will be deducted from Escrow Account. It is Developers
responsibility to police all employees and contractors, for the protection of
Public Roadways, working on site.
Section 3.06 ON SITE DUST CONTROL. Developer will employ such controls as
may reasonably necessary, under the circumstances, to keep dust to a minimum.
Section 3.07 POLICE AREA. During construction Developer will police the
construction area daily keeping the same free and clear of all rubbish, refuse,
brush, debris and discarded building materials so as not to create a public
nuisance. Developer may accumulate such materials in the area approved by
Township until such time as accumulated matters are removed from site by
Developer, provided that Township, in its sole discretion, may require the
removal of any such material by written communication indicating the reasons
therefor at any time during development Developer will remove from site and
dispose all rubbish, refuse, brush, debris and discarded building materials
leaving the development free and clear of the same prior to the release of any
remaining financial security or final acceptance of any public improvements.
Section 3.08 INFILTRATION OF SEWER SYSTEM. Developer covenants, promises
and agrees that no storm water, roof run-off, drainage or the like will
infiltrate the sanitary water system servicing the development. Violation of
this covenant will result in the immediate automatic revocation of any and all
approvals and permits covering the development Reinstatement of said permits and
approvals may be granted by Township when Developer has sufficient guarantee to
protect Township from any and all fines for infiltration of storm water.
Section 3.09 HAULING OVER WEIGHT-RESTRICTED ROADS. Prior to construction
Developer will make arrangements necessary in order to comply with all
requirements and regulations in effect at the time of final plan approval with
respect to hauling equipment and building materials over weight-restricted
roads. Said requirements and regulations may include, but not limited to, fees
and/or bonding requirements.
- 9 -
<PAGE>
Section 3.10 HOURS OF OPERATION. Developer will not permit any grading,
construction or other physical work to be conducted on the site between the
hours of 10:00 p.m. and 6:00 a.m. without written permission from Township.
Section 3.11 INSPECTIONS. Developer hereby specifically grants permission
to Summit Township, its supervisors, employees, agents, contractors or
consultants to conduct inspections on its property. These inspections may take
place at any time and with any frequency as Township deems appropriate and
necessary under the circumstances.
Section 3.12 SNOW REMOVAL AND ICE CONTROL. Developer will be solely
responsible for providing snow removal and ice control on all streets within the
development whenever a structure is occupied until Township accepts said streets
by way of deeds of dedication or otherwise. Developer may enter into a separate
legally binding agreement with Township for snow removal and ice control. It
will be the sole responsibility of Developer to contact the appropriate Township
official in order to execute the appropriate agreement for snow removal and ice
control. All costs and fees incurred by Township in the preparation of the
agreement will be borne by Developer. If Developer elects not to enter into an
agreement for snow removal and ice control with Township, Developer will provide
for the same at its sole cost and expense and such removal and control will be
consistent with those techniques normally used by Township.
Section 3.13 IDENTIFICATION OF TRAFFIC CONTROL SIGNAGE. Developer will,
prior to the issuance of any occupancy permit for any structure in the
development, install any and all identification and traffic control signage.
Developer will submit to Township a traffic circulation plan identifying all
proposed identification and control signage. Accompanying the circulation plan,
the Developer will submit a traffic engineering study for all proposed control
signage. The proposed circulation plan and accompanying engineering studies will
be reviewed and recommended by Township's engineer to Township and must be
approved by Township prior to the installation of any signage and/or occupancy
of any structure.
Section 3.14 OFF STREET PARKING. During construction of any and all phases,
parking for vehicles related to construction activities will be arranged so as
not to create a potential traffic hazard and must be off street. On street
parking will be permitted only during the time of preparation of an off site
parking area, provided, however, that a minimum of 15 feet of right-of-way must
be remain unobstructed at all times. After notice of violation and second
violation occurs Developer will pay penalty of $25.00 per day to be deducted
from escrow fund.
- 10 -
<PAGE>
ARTICLE IV - POST DEVELOPMENT PHASE
Section 4.01 MAINTENANCE OF DETENTION SYSTEM. Developer will be solely
responsible for the maintenance of any required detention system. Developer is
hereby permitted to transfer title to commonly shared detention systems upon
submission and approval of legal documentation as to who will retain ownership
and maintenance responsibilities for such system. Such legal documentation so
specifically identified in the manner in which the system will be maintained,
providing for inspections of the same and will indemnify the party or parties
who cause such maintenance to be affected. The transfer of common detention
systems may include, but not be limited to, transfer to home owner groups of
residential subdivisions and/or groups of property owners on commercial sites.
Such documentation will also include provisions for municipal intervention in
the event the responsible party or parties fail to maintain the system and
provide for the assessment of fees related to the cost of such maintenance.
Section 4.02 MAINTENANCE SECURITY. This only applies when developer conveys
Public Improvements to Township. Township will not accept dedication of public
improvements by Developer until Developer posts with Township a maintenance
security to ensure structural integrity of said improvement, as well as the
functioning of said improvements in accordance with their design and
specifications, for a period of two (2) years from the date of acceptance of
dedication. Said maintenance security will be posted in cash or with a bonding
company or federal or state chartered lending institution authorized to conduct
business with the Commonwealth of Pennsylvania and in accordance with Section
1.02 hereof. Developer hereby agrees, covenants and promises to make such
replacements, repairs and maintenance within reasonable notice from Township to
Developer. Failure to make such replacements, repairs or maintenance within a
reasonable time after such notice shall be a default upon which Township may
proceed to claim Developer's security and to make such repair, replacement and
maintenance from said security. Notwithstanding any of the foregoing, in the
event of an emergency, as determined by Township in its sole discretion,
Township may, in perform such repair, replacement and maintenance required to
correct the emergency situation. Township shall notify developer of such
emergency as soon as practicable. Developer shall reimburse Township for all
costs incurred for such repair, replacement, and/or maintenance within fifteen
(15) days of invoicing. Township is hereby authorized to seize Developer's
security as reimbursement therefor, if Developer fails to reimburse Township
within fifteen (15) days after written notification from Township of its
intention to seize the security.
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<PAGE>
ARTICLE V - GENERAL PROVISIONS
Section 5.01 INSURANCE. Developer will cause its contractors and/or
subcontractors to obtain and maintain liability and other insurance coverage and
agrees to furnish certificates of such insurance as may be required from time to
time by Township.
Section 5.02 INDEMNIFICATION. Developer hereby agrees to indemnify and hold
harmless Township, its Supervisors, officers, employees, attorneys and agents
from any and all liability, suits, actions, claims, demands, losses, expenses
and costs of every kind and nature incurred by or asserted or imposed against
Township, its Supervisors, officers, employees, attorneys and agents, or any of
them, by reason of any accident, injury, death or damage to any person or
property. Developer hereby agrees to indemnify, defend and hold harmless
Township, its officers, agents and employees from any and all costs and damage
which Township, its officers, agents and employees may sustain or suffer by
reason of Developers failing to adequately and properly perform the terms and
conditions of this agreement including the construction of public and other
improvements. This only applies when developer conveys public improvements to
Township.
Section 5.03 BINDING EFFECT. This Agreement is binding upon Developer, its
successors, assigns, agents, representatives and officers, contractors and
subcontractors and shall inure to the benefit of Township.
Section 5.04 ASSIGNABILITY. This Agreement may not be assigned or
transferred by Developer without the written consent of Township.
Section 5.05 REVOCATION. Any permit or approval issued in accordance with
the Land Use and Subdivision Ordinance, any other Ordinance of Township or this
Agreement will be revoked automatically upon Developers failure to satisfy the
terms and conditions of this Agreement or any Ordinance, Resolution or
Regulation of Township or any laws of the County of Erie, Commonwealth of
Pennsylvania or the United States of America.
Section 5.06 COVENANT RUNNING WITH LAND. This Agreement constitutes a
covenant running with the land and may be recorded by Township. Any and all
expenses incurred in the preparation and recording of this Agreement will be
borne by Developer.
Section 5.07 PHASES. Developer will enter into separate agreements for each
and every phase of the development.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day
and year first above written.
ATTEST: SUMMIT TOWNSHIP
/s/ /s/ Marlin K. Coon
- ---------------------- ------------------------------------------
Marlin K. Coon, Chairman
/s/ Richard P. Hessinger
------------------------------------------
Richard P. Hessinger, Vice Chairman
/s/ T. Richard Siegel
------------------------------------------
T. Richard Siegel, Secretary/Treasurer
WITNESS: Essex Partners Inc.
/s/ Annette Haley /s/ Thomas W. Blank
- ---------------------- ------------------------------------------
Thomas W. Blank
------------------------------------------
STATE OF NEW YORK
COUNTY OF MONROE
On this, the 28th day of January 1997, before me, a Notary Public, the
undersigned officer, personally appeared Thomas W. Blank known to me (or
satisfactorily proven) to be the persons whose names are subscribed to the
within instrument and acknowledged that he executed the same for the purposes
therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Mary S. Cott
- ------------------------------
Notary Public
Mary S. Cott
Notary Public, State of New York
Livingston County #4755744
Commission Expires 7/31/98
- 13 -
REAL ESTATE PURCHASE CONTRACT
THIS AGREEMENT, made as of the 17th day of May, 1996 between Richard E. and
May L. Hess at 8042 Old Oliver Road, Erie, PA 16509 ("Seller"), and Essex
Partners Inc., a New York corporation with offices at 100 Corporate Woods, Suite
300, Rochester, New York 14623 ("Purchaser"),
WITNESSETH:
1. Seller agrees to sell to Purchaser and Purchaser agrees to buy from
Seller, in accordance with the terms, conditions and stipulations set forth in
this Real Estate Purchase Contract ("Contract"), that real property with all
improvements located thereon, known as 8042 Old Oliver Road, Erie, PA 16509 with
Erie County Index Number 40-017-073.0002.01 (the "Land").
2. PURCHASE PRICE: The total purchase price to be paid to Seller by
----------------
Purchaser for the Land (the "Purchase Price") shall be two hundred ninety
thousand dollars ($290,000).
3. PAYMENT OF PURCHASE PRICE: Subject to the terms and conditions of this
---------------------------
Contract, the Purchase Price shall be payable to Seller at the Closing in
immediately available U.S. funds.
1
<PAGE>
4. DEPOSIT: Upon receipt of a fully executed Contract (the "Time Line
--------
Date"), Purchaser shall deliver its check in the amount of five thousand dollars
($5,000) to Seller's attorney which shall constitute Purchaser's good faith
deposit ("Deposit"). Purchaser shall have 90 days after the Time Line Date to
notify Seller of its intent to cancel this Contract for any reason whatsoever
and the full Deposit as set forth herein shall be directly returned to
Purchaser. Thereafter in the event this Contract does not close as a result of
failure of any condition in Section 16 or through no fault of Purchaser and
Purchaser waives its right to specific performance of this Contract then the
Deposit and any Additional Deposit as described in Section 10 shall be directly
returned to Purchaser. If Purchaser does not terminate this Contract pursuant to
Section 17 and Purchaser shall fail or refuse to perform its obligations herein
specified at or before the date of Closing (or any agreed upon extension), the
Deposit and Additional Deposit, if any, shall be forfeited as liquidated damages
which the parties hereto agree is a reasonable and proper amount in light of the
circumstances, and which forfeiture shall be Seller's sole remedy in law and
equity. "Deposit" of five thousand dollars ($5,000) shall be given to Seller 90
days after Time Line Date. These monies are non-refundable.
5. TITLE: Promptly after execution the Time Line Date, Seller shall provide
------
Purchaser with a copy of any Abstract of Title and any title policy pertaining
to the Land in its possession and Purchaser shall order evidence of title to the
Land by the issuance of a current title insurance binder (the "Title Binder")
through a major national title insurance company selected by Purchaser (the
"Title Company") in the amount of the Purchase Price. The Title Binder shall set
forth the state of title to the Land and to other property that is or will be
subject to any easements or restrictions (existing or to be created pursuant to
this
2
<PAGE>
Contract) benefiting the Land, together with all exceptions or conditions to
such title, including, but without limitation to, all easements, restrictions,
rights-of-way, covenants, reservations, and all other encumbrances affecting the
Land which would appear in the owner's title policy.
6. SURVEY: Promptly after execution of this Contract, Seller agrees to
-------
provide Purchaser with the most recent instrument survey pertaining to the Land
in its possession. Purchaser acknowledges Seller is not in possession of survey.
7. REVIEW OF TITLE BINDER AND SURVEY: Purchaser shall have 60 days after
-----------------------------------
the Time Line Date to deliver in writing to Seller Purchaser's objections to
title. Purchaser's failure to object to any item on the Title Binder or survey
within the time limitation imposed hereby shall be deemed to be approval of same
by Purchaser.
8. OTHER DOCUMENTATION: Seller shall deliver to Purchaser upon execution of
--------------------
this Contract the originals or copies of any Phase I and Phase II environmental
studies, soils test, utility information, topographical maps and subdivision
plots and correspondence, information and documentation which would relate to
the use and/or occupancy of the Land which are in possession of Seller or to
which Seller has access without cost other than copying or duplicating charges.
9. PURCHASER'S OBJECTION TO TITLE; DEFECTS IN TITLE: Should Purchaser as
---------------------------------------------------
described in Section 7 above deliver to Seller its written objections to title
or to matters
3
<PAGE>
contained in the survey, Seller shall have 60 days either to remove all such
defects or objections or to provide assurances acceptable to Purchaser that same
will be removed at or before Closing; mortgages, deeds of trust or other liens
of a specific amount shall be cleared before or at closing, by seller or, if
requested by the Seller, by Purchaser by deduction from proceeds due Seller.
Should Seller be unable to cure (or provide assurances with respect to) any and
all such defects or objections (except liens as provided above) on or before
expiration of the 60 day period, then Purchaser may, at its option, elect to
terminate this Contract and receive a full refund of the Deposit, or to waive
its objections and proceed to Closing. Seller shall not further intentionally
encumber or restrict the title to the Land without Purchaser's prior written
consent, which shall not be unreasonably withheld.
10. CLOSING: The Closing shall be on or before the sooner of ( i ) the date
--------
which is thirty (30) days after the date upon which Purchaser has received site
plan approval for the Improvements (as hereinafter defined), or ( ii ) 210 days
after the Time Line Date, and shall take place in the offices of the Erie County
Clerk, or such other place mutually designated by the parties; provided,
however, that Purchaser may designate an earlier date for the Closing by written
notice delivered to Seller not less than fifteen (15) days prior to such earlier
date for the Closing so designated in such notice by Purchaser. Provided,
however, that if Purchaser has shown due diligence in endeavoring to satisfy all
contingencies herein and has been delayed by any agency or entity having control
over satisfaction of those contingencies, then it is agreed that upon written
notice to Seller of
4
<PAGE>
such delay, Purchaser shall be entitled to an extension of two months to enable
Purchaser to satisfy those contingencies and close this transaction. An
additional Deposit of $5,000 shall be paid to the Seller on or before the first
day of each month of the extension period.
11. PRORATIONS AND ADJUSTMENTS AT CLOSING: Ad Valorem and similar taxes
----------------------------------------
assessed against the Land shall be prorated between Seller and Purchaser at the
time of Closing on the basis of a 365 day year. Prorations shall be based upon
current year's taxes and assessments, if available, or upon figures for the last
preceding year, in which event Purchaser and Seller shall readjust the
prorations when the current year's taxes and assessments become available. Any
special assessments applicable to the Land including, but no limited to,
"rollback" or other similar assessments or taxes which apply on a change in use
of the Land, if any, whether payable in a lump sum, in installments or
otherwise, shall be paid by Seller. The foregoing obligations shall survive the
Closing.
12. TRANSACTION COSTS: Seller and Purchaser shall each be responsible for
-------------------
the payment of one-half of all transfer, state and documentary stamps to be
affixed to the instrument. Purchaser shall be responsible for all other costs,
including the cost of the Title Policy, Survey and recording the deed, provided,
however, that each party shall pay its own attorney's fees.
13. WARRANTY DEED AND OTHER DOCUMENTS REQUIRED FOR CLOSING:
-------------------------------------------------------
5
<PAGE>
A. At the Closing, Seller shall deliver the following:
1. Warranty Deed in fee simple, free and clear of all liens and
encumbrances, except subject to the following items now of record: utility,
rights-of-way and easements for the purpose of providing utility service to the
property herein described, common driveway or party wall agreements, recorded
restrictions, and zoning regulations; otherwise the title to the above-described
real estate shall be good and marketable and such as will be insured at the
regular rates by a title insurance company licensed to do business in
Pennsylvania. Also, access to a public road may require issuance of a highway
occupancy permit from the Department of Transportation. A specimen deed shall be
delivered by Seller to Purchaser's attorney for review at least ten (10) days
before Closing.
2. Documents evidencing the legal status, standing and authority
of Seller and such other documents, including standard form Seller's affidavits,
as may be required by Title Company for issuance of the Title Policy.
B. At the Closing, Purchaser shall deliver the following:
1. The Purchase price plus any costs to be shared by Purchaser
in cash, certified funds, or a bank draft.
2. Such documents evidencing the legal status, standing and
authority
6
<PAGE>
of Purchaser.
14. POSSESSION: Possession of the premises shall be delivered to the
-----------
Purchaser either ( i ) 120 days after Closing, or ( ii ) 120 days after
Purchaser has provided written notice to vacate, but in no event prior to the
Closing Date, and Purchaser has deposited with Seller's attorney twenty-five
thousand dollars ($25,000) which together with the Deposit and Additional
Deposit, if any, would be forfeited as liquidated damages in the event that
Closing does not occur through no fault of Seller. At Closing, the twenty-five
thousand dollars ($25,000) together with the Deposit and Additional Deposit, if
any, will be applied against the Purchase Price.
15. REPRESENTATION AND WARRANTIES: For the purpose of inducing Purchaser to
------------------------------
enter into and consummate this transaction, Seller represents and warrants to
Purchaser that to the best of his knowledge and belief:
( i ) The Land is not currently being used, has never been used,
as a hazardous waste disposal facility as defined in 40 C.F.R. Section 260.10;
the Land is free of any lien or encumbrance which may be created under any
applicable state or federal law, statute or regulation pertaining to hazardous
waste; and no hazardous waste has been placed onto or into the Land (for
purposes hereof, the term "hazardous waste" includes those substances listed in
40 C.F.R Section 261.30 and those substances previously determined to be
hazardous by any applicable state or federal law, statute or regulation),
7
<PAGE>
( ii ) There is no pending or threatened condemnation or any
road widening respecting all or any part of the Land.
( iii ) Seller is currently, or has entered into a contract by
which he will become, the owner and holder of fee simple title to the Land and
has full power and authority to execute this Contract and all other documents
necessary to consummate the transaction.
( iv ) Seller warrants that he has no knowledge of any deed
restrictions or other contractual restrictions or covenants which would restrict
or other impair the Purchaser from developing and operating a limited service
hotel on the land.
16. CONDITIONS TO CLOSING: Purchaser's obligation to purchase the Land at
the Closing is subject to all of the following conditions, which shall have been
fulfilled to Purchaser's satisfaction:
A. At the Closing, the following conditions shall have been
satisfied:
1. Good and marketable fee simple title to the Land shall be in
the name of the Seller and any beneficial easements and/or restrictions
appurtenant to the Land are not subject to any interest, the termination,
enforcement, exercise or foreclosure of which could terminate or prevent the
enforcement of such easement or restriction.
8
<PAGE>
2. No portion of the Land has been taken by or is the subject of
a condemnation proceeding or is under threat of condemnation
3. There has been no material or adverse change to the condition
of the Land or to the representations and warranties of Seller set forth in
Section 18 hereof.
B. The following conditions shall have been satisfied by the
Purchaser or be deemed waived by the Purchaser on or before Closing:
1. That zoning and the conditions of zoning, including any use
permit, site plan approval, curb cut permit, demolition permit, variances and
other similar governmental approvals required by law or necessitated by
Purchaser's planned use of the Land in conjunction with other land for the
construction and operation thereon of a three-story, limited service hotel
having a minimum of 100 guest rooms, along with all facilities and amenities
attendant thereto (hereinafter the "Improvements"), shall have been received.
2. That all platting or replatting requirements in respect of
the Land have been satisfied by the Purchaser to permit the transfer of title
and accommodate construction and operation of the Improvements under applicable
laws and regulations.
3. That Purchaser has reasonably determined that all permits
necessary, in Purchaser's sole opinion, for the construction and operation of
the
9
<PAGE>
Improvements on the Land, are available to Purchaser after receipt of site plan
approval.
4. Easements: Purchaser, with Seller's assistance must be able
to obtain without cost any and all easements necessary to build the proposed
development. Said easements, including but not limited to the access easement,
shall be unencumbered and the title insurance in favor of Purchaser shall insure
such easements.
5. Soil Conditions: The soil, in its natural state, must have
sufficient load-bearing characteristics to support Purchaser's proposed
development, and must have adequate permeability to drain the proposed
development. Seller warrants that to the best of his knowledge, the Premises do
not contain a landfill, hazardous waste, underground mines, caves or underground
streams and that the soil condition and water table are such that Purchaser can
build the proposed development without incurring additional extraordinary
expenses.
6. That no federal, state or local government restrictions or
requirements would preclude construction and operation of the Improvements on
the Land.
7. That all utilities including but not limited to electric,
gas, telephone, cable TV, will be available for use by Purchaser along Old
Oliver Road or on the Land. Water will be available at the intersection of Old
Oliver Road and Oliver Road. Purchaser will be responsible for bringing water to
the Land along Old Oliver Road. Seller warrants
<PAGE>
that to the best of his knowledge sanitary sewer is currently available on the
Land. The capacity of these various services, i.e., utilities, water and sewer,
are not conditions to Closing.
8. That Purchaser has reasonably determined that the Land is
free of any hazardous substances or wastes that would preclude the Construction
of the Improvements on the Land.
9. That Purchaser is able to secure a franchise for the national
hotel brand of its choice.
C. During the term of this Contract, Purchaser shall have the right
to enter upon the Land for the purpose of making the tests and investigations,
at its expense, necessary or appropriate to satisfy the foregoing conditions.
Purchaser shall defend, indemnify and hold Seller harmless from any liability
which may arise due solely to such entry. Purchaser shall repair any damage to
the Land in the event this transaction is not consummated.
17. FAILURE OF CONDITIONS: If any of the conditions precedent to
------------------------
Purchaser's obligation to close have not occurred or been satisfied or been
deemed satisfied on or
11
<PAGE>
before 210 days after the Time Line Date or any extension thereof as set forth
in Section 10, Purchaser at its sole option may: (a) terminate this Contract by
written notice delivered to Seller on or before the Closing Date, or (b) waive
such conditions precedent and proceed to Closing.
18. NOTICES: All notices and other communications hereunder shall be in
--------
writing and shall be delivered personally against receipt or shall be sent by
registered mail, certified mail, or Express Mail services, postage prepaid and
return receipt requested, or by nationally utilized overnight delivery service,
addressed to the parties as follows:
As to Seller: Richard E. and May L. Hess
8042 Old Oliver Road
Erie, PA 16509
As to Purchaser: ESSEX PARTNERS INC.
100 Corporate Woods
Rochester, New York 14623
Attn: Thomas W. Blank
Any notice in accordance herewith shall be deemed received when delivery is
received or refused, as the case may be. Additionally, notices may be given by
telephone facsimile transmission, provided that an original copy of said
transmission shall be delivered to the addressee by nationally utilized
overnight delivery services on the day following such transmission. Telephone
facsimiles shall be deemed delivered on the date of such transmission.
19. PARTIES BOUND: This Contract shall be binding upon and inure to the
---------------
benefit
12
<PAGE>
of Seller and Purchaser, their respective heirs, personal representatives,
successors and assigns.
20. ASSIGNMENT: Purchaser may assign this Contract to a partnership in
-----------
which it is a general partner or a corporation in which it is a shareholder,
provided that Purchaser shall remain responsible for the faithful performances
of its obligations under the Contract.
21. GOVERNING LAW: The laws of the Commonwealth of Pennsylvania shall
---------------
govern the validity, construction, enforcement and interpretation of this
Contract.
22. EXPIRATION: The offer of Purchaser extended by the delivery of this
-----------
Contract to Seller shall be automatically revoked unless Seller shall execute
and deliver an executed facsimile copy of the Contract to Purchaser on or before
5:00 p.m., May 13, 1996 to be followed by originals in overnight mail.
23. MULTIPLE COUNTERPARTS: This Contract may be executed in a number of
-----------------------
identical counterparts. If so executed, each of such counterparts shall,
collectively, constitute one agreement, but in making proof of this Contract, it
shall not be necessary to produce or account for more than one such counterpart.
If requested by Purchaser, Seller agrees to execute a memorandum of this
Contract in form recordable in the real property records where the Land is
situate.
13
<PAGE>
24. ENTIRE AGREEMENT: This Contract embodies the entire agreement of the
parties in respect of the transaction herein contemplated, superseding all prior
agreements whether oral or written. Any amendments hereto shall be in writing
and executed by the parties hereto.
Sellers may remove all or part of any building or building fixtures on the
property but are not obligated to do so.
SELLER
/S/ Richard E. Hess
- ------------------------------ ---------------------------------
Witness
/s/ May L. Hess
---------------------------------
PURCHASER
ESSEX PARTNERS INC.
/s/ Barbara J. Purvis /s/ Jerald P. Eichelberger
_______________________________ By: _____________________________
Witness Exec. V.P.
14
REAL ESTATE PURCHASE CONTRACT
-----------------------------
THIS AGREEMENT, made as of the 18TH day of MAY, 1996 between David A.
Kellogg c/o American Business Machines at 115 West 20th Street, Erie, PA 16502
("Seller"), and Essex Partners Inc., a New York corporation with offices at 100
Corporate Woods, Suite 300, Rochester, New York 14623 ("Purchaser"),
WITNESSETH:
1. Seller agrees to sell Purchaser and Purchaser agrees to buy from Seller,
in accordance with the terms, conditions and stipulations set forth in this Real
Estate Purchase Contract ("Contract"), all of Seller's right, title and interest
in that real property with all improvements located thereon, as outlined on
Exhibit A attached hereto and made a part hereof, containing 2.5 acres, together
with an Ingress/Egress and Sign Easement set forth in Section 15 of this
Contract (the "Land"). Further, Purchaser shall have the option of increasing
the size of the Land after receipt of its market study and/or preliminary site
plan. It is expressly understood and agreed that Seller has no right, title or
interest in the parcel currently owned by Richard E. and May L. Hess, 8042 Old
Oliver Road, Erie, PA 16509 Erie County Index Number 40-017-073-002.01 for which
Purchaser is entering into a separate Real Estate Purchase Contract. At the time
of Closing, that portion of the Hess property which lies outside of the
boundaries of the Land as shown on Exhibit A shall become the property of
Seller.
2. PURCHASE PRICE: The total purchase price to be paid to Seller by
Purchaser for the Land (the "Purchase Price") shall be Three Hundred Sixty One
Thousand Dollars ($361,000). If Purchaser exercises its option to purchase more
than the Land as set forth in Exhibit A, the Purchase Price shall be increased
in the amount of $6.89 per square foot.
3. PAYMENT OF PURCHASE PRICE: Subject to the terms and conditions of this
Contract, the Purchase Price shall be payable to Seller at the Closing in
immediately available U.S. funds.
4. DEPOSIT: Upon receipt of a fully executed Contract (the "Time Line
Date"), Purchaser shall deliver its check in the amount of five
thousand dollars ($5,000) to Seller's attorney which shall constitute
Purchaser's good faith deposit ("Deposit"). Purchaser shall have 90 days after
the Time Line Date to notify Seller of its intent to cancel this Contract for
any reason whatsoever and the full Deposit as set forth herein shall be directly
returned to Purchaser. Thereafter in the event this Contract does not close as a
result of failure of any condition in Section 20 or through no fault of
Purchaser and Purchaser waives its right to specific performance of this
Contract then the Deposit and any Additional Deposit as described in Section 12
shall be directly returned to Purchaser. If Purchaser does not terminate this
Contract pursuant to Section 21 and Purchaser shall fail or refuse to perform
its obligations herein specified at or before the date of Closing (or any agreed
upon extension), the Deposit and Additional Deposit, if any, shall be forfeited
as liquidated damages which the parties hereto agree is a reasonable and proper
amount in light of the
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<PAGE>
circumstances, and which forfeiture shall be Seller's sole remedy in law and
equity.
5. CONDITION OF OWNERSHIP: A portion of the Land is comprised of a parcel
that Seller does not own, specifically the parcel with Erie County Index Number:
40-17-73-202 (the "Not Owned Parcel"). At the time of execution of this
Contract, Seller shall deliver to Purchaser evidence of such control over the
Not Owned Parcel sufficient to enable Seller to convey title to the Land to
Purchaser in accordance with all terms of this Contract.
6. TITLE: Promptly after the Time Line Date, Seller shall provide Purchaser
with a copy of any Abstract of Title and any title policy pertaining to the Land
in its possession and Purchaser shall order evidence of title to the Land by the
issuance of a current title insurance binder (the "Title Binder") through a
major national title insurance company selected by Purchaser (the "Title
Company") in the amount of the Purchase Price. The Title Binder shall set forth
the state of title to the Land and to other property that is or will be subject
to any easements or restrictions (existing or to be created pursuant to this
Contract) benefitting the Land, together with all exceptions or conditions to
such title, including, but without limitation to, all easements, restrictions,
rights-of-way, covenants, reservations, and all other encumbrances affecting the
Land which would appear in the owner's title policy.
7. EXCLUSIVE USE AND RIGHT OF FIRST REFUSAL: Seller convenants and agrees
that, provided Purchaser fully performs its obligations under this Contract,
Purchaser shall have
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the exclusive right to develop a hotel facility on other lands which Seller
currently owns or controls fronting on Old Oliver Road and all lands contiguous
to such lands fronting on Old Oliver Road and such other lands which Seller may
own or control in the future contiguous to such lands (the "Adjacent Lands").
The exclusive right shall commence on Closing, shall run with the Adjacent Lands
and continue for a period of five (5) years. After expiration of the five (5)
year period, if Seller proposes to sell all or a portion of the Adjacent Lands
for the development of a hotel facility, Purchaser shall have a right of first
refusal exercisable within 30 days of presentation of an executed contract from
a bonafide purchaser acceptable to Seller. A memorandum evidencing the rights
contained herein shall be recorded at the time of Closing.
8. SURVEY: Promptly after execution of this Contract, Seller agrees to
provide Purchaser with the most recent instrument survey pertaining to the Land
in its possession.
9. REVIEW OF TITLE BINDER AND SURVEY: Purchaser shall have 60 days after
the Time Line Date to deliver in writing to Seller Purchaser's objections to
title. Purchaser's failure to object to any item on the Title Binder or survey
within the time limitation imposed hereby shall be deemed to be approval of same
by Purchaser.
10. OTHER DOCUMENTATION: Seller shall deliver to Purchaser upon execution
of this Contract the originals or copies of any Phase I and Phase II
environmental studies, soils
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test, utility information, topographical maps and subdivision plots and
correspondence, information and documentation which would relate to the use
and/or occupancy of the Land which are in possession of Seller or to which
Seller has access without cost other than copying or duplicating charges.
11. PURCHASER'S OBJECTION TO TITLE; DEFECTS IN TITLE: Should Purchaser as
described in Section 9 above deliver to Seller its written objections to title
or to matters contained in the survey, Seller shall have 60 days either to
remove all such defects or objections or to provide assurances acceptable to
Purchaser that same will be removed at or before Closing; mortgages, deeds of
trust or other liens of a specific amount shall be cleared before or at Closing,
by Seller or, if requested by the Seller, by Purchaser by deduction from
proceeds due Seller. Should Seller be unable to cure (or provide assurances with
respect to) any and all such defects or objections (except liens as provided
above) on or before expiration of the 60 day period, then Purchaser may, at its
option, elect to terminate this Contract and receive a full refund of the
Deposit, or to waive its objections and proceed to Closing. Seller shall not
further intentionally encumber or restrict the title to the Land without
Purchaser's prior written consent which shall not be unreasonably withheld.
12. CLOSING: The Closing shall be on or before the sooner of ( i ) the date
which is thirty (30) days after the date upon which Purchaser has received site
plan approval
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for the Improvements (as hereinafter defined), or ( ii ) 210 days after the Time
Line Date, and shall take place in the offices of the Erie County Clerk, or such
other place mutually designated by the parties; provided, however, that
Purchaser may designate an earlier date for the Closing by written notice
delivered to Seller not less than fifteen (15) days prior to such earlier date
for the Closing so designated in such notice by Purchaser. Provided, however,
that if Purchaser has shown due diligence in endeavoring to satisfy all
contingencies herein and has been delayed by any agency or entity having control
over satisfaction of those contingencies, then it is agreed that upon written
notice to Seller of such delay, Purchaser shall be entitled to an extension of
two months to enable Purchaser to satisfy those contingencies and close this
transaction. An Additional Deposit of $5,000 shall be paid to the Seller on or
before the first day of each month of the extension period.
13. PRORATIONS AND ADJUSTMENTS AT CLOSING: Ad Velorem and similar taxes
assessed against the Land shall be prorated between Seller and Purchaser at the
time of Closing on the basis of a 365 day year. Prorations shall be based upon
current year's taxes and assessments, if available, or upon figures for the last
preceding year, in which event Purchaser and Seller shall readjust the
prorations when the current year's taxes and assessments become available. Any
special assessments applicable to the Land including, but not limited to,
"rollback" or other similar assessments or taxes which apply on a change in use
of the Land, if any, whether payable in a lump sum, in installments or
otherwise, shall be paid by Seller. The foregoing obligations shall survive the
Closing.
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14. TRANSACTION COSTS: Seller and Purchaser shall each be responsible for
the payment of one-half of all transfer, state and documentary stamps to be
affixed to the instrument. Purchaser shall be responsible for all other costs,
including the cost of the Title Policy, Survey and recording the deed, provided,
however, that each party shall pay its own attorneys' fee.
15. INGRESS/EGRESS AND SIGN EASEMENT: Serving the demised property is a 30-
foot wide access and sign easement from Peach Street (Route 19) through land
designated as Residue of Land of Travelers Motel, also known as Muggs Restaurant
and Lounge and connecting on the west with Old Oliver Road ("Easement"). The
resulting Easement will benefit the Land as well as the lands remaining with the
Seller. A condition of this Contract will be the successful establishment of an
Easement Maintenance Agreement between the Seller and the Purchaser. This
condition must be satisfied within ninety (90) days of the Time Line Date.
A. Conditions of the Easement Maintenance Agreement shall include but
are not limited to the following:
1. Purchaser shall improve and maintain to established standards the
entire surface of the Easement. A proportionate share of improvement and
maintenance expenses, based on lineal feet of frontage, may be assessed against
properties using or served by the Easement. Said expenses may be liened against
the properties.
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2. Bids for expenditures of said improvements and maintenance are to be
presented for approval by the parties which approval may not be unreasonably
withheld prior to the award of Contract. All accounting for said work will be
made available at all times to the affected parties.
3. Obligations for such expenditures for improvements, upkeep and
maintenance are to run with the lands effected by the Easement. A copy of the
Easement Maintenance Agreement shall be recorded at the time of Closing.
4. Purchaser shall be solely responsible for any signs which Purchaser
places in the Easement for its benefit.
16. WARRANTY DEED AND OTHER DOCUMENTS REQUIRED FOR CLOSING:
A. At the Closing, Seller shall deliver the following:
1. Warranty Deed in fee simple, free and clear of all liens and
encumbrances, except subject to the following items now of record: utility,
rights-of-way and easements for the purpose of providing utility service to the
property herein described, common driveway or party wall agreements, recorded
restrictions, and zoning regulations; otherwise the title to the above-described
real estate shall be good and marketable and such as will be insured at the
regular rates by a title insurance company licensed to do business
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in Pennsylvania. Also, access to a public road may require issuance of a highway
occupancy permit from the Department of Transportation. A speciman deed shall be
delivered by Seller to Purchaser's attorney for review at least ten (10) days
before closing.
2. Documents evidencing the legal status, standing and authority
of Seller and such other documents, including standard form Seller's affidavits,
as may be required by Title Company for issuance of the Title Policy.
B. At the Closing, Purchaser shall deliver the following:
1. The Purchase Price plus any costs to be shared by Purchaser in
cash, certified funds, or a bank draft.
2. Such documents evidencing the legal status, standing and
authority of Purchaser.
17. POSSESSION: Possession of the premises shall be delivered to
the Purchaser up to 120 days of Closing provided, however, that possession of
the Not Owned Parcel shall be delivered to Purchaser either ( i ) 120 days after
Closing, or ( ii ) 120 days after Purchaser has provided written notice to
vacate, but in no event prior to the Closing Date, and Purchaser has deposited
with Seller's attorney twenty-five thousand dollars ($25,000) which together
with the Deposit and Additional Deposit, if any, would be
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forfeited as liquidated damages in the event that Closing does not occur through
no fault of Seller. At Closing, the twenty-five thousand dollars ($25,000)
together with the Deposit and Additional Deposit, if any, will be applied
against the Purchase Price.
18. DEMOLITION: Within 120 days after Closing, Seller, at its sole cost and
expense, shall remove all structural improvements to their foundation levels,
all tanks whether above ground or underground and all other material and
non-organic debris from the Land provided, however, that Buyer shall be
responsible for all demolition on the Not Owned Parcel. Such removal shall be
done in a manner that prevents contamination of the Land by any environmentally
sensitive or toxic material or liquid.
19. REPRESENTATIONS AND WARRANTIES: For the purpose of inducing Purchaser
to enter into and consummate this transaction, Seller represents and warrants to
Purchaser that to the best of his knowledge and belief:
( i ) The Land is not currently being used, has never been used,
as a hazardous waste disposal facility as defined in 40 C.F.R. Section 260.10;
the Land is free of any lien or encumbrance which may be created under any
applicable state or federal law, statute or regulation pertaining to hazardous
waste; and no hazardous waste has been placed onto or into the Land (for
purposes hereof, the term "hazardous waste" includes those substances listed in
40 C.F.R. Section 261.30 and those substances previously determined to be
hazardous by any applicable state or federal law, statute or regulation),
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( ii ) There is no pending or threatened condemnation or any road
widening respecting all or any part of the Land,
( iii ) Seller is currently or has entered into a contract by
which he will become the owner and holder of fee simple title to the Land and
has full power and authority to execute this Contract and all other documents
necessary to consummate the transaction.
( iv ) Seller warrants that he has no knowledge of any deed
restrictions or other contractual restrictions or covenants which would restrict
or other impair the Purchaser from developing and operating a limited service
hotel on the land.
20. CONDITIONS TO CLOSING: Purchaser's obligation to purchase the Land at
the Closing is subject to all of the following conditions, which shall have been
fulfilled to Purchaser's satisfaction:
A. At the Closing, the following conditions shall have been satisfied:
1. Good and marketable fee simple title to the Land shall be in
the name of the Seller and any beneficial easements and/or restrictions
appurtenant to the Land are not subject to any interest, the termination,
enforcement, exercise or foreclosure of which could terminate or prevent the
enforcement of such easement or restriction.
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2. No portion of the Land has been taken by or is the subject of a
condemnation proceeding or is under threat of condemnation.
3. There has been no material or adverse change to the condition
of the Land or to the representations and warranties of Seller set forth in
Section 18 hereof.
B. The following conditions shall have been satisfied by the
Purchaser or be deemed waived by the Purchaser on or before
Closing:
1. That zoning and the conditions of zoning, including any use
permit, site plan approval, curb cut permit, demolition permit, variances and
other similar governmental approvals required by law or necessitated by
Purchaser's planned use of the property for the construction and operation
thereon of a three-story, limited service hotel having a minimum of 100 guest
rooms, along with all facilities and amenities attendant thereto (hereinafter
the "Improvements"), shall have been received.
2. That all platting or replatting requirements in respect of the
Land have been satisfied by the Purchaser to permit the transfer of title and to
accommodate construction and operation of the Improvements under applicable laws
and regulations.
3. That Purchaser has reasonably determined that all permits
necessary, in Purchaser's sole opinion, for the construction and operation of
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the Improvements on the Land, are available to Purchaser after receipt of site
plan approval.
4. Easements: Purchaser, with Seller's assistance must be able to
obtain without cost any and all easements necessary to build the proposed
development. Said easements, including but not limited to the access easement,
shall be unencumbered and the title insurance in favor of Purchaser shall insure
such easements.
5. Soil Conditions: The soil, in its natural state, must have
sufficient load-bearing characteristics to support Purchaser's proposed
development, and must have adequate permeability to drain the proposed
development. Seller warrants that to the best of his knowledge, the Premises do
not contain a landfill, hazardous waste, underground mines, caves or underground
streams and that the soil condition and water table are such that Purchaser can
build the proposed development without incurring additional extraordinary
expenses.
6. That no federal, state or local governmental restrictions or
requirements would preclude construction and operation of the Improvements on
the Land.
7. That all utilities including but not limited to electric, gas,
telephone, cable TV, will be available for use by Purchaser along Old Oliver
Road or on the Land. Water will be available at the intersection of Old Oliver
Road and Oliver Road. Purchaser will be responsible for bringing water to the
Land along Old Oliver Road. Seller will pay
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a prorata share of the expense of installation upon Seller's hook-up, based upon
square footage of lands remaining with the Seller. (Tap-in size and location(s)
to be determined during installation.) Seller has the right to examine and
pre-approve cost to accomplish same which approval is not to be unreasonably
withheld. Seller warrants that to the best of his knowledge sanitary sewer is
currently available on the Land. Further, that a storm water management system
can be approved and installed without unreasonable cost. The capacity of these
various services, i.e., utilities, water and sewer, are not conditions to
Closing.
8. That Purchaser has reasonably determined that the Land is free
of any hazardous substances or wastes that would preclude the Construction of
the Improvements on the Land.
9. That Purchaser is able to secure a franchise for the national
hotel brand of its choice.
C. During the term of this Contract, Purchaser shall have the right to
enter upon the Land for the purpose of making the tests and investigations, at
its expense, necessary or appropriate to satisfy the foregoing conditions.
Purchaser shall defend, indemnify and hold Seller harmless from any liability
which may arise due solely to such entry. Purchaser shall repair any damage to
the Land in the event this transaction is not consummated.
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21. FAILURE OF CONDITIONS: If any of the conditions precedent to
Purchaser's obligation to close have not occurred or been satisfied or been
deemed satisfied on or before 210 days after the Time Line Date or any extension
thereof as set forth in Section 12, Purchaser at its sole option may: (a)
terminate this Contract by written notice delivered to Seller on or before the
Closing Date, or (b) waive such conditions precedent and proceed to Closing.
22. BROKERS: Seller shall be solely responsible for, and shall pay Orlando
Realtors' real estate commission fee of seven (7%) percent. Seller agrees to
indemnify, defend, and hold Purchaser harmless for any claim for such
commission. Orlando Realtors shall be solely responsible for paying Holland
Metro Inc., REALTORS its share of the commission. Purchaser represents that it
has dealt with no broker other than Holland Metro Inc., REALTORS.
Notwithstanding anything contained herein to the contrary, these indemnities
shall survive the closing.
23. NOTICES: All notices and other communications hereunder shall be in
writing and shall be delivered personally against receipt or shall be sent by
registered mail, certified
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mail, or Express Mail services, postage prepaid and return receipt requested, or
by nationally utilized overnight delivery service, addressed to the parties as
follows:
As to Seller: David A. Kellogg
c/o American Business Machines
115 West 20th Street
Erie, PA 16502
As to Purchaser: ESSEX PARTNERS INC.
100 Corporate Woods
Rochester, New York 14623
Attn: Thomas W. Blank
Any notice in accordance herewith shall be deemed received when delivery is
received or refused, as the case may be. Additionally, notices may be given by
telephone facsimile transmission, provided that an original copy of said
transmission shall be delivered to the addressee by nationally utilized
overnight delivery services on the day following such transmission. Telephone
facsimiles shall be deemed delivered on the date of such transmission.
24. PARTIES BOUND: This Contract shall be binding upon and inure to the
benefit of Seller and Purchaser, their respective heirs, personal
representatives, successors and assigns.
25. ASSIGNMENT: Purchaser may assign this Contract to a partnership in
which it is a general partner or a corporation in which it is a shareholder,
provided that Purchaser
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shall remain responsible for the faithful performance of its obligations under
the Contract.
26. GOVERNING LAW: The laws of the Commonwealth of Pennsylvania shall
govern the validity, construction, enforcement and interpretation of this
Contract.
27. EXPIRATION: The offer of Purchaser extended by the delivery of this
Contract to Seller shall be automatically revoked unless Seller shall execute
and deliver an executed facsimile copy of the Contract to Purchaser on or before
5:00 p.m., May 18, 1996 to be followed by originals in overnight mail.
28. MULTIPLE COUNTERPARTS: This Contract may be executed in a number of
identical counterparts. If so executed, each of such counterparts shall,
collectively, constitute one agreement, but in making proof of this Contract, it
shall not be necessary to produce or account for more than one such counterpart.
If requested by Purchaser, Seller agrees to execute a memorandum of this
Contract in form recordable in the real property records where the Land is
situate.
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29. ENTIRE AGREEMENT: This Contract embodies the entire agreement of the
parties in respect of the transaction herein contemplated, superseding all prior
agreements whether oral or written. Any amendments hereto shall be in writing
and executed by the parties hereto.
SELLER
/S/ David A. Kellogg
- ---------------------------- -----------------------------------
Witness
PURCHASER
ESSEX PARTNERS INC.
Jerald P. Eichelberger
/s/ Barbara J. Purvis_______________ By: _____________________
Witness Exec. V. P.
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Exhibit 10-17
PROMISSORY NOTE
$4,700,000.00
Rochester, New York
Dated: December 31, 1997
FOR VALUE RECEIVED, Erie Hotel LLC, a New York limited liability company
with an office for the transaction of business located at 100 Corporate Woods,
Rochester, New York 14623 (the "BORROWER") promises to pay to the order of
KEYBANK NATIONAL ASSOCIATION, a national banking association, with its principal
office and place of business at 50 Fountain Plaza, Buffalo, New York 14202 ("KEY
BANK") the principal sum of Four Million Seven Hundred Thousand and 00/100
($4,700,000.00) Dollars or so much thereof as may be advanced from time to time
in accordance with the terms of a building loan agreement dated on even date
herewith (the "Building Loan Agreement"), with interest on the unpaid principal
balance of such amount from the date of this Note or such advance, as the case
may be, at the Interest Rate (hereinafter defined). This Note evidences a loan
(the "Loan") made, or so much thereof as may be made, by Key Bank to Borrower,
in the principal amount hereof, and is secured by (a) an open-end mortgage and
security agreement from Borrower to Key Bank dated on even date herewith in the
amount of $4,700,000.00 (the "Mortgage") which creates a first lien on certain
real property located in the Township of Summit, Erie County, Commonwealth of
Pennsylvania (the "Real Property"); which, together with financing statements
executed in conjunction therewith (the "Financing Statements"), creates a first
lien security interest in certain personal property (the "Personal Property")
more particularly described in the Mortgage; (b) an assignment of rents and
leases dated on even date herewith from Borrower to Key Bank (the "Assignment")
which will conditionally assign all rents and absolutely assign all leases
applicable to the Real Property to Key Bank; (c) the irrevocable, unconditional,
guaranty of payment by Essex Partners Inc. (the "Guarantor") of the Loan set
forth in a guaranty of payment dated on even date herewith from the Guarantor to
Key Bank (the "Guaranty"); and (d) such other security as may now or hereafter
be given to Key Bank by Borrower as collateral for the Loan (the Building Loan
Agreement, the Mortgage, the Financing Statements, the Assignment, the Guaranty,
this Note and such other documents evidencing such other security which may
hereafter be given as further security for, or in connection with, the Loan,
being hereinafter collectively referred to as the "Loan Documents").
I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the following definitions:
"ADVANCE" shall mean each advance of Loan proceeds by Key Bank to the
Borrower, each of which will be treated separately for purposes of computing
interest and each of which will accrue interest at the Interest Rate selected by
Borrower.
<PAGE>
"DEFAULT INTEREST RATE" shall mean the applicable Interest Rate plus four
(4.0%) percent per annum.
"ELECTION NOTICE" shall mean the Advance and Interest Rate Election Notice
which may be used by the Borrower when the Borrower is seeking an Advance, said
Election Notice to be in the form of Exhibit "A" attached hereto and when
delivered, to have been completed by the Borrower to indicate an Advance amount
and an Interest Rate.
"INTEREST RATE" shall mean the rate of interest (rounded up to the nearest
one-eighth (1/8%) percent) to be calculated hereunder and paid by Borrower on
any outstanding principal due under this Note and shall be at the LIBOR Rate.
"INTEREST RATE ELECTION PERIOD" shall mean the time period selected by the
Borrower during which interest is to ACCRUE on an Advance at the LIBOR Rate. An
Interest Rate Election Period shall be a term of 30, 60 or 90 days (or, if this
Note is dated on other than the first day of a month, for the first Interest
Rate Election Period only, the time period between the date of this Note and the
last day of the month in which this Note is dated, inclusive). In no event shall
any Interest Rate Election Period extend beyond the Maturity Date of the Loan.
"LIBOR" shall mean the rate designated under the heading "LONDON INTERBANK
OFFERED RATES" in the "Money Rates" column as published in The Wall Street
Journal two days prior to the date of the LIBOR Advance for which a LIBOR Rate
is being calculated
"LIBOR ADVANCE" shall mean any Advance that bears interest at the LIBOR
Rate.
"LIBOR RATE" shall mean a fixed rate equal to 30, 60 or 90 day LIBOR, as
applicable, plus two and one-quarter (2.25%) percent.
"MATURITY DATE" shall mean December 31, 1998.
II
INTEREST
(a) COMPUTATION OF INTEREST. Interest on the outstanding principal balance
of this Note shall be computed on the basis of "a 360-day year for the actual
number of days elapsed" (such phrase, as used throughout this Note, shall mean
that in computing interest for the subject period, the interest rate shall be
multiplied by a fraction, the denominator of which is 360 and the numerator of
which is the actual number of days elapsed from the date of the first
disbursement of the Loan or the date of the preceding interest and/or principal
due date, as the case may be, to the date of the next interest and/or principal
due date). Interest shall accrue until the Loan is repaid.
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(b) INTEREST RATE CHANGE PROCEDURES. The LIGBOR Rate calculated hereunder
for the Interest Rate Election Period shall remain constant for the Interest
Rate Election Period.
(c) IMPLEMENTATION OF DEFAULT INTEREST RATE. Upon the occurrence and during
the continuance of an Event of Default (hereinbelow defined), the computation of
interest under this Note shall immediately and without further action by Key
Bank be based upon the Default Interest Rate.
III
PROCEDURES FOR ADVANCES AND ELECTION NOTICES
(a) ADVANCES. Provided that no Event of Default (hereinafter defined) and
no event which but for the passage of time, the giving of notice or both would
constitute an Event of Default, has occurred, and further provided that Borrower
has met all conditions to an Advance set forth in any other Loan Document,
Advances shall be made available to the Borrower from time to time in the manner
set forth in this Article and information with regard to any Advance shall be
recorded and maintained by Key Bank in its internal records and such records
shall be conclusive as to the information set forth therein, absent manifest
error.
(b) PROCEDURE FOR ADVANCES AND ELECTION NOTICES. Borrower may obtain an
Advance by delivering an Election Notice signed by any one of the Authorized
Individuals on the Schedule of Authorized Individuals attached hereto as Exhibit
"B" setting forth the amount of the Advance requested and indicating an Interest
Rate Election Period (which must terminate no later than the Maturity Date) for
such LIBOR Advance. The Interest Rate as determined in accordance with the terms
of this Note at the beginning of the Interest Rate Election Period shall remain
in effect until expiration of the Interest Rate Election Period chosen by the
Borrower for that LIBOR Advance. Prior to the end of each Interest Rate Election
Period, if Borrower will not be repaying the amount of the Advance remaining
unpaid, Borrower shall provide an Election Notice designating a new Interest
Rate Election Period. If Borrower fails to provide the Election Notice to Key
Bank prior to the expiration of any Interest Rate Election Period, and does not
repay the Advance, interest shall accrue on that Advance at the Interest Rate
applicable to an Interest Rate Election Period having a term of 30 days, until
the Borrower delivers an Election Notice. Any Advance shall be deposited by Key
Bank in an account to be opened for that purpose with Key Bank (the "Advance
Account") and the deposit of any Advance in the Advance Account by Key Bank
shall be conclusive as to the receipt of said Advance by Borrower and Borrower
will be responsible for repaying any Advance so made pursuant to the terms of
this Note.
(c) ADVANCES BY KEY BANK. Key Bank may make Advances pursuant to the terms
hereof, for the purpose of paying any sums which have become due and payable
hereunder or under any other Loan Document. Any such Advance shall bear interest
at the Interest Rate.
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IV
LIBOR RESERVE REOUIREMENT
If because of the introduction of or any change in or because of any
judicial, administrative or other governmental interpretation of any law or
regulation, there shall be any increase in the cost to Key Bank of making,
funding, maintaining or allocating capital to any LIBOR Advance, then Borrower
shall from time to time upon demand by Key Bank pay Key Bank additional moneys
sufficient to compensate Key Bank for such increased cost.
V
PAYMENT OF PRINCIEPAL AND INTEREST
(a) PERIODIC PAYMENTS. Borrower shall pay interest at the applicable
Interest Rate on the sums advanced under the Building Loan Agreement beginning
on the first day of February, 1998 and continuing on the first day of each month
thereafter until the Maturity Date (or such earlier date in the event Key Bank
accelerates Borrower's obligations hereunder), at which time, any accrued and
unpaid interest and principal must be paid.
VI
GENERAL CONDITIONS
(a) METHOD OF PAYMENT. All payments under this Note are payable at 50
Fountain Plaza, Buffalo, New York 14202, or at such other place as Key Bank
shall notify Borrower in writing. Key Bank reserves the right to require any
payment on this Note, whether such payment is of a regular installment or
represents a prepayment, to be by wired federal funds or other immediately
available funds or to be paid at a place other than the above address.
(b) APPLICATION OF PAYMENTS RECEIVED. Except as may otherwise be provided
in this Note, all payments received by Key Bank on this Note shall be applied by
Key Bank to any unpaid Late Payment Charges (hereinbelow defined), accrued and
unpaid interest then due and owing and the reduction of principal of this Note,
in such order and in such amounts as Key Bank may determine from time to time.
Sums applied to LIBOR Advances shall be applied first to those LIBOR Advances
having Interest Rate Election Periods which are next to expire in chronological
order.
(c) LATE PAYMENT CHARGES. If Borrower fails to pay any amount of principal
and/or interest on this Note (other than the payment due on the Maturity Date,
however, with regard to that payment, same must be made within 30 days, or the
Late Payment Charge will apply) for ten (1O) days after such payment becomes
due, whether by acceleration or otherwise, Key Bank may, at its option, whether
immediately or at the time of final payment of the amounts evidenced by this
Note, impose a late payment charge (the "Late Payment Charge") computed by
multiplying the
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amount of each past due payment by four (4%) percent. Until any and all Late
Payment Charges are paid in full, the amount thereof shall be added to the
indebtedness secured by any of the Loan Documents. The Late Payment Charge is
not a penalty and is deemed to be liquidated damages for the purpose of
compensating Key Bank for the difficulty in computing the actual amount of
damages incurred by Key Bank as a result of the late payment by Borrower.
(d) PREPAYMENT. The principal balance may be prepaid in whole or in part,
at any time without premium or penalty.
In the event Key Bank receives partial prepayments, or in the event that
Key Bank shall receive proceeds of condemnation or insurance proceeds for
application against the Loan, such prepayments and proceeds shall be applied to
installments of principal in the inverse order of maturity.
(e) REFUSAL TO MAKE FURTHER ADVANCES, ACCELERATION AND DEFAULT. If
(1) Borrower fails to pay any sum due on this Note within ten (10) days
of the date the same is due; or
(2) Borrower shall fail to perform any other covenant, obligation or
agreement required to be performed by Borrower under this Note, for ten
(10) days after Key Bank has given written notice of such failure to
Borrower; or
(3) Any warranty or representation made or given by Borrower or any
financial or other statement submitted by or on behalf of Borrower, or any
Guarantor in any instrument furnished in compliance with or in reference to
this Note or the Loan Documents should be false or misleading in any
material respect; or
(4) Borrower or any Guarantor shall generally not be paying debts as
they become due or file a petition or seek relief under or take advantage
of any insolvency law; make an assignment for the benefit of creditors;
commence a proceeding for the appointment of a receiver, trustee,
liquidator, custodian or conservator of Borrower or any Guarantor or of the
whole or substantially all of Borrower's or any Guarantor's property or of
any collateral pledged as security for this Note; or if Borrower or any
Guarantor shall file a petition or an answer to a petition under any
chapter of the Bankruptcy Reform Act of 1978, as amended (or any successor
statute thereto), or file a petition or seek relief under or take advantage
of any other similar law or statute of the United States of America, any
state thereof, or any foreign country or subdivision thereof, or
(5) A Court of competent jurisdiction shall enter an order, judgment or
decree appointing or authorizing a receiver, trustee, liquidator, custodian
or conservator of Borrower or any Guarantor or of the whole or
substantially all of Borrower's or any Guarantor's property, or any portion
of the collateral pledged as security for this Note, or
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<PAGE>
enter an order for relief against Borrower or any Guarantor in any case
commenced under any chapter of the Bankruptcy Reform Act of 1978, as
amended (or any successor statute thereto), or grant relief under any other
similar law or statute of the United States of America, any state thereof,
or any foreign country or subdivision thereof and the same is not stayed or
discharged within sixty (60) days of entry; or
(6) Under the provisions of any law for the relief or aid of debtors, a
court of competent jurisdiction or a receiver, trustee, liquidator,
custodian or conservator shall assume custody or control or take possession
from Borrower or any Guarantor of all or substantially all of Borrower's or
any Guarantor's property or any portion of any collateral pledged as
security for this Note; or
(7) There is commenced against Borrower or any Guarantor any proceeding
for any of the foregoing relief or if a petition is filed against Borrower
or any Guarantor under any chapter of the Bankruptcy Reform Act of 1978, as
amended (or any successor statute thereto), or under any other similar law
or statute of the United States of America, any state thereof, or any
foreign country or subdivision thereof, and such proceeding or petition
remains undismissed for a period of sixty (60) days or if Borrower or any
Guarantor by any act indicates consent to, approval of or acquiescence in
any such proceeding or petition; or
(8) Key Bank receives a notice to creditors with regard to a bulk
transfer by Borrower or any Guarantor pursuant to Article VI of the Uniform
Commercial Code or if the Borrower shall dissolve, terminate its existence,
fail, cease normal business operation or otherwise discontinue its
existence; or
(9) Borrower or any Guarantor fails to comply with any of the
provisions set forth in the commitment letter from Key Bank dated December
3, 1997, it being understood that the terms of said commitment letter are
hereby incorporated in this Note and, to the extent that any of the terms
of the commitment letter are in conflict with the terms of this Note, the
terms of this Note shall prevail; or
(10) An "Event of Default", as said term is defined in any other Loan
Documents, shall have occurred; or
(11) Borrower fails to comply with the terms of or an "event of
default" occurs under any other loan transaction or credit arrangement of
any kind with Key Bank;
then, and in any such event (an "Event of Default"), Key Bank may, at its
option, refuse to make any further Advances, refuse to permit the renewal of any
LIBOR Advance and declare the entire unpaid balance of this Note together with
interest accrued thereon and any other sums due hereunder or under the Loan
Documents, to be immediately due and payable and Key Bank may proceed to
exercise any rights or remedies that it may have under this Note or any other
Loan Documents, or such other rights and remedies which Key Bank may have at
law, equity or otherwise. In the event of such acceleration, Borrower may
discharge its obligations to Key Bank by paying:
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(i) the unpaid principal balance hereof as at the date of such
payment, plus
(ii) accrued interest computed in the manner set forth above, plus
(iii) any Late Payment Charge computed in the manner set forth above, plus
(iv) any other sum due and owing Key Bank under this Note or any other
Loan Document.
(f) COSTS AND EXPENSES ON DEFAULT. After the occurrence of an Event of
Default, in addition to principal, interest, any Late Payment Charge and any
Prepayment Penalty, Key Bank shall be entitled to collect all costs of
collection, including, but not limited to, reasonable attorneys' fees, incurred
in connection with the protection or realization of collateral or in connection
with any of Key Bank's collection efforts, whether or not suit on this Note or
any foreclosure proceeding is filed, and all such costs and expenses shall be
payable on demand and until paid shall also be secured by the Loan Documents and
by all other collateral held by Key Bank as security for Borrower's obligations
to Key Bank.
(g) NO WAIVER BY KEY BANK. No failure by any Guarantor of the Loan to make
any payments shall be deemed a waiver or release of Borrower's obligations
hereunder. No failure on the part of Key Bank or other holder hereof to exercise
any right or remedy hereunder, whether before or after the happening of a
default, shall constitute a waiver thereof, and no waiver of any past default
shall constitute waiver of any future default or of any other default. No
failure to accelerate the Loan evidenced hereby by reason of default hereunder,
or acceptance of a past due installment, or indulgence granted from time to time
shall be construed to be a waiver of the right to insist upon prompt payment
thereafter, or shall be deemed to be a novation of this Note or as a
reinstatement of the Loan evidenced hereby or as a waiver of such right of
acceleration or any other right, or be construed so as to preclude the exercise
of any right which Key Bank may have, whether by the laws of the state governing
this Note, by agreement or otherwise; and Borrower and each endorser or
Guarantor hereby expressly waive the benefit of any statute or rule of law or
equity which would produce a result contrary to or in conflict with the
foregoing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom such agreement is sought to be
enforced.
(h) FINANCIAL INFORMATION. Borrower will advise Lender in writing if
Borrower operates on other than a calendar year basis. Borrower will at all
times keep proper books of record and account in which full, true and correct
entries shall be made in accordance with generally accepted accounting
principles and will deliver to Key Bank, within one hundred fifty (150) days
after the end of each fiscal year of Borrower, a copy of the annual financial
statements of Borrower relating to such fiscal year, such statements to include
(i) the balance sheet of Borrower as at the end of such fiscal year and (ii) the
related income statement, statement of retained earnings and statement of
changes in the financial position of Borrower for such fiscal year, prepared by
such certified public accountants as may be reasonably satisfactory to Key Bank.
Borrower also agrees
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to deliver to Key Bank from time to time, such other financial information with
respect to Borrower as Key Bank may request.
Borrower shall pay Key Bank a default charge equal to $500.00 for each
month or part thereof during which Borrower has failed to provide any of the
financial statements required pursuant to this subsection. Any amounts due
hereunder shall be payable after ten (10) day prior written notice to Borrower
and failure of Borrower to remedy such failure within said ten (10) day period
and Key Bank's rights under this subsection shall be in addition to any other
rights it may have based upon Borrower's failure to period including without
limitation, the right to accelerate Borrower's obligation to repay the Loan as
provided herein.
(i) WAIVER BY BORROWER. Borrower and each endorser or Guarantor of this
Note hereby waives presentment, protest, demand, diligence, notice of dishonor
and of nonpayment, and waives and renounces all rights to the benefits of any
statute of limitations and any moratorium, appraisement, exemption and homestead
now provided or which may hereafter be provided by any federal or state statute,
including but not limited to exemptions provided by or allowed under the
Bankruptcy Code of 1978, both as to itself personally and as to all of its or
their property, whether real or personal, against the enforcement and collection
of the obligations evidenced by this Note and any and all extensions, renewals
and modifications hereof
(j) COMPLIANCE WITH USURY LAWS. It is the intention of the parties to
conform strictly to the usury laws, whether state or federal, that are
applicable to this Note. All agreements between Borrower and Key Bank, whether
now existing or hereafter arising and whether oral or written, are hereby
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed to
be paid to Key Bank or the holder hereof, or collected by Key Bank or such
holder, for the use, forbearance or detention of the money to be loaned
hereunder or otherwise, or for the payment or performance of any covenant or
obligation contained herein, or in any of the Loan Documents, exceed the maximum
amount permissible under applicable federal or state usury laws. If under any
circumstances whatsoever fulfillment of any provision hereof or of the Loan
Documents, at the time performance of such provision shall be due, shall involve
exceeding the limit of validity prescribed by law, then the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances Key Bank or other holder hereof shall ever receive an amount
deemed interest by applicable law, which would exceed the highest lawful rate,
such amount that would be excessive interest under applicable usury laws shall
be applied to the reduction of the principal amount owing hereunder or to other
indebtedness secured by the Loan Documents and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal and such
other indebtedness, the excess shall be deemed to have been a payment made by
mistake and shall be refunded to Borrower or to any other person making such
payment on Borrower's behalf. All sums paid or agreed to be paid to the holder
hereof for the use, forbearance or detention of the indebtedness of Borrower
evidenced hereby, outstanding from time to time shall, to the extent permitted
by applicable law, and to the extent necessary to preclude exceeding the limit
of validity prescribed by law, be amortized, pro-rated, allocated and spread
from the date of disbursement of the proceeds of this Note until payment in full
of the Loan evidenced hereby and thereby so that the
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actual rate of interest on account of such indebtedness is uniform throughout
the term hereof and thereof. The terms and provisions of this paragraph shall
control and supersede every other provision of all agreements between Borrower,
any endorser or Guarantor and Key Bank.
(k) GOVERNING LAW; SUBMISSION TO JURISDICTION. This Note shall be governed
by and construed under the laws of the State of New York. Borrower and each
endorser or Guarantor hereby submits to personal jurisdiction in said state for
the enforcement of borrower's obligations hereunder or under any other Loan
Document and waives any and all personal rights under the law of any other state
to object to jurisdiction within such state for the purposes of litigation to
enforce such obligations of Borrower.
(l) WAIVER OF JURY TRLAL. Key Bank and the Borrower hereby waive trial by
jury in any litigation in any court with respect to, in connection with, or
arising out of this Note, any other Loan Document or the Loan, or any instrument
or document delivered in connection with the Loan, or the validity, protection,
interpretation collection or enforcement thereof, or any other claim or dispute
howsoever arising between the Borrower and Key Bank.
(m) AUTHORITY OF KEY BANK. Borrower authorizes Key Bank to date this Note
as of the day when the Loan is made and to complete or correct this Note as to
any terms of the Loan not set forth herein at the time of delivery hereof.
(n) NOTICES. Any notices required or permitted to be given hereunder shall
be: (i) personally delivered or (ii) given by registered or certified mail,
postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service, in each instance addressed to the addresses set forth at the
head of this Note, or such other addresses as the parties may for themselves
designate in writing as provided herein for the purpose of receiving notices
hereunder. All notices shall be in writing and shall be deemed given, in the
case of notice by personal delivery, upon actual delivery, and in the case of
appropriate mail or courier service, upon deposit with the U.S. Postal Service
or delivery to the courier service.
(o) LIABILITY IF MORE THAN ONE BORROWER. If more than one person or entity
executes this Note as a Borrower, all of said persons or entities are jointly
and severally liable hereunder.
(p) ENTIRE AGREEMENT. This Note and the other Loan Documents constitute the
entire understanding between Borrower, the Guarantor and Key Bank and to the
extent that any writings not signed by Key Bank or oral statements or
conversations at any time made or had shall be inconsistent with the provisions
of this Note and the other Loan Documents, the same shall be null and void.
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<PAGE>
IN WITNESS WHEREOF, Borrower has executed this instrument the date
first above written.
ERIE HOTEL LLC
BY: ESSEX HOTELS II LLC
its Managing Member
BY: ESSEX HOSPITALITY ASSOCIATES IV L.P.,
its Managing Member
BY: Essex Partners Inc.,
its General Partner
BY: /s/ Barbara J. Purvis
-------------------------------------
Barbara J. Purvis
Senior Vice President
STATE OF NEW YORK )
COUTNTY OF MONROE ) ss.:
On this 31st day of December, 1997, before me personally came Barbara J.
Purvis, to me personally known, who, being by me duly sworn, did depose and say
that she is a Senior Vice President of Essex Partners Inc., a New York
corporation and the general partner of Essex Hospitality Associates IV L.P., a
New York limited partnership and the managing member of Essex Hotels H LLC, a
New York limited liability company and the managing member of Erie Hotel LLC,
the limited liability company described in and on whose behalf she executed the
within Instrument; and she duly acknowledged to me that she signed her name
thereto as the act and deed of said limited liability company.
/s/ Mark R. Foerster
-------------------------------------
Notary Public
MARK R. FOERSTER
Notary Public in the State of New York
MONROE COUNTY
Commission Expires May 31, 1999
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EXHIBIT "A"
ELECTION NOTICE
ADVANCE AND INTEREST RATE ELECTION PERIOD
FROM: ERIE HOTEL LLC (Borrower)
TO: KEYBANK NATIONAL ASSOCIATION (Lender)
DATE: _____________
ADVANCE AMOUNT: $ _______________
INTEREST RATE ELECTION PERIOD: ____ 30 day LIBOR Rate
____ 60 day LIBOR Rate
____ 90 day LIBOR Rate
"BORROWER"
By:________________________
Authorized Individual
<PAGE>
EXHIBIT "B"
SCHEDULE OF AUTHORIZED INDIVIDUALS
NAME
Barbara J. Purvis, Senior Vice-President
Lorrie LoFaso, Vice-President
Trish Albanese, Controller
Exhibit 10-18
BUILDING LOAN AGREEMENT
THIS BUILDING LOAN AGREEMENT (this "Agreement") is made and entered into
this 31st day of December, 1997, by and between KEYBANK NATIONAL ASSOCIATION, a
national banking association with an office for the transaction of business at
50 Fountain Plaza, Buffalo, New York 14202 (hereinafter referred to as
"Lender"), and Erie Hotel LLC, a New York limited liability company with an
office for the transaction of business at 100 Corporate Woods, Rochester, New
York 14623 (hereinafter referred to as "Borrower").
WITNESSETH:
In consideration of the mutual covenants and agreements hereinafter set
forth, Lender agrees to make and Borrower agrees to accept a loan in accordance
with and subject to the terms and conditions hereinafter set forth.
ARTICLE I
TERMS AND DEFINITIONS
In addition to the other terms hereinafter defined, the following terms
shall have the meanings set forth in this Article. References to documents and
other materials shall include those documents and materials as they may be
revised, amended and modified, from time to time, with the prior written
approval of Lender.
1.1 ADVANCE. "Advance" means any disbursement of the proceeds of the Loan
by Lender pursuant to the terms of this Agreement.
1.2 APPROVAL. "Approval", "Approved", "approval" or "approved" means, as
the context so determines, an approval in writing given to the party seeking
approval after full and fair disclosure to the party giving approval of all
material facts necessary in order to determine whether approval should be
granted.
1.3 ARCHITECT'S CONTRACT. "Architects Contract" means the contract, dated
September 5, 1996, between Borrower and Borrower's Architect.
1.4 BORROWER'S ARCHITECT. "Borrower's Architect" means Braun & Steidel
Architects, Inc., whose address is 1041 West Market Street, Akron, Ohio 44313.
1.5 COMPLETION DATE. "Completion Date" means December 31, 1998.
1.6 COMMITMENT. "Commitment" means the commitment letter for the Loan
issued by Lender to Borrower dated December 3, 1997, and accepted by Borrower on
December 12, 1997, as amended by amendment letter from Borrower dated December
12, 1997.
<PAGE>
1.7 CONSTRUCTION BUDGET. "Construction Budget" means the budget for total
estimated Property Costs, submitted by Borrower, approved by Lender, and
attached hereto as I i A, which includes: (a) a line item cost breakdown for
construction of the Improvements by trades, jobs and subcontractors (the "Direct
Cost Breakdown"); (b) a line item cost breakdown for Indirect Costs (the
"Indirect Cost Breakdown"); and (c) a schedule of the sources of funds to pay
Property Costs, indicating by item the portion of Property Costs to be funded
through the Loan and Required Equity Funds (the "Source of Funds Schedule").
1.8 CONSTRUCTION CONTRACT. "Construction Contract" means the contract,
dated December 11, 1997, between Borrower and Contractor and providing for the
construction of the Improvements on the Land.
1.9 CONSTRUCTION INSPECTOR. "Construction Inspector" means Construction
Monitoring Consultants, Inc. or at Lender's option either an officer or employee
of Lender or consulting architects, engineers or inspectors appointed by Lender.
1.10 CONSTRUCTION SCHEDULE. "Construction Schedule" means the schedule,
broken down by trade, of the estimated dates of commencement and completion of
the Improvements, submitted by Borrower, approved by Lender and attached hereto
as EXHIBIT B.
1.11 CONTINGENCY RESERVE. "Contingency Reserve" means the amount(s)
allocated as contingency reserve(s) in the Construction Budget.
1.12 CONTRACTOR. "Contractor" means DiMarco Constructors Corp., whose
address is 2595 Brighton Henrietta Townline Road, Rochester, New York 14623.
1.13 [INTENTIONALLY OMITTED].
1.14 DISBURSEMENT SCHEDULE. "Disbursement Schedule" means the schedule of
the amounts of Advances anticipated to be requisitioned by Borrower each month
during the term of construction of the Improvements (including an itemization of
direct costs and Indirect Costs to be included in each such requisition),
approved by Lender and attached hereto as EXHIBIT C.
1.15 DRAW REQUEST. "Draw Request" means, with respect to each Advance,
Borrower's request for such Advance, and documents required by this Agreement to
be furnished to Lender as a condition to such Advance.
1.16 EVENT OF DEFAULT. "Event of Default" means any condition or event
described herein as such.
1.17 GOVERNMENTAL APPROVALS. "Governmental Approvals" means all approvals,
consents, waivers, orders, acknowledgments, authorizations, permits and licenses
required under applicable Requirements to be obtained from any Governmental
Authority for the construction of
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the Improvements and the use, occupancy and operation of the Property following
completion of construction of the Improvements.
1.18 GOVERNMENTAL AUTHORITY. "Governmental Authority" means the United
States of America, the states in which the Land is located and Borrower and
Guarantor are located or organized, any political subdivision thereof,
municipalities in which the Land is located, and any agency, authority,
department, commission, board, bureau, or instrumentality of any of them.
1.19 GUARANTOR. "Guarantor" means Essex Partners Inc., with a business
address of 100 Corporate Woods, Rochester, New York 14623.
1.20 IMPROVEMENTS' "Improvements" means a 54,000 square foot, 101 room,
four story Hampton Inn to be constructed on the Land substantially in accordance
with the Plans and Specifications.
1.21 INDIRECT COSTS. "Indirect Costs" mean and include title insurance
premiums, survey charges, engineering fees, architectural fees, real estate
taxes during the period of construction, commitment fees and interest payable to
Lender under the Loan, premiums for insurance, appraisal fees, commitment and
other fees payable to Permanent Lender, legal fees and all other expenses which
are, in accordance with sound accounting practices, capital expenditures
relating to the Property.
1.22 LAND. "Land" means the real property described in Exhibit D attached
hereto.
1.23 [INTENTIONALLY OMITTED].
1.24 LOAN. "Loan" means the construction loan which is the subject of this
Agreement.
1.25 LOAN AMOUNT. "Loan Amount" means $4,700,000.00.
1.26 LOAN DOCUMENTS. "Loan Documents" means collectively, this Agreement,
all documents referred to in Article 2 hereof, and all other agreements,
documents and instruments now or hereafter evidencing, securing or otherwise
relating to the Loan.
1.27 [INTENTIONALLY OMITTED].
1.28 PERMANENT COMMITMENT. "Permanent Commitment" means the commitment
letter for the Permanent Loan issued by Permanent Lender to Borrower.
1.29 PERMANENT LENDER. "Permanent Lender" means GMAC Commercial Mortgage
Corporation, whose address is 8814 Westwood Center Drive, Vienna, Virginia
22182.
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<PAGE>
1.30 PERMANENT LOAN. "Permanent Loan" means the loan from Permanent Lender
to Borrower in the amount of $4,700,000.00 to finance the Property after
completion of construction of the Improvements in accordance with the Permanent
Commitment.
1.31 PERSONAL PROPERTY. "Personal Property" means materials, furnishings,
fixtures, machinery, equipment and all items of tangible and intangible personal
property now or hereafter owned by Borrower, wherever located, and either (i) to
be incorporated into the Improvements, (ii) used in connection with the
construction of the Improvements or (iii) to be used in connection with the
operation of the Land or Improvements or both.
1.32 PLANS AND SPECIFICATIONS. "Plans and Specifications" means the plans
and specifications for the Improvements prepared by Borrower's Architect and
more particularly identified on EXHIBIT E attached hereto.
1.33 PROPERTY. "Property" means the Land, Improvements and Personal
Property.
1.34 PROPERTY COSTS. "Property Costs" shall mean and include all costs that
will be incurred by Borrower in connection with the acquisition of the Land, the
construction of the Improvements, the marketing and leasing of leasable space in
the Improvements, and the operation and carrying of the Property through the
maturity date of the Loan, including without limitation all Indirect Costs.
1.35 REQUIRED EQUITY FUNDS. "Required Equity Funds" means the sums, if any,
required of Borrower by Lender, to be available to pay the difference between
Property Costs and the amount of the Loan.
1.36 REQUIRED LEASES. "Required Leases" means the leases, if any, which
Lender has specified in the Commitment must be in effect in a manner
satisfactory to Lender.
1.37 REQUIREMENTS. "Requirements" means any law, ordinance, order, rule or
regulation of any Governmental Authority relating in any way to the Property,
Borrower or Guarantor.
1.38 TAKING. "Taking" shall mean any condemnation for public use of, or
damage by reason of, the action of any Governmental Authority, or any transfer
by private sale in lieu thereof, either temporarily or permanently.
1.39 TERMINATION DATE. "Termination Date" means the earlier of December 31,
1998, or such other date as may be set forth herein which fixes the termination
of Lender's obligations to make Advances.
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<PAGE>
ARTICLE 2
LOAN DOCUMENTS
The following documents have been duly authorized, executed and delivered
to Lender by the parties thereto:
2.1 NOTE. The Promissory Note (hereinafter referred to as the "Note") from
Borrower to Lender, dated as of even date herewith, in the Loan Amount.
2.2 OPEN-END MORTGAGE AND SECURITY AGREEMENT. The Open-End Mortgage And
Security Agreement (hereinafter referred to as the "Mortgage") from Borrower in
favor of Lender, dated of even date herewith, encumbering the Property as
security for the Note and any sums in addition to the Loan Amount advanced by
Lender under the other Loan Documents, together with any assignment of revenues
and a security agreement (whether or not a part thereof) encumbering any
materials, furnishings, fixtures, machinery, equipment, or other articles of
personal property incorporated or to be incorporated in the Improvements or used
in the operation of the Property and all income, profit and revenues derived
from the Property; which Mortgage is to be recorded in the appropriate public
records on or about the date hereof
2.3 FINANCING STATEMENTS. Uniform Commercial Code, Form 1 Financing
Statement(s) (hereinafter referred to as the "Financing Statements") in favor of
Lender giving notice of a security interest; which Financing Statement(s) are to
be filed in the appropriate public records on or about the date hereof
2.4 ASSIGNMENT OF CONTRACT DOCUMENTS. The Assignment of Contract Documents
(hereinafter referred to as the "Assignment of Contract Documents") from
Borrower in favor of Lender dated of even date herewith.
2.5 ASSIGNMENT OF Leases. The Assignment of Rents and Leases (hereinafter
referred to as the "Assignment") from Borrower in favor of Lender dated of even
date herewith which is to be recorded in the appropriate public records on or
about the date hereof
2.6 GUARANTY. The Guaranty of Payment and Performance and Guaranty of
Completion (hereinafter collectively referred to as the "Guaranty") from
Guarantor in favor of Lender dated of even date herewith.
INDEMNITY AGREEMENT. The Hazardous Substances Indemnity Agreement
(hereinafter referred to as the "Indemnity Agreement") from Borrower and
Guarantor in favor of Lender dated of even date herewith.
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<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants to Lender as follows:
3.1 VALIDITY OF LOAN DOCUMENTS. That the Loan Documents are in all respects
valid and legally binding obligations, enforceable in accordance with their
respective terms, and grant to Lender a direct, valid and enforceable first
mortgage lien on and security interest in and to the Property, including any and
all Personal Property acquired by Borrower after the date of this Agreement.
3.2 TITLE TO PROPERTY. That Borrower has good clear record and marketable
fee simple absolute title to the Land, subject to no liens, security interests,
charges or encumbrances in favor of any person other than Lender, and that no
conditional sale contract, chattel mortgage, security agreement, lease,
financing statement or other title retention agreement has been or will be
executed in favor of any person other than Lender with respect to any of the
Personal Property.
3.3 ABSENCE OF CONFLICTS. That the execution and delivery of the Loan
Documents by Borrower and any Guarantor do not, and the performance and
observance by Borrower and any Guarantor of their obligations thereunder will
not, contravene or result in a breach of (a) if Borrower or any Guarantor
purports to be a limited liability company or a corporation, any provision of
Borrower's or any Guarantor's articles of organization, operating agreement or
corporate charter or by-laws, or, if Borrower or any Guarantor purports to be
partnership, any provision of Borrower's or any Guarantor's partnership
agreement or certificate, or (b) any Requirements, or (c) any decree or judgment
binding on Borrower or any Guarantor, or (d) any agreement or instrument binding
on Borrower or any Guarantor or any of their respective properties, nor will the
same result in the creation of any lien or security interest under any such
agreement or instrument.
3.4 PENDING LITIGATION. That there are no actions, suits, investigations or
proceedings pending, or, to the knowledge of Borrower, threatened against or
affecting Borrower (or any general partner of Borrower), any Guarantor or the
Property, or involving the validity or enforceability of any of the Loan
Documents or the priority of the lien thereof, or which will affect Borrower's
ability to repay the Loan, at law or in equity or before or by any Governmental
Authority.
3.5 VIOLATIONS OF REQUIREMENTS. That Borrower has no knowledge of any
violations or notices of violations of any Requirements.
3.6 COMPLIANCE WITH REQUIREMENTS. That the Plans and Specifications and
construction of the Improvements pursuant thereto and the use of the Property
contemplated thereby will comply with all Requirements.
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<PAGE>
3.7 ORGANIZATION, STATUS AND AUTHORITY.
(a) If Borrower purports to be a limited liability company or a
corporation, that (i) it is a limited liability company or a corporation
duly organized, validly existing and in good standing under the laws of the
state in which it is organized or incorporated, (ii) if required by the
laws of the state in which the Land is located, it is duly qualified to do
business and is in good standing therein, (iii) it has the power, authority
and legal right to own and operate its properties and assets, carry on the
business now being conducted and proposed to be conducted by it, and to
engage in the transactions contemplated by the Loan Documents, and (iv) the
execution and delivery of the Loan Documents to which it is a party and the
performance and observance of the provisions thereof have been duly
authorized by all necessary actions.
3.8 AVAILABILITY OF UTILITIES. That all utility services necessary and
sufficient for the construction, Development and operation of the Property for
its intended purposes are presently available to the boundaries of the Land
through dedicated public rights of way or through perpetual private easements,
approved by Lender, with respect to which the Mortgage creates a valid, binding
and enforceable first lien, including, but not limited to, water supply, storm
and sanitary sewer, gas, electric and telephone facilities, and drainage.
3.9 CONDITION OF PROPERTY. That neither the Property nor any portion
thereof is now damaged or injured as result of any fire, explosion, accident,
flood or other casualty or has been the subject of any Taking, and to the
knowledge of Borrower, no Taking is pending or contemplated.
3.10 BROKERAGE COMMISSIONS. That any brokerage commissions due in
connection with the transactions contemplated hereby have been paid in full and
that any such commissions coming due in the future will be promptly paid by
Borrower. Borrower agrees to and shall indemnify Lender from any liability,
claims or losses arising by reason of any such brokerage commissions. This
provision shall survive the repayment of the Loan and shall continue in full
force and effect so long as the possibility of such liability, claims or losses
exists.
3.11 FINANCIAL STATEMENTS. That the financial statements of Borrower and
any Guarantor previously delivered to Lender are true and correct in all
material respects, have been prepared in accordance with generally accepted
accounting principles consistently applied, and fairly present the respective
financial conditions of Borrower and any Guarantor as of the respective dates
thereof and the results of their operations for the periods covered thereby;
that no material adverse change has occurred in the assets, liabilities, or
financial conditions reflected therein since the respective dates thereof-, and
that no additional borrowings have been made by Borrower or any Guarantor since
the date thereof other than the borrowing contemplated hereby.
3.12 TAXES. That all federal, state and other tax returns of Borrower and
any Guarantor required by law to be filed have been filed, that all federal,
state and other taxes, assessments and other governmental charges upon Borrower
and any Guarantor or their respective properties which are due and payable have
been paid, and that Borrower and any Guarantor have set aside on their
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books provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods for which such returns have been filed.
3.13 OTHER CONTRACTS. That Borrower has made no contract or arrangement of
any kind or type whatsoever (whether oral or written, formal or informal), the
performance of which by the other party thereto could give RISE to a lien or
encumbrance on the Property, except for contracts (all of which have been
disclosed in writing to Lender).
3.14 CONSTRUCTION CONTRACT. That (i) the Construction Contract is in full
force and effect; (ii) both Borrower and Contractor are in full compliance with
their respective obligations under the Construction Contract; (iii) the work to
be performed by Contractor under the Construction Contract is the work called
for by the Plans and Specifications and all work required to complete the
Improvements in accordance with the Plans and Specifications is provided for
under the Construction Contract; and (iv) all work on the Improvements shall be
completed substantially in accordance with the Plans and Specifications in a
good and workmanlike manner and shall be free of any defects.
3.15 ACCESS. That the rights of way for all roads necessary for the full
utilization of the Improvements for their intended purposes have either been
acquired by the Borrower, the appropriate Governmental Authority or have been
dedicated to public use and accepted by such Governmental Authority, and all
such roads shall have been completed, or all necessary steps shall have been
taken by Borrower and such Governmental Authority to assure the complete
construction and installation thereof prior to the date upon which access to the
Property via such roads will be necessary. Allcurb cuts, driveway permits and
traffic signals shown on the Plans and Specifications or otherwise necessary for
access to the Property are existing or have been fully approved by the
appropriate Governmental Authority.
3.16 NO DEFAULT. That no Event of Default exists and no event which but for
the passage of time, the giving of notice or both would constitute an Event of
Default has occurred.
3.17 ARCHITECT'S CONTRACT. That (i) the Architect's Contract is in full
force and effect; and (ii) both Borrower and Borrower's Architect are in full
compliance with their respective obligations under the Architect's Contract.
Borrower shall from time to time, upon request by Lender, cause Borrower's
Architect to provide Lender with reports in regard to the status of construction
of the Improvements, in such form and detail as reasonably requested by Lender.
3.18 PLANS AND SPECIFICATIONS. That Borrower has furnished Lender true and
complete sets of the Plans and Specifications which comply with all
Requirements, all Governmental Approvals, and all restrictions, covenants and
easements affecting the Property, and which have been approved by the
Contractor, Borrower's Architect, Permanent Lender, and such Governmental
Authority as is required for construction of the Improvements.
3.19 GOVERNMENTAL APPROVALS. That Borrower has obtained all Governmental
Approvals from, and has given all such notices to, and has taken all such other
actions with respect to such
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Governmental Authority as may be required under applicable Requirements for the
construction of the Improvements.
3.20 CONSTRUCTION BUDGET. That the Construction Budget accurately reflects
all Property Costs of Construction.
3.21 FEASIBILITY. That each of the Construction Schedule and the
Disbursement Schedule is realistic and feasible, and is accurate to date.
3.22 EFFECT OF DRAW REQUEST. That each Draw Request submitted to Lender as
provided in Article 6 hereof shall constitute an affirmation that the
representations and warranties contained in Article 3 of this Agreement (other
than the representations made in the last clause of Section 3.11 as it relates
to the indebtedness of any guarantor) and in the other Loan Documents remain
true and correct as of the date thereof, and unless Lender is notified to the
contrary, in writing, prior to the disbursement of the requested Advance or any
portion thereof, shall constitute an affirmation that the same remain true and
correct on the date of such disbursement.
ARTICLE 4
COVENANTS OF BORROWER
Borrower hereby covenants and agrees with Lender as follows:
4.1 COMMITMENTS. To permit no default under the terms of the Commitment.
4.2 CONSTRUCTION CONTRACT. (i) To permit no default under the terms of the
Construction Contract, (ii) to waive none of the obligations of Contractor
thereunder, (iii) to do no act which would relieve Contractor from its
obligations to construct the Improvements according to the Plans and
Specifications, and (iv) to make no amendments to or change orders under the
Construction Contract without the prior approval of Lender; provided, however,
that the Borrower shall be permitted to make a proposed change order without the
prior approval of the Lender if (a) any such change order results in a reduction
in the cost of the Improvements, or (b) any such change order is for an increase
in the cost of the Improvements in an amount less than $25,000.00 unless the
aggregate amount of all change orders that increase the cost of the Improvements
(inclusive of the proposed change order) between the date of this Agreement and
the date of the proposed change order is greater than $100,000.00.
4.3 ARCHITECT'S CONTRACT. (i) To permit no default under the terms of the
Architect's Contract, (fi) to waive none of the obligations of Borrower's
Architect thereunder, (iii) to do no act which would relieve Borrower's
Architect from its obligations under the Architect's Contract, and (iv) to make
no amendments to the Architect's Contract without the prior approval of Lender;
provided, however, that the Borrower shall be permitted to make a proposed
change order without the prior approval of the Lender if (a) any such change
order results in a reduction in the cost of the Improvements, or (b) any such
change order is for an increase in the cost of the Improvements in
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an amount less than $25,000.00 unless the aggregate amount of all change orders
that increase the cost of the Improvements (inclusive of the proposed change
order) between the date of this Agreement and the date of the proposed change
order is greater than $100,000.00.
4.4 INSURANCE. To obtain insurance or evidence of insurance as Lender may
reasonably require, including, but not limited to, the following:
(a) TITLE INSURANCE. A mortgagee title insurance policy (the "Title
Insurance Policy") in an amount, and issued by a title insurance company
(the "Title Insurer") and through a title agent as shall be approved by
Lender, insuring a valid first lien upon and security interest in and to
the Property by virtue of the Mortgage, with such reinsurance or
co-insurance agreements as may be required by Lender. The Title Insurance
Policy shall contain no exceptions other than those specifically approved
in writing by Lender, contain a pending disbursements clause or endorsement
and such other endorsements as Lender may reasonably require, and such
affirmative insurance as Lender may reasonably require. The Title Insurance
Policy, together with evidence of payment of premiums thereon, shall be
delivered to Lender on or before the date of this Agreement.
(b) INSURANCE REQUIRED BY MORTGAGE. Such insurance as may be required
by the Mortgage. If any hazard insurance required by the Mortgage is
obtained as to all or part of the Property before completion of
construction then such policy shall contain an endorsement recognizing that
construction is in progress and agreeing that such shall not adversely
affect the coverage or be asserted as a defense on any claim under such
policy.
(c) PROFESSIONAL LIABILITY INSURANCE. Evidence or certificates from
insurance companies indicating that Borrower's Architect, the Contractor
and all other architects, engineers, contractors and subcontractors
responsible for the design or construction of the Improvements are covered
by professional liability insurance to the satisfaction of Lender; such
evidence or certificates to be delivered to Lender on or before the date of
this Agreement.
4.5 APPLICATION OF LOAN PROCEEDS. To use the proceeds of the Loan solely
for the purpose of paying for the cost of the construction of the Improvements
in accordance with the terms of this Agreement.
4.6 PROPERTY COSTS AND EXPENSES. To pay all Property Costs, regardless of
the amount, and to pay all costs and expenses of Lender with respect to the
financing, acquisition and construction of the Property, including but not
limited to, appraisal fees, inspection fees, surveying costs, legal
fees(including legal fees incurred by Lender subsequent to the closing of the
Loan in connection with the disbursement, administration, collection or transfer
of the Loan), advances, recording expenses, surveys, intangible taxes, expenses
of foreclosure (including attorney's fees) and similar items.
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4.7 COMMENCEMENT AND COMPLETION OF CONSTRUCTION. To diligently pursue
construction to completion prior to the Completion Date substantially in
accordance with the Plans and Specifications, in full compliance with all
restrictions, covenants and easements affecting the Property, all Requirements,
and all Governmental Approvals, and with all terms and conditions of the Loan
Documents without deviation from the Plans and Specifications unless with the
prior approval of Lender or otherwise permitted by this Agreement; to pay all
sums and to perform such duties as may be necessary to complete such
construction of the Improvements in accordance with the Plans and Specifications
and in full compliance with all restrictions, covenants and easements affecting
the Property, all Requirements and all Governmental Approvals, and with all
terms and conditions of the Loan Documents, all of which shall be accomplished
on or before the Completion Date, free from any liens, claims or assessments
(actual or contingent) asserted against the Property for any material, labor or
other items furnished in connection therewith. Evidence of satisfactory
compliance with the foregoing shall be furnished by Borrower to Lender on or
before the Completion Date.
4.8 RIGHT OF LENDER TO INSPECT PROPERTY. To permit Lender and its
representatives and agents to enter upon the Property and to inspect the
Improvements and all materials to be used in the construction thereof upon
reasonable notice and to cooperate and cause Contractor to cooperate with Lender
and its representatives and agents during such inspections (including making
available to Lender working copies of the Plans and Specifications together with
all related supplementary materials); provided, however, that this provision
shall not be deemed to impose upon Lender any obligation to undertake such
inspections.
4.9 CORRECTION OF DEFECTS. Unless Borrower demonstrates to Lender that such
corrective work is inappropriate or inconsistent with the Plans and
Specifications, to promptly correct all defects in the Improvements or any
material departure from the Plans and Specifications not previously approved by
Lender or otherwise permitted under this Agreement. Borrower agrees that the
advance of any proceeds of the Loan whether before or after such defects or
departures from the Plans and Specifications are discovered by, or brought to
the attention, of Lender, shall not constitute a waiver of Lender's right to
require compliance with this covenant.
4.10 SIGN REGARDING CONSTRUCTION FINANCING. At Lender's option, to erect
promptly and maintain on a suitable site on the Land a sign indicating that
construction financing is being provided by Lender, all to the satisfaction of
Lender; and to prevent the destruction or removal of said sign without the prior
approval of Lender.
4.11 APPROVAL OF CHANGE ORDERS. To permit no deviations from the Plans and
Specifications during construction without the prior approval of Lender and
Permanent Lender, except as permitted in Section 4.2 of this Agreement, or in
the Permanent Commitment, or in the Tri-Party Agreement.
4.12 [INTENTIONALLY OMITTED].
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4.13 BOOKS AND RECORDS. To keep and maintain complete proper and accurate
books, records and accounts reflecting all items of income and expense of
Borrower in connection with the Property and the construction of the
Improvements and the results of the operation thereof, and, upon the reasonable
request of Lender, to make such books, records and accounts immediately
available to Lender for inspection or independent audit.
4.14 FINANCIAL STATEMENTS AND OTHER INFORMATION. To furnish to Lender such
financial statements and information as Borrower has agreed to provide elsewhere
in the Loan Documents.
4.15 CONSTRUCTION INSPECTOR. To permit Lender to retain the Construction
Inspector at the cost of Borrower to perform the following services on behalf of
Lender:
(a) To review and advise Lender whether, in the opinion of the
Construction Inspector, the Plans and Specifications are satisfactory;
(b) To review Draw Requests and change orders;
(c) To make periodic inspections (approximately at the date of each
Draw Request) for the purpose of assuring that construction of the
Improvements to date is substantially in accordance with the Plans and
Specifications and to approve Borrower's then current Draw Request as being
consistent with Borrower's obligations under this Agreement, including
INTER ALIA, an opinion as to Borrower's continued compliance with the
provisions of Section 6.1 (g) (4) hereof.
The fees of the Construction Inspector shall be paid by Borrower forthwith
upon billing therefor and expenses incurred by Lender on account thereof shall
be reimbursed to Lender forthwith upon request therefor, but neither Lender nor
the Construction Inspector shall have any liability to Borrower on account of
(i) the services performed by the Construction Inspector, (ii) any neglect or
failure on the part of the Construction Inspector to properly perform its
services, or (iii) any approval by the Construction Inspector of construction of
the Improvements. Neither Lender nor the Construction Inspector assumes any
obligation to Borrower or any other person concerning the quality of
construction of the Improvements or the absence therefrom of defects.
4.16 SOIL TESTS. To provide promptly to Lender at Borrower's expense such
soil tests and environmental assessments of the Land as Lender may require from
time to time.
4.17 [INTENTIONALLY OMITTED].
4.18 INSUFFICIENCY OF LOAN PROCEEDS. To deposit funds with Lender as
follows: If at any time or from time to time during the terms of this Agreement,
in Lender's judgment and opinion, the remaining undisbursed portion of the Loan,
together with the Required Equity Funds, is or will be insufficient to fully
complete the Improvements substantially in accordance with the Plans and
Specifications, to operate and carry the Property after completion of the
Improvements until payment in full of the Loan by Borrower, to pay all other
Property Costs, to pay all interest accrued
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or to accrue on the Loan during the term of the Loan from and after the date
hereof, and to pay all other sums due or to become due under the Loan Documents,
regardless of how such condition may be caused, Borrower shall, within seven (7)
days after written notice thereof from Lender, deposit with Lender such sums of
money in cash as Lender may require, in an amount sufficient to remedy such
condition, and sufficient to pay any liens for services and materials alleged to
be due and payable at that time in connection with the Improvements, and, at
Lender's option; no further Advances of the Loan shall be made by Lender until
the provisions of this Paragraph have been fully complied with. All such
deposited sums shall stand as additional security for Borrower's obligations
under this Agreement and shall be disbursed by Lender in the same manner as
Advances under this Agreement before any further Advances of the Loan proceeds
shall be made. Lender shall have no obligation to pay Borrower any interest with
respect to such deposited funds.
4.19 ADDITIONAL DOCUMENTS. To perform hereunder as follows:
(a) REGARDING CONSTRUCTION. To furnish to Lender all instruments,
documents, boundary surveys, footing or foundation surveys, certificates,
plans and specifications, appraisals, title and other insurance, reports
and agreements and each and every other document and instrument required to
be furnished by, the terms of the Commitment or this Agreement or the other
Loan Documents, all at Borrower's expense.
(b) REGARDING PRESERVATION OF SECURITY. To execute and deliver to
Lender such documents, instrument, assignments and other writings, and to
do such other acts necessary or desirable, to preserve and protect the
collateral at any time securing or intended to secure the Loan, as Lender
may require.
(c) REGARDING THIS AGREEMENT. To do and execute all and such further
lawful and reasonable acts, conveyances and assurances in the law for the
better and more effective carrying out of the intents and purposes of this
Agreement as Lender shall require from time to time.
4.20 FINANCING PUBLICITY. To permit Lender to obtain publicity in
connection with the construction of the Improvements through press releases and
participation in such events as ground breaking and opening ceremonies; and to
give Lender ample advance notice of such events and to give Lender as much
assistance as possible in connection with obtaining such publicity as Lender may
request.
4.21 EASEMENTS AND RESTRICTIONS. To submit to Lender for Lender's approval
prior to the execution thereof by Borrower all proposed easements, restrictions,
covenants, permits, licenses, and other instruments which would or might affect
the title to the Property, accompanied by a survey showing the exact proposed
location thereof and such other information as Lender shall reasonably require.
Borrower shall not subject the Property or any part thereof to any easement,
restriction or covenant (including any restriction or exclusive use provision in
any lease or other occupancy agreement) without the prior approval of Lender,
which shall not be unreasonably withheld.
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4.22 COMPLIANCE WITH REQUIREMENTS. To comply promptly with all requirements
and governmental approvals and to furnish Lender, on demand, with independent
evidence of such compliance.
4.23 LEASES. To enter into no leases or occupancy agreements affecting the
Property without the prior approval of Lender and Permanent Lender. Borrower
shall deliver to Lender executed counterparts of all leases and occupancy
agreements affecting the Property whether executed before or after the date of
this Agreement, and shall not amend any provision thereof or waive any
obligations of tenants under any leases or occupancy agreements affecting the
Property without the prior approval of Lender.
4.24 COMPLIANCE WITH RESTRICTIONS, COVENANTS AND EASEMENTS. To comply with
all restrictions, covenants and easements affecting the Property.
4.25 LABORERS, SUBCONTRACTORS AND MATERIALMEN. To furnish to Lender, upon
request at anytime, and from time to time, affidavits listing all laborers,
subcontractors, materialmen, and any other parties who might or could claim
statutory or common law liens and are furnishing or have furnished labor or
material to the Property or any portion thereof, together with affidavits, or
other evidence satisfactory to Lender, showing that such parties have been paid
all amounts then due for labor and materials furnished to the Property. In
addition, Borrower will notify Lender immediately, and in writing, if Borrower
receives any notice, written or oral, from any laborer, subcontractor or
materialmen to the effect that said laborer, subcontractor or materialmen has
not been paid when due for any labor or materials furnished in connection with
the construction of the Improvements. Borrower will also furnish to Lender, at
any time and from time to time upon demand by Lender, lien waivers bearing a
then current date from Contractor and such subcontractors or materialmen as
Lender may designate.
4.26 FURTHER ASSURANCE OF TITLE. To further assure title as follows: If at
any time Lender or Lender's counsel has reason to believe that any Advance is
not secured or will or may not be secured by the Mortgage as a first lien or
security interest on the Property, then Borrower shall, within ten (10) days
after written notice from Lender, do all things and matters necessary, to assure
to the satisfaction of Lender and Lender's counsel that any Advance previously
made hereunder or to be made hereunder is secured or will be secured by the
Mortgage as a first lien or first security interest on the Property, and Lender,
at its option, may decline to make further Advances hereunder until lender has
received such assurance.
4.27 [INTENTIONALLY OMITTED].
4.28 COMPLIANCE WITH PERMANENT COMMITMENT. (i) To permit no default under
the terms of the Permanent Commitment, (ii) to waive none of the obligations of
the Permanent Lender thereunder, (iii) to do no act which would relieve
Permanent Lender from its obligations to fund the Permanent Loan or entitle
Permanent Lender to cancel or terminate the Permanent Commitment, (iv) to take
all actions necessary or appropriate in order to close on the Permanent Loan
prior to the expiration of the Permanent Commitment, (v) to complete
construction of the Improvements, and
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each and every part thereof, and to satisfy all conditions to closing of the
Permanent Loan not later than sixty (60) days prior to the expiration of the
Permanent Commitment, (vi) to make no amendments to the Permanent Commitment
without the prior approval of Lender, (vii) to the maximum extent permitted by
law and under the terms of the Permanent Commitment, to assign to Lender, in
such form as Lender may reasonably require, Borrower's right to receive proceeds
of the Permanent Loan (to the extent of Borrower's indebtedness to Lender),
(viii) to direct Permanent Lender to disburse the proceeds of the Permanent Loan
(to the extent of Borrower's indebtedness to Lender) directly to Lender at the
time of closing of the Permanent Loan, and (ix) to provide Lender with copies of
any communications given to or received from Permanent Lender.
4.29 NO TRANSFERS OR ENCUMBRANCES. To cause or permit no sale, conveyance,
transfer, assignment or encumbering of the Property or any interest therein
without the prior approval of Lender; provided, however, that transfers of
limited partnership interests in Essex Hospitality Associates IV L.P. may be
made without the prior approval of the Lender.
ARTICLE 5
AGREEMENT TO LEND
Subject to the terms and conditions set forth in this Agreement, Lender
agrees to make Advances of the Loan to Borrower from time to time during the
period from the date hereof to the Termination Date in an aggregate principal
amount of up to and including the Loan Amount to pay Property Costs actually
incurred in connection with the acquisition of the Land and construction of the
Improvements (including Indirect Costs) if and to the extent such Property Costs
are reflected in the Construction Budget as being funded by Lender.
5.1 NOTE. The obligation of Borrower to pay the principal amount of all
Advances made by Lender to Borrower under this Agreement, plus all interest
accrued thereon at the rate or rates set forth in the Note, shall be evidenced
by the Note.
5.2 ADVANCES. The Construction Budget reflects, by category and line items,
the purposes and the amounts for which funds to be advanced by Lender under this
Agreement are to be used. Except to the extent that reallocations are permitted
under, or approved by the Lender pursuant to Section 5.4, Lender shall not be
required to disburse for any category or line item more than the amount
specified therefor in the Construction Budget.
5.3 COST OVERRUNS. If Borrower becomes aware of any change in Property
Costs which will increase a category or line item of Property Costs reflected on
the Construction Budget (as the Construction Budget is revised from time to time
and approved by Lender), Borrower shall immediately notify Lender in writing and
promptly submit to Lender for its approval a revised Construction Budget. No
further Advances need be made by Lender unless and until the revised
Construction Budget so submitted by Borrower is approved by Lender, and Lender
reserves the right to approve or disapprove any revised Construction Budget
which approval will not be unreasonably withheld. If Lender approves the revised
Construction Budget, and such revised Construction
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Budget reflects Project Costs to be funded by Lender in excess of the Loan
Amount, the amount of such excess shall be added to the Loan Amount, and
Borrower's obligation to repay the same, together with interest thereon at the
rate or rates provided in the Note, shall be deemed to be evidenced by the Note
and secured by the Loan Documents.
5.4 CONTINGENCY RESERVE. Any amount allocated as Contingency Reserve in the
Construction Budget is not intended to be disbursed and will only be disbursed
upon the prior approval of Lender, which approval can be withheld for any reason
or for no reason; provided, however, that the Borrower may request that funds be
reallocated from the Contingency Reserve to a category or line item for which
funds are insufficient, and the Lender shall authorize such reallocation for
Property Costs if it determines in its reasonable discretion (taking into
account the extent of completion of the Improvements) that, after such
reallocation, the aggregate amount of undisbursed proceeds of the Building Loan
and the Borrower's remaining Required Equity Funds will be sufficient to pay in
full all Property Costs required to complete construction of the Improvements.
The disbursement of a portion of the Contingency Reserve shall in no way
prejudice Lender from withholding disbursement of any further portion of the
Contingency Reserve.
5.5 STORED MATERIALS. Lender shall disburse funds for any materials,
furnishings, fixtures, machinery or equipment not yet incorporated into Land or
Improvements (the "Stored Materials"), contingent upon Lender receiving
satisfactory evidence that:
(a) The Stored Materials are components in a form ready for
incorporation into the Improvements;
(b) The Stored Materials are stored at the Land, in a bonded warehouse,
at a site controlled by Borrower, or at such other site as Lender shall
approve, and are protected against theft and damage;
(c) The Stored Materials have been paid for in full or will be paid for
with the funds to be disbursed and all lien rights or claims of the
supplier have been released or will be released upon payment with disbursed
funds;
(d) Lender has or will have upon payment with disbursed funds a
perfected, first priority security interest in the Stored Materials; and
(e) The Stored Materials are insured for an amount equal to their
replacement costs.
5.6 AMOUNT OF ADVANCES. In no event shall any Advance exceed the full
amount of Indirect Costs approved by Lender and theretofore paid or to be paid
with the proceeds of such Advance plus ninety (90%) percent of all costs for
construction of Improvements approved by Lender and incurred by Borrower through
the date of the Draw Request for such Advance less the aggregate amount of any
Advances previously made by Lender. It is further understood that the retainage
described above is intended to provide a contingency fund protecting Lender
against
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failure of Borrower or any Guarantor to fulfill any obligations under the Loan
Documents, and that Lender may charge amounts against such retainage in the
event Lender is required or elects to expend its own funds to cure any Default
or Event of Default.
Anything herein to the contrary notwithstanding, it is understood, stated
and agreed that at such time as the Improvements are fifty percent (50%)
complete, that all Advance amounts shall be made without any retainage by
Lender.
5.7 QUALITY OF WORK. No Advance shall be due unless all work done at the
date the Draw Request for such Advance is submitted is done in a good and
workmanlike manner and without defects, as confirmed by the report of the
Construction Inspector, but Lender may disburse all or part of any Advance
before the sum shall become due if Lender believes it advisable to do so, and
all such Advances or parts thereof shall be deemed to have been made pursuant to
this Agreement.
5.8 REQUIRED EQUITY FUNDS. Required Equity Funds shall be used by Borrower
for Property Costs before any Advances of the Loan proceeds in excess of
$100,000.00 shall be made. Required Equity Funds will be disbursed by Borrower
and not deposited with or disbursed by Lender.
ARTICLE 6
CONDITIONS PRECEDENT TO
DISBURSEMENT OF LOAN PROCEEDS
6.1 CONDITIONS OF INITIAL Advance. The obligation of Lender to make the
initial Advance, which shall be limited to $100,000.00 for soft cost items only,
shall be subject to the following conditions precedent:
(a) COMMITMENT. All items required by the Commitment or letter of
instructions from Lender to Borrower regarding the Loan shall have been
delivered to the proper parties as required therein, and all conditions set
forth in the Commitment or such letter of instructions shall have been
satisfied.
(b) LOAN DOCUMENTS. The Loan Documents, in form and substance
satisfactory to Lender, shall have been duly executed and delivered by the
parties thereto and shall be in full force and effect, and Lender shall
have received the original or a fully executed counterpart thereof All Loan
Documents to be filed or recorded in the public records shall have been so
filed or recorded in the appropriate public records.
(c) CONSTRUCTION DOCUMENTS. The Architect's Contract and Construction
Contract, in form and substance satisfactory to Lender, shall have been
duly executed and delivered by the parties thereto, shall be in full force
and effect, and Lender shall have received a certified or a fully executed
counterpart thereof borrower's Architect and the Contractor shall have duly
executed and delivered to Lender a consent to the assignment of
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the Architect's Contract and Construction Contract, in form and substance
satisfactory to Lender, and Lender shall have received the original or a
fully executed counterpart thereof.
(d) SUBCONTRACTS. Borrower shall have delivered to Lender, and Lender
shall have approved, a list of all subcontractors and materialmen who have
been or, to the extent identified by Borrower, will be supplying labor or
materials for the Property, a copy of the standard form of subcontract to
be used by the Contractor, and correct and complete photocopies of all
executed subcontracts and contracts.
(e) OTHER CONTRACTS. Borrower shall have delivered to Lender correct
and complete photocopies of all other executed contracts with contractors,
engineers or consultants for the Property, and of all development,
management, brokerage, sales or leasing agreements for the Property.
(f) REQUIRED LEASES. The Required Leases, if any, in form and substance
satisfactory to Lender, shall have been duly executed by the parties
thereto and shall be in full force and effect, and Lender shall have
received a certified or fully executed counterpart thereof Lender, Borrower
and each tenant under a Required Lease shall have duly executed an Estoppel
Certificate and Non-Disturbance, Attornment and Subordination Agreement, in
form and substance satisfactory to Lender, and Lender shall have received
the original or a fully executed counterpart thereof.
(g) DELIVERIES. The following items or documents shall have been
delivered to Lender:
(1) PLANS AND SPECIFICATIONS. One complete set of the Plans and
Specifications and approval thereof by any necessary Governmental
Authority, with a certification from Borrower's Architect that the
Improvements to be constructed comply with all Requirements and
Governmental Approvals and that the Construction Contract
satisfactorily provides for the construction of the Improvements.
(2) TITLE INSURANCE POLICY. A paid Title Insurance Policy or
report in all respects satisfactory to Lender and its counsel.
(3) OTHER INSURANCE. Policies (or, if permitted, certificates or
other evidence of) all insurance required by this Agreement or any
other Loan Document.
(4) EVIDENCE OF SUFFICIENCY OF FUNDS. Evidence satisfactory to
Lender that the proceeds of the Loan, together with Required Equity
Funds, will be sufficient to cover all Property Costs reasonably
anticipated to be incurred, to satisfy the requirements of the Required
Leases and Permanent Commitment and to satisfy the obligations of
Borrower to Lender under this Agreement.
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(5) EVIDENCE OF ACCESS, AVAILABILITY OF UTILITIES, GOVERNMENTAL
APPROVALS. Evidence satisfactory to Lender as to:
(A) the methods of access to and egress from the Property,
and nearby or adjoining public ways, meeting the reasonable
requirements of property of the type contemplated to be completed
under this Agreement and the status of completion of any required
improvements to such access;
(B) the availability of storm and sanitary sewer facilities
meeting the reasonable requirements of the Property;
(C) the availability of all other required utilities, in
location and capacity sufficient to meet the reasonable needs of
the Property; and
(D) the securing of all Governmental Approvals from the
applicable Governmental Authority which are required under
applicable Requirements for the construction of the Improvements,
together with copies of all such Governmental Approvals.
(6) ENVIRONMENTAL REPORT. An environmental assessment report or
reports of one or more qualified environmental engineering or similar
inspection firms approved by Lender in form, scope and substance
satisfactory to Lender, which report or reports shall indicate a
condition of the Land in all respects satisfactory to Lender in its
sole discretion and upon which report or reports Lender is expressly
entitled to rely.
(7) SOIL REPORT. A soil report for the Land prepared by a soil
engineer approved by Lender in form and substance satisfactory to
Lender, containing recommendations for the design of foundations, paved
areas and underground utilities.
(8) SURVEY. A survey prepared in accordance with Lender's survey
requirements, certified by a land surveyor registered as such in the
state in which the Land is located, which survey shall be in form and
substance satisfactory to Lender.
(9) DRAW REQUEST. A Draw Request complying with the provisions of
this Agreement.
(10) GMAC DOCUMENTS. Lender shall have received an executed
application letter and a "comfort letter" from the Permanent Lender
evidencing the Permanent Commitment, or the Permanent Commitment.
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(h) LEGAL OPINIONS. Lender shall have received opinions in form and
substance satisfactory to Lender and Lender's counsel from counsel
satisfactory to Lender as to such matters as Lender shall reasonably
request.
(i) CERTIFICATION REGARDING CHATTELS. Lender shall have received a
certification from the Title Insurer or counsel satisfactory to Lender
(which shall be updated from time to time at Borrower's expense upon
request by Lender) that a search of the public records disclosed no
conditional sales contracts, chattel mortgages, leases of personality,
financing statements or title retention agreements which affect the
Property.
(j) NOTICES. All notices required by any Governmental Authority or by
any applicable Requirement to be filed prior to commencement of
construction of the Improvements shall have been filed.
(k) APPRAISAL. Any appraisal requirements set forth in the Commitment
shall have been satisfied.
(1) PERFORMANCE; NO DEFAULT. Borrower shall have performed and complied
with all terms and conditions herein required to be performed or complied
with by it at or prior to the date of the initial Advance, and on the date
of the initial Advance, there shall exist no Default or Event of Default.
(m) REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Borrower and any Guarantor in the Loan Documents or otherwise made
by or on behalf of Borrower or any Guarantor in connection therewith or
after the date thereof shall have been true and correct in all material
respects on the date on which made and shall also be true and correct in
all material respects on the date of the initial Advance.
(n) OTHER DOCUMENTS. Such other documents, opinions and certificates as
Lender or its counsel may reasonably require.
(o) PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be satisfactory to Lender and Lender's counsel in form and substance,
and Lender shall have received all information and such counterpart
originals on certified copies of such documents and such other
certificates, opinions or documents as Lender and Lender's counsel may
reasonably require.
6.2 CONDITIONS OF SUBSEQUENT ADVANCES. The obligation of Lender to make any
Advance after the initial Advance shall be subject to the following conditions
precedent:
(a) PRIOR CONDITIONS SATISFIED. All conditions precedent to the initial
Advance and any prior Advance shall continue to be satisfied as of the date
of such subsequent Advance.
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(b) PERFORMANCE; NO DEFAULT. Borrower shall have performed and complied
with all terms and conditions herein required to be performed or complied
with by it at or prior to the date of such advance, and on the date of such
Advance there shall exist no Default or Event of Default.
(c) REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Borrower and any Guarantor in the Loan Documents or otherwise made
by or on behalf of Borrower or any Guarantor in connection therewith after
the date thereof shall have been true and correct in all material respects
on the date on which made and shall also be true and correct in all
material respects on the date of such Advance.
(d) NO DAMAGE. The Improvements shall not have been injured or damaged
by fire, explosion, accident flood or other casualty, unless Lender shall
have received insurance proceeds sufficient in the judgment of Lender to
effect the satisfactory restoration of the Improvements and to permit the
completion thereof prior to the Completion Date.
(e) RECEIPT BY LENDER. Lender shall have received:
(1) DRAW REQUEST. A Draw Request complying with the requirements
hereof.
(2) ENDORSEMENT TO TITLE INSURANCE POLICY. A "run down"
endorsement to the Title Insurance Policy or report indicating no
change in the state of title and containing no survey exceptions not
approved by Lender, which endorsement shall, expressly or by virtue of
a proper "pending disbursements" clause or endorsement in the policy,
increase the coverage of the policy to the aggregate amount of all
proceeds of the Loan advanced on or before the effective date of such
endorsement.
(3) CERTIFICATES. Certificates from Borrower, Borrower's Architect
and the Construction Inspector to the effect that in their opinion,
based upon on-site observations and submissions by the Contractor, the
construction of the Improvements to the date thereof was performed in a
good and workmanlike manner and substantially in accordance with the
Plans and Specifications, stating the estimated total cost of
construction of the Improvements, stating the percentage of the
in-place construction of the Improvements and stating that the
remaining non-disbursed portion of the Loan allocated for such purpose
is adequate, together with such Required Equity Funds to complete the
construction of the Improvements.
Anything herein to the contrary notwithstanding, the Certificates
from the Borrower's Architect will be required at the following times:
(a) at the time of every other monthly Loan Advance; (b) at the time of
all change orders in excess of $25,000.00; and, (c) at the time of the
final Loan Advance.
(4) APPROVAL BY PERMANENT LENDER. If Lender shall have reasonable
cause to doubt such compliance as set forth in the foregoing
certificates, then, at the option
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of Lender, Lender shall require inspection of work in place and
approval of such work by Permanent Lender as being in compliance with
the terms of the Permanent Commitment.
(5) CONTRACTS. Evidence that one hundred percent (100%) of the
cost of the remaining construction work is covered by firm contracts or
subcontracts, or orders for the supplying of materials, with
contractors, subcontractors, materialmen or suppliers satisfactory to
Lender.
(6) PERMANENT COMMITMENT. Delivery of a copy of the fully executed
Permanent Commitment.
(7) FRANCHISE AGREEMENT. Delivery of an amended Franchise
Agreement between Promus Hotels, Inc. and Essex Partners, Inc.
reflecting a construction completion date of no earlier than December,
1998 and approval to build 101 guest rooms, which Franchise Agreement
shall be assigned to Lender.
(8) PERMANENT LENDER APPROVALS. Evidence satisfactory to Lender
that Permanent Lender has approved and acknowledged satisfaction with
the following:
(A) the survey showing the Property, subject to required
updating to show the as-built location of the Improvements upon
construction thereof,
(B) the Title Insurance Policy or report and all exceptions
therein, subject to required updating or issuance of a new policy
as and when the Permanent Loan is closed;
(9) TRI-PARTY AGREEMENT. Lender, Borrower and Permanent Lender
shall have executed a tri-party agreement (the "Tri-Party Agreement"),
satisfactory to Lender, providing for the closing of the Permanent
Loan, substantially in the form of Exhibit G.
(f) OTHER DOCUMENTS. Such other documents, opinions and certificates as
Lender or its counsel may reasonably require.
6.3 CONDITIONS OF FINAL ADVANCE. In addition to the conditions set forth in
Paragraph 6.2 above, Lender's obligation to advance sums retained pursuant to
this Agreement shall be subject to receipt by Lender of the following:
(a) APPROVAL OF IMPROVEMENTS. Evidence of the approval by all
appropriate Governmental Authority of the Improvements in their entirety
for permanent occupancy to the extent any such approval is or will be a
condition of lawful use and occupancy of the Improvements, and evidence of
approval by all appropriate Governmental Authority of the contemplated uses
thereof.
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<PAGE>
(b) APPROVAL BY CONSTRUCTION INSPECTOR. Notification from the
Construction Inspector to the effect that the Improvements have been
completed in a good and workmanlike manner substantially in accordance with
the Plans and Specifications.
(c) FINAL SURVEY. A final survey acceptable to Lender showing the
as-built location of the completed Improvements and evidence that Permanent
Lender HAS approved such survey.
(d) [INTENTIONALLY OMITTED].
(e) INSPECTION BY PERMANENT UNDER. Evidence satisfactory to Lender that
any and all final inspection requirements of the Permanent Commitment have
been satisfied.
(f) CERTIFICATE OF BORROWER'S ARCHITECT. Certificate of Borrower's
Architect that the Improvements have been completed substantially in
accordance with the Plans and Specifications and that the Improvements
comply with all applicable Requirements and Governmental Approvals and are
in all respects (except for work to be performed by tenants) ready for
occupancy.
(g) PAYMENT OF COSTS. Evidence satisfactory to Lender that all sums due
in connection with the construction of the Improvements have been paid in
full (or will be paid out of the funds requested to be advanced) and that
no party claims or has a right to claim any statutory or common law firm
arising out of the construction of the Improvements or the supplying of
labor, material, and/or services in connection therewith.
ARTICLE 7
METHOD OF DISBURSEMENT OF LOAN PROCEEDS
Lender agrees to make Advances in accordance with the Construction Budget
and subject to the following procedures.
7.1 DRAW REQUEST TO BE SUBMITTED TO LENDER. At such time as Borrower shall
desire to obtain an Advance, Borrower shall complete, execute and deliver to
Lender a Borrower's Requisition in the form attached hereto as EXHIBIT F
(hereinafter referred to as "Borrower's Requisition"). Each Borrower's
Requisition shall be accompanied by:
(a) if Borrower's Requisition includes amounts to be paid to the
Contractor under the Construction Contract, it shall be accompanied by a
completed and itemized Application and Certificate for payment (AIA
Document No. G702) or similar form approved by Lender, containing the
certification of Contractor, Borrower's Architect and the Construction
Inspector as to the accuracy of same, together with invoices relating to
all items of direct cost covered thereby. All such applications for payment
shall show the sum of all subcontracts by trade, the total amount
theretofore paid to all subcontractors as of the date
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of such application, and the total amount to be paid from the proceeds of
the Advance to all subcontractors;
Anything herein to the contrary notwithstanding, the Certificates from
the Borrower's Architect will be required at the following times: (a) at
the time of every other monthly Loan Advance; (b) at the time of all change
orders in excess of $25,000.00; and, (c) at the time of the final Loan
Advance.
(b) if Borrower's Requisition includes payments for Indirect Costs, it
shall be accompanied by a completed and itemized Indirect Cost statement
executed by Borrower, together with invoices for all items of Indirect
Costs covered thereby;
(c) written lien waivers from the Contractor and such laborers,
subcontractors and materialmen for work done and materials supplied by them
which were paid for pursuant to any prior Draw Request;
(d) a written request of Borrower for any necessary changes in the
Plans and Specifications, the Construction Budget the Disbursement Schedule
or the Construction Schedule for which the Lender's approval is required
under this Agreement;
(e) copies of all change orders and subcontracts, and, to the extent
requested by Lender, of all inspection or test reports and other documents
relating to the construction of the Improvements, not previously delivered
to Lender; and
(f) such other information, documentation and certification as Lender
shall reasonably request.
7.2 NOTICE AND FREQUENCY OF ADVANCES. Each Draw Request shall be submitted
to Lender at least five (5) business days prior to the date of the requested
Advance, and no more frequently than monthly and submission of all required
documentation.
7.3 DEPOSIT OF FUNDS ADVANCED. Borrower shall open and maintain a
non-interest bearing loan checking account with Lender into which Lender shall
deposit the proceeds of each Advance. Lender is hereby irrevocably authorized to
make an Advance to and/or charge any account of Borrower with Lender, including
such loan checking account, without the further approval of Borrower, for (i)
any installment of interest due under the Note, (ii) any expenses incurred by
Lender (including without limiting the generality of the foregoing, reasonable
attorneys' fees and other fees incurred by Lender), or (iii) any other sums due
to Lender under the Note, this Agreement or any of the other Loan Documents, all
to the extent that the same are not paid by the respective due dates thereof out
of Advances of the Loan proceeds.
7.4 ADVANCES TO CONTRACTOR. At its option and upon notice to Borrower,
Lender may make any or all Advances for construction expenses directly to
Contractor for deposit in an appropriately designated special bank account, and
the execution of this Agreement by Borrower shall, and hereby does, constitute
an irrevocable authorization so to advance the proceeds of the
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Loan. No further authorization from Borrower shall be necessary to warrant such
direct Advances to Contractor and all such Advances shall satisfy PRO TANTO the
obligations of Lender hereunder and shall be secured by the Mortgage and the
other Loan Documents as fully as if made directly to Borrower.
7.5 ADVANCES TO TITLE INSURER OR TO OTHERS. At its option and upon notice
to Borrower, Lender may make any or all Advances through the Title Insurer and
any portion of the Loan so disbursed by Lender shall be deemed disbursed as of
the date on which such Title Insurer receives such disbursement. At its option,
Lender may make Advances of portions of the proceeds of the Loan to any person
to whom Lender in good faith determines payment is due and any portion of the
Loan so disbursed by Lender shall be deemed disbursed as of the date on which
the person to whom payment is made receives the same. The execution of this
Agreement by Borrower shall, and hereby does, constitute an irrevocable
authorization to Advance the proceeds of the Loan. No further authorization from
Borrower shall be necessary to warrant such direct Advances and all such
Advances shall satisfy PRO TANTO the obligations of Lender hereunder and shall
be secured by the Mortgage and the other Loan Documents as fully as if made
directly to Borrower.
7.6 ADVANCES DO NOT CONSTITUTE A WAIVER. No Advance shall constitute a
waiver of any of the conditions of Lender's obligation to make further Advances
nor, in the event Borrower is unable to satisfy any such condition, shall any
Advance have the effect of precluding Lender from thereafter declaring such
inability to be an Event of Default hereunder.
ARTICLE 8
EVENTS OF DEFAULTS
The occurrence of any one or more of the following conditions or events
(each an "Event of Default") shall constitute a default under and breach of this
Agreement:
(a) any failure by Borrower to pay as and when due and payable any
interest on or principal of or other sum payable under the Note (and
subject to any grace or cure periods that may be applicable); or
(b) any failure by Borrower to deposit with Lender any funds required
by this Agreement to be deposited with Lender within ten (10) days after
notice to the Borrower;
(c) any failure by Borrower to pay as and when due and payable any
other sums to be paid by Borrower to Lender under this Agreement and
continuance of such failure for a period of ten (10) days after written
notice thereof from Lender; or
(d) title to the Property is or becomes unsatisfactory to Lender by
reason of any lien, charge, encumbrance, title condition or exception
(including without limitation, any mechanic's, materialman's or similar
statutory or common law lien or notice thereof), and
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such matter causing title to be or become unsatisfactory is not cured or
removed (including by bonding) within twenty (20) days after notice thereof
from Lender to Borrower; or
(e) any refusal by the Title Insurer to insure any Advance as being
secured by the Mortgage as a valid first lien on the Property and
continuance of such refusal for a period of twenty (20) days after notice
thereof by Lender to Borrower; or
(f) the Improvements are not completed by the Completion Date or, in
the reasonable estimation of Lender, construction of the Improvements will
not be completed by the Completion Date; or
(g) the Property or any portion thereof is injured by fire, explosion,
accident, flood or other casualty, unless Lender shall have received
insurance proceeds sufficient in the reasonable estimation of Lender to
effect the satisfactory restoration of the Property and to permit the
completion of the Improvements prior to the Completion Date; or
(h) the Property is subject to any Taking, or the Property or any
portion thereof is subject to any Taking which will prevent, in the
reasonable estimation of Lender, the completion of the Improvements prior
to the Completion Date; or
(i) any voucher or invoice is submitted at any time which Borrower
knows has not been earned by the payee for services performed or for
materials used in or furnished for the Property; or
(j) any cessation at any time in construction of the Improvements for
more than twenty (20) consecutive days except for strikes, acts of God,
fire or other casualty, or other causes entirely beyond Borrower's control;
or
(k) any failure by Borrower to duly observe or perform any term
covenant, condition or agreement requiring Borrower to maintain insurance
or to comply with the terms of a Permanent Commitment or not to encumber or
transfer the Property; or
(l) Borrower requests a termination of the Loan, or confesses inability
to continue or complete construction of the Improvements in accordance with
this Agreement; or
(m) any Guarantor denies that said Guarantor has any liability or
obligation under the Guaranty or any other agreement to which any Guarantor
is a party, or shall notify Lender of the Guarantor's intention to attempt
to cancel or terminate the Guaranty or any other agreement to which said
Guarantor is a party; or
(n) any representation or warranty made or deemed to be made by or on
behalf of Borrower or any Guarantor in this Agreement or in any other Loan
Document, or in any report, certificate, financial statement, Draw Request
or other instrument furnished in
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connection with this Agreement, any Advance or any other Loan Document,
shall prove to have been false or incorrect in any material respect as at
the date of which made or deemed to be made; or
(o) any dissolution, termination, partial or complete liquidation,
merger or consolidation of Borrower, any general partner of Borrower, or
any Guarantor, or any sale, transfer or other disposition of all or
substantially all of the assets of Borrower, any general partner of
Borrower, or any Guarantor, other than with the prior approval of Lender;
or
(p) any condition occurs which would allow Permanent Lender to
terminate the Permanent Commitment, or Permanent Lender shall fail to
comply with any of the terms, covenants, conditions or agreements of the
Permanent Commitment or any Buy-Sell Agreement, or, in the reasonable
estimation of Lender, the terms of the Permanent Commitment or any Buy-Sell
Agreement cannot be satisfied; or
(q) any suit or proceeding shall be filed against Borrower, any
Guarantor or the Property which, if adversely determined, would have a
materially adverse affect on the ability of Borrower and any Guarantor to
perform each and every one of their respective obligations under and by
virtue of the Loan Documents; or
(r) any failure by Borrower to obtain any Governmental Approvals, or
the revocation or other invalidation of any Governmental Approvals
previously issued; or
(s) the death or mental incapacity of Borrower, any general partner of
Borrower, or any Guarantor; or
(t) any change in the legal or beneficial ownership of Borrower, any
general partner of Borrower or any Guarantor, other than as permitted in
Section 4.29 or with the prior approval of Lender; or
(u) any one or more of the obligations of Borrower or any Guarantor
under the Loan Documents shall at any time and for any reason cease to be
in full force and effect; or
(v) any default in the payment of money shall occur under or in respect
of any loan agreement, credit agreement, promissory note, bond, trust deed,
indenture, mortgage, pledge, security agreement, indemnity or guaranty to
which Borrower, any general partner of Borrower is a party (whether as
principal or guarantor or other surety), or any other default shall occur
thereunder which would entitle the holder thereof to declare all amounts
payable with respect thereto to be immediately due and payable; or
(w) Borrower, any member of Borrower, any Guarantor or any tenant under
a Required Lease shall be involved in financial difficulties as evidenced
by: (1) its commencement of a voluntary case under Title 11 of the United
States Code as from time to time in effect, or its authorizing, by
appropriate proceedings of partners, directors or other
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governing body, the commencement of such a voluntary case; (2) its filing
an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case
under said Title 11, or seeking, consenting to or acquiescing in the relief
therein provided, or by its failing to controvert timely the material
allegations of any such petition; (3) the entry of an order for relief in
any involuntary case commenced under said Title 11; (4) its seeking relief
as a debtor under any applicable law, other than said Title II, of any
jurisdiction relating to the liquidation or reorganization of debtors or to
the modification or alteration of the rights of creditors, or by its
consenting to or acquiescing in such relief-, (5) the entry of an order by
a court of competent jurisdiction which is not withdrawn, reversed or
rescinded within sixty (60) days after its entry (i) finding it to be
bankrupt or insolvent, (ii) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its
creditors, or (ii) assuming custody of, or appointing a receiver or other
custodian for, all or a substantial part of its property; (6) by its making
an assignment for the benefit of, or entering into a composition with, its
creditors, or appointing or consenting to the appointment of a receiver or
other custodian for all or a substantial part of its property; or (7)
generally, its failure to pay its debts as such debts become due; or
(x) any failure by Borrower to duly observe or perform any other term,
covenant, condition or agreement under this Agreement and continuance of
such failure for a period of thirty (30) days after written notice thereof
from Lender; PROVIDED, HOWEVER, that if such failure is not susceptible of
cure during such thirty (30) day period (but is susceptible of cure) and
Borrower promptly commences and diligently pursues cure of such failure
during such thirty (30) day period, then such thirty (30) day period shall
be extended for an additional consecutive period of thirty (30) days; or
(y) any "default" or "event of default" shall occur under any of the
other Loan Documents.
ARTICLE 9
RIGHTS AND REMEDIES OF LENDER
9.1 REMEDIES. Upon the occurrence and continuance of any Event of Default,
Lender may at any time thereafter, at its option, exercise any or all of the
following rights and remedies:
(a) Lender may declare its obligations to make Advances hereunder to be
terminated, whereupon the same shall terminate, and/or declare all unpaid
principal of and accrued interest on the Note, together with all other sums
payable under the Loan Documents, to be immediately due and payable,
whereupon same shall become and be immediately due and payable, anything in
the Loan Documents to the contrary notwithstanding, and without
presentation, protest or further demand or notice of any kind, all of which
are expressly hereby waived by Borrower; provided, however, that Lender may
make Advances or parts of Advances thereafter without thereby waiving the
right to demand
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payment of the Note, without becoming liable to make any other or further
Advances, and without affecting the validity of or enforceability of the
Loan Documents. Notwithstanding and without limiting the generality of the
foregoing, upon the occurrence of an Event of Default under paragraph (w)
of Article 8, or if any event has occurred which but for the passage of
time, the giving of notice or both would constitute an Event of Default,
Lender's obligations to make Advances hereunder automatically shall so
terminate and, in addition, upon the occurrence of an Event of Default
under paragraph (w) of Article 8, all unpaid principal of and accrued
interest on the Note, together with all sums payable under the Loan
Documents, automatically shall become and be immediately so due and
payable, with any declaration or other act on the part of the Lender.
(b) Following acceleration of the Building Loan, Lender may cause the
Property to be completed and may enter upon the Land and construct, equip
and complete the Property in accordance with the Plans and Specifications,
with such changes therein as Lender may, from time to time, and in its sole
discretion, deem appropriate. In connection with any construction of the
Property undertaken by Lender pursuant to the provisions of this
subparagraph, Lender may:
(1) use any funds of Borrower, including any balance which may be
held by Lender as security or in escrow, and any funds remaining
unadvanced under the Loan;
(2) employ existing contractors, subcontractors, agents,
architects, engineers, and the like, or terminate the same and employ
others;
(3) employ security watchmen to protect the Property;
(4) make such additions, changes and corrections in the Plans and
Specifications as shall, in the judgment of Lender, be necessary or
desirable;
(5) take over and use any and all Personal Property contracted for
or purchased by Borrower, if appropriate, or dispose of the same as
Lender sees fit;
(6) execute all applications and certificates on behalf of
Borrower which may be required by any Governmental Authority or
Requirement or contract documents or agreements;
(7) pay, settle or compromise all existing or future bills and
claims which are or may be liens against the Property, or may be
necessary for the completion of the Improvements or the clearance of
title to the Property;
(8) complete the marketing and leasing of leasable space in the
Improvements, enter into new leases and occupancy agreements, and
modify or amend existing leases and occupancy agreements, all as Lender
shall deem to be necessary or desirable;
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(9) prosecute and defend all actions and proceedings in connection
with the construction of the Improvements or in any other way affecting
the Land or the Improvements and take such action and require such
performance as Lender deems necessary under any Payment and Performance
Bonds; and
(10) take such action hereunder, or refrain from acting hereunder,
as Lender may, in its sole and absolute discretion, from time to time
determine, and without any limitation whatsoever, to carry out the
intent of this subparagraph. Borrower shall be liable to Lender for all
costs paid or incurred for the construction, completion and equipping
of the Property, whether the same shall be paid or incurred pursuant to
the provisions of this subparagraph or otherwise, and all payments made
or liabilities incurred by Lender hereunder of any kind whatsoever
shall be deemed advances made to Borrower under this Agreement and
shall be secured by the Mortgage and the other Loan Documents.
To the extent that any costs so paid or incurred by Lender, together with
an other Advances made by Lender hereunder, exceed the Loan Amount, such excess
costs shall be paid by Borrower to Lender on demand, with interest thereon at
the Default Rate, if any, set forth in the Note or, in the absence of a Default
Rate, at the Interest Rate, until paid; and Borrower shall execute such notes or
amendments to the Note as may be requested by Lender to evidence Borrower's
obligation to pay such excess costs and until such notes or amendments are so
executed by Borrower, Borrower's obligation to pay such excess costs shall be
deemed to be evidenced by this Agreement. In the event Lender takes possession
of the Property and assumes control of such construction as aforesaid, it shall
not be obligated to continue such construction longer than it shall see fit and
may thereafter, at any time, change any course of action undertaken by it or
abandon such construction and decline to make further payments for the account
of Borrower whether or not the Property shall have been completed. For the
purpose of this subparagraph, the construction, equipping and completion of the
Property shall be deemed to include any action necessary to cure any Event of
Default by Borrower under any of the terms and provisions of any of the Loan
Documents.
(c) Lender may to the extent permitted by applicable law, at any time
and from time to time, without notice (any such notice being expressly
waived), without regard to the adequacy of any collateral, set off and
apply any and all deposits (general or specific, time on demand,
provisional or final, regardless of currency, maturity, or the branch of
Lender where the deposits are held) at any time held or other sums credited
by or due from Lender to Borrower against any and all liabilities, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising of Borrower to Lender.
(d) Lender may exercise any or all of the rights and remedies set forth
in the other Loan Documents.
9.2 POWER OF ATTORNEY. For the purposes of carrying out the provisions and
exercising the fights, powers and privileges granted by or referred to in this
Agreement, Borrower hereby
- 30 -
<PAGE>
irrevocably constitutes and appoints Lender its true and lawful
attorney-in-fact, with full power of substitution, to execute, acknowledge and
deliver any instruments and do and perform any acts which are referred to in
this Agreement, in the name and on behalf of Borrower. The power vested in such
attorney-in-fact is, and shall be deemed to be, coupled with an interest and
irrevocable.
9.3 REMEDIES CUMULATIVE. Upon the occurrence of any Event of Default the
rights, powers and privileges provided in this Article 9 and all other remedies
available to Lender under this Agreement or under any of the other Loan
Documents or at law or in equity may be exercised by Lender at any time and from
time to time and shall not constitute a waiver of any of Lender's other rights
or remedies thereunder, whether or not the Loan shall be due and payable, and
whether or not Lender shall have instituted any foreclosure proceedings or other
action for the enforcement of its rights under the Loan Documents.
9.4 ANNULMENT OF Defaults. An Event of Default shall not be deemed to be in
existence for any purpose of this Agreement or any Loan Document if Lender shall
have waived such Event of Default in writing or stated that the same has been
cured to its reasonable satisfaction, but no such waiver shall extend to or
affect any subsequent Event of Default or impair any of the rights of Lender
upon the occurrence thereof.
9.5 WAIVERS. Borrower hereby waives to the extent not prohibited by
applicable law (a) all presentments, demands for payment or performance, notices
of nonperformance (except to the extent required by the provisions hereof or of
any other Loan Documents), protests and notices of dishonor, (b) any requirement
of diligence or promptness on Lender's part in the enforcement of its rights
(but not fulfillment of its obligations) under the provisions of this Agreement
or any other Loan Document, and (c) any and all notices of every kind and
description which may be required to be given by any statute or rule of law and
any defense of any kind which Borrower may now or hereafter have with respect to
its liability under this Agreement or under any other Loan Document.
9.6 COURSE OF DEALING, ETC. No course of dealing between Borrower and
Lender shall operate as a waiver of any of Lender's rights under this Agreement
or any Loan Document. No delay or omission on Lender's part in exercising any
right under this Agreement or any Loan Document shall operate as a waiver of
such right or any other right hereunder. A waiver on any one occasion shall not
be construed as a bar to or waiver of any right or remedy on any future occasion
No waiver or consent shall be binding upon Lender unless it is in writing and
signed by Lender. The making of an Advance hereunder during the existence of an
Event of Default shall not constitute a waiver thereof.
ARTICLE 10
GENERAL CONDMONS
The following conditions shall be applicable throughout the term of this
Agreement:
- 31 -
<PAGE>
10.1 RIGHTS OF THIRD PARTIES. All conditions of the obligations of Lender
hereunder, including the obligation to make Advances, are imposed solely and
exclusively for the benefit of Lender and its successors and assigns and no
other person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will make
Advances in the absence of strict compliance with any or all thereof and no
other person shall, under any circumstances, be deemed to be a beneficiary of
such conditions, any and all of which may be freely waived in whole or in part
by Lender at any time if in its sole discretion it deems it desirable to do so.
In particular, Lender makes no representations and assumes no obligations as to
third parties concerning the quality of the construction by Borrower of the
Improvements or the absence therefrom of defects. In this connection Borrower
agrees to and shall indemnify Lender from any liability, claims or losses
resulting from the disbursement of the Loan proceeds or from the condition of
the Property whether related to the quality of construction or otherwise and
whether arising during or after the term of the Loan made by Lender to Borrower
in connection herewith. This provision shall survive the repayment of the Loan
and shall continue in full force and effect so long as the possibility of such
liability, claims or losses exists.
10.2 RELATIONSHIP. The relationship between Lender and Borrower is solely
that of a lender and borrower, and nothing contained herein or in any of the
other Loan Documents shall in any manner be construed as making the parties
hereto partners, joint venturers or any other relationship other than lender and
borrower.
EVIDENCE OF SATISFACTION OF CONDITIONS. Any condition of this Agreement
which requires the submission of evidence of the existence or non-existence of a
specified fact or facts implies as a condition the existence or non-existence,
as the case may be, of such fact or facts and Lender shall, at all times, be
free independently to establish to its satisfaction and in its absolute
discretion such existence or non-existence.
10.4 NOTICES. Any notices required or permitted to be given hereunder shall
be: (i) personally delivered or (ii) given by registered or certified mail,
postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service, in each instance addressed to the addresses set forth at the
head of this Agreement, or such other addresses as the parties may for
themselves designate in writing as provided herein for the purpose of receiving
notices hereunder. All notices shall be in writing and shall be deemed given, in
the case of notice by personal delivery, upon actual delivery, and in the case
of appropriate mail or courier service, upon deposit with the U.S. Postal
Service or delivery to the courier service.
10.5 ASSIGNMENT. Borrower may not assign this Agreement or any of its
rights or obligations hereunder without the prior approval of Lender.
10.6 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever in this Agreement
one of the parties hereto is named or referred to, the heirs, legal
representatives, successors and assigns of such parties shall be included and
all covenants and agreements contained in this Agreement by or on behalf of
Borrower or by or on behalf of Lender shall bind and inure to the benefit of
their respective heirs, legal representatives, successors and assigns, whether
so expressed or not.
- 32 -
<PAGE>
10.7 HEADINGS. The headings of the Articles, Paragraphs and subparagraphs
of this Agreement are for the convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof
10.8 INVALID PROVISIONS TO AFFECT NO OTHERS. If fulfillment of any
provision hereof or any transaction related hereto at the time performance of
such provisions shall be due, shall involve transcending the limit of validity
presently prescribed by law, with regard to obligations of like character and
amount, then IPSO FACTO, the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision herein contained operates
or would prospectively operate to invalidate this Agreement in whole or in part,
then such clause or provision only shall be held for naught, as though not
herein contained, and the remainder of this Agreement shall remain operative and
in full force and effect.
10.9 NUMBER AND GENDER. Whenever the singular or plural number, or the
masculine, feminine or neuter gender is used herein, it shall equally include
the other.
10.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with laws of the State of New York.
10.11 CONSENT TO JURISDICTION. Borrower hereby irrevocably and
unconditionally (a) submits to personal jurisdiction in the State of New York
over any suit, action or proceeding arising out of or relating to this
Agreement, and (b) waives any and all personal rights under the laws of any
state (i) to the right, if any, to trial by jury, or (ii) to object to
jurisdiction within the State of New York or venue in any particular forum
within the State of New York. Nothing contained herein, however, shall prevent
Lender from bringing any suit, action or proceeding or exercising any rights
against any security and against Borrower, and against any property of Borrower,
in any other state. Initiating such suit, action or proceeding or taking such
action in any state shall in no event constitute a waiver of the agreement
contained herein that the laws of the State of New York shall govern the rights
and obligations of Borrower and Lender hereunder or the submission herein by
Borrower to personal jurisdiction within the State of New York.
10.12 AMENDMENTS. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
- 33 -
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement
under seal on the date first above written.
ERIE HOTEL LLC
BY: ESSEX HOTELS II LLC
its Managing Member
BY: ESSEX HOSPITALITY ASSOCIATES IV L.P.,
its Managing Member
BY: Essex Partners Inc.,
its General Partner
BY: /s/ Barbara J. Purvis
--------------------------
Barbara J. Purvis
Senior Vice President
KEYBANK NATIONAL ASSOCIATION
BY: /s/ Karen M. Cummings
--------------------------
Karen M. Cummings
Vice-President
STATE OF NEW YORK )
COUNTY OF MONROE ) ss.:
On this 31st day of December, 1997, before me personally came Barbara J.
Purvis, to me personally known, who, being by me duly sworn, did depose and say
that she is a Senior Vice President of Essex Partners Inc., a New York
corporation and the general partner of Essex Hospitality Associates IV L.P., a
New York limited partnership and the managing member of Essex Hotels H LLC, a
New York limited liability company and the managing member of Erie Hotel LLC,
the limited liability company described in and on whose behalf she executed the
within Instrument; and she duly acknowledged to me that she signed her name
thereto as the act and deed of said limited liability company.
/s/ Mark R. Foerster
------------------------------
Notary Public
MARK R. FOERSTER
Notary Public in the State of New York
MONROE COUNTY
Commission Expires May 31, 1999
- 34 -
<PAGE>
STATE OF NEW YORK )
COUNTY OF ERIE ) ss.:
On the 31st day of December, 1997, before me personally came Karen M.
Cummings, to me known who, being by me duly sworn, did depose and say that she
resides in the Town of Amherst; that she is a Vice-President of KeyBank National
Association, the corporation described in and which executed the foregoing
instrument; and that she signed her name thereto by order of the Board of
Directors of said corporation.
/s/ Louis C. Fessard
------------------------------
Notary Public
LOUIS C. FESSARD
Notary Public State of New York
Qualified in Erie County
My Commission Expires Aug. 31, 1999
- 35 -
<PAGE>
EXHIBIT A
CONSTRUCTION BUDGET
Society National Bank
"A Key Corp Bank"
Essex - Hampton Inn Erie, PA
Enter amounts in the "Total Cost" column first. Then enter amounts in the
"Equity $" column. The "Loan $" column will calculate automatically.
DEVELOPMENT BUDGET Total rooms 98
<TABLE>
<CAPTION>
DESCRIPTION TOTAL COST % OF TOTAL
<S> <C> <C> <C> <C> <C>
LOAN $ EOUITY $ COST PSF COST
LAND $0 $793,600 $793,600 $8,097.96 10.4%
SITE IMPROVEMENTS $0 $550,150 550,150 5,613.78 7.2%
- ----------------- --------- ---------- ---------- ----------- ------
TOTAL LAND & SITE WORK $0 $1,343,750 $1,343,750 $13,711.73 17.6%
HARD COSTS SQ. FT.
Construction costs 0 2,613,887 1,120,373 3,734,260 $38,104.69 48.9%
tech and develop services 0 250,000 0 250,000 $2,551.02 3.3%
Performance Bond 0 0 0
Furniture, Fixtures & Equipment 0 842,100 0 842,100 $8,592.86 11.0%
CONTINGENCY (HARD COSTS) 186,713 0 186,713 $1,905.23 2.4%
- ------------------------ --------- --------- ------- ---------- ------
TOTAL HARD COSTS 3,892,700 1,120,373 5,013,073 $51,153.81 65.5%
SOFT COSTS
ARCHITECTURE/ENGINEERING 108,400 0 108,400 $1,106.12 1.4%
CONSTRUCTION MANAGEMENT 0 0 0 $0.00 0.0%
Note Securities - financing cost 0 190,177 190,177 $1,940.58 2.5%
Permits 106,000 0 106,000 $1,081.63 1.4%
LEGAL FEES 245,000 0 245,000 $2,500.00 3.2%
Recording Fees 47,000 0 47,000 $479.59 0.6%
REAL ESTATE TAXES/Insurance 15,000 0 15,000 $153.06 0.2%
Pre-opening costs 3,800 76,200 80,000 $816.33 1.0%
APPRAISALS 0 12,006 12,000 $122.45 0.2%
ENVIRONMENTAL 0 10,000 10,000 $102.04 0.1%
Franchise Fee 0 45,000 45,000 $459.18 0.6%
TITLE INSURANCE 0 16,000 16,000 $163.27 0.2%
Key BANK FEE 23,500 0 23,500 $239.80 0.3%
PERMANENT LOAN FEE 47,000 0 47,000 $479.59 0.6%
Note Interest 0 112,000 112,000
Travel & other costs 0 24,500 24,500
CONSTRUCTION INTERST 185,180 0 185,180 $1,889.59 2.4%
CONTINGENCY (WORKING CAPITAL) 26,420 0 26,420 $269.59 0.3%
- ----------------------------- --------- --------- ---------- ---------- ------
TOTAL SOFT COST $807,300 $485,877 $1,293,177 $11,802.83 15.1%
========= ========= ========== ========== ======
TOTAL DEVELOPMENT COSTS $4,700,000 $2,950,000 $7,650,000 $78,061.22
PERCENT OF TOTAL COSTS 61.44% 38.56% 100.00%
LOAN PER SQUARE FOOT $47,959.18
CONTINGENCY:
HARD $186,713
SOFT $26,420
--------
TOTAL $213,133
</TABLE>
COMMENTS
<PAGE>
EXHIBIT C
DISBURSEMENT SCHEDULE
<PAGE>
EXHIBIT D
DESCRIPTION OF LAND
ALL THAT CERTAIN piece or parcel of land situate in Tract 373 in the
Township of Summit, County of Erie and Commonwealth of Pennsylvania, being Lot I
as shown on a map entitled "Subdivision of Land of David A. Kellogg, Richard E.
and Mary L. Hess and Pamela A. Giese", made by Henry T. Welks Associates, dated
August 22, 1996, revised September 4, 1996 and May 19, 1997, and recorded in
Erie County Map No. 1997-133, and being more particularly bounded and described
as follows, to wit:
BEGINNING at the most southerly comer of the piece herein described, at a
point in the centerline of Old Oliver Road (50 foot right-of-way); thence North
27(degree) 25' 40" West, a distance of 408.58 feet to a point; thence North
69(degree) 0I' 12" East, a distance of 397.38 feet to an iron survey pin; thence
North 72(degree) 03' 09" East, a distance of 37.77 feet to a point; thence South
54(degree) 11' 20" East, a distance of 124.85 feet to a PK. nail in the
centerline of Old Oliver Road; thence South 35(degree) 48' 40" West, along the
centerline of Old Oliver Road, a distance of 546.91 feet to the point of
beginning. CONTAINING 2.819 acres of land to the centerline of Old Oliver Road;
CONTAINING 2.509 acres of land to the northerly right-of-way line of Old Oliver
Road.
EXCEPTING therefrom a 400 square foot parcel of land conveyed to the Summit
Township Sewer Authority in Erie County Record Book 70 page 635, bearing Erie
County Index No. (40) 17-73-2.09.
<PAGE>
EXHIBIT E
Descriptions of Plans and Specifications
Drawings and specifications for the Erie Hampton Inn, Erie, Pennsylvania
prepared by Braun & Steidl Architects (Project No. 96066) dated August 27, 1997,
as amended by Addendum No. 1 dated September 9, 1997, and Addendum No. 2 dated
September 16, 1997.
<PAGE>
EXHIBIT F
BORROWER'S REQUISITION
BORROWER: ERIE HOTEL LLC
REQUISITION NO.:
DATE:
PROJECT: Erie Hampton Inn, Summit Township, Pennsylvania
Pursuant to the Building Loan Agreement (the "Agreement") between Borrower
and Lender, Borrower hereby authorizes and requests an Advance for the following
purpose(s) and in the following amounts:
Amount Purpose(s) Attributable to
- ---------------------------
$
Total: $
IN CONNECTION WITH AND IN ORDER TO INDUCE LENDER TO ADVANCE THE AMOUNT
REQUESTED ABOVE, THE BORROWER HEREBY REPRESENTS, WARRANTS AND STIPULATES AS
FOLLOWS:
1 . There is existing no Event of Default (as defined in the Agreement) and
no event which but for the passage of time, the giving of notice or both would
constitute an Event of Default. The undersigned has duly complied with and
observed all of the terms, covenants and conditions of each of said instruments
required to be performed by the undersigned to the date of this Requisition, and
unless the Lender is notified to the contrary prior to the disbursement of the
Advance requested above, will be so on the date hereof.
<PAGE>
2. The amounts herein are true and correct to the best of the Borrower's
knowledge and after the honoring of this Requisition, the Loan amount not yet
advanced, less the retainage held, if any, shall be sufficient to pay for the
completion of the costs of construction of the Improvements not yet paid.
3. All sums previously requisitioned have been applied to the payment of
the costs of construction of the Improvements heretofore incurred and the
proceeds of any Advance made in accordance with this Requisition will be applied
to, and solely to, payment of the foregoing items.
4. All work has been performed fully in accordance with the Plans and
Specifications as defined in the Agreement.
"BORROWER"
---------------------------------
<PAGE>
EXHIBIT G
KM&Z Draft
10/21/97
TRI-PARTY AGREEMENT
THIS TRI-PARTY AGREEMENT (the "AGREEMENT") is being executed as of
__________________, 199_____, by and between _____________________, a
_______________(together with any subsequent holder of the Note as defined
below, the GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation
(together with any subsequent holder of the note evidencing the Bridge Loan as
defined below, the "BRIDGE LENDER"),___________________________________________,
a _____________________ (the "Borrower") and _____________________________, a
__________________________ ("Franchisor").
RECITALS:
A. The Borrower is (or will be upon funding of the Loan as defined below)
the owner of certain real property (the "PROPERTY") located in the City of
_________, _________County, ____________, and more particularly described in
EXHIBIT A attached hereto and made a part of this Agreement The Borrower intends
to construct upon the Property certain improvements and appurtenances to consist
generally of a _____________ -story, approximately ________________ square foot
hotel to be operated as a _____ -room _____________ Hotel (the "IMPROVEMENTS);
B. The Bank has agreed to make a loan to the Borrower in the principal sum
of $_________ (the "LOAN") to assist Borrower in financing the acquisition of
the Property, site development of the Property and the construction of the
Improvements. The Loan will be advanced to the Borrower under the terms of a
certain Loan Agreement entered or to be entered into by the Bank and the
Borrower (the "LOAN AGREEMENT"), and is or will be evidenced by a promissory
note in the maximum principal amount of $____________ (the, "NOTE") that is or
will be secured by, among other things, a Construction Deed of Trust, Security
Agreement, Assignment, Assignment of Rents and Leases and Fixture Filing (the
"MORTGAGE") encumbering the Property, the Improvements and certain related
personal property of the Borrower. The Loan Agreement the Note, the Mortgage and
all other documents evidencing or securing the Loan are referred to herein as
the "LOAN DOCUMENTS".
C. The Borrower has obtained from Bridge Lender a conditional loan
commitment (the "COMMITMENT") from the Bridge Lender for a five-year bridge
mortgage loan on the Property and Improvements in the amount of $ ___________
(the "BRIDGE LOAN"). The Commitment is evidenced by a letter from Bridge Lender
to the Borrower dated __________________, 199______ and agreed to by the
Borrower on ________________, 199_________. The Bank and Franchisor acknowledge
that they have received and reviewed the Commitment, a copy of which is attached
hereto as EXHIBIT B.
- 1 -
<PAGE>
D. The Agreement is being executed to coordinate the financing agreements
between the Bank and the Bridge Lender.
IN ORDER TO IMPLEMENT the above facts and understandings, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, covenant
and agree as follows:
1 . ASSIGNMENT. In consideration of the making of the Loan by the Bank to
the Borrower, the Borrower hereby collaterally assigns to the Bank as security
for the Loan, all of Borrower's rights and interests in and to the Commitment
The Bridge Lender hereby consents to such assignment. The Bank, in the event of
any Event of Default as defined in the Loan Agreement, is hereby authorized at
the Bank's election to take any and all actions the Bank deems necessary or
appropriate under the Commitment to close the Bridge Loan in the name of the
Bank, including without limitation, the execution of the Bridge Loan Documents
(as defined herein) as well as any and all other documents required by the
Commitment or documents which may be convenient or appropriate for the closing
of the Bridge Loan for and on behalf of the Bank. Notwithstanding any of the
foregoing, the Bank shall have no obligation to close the Bridge Loan. Bridge
Lender consents to the Bank closing the Bridge Loan in its own name and agrees
to accept the Bridge Loan Documents executed and delivered by the Bank;
PROVIDED, THAT , (i) the Bank delivers a legal opinion, acceptable to Bridge
Lender, regarding the enforceability of the Bridge Loan Documents, and (ii) all
conditions set forth in the Commitment are satisfied in accordance with the
terms and provisions set forth therein.
2. FUNDING OF BRIDGE LOAN. Unless all amounts owing pursuant to the Loan
are otherwise paid in full and the Bank released from all obligations to make
further advances thereunder, the Borrower shall timely comply with the terms and
conditions of the Commitment and timely close the Bridge Loan. The Commitment
shall not be modified or amended without the prior written consent of the Bank
except changes that may be required by applicable law. Upon timely and full
compliance with the terms and conditions of the Commitment, the Bridge Loan
shall be closed by the execution and delivery of the Bridge Loan Documents. The
proceeds of the Bridge Loan (but no amounts in excess thereof) shall be advanced
directly by the Bridge Lender to the Bank or through title company escrow to the
Bank, in an amount not exceeding the sum required to pay in full and satisfy the
Loan. The Borrower shall provide any additional funds required to fully pay the
Loan and all sums then owing to the Bank and secured by the Mortgage and to pay
all fees and expenses of closing the Bridge Loan.
3. THE CLOSING DATE.
(a) Unless all amounts owing pursuant to the Loan are otherwise paid in
full by Borrower, the Borrower shall satisfy all closing conditions set forth in
the Commitment and shall cause the funding of the Bridge Loan on or before
_____________, 199______ or on such earlier date as shall be mutually agreed to
by Borrower and Bridge Lender (the CLOSING DATE"); PROVIDED, HOWEVER, if there
has occurred an Event of Default under any of the Loan Documents, then Bank
- 2 -
<PAGE>
and Bridge Lender may mutually select the Closing Date so long as such closing
date is not later than the end of the term of the Commitment
(b) The Closing Date may be extended by written agreement between the Bank,
Bridge Lender and Borrower, PROVIDED, HOWEVER, that if there has been an Event
of Default under any of the Loan Documents such written agreement may be between
the Bank and the Bridge Lender only, and any such agreement between the Bank and
the Bridge Lender will bind the Borrower as if it were a party to that
agreement. Bank and Borrower acknowledge that Bridge Lender has no obligation to
extend the Closing Date, and that any such agreed extension may be conditioned
upon further conditions and requirements not currently set forth in the
Commitment. Any agreed extension of the Closing Date beyond the term of the
Commitment pursuant to the provisions of this paragraph 3(b) will automatically
extend the expiration date of the Commitment and of this Agreement for an equal
period of time. Any reference in this Agreement to the "Closing Date" will be
construed to mean the Closing Date as it may be extended pursuant to the
provisions of this Agreement.
4. EFFECTIVENESS OF COMMITMENT, NO DEFAULT. Bridge Lender and Borrower
hereby warrant and represent to Bank that (i) the Commitment has been accepted
by Borrower prior to the required acceptance date set out in the Commitment and
all fees due for acceptance of the Commitment have been paid in full; (ii) the
Commitment is in full force and effect and has not been amended, except as
described herein; (iii) to the best of Bridge Lender's knowledge, no default,
nor any condition or event which with the giving of notice or the passage of
time or both would constitute a default currently exists under the Commitment;
and (iv) the Commitment is a binding contract currently entitling Borrower to
the benefits thereof (subject to equitable principles, bankruptcy, insolvency
and other similar creditor's rights laws) and, upon execution of this Agreement
and subject to the provisions of Section 1 of this Agreement, the Bank will be
entitled to such benefits, in each case subject to the satisfaction of all
conditions set forth in the Commitment.
5. BRIDGE LOAN DOCUMENTS. Borrower and Bridge Lender shall agree on the
form of loan documents evidencing, guaranteeing, governing and securing the
Bridge Loan (collectively, the "BRIDGE LOAN DOCUMENTS") prior to the Closing
Date. The Bridge Loan Documents shall be in the same form in all materials
respects as those form loan documents typically used in transactions similar to
the Bridge Loan where Franchisor is providing credit enhancement to the Bridge
Lender, which form documents have previously been provided by Bridge Lender to
Borrower and Bank, as modified to reflect (i) changes in such form loan
documents as are made after today's date at the request of Franchisor or as are
otherwise acceptable to Franchisor, (ii) the business terms and conditions set
forth in the Commitment and (iii) the requirements of local law. Bridge Lender
warrants and represents to Bank that the Bridge Loan Documents are the only loan
documents required as a condition precedent to the rending of the Bridge Loan.
Borrower agrees to execute and deliver the Bridge Loan Documents in the form
agreed to as provided above. Upon Borrower's satisfaction of all Commitment
requirements and conditions, Bridge Lender agrees to execute any Bridge Loan
Documents requiring Bridge Lender's
- 3 -
<PAGE>
signature. Bank acknowledges that Franchisor must also execute certain Bridge
Loan Documents, including, a certain guaranty agreement providing credit
enhancement to Bridge Lender and a "comfort letter" or other instrument
providing certain information to Bridge Lender regarding the status of the
Management Agreement (as hereinafter defined).
6. MANAGEMENT AGREEMENT. Borrower and Bridge Lender acknowledge that the
Management Agreement (the "MANAGEMENT AGREEMENT") dated . 1997 between Borrower
and Franchisor is acceptable to Borrower and Bridge Lender. The Management
Agreement shall not be modified or amended without the prior written approval of
Bank or Bridge Lender.
7. COMPLETION OF CONSTRUCTION. Upon completion of the construction of the
Improvements in substantial accordance with the Plans, the Bank and the Borrower
agree to deliver to the Bridge Lender written notice of such completion and of a
proposed date for the closing of the Bridge Loan, which proposed date shall be
not later than ten (1 0) days prior to expiration of the Commitment. On the date
specified in the notice, or on any earlier or later date agreed to by the
parties, the Bridge Loan will be funded as contemplated by this Agreement so
long as all conditions of such funding set forth in the Commitment have been
fulfilled.
8. SUBSTITUTION OF GENERAL PARTNER. Bridge Lender acknowledges and agrees
that the limited partners of Borrower may remove the general partner of Borrower
and admit a new general partner of Borrower pursuant to the terms of Borrower's
partnership agreement and that the same shall not affect or impair Bridge
Lender's obligations to fund the Bridge Loan in accordance with the Commitment
and this Agreement so long as such new general partner is an affiliate of
____________________ and so long as Borrower continues to satisfy the
"single-purpose, bankruptcy-remote" requirements set forth in the Commitment and
in such event Bridge Lender agrees to a substitution of the organizational
documents and resolution of such substitute general partner in the place of
those of the current general partner.
9. DEFAULT BY BORROWER, The Bridge Lender agrees to give the Bank and the
Borrower prompt written notice of any default of the Borrower under this
Agreement or the Commitment to the extent the Bridge Lender becomes aware of
such default. Failure of the Bridge Lender to become aware of any such default
or to provide such notice shall not be a default under this Agreement or affect
Bridge Lender's rights under the Commitment The Bank and/or the Borrower will
have thirty (30) days after receipt of any such notice of default to cure all
defaults, or if such default is not reasonably capable of being cured within
such period of time, the Bank and/or Borrower shall have the right to commence
remedying such default and shall proceed diligently to cure the same, except
that no such period for notice or cure will extend the Closing Date without the
prior written consent of the Bridge Lender, PROVIDED, HOWEVER, nothing contained
herein shall obligate Bank to cure any such default. Failure of the Borrower and
the Bridge Lender to agree on the terms of the Bridge Loan Documents shall
constitute a default on the part of Borrower which the Bank shall have the
right, but not the obligation, to attempt to cure. No notice and/or cure periods
set forth herein shall extend the term of the
- 4 -
<PAGE>
Commitment as set forth therein. If all defaults are not cured within such
period, then, in addition to pursing its available rights and remedies under
applicable law, the Bridge Lender may, at its option, and by prompt written
notice to the Bank and Borrower either terminate the Commitment and its
obligations under this Agreement or waive the defaults that have not yet been
cured and extend the time for cure of those defaults. 'Me Bank and Borrower
acknowledge that upon any such termination of the Commitment, certain fees,
including without Stations the Deferred Financing Fee, will remain payable under
the Commitment, and Borrower and bank hereby agree that the Bank shall not
release the lien of its Mortgage without first obtaining written confirmation
from the Bridge Lender that payment of any such fees arising under the
Commitment have been paid in full or waived.
Without in any way limiting any rights or remedies which the Bank may have
against Borrower, in the event of any default by Borrower under any of the Loan
Documents, the Bank (a) shall promptly notify the Bridge Lender of such default
by Borrower and (b) may elect in its discretion to terminate this Agreement, or
to promptly notify the Bridge Lender in writing that Bank elects to assume the
obligations of the Borrower to the Bridge Lender under the terms and conditions
of the Commitment and this Agreement, in which event (i) the Bridge Lender
agrees not to terminate the Commitment and to make the Bridge Loan directly to
the Bank upon completion of construction of the Improvements in accordance with
the Commitment and satisfaction of all other conditions of the Commitment and
this Agreement, and (ii) Bank shall assume Borrower's obligations under the
Management Agreement and Franchisor hereby acknowledg6s that it shall consent to
such assumption. Nothing in this Section 1 0 shall extend the term of the
Commitment as set forth therein.
10. ADDITIONAL BANK COVENANTS. Prior to expiration of the Commitment, Bank
hereby agrees (a) not to release any part of the Property required to secured
the Bridge Loan, (b) not to accept payment or prepayment of principal under the
Note (except to the extent required to reduce the unpaid balance of the Note to
au amount equal to the amount of the Bridge Loan), (c) not to assign or transfer
the Note and other Loan Documents, without the prior written consent of the
Bridge Lender. not to be unreasonably withhold or delayed, (d) not to release
the lien of the Mortgage without first obtaining written confirmation from the
Bridge Lender that it has received or waived payment of the Deferred Financing
Fee described in the Commitment, and (e) not to accelerate the maturity of the
Note unless an event of default has arisen under the Loan Documents and within
twenty (20) days after receipt of written notice of such default from the Bank,
the Bridge Lender does not either (i) cure or cause to be cured such default or
(ii) notify the Bank of Bridge Lender's willingness to purchase the Loan from
the Bank by payment of any outstanding balance of principal and interest
thereunder within ten (1O) business days after expiration of such twenty-day
period and does so purchase the Loan within such period.
11. AMENDMENTS. Except as otherwise provided herein, no amendment or
modification of the Commitment after the date of this Agreement will affect any
obligations of the parties under this Agreement, unless that amendment or
modification is approved in writing by all parties to this Agreement.
- 5 -
<PAGE>
12. NOTICES. All notices and requests for visits and confirmations of
compliance under this Agreement must be given in writing and will be considered
to have been duly and properly served upon personal delivery to the party or an
officer of the party being served, or if mailed, upon the first to occur of (i)
actual receipt (ii) the expiration of four (4) business days after deposit in
United States registered or certified mail postage prepaid, or (iii) the
expiration of twenty-four (24) hours after deposit for overnight delivery with
Federal Express or another nationally recognized express delivery company,
addressed to the parties as follows:
BANK:
-----------------------------
-----------------------------
-----------------------------
BORROWER:
-----------------------------
-----------------------------
-----------------------------
Attn:
BRIDGE LENDER::
GMAC Commercial Mortgage Corporation
8614 Westwood Center Drive, Suite 630
Vienna, Virginia 22182-2233
Attn: Morgan G. Earnest, II
Senior Vice President
FRANCHISOR:
-----------------------------
-----------------------------
-----------------------------
Attn:
- 6 -
<PAGE>
Such addresses may be changed by notice to the other parties given in the same
manner as provided above, such changes in address to be effective only upon
receipt.
14. TERMINATION. This Agreement will terminate upon:
(a) Funding of the Bridge Loan by the Bridge Lender, or
(b) Termination of this Agreement under Section 9 above.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts by the parties. Each of the counterparts will be considered an
original and all counterparts will constitute but one and the same Instrument.
16. CONSENTS. Except as expressly provided otherwise herein, whenever the
consent or approval of the Bank or the Bridge Lender is required under the
Commitment or under this Agreement, the Bank and the Bridge Lender agrees that
such consent or approval will not be unreasonably withhold, conditioned or
delayed. The foregoing provisions of this Section notwithstanding, the Bridge
Lender shall have no obligation to extend the term of the Commitment, or to
increase the Bridge Loan amount, or to delete or limit the provisions
customarily included in the Bridge Loan Documents.
17. WAIVER, No waiver of any of the terms or conditions of this Agreement,
and no waiver of any default or compliance, shall be effective unless in
writing, and no waiver furnished in writing shall be deemed to be a waiver of
any other term or provision or any future condition of this Agreement.
18. MISCELLANEOUS, This Agreement will be governed by_____________ law. The
invalidity or unenforceability of any provision of this Agreement will not
affect any other provision. The captions of the Paragraphs of this Agreement are
for convenience only and do not limit any terms or provisions.
19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, including without limitation, any person or entity obligated by
operation of law upon the reorganization, merger, consolidation or other change
in the organizational structure of any of the parties hereto. Notwithstanding
the foregoing, Banks right to assign the Loan and this Agreement are restricted
pursuant to Section 10 above, and Bank's right under Section 9 above to elect to
assume Borrower's obligations to Bridge Lender under the terms and conditions of
the Commitment and this Agreement upon a default by Borrower under any of the
Loan Documents is not assignable without the prior written consent of Bridge
Lender.
- 7 -
<PAGE>
IN WITTNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
BORROWER:
_____________________, a __________________
By: _____________________, a _______________
_____________________, its __________________
By:_______________________________
Name:_____________________________
Its:______________________________
BRIDGE LENDER:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation
By:____________________________________
Morgan G. Earnest, II, Senior Vice President
FRANCHISOR:
_____________________, a __________________
_____________________
By:_______________________________
Name:_____________________________
Its:______________________________
BANK:
_____________________, a __________________
By:_______________________________
Name:_____________________________
Its:______________________________
- 8 -
Exhibit 10-19
THIS IS AN OPEN-END MORTGAGE, AS DEFINED BY ACT. NO. 126 OF 1990, P.L. 525,
OCTOBER 12, 1990, 42 P.A.C.S.A. SECTION 8143, ET. SEQ.,
WHICH SECURES FUTURE ADVANCES
OPEN-END MORTGAGE AND SECURITY AGREEMENT
$4,700,000.00
THIS OPEN-END MORTGAGE AND SECURITY AGREEMENT, made the 31st day of
December, 1997, by Erie Hotel LLC, a New York limited liability company, with an
office for the transaction of business located at 100 Corporate Woods,
Rochester, New York 14623, the MORTGAGOR to KEYBANK NATIONAL ASSOCIATION, a
national banking association with its principal office located at 50 Fountain
Plaza, Buffalo, New York 14202, the MORTGAGEE.
WITNESSETH, that to secure the payment of an indebtedness evidenced by a
certain Promissory Note bearing even date herewith in the principal sum of Four
Million Seven Hundred Thousand and 00/100 ($4,700,000.00) Dollars lawful money
of the United States, as the same may be modified, renewed or extended (the
"Note") which sum, with interest thereon is to be paid by Mortgagor to Mortgagee
in accordance with the terms of said Note; to secure the payment by Mortgagor to
Mortgagee of all indebtedness, liabilities and obligations now existing or which
may hereafter arise by reason of the Note, this Mortgage or any of the Loan
Documents (as that term is defined in the Note) or any renewals, extensions or
modifications of the same; to secure the payment of any future advances made to
Mortgagor pursuant to the Note, this Mortgage or any of the Loan Documents or
any renewals, extensions or modifications of the same; and to secure the
performance of each covenant, term and provision by Mortgagor to be performed
pursuant to this Mortgage or any other Loan Document or any renewals, extensions
or modifications of the same, Mortgagor hereby mortgages to Mortgagee, its
successors and assigns, the following described property (the "Mortgaged
Property") whether now owned or held or hereafter acquired:
ALL THAT TRACT OR PARCEL OF LAND situate in the Township of Summit, County
of Erie, Commonwealth of Pennsylvania, and being the same premises described in
Schedule "A" hereto annexed and made a part hereof (the "Premises").
ALL RIGHT, TITLE AND INTEREST of Mortgagor in and to any and all buildings,
structures and improvements, including without limitation, the foundations and
footings thereof, now or at any time hereafter erected, constructed or situated
upon the Premises or any part thereof (the "Improvements").
TOGETHER with all fixtures, chattels and articles of personal property now
or hereafter attached to or used in connection with the Premises, together with
any and all replacements thereof and additions thereto (the "Chattels"). This
Mortgage shall be considered a financing statement
- 1 -
<PAGE>
pursuant to the provisions of the Uniform Commercial Code, covering fixtures
which are affixed to the Premises. The types of collateral covered hereby are
described in this paragraph. The debtor is Erie Hotel LLC. The secured party is
KEYBANK NATIONAL ASSOCIATION. Their addresses are set forth above.
TOGETHER with all right, title and interest, if any, of Mortgagor of, in
and to the bed of any street, road or avenue, opened or proposed, in front of,
adjoining or abutting upon the Premises to the center line thereof
TOGETHER with any and all awards heretofore and hereafter made to the
present and all subsequent owners of the Premises by any governmental or other
lawful authorities for the taking by eminent domain of the whole or any part of
the Premises, or any easement therein, including any awards for any changes of
grade of streets, which said awards are hereby assigned to Mortgagee, who is
hereby authorized to collect and receive the proceeds of any such awards from
such authorities and to give proper receipts and acquittances therefor, and to
apply the same toward the payment of the amount owing on account of this
Mortgage and the Note, notwithstanding the fact that the amount owing thereon
may not then be due and payable.
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its
successors and assigns, PROVIDED ALWAYS that if Mortgagor shall pay or cause to
be paid to Mortgagee, its successors and assigns, said principal sum of money
and other charges mentioned and set forth in this Mortgage and in the Note,
together with interest thereon, then and from thence forth, the Mortgaged
Property and the estate hereby granted shall cease, determine and be void.
AND Mortgagor covenants with Mortgagee as follows:
1 . REPRESENTATIONS. Mortgagor hereby represents and warrants to Mortgagee
as follows:
(a) That the Loan Documents (as that term is defined in the Note) are
in all respects validand legally binding obligations, enforceable in
accordance with their respective terms.
(b) That the execution and delivery of the Loan Documents by Mortgagor
and any guarantor do not, and the performance and observance by Mortgagor
and any guarantor of their obligations thereunder will not, contravene or
result in a breach of (i) if Mortgagor or any guarantor purports to be a
limited liability company or a corporation, any provision of Mortgagor's or
any guarantor's articles of organization or operating agreement, or
corporate charter or by-laws, or, if Mortgagor or any guarantor purports to
be partnership, any provision of Mortgagor's or any guarantor's partnership
agreement or certificate, or (ii) any governmental requirements, or (iii)
any decree or judgment binding on Mortgagor or any guarantor, or (iv) any
agreement or instrument binding on Mortgagor or any guarantor or any of
their respective properties, nor will the same result in the creation of
any lien or security interest under any such agreement or instrument.
- 2 -
<PAGE>
(c) That there are no actions, suits, investigations or proceedings
pending, or, to the knowledge of Mortgagor, threatened against or affecting
Mortgagor (or any member of Mortgagor), any guarantor or the Mortgaged
Property, or involving the validity or enforceability of any of the Loan
Documents or the priority of the lien thereof, or which will affect
Mortgagor's ability to repay the Note, at law or in equity or before or by
any governmental authority.
(d) That Mortgagor has no knowledge of any violations or notices of
violations of any requirements.
(e) If Mortgagor or any guarantor purports to be a limited liability
company or a corporation, that (i) it is a limited liability company or a
corporation duly organized, validly existing and in good standing under the
laws of the state in which it is organized or incorporated, (ii) if
required by the laws of the state in which the Premises is located, it is
duly qualified to do business and is in good standing therein, (iii) it has
the power, authority and legal right to own and operate its properties and
assets, carry on the business now being conducted and proposed to be
conducted by it, and to engage in the transactions contemplated by the Loan
Documents, and (iv) the execution and delivery of the Loan Documents to
which it is a party and the performance and observance of the provisions
thereof have been duly authorized by all necessary actions.
(f) That all utility services necessary and sufficient for the
construction, development and operation of the Mortgaged Property for its
intended purposes are presently available to the Premises (or the
boundaries thereof if this Mortgage is executed in conjunction with a
construction loan) through dedicated public rights of way or through
perpetual private easements, approved by Mortgagee, with respect to which
the Mortgage creates a valid, binding and enforceable first lien,
including, but not limited to, water supply, storm and sanitary sewer, gas,
electric and telephone facilities, and drainage.
(g) That neither the Mortgaged Property nor any portion thereof is now
damaged or injured as result of any fire, explosion, accident, flood or
other casualty or has been the subject of any taking, and to the knowledge
of Mortgagor, no taking is pending or contemplated.
(h) That any brokerage commissions due in connection with the
transactions contemplated hereby have been paid in full and that any such
commissions coming due in the future will be promptly paid by Mortgagor.
Mortgagor agrees to and shall indemnify Mortgagee from any liability,
claims or losses arising by reason of any such brokerage commissions. This
provision shall survive the repayment of the Note and shall continue in
full force and effect so long as the possibility of such liability, claims
or losses exists.
(i) That the financial statements of Mortgagor and any guarantor
previously delivered to Mortgagee are true and correct in all respects,
have been prepared in accordance with generally accepted accounting
principles consistently applied, and fairly present the respective
financial conditions of Mortgagor and any guarantor as of the respective
dates thereof and the results of their operations for the periods covered
thereby; that no adverse change has occurred in the assets, liabilities, or
financial conditions reflected therein since the respective dates thereof,
and that no
- 3 -
<PAGE>
additional borrowings have been made by Mortgagor or any guarantor since
the date thereof other than the borrowing contemplated hereby.
(j) That all federal, state and other tax returns of Mortgagor and any
guarantor required by law to be filed have been filed, that all federal,
state and other taxes, assessments and other governmental charges upon
Mortgagor and any guarantor or their respective properties which are due
and payable have been paid, and that Mortgagor and any guarantor have set
aside on their books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods for which such returns have
been filed.
(k) That Mortgagor has made no contract or arrangement of any kind or
type whatsoever (whether oral or written, formal or informal), the
performance of which by the other party thereto could give rise to a lien
or encumbrance on the Mortgaged Property, except for contracts (all of
which have been disclosed in writing to Mortgagee).
(1) That the rights of way for all roads necessary for the full
utilization of the Improvements for their intended purposes have either
been acquired by the Mortgagor, the appropriate governmental authority or
have been dedicated to public use and accepted by such governmental
authority, and all such roads shall have been completed, or all necessary
steps shall have been taken by Mortgagor and such governmental authority to
assure the complete construction and installation thereof prior to the date
upon which access to the Mortgaged Property via such roads will be
necessary. Allcurb cuts, driveway permits and traffic signals necessary for
access to the Mortgaged Property are existing or have been fully approved
by the appropriate governmental authority.
(m) That no Event of Default (hereinbelow defined) exists and no event
which but for the passage of time, the giving of notice or both would
constitute an Event of Default has occurred.
2. THE INDEBTEDNESS. Mortgagor will pay the indebtedness as provided in the
Note or in any modification, renewal or extension of the Note.
3 . INSURANCE. At all times that the Note is outstanding, including without
limitation during any construction period (a "Construction Period"), Mortgagor
shall maintain, or shall cause to be maintained, insurance with respect to the
Premises the Improvements and the Chattels against such risks and for such
amounts as are customarily insured against by businesses of like size and type
paying, as the same become due and payable, all premiums in respect thereto,
including but not limited to:
(a) Prior to completion of construction of the Improvements, builder's
risk all risk (or equivalent coverage) insurance upon any work done or
material furnished in connection with construction of the Improvements,
issued to Mortgagor and Mortgagee and written in non-reporting completed
form in the principal amount of the Note and with respect to the
Improvements and at such time that builder's risk insurance shall not be
available due to completion of the construction
- 4 -
<PAGE>
of the Improvements, or if all Improvements have been completed, insurance
protecting the interests of the Mortgagor and Mortgagee as their interests
may appear against loss or damage to the Improvements by fire, lightning,
flood and other casualties normally insured against, with a uniform
standard extended coverage endorsement, such insurance at all times to be
in an amount of the Note or the total cash replacement value of the
Improvements not covered by builder's risk insurance, as determined at
least once every three years by a recognized appraiser or insurer selected
by the Mortgagor and approved by the Mortgagee.
(b) Boiler and machinery insurance covering physical damage to the
Improvements and to the major components of any central heating, air
conditioning or ventilation systems and such other equipment as Mortgagee
shall designate.
(c) Business interruption insurance in an amount sufficient to prevent
Mortgagor from becoming a co-insurer within the terms of the applicable
policies and sufficient to cover the continued loss of income for a period
of one (1) year from the Mortgaged Property and, in all events, based upon
the projected expenses and net operating income of the Mortgage Property,
in an amount not less than $1,000,000.00.
(d) Workers' compensation insurance, disability benefits insurance, and
such other form of insurance which the Mortgagor is required by law to
provide, covering loss resulting from injury, sickness, disability or death
of employees of Mortgagor who are located at or assigned to the Premises or
who are responsible for the construction of the Improvements.
(e) Insurance protecting Mortgagor and Mortgagee against loss or losses
from liabilities imposed by law or assumed in any written contract and
arising from personal injury and death or damage to the property of others
caused by accident or occurrence, in such amounts as may be designated from
time to time by Mortgagee, excluding liability imposed upon the Mortgagor
by any applicable workers' compensation law, or such other amounts as may
be required in writing by the Mortgagee; and a blanket excess liability
policy in an amount reasonably satisfactory to the Mortgagee protecting
Mortgagor and Mortgagee against any loss or liability or damage for
personal injury or property damage.
4. OTHER INSURANCE PROVISIONS, All insurance required under this Mortgage
shall be procured and maintained in financially sound and generally recognized
responsible insurance companies selected by the Mortgagor and authorized to
write such insurance in the Commonwealth of Pennsylvania and acceptable to the
Mortgagee. Such insurance may be written with deductible amounts comparable to
those on similar policies carried by other entities engaged in businesses
similar in size, character and other respects to those in which the Mortgagor is
engaged. All policies evidencing such insurance shall provide for (i) payment of
the losses to Mortgagor and Mortgagee as their respective interests may appear,
and (ii) at least thirty (30) days written notice to Mortgagor and Mortgagee
prior to cancellation, reduction in policy limits or material change in coverage
thereof. The insurance required by Section 3(a) shall contain a Pennsylvania
mortgagee endorsement in favor of Mortgagee. All insurance required hereunder
shall be in form, content and coverage satisfactory to the Mortgagee. The
original policy, or a certified
- 5 -
<PAGE>
duplicate copy thereof, for all insurance required hereby shall be delivered to
Mortgagee. So long as no Event of Default shall have occurred and is continuing,
the Mortgagor may adjust losses and receive insurance proceeds in amounts not
greater than $250,000.00 without the prior written consent of the Mortgagee. If
an Event of Default has occurred and is continuing, or if the insurance proceeds
to be paid with respect to a casualty are equal to or greater than $250,000.00,
then the Mortgagor may not adjust a casualty loss or receive such proceeds
without the prior written consent of the Mortgagee. The proceeds of any
insurance equal to or greater than $250,000.00 shall be paid to the Mortgagee
and may be applied by the Mortgagee toward the payment of any monies secured by
this Mortgage, or, may be paid over, wholly or in part, to the Mortgagor for the
repair of the Improvements or for any other purpose or object satisfactory to
the Mortgagee. The Mortgagor shall be obligated to repair and restore the
Mortgaged Property following the occurrence of a casualty only if the proceeds
of insurance are made available to the Mortgagor. Mortgagor shall deliver to
Mortgagee at least thirty (3 0) days prior to the expiration date of any
insurance coverages required hereunder, a certificate reciting that there is in
full force and effect, with a term covering at least the next succeeding year,
insurance in the amounts and of the types required hereunder.
5. ALTERATIONS. No Improvements shall be structurally altered, removed or
demolished without the prior written consent of Mortgagee.
6. APPOINTMENT OF RECEIVER. Mortgagee in any action to foreclose this
Mortgage shall be entitled, without notice and as a matter of right and without
regard to the adequacy of any security of the indebtedness or the solvency of
Mortgagor, upon application to any court having jurisdiction, to the appointment
of a receiver of the rents, income and profits of the Mortgaged Property.
If an Event of Default (hereinbelow defined) occurs under this Mortgage, as
a matter of right and without regard to the adequacy of any security for the
Note, the Mortgagor, upon demand of the Mortgagee, shall surrender the
possession of, and it shall be lawful for Mortgagee, by such officer or agent as
it may appoint, to take possession, of all or any part of the Mortgaged Property
together with the books, papers, and accounts of the Mortgagor pertaining
thereto, and to hold, operate and manage the same, and from time to time to make
all needed repairs and improvements as Mortgagee shall deem wise; and, if
Mortgagee deems it necessary or desirable, to complete construction and
equipping of any Improvements and in the course of such construction or
equipping to make such changes to the same as it may deem desirable; and
Mortgagee may sell the Mortgaged Property or any part thereof, or institute
proceedings for the complete or partial foreclosure of the lien of this Mortgage
on the Mortgaged Property, or lease the Premises or any part thereof in the name
and for the account of the Mortgagor or Mortgagee and collect, receive and
sequester the rents, revenues, earnings, income, products and profits therefrom,
and out of the same and any other monies received hereunder pay or provide for
the payment of, all proper costs and expenses of taking, holding, leasing,
selling and managing the same, including reasonable compensation to Mortgagee,
its agents and counsel, and any charges of Mortgagee hereunder, and any taxes
and other charges prior to the lien of this Mortgage which Mortgagee may deem it
wise to pay.
- 6 -
<PAGE>
7. PAYMENT OF TAXES. Mortgagor will pay all taxes, assessments, sewer rents
or water rates or sums due under any payment in lieu of tax agreement ("Pilot
Agreement") and in default thereof, Mortgagee may pay the same. In the event
that Mortgagee shall pay any such tax, assessment, sewer rent or water rate,
Mortgagee shall have the right, among other rights, to declare the amount so
paid with interest thereon immediately due and payable, and upon default of
Mortgagor in paying any such amount with interest thereon, Mortgagee shall have
the right to foreclose for such amount subject to the continuing lien of this
Mortgage for the balance of the mortgage indebtedness not then due.
In the event that the Mortgagor should fail to pay any sum the Mortgagor
has agreed to pay pursuant to this covenant for a period in excess of sixty (60)
days after the same is due and payable, in addition to any other remedies
available to the Mortgagee hereunder, the Mortgagee may, at its option, require
that the Mortgagor deposit with the Mortgagee, monthly, one-twelfth (1/12th) of
the annual charges for taxes and any other sums the Mortgagor is obligated to
pay pursuant to this covenant and the Mortgagor shall make such deposits with
the Mortgagee. The Mortgagor shall simultaneously therewith deposit with the
Mortgagee a sum of money which together with the monthly installments
aforementioned will be sufficient to make payment of all sums required to be
paid hereunder at least thirty (30) days prior to the due date of such payments,
it being understood that the Mortgagee shall calculate the amount of such
deposits and notify the Mortgagor of the sum due. Should an Event of Default
(hereinbelow defined) occur, the funds deposited with the Mortgagee pursuant to
this provision may be applied in payment of the charges for which said funds
shall have been deposited or to the payment of any other sums secured by this
Mortgage as the Mortgagee sees fit.
8. PAYMENT OF MORTGAGE TAXES. Mortgagor shall pay all taxes imposed by any
statute, order or regulation, whether said tax is imposed at the time of
recording or subsequent thereto. This obligation shall survive the satisfaction
or other termination of this Mortgage.
9. STATEMENT OF AMOUNT DUE. Mortgagor, within five (5) days upon request in
person or within fifteen (15) days upon request by mail, will furnish a written
statement duly acknowledged of the amount due on this Mortgage and whether any
offsets or defenses exist against the said indebtedness.
10. NOTICES. Any notices required or permitted to be given hereunder shall
be: (i) personally delivered or (ii) given by registered or certified mail,
postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service, in each instance addressed to the addresses set forth at the
head of this Mortgage, or such other addresses as the parties may for themselves
designate in writing as provided herein for the purpose of receiving notices
hereunder. All notices shall be in writing and shall be deemed given, in the
case of notice by personal delivery, upon actual delivery, and in the case of
appropriate mail or courier service, upon deposit with the U.S. Postal Service
or delivery to the courier service.
11. WARRANTY OF TITLE. Mortgagor warrants the title to the Premises,
Improvements and Chattels.
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<PAGE>
12. SALE IN ONE PARCEL. In case of a sale, the Premises may be sold in one
parcel together with the Improvements and Chattels. Should the Premises consist
of more than one parcel, in the event of a foreclosure of this Mortgage or any
mortgage at any time consolidated with this Mortgage, Mortgagor agrees that
Mortgagee shall be entitled to a judgment directing the referee appointed in the
foreclosure proceeding to sell all of the parcels constituting the Premises at
one foreclosure sale, either as a group or separately and that the Mortgagor
expressly waives any right that it may now have or hereafter acquire to (i)
request or require that the parcels be sold separately or (ii) request, if
Mortgagee has elected to sell parcels separately, that there be a determination
of any deficiency amount after any such separate sale or otherwise require a
calculation of whether said parcel or parcels separately sold were conveyed for
their "fair market value".
13. ASSIGNMENT OF RENTS AND LEASES. The rents, income, security deposits
and profits of the Premises and all leases at any time existing are hereby
assigned to Mortgagee as further security for the payment of said indebtedness,
and Mortgagor shall, on demand, surrender possession of the Premises and
Improvements and Chattels to Mortgagee, and hereby consents that, at any time
after such demand, Mortgagee may enter upon and take possession of the Premises
and Improvements and Chattels and let the same and collect all rents, income and
profits therefrom which are due or to become due and apply the same, after
payment of all charges and expenses, on account of any part of said
indebtedness, whether matured or not, but Mortgagee hereby waives the right to
enter upon and take possession of the Premises and Improvements and Chattels for
the purpose of collecting said rents, income and profits, and Mortgagor shall be
entitled to collect and receive said rents, income and profits (except as might
be otherwise provided in any assignment of rents and leases executed in
connection with this Mortgage), until the occurrence of an Event of Default. If
an Event of Default occurs, Mortgagee, by virtue of such right to possession, or
as the agent of Mortgagor may dispossess, by the usual summary proceedings, any
tenant then or thereafter in default in the payment of any rent, and Mortgagor
hereby irrevocably appoints Mortgagee the agent of Mortgagor for such purpose.
In the event that Mortgagor is an occupant of the Premises or the Improvements,
Mortgagor agrees to surrender possession of the Premises or Improvements so
occupied as Mortgagee may demand and in default of so doing, Mortgagor may also
be dispossessed by the usual summary proceedings. Mortgagor makes these
covenants for the benefit of Mortgagee and any subsequent owner of the Mortgaged
Property and these covenants shall become effective immediately after the
happening of any Event of Default solely on the determination of Mortgagee,
provided Mortgagee shall give notice of such determination to Mortgagor. In case
of foreclosure and the appointment of a receiver of rents, the covenants herein
contained shall inure to the benefit of such receiver.
14. NEGATIVE COVENANTS. Mortgagor will not (i) execute an assignment of the
rents, income or profits, or any part thereof from the Mortgaged Property except
to Mortgagee, or (ii) except where the tenant is in default thereunder,
terminate or consent to the cancellation or surrender of any lease of the
Premises or Improvements or of any part thereof, now existing or hereafter to be
made, having an unexpired term of two (2) years or more, except that any lease
may be canceled provided that promptly after the cancellation or surrender
thereof a new lease is entered into with a new tenant having a credit standing,
in the judgment of the Mortgagee, at least equivalent to that of the tenant
whose lease was canceled, on substantially the same terms as the terminated or
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canceled lease, or modify any such lease so as to shorten the unexpired term
thereof or so as to decrease the amount of the rents payable thereunder, or
(iii) accept prepayments of any sums to become due under such leases, except
prepayments of rent for more than one (1) month in advance or prepayments in the
nature of security for the performance of the tenants thereunder, (iv) in any
other manner impair the value of the Mortgaged Property or the security of this
Mortgage or (v) further encumber, alienate, hypothecate, grant a security
interest in or grant any other interest whatsoever in the Mortgaged Property. No
rent reserved under any lease of the Premises or Improvements has been assigned
or anticipated, and no rent for any period subsequent to the date hereof has
been collected in advance of the due date thereof Mortgagor will not execute any
lease of all or a substantial portion of the Premises or Improvements except for
actual occupancy by the tenant thereunder, and will at all times promptly and
faithfully perform, or cause to be performed, all of the covenants, conditions
and agreements contained in all leases of the Premises or Improvements now or
hereafter existing, on the part of the landlord thereunder to be kept and
performed and will at all times do all things necessary to compel performance by
the tenant under each lease of all obligations, covenants and agreements by such
tenant to be performed thereunder. If any of such leases provide for the giving
by the tenant of certificates with respect to the status of such leases,
Mortgagor shall exercise its right to request such certificates within five (5)
days of any demand therefor by Mortgagee. Mortgagor shall furnish to Mortgagee,
upon request of Mortgagee to do so, a written statement containing the names of
all tenants of the Premises or Improvements, the terms of their respective
leases, the space occupied and the rentals payable thereunder.
15. APPRAISAL: LOAN TO VALUE RATIO. For the purposes of this Section, the
following terms shall be defined as follows:
(a) "Appraisal" shall mean an appraisal of the fair market
value ("as stabilized") of the Mortgaged Property prepared by an Appraiser.
(b) "Appraiser" shall mean an appraiser selected by Mortgagor and
approved by Mortgagee.
(c) "Loan To Value Ratio" shall mean the percentage obtained by
dividing the then outstanding principal balance under the Note by the fair
market value of the Premises set forth in the Appraisal.
(d) "Target Loan To Value Ratio" shall mean sixty (60%) percent or
less.
Within ninety (90) days from the date Mortgagee has mailed a written notice
to Mortgagor requesting the same, Mortgagor shall provide Mortgagee, at
Mortgagor's expense, with an Appraisal of the Mortgaged Property. An Appraisal
may be required not more frequently than once every twelve (12) months except
that it may also be required prior to any extension or renewal of the Note.
When Mortgagee receives the Appraisal, it will determine the Loan To Value
Ratio and if the Loan To Value Ratio is greater than the Target Loan To Value
Ratio, the Mortgagor must, within thirty (30) days after receipt of the
Appraisal, do one of the following:
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(e) Provide Mortgagee with collateral in addition to the Mortgaged
Property (and any other collateral for the Note) which is in all respects
acceptable to the Mortgagee which will reduce the Loan To Value Ratio to
the Target Loan To Value Ratio; or
(f) Make such principal payments (which will be accepted by Mortgagee
without the payment of any prepayment penalty chargeable under the Note) as
will reduce the principal balance of the Note to an amount which will
reduce the Loan To Value Ratio to the Target Loan To Value Ratio; or
(g) Pay all sums due Mortgagee under the Note or any other Loan
Document (as that term is defined in the Note).
16. BOOKS AND RECORDS.
(a) In addition to any requirements elsewhere in the Loan Documents,
Mortgagor shall keep and maintain at all times at Mortgagors' addresses
stated in this Mortgage, or such other place as Mortgagee may approve in
writing, complete and accurate books of accounts and records adequate to
reflect correctly the results of the operation of the Mortgaged Property
and copies of all written contracts, leases and other instruments which
affect the Mortgaged Property. Such books, records, contracts, leases and
other instruments shall be subject to examination and inspection at any
reasonable time by Mortgagee, upon reasonable notice.
(b) Upon request of Mortgagee in writing, Mortgagor shall promptly
provide Mortgagee with all documents reasonably requested by Mortgagee
prepared in the form and manner called for in such request and as may
reasonably relate to the operation or condition thereof, or the financial
condition of Mortgagor or any party obligated on the Note or under any
guaranty, including, without limitation, all leases or leasehold interests
granted to or by Mortgagor, operating statements, profit and loss
statements and balance sheets, personal financial statements of Mortgagor
or income tax returns (including quarterly returns), any or all of which
documents shall be audited or certified as true and accurate by a certified
public accountant, if requested by Mortgagee, and shall cover such period
or periods as may be specified by Mortgagee.
17. FUTURE LAWS. In the event of the passage after the date of this
Mortgage of any federal state or municipal law, deducting from the value of land
for the purposes of taxation any lien thereon, or changing in any way, the laws
for the taxation of mortgages or debts secured by mortgages, or the manner of
collection of any such taxes, so as to affect Mortgagee, this Mortgage, or said
indebtedness, Mortgagee shall have the right to give thirty (30) days' written
notice to Mortgagor requiring the payment of said indebtedness. If such notice
be given, said indebtedness shall become due, payable and collectible at the
expiration of said thirty (30) days.
18. [INTENTIONALLY OMITTED]
19. PROVISIONS REGARDING USE OF MORTGAGED PROPERTY. Mortgagor warrants and
represents that:
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(a) Mortgagor is not responsible for any action or omission, and does
not know of any action or omission by any prior owner, that would cause the
Mortgaged Property to be subject to forfeiture pursuant to any law, rule or
regulation (a "Forfeiture").
(b) The Mortgaged Property has not been acquired with any proceeds from
a transaction or an activity that would cause the Mortgaged Property to be
subject to Forfeiture.
Mortgagor covenants that Mortgagor will not use, and will not permit
any third party to use, the Mortgaged Property or any portion thereof or
interest therein for any purpose or activity that would cause a Forfeiture
thereof
20. ACTIONS AND PROCEEDINGS. If any action or proceeding be commenced to
which action or proceeding Mortgagee is made a party and in which it becomes
necessary in the opinion of Mortgagee to defend or uphold the lien of this
Mortgage, all sums paid by Mortgagee for the expense of any litigation to
prosecute and defend the rights and lien created by this Mortgage, including
reasonable counsel fees, costs and allowances, shall, together with interest
thereon be a lien on the Mortgaged Property and secured by this Mortgage and
shall be collectible in like manner as said indebtedness and shall be paid by
Mortgagor on demand.
21. SECURITY INTEREST UNDER THE UNIFORM COMMERCIAL CODE. Mortgagee is
authorized to sign as the agent of Mortgagor such agreement in addition to this
Mortgage as Mortgagee at any time may deem necessary or proper or require to
grant to Mortgagee a perfected security interest in the Chattels. Mortgagor
hereby authorizes Mortgagee to file financing statements (as such term is
defined in said Uniform Commercial Code) with respect to the Chattels, at any
time, without the signature of Mortgagor. Mortgagor will, however, at any time
upon request of Mortgagee, sign such financing statements. Mortgagor will pay
all filing fees for the filing of such financing statements and for the refiling
thereof at the times required, in the opinion of Mortgagee, by said Uniform
Commercial Code. If the lien of this Mortgage be subject to any security
agreement covering the Chattels, then in the event of any default under this
Mortgage, all the right, title and interest of Mortgagor in and to any and all
of the Chattels is hereby assigned to Mortgagee, together with the benefit of
any deposits or payments now or hereafter made thereof by Mortgagor or the
predecessors or successors in title of Mortgagor in the Mortgaged Property.
22. CONDEMNATION. Any and all awards heretofore and hereafter made to
Mortgagor and all subsequent owners of the Mortgaged Property by any
governmental or other lawful authorities for the taking by eminent domain of the
whole or any part of the Mortgaged Property or any easement therein, including
any awards for any changes of grade of streets, are hereby assigned to
Mortgagee. So long as no Event of Default has occurred and is continuing, the
Mortgagor may settle and adjust claims and receive condemnation awards in
amounts less than $250,000.00 without the prior written consent of the
Mortgagee. In the event that an Event of Default has occurred and is continuing,
or if any such claim is equal to or greater than $250,000.00, then the Mortgagee
is hereby authorized to collect and receive the proceeds of any such awards from
such authorities, to give proper receipts and acquittances therefor and to apply
the same toward the
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payment of the amount owing on account of this Mortgage and said indebtedness,
notwithstanding the fact that the amount owing thereon may not then be due and
payable; and Mortgagor hereby covenants and agrees, upon request, to make,
execute and deliver any and all assignments and other instruments sufficient for
the purpose of assigning the aforesaid awards to Mortgagee free, clear and
discharged of any and all encumbrances of any kind or nature whatsoever.
Mortgagor shall continue to make all payments required by the Note until any
such award shall have been actually received by Mortgagee and any reduction in
said indebtedness resulting from the application by Mortgagee of such award
shall be deemed to take effect only on the date of such receipt.
Notwithstanding the foregoing, if any one or more of the portions of the
Mortgaged Property described in subparagraphs (a) and (b) below shall be damaged
or taken through condemnation, either temporarily or permanently, then the
entire balance due under the Note and any other Loan Documents shall, at the
option of Mortgagee, become immediately due and payable:
(a) Any portion or portions of the Improvements or the support or
foundation of any portion or portions of the Improvements; or
(b) Any portion or portions of the Premises which, when so damaged or
taken, would result either in (i) an impairment of access to the
Improvements from the publicly dedicated rights of way now adjoining the
Premises, or (ii) the failure of the Improvements to comply with any
building code, zoning or other governmental laws or regulations, lease or
other agreement to which the Mortgaged Property is subject.
Mortgagor authorizes Mortgagee, at Mortgagee's option, following the
occurrence and during the continuance of an Event of Default, as attorney in
fact for Mortgagor, to commence, appear in and prosecute in Mortgagor's or
Mortgagee's name, any action or proceeding relating to any condemnation or other
taking of the Mortgaged Property and to settle or compromise any claim in
connection with such condemnation or other taking.
23. TITLE TO MORTGAGED PROPERTY. Mortgagor is now the owner of the
Mortgaged Property upon which this Mortgage is a valid first lien for the amount
above specified, with interest thereon at the rate set forth in the Note and
there are no defenses or offsets to this Mortgage or to the said indebtedness.
24. LEASES OF THE MORTGAGED PROPERTY. Mortgagor will not lease all or any
portion of the Mortgaged Property or amend, modify or terminate any now existing
or future lease of the Mortgaged Property without the prior written consent of
Mortgagee. Notwithstanding the foregoing, all leases covering more than fifteen
percent (I 5%) of the gross leasable area of the Mortgaged Property (if the
Mortgaged Property is improved rental property) must require the tenant
thereunder to provide Mortgagee with annual financial statements of the tenant
certified to by an independent certified public accountant. Mortgagor, at
Mortgagee's request, shall furnish Mortgagee with executed copies of all leases
hereafter made of all or any part of the Mortgaged Property, and all leases now
or hereafter entered into will be in form and substance subject to the approval
of
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<PAGE>
Mortgagee. Upon Mortgagee's request, Mortgagor shall make a separate and
distinct assignment to Mortgagee, as additional security, of all leases
hereafter made a part of the Mortgaged Property.
25. TRANSFER OF MORTGAGED PROPERTY. In the event of the sale, conveyance or
transfer, by deed, any other voluntary or involuntary act or by operation of law
or otherwise (including the entry into any land sale contract or other similar
agreement) of-any interest in any of the stock of Mortgagor, if Mortgagor be a
corporation, or partnership interest, if Mortgagor be a partnership, or of the
Mortgaged Property or a part thereof, while this Mortgage shall remain a lien
thereon, the full balance of the indebtedness then remaining unpaid, with
interest, shall, at the option of the Mortgagee, or its assigns, be immediately
due and payable without notice or demand unless the prior written consent of the
Mortgagee to such sale, conveyance, or transfer shall have been obtained. A
mortgage of the Mortgaged Property to any mortgagee other than the Mortgagee
shall be deemed a conveyance for the purpose of this Section.
26. ACCESS. Mortgagee, by its employees or agents, shall at all times have
the right to enter upon the Mortgaged Property during reasonable business hours
for the purpose of examining and inspecting the same.
27. [INTENTIONALLY OMITTED].
28. PERFORMANCE OF MORTGAGOR'S COVENANTS BY MORTGAGEE. In the event of any
default in the performance of any of the covenants, terms, or provisions of
Mortgagor under this Mortgage, Mortgagee may, at the option of Mortgagee,
perform the same and the cost thereof, with interest, shall immediately be due
from Mortgagor to Mortgagee and secured by this Mortgage.
29. REMIEDIES NOT EXCLUSIVE. Mortgagee shall have the right from time to
time, to take action to recover any amounts of past due principal indebtedness
and interest thereon, or any installment of either, or any other sums required
to be paid under the covenants, terms and provisions of this Mortgage or the
Note, as the same become due, whether or not the principal indebtedness secured,
or any other sums secured by the Note or this Mortgage shall be due, and without
prejudice to the right of Mortgagee thereafter to bring an action of
foreclosure, or any other action, for default or defaults by Mortgagor existing
at the time such earlier action was commenced.
30. ADDITIONAL ACTS AND DOCUMENTS. Mortgagor covenants that it will do,
execute, acknowledge, deliver, file and/or record, or cause to be recorded every
and all such further acts, deeds, conveyances, advances, mortgages, transfers
and assurances, in law as Mortgagee shall require for the better assuring,
conveying, transferring, mortgaging, assigning and confirming unto Mortgagee all
and singular the Mortgaged Property.
31. REMEDIES CUMULATIVE. The rights and remedies herein afforded to
Mortgagee shall be cumulative and supplementary to and not exclusive of any
other rights and remedies afforded the holder of this Mortgage and the Note.
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<PAGE>
32. SUCCESSORS. All of the provisions of this Mortgage shall inure to the
benefit of Mortgagee and of any subsequent holder of this Mortgage and shall be
binding upon Mortgagor and each subsequent owner of the Mortgaged Property.
33. EFFECT OF RELEASES. Mortgagee, without notice, may release any part of
the security described herein, or any person or entity liable for any
indebtedness secured hereby without in any way affecting the lien hereof upon
any part of the security not expressly released, and may agree with any party
obligated on said indebtedness or having any interest in the security described
herein to extend the time for payment of any part or all of the indebtedness
secured hereby. Such agreement shall not in any way release or impair the lien
hereof, but shall extend the lien hereof as against the title of all parties
having any interest in said security, which interest is subject to said lien,
and no such release or agreement shall release any person or entity obligated to
pay any indebtedness secured hereby.
34. WAIVERS. Any failure by Mortgagee to insist upon the strict performance
by Mortgagor Of any of the covenants, terms and provisions of this Mortgage
shall not be deemed to be a waiver of any of the covenants, terms and provisions
of this Mortgage, and Mortgagee, notwithstanding any such failure, shall have
the right thereafter to insist upon the strict performance by Mortgagor of any
and all of the covenants, terms and provisions of this Mortgage to be performed
by Mortgagor. Neither Mortgagor nor any other person or entity now or hereafter
obligated for the payment of the whole or any part of said indebtedness shall be
relieved of such obligation by reason of (i) the failure of Mortgagee to comply
with any request of Mortgagor, or of any other person or entity so obligated,
(ii) the failure of Mortgagee to take action to foreclose this Mortgage or
otherwise enforce any of the covenants, terms and provisions of this Mortgage or
the Note, (iii) the release, regardless of consideration, of the whole or any
part of the security held for payment of said indebtedness or (iv) any agreement
or stipulation between any subsequent owner or owners of the Mortgaged Property
and Mortgagee modifying the covenants, terms and provisions of this Mortgage or
the Note without first having obtained the consent of Mortgagor or such other
person or entity. In the last mentioned event, Mortgagor and all such other
persons or entities shall continue liable to make such payments according to the
terms and provisions of any such agreement or extension or modification unless
expressly released and discharged in writing by Mortgagee. Mortgagee may
release, regardless of consideration, any part of the security held for payment
of said indebtedness without, as to the remainder of the security, in any way
impairing or affecting the lien of this Mortgage or the priority of such lien
over any subordinate lien. Mortgagee may resort for the payment of said
indebtedness to any other security therefor held by Mortgagee in such order and
manner as Mortgagee may elect.
35. INTEREST ON ADVANCES. Wherever, under the provisions of this Mortgage
or by law, Mortgagee is entitled to interest on advances made or expenses
incurred, such interest shall be computed at a rate per annum which shall be the
interest rate payable under the Note.
36. MORTGAGEE NOT OBLIGATED. Nothing herein contained shall be construed as
making the payment of any insurance premiums, taxes or assessments obligatory
upon Mortgagee, although Mortgagee may pay same, or as making Mortgagee liable
in any way for loss,
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damage or injury, resulting from the non-payment of any such insurance premiums,
taxes or assessments.
37. ADVANCES. Mortgagor will receive the advances secured by this Mortgage
and will hold the right to receive such advances as a trust fund to be applied
first for the purpose of paying the cost of the improvement and will apply the
same first to the payment of the cost of the improvement before using any part
of the total of the same for any other purpose.
38. ENVIRONMENTAL WARRANTEES AND COVENANTS.
(a) Warranties. Mortgagor makes the following representations and
warranties, to the best of its knowledge, except as described in either
environmental assessment report furnished by Mortgagor to Mortgagee in
connection with the Mortgaged Property, (i) Mortgagor (or the present owner
of the Mortgaged Property, if different) is in compliance in all respects
with all applicable federal, state and local laws and regulations,
including, without limitation, those relating to toxic and hazardous
substances and other environmental matters (the "Laws"), (ii) no portion of
the Mortgaged Property is being used or has been used at any previous time,
-for the disposal, storage, treatment, processing or other handling of any
hazardous or toxic substances, in a manner not in compliance with the Laws,
(iii) the soil and any surface water and ground water which are a part of
the Mortgaged Property are free from any solid wastes, toxic or hazardous
substance or contaminant and any discharge of sewage or effluent; and (iv)
neither the federal government nor the Commonwealth of Pennsylvania
Department of Environmental Protection or any other governmental or quasi
governmental entity has filed a lien on the Mortgaged Property, nor are
there any governmental judicial or administrative actions with respect to
environmental matters pending, or to the best of the Mortgagor's knowledge,
threatened, which involve the Mortgaged Property.
(b) Inspection. If Mortgagee has a reasonable basis therefore,
Mortgagor agrees that Mortgagee or its agents or representatives may, at
any reasonable time, upon reasonable notice and at Mortgagor's expense
inspect Mortgagor's books and records and inspect and conduct any tests on
the Mortgaged Property including taking soil samples in order to determine
whether Mortgagor is in continuing compliance with the Laws, so long as the
Mortgaged Property is restored to its condition prior to the commencement
of such tests.
(c) Agreement to Comply. If any environmental contamination is found on
the Mortgaged Property for which any removal or remedial action is required
pursuant to Law, ordinance, order, rule, regulation or governmental action,
Mortgagor agrees that it will at its sole cost and expense, take such
removal or remedial action promptly and to Mortgagee's satisfaction.
(d) Indemnification. Mortgagor agrees to defend, indemnify and hold
harmless Mortgagee, its employees, agents, officers and directors from and
against any claims, actions, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses (including, without limitation,
reasonable attorney and consultant fees, investigations and laboratory
fees, court costs and litigation expenses of whatever kind or nature known
or unknown, contingent or otherwise) arising out of or in any way related
to: (i) the past or present disposal, release or threatened release
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of any hazardous or toxic substances on the Mortgaged Property; (ii) any
personal injury (including wrongful death or property damage, real or
personal) arising out of or related to such hazardous or toxic substances;
(iii) any lawsuit brought or threatened, settlement reached or government
order given relating to such hazardous or toxic substances; and/or (iv) any
violation of any law, order, regulation, requirement, or demand of any
government authority, or any policies or requirements of Mortgagee, which
are based upon or in any way related to such hazardous or toxic substances.
(e) Other Sites. Mortgagor knows of no on-site or off-site locations
where hazardous or toxic substances from the operation of any Improvement
have been stored, treated, recycled or disposed of
(f) Leases. Mortgagor agrees not to lease or permit the sublease of the
Mortgaged Property to a tenant or subtenant whose operations may result in
contamination of the Mortgaged Property with hazardous or toxic substances.
(g) Non-Operation by Mortgagee. Mortgagor acknowledges that any action
Mortgagee takes under this Mortgage shall be taken to protect Mortgagee's
security interest only; Mortgagee does not hereby intend to be involved in
the operations of the Mortgagor.
(h) Compliance Determinations. Mortgagor acknowledges that any
determinations Mortgagee makes under this Section regarding compliance with
environmental laws shall be made for Mortgagee's benefit only and are not
intended to be relied upon by any other party.
(i) Survival of Conditions. The provisions of ties Section shall be in
addition to any other obligations and liabilities Mortgagor may have to
Mortgagee at common law, and shall survive the transactions contemplated
herein, subject to the limitations described in Section 4 of that certain
Hazardous Substances Indemnity Agreement by and between the Mortgagor and
the Mortgagee of even date herewith.
(j) Definitions. The term "hazardous substance" shall include, without
limit, any substance or material defined in 42 U.S.C. Section 9601 (as the
same may be amended from time to time), the Hazardous Materials
Transportation Act (as amended from to time), and any analogous
Commonwealth of Pennsylvania statute (as may be amended from time to time)
and in any regulations adopted or publications promulgated pursuant to any
of the foregoing.
39. EVENTS OF DEFAULT. The whole of the principal sum of the indebtedness
secured hereby and interest thereon and all other sums due and payable hereunder
shall become due, at the option of Mortgagee, if one or more of the following
events (an "Event of Default") shall happen:
(a) The occurrence of an "Event of Default" under the Note; or
(b) If Mortgagor defaults in the payment of any tax, water rate or
sewer rent or payment under any Pilot Agreement against the Mortgaged
Property for thirty (30) days after the
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same become due and payable or fails to exhibit to Mortgagee, within thirty
(30) days after demand, receipts showing payment of all taxes, water rates
or sewer rents; or
(c) The actual or threatened removal demolition or structural
alteration, in whole or in part, of any Improvement, without the prior
written consent of Mortgagee; or the removal, demolition or destruction in
whole or in part, of any Chattels without replacing the, same with Chattels
at least equal in quality and condition to those replaced, free from any
security interest or other encumbrance thereon and free from any
reservation of title thereto; or the commission of any waste in respect to
the Mortgaged Property; or
(d) Failure of Mortgagor to pay within fifteen (I 5) days after notice
and demand any installment of any assessment made against the Premises for
local improvements, heretofore or hereafter made, which assessment is, or
may become, a lien on the Premises prior to the lien of this Mortgage,
notwithstanding the fact that such installment be not due and payable at
the time of such notice and demand; or
(e) Failure of Mortgagor to pay the said indebtedness secured by this
Mortgage within (30) days after notice and demand, in the event of the
passage after the date of this Mortgage of any federal, state or municipal
law deducting from the value of land for the purpose of taxation any Hen
thereon, or changing in any way the laws now in force for the taxation of
mortgages, or of debts secured by mortgages, or the manner of collection of
any such taxes, so as to affect Mortgagee, this Mortgage or the
indebtedness which is secured, notwithstanding that Mortgagor, before or
after such notice, may have the option to pay or contest the payment of
such tax; or
(f) Failure of Mortgagor to maintain the Improvements on the Premises
in a rentable or tenantable state of repair to the satisfaction of
Mortgagee, for thirty (3 0) days after notice of such failure has been
given to Mortgagor, or to comply with any order or requirement of any
municipal, state, federal or other governmental authority having
jurisdiction of the Premises within thirty (30) days after such order or
requirement shall have been issued by any such authority; or failure of
Mortgagor or of any tenant holding under Mortgagor, to comply with any and
all and singular the statutes, requirements, orders or decrees of any
federal, state or municipal authority relating to the use of the Mortgaged
Property, or of any part thereof, or failure of Mortgagor to observe and
timely perform all of the covenants, terms and provisions contained in any
lease now or hereafter affecting the Premises or the Improvements or any
portion thereof, on the part of the landlord to be observed and performed;
or
(g) Failure of Mortgagor, in the event of the entry of a final judgment
for the payment of money against Mortgagor, to discharge such judgment or
to have it stayed pending appeal within thirty (30) days from the entry
thereof, or if such judgment shall be affirmed on appeal, the failure to
discharge such judgment within thirty (30) days from the entry of such
affirmance; or
(h) Failure of Mortgagor to pay within fifteen (I 5) days after notice
and demand any filing or refiling fees required hereunder; or
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(i) Failure of Mortgagor or any occupant of the Mortgaged Property, to
allow or permit Mortgagee, or its duly authorized agent, to inspect said
Mortgaged Property at any time and from time to time during reasonable
business hours and following reasonable notice; or
(j) Default for thirty (30) days after notice and demand in the
observance or performance of any other covenant or agreement under this
Mortgage.
40. INTEREST TO ACCRUE. If the whole of the principal sum evidenced by the
Note and interest, shall become due by exercise of the option of the Mortgagee
after default by the Mortgagor under any of the terms, covenants and conditions
of this Mortgage and/or the Note, or if the whole of said principal sum and
interest shall mature and become due under the terms, covenants and conditions
of this Mortgage and the Note regardless of default, if any, on the part of the
Mortgagor, then interest on said principal sum shall continue to accrue at the
rate provided for in the Note, and in this Mortgage, until said principal sum is
fully paid.
41. FLOOD INSURANCE. In addition to the terms and provisions of this
Mortgage with regard to insurance, in the event the Premises are determined to
be in a special flood hazard area as determined by any governmental agency,
Mortgagor further covenants and agrees to fully insure the Premises and
Improvements against loss or damage by flood, with coverage as is therein
provided for by fire and other specified perils to the same extent and effect as
if such flood insurance was therein specifically set forth.
42. COSTS, EXPENSES AND ATTORNEY'S FEES. Should one or more Events of
Default occur hereunder, and should an action be commenced for the foreclosure
of this Mortgage, Mortgagee shall be entitled to recover all sums due hereunder,
statutory costs, and in addition thereto, reasonable attorneys' fees in such
proceeding and in all proceedings related thereto necessary to and related to
the foreclosing proceeding, and such amount shall be added to the principal
balance and interest then due and shall be a lien on the Mortgaged Property
prior to any right or title to, interest in or claim upon the Mortgaged Property
attaching and accruing subsequent to the lien of this Mortgage, and shall be
deemed to be secured by this Mortgage and the indebtedness which it secures.
43. [INTENTIONALLY OMITTED].
44. TERMS. It is understood and agreed that the words, "Mortgagor" and
"Mortgagee" herein shall include the respective heirs, successors and assigns of
Mortgagor and Mortgagee.
45. ENTIRE AGREEMENT. This Mortgage and the other Loan Documents constitute
the entire understanding between Mortgagor, any guarantors, and Mortgagee and to
the extent that any writings not signed by Mortgagee or oral statements or
conversations at any time made or had shall be inconsistent with the provisions
of this Mortgage and the other Loan Documents, the same shall be null and void.
- 18 -
<PAGE>
46. GOVERNING LAW; SEVERABILITY. This Mortgage shall be governed by the law
of the jurisdiction in which the Mortgaged Property is located. In the event
that any provision or clause of this Mortgage or the Note conflicts with
applicable law, such conflict shall not affect other provisions of this Mortgage
or the Note which can be given effect without the conflicting provision, and to
this end, the provisions of this Mortgage and the Note are declared to be
severable.
47. TIME OF THE ESSENCE. Time is of the essence with respect to each and
every covenant, agreement and obligation of Mortgagor under this Mortgage, the
Note and any and all other Loan Documents.
48. INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET.
(a) Mortgagor shall indemnify, defend and hold Mortgagee harmless
against: (i) any and all claims for brokerage, leasing, finders or similar
fees which may be made relating to the Mortgaged Property or the loan which
is the subject of the Note, and (ii) against any and all liability,
obligations, losses, damages, penalties, claims, actions, suits, costs, and
expenses (including its reasonable attorneys' fees, together with
reasonable appellate counsel fees, if any) of whatever kind or nature which
may be imposed on or incurred by Mortgagee at any time pursuant either to a
judgment or decree or other order entered into by a court or administrative
agency or to a settlement reasonably approved by Mortgagor, which judgment,
decree, order or settlement relates in any way to or arises out of the
offer, sale or lease of the Mortgaged Property and/or the ownership, use,
occupation or operation of any portion of the Mortgaged Property, and is
not caused by the gross negligence or willful misconduct, or other act or
omission of the Mortgagee.
(b) If Mortgagee is made a party defendant to any litigation brought by
any person or entity other than the Mortgagor or a guarantor concerning the
loan which is the subject of the Note, this Mortgage, the Mortgaged
Property, or any part thereof, or any interest therein, or the occupancy
thereof, then Mortgagor shall indemnify, defend and hold Mortgagee harmless
from all liability by reason of said litigation, including reasonable
attorneys' fees (together with reasonable appellate counsel fees, if any)
and expenses incurred by Mortgagee in any such litigation, whether or not
any such litigation is prosecuted to judgment. If Mortgagee commences an
action against Mortgagor to enforce any of the terms hereof or to prosecute
any breach by Mortgagor of any of the terms hereof or to recover any sum
secured hereby, Mortgagor shall pay to Mortgagee such reasonable attorneys'
fees (together with reasonable appellate counsel fees, if any) and
expenses. The right to such attorneys fees (together with reasonable
appellate counsel fees, if any) and expenses shall be deemed to have
accrued on the commencement of such action, and shall be enforceable
whether or not such action is prosecuted to judgment. If Mortgagor breaches
any term of this Mortgage, Mortgagee may employ an attorney or attorneys to
protect its rights hereunder, and in the event of such employment following
any breach by Mortgagor, Mortgagor shall pay Mortgagee reasonable
attorneys' fees (together with reasonable appellate counsel fees, if any)
and expenses incurred by Mortgagee, whether or not an action is actually
commenced against Mortgagor by reason of such breach.
- 19 -
<PAGE>
(c) A waiver of subrogation shall be obtained by Mortgagor from its
insurance carrier and, consequently, Mortgagor waives any and all right to
claim or recover against Mortgagee, its officers, employees, agents and
representatives, for loss of or damage to Mortgagor, the Mortgaged
Property, Mortgagor's property or the property of others under Mortgagor's
control from any cause insured against or required to be insured against by
the provisions of this Mortgage.
(d) All sums payable by Mortgagor hereunder shall be paid without
notice (except as may otherwise be provided herein), demand, counterclaim
set-off, deduction or defense and without abatement, suspension, deferment,
diminution or reduction, and the obligations and liabilities of Mortgagor
hereunder shall in no way be released, discharged or otherwise affected by
reason of: (i) any damage to or destruction of or any condemnation or
similar taking of the Mortgaged Property or any part thereof; (ii) any
restriction or prevention of or interference with any use of the Mortgaged
Property or any part thereof; (iii) any title defect or encumbrance or any
eviction from the Premises or the Improvements or any part thereof by title
superior or otherwise; (iv) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation, or other like proceeding
relating to Mortgagee, or any action taken with respect to this Mortgage by
any trustee or receiver of Mortgagee, or by any court, in such proceeding;
(v) any claim which Mortgagor has, or might have, against Mortgagee; (vi)
any default or failure on the part of Mortgagee to perform or comply with
any of the terms hereof or of any other agreement with Mortgagor; or (vii)
any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not Mortgagor shall have notice or knowledge of any
of the foregoing. Mortgagor waives all rights now or hereafter conferred by
statute or otherwise to any abatement, suspension, deferment, diminution,
or reduction of any sum secured hereby and payable by Mortgagor.
49. WAIVER OF JURY TRIAL. The Mortgagor and the Mortgagee hereby waive
trial by jury in any litigation in any court with respect to, in connection
with, or arising out of this Mortgage or any other Loan Document, or any
instrument or document delivered in connection with the loan which is the
subject of the Note, or the validity, protection, interpretation, collection or
enforcement thereof or the relationship between Mortgagor and Mortgagee as
borrower and lender, or any other claim or dispute howsoever arising between the
Mortgagor and Mortgagee.
50. BUILDING LOAN AGREEMENT. This Mortgage is executed in conjunction with
a Building Loan Agreement dated of even date herewith, and any breach, violation
or default in the performance of any covenant required to be performed under the
Building Loan Agreement shall be an Event of Default under this Mortgage.
Where used herein, the word, "Mortgagor" may be read "Mortgagors" where
applicable.
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<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor and
Mortgagee.
ERIE HOTEL LLC
BY: ESSEX HOTELS II LLC
its Managing Member
BY: ESSEX HOSPITALITY ASSOCIATES IV L.P.,
its Managing Member
BY: Essex Partners Inc.,
its General Partner
BY: /s/ Barbara J. Purvis
--------------------------
Barbara J. Purvis
Senior Vice President
KEYBANK NATIONAL ASSOCIATION
BY: /s/ Karen M. Cummings
--------------------------
Karen M. Cummings
Vice-President
STATE OF NEW YORK )
COUNTY OF MONROE ) ss.:
On this 31st day of December, 1997, before me personally came Barbara J.
Purvis, to me personally known, who, being by me duly sworn, did depose and say
that she is a Senior Vice President of Essex Partners Inc., a New York
corporation and the general partner of Essex Hospitality Associates IV L.P., a
New York limited partnership and the managing member of Essex Hotels 11 LLC, a
New York limited liability company and the managing member of Erie Hotel LLC,
the limited liability company described in and on whose behalf she executed the
within Instrument; and she duly acknowledged to me that she signed her name
thereto as the act and deed of said limited liability company.
/s/ Mark R. Foerster
-------------------------------------
Notary Public
MARK R. FOERSTER
Notary Public in the State of New York
MONROE COUNTY
Commission Expires May 31, 1999
- 21 -
<PAGE>
STATE OF NEW YORK )
COUNTY OF ERIE ) ss.:
On the 31st day of December, 1997, before me personally came Karen M.
Cummings, to me known who, being by me duly sworn, did depose and say that she
resides in the Town of Amherst; that she is a Vice-President of KeyBank National
Association, the corporation described in and which executed the foregoing
instrument; and that she signed her name thereto by order of the Board of
Directors of said corporation.
/s/ Louis C. Fessard
------------------------------
Notary Public
LOUIS C. FESSARD
Notary Public State of New York
Qualified in Erie County
My Commission Expires Aug. 31, 1999
- 22 -
<PAGE>
SCHEDULE A
(LEGAL DESCRIPTION)
ALL THAT CERTAIN piece or parcel of land situate in Tract 373 in the
Township of Summit, County of Erie and Commonwealth of Pennsylvania, being Lot 1
as shown on a map entitled "Subdivision of Land of David A. Kellogg, Richard E.
and Mary L. Hess and Pamela A. Giese", made by Henry T. Welks Associates, dated
August 22, 1996, revised September 4, 1996 and May 19, 1997, and recorded in
Erie County Map No. 1997-133, and being more particularly bounded and described
as follows, to wit:
BEGINNING at the most southerly corner of the piece herein described, at a
point in the centerline of Old Oliver Road (50 foot right-of-way); thence North
27(degree) 25' 40" West, a distance of 408.58 feet to a point; thence North
69(degree) 01' 12" East, a distance of 397.38 feet to an iroN survey pin; thence
North 72(degree) 03' 09" East, a distance of 37.77 feet to a point; thence South
54(degree) 1l' 20" East, a distance of 124.85 feet to A P.K. nail in the
centerline of Old Oliver Road; thence South 35(degree) 48' 40" West, along the
centerline of Old Oliver Road, a distance of 546.91 feet to the point of
beginning. CONTAINING 2.819 acres of land to the centerline of Old Oliver Road;
CONTAINING 2.509 acres of land to the northerly right-of-way line of Old Oliver
Road.
EXCEPTING therefrom a 400 square foot parcel of land conveyed to the Summit
Township Sewer Authority in Erie County Record Book 70 page 635, bearing Erie
County Index No. (40) 17-73-2.09.
- 23 -
Exhibit 10-20
GUARANTY OF PAYMENT AND PERFORMANCE
THIS GUARANTY dated December 31, 1997 (the "GUARANTY") from Essex Partners
Inc., a New York corporation, with an office for the transaction of business
located at 100 Corporate Woods, Rochester, New York 14623 (the "GUARANTOR") To
KEYBANK NATIONAL ASSOCIATION, a national banking association with an office for
the transaction of business located at 50 Fountain Plaza, Buffalo, New York
14202 (the "LENDER").
WITNESSETH:
WHEREAS, Erie Hotel LLC, a New York limited liability company, (herein
called the "BORROWER"), is about to borrow from the Lender the sum of Four
Million Seven Hundred Thousand and 00/100 Dollars, (the "LOAN"); and
WHEREAS, the Lender is unwilling to make the Loan to the Borrower unless it
receives this Guaranty; and
WHEREAS, the Guarantor is willing to enter into this Guaranty in order to
induce the Lender to make the Loan and the Guarantor has approved the form and
substance of any documents executed or delivered by Borrower in connection with
the Loan (the "Loan Documents").
NOW, THEREFORE, in order to induce the Lender to make the Loan to the
Borrower and in consideration of the premises and of other good and valuable
consideration, the Guarantor intends to guarantee absolutely and unconditionally
to the Lender, the punctual payment of the Loan and all notes or other evidences
of indebtedness given by the Borrower to the Lender in connection therewith and
all extensions, modifications or renewals thereof (collectively, the "Note") and
all interest and other sums due under the Note or any Loan Document and such
further payment and performance as may be set forth in Article 2 hereof.
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
The Guarantor hereby represents and warrants to Lender that:
SECTION 1.1 CAPACITY OF THE GUARANTOR. Guarantor:
(A) Has the capacity to enter into this Guaranty.
(B) Has an office at the address set forth at the head of this
Guaranty.
SECTION 1.2 NO VIOLATION OF RESTRICTIONS. Neither the execution and
delivery of this Guaranty, the consummation of the transactions contemplated
hereby nor the fulfillment of or compliance with the provisions of this Guaranty
will conflict with or result in a breach of any of the
<PAGE>
terms, covenants, conditions or provisions of any agreement, judgment or order
to which any party named as a Guarantor is a party or by which the Guarantor is
bound, or will constitute a default under any of the foregoing, or result in the
creation or imposition of any lien of any nature whatsoever.
SECTION 1.3 COMPLIANCE WITH LAW. Each party named as a Guarantor (A) is not
in violation of any law, ordinance, governmental rule, regulation, order or
judgment to which the Guarantor may be subject or which would materially affect
the business of the Guarantor and (B) has not failed to obtain any license,
permit, franchise or other governmental authorization necessary to the conduct
of their present business.
SECTION 1.4 FINANCIAL STATEMENTS. The financial statements submitted by
each party named as Guarantor, including balance sheets, statement of income,
retained earnings and other related schedules, to Lender fairly represent the
financial condition as of the date of each statement and there has been no
adverse change in the financial condition of any Guarantor since the date of the
respective statements submitted to Lender.
SECTION 1.5 SOLVENCY OF GUARANTOR AND BORROWER. Each party named as a
Guarantor is solvent and Each Guarantor has made an appropriate financial
investigation of the Borrower and has determined that the Borrower is solvent at
the time of execution of this Guaranty.
ARTICLE 2
COVENANTS AND AGREEMENTS
SECTION 2.1 GUARANTY OF PAYMENT. The Guarantor irrevocably, absolutely and
unconditionally guarantees to the Lender:
(A) The punctual payment of the Loan, the Note, all principal and
interest due thereunder and any other sums due under the Note or any Loan
Document.
(B) The full and prompt payment and performance of any and all
obligations of Borrower to Lender under the Loan Documents including,
without limitation, the obligations of Borrower concerning hazardous
materials and other environmental matters contained in any of the Loan
Documents.
SECTION 2.2 OBLIGATIONS UNCONDITIONAL. This Guaranty shall remain in full
force and effect until the Loan, the Note and all sums due thereunder or under
any Loan Document are paid in full, irrespective of any interruptions in the
business relationships of the Borrower and the Guarantor with the Lender, and
shall not be affected, modified or impaired by any state of facts or the
happening from time to time of any event, including, without limitation, any of
the following, whether or not with notice to or the consent of the Guarantor:
- 2 -
<PAGE>
(A) The invalidity, irregularity, illegality or unenforceability of, or
any defect in, the Note or any Loan Document or any collateral security for
the Loan (the "Collateral").
(B) Any present or future law or order of any government (DE JUERE or
DE FACTO) or of any agency thereof purporting to reduce, amend or otherwise
affect the Note or any other obligation of the Borrower or any other
obligor or to any other terms of payment.
(C) The waiver, compromise, settlement, release or termination of any
or all of the obligations, covenants or agreements of the Borrower under
the Note or any Loan Documents or of any party named as a Guarantor under
this Guaranty.
(D) The failure to give notice to the Guarantor of the occurrence of an
event of default under the Note or any other Loan Document.
(E) The loss, release, sale, exchange, surrender or other change in any
Collateral.
(F) The extension of the time for payment of any principal of or
interest on the Note or of the time for performance of any other
obligations, covenants or agreements under or arising out of the Note or
any Loan Document or the extension or the renewal of any thereof.
(G) The modification or amendment (whether material or otherwise) of
any obligation, covenant or agreement set forth in the Note or any Loan
Document.
(H) The taking of, or the omission to take, any of the actions referred
to in the Note or any Loan Document.
(I) Any failure, omission or delay on the part of the Lender to
enforce, assert or exercise any right, power or remedy conferred on the
Lender in the Note or any Loan Document.
(J) The voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition with
creditors or readjustment of, or other similar proceedings affecting the
Guarantor or the Borrower or any of their assets, or any allegation or
contest of the validity of the Note or any Loan Document.
(K) The default or failure of the Guarantor to fully perform any
obligations set forth in this Guaranty.
(L) Any event or action that would, in the absence of this paragraph,
result in the release or discharge of the Guarantor from the performance or
observance of any obligation, covenant or agreement contained in this
Guaranty.
- 3 -
<PAGE>
(M) Any other circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or a guarantor.
SECTION 2.3 WAIVER BY GUARANTOR. The Guarantor hereby waives:
(A) Notice of acceptance of this Guaranty.
(B) Diligence, presentment and demand for payment of the Loan and/or
the Note.
(C) Protest and notice of protest, dishonor or default to the Guarantor
or to any other party with respect to the Loan.
(D) Any and all notices to which the Guarantor might otherwise be
entitled.
(E) Any demand for payment under this Guaranty.
(F) Any and all defenses to payment including, without limitation, any
defenses and counterclaims of the Guarantor or the Borrower based upon
fraud, negligence or the failure of any condition precedent or claims of
offset or defenses involving the invalidity, irregularity or
unenforceability of all or any part of the liabilities herein guaranteed or
any defense otherwise available to the Guarantor or the Borrower.
(G) Until the Loan is repaid in full, unless Lender is required by a
court of competent jurisdiction to disgorge any payment(s) received by it,
any and all rights of subrogation, reimbursement, indemnity, exoneration,
contribution or any other claim which the Guarantor may now or hereafter
have against the Borrower or any other person directly or contingently
liable for the Loan guaranteed hereunder, or against or with respect to the
Borrower's property (including, without limitation, property
collateralizing the Loan), arising from the existence or performance of
this Guaranty and whether or not such claim, right or remedy arises in
equity, under contract, by statute, under common law or otherwise.
SECTION 2.4 NATURE OF GUARANTY. This Guaranty is a guaranty of payment and
not of collection and the Guarantor hereby waives the right to require that any
action be brought first against the Borrower or any other Guarantor, or any
security, or to require that resort be made to any security or to any balance of
any deposit account on credit on the books of the Lender in favor of the
Borrower or of any Guarantor.
SECTION 2.5 CONTINUATION OF GUARANTY. The Guarantor further agrees that the
obligations hereunder shall continue to be effective or reinstated, as the case
may be, if at any time payment or any part thereof of the Loan or the Note is
rescinded or must otherwise be restored by the Lender upon the bankruptcy or
reorganization of the Borrower, the Guarantor or otherwise.
SECTION 2.6 SUBORDINATION OF DEBT. The Guarantor hereby subordinates any
and all indebtedness of Borrower now or hereafter owed to Guarantor to all
indebtedness of Borrower to
- 4 -
<PAGE>
Lender and agrees with Lender that Guarantor shall not demand or accept any
payment from Borrower, shall not claim any offset or other reduction of
Guarantor's obligations hereunder because of any such indebtedness and shall not
take any action to obtain any interest in any of the security described in and
encumbered by the Loan Documents; provided, however, that, if Lender so
requests, such indebtedness shall be collected, enforced and received by
Guarantor as trustee for Lender and paid over to Lender on account of the
indebtedness of Borrower to Lender, but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this Guaranty
except to the extent the principal amount of such outstanding indebtedness shall
have been reduced by such payment.
SECTION 2.7 FINANCIAL STATEMENTS. Guarantor will advise Lender in writing
if Guarantor operates on other than a calendar year basis. Guarantor will at all
times keep proper books of record and account in which full, true and correct
entries shall be made in accordance with generally accepted accounting
principles and will deliver to Lender, within one hundred fifty (150) days
after the end of each fiscal year of Guarantor, a copy of the annual financial
statements of Guarantor relating to such fiscal year, such statements to include
(A) the balance sheet of Guarantor as at the end of such fiscal year and (B) the
related income statement, statement of retained earnings and statement of
changes in the financial position of Guarantor for such fiscal year, prepared by
such certified public accountants as may be reasonably satisfactory to Lender.
Guarantor also agrees to deliver to Lender from time to time at the request of
Lender, such other financial information with respect to Guarantor as Lender may
request. If Guarantor fails to provide any statement required by this Section
for ten (10) days after notice of said failure from Lender, Guarantor will be
obligated to pay a fee of $500.00 for each successive thirty (30) day period
after the expiration of the notice period during which Lender has not received
the required statement or return.
SECTION 2.8 TRANSFER OF INTEREST. Guarantor agrees not to make or permit to
be made, by a voluntary or involuntary means, any transfer of the interest of
Guarantor in the Borrower, without first obtaining the prior written consent of
Lender.
ARTICLE 3
EVENTS OF DEFAULT
SECTION 3.1 EVENTS OF DEFAULT DEFINED. An "Event of Default" shall exist if
any of the following occurs:
(A) Any party named as a Guarantor fails to perform or observe any
covenant contained herein.
(B) Any warranty, representation or other statement by or on behalf of
any party named as a Guarantor contained in this Guaranty is false or
misleading in any material respect when made.
- 5 -
<PAGE>
(C) A receiver, liquidator or trustee of any party named as a Guarantor
or any of his or its property is appointed by court order, or any party
named as a Guarantor is adjudicated bankrupt or insolvent or any of his or
its property is sequestered by court order and such order remains in effect
for more than sixty (60) days, or a petition is filed against any party
named as a Guarantor under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not dismissed
within sixty (60) days of such filing.
(D) Any party named as a Guarantor files a petition in voluntary
bankruptcy or seeks relief under any provision of any reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
law of any jurisdiction, whether now or hereafter in effect, or consents to
the filing of any petition against it under any such law.
(E) Any party named as a Guarantor makes an assignment for the benefit
of creditors or admits in writing inability to pay debts generally as they
become due, or consents to the appointment of a receiver, trustee or
liquidator of all or any part of his or its property.
(F) The occurrence of an Event of Default under any other Loan
Document.
SECTION 3.2 REMEDIES ON DEFAULT. If an event of default exists, Lender may
proceed to enforce the provisions hereof and to exercise any other rights,
powers and remedies available to the Lender.
SECTION 3.3 WAIVER AND NOTICE.
(A) No remedy herein conferred upon or reserved to the Lender is
intended to be exclusive of any other available remedy or remedies, but
each and every such remedy shall be cumulative and shall be in addition to
every other remedy given under this Guaranty now or hereafter existing at
law or in equity or by statute.
(B) No delay or omission to exercise any right or power accruing upon
the occurrence of any Event of Default shall impair any such right or power
or shall be construed to be a waiver thereof, but any such right or power
may be exercised from time to time and as often as may be deemed expedient.
(C) In order to entitle the Lender to exercise any remedy reserved to
it in this Guaranty, it shall not be necessary to give any notice, other
than such notice as may be expressly required in this Guaranty.
(D) No waiver, amendment, release or modification of this Guaranty
shall be established by conduct, custom or course of dealing.
- 6 -
<PAGE>
ARTICLE 4
MISCELLANEOUS
SECTION 4.1 CONSTRUCTION. If this Guaranty is executed by two or more
parties, they shall be jointly and severally liable hereunder and the phrase
Guarantor whenever used herein shall be construed to refer to each of the
parties in the same manner and with the same effect as if each party had signed
a separate guaranty.
SECTION 4.2 GOVERNING Law. This Guaranty shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 4.3 SUBMISSION TO JURISDICTION. The Guarantor hereby irrevocably
and unconditionally agrees that any suit, action or proceeding arising out of or
relating to this Guaranty shall be brought in the state courts of the State of
New York or federal district court for the Western District of New York and
waives any right to object to jurisdiction within either of the foregoing forums
by Lender. Nothing contained herein shall prevent Lender from bringing any suit,
action or proceeding or exercising any rights against any security and against
any Guarantor personally, and against any property of any Guarantor, within any
other jurisdiction and the initiation of such suit, action or proceeding or
taking of such action in any such other jurisdiction shall in no event
constitute a waiver of the agreements contained herein with respect to the laws
of the State of New York governing the rights and obligations of the parties
hereto or the agreement of the Guarantor to submit to personal jurisdiction
within the State of New York.
SECTION 4.4 WAIVER OF JURY TRIAL. The Guarantor and Lender agree that any
suit, action or proceeding arising under or in connection with this Guaranty
shall be before a court without a jury.
SECTION 4.5 SUCCESSORS AND ASSIONS. This Guaranty shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto.
SECTION 4.6 NOTICES. Any notices required or permitted to be given
hereunder shall be: (i) personally delivered or (ii) given by registered or
certified mail, postage prepaid, return receipt requested, or (iii) forwarded by
overnight courier service, in each instance addressed to the addresses set forth
at the head of this Guaranty, or such other addresses as the parties may for
themselves designate in writing as provided herein for the purpose of receiving
notices hereunder. All notices shall be in writing and shall be deemed given, in
the case of notice by personal delivery, upon actual delivery, and in the case
of appropriate mail or courier service, upon deposit with the U.S. Postal
Service or delivery to the courier service.
SECTION 4.7 ENTIRE AGREEMENT. This Guaranty and the Note and other Loan
Documents constitute the entire understanding between Borrower, the Guarantor
and the Lender and to the extent that any writings not signed by the Lender or
oral statements or conversations at any time
- 7 -
<PAGE>
made or had are inconsistent with the provisions of this Guaranty, the Note or
the other Loan Documents, the same shall be null and void.
SECTION 4.8 AMENDMENTS. No amendment, change, modification, alteration or
termination of this Guaranty shall be made except upon the written consent of
the Lender.
SECTION 4.9 ASSIGNMENT. This Guaranty is assignable by Lender in whole or
in part in conjunction with an assignment of the Note and any assignment hereof
or any transfer or assignment of the Note or portions thereof shall operate to
vest in any such assignee the rights and powers, in whole or in part, as
appropriate, herein conferred upon and granted to Lender.
SECTION 4.10 PARTIAL INVALIDITY. The invalidity or unenforceability of any
one or more phrases, sentences, clauses or sections in this Guaranty shall not
affect the validity or enforceability of the remaining portions of the Guaranty
or any part thereof.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the day
and year first above written.
ESSEX PARTNERS INC.
BY: /s/ Barbara J. Purvis
----------------------------
Barbara J. Purvis
Senior Vice-President
STATE OF NEW YORK )
COUNTY OF MONROE ) ss.:
On the 31st day of December, 1997, before me personally came Barbara J.
Purvis, to me known who, being by me duly sworn, did depose and say that she
resides at 66 Castlebar Road, Rochester, New York; that she is the Senior
Vice-President of Essex Partners Inc., the corporation described in and which
executed the foregoing instrument; and that she signed her name thereto by order
of the Board of Directors of said corporation.
/s/ Mark R. Foerster
------------------------------
Notary Public
MARK R. FOERSTER
Notary Public in the State of New York
MONROE COUNTY
Commission Expires May 31, 1999
- 8 -
Exhibit 10-21
GUARANTY OF COMPLETION
THIS GUARANTY, dated December 31, 1997, is given by Essex Partners Inc., a
New York corporation, having an office at 100 Corporate Woods, Rochester, New
York 14623, (the "GUARANTOR"), to KEYBANK NATIONAL ASSOCIATION, a national
banking association having an office at 50 Fountain Plaza, Buffalo, New York
14202 ("LENDER").
RECITALS:
WHEREAS:
A. Erie Hotel LLC, a New York limited liability company (the "BORROWER") is
the owner of certain real property located at Old Oliver Road at I-90, Township
of Summit, Erie County, Pennsylvania, as more particularly described in the
Mortgage (hereinafter defined) (the "PROPERTY");
B. Borrower intends to construct and install certain improvements (the
"IMPROVEMENTS") on the Property;
C. Borrower has asked Lender to provide financing for a portion of the cost
of constructing and installing the Improvements by making a loan to Borrower
pursuant to, and subject to the conditions set forth in, that certain Building
Loan Agreement between Borrower and Lender dated of even date herewith (the
"BUILDING LOAN AGREEMENT") and evidenced by a certain Promissory Note of
Borrower to Lender (the "NOTE") in the principal amount of $4,700,000.00 dated
of even date herewith (the "BUILDING LOAN");
D. The Building Loan will be or is secured by a certain Open-End Mortgage
And Security Agreement given by the Borrower to the Lender covering the Property
and recorded in the Erie County Clerk's Office (the "BUILDING LOAN MORTGAGE");
E. The Note, the Building Loan Agreement and the Building Loan Mortgage are
hereinafter collectively referred to as the "BUILDING- LOAN DOCUMENTS;"
F. Lender is unwilling to make the Building Loan to Borrower unless
Guarantor executes a guaranty of completion in the form hereof, and
G. Guarantor acknowledges that the malting of the Building Loan to Borrower
will result in substantial economic benefits to it.
NOW, THEREFORE, in consideration of the premises and to induce Lender to
make the Building Loan to Borrower, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor hereby covenants and agrees with Lender as follows:
<PAGE>
1. All capitalized terms used herein and not otherwise defined shall have
the same meanings assigned thereto in the Building Loan Agreement.
2. Guarantor acknowledges receipt of a set of the Plans and a copy of the
Architect's Agreement, the Contract and the Building Loan Agreement. Guarantor
agrees that the Plans may be changed from time to time, and that the Architect's
Agreement, the Contract and the Building Loan Agreement may be modified or
amended from time to time without in any manner affecting this Guaranty or
releasing the Guarantor therefrom and without obtaining the consent of the
Guarantor thereto.
3. Guarantor guarantees to Lender the Lien Free Completion of the
Improvements (as hereinafter defined) and the prompt performance of all
obligations of the Borrower under the Building Loan Mortgage and the Building
Loan Agreement. The term "LIEN FREE COMPLETION OF THE IMPROVEMENTS" shall mean
completion of the construction and equipping of the Improvements in a good and
workmanlike manner and in full compliance with all requirements of the Township
of Summit, Erie County, Pennsylvania and all other applicable Governmental
Authorities and ready for occupancy on or before the Completion Date,
substantially in accordance with the Plans and the terms and conditions of the
Contract and in compliance with the terms of the Building Loan Agreement, free
and clear of all mechanic's liens and any other liens, security interests,
encumbrances or exceptions to title, except for Permitted Exceptions, and the
issuance and delivery to the Lender of all evidence of Completion on or before
the Maturity Date. The Guarantor's Obligations under this Section 3, shall be
conditioned upon the Lender's disbursement of the proceeds of the Building Loan
to the Borrower or the Guarantor.
4. In the event that Borrower fails to pay when due any sums due to any
person, firm or corporation for work, labor or services performed or materials,
supplies or equipment furnished in connection with the construction or equipping
of the Improvements, Guarantor agrees to pay the same.
5. In the event that Borrower fails to fully pay or to bond and discharge
of record any mechanic's lien within thirty (30) days after the recording or
filing thereof, Guarantor agrees to do so.
6. In the event that the Guarantor shall advance or become obligated to pay
any sums toward the construction or equipping of the Improvements or in the
event that for any reason Borrower shall hereafter become indebted to the
Guarantor, the amount of such advance, payment or indebtedness shall at all
times be subject and subordinate in lien and payment to all amounts due and
owing to Lender under the Note or the Building Loan Mortgage. Nothing contained
herein is intended nor shall be construed to give Guarantor any right of
subrogation in or under the Note or the Building Loan Mortgage, or any right to
participate in any way therein, notwithstanding any payments made by it toward
the construction or equipping of the Improvements or any payments made by it
under this Guaranty, all such rights of subrogation and participation being
hereby expressly and irrevocably waived and released.
- 2 -
<PAGE>
7. This Guaranty shall remain in full force and effect notwithstanding:
(a) the invalidity or unenforceability of any of the terms or provisions
of the Building Loan Documents, the Architect's Agreement or the Contract;
(b) the release or discharge of Borrower, the Architect, the Contractor,
or any guarantor in any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, dissolution, liquidation or other similar proceeding;
or
(c) any other circumstances which might otherwise constitute a legal or
equitable release or discharge of the Borrower under any of the Building Loan
Documents, the Architect under the Architect's Agreement or the Contractor under
the Contract.
8. Guarantor hereby waives notice of acceptance of this Guaranty by Lender
and of any action by Lender in reliance hereon.
9. Any notice, demand or request by Lender to Guarantor hereunder shall be
in writing and shall be deemed to have been duly given or made when delivered
personally to Guarantor or when mailed, postage prepaid, by registered or
certified mail to Guarantor at their address set forth above or at such other
addresses as Guarantor may designate by written notice to Lender.
10. This Guaranty may not be changed or terminated orally, but only by a
written instrument signed by Lender.
11. This Guaranty shall be governed by and construed in accordance with
the laws of the State of New York.
This Guaranty shall be binding upon Guarantor and its respective legal
representatives and fiduciaries and shall inure to the benefit of and may be
enforced by Lender, its successors and assigns and any subsequent holder of the
Building Loan Mortgage.
If the Guarantor consists of more than one person or entity, the
obligations and liabilities of each such person or entity shall be joint and
several.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed
as of the day and year first above written.
ESSEX PARTNERS INC.
By: /s/ Barbara J. Purvis
-------------------------------
Barbara J. Purvis
Senior Vice President
- 3 -
<PAGE>
STATE OF NEW YORK )
COUNTY OF MONROE ) ss:
On this 31st day of December, 1997, before me personally came Barbara J.
Purvis, to me known, who being by me duly sworn, did depose and say that she
resides at 66 Castlebar Road, Rochester, New York; that she is the Senior Vice
President of Essex Partners Inc., the corporation described in and which
executed the foregoing instrument, and she signed her name by authority of the
Board of Directors of said corporation.
/s/ Mark R. Foerster
------------------------------
Notary Public
MARK R. FOERSTER
Notary Public in the State of New York
MONROE COUNTY
Commission Expires May 31, 1999
- 4 -
Exhibit 21 - Subsidiaries
1. Solon Hotel LLC
New York Limited Liability Corporation
Authorized to do business in the State of Ohio
2. Erie Hotel LLC
New York Limited Liability Corporation
Authorized to do business in the State of Pennsylvania
3. Warwick Hotel LLC
New York Limited Liability Corporation
4. Essex Hotels LLC
New York Limited Liability Corporation
5. Essex Hotels II LLC
New York Limited Liability Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001000375
<NAME> ESSEX HOSPITALITY ASSOCIATES IV L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,642
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<FN>
<F1> UNCLASSIFIED BALANCE SHEET USED
</FN>
<PP&E> 7,791
<DEPRECIATION> 196
<TOTAL-ASSETS> 11,015
<CURRENT-LIABILITIES> 739
<BONDS> 9,913
0
0
<COMMON> 0
<OTHER-SE> 362
<FN>
<F2> EQUITY IS PARTNERS' CAPITAL
</FN>
<TOTAL-LIABILITY-AND-EQUITY> 11,015
<SALES> 1,664
<TOTAL-REVENUES> 1,858
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,304
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 646
<INCOME-PRETAX> (980)
<INCOME-TAX> 0
<INCOME-CONTINUING> (980)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (980)
<EPS-PRIMARY> (394)
<EPS-DILUTED> (394)
<FN>
<F3> ENTITY IS A PARTNERSHIP, EPS IS LOSS PER LIMITED
PARTNERSHIP UNIT.
</FN>
</TABLE>
