SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED
SEPTEMBER 30, 1996
1-12017
(SEC File No.)
CAPSTAR HOTEL COMPANY
1010 WISCONSIN AVENUE, NW, SUITE 650
WASHINGTON, D.C. 20007
(202) 965-4455
Delaware 52-1979383
(State of Incorporation) (IRS Employer
Identification No.)
The Registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the period that
the Registrant was required to file such reports, and (2) has not been
subject to such filing requirements for the past 90 days.
The number of shares of Common Stock, par value $0.01 per share, outstanding at
November 14, 1996 was 12,754,321.
<PAGE>
CAPSTAR HOTEL COMPANY
Form 10-Q
INDEX
PART I Financial Information PAGE NO.
ITEM 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - Historical
September 30, 1996 and December 31, 1995 1
Consolidated Statements of Operations - Pro Forma
Three Months and Nine Months Ended
September 30, 1996 and September 30, 1995 2
Consolidated Statements of Operations - Historical
Three Months and Nine Months Ended
September 30, 1996 and September 30, 1995 3
Consolidated Statements of Cash Flows - Historical
Nine Months Ended September 30, 1996 and
September 30, 1995 4
Notes to the Consolidated Financial Statements 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II Other Information
ITEM 5. Other Information 16
ITEM 6. Exhibits and Reports on Form 8-K 16
<PAGE>
Page 1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAPSTAR HOTEL COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
HISTORICAL
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
<S> <C> <C>
(Unaudited)
Assets
Cash and cash equivalents $ 9,161 $ 6,832
Accounts receivable, net 8,021 2,749
Deposits, prepaid expenses, and other 6,920 3,954
------- ------
Total current assets 24,102 13,535
Property and equipment
Land 41,166 12,768
Building and improvements 152,574 84,545
Furniture, fixtures, and equipment 22,710 11,353
Construction in progress 6,066 2,216
------- ------
222,516 110,882
Accumulated depreciation (6,692) (1,756)
------- ------
Total property and equipment, net 215,824 109,126
Deferred costs, net of accumulated amortization
of $495 at September 30, 1996 and $271 at
December 31, 1995 6,179 2,638
Restricted cash 1,000 7,351
------- ------
$ 247,105 $ 132,650
======= ======
Liabilities, Minority Interest, and Equity
Accounts payable $ 4,516 $ 2,329
Accrued expenses and other liabilities 8,410 4,626
Long term debt, current portion 408 2,668
------- ------
Total current liabilities 13,334 9,623
Long term debt 73,554 73,574
------- ------
Total liabilities 86,888 83,197
Minority interest 625 816
Partners' capital 0 48,637
Common stock (49,000 shares authorized, at $.01
par value, 12,754 issued and outstanding at
September 30, 1996) 128 0
Paid in capital 159,782 0
Retained deficit (318) 0
------- ------
$ 247,105 $ 132,650
======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Page 2
CAPSTAR HOTEL COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands,
except per share amounts)
PRO FORMA (NOTE 4)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue
Rooms $ $ $
21,736 19,350 59,479 $54,219
Food and beverage 7,780 8,406 25,057 25,191
Management fees and other 2,553 2,472 7,679 7,175
------ ------ ------ ------
revenue
Total revenue 32,069 30,228 92,215 86,585
------ ------ ------ ------
Hotel operating expenses by
department
Rooms 5,063 4,888 14,728 14,009
Food and beverage 6,563 6,869 20,468 20,661
Other operating expenses 731 692 2,202 2,166
Undistributed operating
expenses
Administrative and general 5,676 6,532 18,376 19,545
Property operating costs 3,654 2,601 10,153 7,116
Property taxes, insurance 1,159 1,674 4,052 4,699
and other
Depreciation and 2,139 2,495 7,172 7,484
------ ------ ------ ------
amortization
Total operating expenses 24,985 25,751 77,151 75,680
Interest expense, net 1,107 1,157 3,321 3,470
------ ------ ------ ------
Income before minority 5,977 3,320 11,743 7,435
interest and income taxes
Minority interest (49) 15 (18) 44
------ ------ ------ ------
Income before income taxes 5,928 3,335 11,725 7,479
Income taxes 2,371 1,334 4,690 2,992
------ ------ ------ ------
Net income from continuing
operations 3,557 2,001 7,035 $4,487
====== ====== ====== ======
Pro forma earnings per common $ 0.28 $ 0.16 $ 0.55 $0.35
share ====== ====== ====== ======
Weighted average number of common
shares outstanding 12,754 12,754 12,754 12,754
------ ------ ------ ------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Page 3
<TABLE>
<CAPTION>
CAPSTAR HOTEL COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED, IN THOUSANDS)
HISTORICAL
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Rooms $ 20,839 $ 5,869 $ 48,960 $ 7,797
Food and beverage 7,537 1,955 20,525 2,514
Management fees and other revenue 2,496 1,577 7,643 3,899
------ ------ ------ ------
Total revenue 30,872 9,401 77,128 14,210
------ ------ ------ ------
Hotel operating expenses by
department:
Rooms 4,868 1,558 12,232 2,086
Food and beverage 6,318 1,618 16,620 2,043
Other operating expenses 709 166 1,798 246
Undistributed operating expenses:
Administrative and general 5,440 2,012 14,897 4,475
Property operating costs 3,539 1,390 8,920 1,816
Property taxes, insurance and 1,108 392 3,225 477
other
Depreciation and amortization 2,036 663 5,955 966
------ ------ ------ ------
Total operating expenses 24,018 7,799 63,647 12,109
INTEREST EXPENSE, NET 3,138 797 10,428 1,131
------ ------ ------ ------
Income before minority interest,
income taxes and extraordinary loss 3,716 805 3,053 970
Minority interest (49) 0 20 0
------ ------ ------ ------
Income before income taxes and
extraordinary loss 3,667 805 3,073 970
Income taxes 1,092 0 1,092 0
------ ------ ------ ------
Income before extraordinary loss 2,575 805 1,981 970
Extraordinary loss from early
extinguishment of debt, net of tax
benefit of $1,304 1,956 0 1,956 0
------ ------ ------ ------
Net income $ 619 $ 805 $ 25 $ 970
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Page 4
CAPSTAR HOTEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
HISTORICAL
<TABLE>
<CAPTION>
Nine months ended Nine months ended
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 25 $ 970
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,955 966
Extraordinary loss 3,260 0
Minority interest (20) 0
Changes in operating assets and liabilities:
Accounts receivable, net (5,272) (3,261)
Deposits, prepaid expenses, and other (2,966) (1,794)
Accounts payable 2,187 1,847
Accrued expenses and other liabilities 3,784 3,215
------- -----
Net cash provided by operating activities 6,953 1,943
------- -----
Cash flows from investing activities:
Purchases of property and equipment (111,328) (54,427)
Purchases of minority interest (67) 0
Decrease (increase) in restricted cash 6,351 (7,204)
------- -----
Net cash used in investing activities (105,044) (61,631)
------- -----
Cash flows from financing activities:
Deferred financing costs (7,818) (4,000)
Proceeds from long term debt 246,995 33,132
Payments of long term debt (245,183) (295)
Repayment of (loans to) management 987 (233)
Payments of capital lease obligations (215) 0
Borrowings (repayments) on line of credit, net (4,182) 1,800
Capital contributions 0 32,827
Proceeds from issuance of common stock, net 110,112 0
Distributions to limited partners (172) 0
------- -----
Distributions to minority investors (104) 0
Net cash provided by financing activities 100,420 63,231
------- -----
Net change in cash 2,329 3,543
Cash, beginning of period 6,832 0
------- -----
Cash, end of period $ 9,161 $ 3,543
======= =====
Supplemental disclosure of cash flow information:
Cash paid for interest $ 11,109 $ 862
======= =====
Capitalized interest costs $ 325 $ 0
======= =====
Supplemental disclosure of non-cash investing
activities:
Additions to equipment through capital leases $ 305 $ 254
======= =====
Assets contributed by a limited partner $ 0 $ 148
======= =====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Page 5
CAPSTAR HOTEL COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. ORGANIZATION
The corporate structure of CapStar Hotel Company and its subsidiaries
(the "Company") was formed pursuant to a Formation Agreement dated June
20, 1996 (the "Formation Agreement"). The principal activity of the
Company is to acquire, own, renovate, reposition and manage upscale,
full-service hotels throughout the continental United States. As of
September 30, 1996, the Company owned twelve hotels (the "Owned Hotels").
As a result of the transactions discussed in Note 3, the consolidated
interim financial statements of the Company as of September 30, 1996 and
1995, include the historical results of certain predecessor entities,
including EquiStar Hotel Investors, L.P. and subsidiaries (collectively,
"EquiStar"), and CapStar Management Company L.P. ("CapStar Management").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
All significant intercompany transactions and balances have been
eliminated in the consolidation.
The accompanying consolidated interim financial statements have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles ("GAAP") have been omitted pursuant to such rules and
regulations. The consolidated interim financial statements should be
read in conjunction with the financial statements, notes thereto and
other information included in the Company's Registration Statement on
Form S-1, filed with the SEC on August 20, 1996 (the "Registration
Statement").
The accompanying unaudited consolidated interim financial statements
reflect, in the opinion of management, all adjustments, which are of a
normal and recurring nature, necessary for a fair presentation of the
financial position and results of operations and cash flows for the
periods presented. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions. Such estimates and assumptions affect the
reported amounts of assets and liabilities, as well as the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
The results of operations for the interim periods are not necessarily
indicative of the results for the entire year.
<PAGE>
Page 6
3. INITIAL PUBLIC OFFERING
On August 20, 1996, the Company completed an initial public offering of
9,250,000 shares of common stock at a price of $18 per share (the Initial
Offering). The Company sold 6,750,000 of the initial shares which, after
underwriting discounts, commissions and other Initial Offering expenses,
produced net proceeds to the Company of $110,112. The remaining
2,500,000 were sold by Acadia Partners which received 100% of the net
proceeds from the sale of their shares. The Company used the proceeds of
the Initial Offering to repay a portion of the Company's outstanding
indebtedness.
The following transactions (the "Formation Transactions") occurred prior
to or concurrently with the consummation of the Initial Offering:
a limited partner of CapStar Management contributed its partnership
interest in CapStar Management to the Company in exchange for shares
of Common Stock;
the Company contributed such partnership interest to CapStar LP
Corporation, a wholly-owned subsidiary of the Company ("CapStar
Sub");
the remaining partners of CapStar Management (including its general
partner but not including CapStar Sub) and the partners of EquiStar
contributed their respective partnership interests in CapStar
Management and EquiStar to the Company in exchange for shares of
Common Stock;
the Company contributed all the assets of EquiStar to CapStar
Management and CapStar Management assumed all of the liabilities of
EquiStar; and
the Agreement of Limited Partnership of CapStar Management was
amended and restated to reflect the fact that CapStar Management has
succeeded to the business of EquiStar and the Company became the
general partner of CapStar Management.
4. PRO FORMA INFORMATION
The unaudited pro forma consolidated statements of operations for the
three-month and nine-month periods ended September 30, 1996 and 1995 are
presented as if the Initial Offering, the Formation Transactions, the execution
of the Credit Facility (see Note 6), acquisition of the Owned Hotels
(the "Transactions") had been consummated at the beginning of the periods
presented. Such pro forma information is based in part upon information
contained in the Registration Statement and should be read in conjunction
with the Registration Statement. In management's opinion, all pro forma
adjustments necessary to reflect the material effects of these
transactions have been made. The pro forma information does not include
certain one-time charges to income, and does not purport to present what
the actual results of operations of the Company would have been if the
Transactions had occurred on such dates or to project the results of
operations of the Company for any future period.
<PAGE>
Page 7
5. EARNINGS PER SHARE
Prior to the consummation of the Company's Initial Offering, the
predecessor entities of the Company were organized as limited
partnerships and limited liability companies. Accordingly, the Company
believes that the historical earnings per share calculations required in
accordance with Accounting Principle Board Opinion No. 15 are not
meaningful for periods prior to the Initial Offering and, therefore, have
not been provided. Pro forma earnings per share is a more meaningful
measure of the Company's results of operations for the periods presented.
The weighted average number of common shares and common share equivalents
used in the computation of pro forma earnings per share for the three-
month and nine-month periods ended September 30, 1996 and 1995 is
12,754,321.
The pro forma earnings per share for the three-months and nine-months
ended September 30, 1996 and 1995 have been calculated by dividing pro
forma net income by the weighted average number of shares of common stock
deemed to be outstanding. Net income has been adjusted to pro forma net
income by reflecting the transactions discussed in Note 3 and other
required adjustments as discussed in Note 4 as if the transactions had
occurred on January 1 of each period.
6. LONG TERM DEBT
Long term debt consists of:
SEPTEMBER 30, 1996 DECEMBER 31, 1995
Senior Secured Revolving Credit
Facility $ 72,500 $ 0
Mortgage debt 0 74,048
Note payable 0 950
Capital Leases 738 648
Other 724 596
------ ------
73,962 76,242
Less current portion (408) (2,668)
------ ------
$ 73,554 $ 73,574
====== ======
<PAGE>
Page 8
On September 30, 1996, the Company entered into a $225,000 Senior Secured
Revolving Credit Facility (the "Credit Facility"). The Credit Facility
provides for acquisition loans, working and renovation capital and
letters of credit. The initial proceeds from the Credit Facility were
used to refinance certain existing indebtedness and to fund hotel
renovations. The Credit Facility has an initial term of three years,
which can be extended at the Company's option using two additional one-
year periods upon the satisfaction of certain conditions.
Interest on the Credit Facility is payable monthly at the Company's
election of the Base Rate (lenders' prime rate) plus 0.5% or Eurodollar
Option (LIBOR for periods of one, two, three or six months) plus 2.0%.
The Company elected the Eurodollar option for the initial draw on
September 30, 1996 with an interest rate of 7.5%.
Beginning on December 31, 1996, a commitment fee is payable quarterly on
the average unutilized amount of the Credit Facility, calculated at an
annual rate of 0.25%. Letter of credit fees of 2.0% per annum of the
average outstanding letters of credit, if any, are payable quarterly.
The Credit Facility agreement contains certain covenants, including
maintenance of certain financial ratios, restrictions on payments of
dividends, certain reporting requirements and other customary
restrictions. Substantially all of the assets of the Company are pledged
as collateral for the Credit Facility.
Aggregate maturities of the above obligations are as follows:
1996 $ 123
1997 498
1998 463
1999 72,785
2000 83
Thereafter 10
-----------
$ 73,962
===========
7. INCOME TAXES
The Company's predecessor entities were organized as limited liability
companies and limited partnerships for federal and state income tax purposes.
Accordingly, the Company was not subject to income tax prior to the
Initial Offering as all taxable income or loss of the Company was
reported on the tax return of its shareholders or owners. As a result of
the change in the Company's tax status to a C corporation in connection
with the consummation of the Initial Offering, the Company recorded
income tax expense amounting to $1,092 based upon net income resulting
from August 20, 1996 through September 30, 1996. The Company recognized
a current deferred tax asset of $212 resulting from the income tax
liability netted against an income tax benefit of $1,304 resulting from
an extraordinary loss from early extinguishment of debt. The retained
deficit reflects the historical results of operations since the Offering,
which includes the extraordinary loss.
<PAGE>
Page 9
8. EXTRAORDINARY LOSS
During the quarter ended September 30, 1996, the Company recognized an
extraordinary loss from the write-off of deferred financing fees in
connection with the refinancing of a credit facility that was retired.
The recorded loss of $1,956, net of a tax benefit of $1,304, reflects the
unamortized balance of deferred financing fees at the time of the
refinancing.
9. SUBSEQUENT EVENTS
The Company acquired the 293 room Hilton Southwest in Houston, Texas,
from Rushlake Hotels USA on October 30, 1996 for a purchase price of
$18,500. The acquisition was funded through the Credit Facility.
<PAGE>
Page 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
From January 12, 1995 through September 30, 1996, the Company acquired 12
hotels on the following dates: March 3, 1995; June 30, 1995 (two
hotels), August 4, 1995, October 3, 1995, November 15, 1995, February 2,
1996, February 16, 1996, February 22, 1996, March 8, 1996, April 17, 1996
and August 23, 1996. Thus, the historical financial statements for the
nine months and three months ended September 30, 1996 and 1995, reflect
differing numbers of Owned Hotels throughout the periods. Due to the
timing and magnitude of the acquisitions made in 1995 and 1996, it is
difficult to compare results of these periods.
The pro forma financial statements for the nine months and three months
ended September 30, 1996 and 1995, reflect the operations of the Owned
Hotels for the entire periods. For some or all of such periods, such
hotels were owned and/or operated by other companies. Pro forma
departmental, general, administrative and other operating expenses
reflect the actual costs incurred by the previous owners prior to each
acquisition and the actual costs incurred by the Company thereafter. Pro
forma depreciation, amortization, interest and income taxes reflect the
expenses that would have been incurred by the Company if the Initial
Offering, the Credit Facility and the Formation Transactions had taken
place at the beginning of the periods.
Except as noted in the following period to period comparison discussions,
the changes in historical income statement items between periods are
attributable to the changes in the Company's business and the growth in
the number of owned hotels.
RESULTS OF OPERATIONS
PRO FORMA RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1996 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1995
On a pro forma basis, after giving effect to the acquisition of the hotels
acquired during the periods, the Initial Offering and the Credit Facility,
pro forma total revenues increased by $1.9 million or 6.3% from $30.2
million in the three months ended September 30, 1995 to $32.1 million in
the three months ended September 30, 1996. This increase in total
revenue was related to an increase in rooms revenue. Rooms revenue
increased by $2.3 million, from $19.4 million in the three months ended
September 30, 1995 to $21.7 million in the three months ended September
30, 1996. The increase was due to an overall change in the market mix of
guests at the Owned Hotels, which has shifted from a lower-rated group
business to a concentration of corporate guests at a higher average room
rate. For the Owned Hotels, the average daily room rate ("ADR")
increased from $76.22 during the three months ended September 30, 1995 to
$87.52 during the three months ended September 30, 1996, an increase of
14.8%. This resulted in a 12.4% increase in revenue per available room
("RevPAR") to $67.48 during the three months ended September 30, 1996.
<PAGE>
Page 11
Pro forma operating expenses remained relatively stable in the three
months ended September 30, 1996 and 1995, at $12.4 million.
Pro forma net interest expense of $1.1 million for the three months ended
September 30, 1996 decreased from the $1.2 million for the three months
ended September 30, 1995 due to decreased interest rates.
The pro forma net income of $3.6 million for the three months ended
September 30 1996 represents an increase of 80% from the $2.0 million for
the three months ended September 30, 1995, and is due to the increased
room revenues and stable operating expenses discussed above.
Pro forma earnings before interest, taxes, depreciation and amortization
("EBITDA") improved to $9.2 million for the three months ended September
30, 1996 from $7.0 million for the same period in the prior year.
Management believes that EBITDA is a useful measure of operating
performance because it is industry practice to evaluate hotel performance
based on operating income before interest, taxes, depreciation and
amortization, which is generally equivalent to EBITDA and EBITDA is
unaffected by the debt and equity structure of the property owner.
EBITDA does not represent cash flow from operations as defined by GAAP
and is not necessarily indicative of cash available to fund all cash flow
needs and should not be considered as an alternative to net income under
GAAP for purposes of evaluating the Company's operating performance.
PRO FORMA NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH PRO FORMA
NINE MONTHS ENDED SEPTEMBER 30, 1995
Total pro forma revenues increased to $92.2 million in the nine months
ended September 30, 1996 from $86.6 million in the nine months ended
September 30, 1995. Room revenues for the nine months ended September
30, 1996 increased to $59.5 million from $54.2 million. The ADR for the
Owned Hotels increased from $75.26 during the nine months ended September
30, 1995 to $84.25 during the nine months ended September 30, 1996. This
resulted in a 12.6% increase in RevPAR to $62.85 during the nine months
ended September 30, 1996.
Operating costs and expenses increased to $77.2 million in the nine
months ended September 30, 1996 from $75.7 million in the nine months
ended September 30, 1995 due to the additional costs needed to support
the increased revenues.
Pro forma net interest expense of $3.3 million for the nine months ended
September 30, 1996 was down from the $3.5 million for the nine months
ended September 30, 1995 due to decreased interest rates.
<PAGE>
Page 12
The net income of $7.0 million for the nine months ended September 30,
1996 represents an increase from the $4.5 million for the nine months
ended September 30, 1995, and is primarily due to the increased room
revenues discussed above.
EBITDA increased to $22.2 million for the nine months ended September 30,
1996 from $18.4 million for the nine months ended September 30, 1995, an
increase of 20.7%. EBITDA as a percentage of total revenue increased to
24.1% for the nine months ended September 30, 1996 from 21.2% for the
nine months ended September 30, 1995.
HISTORICAL THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH HISTORICAL
THREE MONTHS ENDED SEPTEMBER 30, 1995
Total revenues increased by $21.5 million from $9.4 million in the three
months ended September 30, 1995 to $30.9 million in the three months
ended September 30, 1996. This increase can be attributed to the timing
of acquisitions of the Owned Hotels. As noted earlier, the three months
ended September 30, 1996 reflects a complete three months results for
eleven of the Owned Hotels, and partial activity for one of the Owned
Hotels, whereas the three months ended September 30, 1995 reflects a
complete three months results for only three Owned Hotels, and partial
activity for two Owned Hotels.
Operating costs and expenses increased to $24.0 million in the three
months ended September 30, 1996 from $7.8 million in the three months
ended September 30, 1995, resulting from the acquisitions of additional
Owned Hotels.
Operating income increased to $6.9 million for the three months ended
September 30, 1996 from $1.6 million for the three months ended September
30, 1995. Operating income as a percentage of revenue increased to 22.3%
for the three months ended September 30, 1996 from 17.0% for the three
months ended September 30, 1995, resulting from higher revenue and
increased operating efficiencies.
Net interest expense increased to $3.1 million in the three months ended
September 30, 1996 from $.8 million in the three months ended September
30, 1995, resulting from the debt incurred related to the acquisitions of
the additional Owned Hotels.
The net income of $.6 million for the three months ended September 30,
1996 is a decrease from the net income of $.8 million for the three
months ended September 30, 1995. The reduction was caused by a provision
for income taxes of $1.1 million and a net extraordinary loss from the
write-off of deferred financing fees of $2.0 million.
Income tax expense of $1.1 million reflects a provision for federal and
state income taxes at a combined 40.0% rate. The income tax provision
was calculated on the net income specifically attributable to the period
during which the company was operating as a C corporation, from the date
of the Initial Offering, August 20, 1996 through September 30, 1996.
There is no income tax provision for the three months ended September 30,
1995, as the predecessor entities consisted of limited partnerships and
limited liability companies. No tax provision is made for these entities
as net income passes through to the individual partners or members.
<PAGE>
Page 13
The extraordinary loss of $2.0 million reflects the write-off of deferred
financing fees of $3.2 million, net of a deferred tax benefit of $1.3
million. The financing fees were connected with the credit facility
which was refinanced prior to maturity.
EBITDA increased to $8.9 million for the three months ended September 30,
1996 from $2.3 million for the three months ended September 30, 1995.
EBITDA as a percentage of revenue increased to 28.8% for the three months
ended September 30, 1996 from 24.5% for the three months ended September
30, 1995.
HISTORICAL NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH HISTORICAL
NINE MONTHS ENDED SEPTEMBER 30, 1995
Total revenues increased by $62.9 million from $14.2 million in the nine
months ended September 30, 1995 to $77.1 million in the nine months ended
September 30, 1996. This increase is attributable to the acquisitions of
the Owned Hotels.
Operating costs and expenses increased to $63.6 million in the nine
months ended September 30, 1996, from $12.1 million in the nine months
ended September 30, 1995 resulting from the acquisitions of additional
Owned Hotels.
Operating income increased to $13.5 million for the nine months ended
September 30, 1996 from $2.1 million for the nine months ended September
30, 1995. Operating income as a percentage of revenue increased to 17.5%
for the nine months ended September 30, 1996 from 14.8% for the nine
months ended September 30, 1995, resulting from increased revenue and
operating efficiencies.
Net interest expense increased to $10.4 million in the nine months ended
September 30, 1996 from $1.1 million in the nine months ended September
30, 1995, resulting from the debt incurred related to the acquisitions of
the additional Owned Hotels.
Income tax expense of $1.1 million reflects a provision of federal and
state income taxes at a combined 40.0% rate. The income tax provision was
calculated on the net income specifically attributable to the period
during which the company was operating as a C corporation, from the date
of the Initial Offering, August 20, 1996 through September 30, 1996.
There is no income tax provision for the nine months ended September 30,
1995, as the predecessor entities consisted of limited partnerships and
limited liability companies. No tax provision is made for these entities
as net income passes through to the individual partners or members.
The extraordinary loss of $2.0 million reflects the write-off of deferred
financing fees of $3.2 million, net of a deferred tax benefit of $1.3
million. The financing fees were connected with the credit facility
which was refinanced prior to maturity.
The net income of $.03 million for the nine months ended September 30,
1996 is a decrease from the net income of $1.0 million for the nine
months ended September 30, 1995. The decrease was caused by a provision
for income taxes of $1.1 million and an extraordinary loss of $2.0
million, net of tax benefit.
<PAGE>
Page 14
EBITDA increased to $19.4 million for the nine months ended September 30,
1996 from $3.1 million for the nine months ended September 30, 1995.
EBITDA as a percentage of revenue increased to 25.2% for the nine months
ended September 30, 1996 from 21.8% for the nine months ended September
30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash on hand, cash
generated from operations and borrowings under the Credit Facility. The
Company's continuing operations are funded through cash generated from
hotel operations. Hotel acquisitions are financed through a combination
of internally generated cash and borrowings under the Credit Facility.
At September 30, 1996, the Company had $9.2 million in cash and cash
equivalents, an increase of $2.4 million from $6.8 million at December
31, 1995. Since the first hotel acquisition on March 3, 1995, the
Company invested $19.5 million in capital improvements in connection with
renovations of the Owned Hotels. The Company plans to spend an
additional $8.2 million in 1996 and $2.1 million in 1997 for the
completion of the renovation of the Owned Hotels. Capital for renovation
work has been and will be provided by a combination of internally
generated cash and borrowings under credit facilities. Once existing
planned renovation programs are complete, the Company expects to spend
approximately 4% of revenues on an annual basis for ongoing capital
expenditures, including room and facilities refurbishments, renovations,
and furniture and equipment replacements. The Company believes that
these investments will enhance the competitive position of its hotels.
The Company has entered into the Credit Facility with a group of banks,
in the maximum principal amount of $225 million. Borrowings under the
Credit Facility were used by the Company to repay indebtedness (including
$63 million of indebtedness owed under the old credit facility that
remained outstanding following consummation of the Initial Offering and
the application of proceeds therefrom) and will be used to acquire and
renovate upscale, full service hotels in the United States, and for other
corporate purposes. The term of the Credit Facility is three years,
subject to two one-year extensions upon the satisfaction of certain
conditions.
The Credit Facility is a direct obligation of CapStar Management and is
fully and unconditionally guaranteed by the Company and certain
subsidiaries of CapStar Management, including the subsidiaries owning
hotel properties. The Credit Facility is secured by substantially all
the real and personal property of CapStar Management and its
subsidiaries.
<PAGE>
Page 15
The Credit Facility contains covenants that impose certain limitations on
the Company in respect of, among other things, (i) the payment of
dividends and other distributions, (ii) acquisitions of additional hotel
properties, (iii) the creation or incurrence of liens, (iv) the
incurrence of certain indebtedness, lease obligations or contingent
liabilities, (v) the acquisition of investments in and securities issued
by joint ventures and other entities, (vi) transactions with affiliates,
(vii) management or similar agreements delegating to another person
substantial authority over the operation or maintenance of its hotel
properties, (viii) mergers, acquisitions, divestitures or
reorganizations, (ix) the issuance of preferred stock and (x) sale-
leaseback transactions involving any of its hotel properties. The Credit
Facility also contains covenants that subject the Company to certain
operating requirements and that require the maintenance of certain
financial levels, such as consolidated net worth, and certain financial
ratios, such as consolidated indebtedness to market equity capitalization
and shareholders' equity, consolidated EBITDA to interest and
consolidated EBITDA to total indebtedness.
<PAGE>
Page 16
PART II OTHER INFORMATION
ITEM 5. OTHER INFORMATION
(a) The Company acquired the 293 room Hilton Southwest in
Houston, Texas, from Rushlake Hotels USA on October 30, 1996
for a purchase price of $18,500,000. The acquisition was
funded through the Credit Facility.
(b) Forward-Looking Statements
Certain statements in this Form 10-Q and in the future
filings by the Company with the SEC, in the Company's press
releases, and in oral statements made by or with the
approval of an authorized executive officer constitute
"forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual
results, performance or achievements expressed or implied
by such forward-looking statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)
10- Senior Secured Revolving Credit Agreement, dated as of
September 24, 1996, among CapStar Management Company, L.P.,
as borrower, CapStar Hotel Company, as guarantor, the
lenders party thereto and Bankers Trust Company, as agent
27- Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
Page 17
SIGNATURES
Pursuant to the requirements 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.
CAPSTAR HOTEL COMPANY
Dated: November 14, 1996 /S/ PAUL W. WHETSELL
Paul W. Whetsell
President and Chief Executive Officer
/S/ W. MICHAEL KARNES
Dated:November 14, 1996 W. Michael Karnes
Chief Financial and Accounting Officer
SENIOR SECURED REVOLVING CREDIT AGREEMENT
DATED AS OF SEPTEMBER 24, 1996
AMONG
CAPSTAR MANAGEMENT COMPANY, L.P.,
AS BORROWER,
CAPSTAR HOTEL COMPANY,
AS GUARANTOR,
THE LENDERS PARTY HERETO
AND
BANKERS TRUST COMPANY,
AS AGENT
NY1-446326/045,710-644
<PAGE>
PAGE
CAPSTAR MANAGEMENT COMPANY, L.P.
CAPSTAR HOTEL COMPANY
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1
INTERPRETATION...................... 2
1.1 Certain Defined Terms............................... 2
1.2Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement; Pro Forma............. 49
1.3 References to Articles, Sections, Exhibits, Schedules and
Attachments......................................... 49
1.4 Captions............................................ 50
1.5 Drafter............................................. 50
1.6 References to Persons Include Permitted Successors and
Assigns............................................. 50
1.7 References to Applicable Law and Contracts.......... 50
1.8 Herein.............................................. 50
1.9 Including Without Limitation........................ 50
1.10 Gender.............................................. 50
1.11 Singular and Plural................................. 51
1.12 Knowledge........................................... 51
SECTION 2
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS........ 51
2.1 Purchase and Sale of Virginia Loan; Commitments; Loans;
Notes; the Register................................. 51
2.2 Interest on the Loans............................... 56
2.3 Fees................................................ 59
2.4Repayments and Prepayments; General Provisions Regarding
Payments............................................ 60
2.5Use of Proceeds....................................... 63
2.6Special Provisions Governing Eurodollar Rate Loans.... 63
2.7 Increased Costs; Taxes; Capital Adequacy............ 65
2.8 Obligation of the Lenders to Mitigate............... 69
2.9 Acquisition of Properties........................... 69
2.10 Releases of Pool A Properties and Other Collateral.. 75
SECTION 3
LETTERS OF CREDIT.................... 78
3.1Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein.............................. 78
3.2 Letter of Credit Fees............................... 80
3.3Drawings and Reimbursement of Amounts Paid Under Letters of
Credit.............................................. 81
3.4 Obligations Absolute................................ 83
3.5Indemnification; Nature of Issuing Lenders' Duties.... 84
3.6Increased Costs and Taxes Relating to Letters of Credit 85
SECTION 4
CONDITIONS PRECEDENT................... 86
4.1 Conditions to Effectiveness of Commitments.......... 86
4.2 Conditions to All Loans............................. 96
4.3 Conditions to Letters of Credit..................... 98
SECTION 5
REPRESENTATIONS AND WARRANTIES.............. 98
5.1Organization, Powers, Qualification, Good Standing, Business
and Subsidiaries.................................... 98
5.2 Authorization of Borrowing, etc.....................100
5.3 Financial Condition; Contingent Obligations.........102
5.4 Properties; Agreements; Licenses....................103
5.5 Litigation; Adverse Facts...........................105
5.6 Taxes...............................................105
5.7Performance of Agreements; Materially Adverse Agreements.106
5.8 Governmental Regulation; Securities Activities......106
5.9 Employee Benefit Plans..............................106
5.10 Certain Fees........................................107
5.11 Solvency............................................107
5.12 Disclosure..........................................108
5.13 Liens on the Collateral.............................108
5.14 Zoning; Authorizations..............................110
5.15 Physical Condition; Encroachment; Capital Expenditures111
5.17 Leases..............................................111
5.18 Environmental Reports; Engineering Reports; Appraisals;
Market Studies......................................112
5.19 No Condemnation or Casualty.........................112
5.20 Utilities and Access................................112
5.21 Intellectual Property...............................112
5.22 Wetlands............................................113
5.23 Cash Management System..............................113
5.24 Labor Matters.......................................113
5.25 Employment and Labor Agreements.....................114
SECTION 6
AFFIRMATIVE COVENANTS..................114
6.1 Financial Statements and Other Reports..............114
6.2 Common Stock........................................121
6.3 Corporate Existence; Corporate Separateness etc.....121
6.4 Taxes and Claims; Tax Consolidation.................122
6.5 Maintenance of Properties; Repair; Alteration.......123
6.6 Inspection; Lenders' Meeting; Appraisals............124
6.7 Compliance with Laws, Authorizations, etc...........124
6.8 Performance of Loan Documents and Related Documents.125
6.9 Payment of Liens....................................126
6.10 Insurance...........................................126
6.11 Casualty and Condemnation; Restoration..............132
6.12Renovations..........................................140
6.13 Brundage Clause.....................................142
6.14 Interest Rate Protection............................142
6.15 Cash Management System; Agent Rights; Application of Cash
Flow; Depository Account Names......................143
6.16 Capital Reserve Account; Deferred Maintenance.......145
6.17 O&M Requirements; Certain Post-Closing Environmental
Covenants...........................................147
6.18 Management of Properties............................148
6.19 Intellectual Property...............................148
6.20 Further Assurances..................................148
SECTION 7
NEGATIVE COVENANTS....................150
7.1 Indebtedness........................................150
7.2 Liens and Related Matters...........................153
7.3 Investments and Certain Capital Expenditures........154
7.4 Contingent Obligations..............................157
7.5 Restricted Junior Payments..........................158
7.6 Financial Covenants.................................159
7.7 Fundamental Changes.................................162
7.8 Zoning and Contract Changes and Compliance..........163
7.9 No Joint Assessment; Separate Lots..................163
7.10Transactions with Affiliated Persons.................164
7.11 Sales and Lease-Backs...............................164
7.12 Sale or Discount of Receivables.....................165
7.13 Ownership of Subsidiaries...........................166
7.14 Conduct of Business; Restrictions on Operations in Canada166
7.15Properties...........................................167
7.16 Renovation Expenditures.............................167
7.17Management Agreements and Servicing Agreements.......167
7.18 Intellectual Property; Franchise Agreements.........168
7.19 Material Leases.....................................168
7.20Changes in Certain Obligations and Documents; Issuance of
Equity Securities...................................169
7.21 Fiscal Year.........................................171
SECTION 8
EVENTS OF DEFAULT; REMEDIES...............171
8.1 Events of Default...................................171
8.2 Certain Remedies....................................176
SECTION 9
MISCELLANEOUS......................179
9.1Assignments and Participations in Loans and Letters of Credit.
179
9.2 Expenses............................................180
9.3 Indemnity...........................................181
9.4 No Joint Venture or Partnership.....................184
9.5 Ratable Sharing.....................................184
9.6 Amendments and Waivers..............................185
9.7 Independence of Covenants...........................185
9.8 Notices.............................................185
9.9 Survival of Representations, Warranties and Agreements.185
9.10 Agent's Discretion; Successor Agents................186
9.11 Obligations Several; Independent Nature of the Lenders'
Rights..............................................186
9.12 Remedies of the Borrower............................186
9.13 Marshalling; Payments Set Aside.....................187
9.14 Maximum Amount......................................187
9.15 Severability........................................188
9.16 Headings............................................188
9.17 Applicable Law......................................188
9.18 Successors and Assigns..............................188
9.19 Consent to Jurisdiction and Service of Process......188
9.20 Waiver of Jury Trial................................189
9.21 Counterparts; Effectiveness.........................190
9.22 Material Inducement.................................190
9.23 Entire Agreement....................................190
9.24 Confidentiality.....................................191
(i)
<PAGE>
EXHIBITS
I FORM OF NOTE
II FORM OF NOTICE OF BORROWING
III FORM OF NOTICE OF CONTINUATION
IV FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
V FORM OF COMPLIANCE CERTIFICATE
VI FORM OF BORROWING BASE CERTIFICATE
VII FORM OF CAPSTAR GUARANTY
VIII FORM OF AFFILIATE GUARANTY
IX FORM OF SECURITY AGREEMENT
X FORM OF TRADEMARK SECURITY AGREEMENT
XI FORM OF OMNIBUS MANAGEMENT AND LIQUOR LICENSE AGREEMENT
XII FORM OF CASH MANAGEMENT LETTER
XIII FORM OF ENVIRONMENTAL INDEMNITY
XIV FORM OF COLLATERAL ACCOUNT AGREEMENT
XV FORMS OF OPINIONS OF LOAN PARTIES' COUNSEL
XVI FORM OF ADDITION CERTIFICATE
XVII FORM OF NOTICE OF RENOVATION/RESTORATION
XVIII FORM OF COMPLETION CERTIFICATE
(ii)
<PAGE>
SCHEDULES
1.1A MBL PROPERTIES
1.1B MAXIMUM MORTGAGE AMOUNTS
2.1B LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1J FRANCHISE AGREEMENTS
4.1K MATERIAL LEASES AND ESTOPPELS
5.1A ORGANIZATION AND CAPITALIZATION
5.1B GOOD STANDING
5.2C GOVERNMENT CONSENTS
5.3B CONTINGENT OBLIGATIONS
5.4A1 POOL A PROPERTIES
5.4A2 POOL B PROPERTIES
5.4B POOL A GROUND LEASES
5.4C POOL B DOCUMENTS
5.4D MANAGEMENT AGREEMENTS AND ESTOPPELS
5.4E SERVICING AGREEMENTS
5.4H LIQUOR LICENSES
5.5 LITIGATION
5.7 CERTAIN CONTRACTUAL OBLIGATIONS
5.14A ZONING
5.15B REQUIRED CAPITAL EXPENDITURES
5.16 INSURANCE
5.21A INTELLECTUAL PROPERTY
5.22 WETLANDS
5.23 CASH MANAGEMENT SYSTEM
5.25 EMPLOYMENT AND LABOR AGREEMENTS
6.1 FORM OF FINANCIAL STATEMENT
6.12A APPROVED RENOVATION BUDGETS AND PLANS
6.16B DEFERRED MAINTENANCE
7.2 PERMITTED ENCUMBRANCES
7.10 AFFILIATE TRANSACTIONS
(iii)
<PAGE>
SENIOR SECURED REVOLVING CREDIT AGREEMENT
This SENIOR SECURED REVOLVING CREDIT AGREEMENT is dated as of
September 24, 1996 and entered into among CAPSTAR MANAGEMENT COMPANY, L.P.,
a Delaware limited partnership (the ``BORROWER''), CAPSTAR HOTEL COMPANY, a
Delaware corporation (``CAPSTAR''), THE LENDERS LISTED ON THE SIGNATURE
PAGES HEREOF (individually referred to herein as a ``LENDER'' and
collectively as the ``LENDERS'') and BANKERS TRUST COMPANY (``BANKERS''),
as agent for the Lenders (in such capacity, the ``AGENT'').
R E C I T A L S
A. CapStar is the sole general partner of the Borrower and CapStar
LP Corporation, a Delaware corporation and wholly-owned subsidiary of
CapStar (``CAPSTAR SUB''), is the sole limited partner of the Borrower.
B. The Borrower, CapStar and their subsidiaries desire that the
Lenders provide certain loan facilities, the proceeds of which, together
with the proceeds of the Equity Offering (as hereinafter defined), will be
used for the general corporate purposes of the Borrower and its
Subsidiaries, which include but are not limited to (i) the repayment of
existing indebtedness, (ii) the acquisition, ownership, renovation,
restoration, management and operation of upscale full service hotels in the
United States of America and, to the extent permitted herein, Canada,
(iii) the acquisition and ownership of real property for the expansion of
such hotels, (iv) the provision or acquisition and ownership of equity and
debt investments in joint ventures or other entities formed to acquire,
own, renovate, restore, manage, operate and dispose of such hotels, (v) the
acquisition and ownership of certain mortgage loans secured primarily by
such hotels and (vi) the acquisition and ownership of certain other equity
and debt securities.
C. CapStar is currently the holder of the Virginia Note in the
original principal amount of $18,500,000, under which the Borrower is the
obligor.
D. CapStar desires to sell to the Lenders, and the Lenders desire to
purchase from CapStar, the loan evidenced by the Virginia Note (the
``VIRGINIA LOAN''), together with all documents, instruments, certificates,
agreements, indemnities and other materials evidencing, governing, securing
or otherwise relating to the Virginia Loan (collectively, the ``VIRGINIA
DOCUMENTS'').
E. Simultaneously with the sale of the Virginia Loan to the Lenders,
the Borrower and the Lenders desire to amend and restate the Virginia Note
and the other Virginia Documents so that all of the agreements of the Loan
Parties and the Lenders with respect to the Virginia Loan shall thenceforth
be as set forth in this Agreement and in the other Loan Documents.
F. CapStar, Capstar Sub and the subsidiaries of the Borrower that
are Loan Parties (as hereinafter defined) desire to guaranty the
obligations of the Borrower under this Agreement.
G. The Borrower and the other Loan Parties desire to grant Liens in
the Collateral in favor of the Agent to secure their respective obligations
under the Loan Documents.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, CapStar, the Borrower, the
Lenders and the Agent agree as follows:
SECTION 1
INTERPRETATION
This Agreement and the other Loan Documents shall be construed and
interpreted in accordance with this Section 1.
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement and the other Loan
Documents shall have the following meanings when used herein with initial
capital letters:
``ABM'' has the meaning assigned to that term in subsection 6.17A.
``ACADIA'' means Acadia Partners, L.P., a Delaware limited
partnership.
``ACQUISITION'' means any acquisition by the Borrower or any of its
Wholly Owned Subsidiaries of any fee or, to the extent permitted herein,
leasehold interest in any hotel property.
``ACQUISITION AGREEMENTS'' means, collectively, the agreements entered
into by the Borrower and any of its Subsidiaries in connection with an
Acquisition by (i) the Borrower or a Wholly Owned Subsidiary pursuant to
subsection 2.9A or (ii) by a Wholly Owned Subsidiary of the Borrower
pursuant to subsection 2.9B.
``ADDITIONAL POOL A PROPERTY'' has the meaning assigned to that term
in subsection 2.9A.
``ADDITION CERTIFICATE'' means an Officers' Certificate, substantially
in the form attached hereto as EXHIBIT XVI, delivered to the Agent pursuant
to subsection 2.9A.
``ADDITION DATE'' means the following:
(i) with respect to any Pool A Property listed on Schedule 5.4A,
as of the Closing Date, the Closing Date; and
(ii) with respect to any Additional Pool A Property or any Pool B
Property acquired after the Closing Date in accordance with subsection
2.9, the latest to occur of (a) the date on which the Acquisition of
such Property is consummated and (b) the date on which all the
conditions to such Acquisition set forth in subsection 2.9A or 2.9B,
as the case may be, shall have been satisfied with respect to such
Property.
``ADJUSTED EURODOLLAR RATE'' means, for any Interest Rate
Determination Date with respect to a Eurodollar Rate Loan, the rate per
annum obtained by DIVIDING (i) the Eurodollar offered rate for deposits
with maturities comparable to the Interest Period for which such Adjusted
Eurodollar Rate will apply as of approximately 10:00 A.M. (New York time)
on such Interest Rate Determination Date as set forth on Telerate Page 4756
(or such other page as may, in the opinion of the Agent, replace such page
for the purpose of displaying such rate) BY (ii) a percentage equal to 100%
MINUS the stated maximum rate of all reserve requirements (including any
marginal, emergency, supplemental, special or other reserves) applicable on
such Interest Rate Determination Date to any member bank of the Federal
Reserve System in respect of ``Eurocurrency liabilities'' as defined in
Regulation D (or any successor category of liabilities under Regulation D).
``ADJUSTED STOCKHOLDERS' EQUITY'' means, as of any date of
determination, the sum of (i) $147,000,000; PLUS (ii) an amount equal to
50% of the cumulative Consolidated Net Income of CapStar and its
Subsidiaries determined from August 23, 1996 to the last day of the
calendar quarter ending not less than 30 days before such date of
determination for which the Agent has received the financial statements
pursuant to subsection 6.1(iii); PLUS (iii) an amount equal to 50% of the
aggregate net cash proceeds received by CapStar on or before each such last
day from the issuance and sale of Common Stock of CapStar in excess of the
9,250,000 shares of Common Stock issued and sold by CapStar in the Equity
Offering.
``ADJUSTMENT CONDITION'' means, as of any date of determination after
the first Anniversary, that as of the last day of the calendar quarter
ending not less than 30 days before such date of determination for which
the Agent has received the financial statements pursuant to subsection
6.1(iii), the ratio of Consolidated Total Indebtedness to Consolidated
EBITDA (calculated for the 12 consecutive months ending on such last day)
(i) is equal to or less than 3.5 to 1.0 and (ii) shall not have been
greater than 3.5 to 1.0 as of any date of determination during the six
months ending on such last day.
``AFFECTED LENDER'' has the meaning assigned to that term in
subsection 2.6C.
``AFFECTED LOANS'' has the meaning assigned to that term in subsection
2.6C.
``AFFILIATE'' means with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, ``control''
(including, with correlative meanings, the terms ``controlling'',
``controlled by'' and ``under common control with''), as applied to any
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by contract
or otherwise.
``AFFILIATE GUARANTY'' means the Affiliate Guaranty by each Loan Party
(other than CapStar) and any other Subsidiary of CapStar that becomes a
party thereto, substantially in the form of EXHIBIT VIII annexed hereto, as
such Affiliate Guaranty may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
``AGENT'' has the meaning assigned to that term in the introduction to
this Agreement and also means and includes any successor Agent hereunder.
``AGREEMENT'' means this Senior Secured Revolving Credit Agreement
dated as of the date first written above among CapStar, the Borrower, the
Lenders and the Agent, as it may be amended, restated, supplemented or
otherwise modified from time to time.
``ANNIVERSARY'' means each of the dates that are anniversaries of the
Closing Date.
``ALTA'' means the American Land Title Association or any successor
thereto.
``APPLICABLE BASE RATE MARGIN'' means, as of any date of
determination, a per annum rate equal to 1.00%; PROVIDED that, at any time
after the first Anniversary, the Applicable Base Rate Margin shall be a per
annum rate of .75% if and so long as the Adjustment Condition shall occur
and be continuing.
``APPLICABLE EURODOLLAR RATE MARGIN'' means, as of any date of
determination, a per annum rate equal to 2.00%; PROVIDED that, at any time
after the first Anniversary, the Applicable Eurodollar Rate Margin shall be
a per annum rate of 1.75% if and so long as the Adjustment Condition shall
occur and be continuing.
``APPLICABLE LAWS'' means, collectively, all statutes, laws, rules,
regulations, ordinances, orders, decisions, writs, judgments, decrees and
injunctions of Governmental Authorities (including Environmental Laws)
affecting the Borrower, any Loan Party or the Collateral or any part
thereof (including the acquisition, development, construction, Renovation,
occupancy, use, improvement, alteration, management, operation,
maintenance, repair or restoration thereof), whether now or hereafter
enacted and in force, and all Authorizations relating thereto, and all
covenants, conditions and restrictions contained in any instruments, either
of record or known to the Borrower or any other Loan Party, at any time in
force affecting any Property or any part thereof, including any such
covenants, conditions and restrictions which may (i) require improvements,
repairs or alterations in or to such Property or any part thereof or
(ii) in any way limit the use and enjoyment thereof; for purposes of usury,
Applicable Laws means the law of the State of New York applicable to
maximum rates of interest.
``APPRAISAL'' means, with respect to any Property, a written appraisal
of such Property prepared by an Appraiser and requested by the Agent
pursuant to subsection 6.6B or delivered to the Agent pursuant to
subsection 2.9 or 4.1N, in each case in form, content and methodology
satisfactory to the Agent and in compliance with all applicable legal and
regulatory requirements (including the requirements of Title XI of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, 12
U.S.C. <section><section> 3331, et seq., as amended (or any successor
statute thereto), and the regulations promulgated thereunder).
``APPRAISER'' means CB Commercial Real Estate Group, Inc. or any other
independent appraiser selected by the Agent and reasonably acceptable to
the Borrower who meets all regulatory requirements applicable to the Agent
and the Lenders, who is a member of the Appraisal Institute with a national
practice and who has at least 10 years experience with real estate of the
same type as the Property to be appraised.
``APPRAISED VALUE'' means, as of any date of determination and with
respect to any Property, the lesser of (i) the appraised value of such
Property, in each case as most recently determined by an Appraisal approved
by the Agent on or before such date of determination and (ii) the maximum
aggregate principal amount secured by the Mortgage applicable to such
Property, as expressly set forth in such Mortgage, as set forth in SCHEDULE
1.1B annexed hereto, as such Schedule shall be modified or supplemented
from time to time in accordance with this Agreement, and with respect to
which the Borrower has paid from time to time all applicable mortgage or
recording taxes.
``APPROVED ENVIRONMENTAL CONSULTANT'' means EMG, Inc. or any other
qualified, independent environmental consultant reasonably acceptable to
the Agent.
``ASSIGNMENT OF RENTS AND LEASES'' means each Assignment of Rents and
Leases executed and acknowledged by the Loan Party party thereto in favor
of the Agent for the benefit of the Agent and the Lenders substantially in
the form delivered on or before the Closing Date pursuant to subsection
4.1E(i), as any such Assignment of Rents and Leases may be amended,
restated, supplemented, consolidated, extended or otherwise modified from
time to time in accordance with the terms thereof and hereof.
``ATLANTA AIRPORT PROPERTY'' means the real property, together with
all Improvements thereon and all fixtures attached thereto and all personal
property used in connection therewith, located at 4736 Best Road, Atlanta,
Georgia and known, as of the date of this Agreement, as the Westin Hotel
Atlanta Airport, as more particularly described on SCHEDULE 5.4A1 annexed
hereto.
``ATLANTA AIRPORT SUB'' means Lepercq Atlanta Renaissance Partners,
L.P., a limited partnership.
``ATLANTA COLLATERAL ASSIGNMENT'' means that certain Assignment of
Deed to Secure Debt and Other Documents dated as of the date hereof by and
between the Borrower and the Agent, pursuant to which the Atlanta Documents
will be assigned as security for the Obligations, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time.
``ATLANTA DOCUMENTS'' means, collectively, (i) the Atlanta Partnership
Agreement, (ii) the Atlanta Mortgage, (iii) the Atlanta Note, (iv) the
Amended and Restated Loan Agreement dated as of August 23, 1996 between the
Atlanta Airport Sub and Borrower, (v) the Amended and Restated Security
Agreement dated as of August 23, 1996 by the Atlanta Airport Sub for the
benefit of the Borrower and assigned to the Agent, (vi) the Amended and
Restated Assignment of Rents and Leases dated as of August 23, 1996 by
Atlanta Airport Sub to the Borrower and assigned to the Agent, (vii) the
Environmental Indemnity Agreement dated as of August 23, 1996 by the
Atlanta Airport Sub for the benefit of the Borrower and assigned to the
Agent and (viii) the Amended and Restated Assignment of Contracts,
Licenses, Permits, Agreements, Warranties and Approvals dated as of August
23, 1996 by the Atlanta Airport Sub to the Borrower and assigned to the
Agent; as any of the same may be amended, restated, supplemented or
otherwise Modified from time to time to the extent permitted therein and
herein.
``ATLANTA GP'' means EquiStar Atlanta GP Company, L.L.C., a Delaware
limited liability company.
``ATLANTA LP'' means EquiStar Atlanta LP Company, L.L.C., a Delaware
limited liability company.
``ATLANTA MORTGAGE'' means that certain Amended and Restated Deed to
Secure Debt, Assignment of Leases and Rents and Security Agreement dated as
of August 23, 1996 executed by the Atlanta Airport Sub in favor of the
Borrower and assigned to the Agent, as amended, restated, supplemented or
otherwise modified from time to time to the extent permitted therein and
herein.
``ATLANTA NOTE'' means that certain Consolidated and Amended and
Restated Note dated as of August 23, 1996 executed by Atlanta Airport Sub
in the original principal amount of $23,609,456, as such note may be
amended, restated, supplemented or otherwise modified from time to time to
the extent permitted therein and herein.
``ATLANTA PARTNERSHIP AGREEMENT'' means the Amended and Restated
Agreement of Limited Partnership dated as of June 11, 1987 of LePercq
Atlanta Renaissance Parties, LP, as such agreement may be further amended,
restated, supplemented or otherwise modified from time to time.
``ATTRIBUTABLE ECONOMIC INTEREST'' means, with respect to any Person
as of any date of determination, the number of shares of Capital Stock of
any entity of which such Person is the record owner PLUS the total number
of shares that such Person would be entitled to receive upon the
distribution to such Person by such entity, pro rata with respect to
ownership interests of such entity (and without regard to any liabilities
of such entity), of all shares of which such Person is deemed to be the
beneficial owner but of which other Persons are the record owners.
``ATTRIBUTABLE INDEBTEDNESS'' means, when used with respect to any
sale and leaseback transaction with respect to which the lease is not
accounted for as a Capital Lease, as of any date of determination, the
greater of (i) the unamortized portion (determined on a level pay basis
over the term of the lease) of an amount equal to 85% of the gross purchase
price for the property subject to such transaction; PROVIDED that in
connection with any sale to a real estate investment trust, the amount
calculated pursuant to this clause (i) shall be net of any security deposit
required to be established with the proceeds of such purchase price; and
(ii) the present value (discounted at 10% per annum, compounded on a
monthly basis) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such arrangement
(including any period for which such lease has been extended), as each such
amount shall be reasonably determined by the Borrower and certified to the
Agent in an Officers' Certificate of the Borrower, together with the
information utilized by the Borrower to make such determination; PROVIDED,
HOWEVER, that if the applicable lease specifies the amount of a termination
fee, liquidated damages or other maximum amount that is payable by the
lessee upon a termination (for whatever reason) of the lease by the lessor
or the lessee prior to the scheduled termination of the base term or any
extension thereof, the amount calculated pursuant to this definition shall
not exceed such maximum amount.
``AUTHORIZATION'' means any authorization, approval, franchise,
license, variance, land use entitlement, sewer and waste water discharge
permit, storm water discharge permit, air pollution authorization to
operate, certificate of occupancy, municipal water and sewer connection
permit, and any like or similar permit now or hereafter required for the
construction or Renovation of any Improvements located on any Property or
for the use, occupancy or operation of any Property and all amendments,
modifications, supplements and addenda thereto.
``BANKERS'' has the meaning assigned to that term in the introduction
to this Agreement.
``BANKRUPTCY CODE'' means Title 11 of the United States Code entitled
``Bankruptcy'', as now and hereafter in effect, or any successor statute.
``BASE RATE'' means, at any time, the rate per annum that is the
higher of (i) of the Prime Rate and (ii) the sum of (a) the Federal Funds
Effective Rate PLUS (b) 1/2 of 1.00%.
``BASE RATE LOANS'' means Loans bearing interest at rates determined
by reference to the Base Rate as provided in subsection 2.2A.
``BORROWER'' has the meaning assigned to that term in the introduction
to this Agreement.
``BORROWING BASE'' means, as of any date of determination from and
after the Closing Date through and including the Maturity Date, the amount
determined by the Agent as of the last day of the preceding calendar
quarter (PROVIDED that if the Agent requests, in accordance with subsection
6.1(ii), that the Borrowing Base Certificate be delivered monthly, then the
Borrowing Base shall be calculated as of the last day of the preceding
calendar month) or, if subsequent thereto, the most recent Addition Date or
Release Date, that is equal to the sum of the Property Amounts in respect
of all Designated Pool A Properties as of such date of determination,
PROVIDED that the calculation of the amount referred to in this definition
shall exclude (i) the amount, if any, by which the Property Amount with
respect to any Designated Pool A Property (other than any Designated Pool A
Property referred to in clause (ii) of the definition of Property Amount)
as of such date of determination otherwise exceeds 20% of the amount
determined pursuant to this definition for such period and (ii) the amount,
if any, by which the sum of the Property Amounts in respect of Designated
Pool A Properties referred to in clause (ii) of the definition of Property
Amount as of such date of determination otherwise exceeds 10% of the amount
determined pursuant to this definition for such period. The Borrowing Base
is subject to (1) reduction from time to time as provided in subsections
2.4B(iii) and 2.10 and (2) adjustment from time to time as provided in the
definitions of Property Amount and Property EBITDA.
``BORROWING BASE CERTIFICATE'' means a certificate delivered by the
Borrower pursuant to Section 4.1C(iv) or subsection 6.1(ii) substantially
in the form delivered on the Closing Date pursuant to subsection 4.1C(v).
``BUSINESS DAY'' means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or is a
day on which banking institutions located in such state are authorized or
required by law or other governmental action to close.
``CAPITAL EXPENDITURES'' means, with respect to any Property, for any
period and as of any date of determination, the sum of (i) 4.0% of Property
Gross Revenues from such Property for such period, PROVIDED that, with
respect to any Property at which a Renovation costing more than $1,000,000
(as evidenced by written documentation reasonably satisfactory in form and
substance to the Agent) has been completed during the 12 consecutive month
period ending on the last day of the month immediately preceding the
applicable date of determination, such percentage shall be 3.00% for the
period from the Addition Date to the first anniversary of such Addition
Date; PLUS (ii) the aggregate amount, if any, in excess of 4.0% of Property
Gross Revenues which is required to be paid, deposited or reserved by the
Borrower or any of its Subsidiaries in respect of such Property for Capital
Items pursuant to the Pool B Obligations or any applicable Ground Lease for
such period.
``CAPITAL ITEMS'' means, with respect to any Property for any period
and as of any date of determination, the cost of capital repairs and
replacements of all or any portion of the Improvements or any other portion
of such Property, including (i) costs of tenant improvements and brokerage
commissions payable in connection with lease transactions at any Property,
(ii) costs of environmental audits and monitoring, environmental
remediation work or any other costs and expenses incurred with respect to
compliance with Environmental Laws, (iii) costs of any Restoration,
(iv) costs of any Renovation, (v) costs of FF&E, (vi) costs of appraisals,
valuations, title insurance and inspections and (vii) any other costs
incurred in connection with the Properties that are not included in
Operating Expenses, in each case to the extent such costs would be
capitalized on a balance sheet in accordance with GAAP.
``CAPITAL LEASE'' means, with respect to any Person, lease of any
property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
``CAPITAL RESERVE ACCOUNT'' means, collectively, one or more interest-
bearing accounts to be established and maintained by the Borrower at the
offices of the Agent located at 280 Park Avenue, New York, New York, each
in the name of ``Bankers Trust Company, as Agent - CapStar Capital Reserve
Account,'' with such additional identifying references in such name as the
Borrower and the Agent shall agree. Capital Reserve Accounts are not, and
do not include, Other Capital Reserve Accounts.
``CAPITAL STOCK'' means, with respect to any Person, any capital
stock, partnership, limited liability company or joint venture interests of
such Person and shares, interests, participations or other ownership
interests (however designated) of any Person and any rights (other than
debt securities convertible into any of the foregoing), warrants or options
to purchase any of the foregoing.
``CAPSTAR'' has the meaning assigned to that term in the recitals to
this Agreement.
``CAPSTAR GUARANTY'' means the CapStar Guaranty by CapStar,
substantially in the form of EXHIBIT VII annexed hereto, as such CapStar
Guaranty may be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms thereof and hereof.
``CAPSTAR SUB'' has the meaning assigned to that term in the recitals
to this Agreement.
``CASH'' means money, currency or a credit balance in a Deposit
Account.
``CASH AVAILABLE FOR DEBT SERVICE'' means, with respect to any Pool B
Subsidiary for any period and as of any date of determination, an amount
equal to Property EBITDA with respect to the Properties owned by such Pool
B Subsidiary, as the same shall be determined based upon the financial
statements for such Properties for such period and such other information
with respect thereto that may be provided by the Loan Parties and their
respective Subsidiaries, subject to such adjustments as may reasonably be
required by the Agent so that Property EBITDA with respect to such
Properties shall be calculated in the same manner as Property EBITDA with
respect to Pool A Properties owned by the Loan Parties and their respective
Subsidiaries during the entire period; PROVIDED, HOWEVER, that for purposes
of the calculation of Property EBITDA under this definition of Cash
Available for Debt Service with respect to any Property for any period,
Operating Expenses shall include (i) franchise and marketing fees of not
less than 7.5% of revenues from room rentals for such period in the event
such Property is subject to a Franchise Agreement, (ii) not less than 7.0%
of Property Gross Revenues for marketing expenses in the event such
Property is not subject to a Franchise Agreement, (iii) all Management Fees
in respect of each such Property payable to the Borrower but in no event
less than 3.0% of Property Gross Revenues in respect of such Property and
(iv) and a reserve for Capital Items in an amount not less than 4.0% of
Property Gross Revenues in respect of each such Property (except to the
extent that higher reserves are required by a franchisor under any
applicable Franchise Agreement).
``CASH EQUIVALENTS'' means, as of any date of determination,
(i) marketable securities (a) issued or directly and unconditionally
guaranteed as to interest and principal by the United States of America or
(b) issued by any agency of the United States of America the obligations of
which are backed by the full faith and credit of the United States of
America, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States
of America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either S&P or Moody's; (iii) commercial paper maturing no
more than one year from the date of creation thereof and having, at the
time of the acquisition thereof, a rating of at least A-1 from S&P or at
least P-1 from Moody's; (iv) Eurodollar deposits due within one year of any
commercial banks whose outstanding senior long-term debt securities are
rated either A- or higher by S&P or A-3 or higher by Moody's; (v)
repurchase obligations with a term of not more than 7 days for underlying
securities of the types described in clause (i) of this paragraph with any
bank meeting the qualifications specified in clause (vi) of this paragraph;
(vi) certificates of deposit or bankers' acceptances maturing within one
year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia that (a) is at least
``adequately capitalized'' (as defined in the regulations of its primary
Federal banking regulator) and (b) has Tier 1 capital (as defined in such
regulations) of not less than $100,000,000; and (vii) shares of any money
market mutual fund that (a) has at least 95% of its assets invested
continuously in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and (c) has
the highest rating obtainable from either S&P or Moody's.
``CASH MANAGEMENT LETTERS'' means (i) each letter agreement with
respect to the Local Accounts among the applicable Loan Parties, the
financial institutions at which Deposit Accounts are located pursuant to
the Cash Management System and the Agent, in each case substantially in the
form of EXHIBIT XII annexed hereto with such changes as are acceptable to
the Agent, (ii) the Cash Manager Cash Management Agreement, and (iii) all
other agreements with or directions to the financial institutions at which
Deposit Accounts are located satisfactory to the Agent, in either case
pursuant to which, in accordance with subsection 6.15, such financial
institutions are to direct funds from such Deposit Accounts to the
Concentration Account.
``CASH MANAGEMENT SYSTEM'' means the system of Deposit Accounts of
Loan Parties and their Subsidiaries pursuant to which all Receipts of Loan
Parties and such Subsidiaries (other than the Atlanta Airport Sub and Pool
B Subsidiaries) are collected and distributed, all as described in
SCHEDULE 5.23 annexed hereto, as it may be modified from time to time in
accordance with the terms hereof.
``CASH MANAGER'' means Wells Fargo Bank, N.A., or any successor
thereto approved by the Agent.
``CASH MANAGER CASH MANAGEMENT AGREEMENT'' means the letter agreement
delivered pursuant to subsection 4.1E(xi) with respect to the Concentration
Accounts by and among the Cash Manager, the Agent and the Borrower.
``CASH PROCEEDS'' means, with respect to any sale or other disposition
or refinancing of any Property, Cash payments received from such sale or
disposition or refinancing.
``CLOSING DATE'' means the first date on which each of the conditions
set forth in subsection 4.1 are satisfied.
``COLLATERAL'' means, collectively, all property (including, without
limitation, Capital Stock and promissory notes and other evidences of
Indebtedness), whether real, personal or mixed, tangible or intangible,
owned or to be owned or leased or to be leased or otherwise held or to be
held by CapStar or any of its Subsidiaries or in which CapStar or any of
its Subsidiaries has or shall acquire an interest, to the extent of
CapStar's or such Subsidiary's interest therein, now or hereafter granted,
assigned, transferred, mortgaged or pledged to the Agent and/or the Lenders
or in which a Lien is granted to the Agent and/or the Lenders to secure all
or any part of the Obligations, whether pursuant to the Security Documents
or otherwise, including, without limitation, the Pool A Properties, the
Leases and Rents and rights under the Original Acquisition Documents, the
Acquisition Documents and the Management Agreements, and any and all
proceeds of the foregoing, but excluding the Excluded Assets.
``COLLATERAL ACCOUNT'' has the meaning assigned to that term in the
Collateral Account Agreement.
``COLLATERAL ACCOUNT AGREEMENT'' means the Collateral Account
Agreement executed and delivered by the Borrower and the Agent on or before
the Closing Date, substantially in the form of EXHIBIT XIV annexed hereto,
pursuant to which the Borrower may pledge cash to the Agent to secure the
obligations of the Borrower to reimburse Issuing Lenders for payments made
under one or more Letters of Credit, as provided in subsections 2.4B and
8.1, as such Collateral Account Agreement may hereafter be amended,
supplemented or otherwise modified from time to time.
``COMMERCIAL LETTER OF CREDIT'' means any letter of credit or similar
instrument issued for the purpose of providing the primary payment
mechanism in connection with the purchase of any materials, goods or
services by the Borrower or any of its Subsidiaries.
``COMMITMENT'' means the commitment of a Lender to pay the Purchase
Price pursuant to subsection 2.1A, to make or maintain Loans pursuant to
subsection 2.1B and to issue Letters of Credit and purchase participations
therein as provided in subsection 3, and ``COMMITMENTS'' means such
commitments of all Lenders in the aggregate.
``COMMON STOCK'' means the common stock of CapStar, par value $.01 per
share.
``COMPLETION CERTIFICATE'' means a certificate of an architect or
Engineer substantially in the form of Exhibit XVIII annexed hereto,
delivered to the Agent pursuant to subsection 6.11F, 6.11G or 6.12A.
``COMPLIANCE CERTIFICATE'' means a certificate delivered to the Agent
by the Borrower pursuant to subsection 6.1(v) substantially in the form
attached as EXHIBIT V hereto.
``CONCENTRATION ACCOUNT'' means, collectively, the accounts
established and maintained in the name of the Agent at the offices of the
Cash Manager pursuant to the terms of the Security Agreement, to which
funds on deposit in the Deposit Accounts included in the Cash Management
System are directed by the Agent in accordance with subsection 6.15.
``CONDEMNATION PROCEEDS'' means all compensation, awards, damages,
rights of action and proceeds awarded to any Loan Party or any of its
Subsidiaries by reason of any Taking.
``CONSOLIDATED EBITDA'' means, for any period, the remainder of the
following:
(i) the sum, without duplication, of (a) Total Property EBITDA
for such period PLUS (b) all revenue of CapStar and its Subsidiaries
for such period, determined on a consolidated basis in conformity with
GAAP, that was not included in the calculation of Total Property
EBITDA for such period irrespective of whether such income relates to
the Properties, including, without limitation and without duplication,
(1) Management Fees with respect to Properties that shall have been
included in the calculation of Operating Expenses for such period and
(2) payments received by CapStar and its Subsidiaries in respect of
Interest Rate Agreements; PROVIDED that the calculation of the amount
referred to in this clause (i) shall exclude (v) income expressly
excluded from the definition of Property Gross Revenue, (w) income
resulting from the write-up of the value of assets, (x) income from
interest earned on notes and receivables from affiliates except to the
extent actually received, (y) the income of a Joint Venture and income
accounted for by the equity method of accounting, in each case except
to the extent distributed to CapStar or any of its Subsidiaries, and
increases or decreases in earnings attributable to minority interests
and (z) the income of any Person acquired in a pooling of interests
transaction before the date of acquisition; MINUS
(ii) all expenses, without duplication, of CapStar and its
Subsidiaries (to the extent not deducted from the calculation of Total
Property EBITDA) for such period and determined on a consolidated
basis in accordance with GAAP, whether or not such expenses relate to
the Properties; PROVIDED that the calculation of the amount referred
to in this clause (ii) shall exclude any expense related to the charge
off of amounts referred to in clause (i) above previously recognized
as revenue.
``CONSOLIDATED EBITDA-CAP EX'' means, for any period, Consolidated
EBITDA MINUS Capital Expenditures with respect to all Properties.
``CONSOLIDATED INTEREST EXPENSE'' means, for any period, total
interest expense (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) of CapStar and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
with respect to all outstanding Indebtedness of CapStar and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
``CONSOLIDATED NET INCOME'' means, with respect to any Person as of
any date of determination and for any period, the aggregate Net Income of
such Person and its Subsidiaries, on a consolidated basis, determined in
accordance with GAAP, from the first day of such period to the last day of
the calendar quarter ending not less than 30 days before such date of
determination for which the Agent has received the financial statements
pursuant to subsection 6.1(iii); PROVIDED, that (i) the Net Income of any
Person that is not a Subsidiary or that is accounted for by the equity
method of accounting shall be excluded, whether or not distributed to
CapStar or one of its Subsidiaries, (ii) the Net Income of any Person that
is a Subsidiary and that is restricted from declaring or paying dividends
or other distributions, directly or indirectly, by operation of the terms
of its charter, any applicable agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation or otherwise shall be
included only to the extent of the amount of dividends or distributions
paid to any Person or a Wholly Owned Subsidiary of any Person and (iii) the
Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded;
PROVIDED FURTHER, that for the purpose of determining compliance with
subsection 7.6A, both extraordinary gains and extraordinary losses (each
determined in accordance with GAAP) shall be excluded from the calculation
of Consolidated Net Income.
``CONSOLIDATED TOTAL INDEBTEDNESS'' means, as of any date of
determination, the sum of the following, without duplication: (i) all
Indebtedness of CapStar and its Subsidiaries, determined on a consolidated
basis; PLUS (ii) all Contingent Obligations of CapStar and its Subsidiaries
to make any Investments or Guaranties; PLUS (iii) all Guaranties of CapStar
or any of its Subsidiaries; PLUS (iv) the Letter of Credit Usage MINUS the
sum of (a) the Letter of Credit Usage with respect to Letters of Credit
supporting other Indebtedness of CapStar or any of its Subsidiaries PLUS
(b) the amount of Cash deposited and held pursuant to the terms of the
Collateral Account Agreement; PLUS (v) Attributable Indebtedness; PROVIDED
FURTHER that, for purposes of determining satisfaction of the Adjustment
Condition, the Borrower may elect by written notice delivered to the Agent
to exclude from the calculation of Consolidated Total Indebtedness the
lesser of (a) the aggregate principal amount of Loans that have been paid
from the net proceeds of the offering of Common Stock (other than the
Equity Offering) during the period commencing on the first day of the 12-
month period ending on the last day of the month preceding the applicable
date of determination and ending on the applicable date of determination
and (b) the aggregate principal amount of permanent Commitment reductions
pursuant to subsection 2.4B(ii).
``CONTINGENT OBLIGATION'' means, with respect to any Person, as of any
date of determination and without duplication, any direct or indirect
liability, contingent or otherwise, of that Person which has not been (or
to the extent that it has not been) paid or otherwise discharged with
respect to the following: (i) any Guaranty; (ii) any letter of credit
issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings (including, with respect to
the Borrower, Letters of Credit); or (iii) performance, surety and similar
bonds in respect of any Restoration, Renovation or other design,
construction, restoration, renovation, expansion or repair of any
Improvements, in each case with respect to any Property or other hotel
property; PROVIDED that Contingent Obligations shall not include (x) other
performance, surety and appeal bonds provided in the ordinary course of
business consistent with past practices or contemplated by subsection 6.9,
(y) indemnification or contribution obligations in respect of agreements
providing for indemnification, adjustment of purchase price or similar
obligations or for Guaranties or letters of credit, surety bonds and
performance bonds securing any obligations of the Borrower or any of its
Subsidiaries pursuant to such agreements, in any case incurred in
connection with the acquisition or Transfer of a business, asset or
Subsidiary (other than Guaranties of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or Subsidiary for the
purpose of financing such acquisition), and (z) indemnification obligations
with respect to environmental matters and ``bad deeds'' and other actions
(other than the payment of any Indebtedness, Contingent Obligation,
Guaranty or other monetary liability) in connection with Indebtedness,
Management Agreements, Servicing Agreements, service contracts, Leases,
partnerships, agreements, Franchise Agreements, leases, licensing
agreements and Ground Leases, in each case on customary terms consistent
with industry practice and to the extent that such Indebtedness or
agreements are not prohibited by this Agreement and (iv) obligations of the
type set forth in clauses (i) - (iii) above and all Indebtedness owed
either by any partnership of which such Person is a general partner or by
any limited liability company of which such Person is a member and with
respect to which Indebtedness such Person has liability under law or by
agreement. The amount of any Contingent Obligation, as of any date of
determination, shall be equal to the least of (x) the amount of the
obligation so Guaranteed or that otherwise may be required to be paid,
(y) the amount to which such Contingent Obligation is expressly limited and
(z) except with respect to a Guaranty of Indebtedness, the maximum exposure
under such Contingent Obligation as reasonably calculated by the Borrower
and approved by the Agent in its sole discretion.
``CONTRACTUAL OBLIGATION'' means, with respect to any Person, any
provision of any Security issued by that Person or of any material
indenture, mortgage, deed of trust, deed to secure debt, contract, lease,
purchase order, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject, including, with respect to
CapStar or any of its Subsidiaries, any provision of the Related Documents
to which CapStar or such Subsidiary is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.
``CREDIT BID'' means a bid in a foreclosure sale pursuant to a
Mortgage made by the Agent consisting of all or a portion of the
outstanding amount of the Obligations.
``CURRENCY AGREEMENT'' means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect CapStar or any of its
Subsidiaries against fluctuations in currency values.
``DEFAULTING LENDER'' means any Lender that fails to fund any Loan or
make any extension of credit required to be funded or made by such Lender
pursuant to the express terms of this Agreement.
``DEFERRED MAINTENANCE'' means the deferred maintenance and repair in
respect of the Pool A Properties recommended to be completed on or before
the first Anniversary and the estimated cost thereof and the improvements
recommended to be made to the Pool A Properties in furtherance of causing
the Pool A Properties to comply with the Americans with Disabilities Act,
each as set forth in the Engineering Reports delivered by the Borrower
pursuant to subsection 4.1T and specified in the columns entitled
``Immediate Repair of Deferred Items'', ``Immediate Repair of ADA Items''
and ``Additional Repair of Deferred Items During First Year'' on SCHEDULE
6.16B annexed hereto.
``DEFERRED MAINTENANCE ACCOUNT'' means, collectively, one or more
interest-bearing accounts to be established and maintained by Borrower at
the offices of the Agent located at 280 Park Avenue, New York, New York,
each in the name of ``Bankers Trust Company, as Agent
- -- CapStar Deferred Maintenance Account,'' with such additional identifying
references in such name as the Borrower and the Agent shall agree.
``DEPOSIT ACCOUNT'' means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced, by a negotiable certificate
of deposit.
``DESIGNATED POOL A PROPERTIES'' means, as of any date of
determination, the Pool A Properties other than the Removed Pool A
Properties.
``DEVELOPMENT'' means the erection or other construction or
installation of Improvements on real property that is then substantially
unimproved or from which all or substantially all of the existing
Improvements thereon have been removed or in connection with such erection,
construction or installation will be removed; PROVIDED that Development
does not include (x) Restorations and Renovations and (y) the erection or
other construction or installation of Improvements on real property that is
contiguous with a Property and in connection with the expansion of
Improvements at such Property.
``DOLLARS'' and the sign ``$'' mean the lawful money of the United
States of America.
``EAC'' means EquiStar Acquisition Corporation, a Delaware
corporation.
``ELIGIBLE ASSIGNEE'' means (i) (a) a commercial bank organized under
the laws of the United States of America or any state thereof; (b) a
savings and loan association or savings bank organized under the laws of
the United States of America or any state thereof; (c) a commercial bank
organized under the laws of any other country or a political subdivision
thereof; PROVIDED, HOWEVER, that (x) such bank is acting through a branch
or agency located in the United States of America or (y) such bank is
organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (d) any other entity which is an ``accredited investor'' (as
defined in Regulation D under the Securities Act) which extends credit or
buys loans as one of its principal businesses including, but not limited
to, insurance companies, investment banks, mutual funds and lease financing
companies, in each case (under clauses (a) through (d) above) that is
reasonably acceptable to the Agent; and (ii) any Lender and any Affiliate
of any Lender; PROVIDED FURTHER, HOWEVER, that each Eligible Assignee under
clauses (i)(a) through (i)(c) above shall have Tier 1 capital (as defined
in the regulations of its primary Federal banking regulator) of not less
than $100,000,000.
``EMPLOYEE BENEFIT PLAN'' means any ``employee benefit plan'' as
defined in Section 3(3) of ERISA which (i) is currently maintained or
contributed to by CapStar, any of its Subsidiaries, or any of their
respective ERISA Affiliates, or (ii) was at any time within the preceding
five years maintained or contributed to by CapStar, any of its
Subsidiaries, or any of their respective ERISA Affiliates to the extent any
of them could reasonably be expected to incur liability with respect to
such employee benefit plan.
``ENGINEER'' means each reputable engineer approved by the Agent
licensed as such in the state in which the applicable Property in question
is located.
``ENGINEERING REPORT'' means, with respect to any Property, a written
report prepared by an Engineer, describing and analyzing the physical
condition of the Improvements of such Property, describing any necessary or
recommended repairs, estimating the cost of such repairs and otherwise in
form and substance reasonably satisfactory to the Agent.
``ENVIRONMENTAL CLAIM'' means any accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any Governmental Authority or any other
Person for any damage, including personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
damage to natural resources, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or
restrictions, in each case relating to, resulting from or in connection
with Hazardous Materials and relating to CapStar, any of its Subsidiaries
(including any Person who was a Subsidiary prior to the Closing Date) or
any Property.
``ENVIRONMENTAL INDEMNITY'' means the Environmental Indemnity executed
and delivered by the Borrower and each of its Subsidiaries that owns a
Property on or before the Closing Date, and thereafter by each other
Subsidiary of the Borrower that becomes a party thereto, in favor of the
Agent and the Lenders, in substantially the form of EXHIBIT XIII annexed
hereto, as such agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof
and hereof.
``ENVIRONMENTAL LAWS'' means all statutes, laws, ordinances, orders,
rules, regulations, written guidelines, writs, judgments, decrees or
injunctions and the like relating to (i) environmental matters, including
those relating to fines, injunctions, penalties, damages, contribution,
cost recovery compensation, losses or injuries resulting from the Hazardous
Release or threatened Hazardous Release of Hazardous Materials, (ii) the
generation, use, storage, transportation or disposal of Hazardous
Materials, or (iii) occupational safety and health, industrial hygiene, or
the protection of human, plant or animal health or welfare, in any manner
applicable to any Loan Party or any of its Subsidiaries or any of their
properties, including the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. <section><section> 9601, et
seq.), the Hazardous Materials Transportation Act (49 U.S.C.
<section><section> 1801, et seq.), the Resource Conservation and Recovery
Act (42 U.S.C. <section><section> 6901, et seq.), the Federal Water
Pollution Control Act (33 U.S.C. <section><section> 1251, et seq.), the
Clean Air Act (42 U.S.C. <section><section> 7401, et seq.), the Toxic
Substances Control Act (15 U.S.C. <section><section> 2601, et seq.), the
Solid Waste Disposal Act (42 U.S.C. <section><section> 6901, et seq.), as
amended by the Resource Conservation and Recovery Act (42 U.S.C.
<section><section> 6901, et seq.), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. <section><section> 136, et seq.), the
Occupational Safety and Health Act (29 U.S.C. <section><section> 651, et
seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C.
<section><section> 11001, et seq.), each as amended or supplemented, and
rules and regulations, policies and guidelines promulgated pursuant thereto
and any analogous future or present local, state and federal statutes and
rules and regulations, policies and guidelines promulgated pursuant
thereto, each as in effect as of the date of determination.
``EQUITY OFFERING'' means the offering and sale of 9,250,000 shares of
Common Stock pursuant to the Equity Offering Documents.
``EQUITY OFFERING DOCUMENTS'' means, collectively, the Equity
Underwriting Agreements, the Equity Registration Statement and each of the
other documents and agreements executed in connection with the Equity
Offering, as each such document and agreement may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
``EQUITY PROSPECTUS'' means the prospectus relating to the Common
Stock in the form included in the Equity Registration Statement or, if the
prospectus included in the Equity Registration Statement omits information
in reliance on Rule 430A under the Act and such information is included in
prospectuses filed with the Securities and Exchange Commission pursuant to
Rule 424(b) under the Securities Act, ``Prospectus'' means the prospectus
relating to the Common Stock in the form included in the Equity
Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus relating to the Common Stock filed
with the Securities and Exchange Commission pursuant to Rule 424(b).
``EQUITY REGISTRATION STATEMENT'' means Registration Statement (No.
333-6583) of the Borrower on Form S-1 and the prospectus included therein,
as filed with the Securities Exchange Commission on June 21, 1996, as
amended by Amendment Nos. 1 and 2 thereto, as filed with the Securities and
Exchange Commission on July 31, 1996 and August 15, 1996, respectively, and
together with the Equity Prospectus, and as each may be further amended or
supplemented from time to time, before or after the effectiveness thereof,
with respect to the Equity Offering.
``EQUITY UNDERWRITING AGREEMENTS'' means, collectively, the
Underwriting Agreements, each dated as of August 20, 1996, among CapStar,
certain other persons, as selling shareholders, and the underwriters named
therein, as each such agreement may be amended, restated, consolidated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, pursuant to which 9,250,000 shares of Common Stock were
issued and sold in the Equity Offering.
``ERISA'' means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor thereto.
``ERISA AFFILIATE'' means, with respect to any Person, (i) any
corporation which is, or was at any time, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue
Code of which that Person is a member; (ii) any trade or business (whether
or not incorporated) which is a member of a group of trades or businesses
under common control within the meaning of Section 414(c) of the Internal
Revenue Code of which that Person is a member; and (iii) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of the
Internal Revenue Code of which that Person, any corporation described in
clause (i) above or any trade or business described in clause (ii) above is
a member. Any former ERISA Affiliate of any Loan Party or any of its
Subsidiaries shall continue to be considered an ERISA Affiliate of such
Loan Party or such Subsidiary, within the meaning of this definition with
respect to the period during which such entity was an ERISA Affiliate of
such Loan Party or such Subsidiary and with respect to liabilities arising
after such period for which such Loan Party or such Subsidiary could be
liable under the Internal Revenue Code or ERISA.
``ERISA EVENT'' means (i) a ``reportable event'' within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice
to the PBGC has been waived by regulation), (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived in accordance with
Section 412(d) of the Internal Revenue Code) or the failure to make by its
due date a required installment under Section 412(m) of the Internal
Revenue Code with respect to any Pension Plan or the failure to make any
required contribution to a Multiemployer Plan, in the case of any such
failure, by a material amount, (iii) the provision by the administrator of
any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of
intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA, (iv) the withdrawal by any Loan Party, any of its
Subsidiaries or any of their respective ERISA Affiliates from any Pension
Plan with two or more contributing sponsors or the termination of any such
Pension Plan resulting in liability pursuant to Section 4063 or 4064 of
ERISA, (v) the institution by the PBGC of proceedings to terminate any
Pension Plan, or the occurrence of any event or condition which might
constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan, (vi) the imposition of
liability on any Loan Party or any of its Subsidiaries or any of their
respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or
by reason of the application of Section 4212(c) of ERISA, (vii) the
withdrawal by any Loan Party or any of its Subsidiaries or any of their
respective ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if
there is any potential material liability therefor, or the receipt by any
Loan Party or any of its Subsidiaries or any of their respective ERISA
Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or
that it intends to terminate or has terminated under Section 4041A or 4042
of ERISA, (viii) the occurrence of an act or omission which could give rise
to the imposition on any Loan Party or any of its Subsidiaries or any of
their respective ERISA Affiliates of material fines, penalties, taxes or
related charges under Chapter 43 of the Internal Revenue Code or under
Section 409 or Section 502(c)(2), (i) or (l), or Section 4071 of ERISA in
respect of any Employee Benefit Plan, (ix) the assertion of a material
claim (other than routine claims for benefits) against any Employee Benefit
Plan other than a Multiemployer Plan or the assets thereof, or against any
Loan Party or any of its Subsidiaries or any of their respective ERISA
Affiliates in connection with any such Employee Benefit Plan, (x) receipt
from the Internal Revenue Service of notice of the failure of any Pension
Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code) to qualify under
Section 401(a) of the Internal Revenue Code, or the failure of any trust
forming part of any Pension Plan to qualify for exemption from taxation
under Section 501(a) of the Internal Revenue Code or (xi) the imposition of
a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue
Code or pursuant to ERISA with respect to any Pension Plan.
``EURODOLLAR RATE LOANS'' means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
``EVENT OF DEFAULT'' means each of the events set forth in
subsection 8.1.
``EXCHANGE ACT'' means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
``EXCLUDED ASSETS'' means the rights of the Loan Parties under
Management Agreements, liquor licenses, Authorizations, service contracts,
equipment leases, purchase agreements, collective bargaining agreements and
other agreements that, by their terms or by law and in accordance with
general practice, cannot be pledged to the Agent.
``EXCUSABLE DELAY'' means a delay due to acts of God, governmental
restrictions, enemy actions, war, civil commotion, fire, casualty, strikes,
shortages of supplies or labor, work stoppages or other causes beyond the
reasonable control of CapStar or any of its Affiliates, but lack of funds
shall not be deemed a cause beyond the reasonable control of CapStar or any
of its Affiliates.
``EXTRAORDINARY RECEIPTS'' means the proceeds to CapStar or any of its
Subsidiaries from such items as (i) sales, exchanges or other dispositions
of the assets of CapStar or any of its Subsidiaries other than in the
ordinary course of business thereof, (ii) damage recoveries and casualty
insurance proceeds (including Condemnation Proceeds or Insurance Proceeds
but other than the proceeds of business interruption insurance or rental
loss insurance), (iii) income derived from Securities and other property
acquired for investment except to the extent such Securities represent Cash
Equivalents, (iv) condemnation awards or sales in lieu of and under the
threat of condemnation (other than awards or other payments for any Taking
for temporary use), (v) debt or equity financing or refinancing, and
(vi) all other amounts of any nature paid to CapStar or any of its
Subsidiaries not arising out of the ordinary course of business thereof.
``FEDERAL FUNDS EFFECTIVE RATE'' means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent.
``FF&E'' means, with respect to any Property or the offices of CapStar
and its Subsidiaries, any furniture, fixtures and equipment, including any
beds, lamps, bedding, tables, chairs, sofas, curtains, carpeting, smoke
detectors, mini bars, paintings, decorations, televisions, telephones,
radios, desks, dressers, towels, bathroom equipment, heating, cooling,
lighting, laundry, incinerating, loading, swimming pool, landscaping,
garage and power equipment, machinery, engines, vehicles, fire prevention,
refrigerating, ventilating and communications apparatus, carts, dollies,
elevators, escalators, kitchen appliances, restaurant equipment, computers,
reservation systems, software, cash registers, switchboards, hotel cleaning
equipment or any other items of furniture, fixtures and equipment typically
used in hotel properties (including furniture, fixtures and equipment used
in guest rooms, lobbies, common areas, front desk, back office, bars,
restaurants, kitchens, laundries, concierge, bellman, recreation,
amusement, landscaping, parking and other areas of hotels) and any
replacements of all or any portion of any of the foregoing.
``FORMATION'' means, collectively, the transactions contemplated by
the Formation Documents, as described in the Equity Prospectus in the
section entitled ``The Formation Transactions''.
``FORMATION AGREEMENT'' means the Formation Agreement dated as of June
20, 1996 among CapStar and the other parties identified on the signature
pages thereof, as such agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof
and hereof.
``FORMATION DATE'' means August 23, 1996, which is the date on which
the transactions constituting the Formation were consummated.
``FORMATION DOCUMENTS'' means, collectively, the Formation Agreement
and each other agreement or other document giving effect to the Formation,
and each opinion, agreement, assignment, deed, instrument, material
certificate or other material document delivered in connection therewith or
pursuant thereto.
``FRANCHISE AGREEMENT'' means each of the franchise agreements listed
on SCHEDULE 4.1J annexed hereto, together with the most recent related
property improvement plan required by the respective franchisor, as each
such agreement may be amended, restated, supplemented or otherwise modified
or replaced from time to time in accordance with subsection 7.20G.
``FUNDING DATE'' means the date of the funding of a Loan.
``GAAP'' means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set
forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, in each case as
the same are applicable to the circumstances as of the date of
determination.
``GOVERNMENTAL ACTS'' has the meaning assigned to that term in
subsection 3.5A.
``GOVERNMENTAL AUTHORITY'' means any nation or government, any state,
county, municipality or other political subdivision or branch thereof, and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including any
agency, board, central bank, commission, court, department or officer
thereof.
``GROUND LEASES'' means each of the ground leases with respect to the
Properties listed on SCHEDULE 5.4B or SCHEDULE 5.4C annexed hereto, as such
Schedules may be revised or supplemented from time to time pursuant to
subsection 2.9, 2.10 and 7.11.
``GUARANTOR'' means each Loan Party party to the Affiliate Guaranty
and the CapStar Guaranty.
``GUARANTY'' means, with respect to any Person, any obligation,
contingent or otherwise, of that Person which has not been (or to the
extent that it has not been) paid or otherwise discharged with respect to
any Indebtedness, Ground Lease, other lease, dividend or other obligation
of any other Person if the primary purpose or intent thereof by the Person
incurring the Guaranty is to provide assurance to the obligee of such
obligation that such obligation of another will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the
holders of such obligation will be protected (in whole or in part) against
loss in respect thereof. Guaranties shall include, without limitation,
(i) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the
obligation of another, (ii) the obligation to make take-or-pay or similar
payments if required regardless of non-performance by any other party or
parties to an agreement, and (iii) any liability of such Person for the
obligation of another Person through any agreement (contingent or
otherwise) (a) to purchase, repurchase or otherwise acquire such obligation
or any security therefor, or to provide funds for the payment or discharge
of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (b) to maintain the
solvency or any balance sheet item, level of income or financial condition
of another Person if, in the case of any agreement described under
subclauses (a) or (b) of this sentence, the primary purpose or intent
thereof is as described in the preceding sentence. The amount of any
Guaranty shall be equal to the least of (x) the amount of the obligation so
guaranteed or otherwise supported, (y) the amount to which such Guaranty is
specifically limited and (z) except with respect to a Guaranty of
Indebtedness, the maximum exposure under such Guaranty as reasonably
calculated by the Borrower and approved by the Agent in its sole
discretion. Guaranties shall not include (i) any of the foregoing
obligations to the extent that the same constitutes Indebtedness under the
definition thereof or is a Guaranty with respect thereto and (2) Guaranties
of any liability or obligation of the Borrower or any Pool A Subsidiary in
respect of which the Borrower and the Pool A Subsidiaries are permitted to
become liable pursuant to this Agreement. The term ``Guarantee'' used as a
verb has a corresponding meaning.
``HAZARDOUS MATERIALS'' means (i) any chemical, material or substance
at any time defined as or included in the definition of ``hazardous
substances'', ``hazardous wastes'', ``hazardous materials'', ``extremely
hazardous waste'', ``restricted hazardous waste'', ``infectious waste'',
``toxic substances'', ``pollutant'', ``contaminant'' or any other
formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, ``TCLP toxicity'' or ``EP
toxicity'' or words of similar import under any applicable Environmental
Laws, (ii) any oil, petroleum, petroleum fraction or petroleum derived
substance, (iii) any drilling fluids, produced waters and other wastes
associated with the exploration, development or production of crude oil,
natural gas or geothermal resources, (iv) any flammable substances or
explosives, (v) any radioactive materials, (vi) asbestos in any form,
(vii) radon, (viii) urea formaldehyde foam insulation, (ix) electrical
equipment which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty parts per million,
(x) pesticides, and (xi) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any Governmental
Authority or which may or could pose a hazard to the health and safety of
the owners, occupants or any Persons in the vicinity of the Properties;
PROVIDED, however, that Hazardous Materials shall not include any materials
in a non-hazardous form such as asphalt contained in road-surfacing
materials or hazardous materials customarily used in the operation of hotel
properties and properly stored and maintained.
``HAZARDOUS RELEASE'' means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of Hazardous Materials into the
indoor or outdoor environment (including the abandonment or disposal of any
barrels, containers or other receptacles containing any Hazardous
Materials), or into or out of any Property, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
``IMPOSITIONS'' means all real property taxes and assessments, of any
kind or nature whatsoever, including, without limitation, vault, water and
sewer rents, rates, charges and assessments, levies, permits, inspection
and license fees and other governmental, quasi-governmental or
nongovernmental levies or assessments such as maintenance charges, owner
association dues or charges or fees resulting from covenants, conditions
and restrictions affecting the Properties, assessments resulting from
inclusion of any Property in any taxing district or municipal or other
special district, any of which are assessed or imposed upon the Property,
or become due and payable, and which create or may create a Lien upon the
Property, or any part thereof. In the event that any penalty, interest or
cost for nonpayment of any Imposition becomes due and payable, such
penalty, interest or cost shall be included within the term
``Impositions''.
``IMPROVEMENTS'' means all buildings, structures, fixtures, tenant
improvements and other improvements of every kind and description now or
hereafter located in or on or attached to any Land, including all building
materials, water, sanitary and storm sewers, drainage, electricity, steam,
gas, telephone and other utility facilities, parking areas, roads,
driveways, walks and other site improvements; and all additions and
betterments thereto and all renewals, substitutions and replacements
thereof.
``INDEBTEDNESS'' means, with respect to any Person and without
duplication, to the extent required to be shown on a balance sheet prepared
in conformity with GAAP, (i) all indebtedness for money borrowed by that
Person, (ii) that portion of obligations with respect to Capital Leases
that is classified as a liability on a balance sheet in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money, (iv) all
obligations owed for all or any part of the deferred purchase price of
assets or services purchased by that Person (a) due more than six months
from the date of incurrence of the obligation in respect thereof,
(b) evidenced by a note or similar written instrument or (c) owed in
respect of real property purchased by such Person or any of its
Subsidiaries, (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to
the credit of that Person, (vi) obligations under Currency Agreements and
Interest Rate Agreements, (vii) that portion of any other obligation of
that Person (other than reservation and similar deposits from customers and
working capital deposits from owners received and held in the ordinary
course of business) that is classified as a liability on a balance sheet in
conformity with GAAP, which obligation is (a) due more than six months from
the date of incurrence thereof or (b) evidenced by a note or similar
written instrument, (viii) trade payables of such Person and its
Subsidiaries that by their terms are more than 90 days delinquent and (ix)
all Guaranties by that Person.
``INDEMNIFIED PERSON'' has the meaning assigned to that term in
subsection 9.3.
``INSURANCE PROCEEDS'' means all insurance proceeds, damages, claims
and rights of action and the right thereto under any insurance policies
relating to any portion of any Property.
``INSURANCE REQUIREMENTS'' means all terms of any insurance policy
required hereunder covering or applicable to any Property or any part
thereof, all requirements of the issuer of any such policy, and all orders,
rules, regulations and other requirements of the National Board of Fire
Underwriters (or any other body exercising similar functions) applicable to
or affecting any Property or any part thereof or any use of any Property or
any portion thereof.
``INTELLECTUAL PROPERTY'' means, as of any date of determination, all
patents, trademarks, tradenames, copyrights, technology, know-how and
processes used in or necessary for the conduct of the business of the Loan
Parties and their respective Subsidiaries as conducted on such date of
determination that are material to the business, operations, condition
(financial or otherwise) or prospects of the Loan Parties and their
Subsidiaries, taken as a whole, including any of the foregoing licensed to
the Loan Parties or any of their respective Subsidiaries by other Persons.
``INTEREST PERIOD'' has the meaning assigned to that term in
subsection 2.2B.
``INTEREST RATE AGREEMENT'' means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect CapStar or any of its
Subsidiaries against fluctuations in interest rates.
``INTEREST RATE DETERMINATION DATE'' means each date for calculating
the Adjusted Eurodollar Rate for purposes of determining the interest rate
in respect of an Interest Period. The Interest Rate Determination Date
shall be the second Business Day prior to the first day of the related
Interest Period for any Loan.
``INTERNAL REVENUE CODE'' means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
``INVESTMENT'' means, with respect to any Person or any of its
Subsidiaries, as of any date of determination and without duplication:
(i) any direct or indirect purchase or other acquisition
(whether or not for consideration) by such investing Person or
Subsidiary of, or of a beneficial interest in, any Securities of any
other Person;
(ii) any direct or indirect redemption, retirement, purchase or
other acquisition for value by such investing Person or Subsidiary
from any other Person (other than (a) a Person with respect to which
such investing Person or Subsidiary is a Wholly Owned Subsidiary or
(b) any other Wholly Owned Subsidiary of the Person referred to in the
preceding clause (a); PROVIDED that, in the case of CapStar and its
Subsidiaries, such other Wholly Owned Subsidiary is a Loan Party and
has Guaranteed the Obligations), of any equity Securities of such
investing Person or Subsidiary;
(iii) any direct or indirect loan, advance (other than (a)
advances to officers, employees, consultants, accountants, attorneys
and other advisors and members of the Board of Directors of any Person
for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in each case incurred in the ordinary course of
business and (b) advances to officers of any Person for other purposes
in an amount not greater than $100,000 individually or $330,000 in the
aggregate, in each case at any time outstanding) or capital
contribution to any other Person, including all indebtedness and
accounts receivable from that other Person that are not current assets
or did not arise from sales to that other Person in the ordinary
course of business;
(iv) any payment to any other Person for the purpose of or
otherwise in connection with securing, extending, renewing or
modifying any Management Agreement;
(v) any commitment or obligation to make any investment
described in clauses (i) through (iv) above; and
(vi) any liability that is recourse to such investing Person or
Subsidiary or secured by any asset of such investing Person or
Subsidiary and that arises, by law, contract, ownership of Securities
or otherwise, directly or indirectly, as the result of or otherwise in
connection with the origination, continuation or termination of any
investment described in clauses (i) through (iv) above.
The amount of any Investment, as of any date of determination, shall be
equal to (y) with respect to an Investment referred to in clause (i) or
(ii) of the preceding sentence, the remainder of (1) the sum of original
cost of such Investment PLUS the cost of all additions thereto as of such
date of determination, MINUS (2) the aggregate amount paid to such Person
or Subsidiary as a return of such Investment; PROVIDED, that (A) the
calculation of the amount referred to in this clause (2) shall exclude all
fees and other amounts (or the portion thereof) that shall constitute
interest, dividends or other amounts in respect of the return on such
Investment, as determined in accordance with GAAP, and (B) the calculation
of the amount referred to in this clause (i) shall exclude, all adjustments
for increases or decreases in value, and write-ups, write-downs or write-
offs with respect to such Investment, and (z) with respect to an Investment
referred to in clause (iv) or (v) of the preceding sentence, the maximum
aggregate liability for which such investing Person or Subsidiary may
become liable, by law, contract, ownership of Securities or otherwise, with
respect to such Investment as of such date of determination.
``IP LICENSE AGREEMENTS'' has the meaning assigned to that term in
subsection 5.21A.
``ISSUING LENDER'' means, with respect to any Letter of Credit, the
Lender which agrees or is otherwise obligated to issue such Letter of
Credit, determined as provided in subsection 3.1B(ii).
``JOINT VENTURE'' means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership, limited liability company
or other legal form, which joint venture, partnership or other similar
arrangement may be a Subsidiary of any Person, including, without
limitation, a Subsidiary (other than a Wholly Owned Subsidiary) of the
Borrower.
``LAND'' means, with respect to each Pool A Property and Pool B
Property, the land located in the municipalities, towns, counties and
states listed on SCHEDULE 5.4A1 annexed hereto (and more particularly
described (i) in EXHIBIT A to each Mortgage (other than the Mortgages with
respect to the Ground Leases, in which case the applicable Land is
described in EXHIBIT A to each such Mortgage) and (ii) in EXHIBIT A to the
Atlanta Collateral Assignment)) and SCHEDULE 5.4A2 annexed hereto,
respectively, together with all strips and gores within or adjoining such
property, all estate, right, title, interest, claim or demand whatsoever of
any Loan Party or any of its Subsidiaries in the streets, roads, sidewalks,
alleys, and ways adjacent thereto (whether or not vacated and whether
public or private and whether open or proposed), all vaults or chutes
adjoining such land, all of the tenements, hereditaments, easements,
reciprocal easement agreements, rights pursuant to any trackage agreement,
rights to the use of common drive entries, rights-of-way and other rights,
privileges and appurtenances thereunto belonging or in any way pertaining
thereto, all reversions, remainders, dower and right of dower, curtesy and
right of curtesy, all of the air space and right to use said air space
above such property, all transferable development rights arising therefrom
or transferred thereto, all water and water rights (whether riparian,
appropriative or otherwise, and whether or not appurtenant) and shares of
stock evidencing the same, all mineral, mining, gravel, geothermal, oil,
gas, hydrocarbon substances and other rights to produce or share in the
production of anything related to such property, all drainage, crop,
timber, agricultural, and horticultural rights with respect to such
property, and all other appurtenances appurtenant to such property,
including without limitation, any now or hereafter belonging or in any way
appertaining thereto, and all claims or demands of such Loan Party or such
Subsidiary, either at law or in equity, in possession or expectancy, now or
hereafter acquired, of, in or to the same.
``LEASE'' means each of the leases (other than the Ground Leases),
licenses, concession agreements, franchise agreements (other than the
Franchise Agreements) and other occupancy agreements and other agreements
demising, leasing or granting rights of possession or use or, to the extent
of the interest therein of any Loan Party or any of its Subsidiaries, any
sublease, subsublease, underletting or sublicense, which now or hereafter
may affect any Property or any part thereof or interest therein, including
any agreement relating to a loan or other advance of funds made in
connection with any such lease, license, concession agreement, franchise or
other occupancy agreement and such sublease, subsublease, underletting or
sublicense, and every amendment, restatement, supplement, consolidation or
other modification of or other agreement relating to or entered into in
connection with such lease, license, concession agreement, franchise or
other occupancy agreement and such sublease, subsublease, underletting or
sublicense, and every Guaranty of the performance and observance of the
covenants, conditions and agreements to be performed and observed by the
other party thereto, and any Guaranties of leasing commissions.
``LENDER'' and ``LENDERS'' means the persons identified as ``Lenders''
and listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 9.1.
``LETTER OF CREDIT'' OR ``LETTERS OF CREDIT'' means Commercial Letters
of Credit and Standby Letters of Credit issued or to be issued by Issuing
Lenders for the account of the Borrower pursuant to subsection 3.1.
``LETTER OF CREDIT USAGE'' means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter
may become available for drawing under all Letters of Credit then
outstanding PLUS (ii) the aggregate amount of all drawings under Letters of
Credit honored by Issuing Lenders and not theretofore reimbursed by the
Borrower (including any such reimbursement out of the proceeds of Loans
pursuant to subsection 3.3B).
``LIEN'' means any lien (including any lien or security title granted
pursuant to any mortgage, deed of trust or deed to secure debt), pledge,
hypothecation, assignment, security interest, charge, levy, attachment,
restraint or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the
foregoing.
``LIQUOR LEASE'' means each Lease entered into between the Borrower or
any of its Wholly Owned Subsidiaries, in each case as lessor, and the
holder of a Liquor License in respect of a Property, in each case in
connection with the sale of alcoholic beverages at such Property,
substantially in the form approved by the Agent on or before the Closing
Date or in such form as may be reasonably acceptable to the Agent as any
such Lease may be amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms hereof and thereof.
``LIQUOR LICENSES'' means, collectively, the licenses set forth on
SCHEDULE 5.4H annexed hereto and each other license issued by the
Department of Alcoholic Beverage Control or similar state or local agency
to any Loan Party or any of its Subsidiaries or in respect of any Property,
in each case in connection with the sale of alcoholic beverages at such
Property, as such Schedule may be revised from time to time pursuant to
subsection 2.9, 2.10 or 7.17.
``LIQUOR OPERATIONS SERVICING AGREEMENTS'' means, collectively, the
sub-management agreements entered into between the Borrower and each Loan
Party (or Subsidiary of a Loan Party) that is a holder of a Liquor License,
substantially in the form approved by the Agent on or before the Closing
Date or in such other form as may be reasonably acceptable to the Agent, as
any such sub-management agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof
and hereof.
``LLC LOAN PARTIES'' means, collectively, each Person that is a
limited liability company and is, or becomes, a Loan Party.
``LOAN DOCUMENTS'' means, collectively, this Agreement, the CapStar
Guaranty, the Affiliate Guaranty, the Notes, the Security Documents, the
Environmental Indemnity, the Letters of Credit (and any applications for,
or reimbursement agreements or other documents or certificates executed by
the Borrower in favor of an Issuing Lender relating to the Letters of
Credit), the Collateral Account Agreement and any other documents entered
into in connection with the Cash Management System.
``LOAN EXPOSURE'' means, with respect to any Lender, as of any date of
determination (i) prior to the termination of the Commitments, that
Lender's Commitment and (ii) after the termination of the Commitments, the
sum of (a) the aggregate outstanding principal amount of the Loans of that
Lender, PLUS (b) in the event that Lender is an Issuing Lender, the
aggregate Letter of Credit Usage in respect of all Letters of Credit issued
by that Lender (in each case net of any participations purchased by other
Lenders in such Letters of Credit or any unreimbursed drawings thereunder),
PLUS (c) the aggregate amount of all participations purchased by that
Lender in any outstanding Letters of Credit or any unreimbursed drawings
under any Letters of Credit.
``LOAN PARTIES'' means, collectively, CapStar, CapStar Sub, the
Borrower and any other Subsidiary of CapStar which is or becomes a party to
a Loan Document.
``LOANS'' means, collectively, the Loans made by the Lenders to the
Borrower pursuant to subsection 2.1B.
``LOCAL ACCOUNTS'' means, collectively, the Deposit Accounts listed on
SCHEDULE 5.23 annexed hereto as ``Local Accounts'' and any other Deposit
Account established with respect to one or more Properties for the purpose
of receiving Receipts pursuant to subsection 6.15.
``MAJOR RENOVATION/RESTORATION'' means, as of any date of
determination, any Renovation or Restoration of a Property with respect to
which more than 50% of the rooms ``available for sale'' at the applicable
Property have been, are scheduled to be, or could reasonably be expected to
be, ``rooms out-of-order'', as determined in accordance with the Uniform
System, during any period of 30 consecutive days; PROVIDED that a
Restoration related to a casualty or Taking and conducted pursuant to and,
as of such date of determination, satisfying the conditions of subsection
6.11F is not a Major Renovation/Restoration.
``MAJOR RENOVATION/RESTORATION REMOVAL PERIOD'' means with respect to
any Property, the period commencing on the day that a Major
Renovation/Restoration shall commence with respect to such Property and
terminating on the day that such Major Renovation/Restoration shall
terminate with respect to such Property, in each case as such dates of
commencement and termination shall be reasonably determined by the Agent
based on documentation received from the Borrower and on such other
information as the Agent shall determine to be relevant.
``MANAGED PROPERTIES'' means, collectively, the real properties,
together with all Improvements thereon and all fixtures attached thereto
and all personal property used in connection therewith, that are managed by
the Borrower or any of its Wholly Owned Subsidiaries pursuant to the
Management Agreements. Managed Properties do not include Properties.
``MANAGEMENT AGREEMENT EFFECTIVENESS DATE'' means the date that is 30
days after the last day of a calendar quarter that is also the last day of
12 consecutive calendar months during which the aggregate amount of
Management Fees paid to the Borrower and its Subsidiaries pursuant to
Management Agreements is equal to or greater than 10% of the consolidated
gross revenues of CapStar and its Subsidiaries; PROVIDED that the
calculation of gross revenues shall exclude the income excluded from clause
(i) of the definition of ``Consolidated EBITDA''.
``MANAGEMENT AGREEMENTS'' means, collectively, all hotel management
agreements under which CapStar or any of its Subsidiaries is named or acts
as manager, including the hotel management agreements listed on
SCHEDULE 5.4D annexed hereto, as such Schedule may be revised or
supplemented from time to time pursuant to subsection 2.9A or 2.9B, as any
such hotel management agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof
and hereof. Management Agreements do not include the Servicing Agreements
or other hotel management agreements among the Borrower and any of its
Subsidiaries with respect to the Properties.
``MANAGEMENT FEES'' means, collectively, all hotel management fees
(however characterized, including base fees, trade name fees, incentive
fees, special incentive fees, termination fees and all fees in respect of
liquor license operations) and all other fees or charges payable to the
manager for the management and operation of a hotel property, the related
land and the improvements thereof.
``MARGIN STOCK'' has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
``MARKET EQUITY CAPITALIZATION'' means, with respect to any issuer and
as of any date of determination, the product of (i) the number of shares of
common stock of such issuer outstanding as of such date MULTIPLIED BY
(ii) the average of the closing bid prices of such common stock on the
principal national securities exchange on which such common stock is listed
or, if such common stock is not so listed, on NASDAQ/NMS, as the case may
be, for each of the 30 consecutive trading days next preceding such date of
determination (or such shorter period during which such common stock shall
have been publicly traded until such time as it has been so traded for 30
consecutive trading days); PROVIDED that the amount referred to in the
preceding clause (ii) for the Common Stock on the Formation Date shall be
the initial offering price per share of Common Stock pursuant to the Equity
Offering.
``MATERIAL ADVERSE EFFECT'' means (i) a material adverse effect upon
the business, operations, condition (financial or otherwise) or prospects
of the Loan Parties, taken as a whole, and (ii) the material impairment of
the ability of any of the Loan Parties to perform, or of the Agent or the
Lenders to enforce, any Obligation of any Loan Party.
``MATERIAL LEASE'' means each Lease either (i) demising in excess of
7,500 square feet of the Improvements with respect to any Property or
(ii) generating in excess of 5.0% of the Property Gross Revenues with
respect to any Property or otherwise identified as a Material Lease by the
Borrower pursuant to subsection 4.1K; PROVIDED that no Liquor Lease shall
be a Material Lease.
``MATERIAL MANAGEMENT AGREEMENT'' means any Management Agreement
pursuant to which the Borrower or any of its Subsidiaries has received or
reasonably expects that it is, or will become, entitled to receive more
than $250,000 per year in gross revenues.
``MATURITY DATE'' means the earliest of (i) the date that is the third
Anniversary of the Closing Date, as such date may be extended pursuant to
subsection 2.1F to a date not later than the fifth Anniversary of the
Closing Date, (ii) the date as of which the Obligations shall have become
immediately due and payable pursuant to subsection 8.1 and (iii) the date
as of which the Obligations shall have become immediately due and payable
pursuant to subsection 2.4B(v).
``MBL ACQUISITION DOCUMENTS'' means the MBL Purchase Agreement and
each other document or certificate executed in connection therewith.
``MBL PROPERTIES'' means each of the hotel properties listed on
SCHEDULE 1.1A annexed hereto to be acquired by the Borrower pursuant to the
MBL Acquisition Documents.
``MBL PURCHASE AGREEMENT'' means that certain Agreement of Sale and
Purchase dated June 20, 1996 by and between MBL Life Assurance Corporation
and EquiStar Hotel Investors, L.P., as such agreement may be amended,
restated, supplemented or otherwise modified from time to time.
``MOODY'S'' means Moody's Investors Service, Inc. or any successor to
the business thereof.
``MORTGAGE'' means each Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing and each Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing and each Deed to Secure Debt,
Assignment of Rents, Security Agreement and Fixture Filing executed and
acknowledged by the Loan Party thereto in favor of the Agent for the
benefit of the Lenders (or, in the case of a deed of trust, to a trustee
for the benefit of the Agent and the Lenders) substantially in the form
delivered on or before the Closing Date pursuant to subsection 4.1E(i), as
each such agreement may be amended, restated, supplemented, consolidated,
extended or otherwise modified from time to time in accordance with the
terms thereof and hereof.
``MORTGAGED PROPERTY'' has the meaning assigned to that term in the
Mortgages.
``MULTIEMPLOYER PLAN'' means any Employee Benefit Plan that is a
``multiemployer plan'', as defined in Section 3(37) of ERISA.
``NASDAQ/NMS'' means the National Association of Securities Dealers
Automated Quotation System/National Market Securities.
``NET INCOME'' means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of Preferred Stock dividends, excluding, however, any
gain (but not loss), together with any related provision for Taxes on such
gain (but not loss), realized in connection with any Asset Sale, and
excluding any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
``NET INSURANCE/CONDEMNATION PROCEEDS'' means all Insurance Proceeds
on account of damage or destruction to any Property or all Condemnation
Proceeds in respect of any Property, MINUS the reasonable cost, if any, of
such recovery and of paying out such proceeds, including reasonable
attorneys' fees and costs allocable to inspecting the Work and the plans
and specifications therefor.
``NET SALES PRICE'' means, with respect to any sale or other permanent
disposition by a Loan Party or any of its Subsidiaries of a Property, or
other asset, the gross purchase price therefor less the sum of (i) except
with respect to the sale or other permanent disposition of a Pool A
Property, the amounts applied to the payment of Indebtedness or other
obligations secured by a Lien on such Property or other asset (other than
the Obligations), (ii) the reasonable out-of-pocket costs and expenses
incurred by such Loan Party or Subsidiary directly in connection with such
sale or other permanent disposition, including income taxes paid or
estimated to be actually payable as a result thereof, after taking into
account any available tax credits or deductions and any tax sharing
arrangements (PROVIDED that the amount of income taxes so estimated to be
actually payable shall be approved by the Agent, which approval shall not
be unreasonably withheld, conditioned or delayed), and (iii) closing
adjustments contemplated and reserved.
``NET WORTH'' means, as of any date of determination, the sum of the
capital stock and additional paid-in capital PLUS retained earnings (or
MINUS accumulated deficits) of CapStar and its Subsidiaries determined in
conformity with GAAP.
``NOTES'' means, collectively, (i) the promissory notes of the
Borrower issued on the Closing Date pursuant to subsection 2.10(i) and
(ii) any promissory notes issued by the Borrower pursuant to the last
sentence of subsection 10.1B(i) in connection with assignments of the Loan
Commitments and Loans of any Lenders, in each case substantially in the
form of EXHIBIT I annexed hereto, as they may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
``NOTICE OF BORROWING'' means a notice substantially in the form of
EXHIBIT II annexed hereto delivered by the Borrower to the Agent pursuant
to subsection 2.1C with respect to a proposed borrowing hereunder.
``NOTICE OF CONTINUATION'' means a notice substantially in the form of
EXHIBIT III annexed hereto delivered by the Borrower to the Agent pursuant
to subsection 2.2D with respect to a proposed conversion or continuation of
the applicable basis for determining the interest rate with respect to the
Loans specified therein.
``NOTICE OF ISSUANCE OF LETTER OF CREDIT'' means a notice
substantially in the form of EXHIBIT IV annexed hereto delivered by the
Borrower to the Agent pursuant to subsection 3.1B(i) with respect to the
proposed issuance of a Letter of Credit.
``NOTICE OF RENOVATION/RESTORATION'' means a notice, substantially in
the form of EXHIBIT XVII annexed hereto, delivered to the Agent pursuant to
subsection 6.11A, 6.11C or 7.12A.
``OBLIGATIONS'' means, collectively, all obligations of every nature
of CapStar or any of its Subsidiaries from time to time owed to the Agent
or Lenders or any of them under or in respect of the Loans and the Loan
Documents, whether for principal, interest, reimbursement of amounts drawn
under Letters of Credit, fees, commissions, expenses, indemnification or
otherwise.
``OFFICERS' CERTIFICATE'' means, as applied to any corporation, a
certificate executed on behalf of such corporation by a person specified in
this Agreement for such purpose or, in the absence of such specification,
by its chairman of the board (if an officer) or its president or one of its
vice presidents and by its chief financial officer or its treasurer;
PROVIDED, however, that every Officers' Certificate with respect to the
compliance with a condition precedent to the making of the Loan hereunder
shall include (i) a statement that each officer making or giving such
Officers' Certificate has read such condition and any definitions or other
provisions contained in this Agreement relating thereto, (ii) a statement
that, in the opinion of each signer, he has made or has caused to be made
such examination or investigation as is reasonably necessary to enable him
to express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of each
signer, such condition has been complied with.
``OMNIBUS MANAGEMENT AND LIQUOR LICENSE AGREEMENT'' means the
Agreement regarding Servicing Agreements and Liquor Licenses executed and
delivered by the Borrower and each other Loan Party thereto in favor of the
Agent on or before the Closing Date pursuant to subsection 4.1E(i), and
thereafter by each other Subsidiary of CapStar that becomes a party
thereto, substantially in the form of EXHIBIT XI annexed hereto, as such
agreement may be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereof.
``OPERATING EXPENSES'' means, for any period and as calculated on the
accrual basis of accounting, all expenses incurred by Cap Star or any of
its Subsidiaries during such period in connection with the ownership,
management, operation, cleaning, maintenance, ordinary repair or leasing of
any Property, including, without duplication:
(i) costs and expenses in connection with the cleaning, ordinary
repair, maintenance, decoration and painting of such Property;
(ii) wages, benefits, payroll taxes, uniforms, insurance costs
and all other related expenses for employees of CapStar and its
Subsidiaries engaged in the management, operation, cleaning,
maintenance, ordinary repair and leasing of such Property and service
to guests, customers, Tenants, concessionaires and licensees of such
Property;
(iii) the cost of all services and utilities with respect to such
Property, including all electricity, oil, gas, water, steam, heating,
ventilation, air conditioning, elevator, escalator, landscaping, model
furniture, answering services, telephone maintenance, credit check,
snow removal, trash removal and pest extermination costs and expenses
and any other energy, utility or similar item and overtime services
with respect to such Property;
(iv) the cost of building and cleaning supplies with respect to
such Property;
(v) insurance premiums required in order to maintain the
insurance policies required under this Agreement or any other Loan
Documents or Pool B Obligations, in each case with respect to such
Property (which, in the case of any policies covering multiple
Properties, shall be allocated among the Properties pro rata in
proportion to the insured value of the Properties covered by such
policies);
(vi) legal, accounting, engineering and other fees, costs and
expenses incurred by or on behalf of CapStar or such Subsidiary in
connection with the ownership, management, operation, maintenance,
ordinary repair and leasing of such Property, including collection
costs and expenses;
(vii) operating costs and expenses of security and security
systems provided to and/or installed and maintained with respect to
such Property;
(viii) operating costs and expenses of reservation systems,
internal telephone exchanges and key card systems with respect to such
Property;
(ix) costs and expenses of parking and valet services, parking
lot maintenance and ordinary parking lot repairs in respect of such
Property;
(x) costs and expenses of food and beverages with respect to
such Property;
(xi) real property taxes and assessments with respect to such
Property and the costs incurred in seeking to reduce such taxes or the
assessed value of such Property;
(xii) advertising, marketing and promotional costs and expenses
with respect to such Property;
(xiii) costs and expenses incurred in connection with lock changes,
storage, moving, market surveys, permits (and the application or
registration therefor) and licenses (and the application or
registration therefor) with respect to such Property;
(xiv) maintenance and cleaning costs related to guest and customer
amenities with respect to such Property;
(xv) costs and expenses of maintaining and repairing FF&E
(including the breakage or loss of any such FF&E) with respect to such
Property;
(xvi) franchise fees due and payable with respect to such
Property;
(xvii) payments due and payable under the Ground Lease with respect
to such Property, if applicable;
(xviii) actual reserves required under the Ground Lease with respect
to such Property, if applicable;
(xix) Management Fees with respect to such Property for such
period;
(xx) tenant improvements and leasing commissions with respect to
such Property accrued during such period;
(xxi) contributions by CapStar or any of its Subsidiaries to any
merchants' association, whether as dues or advertising costs or
otherwise with respect to such Property;
(xxii) costs incurred pursuant to any reciprocal easement agreement
affecting such Property;
(xxiii) refunds CapStar or any of its Subsidiaries must pay to
guests, customers, Tenants, concessionaires and licensees and other
occupants of such Property;
(xxiv) reserves (other than reserves required to be deposited in
the Capital Reserve Account) for such purposes and in such amounts as
the Borrower and the Agent may reasonably agree upon;
(xxv) costs and expenses of maintaining operating, repairing and
servicing vehicles, including fuel and insurance premiums;
(xxvi) costs of environmental audits and monitoring, environmental
remediation work or any other costs and expenses incurred with respect
to compliance with Environmental Laws; and
(27) all other ongoing expenses which in accordance with the
accrual basis of accounting should be included in CapStar's or any of
its Subsidiaries' annual financial statements as operating expenses of
such Property.
Notwithstanding the foregoing, Operating Expenses shall not include,
without duplication, (a) non-cash equity participation expenses,
(b) Consolidated Interest Expense, including such items included within the
definition thereof as shall apply to any Property or Properties with
respect to which such Operating Expenses are being determined, (c) income
taxes, (d) depreciation, (e) amortization, (f) principal or Release Prices,
if any, due under the Loans or the Notes or otherwise in connection with
the Obligations, (g) principal, if any, due in respect of the Pool B
Obligations, or (h) expenses referred to in the preceding sentence that are
capitalized on the financial statements of CapStar or any of its
Subsidiaries in conformity with GAAP.
``OPERATING LEASE'' means, with respect to any Person, a lease of any
property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is not accounted for as a capital lease on the
balance sheet of that Person.
``ORIGINAL ACQUISITION AGREEMENTS'' means, collectively, the
agreements entered into before the Closing Date by any Loan Party or any of
its Subsidiaries or any predecessor to any Loan Party or such Subsidiary in
connection with the acquisition of a Property, other than the Formation
Documents, under or with respect to which agreements CapStar or any of its
Subsidiaries has any rights or obligations as of the Closing Date, as any
such agreement may be amended, restated, supplemented or otherwise modified
from time to time.
``ORIGINAL ACQUISITION DOCUMENTS'' means, collectively the Original
Acquisition Agreements and each certificate, opinion, agreement,
assignment, deed, instrument or other document delivered in connection
therewith or pursuant thereto.
``ORIGINAL FINANCING LETTER'' means that certain letter agreement
dated as of August 8, 1996 by and among CapStar, the Borrower, Bankers, The
First National Bank of Boston and Wells Fargo Bank, N.A., as such letter
agreement may be amended, restated, supplemented or otherwise modified from
time to time.
``OTHER CAPITAL RESERVE ACCOUNTS'' means, collectively, accounts
required to be maintained by the Loan Parties and their respective
Subsidiaries pursuant to the terms of the Pool B Obligations for the
deposit, reserve and disbursement of funds for Capital Items in respect of
the related Pool B Properties. Other Capital Reserve Accounts are not
Capital Reserve Accounts.
``PARTNERSHIP LOAN PARTIES'' means, collectively, each Person that is
a partnership and is, or becomes, a Loan Party.
``PAYMENT DATE'' means the last day of each calendar month, beginning
October 31, 1996, or, if such day is not a Business Day, the next
succeeding Business Day.
``PBGC'' means the Pension Benefit Guaranty Corporation (or any
successor thereto).
``PENSION PLAN'' means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.
``PERMITTED ENCUMBRANCES'' means the Liens shown on SCHEDULE 7.2
annexed hereto for such Property and, with respect to any Property
(including any Pool B Property), the following types of Liens (other than
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA):
(i) Liens for real property Taxes, assessments, vault charges,
water and sewer rents, and other Impositions the payment of which is
not, at the time, required by subsection 6.4;
(ii) the Leases in existence on the Closing Date and any Leases
entered into thereafter in accordance with the requirements of the
Loan Documents;
(iii) covenants, easements, rights-of-way, restrictions, minor
encroachments or other similar encumbrances incurred in the ordinary
course of business of CapStar and its Subsidiaries that do not make
such Property unmarketable or interfere in any material respect, and
which could not reasonably be expected to interfere in any material
respect, with the use of the Property for hotel purposes or with the
ordinary conduct of the business of CapStar and its Subsidiaries;
(iv) Liens securing the Obligations;
(v) Liens that are bonded and thereby released of record in a
manner reasonably satisfactory to the Agent;
(vi) rights of guests to occupy rooms and of Tenants under
Leases;
(vii) all exceptions contained in any Title Policy (a) delivered
on or prior to the Closing Date and reasonably satisfactory to the
Lenders or (b) with respect to an Additional Pool A Property or, if
such exceptions reflect one or more Liens securing a monetary
obligation, a Pool B Property, in each case approved by the Agent in
its sole discretion; PROVIDED that in no event shall any Servicing
Agreement, Management Agreement or other hotel management agreement be
a Permitted Encumbrance.
``PERSON'' means, collectively, natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint
stock companies, Joint Ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and Governmental Authorities.
``POOL A GROUND LEASE'' means each of the ground leases with respect
to the Pool A Properties listed on SCHEDULE 5.4B annexed hereto, as such
Schedule may be revised or supplemented from time to time pursuant to
subsection 2.9 or 2.10, together with all right, title and interest of any
Loan Party, as the case may be, in and to the leasehold estate created
pursuant to each such ground lease as each such ground lease may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
``POOL A PROPERTIES'' means, collectively, the hotel properties, the
Land on which they are located, the related Pool A Ground Leases and all
Improvements thereon and all fixtures attached thereto and all personal
property used in connection therewith, in each case as listed on SCHEDULE
5.4A1 annexed hereto, as such Schedule may be revised or supplemented from
time to time pursuant to subsection 2.9 or 2.10.
``POOL A SUBSIDIARIES'' means, collectively, each Wholly Owned
Subsidiary of the Borrower in existence on the date of this Agreement or
created pursuant to subsection 7.7 to own or lease any Pool A Property.
``POOL B DOCUMENTS'' means, collectively, each Pool B Ground Lease,
agreement, Guaranty, instrument, promissory note or other document entered
into by any Loan Party or any of its Subsidiaries in connection with any
Pool B Obligation and set forth on SCHEDULE 5.4C annexed hereto, as each
such Pool B Ground Lease, agreement, Guaranty, instrument or other document
may be amended, restated, supplemented or otherwise modified from time to
time), as such Schedule may be revised from time to time pursuant to
subsections 2.9B and 2.10.
``POOL B GROUND LEASE'' means each of the ground leases with respect
to the Pool B Properties listed on SCHEDULE 5.4C annexed hereto, as such
Schedule may be revised or supplemented from time to time pursuant to
subsection 7.11.
``POOL B INDEBTEDNESS'' has the meaning assigned to that term in
subsection 7.1(v).
``POOL B OBLIGATIONS'' means, collectively, the obligations of any of
the Loan Parties, any of their respective Subsidiaries and any of the Pool
B Subsidiaries, respectively, of any nature, from time to time owed in
respect of any Pool B Indebtedness, whether for principal, interest, fees,
commissions, expenses, indemnification or otherwise.
``POOL B PROPERTIES'' means, collectively, the hotel properties, the
Land on which they are located and all Improvements thereon and all
fixtures attached thereto and all personal property used solely in
connection therewith, in each case as listed on SCHEDULE 5.4A2 annexed
hereto, as such Schedule may be revised or supplemented from time to time
pursuant to subsection 2.9B and 2.10.
``POOL B SUBSIDIARIES'' means, collectively, each Wholly Owned
Subsidiary of the Borrower created pursuant to subsection 7.7 to own one or
more Pool B Properties.
``POTENTIAL EVENT OF DEFAULT'' means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default if
that condition or event were not cured or removed within the applicable
grace period.
``PREFERRED LIMITED PARTNER INTERESTS'' has the meaning assigned to
that term in subsection 7.20C(ii).
``PRIME RATE'' means the rate that Bankers announces from time to time
as its prime lending rate, as in effect from time to time or, if Bankers
shall cease to announce such rate, the rate that is published as the
``Prime Rate'' in THE WALL STREET JOURNAL (Eastern edition) or other rate
published in THE WALL STREET JOURNAL (Eastern edition) or any other
newspaper of general circulation that shall have been approved by the
Borrower and the Agent. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any
customer. Bankers or any other Lender may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
``PROJECTED INTEREST EXPENSE'' means, with respect to any Pool B
Subsidiary as of any date of determination and for any period, total
interest expense (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) reasonably projected by the
Borrower to be incurred on all outstanding and proposed Pool B Indebtedness
of such Pool B Subsidiary, including, without limitation, all commissions,
discounts and other fees and charges and net costs under Interest Rate
Agreements.
``PROPERTIES'' means, collectively, from and after the respective
dates of Acquisition, each of the Pool A Properties and the Pool B
Properties. Properties do not include Managed Properties.
``PROPERTY AMOUNT'' means, as of any date of determination with
respect to any Designated Pool A Property, the following:
(i) except with respect to a Designated Pool A Property
described in clause (ii) or (iii) below, the lesser of (a) the product
of the applicable factor set forth in column (I) below MULTIPLIED BY
the Property EBITDA for such Designated Pool A Property and (b) the
product of the applicable factor set forth in column (II) below
MULTIPLIED BY the Property EBITDA-CapEx for such Designated Pool A
Property, in each case for the 12 most recently completed calendar
months ending not less than 30 days before such date of determination
for which the Agent has received the financial statements with respect
to such Properties required to be delivered pursuant to subsection
6.1(i):
<TABLE>
<CAPTION>
(I) (II)
PERIOD EBITDA FACTOR EBITDA-CAP EX
FACTOR
<S> <C> <C>
from and including the Closing Date 4.25 5.00
to but excluding the first
Anniversary
from and including the first 4.00 4.75
Anniversary to but excluding the
second Anniversary
from and including the second 3.75 4.50
Anniversary to but excluding the
third Anniversary
</TABLE>
; PROVIDED that such Property Amount shall not be greater than an
amount equal to 55% of the Appraised Value thereof; or
(ii) with respect to each of not more than two Designated Pool A
Properties, as designated from time to time by the Borrower in a
writing delivered to the Agent, with respect to which a Renovation
shall have commenced and before the end of 12 complete calendar months
after completion of the Renovation, an amount equal to 60% of the most
recently Appraised Value, on an ``as completed'' basis, on or before
the applicable date of determination; or
(iii) with respect to the Atlanta Airport Property, the least of
(a) the applicable amount calculated pursuant to clause (i) above, (b)
an amount equal to 55% of the Appraised Value of the Atlanta Airport
Property and (c) the aggregate outstanding principal amount of the
Atlanta Note as of the applicable date of determination.
``PROPERTY EBITDA'' means, with respect to any Property, for any
period and as of any date of determination and calculated on the accrual
basis of accounting, whether a positive or negative number, the amount
equal to the remainder of the following:
(i) all Property Gross Revenues for such period in respect of
such Property; PROVIDED that Property Gross Revenues for such period
in respect of any Property shall be included in the calculation of
Property EBITDA for such period only to the extent that the Agent and
Lenders shall have received the financial statements for such period
required to be delivered on or before such date of determination
pursuant to subsection 2.9 or 6.1(i), as the case may be; MINUS
(ii) all Operating Expenses for such period with respect to such
Property, without duplication of items excluded from the definition of
Property Gross Revenues; PROVIDED that (x) Management Fees included in
the calculation of Property EBITDA for such period with respect to
such Property shall not be less than 3.0% of Property Gross Revenues
for such period with respect to such Property and (y) the sum of the
aggregate amount of fees payable pursuant to Franchise Agreements PLUS
marketing fees and expenses included in the calculation of Property
EBITDA for such period with respect to such Property shall not be less
than 8.5% of Property Gross Revenues with respect to such Property;
PROVIDED that:
(v)Property EBITDA with respect to any Property shall be zero for
such period if (1) the Addition Date with respect to such Property
shall not have occurred on or before such date of determination or
(2) such Property shall have been sold or otherwise permanently
disposed of on or before such date of determination;
(w)if the Addition Date with respect to such Property shall have
occurred after the Closing Date and after the commencement of such
period but before the termination of such period, Property EBITDA with
respect to such Property for such period shall be the sum of
(A) Property EBITDA for the portion of such period commencing on the
first day of such period and ending on the day before such Addition
Date, as the same shall be determined based upon the financial
statements for such period required by subsection 2.9A to be delivered
with respect to such Property and such other information with respect
thereto that may be provided by the Loan Parties and their respective
Subsidiaries, subject to such adjustments as may be reasonably
required by the Agent so that Property EBITDA with respect to such
Property shall be calculated in the same manner as Property EBITDA
with respect to Properties owned by the Loan Parties and their
respective Subsidiaries during the entire period, PLUS (B) Property
EBITDA with respect to such Property for the portion of such period
commencing on such Addition Date and ending on the last day of such
period, based upon the financial statements for such period required
to be delivered on or before such date of determination pursuant to
subsection 6.1(i);
(x)if such date of determination shall occur during a Major
Renovation/Restoration Removal Period with respect to such Property
and the Property EBITDA with respect to such Property for such period
is a positive number, then (1) for purposes of calculating the
Property Amount with respect to such Property (if such Property is a
Pool A Property) as of such date of determination, Property EBITDA
with respect to such Property for such period shall be zero and
(2) for purposes of calculating any amount pursuant to subsections
7.6C, 7.6D, 7.6E and 7.6F as of such date of determination, Property
EBITDA with respect to such Property for such period shall be equal to
the product of (1) the applicable factor set forth below as of such
date of determination, as determined by reference to the percentage
amount of the rooms ``available for sale'' at such Property that have
been, are scheduled to be, or could reasonably be expected to be,
``rooms out-of-order'', as determined in accordance with the Uniform
System, during such Major Renovation/Restoration Removal Period,
multiplied by (2) the amount of Property EBITDA with respect to such
Property for such period as of such date of determination if effect
were not given to this clause (x):
<TABLE>
<CAPTION>
PERCENTAGE FACTOR
<S> <C>
50.00% - 74.99% 0.33
75.00% - 100.00% 0.00.
</TABLE>
``PROPERTY EBITDA-CAPEX'' means, with respect to any Property, for any
period and as of any date of determination, the Property EBITDA with
respect to such Property MINUS Capital Expenditures with respect to such
Property.
``PROPERTY GROSS REVENUE'' means, for any period, all Receipts
resulting from the operation of such Property, including, without
limitation, Rents or other payments from guests and customers, Tenants,
licensees and concessionaires and business interruption and rental loss
insurance payments; PROVIDED that Property Gross Revenue shall be
determined net of allowances in accordance with the Uniform System and
shall exclude (i) excise, sales, use, occupancy and similar taxes and
charges collected from guests or customers and remitted to Governmental
Authorities, (ii) gratuities collected for employees of such Property,
(iii) security deposits and other advance deposits, until and unless same
are forfeited to any Loan Party or Subsidiary thereof or applied for the
purpose for which collected, (iv) federal, state or municipal excise,
sales, use or similar taxes collected directly from patrons or guests or
included as part of the sales price of any goods or services, (v) interest
income on amounts deposited in such Property's bank accounts in excess of
amounts so deposited in the ordinary course of business and in accordance
with past practices, (vi) rebates, refunds or discounts (including, without
limitation, free or discounted accommodations) and (vii) Extraordinary
Receipts.
``PROPERTY INFORMATION'' means, with respect to any Acquisition of any
Additional Pool A Property pursuant to subsection 2.9A, any Pool B Property
pursuant to subsection 2.9B or any MBL Property pursuant to subsection
2.9E, the following information:
(i) financial statements in respect of such Property for the
most recently completed three calendar years and for the completed
calendar months after the most recently completed calendar year, in
each case, to the extent such financial statements exist and can be
readily obtained by any Loan Party or any of its Subsidiaries;
(ii) copies of all other consolidated balance sheets and related
statements of operations and statements of cash flows of such Property
that are to be delivered to any Loan Party or any of its Subsidiaries
in connection with such Acquisition;
(iii) to the extent any Renovation is then proposed for such
Property, (a) a preliminary project plan and a project budget for such
Property which, as to a Pool A Property, shall be satisfactory in form
and substance to the Agent in its sole discretion and (b) if the
approval by the Agent of such Renovation pursuant to subsection 6.12A
with respect thereto shall be sought by the Borrower in connection
with the approval by the Agent of such Acquisition and Lenders
pursuant to subsection 2.9A, the materials required to be delivered
to, and approved by, the Agent pursuant to subsection 6.12A;
(iv) (a) a comprehensive environmental audit with respect to such
Property dated not more than six months prior to the closing date
(which shall include a Phase I environmental audit and, either if
recommended or suggested by an Approved Environmental Consultant or,
if not so recommended or suggested, if determined by the Agent in its
sole discretion to be necessary or desirable after considering factors
reasonably related to such determination, a Phase II environmental
audit), satisfactory in form and substance to the Agent, conducted and
certified by an Approved Environmental Consultant (the Borrower shall
certify as of the closing date of such Acquisition that, as to any
environmental audit delivered by the Borrower prior to such closing
date, to the Borrower's knowledge, the information contained in such
audit remains true, correct and complete), (b) a reliance letter from
such Approved Environmental Consultant with respect to each such
environmental audit addressed to the Agent and Lenders, together with
a copy of such Approved Environmental Consultant's errors and
omissions policy, which reliance letter and such insurance policy
shall be satisfactory in form and substance to the Agent, (c) evidence
reasonably satisfactory to the Agent that all required approvals from
all Governmental Authorities having jurisdiction with respect to the
environmental condition of such Property, if any, have been obtained,
and (d) such other environmental reports, inspections and
investigations as the Agent shall in its sole discretion require after
considering factors reasonably related to such determination,
prepared, in each instance, by an Approved Environmental Consultant,
which audits, approvals, reports, inspections and investigations shall
be satisfactory in form and substance to the Agent, in its sole
discretion;
(v) (a) a written Engineering Report with respect to such
Property dated not more than 90 days prior to the closing date of such
Acquisition that shall be prepared by an Engineer acceptable to the
Agent, which Engineering Report, in the case of an Additional Pool A
Property, shall be satisfactory in form and substance to the Agent,
and (b) a reliance letter from such Engineer with respect to each such
Engineering Report addressed to the Agent and Lenders, which letter
shall be in form and substance reasonably satisfactory to the Agent;
(vi) to the extent then available, copies (if available) or
drafts of the related Acquisition Agreements, Pool A Ground Leases,
Pool B Ground Leases, all other purchase agreements, letters of intent
or other related agreements entered into by any Loan Party or any of
its Subsidiaries in connection with such Acquisition (it being
understood and agreed that, to the extent such agreements or letters
of intent have not been entered into at such time, copies of such
agreements and letters of intent shall be delivered reasonably
promptly after the execution thereof);
(vii) a market study with respect to such Property as of a date
not earlier than 90 days before the proposed date of closing of such
Acquisition and copies of all other appraisals and market studies with
respect to such Property to the extent such appraisals and market
studies exist and can be readily obtained by any Loan Party or any of
its Subsidiaries; and
(viii) any other information relating to such Acquisition or such
Property reasonably requested by the Agent or any Lender.
``PROPERTY SERVICING AGREEMENTS'' means, collectively, the hotel
management agreements entered into between the Borrower, on the one part,
and a Subsidiary of the Borrower that owns a fee or leasehold interest in a
Property, on the other part, substantially in the form approved by the
Agent on or before the Closing Date or in such other form as may be
reasonably acceptable to the Agent, as any such Servicing Agreement may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
``PURCHASE PRICE'' has the meaning assigned to that term in subsection
2.1A.
``PRO RATA SHARE'' means, with respect to each Lender, the percentage
obtained by dividing (i) the sum of the Loan Exposure of that Lender by
(ii) the sum of the aggregate Loan Exposure of all Lenders, as such
percentage may be adjusted by assignments permitted pursuant to subsection
9.1. The initial Pro Rata Share of each Lender is set forth opposite the
name of that Lender in SCHEDULE 2.1B annexed hereto.
``QUALIFIED CAPITAL STOCK'' means, with respect to any Person, any
series or class of Capital Stock of that Person which may not be required
to be redeemed or repurchased, in whole or in part, by that Person or any
of its Subsidiaries, in whole or in part, at the option of the holder
thereof, on or prior to the Maturity Date, or not be convertible or
exchangeable into or exercisable for Capital Stock of CapStar that is not
Qualified Capital Stock on or prior to the date that is one year and one
day after the Maturity Date; PROVIDED that Capital Stock will be deemed to
be Qualified Capital Stock if it may only be so redeemed or put solely in
consideration of Qualified Capital Stock.
``RECEIPTS'' means, collectively, all cash, Cash Equivalents, checks,
notes, drafts and any items of payment or collection received, by or on
behalf of CapStar or any of its Subsidiaries, or by any officers, employees
or agents of CapStar or any of its Subsidiaries or other Persons acting for
or in concert with CapStar or such Subsidiary to make collections on
CapStar's or such Subsidiary's behalf in connection with or in any way
relating to CapStar or such Subsidiary or the operation of CapStar's or
such Subsidiary's business, including, without limitation, any proceeds
received from or pursuant to (i) any sales of, or loans against, accounts
of CapStar or any of its Subsidiaries (other than the Loans pursuant to
this Agreement), (ii) any disposition of assets (including, without
limitation, any disposition of assets permitted hereunder or consented to
by the Agent, but excluding amounts applied to the repayment of
indebtedness or other obligations secured by a Lien on the assets subject
to such disposition) or issuance or sale of equity Securities by CapStar or
any of its Subsidiaries, (iii) the incurrence of Indebtedness by CapStar or
any of its Subsidiaries and the issuance and sale by CapStar or any of its
Subsidiaries of equity or debt Securities, in each case other than the
Obligations and other Indebtedness permitted by this Agreement,
(iv) insurance policies (other than liability insurance payable directly or
indirectly to a third party) maintained by CapStar or any of its
Subsidiaries, whether or not the Agent is an additional insured or named as
loss payee thereunder, (v) the successful prosecution (including any
settlement) of any claims, actions or other litigation or proceeding by or
on behalf of or against CapStar or any of its Subsidiaries, (vi)
Investments in, or equity and debt Securities issued by, Joint Ventures or
other Persons and (vii) the Management Agreements (other than amounts
received by CapStar or any of its Subsidiaries in respect of the Managed
Properties on behalf of, or as agent for, the parties to the Management
Agreements other than CapStar and its Subsidiaries); it being understood
and agreed that nothing contained in this definition shall in any respect
be deemed to permit any transactions by CapStar or any of its Subsidiaries
otherwise restricted or prohibited by this Agreement.
``REGISTER'' has the meaning assigned to that term in subsection 2.1E.
``REGULATION D'' means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
``REIMBURSEMENT DATE'' has the meaning assigned to that term in
subsection 3.3B.
``RELATED DOCUMENTS'' means, collectively, the Original Acquisition
Documents, the Acquisition Documents, the MBL Acquisition Documents, the
Management Agreements, the Franchise Agreements, the IP License Agreements,
the Ground Leases, the Material Leases, the Pool B Documents, the Equity
Offering Documents and the Formation Documents.
``RELEASE'' means any satisfaction, release, assignment instrument,
deed of reconveyance or similar instrument or instruments (each in
recordable form but without any representation or warranty of the Agent or
the Lenders) necessary and sufficient to release any Collateral from the
Lien of all applicable Security Documents.
``RELEASE DATE'' means the date of a release of the Lien of the
Security Documents on any Property pursuant to subsection 2.10.
``RELEASE PRICE'' means, as calculated as of any Release Date, the
following:
(i) with respect to any Pool A Property, the amount that is the
greatest of the following:
(a) the amount equal to 125% of the Property Amount with
respect to such Pool A Property; PROVIDED that, with respect to
the Specified Release Properties, such amount shall be 100% of
the Property Amount with respect to such Specified Release
Property;
(b) in the event of a sale or other permanent disposition
of such Pool A Property, the amount equal to 75% of the Net Sales
Price for such Pool A Property; PROVIDED that, with respect to
the Specified Release Properties, such amount shall be zero;
(c) the amount necessary to ensure both that (1) the Total
Utilization (excluding the aggregate principal amount of Pool B
Indebtedness) shall not exceed the Borrowing Base then in effect
and (2) the Total Utilization shall not exceed the aggregate
amount of Commitments then in effect, after giving effect to
(x) any reduction in the Borrowing Base required pursuant to
subsections 2.4B(iii), 2.10 and 7.15B and (y) each other payment
made as of the Release Date pursuant to any other provision of
this definition of Release Price; and
(d) in the event of a casualty or Taking with respect to
such Pool A Property, the Insurance Proceeds or Condemnation
Proceeds, as the case may be, resulting therefrom; and
(ii) with respect to any leasehold or real property Collateral
not subject to clause (i) above, the amount that is the greater of the
following:
(a) the amount necessary to ensure both that (1) the Total
Utilization (excluding the aggregate amount of Pool B
Indebtedness) shall not exceed the Borrowing Base in effect and
(2) the Total Utilization shall not exceed the aggregate amount
of Commitments then in effect, after giving effect to (x) any
reduction in the Borrowing Base required pursuant to subsection
2.4(B)(iii) and (y) each other payment made as of the Release
Date pursuant to any other provision of this definition of
Release Price; and
(b) in the event of a sale or other permanent disposition
of such item of Collateral, the amount equal to 100% of the Net
Sales Price for such item or, if the release of the Lien on such
item of Collateral shall not be effected in connection with the
sale or other permanent disposition of such item, 100% of the
aggregate amount of termination fees and other amounts paid to
the Loan Parties and their respective Subsidiaries in connection
therewith.
``REMOVED POOL A PROPERTIES'' means, as of any date of determination,
all Pool A Properties that have been removed pursuant to subsection 2.9D
hereof.
``RENOVATION'' means the expansion, rebuilding, repair, restoration,
refurbishment, fixturing and equipping of the Improvements at a Property or
a Managed Property. The term ``Renovate'' used as a verb has a
corresponding meaning.
``RENTS'' means, collectively, all rents, issues, profits, royalties,
receipts, revenues, accounts receivable, security deposits and other
deposits (subject to the prior right of Tenants making such deposits) and
income, including room receipts, rack charges, vending machine receipts,
food and beverage receipts, concession fees and charges, public assembly
room receipts, fixed, additional and percentage rents, occupancy charges,
operating expense reimbursements, reimbursements for increases in taxes,
sums paid by Tenants to any Loan Party or any of its Subsidiaries to
reimburse such Loan Party or such Subsidiary for amounts originally paid or
to be paid by such Loan Party or such Subsidiary or such Loan Party's or
such Subsidiary's agents or Affiliates for which such Tenants were liable,
as, for example, tenant improvements costs in excess of any work letter,
lease takeover costs, moving expenses and tax and operating expense pass-
throughs for which a Tenant is solely liable, parking, valet, maintenance,
common area, tax, insurance, utility and service charges and contributions,
proceeds of sale of electricity, gas, heating, air-conditioning and other
utilities and services, deficiency rents and liquidated damages, and other
benefits.
``RESTORATION'' means the repair, restoration (including demolition),
replacement and rebuilding of all or any portion of a Property (or the
Improvements thereof) following the destruction, damage, loss or Taking
thereof. The term ``Restore'' used as a verb has a corresponding meaning.
``RESTRICTED JUNIOR PAYMENT'' means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock or other equity Security of any Loan Party or any Subsidiary of a
Loan Party now or hereafter outstanding, except a dividend or distribution
payable to the Borrower or any of its Wholly Owned Subsidiaries that are
Loan Parties or payable solely in shares of that class of stock to the
holders of that class, (ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any equity Securities, now or hereafter
outstanding, of CapStar or any of its Subsidiaries that are not Wholly
Owned Subsidiaries, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any now or hereafter outstanding, of CapStar or any of its
Subsidiaries that are not Wholly Owned Subsidiaries and (iv) any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in substance or legal
defeasance), sinking fund or similar payment with respect to, any
Indebtedness of CapStar or any of its Subsidiaries.
``SCHEDULED PRINCIPAL PAYMENT DATE'' means (i) if the Maturity Date is
extended beyond the third Anniversary pursuant to subsection 2.1F(i), each
of the third, sixth and ninth Payment Dates after the third Anniversary and
(ii) in addition to the dates set forth in clause (i) of this definition,
if the Maturity Date is extended beyond the fourth Anniversary pursuant to
subsection 2.1F(ii), each of the third, sixth and ninth Payment Dates after
the fourth Anniversary.
``SECURITIES'' means any stock, shares, partnership interests,
interests in limited liability companies, voting trust certificates,
certificates of interest or participation in any profit-sharing agreement
or arrangement, options, warrants, bonds, debentures, notes or other
evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or in general any instruments commonly known as
``securities'' or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or
any right to subscribe to, purchase or acquire, any of the foregoing.
``SECURITIES ACT'' means the Securities Act of 1933, as amended from
time to time, and any successor statute.
``SECURITY AGREEMENT'' means the Security and Pledge Agreement
executed and delivered by each Loan Party and the Agent on or before the
Closing Date pursuant to subsection 4.1E(i), and thereafter by each other
Subsidiary of CapStar that becomes a party thereto, in substantially the
form of EXHIBIT IX annexed hereto, pursuant to which such Loan Party will
pledge and grant a security interest in the Collateral described therein to
Agent for the benefit of the Agent and the Lenders, as such Security and
Pledge Agreement may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
``SECURITY DOCUMENTS'' means, collectively, the Mortgages, the
Assignments of Rents and Leases, the Security Agreement, the Trademark
Agreement, the Cash Management Letters, the Omnibus Management and Liquor
License Agreement, the Tenant Subordination Agreements, the Atlanta
Documents, the Atlanta Collateral Assignment, and all deeds of trust, deeds
to secure debt, mortgages, security agreements, pledge agreements,
assignments and all other instruments or documents (including UCC-1
financing statements, fixture filings, amendments of financing statements
or similar documents required or advisable in order to perfect or maintain
the Liens created by the Security Documents) delivered by any Person
pursuant to this Agreement or any of the other Loan Documents, whether such
delivery is prior to, contemporaneous with or after delivery of this
Agreement, in order to grant to the Agent Liens in real, personal or mixed
property of that Person, and to maintain such Liens as each of the
foregoing may be amended, restated, consolidated, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
Security Documents do not include this Agreement or the Notes.
``SERVICING AGREEMENTS'' means, collectively, the Property Servicing
Agreements, the Liquor Operations Servicing Agreements and the Liquor
Leases listed on SCHEDULE 5.4E annexed hereto, as such Schedule may be
revised or supplemented from time to time pursuant to subsection 2.9, 2.10
or 7.17, as any such agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof
and hereof.
``SPECIFIED RELEASE PROPERTIES'' means three Properties designated by
the Borrower at the time such Properties are Released; PROVIDED that each
Property so designated shall either (i) have been a Property on the date of
this Agreement or (ii) be an MBL Property.
``STANDBY LETTER OF CREDIT'' means any standby letter of credit or
similar instrument issued for the purpose of supporting any corporate
purposes, including (i) workers' compensation liabilities of CapStar or any
of its Subsidiaries, (ii) the obligations of third party insurers of
CapStar or any of its Subsidiaries arising by virtue of the laws of any
jurisdiction requiring third party insurers, and (iii) performance,
payment, deposit or surety obligations of CapStar or any of its
Subsidiaries, in any case if required by law or governmental rule or
regulation or in accordance with custom and practice in the industry;
PROVIDED that Standby Letters of Credit may not be issued for the purpose
of supporting (a) trade payables or (b) any Indebtedness constituting
``antecedent debt'' (as that term is used in Section 547 of the Bankruptcy
Code).
``SUBORDINATED INDEBTEDNESS'' has the meaning assigned in subsection
7.1(vi).
``SUBSIDIARY'' means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which either (i) the Person is a general partner or
member of a limited liability company or other entity having the right to
direct or manage the business and affairs of such entity or (ii) more than
50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at
the time owned or controlled, directly or indirectly, by that Person or one
or more of the other Subsidiaries of that Person or a combination thereof.
``SURVEY'' means, with respect to any Property, a current survey map
prepared by a surveyor licensed in the state in which such Property is
located, reasonably acceptable to the Agent, which shall (i) contain the
legal description of such Property, (ii) conform, and be certified by such
surveyor to the Agent and the Lenders and the Title Company as conforming,
to the Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys for urban survey class as adopted by ALTA and American Congress on
Surveying & Mapping (1992 version), and (iii) show, to the extent
practicable, all matters described in ``Table A/Optional Survey
Responsibilities and Specifications'' in such Minimum Standard Detail
Requirements; PROVIDED, however, that the survey need not satisfy the
requirements of the preceding clauses (ii) and (iii) if the Title Company
has eliminated the survey exception from the Title Policies and all other
exceptions to the Title Policies based upon such survey are acceptable to
the Agent in its sole discretion. Any such survey shall contain a
certification by such surveyor to the Agent and the Lenders stating whether
the Property is located in an area having special flood hazards as
identified by the Federal Emergency Management Agency.
``S&P'' means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc., or any successor to the business thereof.
``TAKING'' means the taking or appropriation (including by deed in
lieu of condemnation or by voluntary sale or transfer under threat of
condemnation or while legal proceedings for condemnation are pending) of
any Property, or any part thereof or interest therein, for public or quasi-
public use under the power of eminent domain, by reason of any public
improvement or condemnation proceeding, or in any other manner or any
damage or injury or diminution in value through condemnation, inverse
condemnation or other exercise of the power of eminent domain. The term
``Taken'' used as a verb has a correlative meaning.
``TAX'' or ``TAXES'' means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever
called, on whomsoever and wherever imposed, levied, collected, withheld or
assessed by a Governmental Authority; PROVIDED, however, that ``TAX ON THE
OVERALL NET INCOME'' of a Person shall be construed as a reference to a tax
imposed by the jurisdiction in which that Person's principal office
(and/or, in the case of any Lender, its lending office) is located or in
which that Person is deemed to be doing business on all or part of the net
income, profits or gains of that Person (whether worldwide, or only insofar
as such income, profits or gains are considered to arise in or to relate to
a particular jurisdiction, or otherwise).
``TENANT'' means any Person liable by contract or otherwise to pay
rent or a percentage of income, revenue or profits pursuant to a Lease, and
includes a tenant, subtenant, lessee and sublessee.
``TENANT SUBORDINATION AGREEMENT'' means any Subordination, Non-
Disturbance and Attornment Agreement executed and acknowledged by a Tenant,
the Borrower or any other Loan Party and the Agent, and reasonably
satisfactory in form and substance to the Agent, as each such agreement may
be amended, restated, supplemented or otherwise modified from time to time
in accordance with the terms thereof and hereof.
``TITLE COMPANY'' means (i) as of any date on or prior to the Closing
Date, Chicago Title Insurance Company and (ii) as of any date after the
Closing Date, such other title company as may be selected by the Borrower
and approved by the Agent in its reasonable discretion.
``TITLE POLICIES'' means, with respect to the Pool A Properties, the
paid mortgagee policies of title insurance in the form of a 1970 ALTA loan
policy (or other form of loan policy available in the applicable state and
acceptable to the Agent) and issued by the Title Company.
``TOTAL PROPERTY EBITDA'' means, for any period and as of any date of
determination, the aggregate Property EBITDA for such period with respect
to all Properties.
``TOTAL UTILIZATION'' means, as of any date of determination, the sum
of the following, without duplication:
(i) the Total Utilization of Commitments; PLUS
(ii) the aggregate principal amount of Pool B Indebtedness; PLUS
(iii) the aggregate amount of reserves against Total Utilization
established by the Borrower in accordance with the provisions of
subsections 2.9F and 4.1T in respect of required deferred maintenance
deposits, as the same may be reduced pursuant to subsection 6.16B;
PLUS
(iv) the aggregate amount of reserves against Total Utilization
established by the Borrower in accordance with the provisions of
subsection 6.16(i) in respect of required capital reserve deposits;
PLUS
(v) the aggregate costs for the Renovations of any Property
pursuant to subsection 7.16, in each case as specified in the
Renovation budget therefor most recently delivered to the Agent, with
respect to which the Borrower has not delivered to the Agent evidence
of payment reasonably satisfactory to the Agent; PLUS
(vi) during any period in which holders of Preferred Limited
Partner Interests are entitled to exercise any right of conversion,
exercise or redemption for Cash, the maximum aggregate potential
liability of the Loan Parties and their Subsidiaries upon such
conversion, exercise or redemption.
``TOTAL UTILIZATION OF COMMITMENTS'' means, as of any date of
determination, the sum of (i) the aggregate principal amount of all
outstanding Loans (other than Loans made for the purpose of reimbursing the
applicable Issuing Lender for any amount drawn under any Letter of Credit
but not yet so applied) PLUS (ii) the Letter of Credit Usage.
``TRADEMARK AGREEMENT'' means the Trademark Security Agreement by
CapStar, the Borrower and each of the other Loan Parties party thereto, in
favor of the Agent for the benefit of the Agent and the Lenders, in
substantially the form of EXHIBIT X annexed hereto, as such agreement may
be amended, restated, supplemented or otherwise modified from time to time
in accordance with the terms thereof and hereof.
``TRANSFER'' means any conveyance, assignment, sale, mortgaging,
encumbrance, pledging, hypothecation, granting of a security interest in,
granting of options with respect to or other disposition of (directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise,
and whether or not for consideration or of record) all or any portion of
any legal or beneficial interest (i) in all or any portion of any Property
or (ii) in any other assets of any Loan Party or any of its Subsidiaries.
``UNIFORM SYSTEM'' means the Uniform System of Accounts for Hotels,
8th Revised Edition, 1986, as published by the Hotel Association of New
York City, as the same may be further revised from time to time.
``UNITED STATES OF AMERICA'' means the 50 states of the United States
of America and Washington, D.C., but excluding any territories or
possessions thereof other than the Commonwealth of Puerto Rico.
``VIRGINIA DOCUMENTS'' has the meaning assigned to that term in the
recitals to this Agreement.
``VIRGINIA LOAN'' has the meaning assigned to that term in the
recitals to this Agreement.
``VIRGINIA NOTE'' has the meaning assigned to that term in the
recitals to this Agreement.
``VIRGINIA PARKING SUB'' means Ballston Parking Associates, a Virginia
general partnership.
``VIRGINIA SUB'' means EquiStar Virginia Company, L.L.C., a Delaware
limited liability company.
``WHOLLY OWNED'' means, with respect to any Subsidiary of any Person,
a Subsidiary all of the outstanding equity Securities of which are owned
directly or indirectly by such Person.
``WORK'' has the meaning assigned to that term in subsection 6.11F.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT; PRO FORMA.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings
assigned to them in conformity with GAAP. Financial statements and other
information required to be delivered by the Borrower to the Agent for
distribution to the Lenders pursuant to subsection 6.1 shall be prepared in
accordance with GAAP as in effect at the time of such preparation. Except
as otherwise expressly provided herein, (i) calculations in connection with
the definitions, covenants and other provisions of this Agreement shall
utilize accounting principles and policies in conformity with those used to
prepare the financial statements referred to in subsection 5.3A(i) and
(ii) calculations made in connection with the calculation of the Borrowing
Base shall utilize accounting principles and policies in conformity with
those used in connection with the Borrowing Base Certificate delivered
pursuant to subsection 4.1C(iv). For purposes of calculating the Borrowing
Base and any amount pursuant to subsection 7.6, as of any date of
determination and for any period, pro forma effect shall be given to the
consummation of the Formation and the Equity Offering and the application
of all proceeds therefrom, as if such transactions shall have been
consummated on the first day of such period.
1.3 REFERENCES TO ARTICLES, SECTIONS, EXHIBITS, SCHEDULES AND ATTACHMENTS.
All references appearing in a Loan Document to Articles, Sections,
subsections, clauses, Recitals, Exhibits, Schedules or Attachments are
references to the Articles, Sections, subsections, clauses and Recitals
thereof and to the Exhibits, Schedules or Attachments annexed to such Loan
Document unless expressly otherwise designated in such Loan Document. All
references appearing in a Loan Document to Exhibits, Schedules and
Attachments are references to such documents as initially annexed to such
Loan Document or as supplemented or revised in accordance with the terms of
this Agreement or such other Loan Document.
1.4 CAPTIONS.
All captions to any Article, Section, subsection, clause, Recital,
Exhibit, Schedule or Attachment in a Loan Document are used for convenience
and reference only and in no way define, limit or describe the scope or
intent of, or in any way affect, such Loan Document.
1.5 DRAFTER.
No inference against or in favor of any party to any Loan Document
shall be drawn from the fact that such party or its counsel has drafted any
portion of any Loan Document.
1.6 REFERENCES TO PERSONS INCLUDE PERMITTED SUCCESSORS AND ASSIGNS.
Except as otherwise specified in a Loan Document, all references in
such Loan Document to any Person, other than the Borrower or any of its
Affiliates, shall be deemed to include the successors and assigns of such
Person.
1.7 REFERENCES TO APPLICABLE LAW AND CONTRACTS.
Except as otherwise specified in a Loan Document, all references in
such Loan Document to any Applicable Law or contracts specifically defined
or referred to therein, shall be deemed references to such Applicable Law
or contracts as may be amended, restated, supplemented, consolidated or
otherwise modified from time to time, or, in the case of any such contract,
as the terms thereof may be waived or modified, but only in the case of
each such amendment, waiver or modification of a contract, to the extent
permitted by, and effected in accordance with, the terms thereof and hereof
and only to the extent such amendment, waiver or modification of a contract
is not prohibited by any of the Loan Documents.
1.8 HEREIN.
The words ``herein'', ``hereinabove'', ``hereinbelow'', ``hereof'',
``hereunder'' and words of similar import, when used in a Loan Document,
shall refer to such Loan Document as a whole.
1.9 INCLUDING WITHOUT LIMITATION.
The words ``includes'', ``including'' and similar terms used in any
Loan Document shall be construed as if followed by the words ``without
limitation''.
1.10 GENDER.
Whenever the context so requires, the neuter gender includes the
masculine or feminine and the singular number includes the plural, and vice
versa.
1.11 SINGULAR AND PLURAL.
Any of the terms defined in a Loan Document may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.
1.12 KNOWLEDGE.
As used in this Agreement or in any other Loan Document, the phrases
``TO THE BORROWER'S ACTUAL KNOWLEDGE'', ``TO THE KNOWLEDGE OF THE
BORROWER'' and any variations thereof shall mean, as of any date of
determination and after inquiry that would be made by a prudent owner and
manager of upscale full service hotels owning or managing such hotels for
its own account, the actual knowledge or awareness, as of such date, of the
persons who occupy the offices of Chairman of the Board, Chief Executive
Officer, President, Chief Operating Officer, Chief Financial Officer,
Senior Executive Vice President-Finance, Executive Vice President-Finance
and Development, Senior Vice President-Operations and such other officers
as shall from time to time perform the functions that are performed by the
foregoing officers as of the date of this Agreement. The Borrower
represents and warrants that the foregoing Persons have executive and
administrative responsibility for the Borrower and its assets and, in the
performance of their duties in the ordinary course of business, and that
one or more of such Persons would customarily have knowledge of the matters
referred to herein.
SECTION 2
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 PURCHASE AND SALE OF VIRGINIA LOAN; COMMITMENTS; LOANS; NOTES; THE
REGISTER.
A. PURCHASE AND SALE OF VIRGINIA LOAN.
Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of CapStar and the Borrower herein
set forth, CapStar shall sell to the Lenders, and the Lenders shall
purchase from CapStar, all right, title and interest of CapStar in and to
the Virginia Loan.
The purchase price (the ``PURCHASE PRICE'') for the Virginia Loan
shall be $16,000,000. CapStar hereby directs the Lenders to pay the
Purchase Price on the Closing Date by causing an amount of same-day funds
equal to the Purchase Price to be credited to the account of the Borrower.
The obligations of the Lenders to purchase the Virginia Loan shall be
subject to satisfaction of all of the conditions set forth in Section 4.
Simultaneously with the purchase and sale of the Virginia Loan, the
Lenders and the Borrower shall, and hereby do, split such indebtedness into
the several Loans of each of the several Lenders and amend and restate the
Virginia Documents in their entirety so that, from and after the Closing
Date, all of the agreements, covenants, representations, warranties,
indemnities, rights and obligations of the Loan Parties and the Lenders
with respect to the Virginia Loan shall be as provided in this Agreement
and the other Loan Documents and as otherwise provided by Applicable Law
with respect to the Loans hereunder.
B. COMMITMENTS.
Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of CapStar and the Borrower herein
set forth, each Lender hereby severally agrees, subject to the limitations
set forth below with respect to the maximum amount of Loans permitted to be
outstanding from time to time, to lend to the Borrower from time to time
during the period from the Closing Date to but excluding the third
Anniversary, an aggregate amount not exceeding such Lender's Pro Rata Share
of the aggregate amount of the Commitments to be used for the purposes
identified in subsection 2.5A. In addition, each Lender hereby agrees to
maintain as Loans, subject to the provisions of subsection 2.4, the Loans
of such Lender outstanding on the third Anniversary during the period, if
any, from the third Anniversary to the Maturity Date; PROVIDED that, except
with respect to Loans made pursuant to subsection 3.3B to reimburse an
Issuing Lender, no Lender shall be required to make additional Loans on or
after the third Anniversary. The original amount of each Lender's
Commitment and such Lender's Pro Rata Share is set forth opposite its name
on SCHEDULE 2.1B annexed hereto and the aggregate original amount of the
Commitments is $225,000,000; PROVIDED, however, that the Commitments of the
Lenders shall be adjusted to give effect to any assignments of the
Commitments pursuant to subsection 9.1; PROVIDED FURTHER, HOWEVER, that the
amount of the Commitments shall be automatically reduced by the amount of
any reductions to the Commitments made pursuant to subsection 2.4B(ii).
Each Lender's Commitment shall expire on the Maturity Date and all
Loans and all other amounts owed hereunder with respect to the Loans and
the Commitments shall be paid in full no later than the Maturity Date;
PROVIDED, however, that each Lender's Commitment shall expire immediately
and without further action on October 31, 1996, if the Closing Date has not
occurred on or before that date.
Anything contained in this Agreement to the contrary notwithstanding,
the Loans and the Commitments shall be subject to the limitation that (i)
the Total Utilization (excluding the aggregate principal amount of Pool B
Indebtedness and after giving effect to any concurrent payment of the Loans
made with the proceeds of Loans) shall not exceed the lesser of the
Borrowing Base and the Commitments then in effect and (ii) the Total
Utilization (after giving effect to any concurrent payment of the Loans
made with the proceeds of Loans) shall not exceed the Commitments then in
effect.
C. BORROWING MECHANICS. Loans made on any Funding Date (other than
Loans made pursuant to subsection 3.3B for the purpose of reimbursing any
Issuing Lender for the amount of a drawing under a Letter of Credit issued
by it) shall be in an aggregate minimum amount of $1,000,000. The Borrower
shall be permitted to borrow Loans pursuant to this subsection 2.1C only
twice during any 30 consecutive day period. Whenever the Borrower desires
that the Lenders make Loans, it shall deliver to the Agent a Notice of
Borrowing no later than 10:00 A.M. (New York time) at least three Business
Days in advance of the proposed Funding Date.
Each Notice of Borrowing shall contain the information specified in
the form attached hereto as EXHIBIT II. If any of the proceeds of such
Loan is to be applied to the Restoration of any Property, the Borrower
shall deliver all lien waivers and search reports then required to be
delivered pursuant to subsection 6.11F concurrently with the Notice of
Borrowing.
The Borrower shall notify the Agent prior to the funding of any Loans
in the event that any of the matters to which the Borrower is required to
certify in the applicable Notice of Borrowing is no longer true and correct
as of the applicable Funding Date, and the acceptance by the Borrower of
the proceeds of any Loans shall constitute a re-certification by the
Borrower, as of the applicable Funding Date, as to the matters to which the
Borrower is required to certify in the applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B and 2.6C, a Notice of
Borrowing for a Eurodollar Rate Loan shall be irrevocable on and after the
related Interest Rate Determination Date, and the Borrower shall be bound
to make a borrowing in accordance therewith.
D. DISBURSEMENT OF FUNDS. All Loans under this Agreement shall be
made by the Lenders simultaneously and proportionately to their respective
Pro Rata Shares, it being understood that no Lender shall be responsible
for any default by any other Lender in that other Lender's obligation to
make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of a default by any other Lender in that
other Lender's obligation to make a Loan requested hereunder. After
receipt by the Agent of a Notice of Borrowing pursuant to subsection 2.1C
(or telephonic notice in lieu thereof), the Agent shall promptly notify
(and, if the Notice of Borrowing is received by the Agent by 10:00 A.M.
(New York time) on any day, in any event by the end of such day) each
Lender of the proposed borrowing. Each Lender shall make the amount of its
Loan available to the Agent, in same day funds, at the office of the Agent
located at One Bankers Trust Plaza, New York, New York, not later than
12:00 Noon (New York time) on the applicable Funding Date in same day funds
in Dollars. Except as provided in subsection 3.3B with respect to Loans
used to reimburse any Issuing Lender for the amount of a drawing under a
Letter of Credit issued by it, upon satisfaction or waiver of the
conditions precedent specified in subsections 4.1 (in the case of Loans
made on the Closing Date) and 4.2 (in the case of all Loans), the Agent
shall make the proceeds of such Loans available to the Borrower on the
applicable Funding Date by causing an amount of same day funds equal to the
proceeds of all such Loans received by the Agent from the Lenders to be
transferred to the Operating Account.
Unless the Agent shall have been notified by any Lender prior to the
Funding Date for any Loans that such Lender does not intend to make
available to the Agent the amount of such Lender's Loan requested on such
Funding Date, the Agent may assume that such Lender has made such amount
available to the Agent on such Funding Date and the Agent may, in its sole
discretion, but shall not be obligated to, make available to the Borrower a
corresponding amount on such Funding Date. If such corresponding amount is
not in fact made available to the Agent by such Lender, the Agent shall be
entitled to recover such corresponding amount on demand from such Lender
together with interest thereon, for each day from such Funding Date until
the date such amount is paid to the Agent, at the Federal Funds Effective
Rate for three Business Days and thereafter at the Base Rate. If such
Lender does not pay such corresponding amount forthwith upon the Agent's
demand therefor, the Agent shall promptly notify the Borrower and the
Borrower shall immediately pay such corresponding amount to the Agent
together with interest thereon, for each day from such Funding Date until
the date such amount is paid to the Agent, at the rate payable under this
Agreement for Base Rate Loans. Nothing in this subsection 2.1D shall be
deemed to relieve any Lender from its obligation to fulfill its Commitment
hereunder or to prejudice any rights that the Borrower may have against any
Lender as a result of any default by such Lender hereunder.
E. THE REGISTER.
(i) The Agent shall maintain, at its address referred to in
subsection 9.8, a register for the recordation of the names and
addresses of the Lenders and the Commitment and Loans of each Lender
from time to time (the ``REGISTER''). The Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable
prior notice.
(ii) The Agent shall record in the Register the Commitment and
the Loans from time to time of each Lender, and each repayment or
prepayment in respect of the principal amount of the Loans of each
Lender. Any such recordation shall be conclusive and binding on the
Borrower and each Lender, absent manifest error; PROVIDED, HOWEVER,
that failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's Obligations in respect of
the applicable Loans.
(iii) Each Lender shall record on its internal records (including
any promissory note described in subsection 2.1E(iv)) the amount of
each Loan made by it and each payment in respect thereof. Any such
recordation shall be conclusive and binding on the Borrower, absent
manifest error; PROVIDED, HOWEVER, that failure to make any such
recordation, or any error in such recordation, shall not affect the
Borrower's Obligations in respect of the applicable Loans; PROVIDED
FURTHER, HOWEVER, that in the event of any inconsistency between the
Register and any Lender's records, the recordations in the Register
shall govern.
(iv) Any Lender may, by notice to the Agent and the Borrower,
request that all or part of the principal amount of the Borrower's
Loans from such Lender hereunder be evidenced by a Note. Within three
Business Days of the Borrower's receipt of such notice, the Borrower
shall execute and deliver to the Agent for delivery to the appropriate
Lender a Note in the principal amount(s) of such Loans, in the form of
EXHIBIT I attached hereto, payable to the notifying Lender or, if so
specified in such notice, any Person who is an assignee of such Lender
pursuant to subsection 9.1 hereof. If the foreclosure or other
enforcement of any Mortgage or any other Security Document requires
the presentation of a Note evidencing the Obligations secured by such
Security Document and the Borrower fails or refuses to comply with a
request for such Note, then a copy of this Agreement may be presented
in lieu of such a Note.
F. EXTENSION OF MATURITY DATE.
(i) At any time prior to the date that is 180 days before the
third Anniversary, the Borrower may deliver a written notice to the
Agent requesting that the Maturity Date be extended from the third
Anniversary to the fourth Anniversary and, if such notice is
delivered, the Maturity Date shall be so extended provided that the
following conditions are satisfied:
(a) as of the third Anniversary, no Event of Default or
Potential Event of Default shall have occurred and be continuing
and the Borrower shall have delivered an Officers' Certificate
certifying thereto;
(b) on or prior to the third Anniversary, the Borrower
shall have paid to the Agent in immediately available funds, for
distribution to the Lenders in accordance with their Pro Rata
Shares, a fee equal to .25% of the Total Utilization of
Commitments on the third Anniversary; and
(c) after giving effect to the proposed extension, no
Indebtedness permitted pursuant to subsection 7.1(iv), (v) or
(vi) shall mature prior to the date that is 91 days after the
Maturity Date, as so extended, except to the extent expressly
permitted by the second proviso contained in subsection 7.1(iv).
(ii) If the Maturity Date has been extended pursuant to
clause (i) above, at any time prior to the date that is 180 days
before the fourth Anniversary, the Borrower may deliver a written
notice to the Agent requesting that the Maturity Date be extended from
the fourth Anniversary to the fifth Anniversary and, if such notice is
delivered, the Maturity Date shall be so extended provided that the
following conditions are satisfied:
(a) as of the fourth Anniversary, no Event of Default or
Potential Event of Default shall have occurred and be continuing
and the Borrower shall have delivered an Officers' Certificate
certifying thereto;
(b) on or prior to the fourth Anniversary, the Borrower
shall have paid to the Agent in immediately available funds, for
distribution to the Lenders in accordance with their Pro Rata
Shares, a fee equal to .25% of the Total Utilization of
Commitments on the fourth Anniversary; and
(c) after giving effect to the proposed extension, no
Indebtedness permitted pursuant to subsection 7.1(iv), (v) or
(vi) shall mature prior to the date that is 91 days after the
Maturity Date, as so extended, except to the extent expressly
permitted by the second proviso contained in subsection 7.1(iv).
G. REPLACEMENT OF DEFAULTING LENDER. If any Lender is a Defaulting
Lender and shall remain a Defaulting Lender for 5 or more consecutive
Business Days, the Borrower shall have the right (in addition to all other
rights that the Borrower may have with respect to such Defaulting Lender)
for a period of 45 days following the date of such Lender becomes a
Defaulting Lender to request that such Defaulting Lender assign its
Commitment and outstanding Obligations to a proposed Eligible Assignee
designated by the Borrower and reasonably satisfactory to Agent and, within
10 Business Days of such request, such Defaulting Lender shall, upon
payment in cash to such Defaulting Lender of all such Lender's outstanding
Obligations and at the Borrower's expense, promptly take all actions
reasonably necessary to consummate such assignment; PROVIDED that at any
time prior to the consummation of any such assignment, the Agent may (but
shall have no obligation to) designate a proposed Eligible Assignee in
substitution for the proposed Eligible Assignee designated by the Borrower,
in which event, the applicable Defaulting Lender shall, upon payment in
cash to such Defaulting Lender of all such Lender's outstanding Obligations
and at the Borrower's expense, promptly take all actions reasonably
necessary to consummate the proposed assignment. The Borrower shall offer
the Commitment of such Defaulting Lender to other Lenders (other than
Defaulting Lenders) before offering such Commitment for assignment to any
Person that is not a Lender.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.2E,
2.6 and 2.7, each Loan shall bear interest on the unpaid principal amount
thereof from the date made through the Maturity Date at a rate determined
by reference to the Adjusted Eurodollar Rate; PROVIDED HOWEVER, that in the
event that any Loan is to be made on a day when there are seven Interest
Periods outstanding, such Loan shall bear interest at a rate determined by
reference to the Base Rate until such Loan is converted to a Eurodollar
Rate Loan in accordance with subsection 2.2D; PROVIDED FURTHER that at all
times during which the Credit Agreement otherwise provides that a Loan
shall be a Base Rate Loan, such Loan shall bear interest at a rate
determined by reference to the Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the Loans shall
bear interest through the Maturity Date as follows:
(i) if a Base Rate Loan, then at a rate equal to the sum of the
Base Rate PLUS the Applicable Base Rate Margin; and
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate PLUS the Applicable Eurodollar Rate Margin.
From time to time upon the request of the Borrower with respect to any
Loan, the Agent shall advise the Borrower of the interest rate applicable
to such Loan. The Agent shall advise the Borrower of the amount of each
interest payment in advance of each Payment Date in accordance with the
customary procedures of the Agent with respect thereto, but the failure of
the Agent to provide such advice accurately or timely shall not vary the
obligation of the Borrower to pay the same in accordance with the terms of
this Agreement.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan,
the Borrower shall, pursuant to the applicable Notice of Borrowing or
Notice of Continuation, as the case may be, select an interest period (each
an ``INTEREST PERIOD'') to be applicable to such Loan, which Interest
Period shall be at the Borrower's option either a one, two, three or, if
available, six month period; PROVIDED, HOWEVER, that:
(i) the initial Interest Period for any Eurodollar Rate Loan
shall commence on the Funding Date in respect of such Loan;
(ii) each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED, HOWEVER, that, if any Interest
Period would otherwise expire on a day that is not a Business Day but
is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(iv) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on
the last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Loans
shall extend beyond the Maturity Date;
(vi) there shall be no more than seven Interest Periods
outstanding at any time;
(vii) in the event the Borrower shall fail to specify an Interest
Period for a Eurodollar Rate Loan in the applicable Notice of
Borrowing or Notice of Continuation, the Borrower shall be deemed to
have selected an Interest Period of one month; and
(viii) if seven Interest Periods are outstanding, at least one
Interest Period shall be either (a) a one month Interest Period or (b)
an Interest Period with less than 30 days remaining.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on the Loans shall be payable monthly in arrears on and to each
Payment Date, upon any prepayment of the Loans (to the extent accrued on
the amount being prepaid) and at the Maturity Date.
D. CONVERSION/CONTINUATION. Subject to the provisions of
subsections 2.2E and 2.6, (i) if any Eurodollar Rate Loan is to be made or
continued on any date in which one or more Base Rate Loans are outstanding,
each outstanding Base Rate Loan shall be automatically converted into a
Eurodollar Rate Loan on such date and, subject to the provisions of
subsection 2.2B, shall have the Interest Period specified in a written
notice delivered by the Borrower to the Agent at least 3 days prior to such
date or, if no such notice was timely delivered, the same Interest Period
as the Eurodollar Rate Loan to be made or continued on such date and (ii)
if any Base Rate Loan has been outstanding for 27 days, such Base Rate Loan
shall be automatically converted into a Eurodollar Rate Loan on the 30th
day after the making of such Loan and shall have the Interest Period
specified in a written notice delivered by the Borrower to the Agent by the
27th day after the making of such Loan or, if no such notice was timely
delivered, an Interest Period of one month. Notwithstanding anything to
the contrary contained in this section 2.2, no Loan (other than Loans made
pursuant to subsection 3.3B to reimburse an Issuing Lender) may be made as
a Base Rate Loan during the period from December 24 of any year to and
including January 7 of the next succeeding year.
Upon the expiration of any Interest Period applicable to a Eurodollar
Rate Loan, the Borrower shall continue such Loan as a Eurodollar Rate Loan.
The Borrower shall deliver a Notice of Continuation to the Agent no later
than 10:00 A.M. (New York time) at least three Business Days in advance of
the proposed continuation date for the applicable Eurodollar Rate Loan. A
Notice of Continuation shall specify (i) the proposed continuation date
(which shall be a Business Day), (ii) the amount of the Eurodollar Rate
Loan to be continued, (iii) the requested Interest Period, and (iv) that no
Potential Event of Default or Event of Default has occurred and is
continuing. In lieu of delivering the above-described Notice of
Continuation, the Borrower may give the Agent telephonic notice by the
required time of any proposed continuation under this subsection 2.2D;
PROVIDED, HOWEVER, that such notice shall be promptly confirmed in writing
by delivery of a Notice of Continuation to the Agent on or before the
proposed continuation date. Upon receipt of written or telephonic notice
of any proposed continuation under this subsection 2.2D, the Agent shall
promptly transmit such notice by telefacsimile or telephone to each Lender.
Neither the Agent nor any Lender shall incur any liability to the
Borrower or any of its Affiliates in acting upon any telephonic notice
referred to above that Agent believes in good faith to have been given by a
duly authorized officer or other person authorized to act on behalf of the
Borrower or for otherwise acting in good faith under this subsection 2.2D,
and upon continuation of the applicable basis for determining the interest
rate with respect to any Loans in accordance with this Agreement pursuant
to any such telephonic notice the Borrower shall have effected a
continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.2E, 2.6B and 2.6C,
a Notice of Continuation for continuation of a Eurodollar Rate Loan (or
telephonic notice in lieu thereof) shall be irrevocable on and after the
related Interest Rate Determination Date, and Borrower shall be bound to
effect a continuation in accordance therewith.
E. DEFAULT RATE INTEREST. During the continuation of any Event of
Default, the outstanding principal amount of all Loans and, to the extent
permitted by applicable law, any interest payments thereon not paid when
due (other than any excess interest payable solely pursuant to this
subsection 2.2E) and any fees and other amounts then due and payable
hereunder, shall thereafter bear interest (including post-petition interest
in any proceeding under the Bankruptcy Code or other applicable bankruptcy
or insolvency laws) payable upon demand at a rate that is 3.0% per annum in
excess of the interest rate otherwise payable under this Agreement with
respect to the applicable Loans (or, in the case of any such fees and other
amounts, at a rate which is 3.0% per annum in excess of the interest rate
otherwise payable under this Agreement for Base Rate Loans); PROVIDED,
HOWEVER, that, in the case of Eurodollar Rate Loans, if such Event of
Default is continuing, upon the expiration of the Interest Period in effect
at the time any such increase in interest rate is effective, such
Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall
thereafter bear interest payable upon demand at a rate which is 3.0% per
annum in excess of the interest rate otherwise payable under this Agreement
for Base Rate Loans. Payment or acceptance of the increased rates of
interest provided for in this subsection 2.2E is not a permitted
alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of
the Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed
(i) in the case of Base Rate Loans, on the basis of a 365-day or 366-day
year, as the case may be, and (ii) in the case of Eurodollar Rate Loans, on
the basis of a 360-day year, in each case for the actual number of days
elapsed in the period during which it accrues. In computing interest on
any Loan, the date of the making of such Loan or the first day of an
Interest Period applicable to such Loan shall be included, and the date of
payment of such Loan or the expiration date of an Interest Period
applicable to such Loan shall be excluded; PROVIDED, HOWEVER, that if a
Loan is repaid on the same day on which it is made, one day's interest
shall be paid on that Loan.
2.3 FEES.
A. COMMITMENT FEES. The Borrower agrees to pay to the Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the third Anniversary, equal to (i) the average of the daily
unused portion of the Commitments, taking into consideration any reductions
thereof in accordance with Section 2.4B, MULTIPLIED BY (ii) 0.25% per
annum, such commitment fees to be calculated on the basis of a 360-day year
and the actual number of days elapsed and to be payable quarterly in
arrears on the last day of each calendar quarter, commencing with the first
such date to occur after the Closing Date, and on the third Anniversary.
Anything contained in this Agreement to the contrary notwithstanding, for
purposes of calculating the commitment fees payable by the Borrower
pursuant to this subsection 2.3B, the ``unused portion of the
Commitments,'' as of any date of determination, shall be an amount equal to
the aggregate amount of Commitments as of such date MINUS the sum of
(i) the aggregate principal amount of all outstanding Loans on such date
PLUS (ii) the aggregate face amount of outstanding Letters of Credit. The
commitment fees shall be payable as provided in this subsection
notwithstanding that the amount available to be borrowed hereunder may be
less than the amount of the Commitments due to the operation of the
Borrowing Base or otherwise.
B. OTHER FEES. The Borrower agrees to pay to the Agent such other
fees in the amounts and at the times separately agreed upon in writing
between the Borrower and the Agent.
2.4 REPAYMENTS AND PREPAYMENTS; GENERAL PROVISIONS REGARDING PAYMENTS.
A. SCHEDULED PAYMENTS OF THE LOANS. On each Scheduled Principal
Payment Date, if any, the Borrower shall make a principal payment in the
amount equal to 6 2/3% of the amount of the Total Utilization of
Commitments on the third Anniversary. The amounts of the payments required
by the preceding sentence shall not be increased or decreased by the
occurrence or amounts of prepayments pursuant to subsection 2.4B or
otherwise; PROVIDED that voluntary prepayments made after the third
Anniversary pursuant to subsection 2.4B(i) shall be applied against the
scheduled payments required pursuant to this subsection 2.4A(i) in inverse
order of maturity. The Loans and all other Obligations shall be paid in
full by the Borrower no later than the Maturity Date.
B. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS.
(i) VOLUNTARY PREPAYMENTS. The Borrower may, without prepayment
charge or penalty (except as provided in Section 2.6D), upon not less
than one Business Day's prior written or telephonic notice, in the
case of Base Rate Loans, and upon not less than three Business Days'
prior written or telephonic notice in the case of Eurodollar Rate
Loans, in each case confirmed in writing to the Agent (which notice
the Agent will promptly transmit by telefacsimile or telephone to each
Lender), at any time and from time to time prepay any Loans on any
Business Day in whole or in part in an aggregate minimum amount of
$500,000 and integral multiples of $100,000 in excess of that amount
(or, if less, the total amount of all outstanding Loans); PROVIDED,
HOWEVER, that in the event a Eurodollar Rate Loan is prepaid on a day
other than the last day of the Interest Period applicable thereto,
such prepayment shall be accompanied by the payment of any amounts
payable under subsection 2.6D. Notice of prepayment having been given
as aforesaid, the principal amount of the Loans specified in such
notice shall become due and payable on the prepayment date specified
therein. Any such voluntary prepayment shall be applied as specified
in subsection 2.4B(vi). Amounts prepaid pursuant to this subsection
2.4B(i) may be reborrowed pursuant to subsection 2.1B.
(ii) VOLUNTARY REDUCTIONS OF COMMITMENTS. The Borrower may, upon
not less than three Business Days' prior written or telephonic notice
confirmed in writing to the Agent (which notice the Agent will
promptly transmit by telegram, telex or telephone to each Lender), at
any time and from time to time terminate in whole or permanently
reduce in part, without premium or penalty, the Commitments in an
amount up to the amount by which the Commitments exceed the Total
Utilization; PROVIDED, HOWEVER, that any such partial reduction of the
Commitments shall be in an aggregate minimum amount of $500,000 and
integral multiples of $100,000 in excess of that amount. The
Borrower's notice to the Agent shall designate the date (which shall
be a Business Day) of such termination or reduction and the amount of
any partial reduction, and such termination or reduction of the
Commitments shall be effective on the date specified in the Borrower's
notice and shall reduce the Commitment of each Lender in the same
proportion as its Pro Rata Share.
(iii) REDUCTIONS IN BORROWING BASE DUE TO CASUALTY, CONDEMNATION
OR DISPOSITION OF POOL A PROPERTY. If there shall occur a casualty or
Taking with respect to any Pool A Property (or any portion thereof) or
a sale or other permanent disposition of such Pool A Property, with
respect to which occurrence a prepayment is required to be made
pursuant to subsection 6.11E or 7.15B, as the case may be, then the
Borrowing Base shall be reduced by an amount equal to the then
applicable Property Amount with respect to such Pool A Property.
(iv) PREPAYMENTS DUE TO BORROWING BASE OR TOTAL UTILIZATION. If
at any time (a) the Total Utilization (excluding the aggregate
principal amount of Pool B Indebtedness) exceeds the Borrowing Base
then in effect, as demonstrated by a Borrowing Base Certificate
delivered (or required to be delivered) pursuant to
subsection 6.1(ii), or (b) the Total Utilization exceeds the aggregate
amount of the Commitments then in effect, then the Borrower shall
prepay the Loans (or, if no Loans are then outstanding, deposit Cash
to be held pursuant to the terms of the Collateral Account Agreement
with respect to Letters of Credit then outstanding, whether or not any
beneficiary under any such Letter of Credit shall have presented, or
shall be entitled at such time to present, the drafts or other
documents or certificates required to draw under such Letter of
Credit) in an amount equal to the greater of the amounts determined
pursuant to the preceding clauses (a) and (b) not later than 10 days
after the date that such Borrowing Base Certificate shall have been
delivered (or, if such Borrowing Base Certificate shall not have been
delivered timely or at all, on the last day that such Borrowing Base
Certificate is permitted by subsection 6.1(ii) to be delivered) or
such excess Total Utilization occurred, as the case may be. Any
mandatory prepayments pursuant to this subsection 2.4B(iv) shall be
applied as specified in subsection 2.4B(vi).
(v) ACCELERATION DUE TO REDUCTION OF THE FACILITY AMOUNT. If at
any time the aggregate amount of the Commitments is less than
$100,000,000, whether due to a reduction in the Commitments or
otherwise, (a) the Commitments shall be automatically terminated,
(b) the Loans outstanding and all other Obligations of the Borrower
shall become immediately due and payable and (c) the Borrower shall be
required to deposit in Cash to be held pursuant to the terms of the
Collateral Account Agreement an amount equal to the maximum amount
that may at any time be drawn under all Letters of Credit then
outstanding (whether or not any beneficiary under any such Letter of
Credit shall have presented, or shall be entitled at such time to
present, the drafts or other documents or certificates required to
draw under such Letter of Credit).
(vi) APPLICATION OF PREPAYMENTS. Each prepayment of the Loans
shall be applied first to Base Rate Loans to the full extent thereof
before application to Eurodollar Rate Loans, in each case in a manner
which minimizes the amount of any payments required to be made by the
Borrower pursuant to subsection 2.6D.
C. APPLICATION OF PAYMENTS TO PRINCIPAL AND INTEREST. All payments
in respect of the principal amount of the Loans shall include payment of
accrued interest on the principal amount being repaid or prepaid, and all
such payments shall be applied to the payment of unpaid interest before
application to principal.
D. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) MANNER AND TIME OF PAYMENT. All payments by the Borrower of
principal, interest, fees and other Obligations hereunder and under
the Notes and the other Loan Documents owed to Agent or any Lender
shall be made in same day funds and without defense, setoff or
counterclaim, free of any restriction or condition, and delivered to
the Agent not later than 2:00 P.M. (New York time) on the date due at
its office located at One Bankers Trust Plaza, New York, New York, for
the account of the Lenders; funds received by the Agent after that
time on such due date shall be deemed to have been paid by the
Borrower on the next succeeding Business Day. Upon the occurrence and
during the continuance of an Event of Default, the Borrower hereby
authorizes the Agent to instruct the Cash Manager to charge its
accounts with the Cash Manager (including the Concentration Account
and the Operating Account) in order to cause timely payment to be made
to the Agent of all principal, interest, fees and expenses due
hereunder or under the Notes or the other Loan Documents (subject to
sufficient funds being available in its accounts for that purpose).
(ii) APPORTIONMENT OF PAYMENTS. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which
such payments relate, in each case proportionately to the Lenders'
respective Pro Rata Shares. The Agent shall promptly distribute to
each Lender, at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such
Lender may request, its Pro Rata Share of all such payments received
by the Agent and the commitment fees of such Lender when received by
the Agent pursuant to subsection 2.3. Notwithstanding the foregoing
provisions of this subsection 2.4D(ii), if, pursuant to the provisions
of subsection 2.6C, any Affected Lender makes Base Rate Loans in lieu
of its Pro Rata Share of any Eurodollar Rate Loans, the Agent shall
give effect thereto in apportioning payments received thereafter.
(iii) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business
Day, such payment shall be made on the next succeeding Business Day
and such extension of time shall be included in the computation of the
payment of interest hereunder.
(iv) NOTATION OF PAYMENT. Each Lender agrees that before
disposing of the Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation
thereon of all Loans evidenced by that Note and all principal payments
previously made thereon and of the date to which interest thereon has
been paid; PROVIDED, HOWEVER, that the failure to make (or any error
in the making of) a notation of any Loan made under such Note shall
not limit or otherwise affect the obligations of the Borrower
hereunder or under such Note with respect to any Loan or any payments
of principal or interest on such Note.
(v) DISTRIBUTION TO LENDERS. Any payment received by the Agent
for distribution to the Lenders that is received by 2:00 P.M. (New
York time) on any day shall be paid to the Lenders by the end of such
day and, if such amounts are not paid to the Lenders on such date,
shall bear interest, payable on demand, until paid to the Lenders at
the Federal Funds Effective Rate for three Business Days and
thereafter at the Base Rate.
2.5 USE OF PROCEEDS.
A. LOANS. Subject to the other provisions of this Agreement, the
proceeds of the Loans shall be applied by the Borrower for the general
corporate purposes of the Borrower and its Subsidiaries, which may include
(i) the repayment of existing Indebtedness, (ii) the acquisition,
ownership, Renovation, Restoration, management and operation of upscale
full service hotels in the United States of America and, to the extent
permitted by subsection 7.14B, Canada, (iii) the acquisition and ownership
of real property for the expansion of such hotels, (iv) the provision or
acquisition and ownership of equity and debt Investments in Joint Ventures
or other entities formed to acquire, own, Renovate, Restore, manage,
operate and dispose of such hotels, (v) the acquisition and ownership of
certain mortgage loans secured primarily by such hotels, and (vi) the
acquisition and ownership of certain other equity and debt Securities.
B. LETTERS OF CREDIT. Subject to subsections 2.5C, 7.3 and 7.4, the
Letters of Credit shall be issued for the purposes set forth in the
definitions of Commercial Letter of Credit and Standby Letter of Credit and
such other general corporate purposes as may, in any instance, be approved
in advance, in writing, by the Agent.
C. MARGIN REGULATIONS. No portion of the proceeds of any borrowing
under this Agreement shall be used by any Loan Party or any of its
Subsidiaries in any manner that might cause the borrowing to violate
Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such
Board or to violate the Exchange Act, in each case as in effect on the date
or dates of such borrowing.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to the Eurodollar Rate
Loans as to the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as
practicable after 10:00 A.M. (New York time) on each Interest Rate
Determination Date, the Agent shall determine (which determination shall,
absent manifest error, be final, conclusive and binding upon all parties)
the interest rate that shall apply to the Eurodollar Rate Loans for which
an interest rate is then being determined for the applicable Interest
Period and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to the Borrower and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE; EXISTENCE OF
DEFAULT. In the event that the Agent shall have determined in good faith
(which determination shall absent manifest error be final and conclusive
and binding upon all parties hereto), on any Interest Rate Determination
Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the interest rate applicable to such
Loans on the basis provided for in the definition of Adjusted Eurodollar
Rate, the Agent shall on such date give notice (by telefacsimile or by
telephone confirmed in writing) to the Borrower and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to
Eurodollar Rate Loans until such time as the Agent notifies the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist and (ii) any Notice of Borrowing or Notice of Continuation given by
the Borrower with respect to the Loans in respect of which such
determination was made shall be deemed to contain a request that such Loans
be made as or converted to Base Rate Loans. Notwithstanding anything to
the contrary contained in this Agreement, no Loan may be made as, or
converted into, a Eurodollar Rate Loan if an Event of Default or Potential
Event of Default has occurred and is continuing.
C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the
event that on any date any Lender shall have determined in good faith
(which determination shall be final and conclusive and binding upon all
parties hereto but shall be made only after consultation with the Agent)
that the making, maintaining or continuation of its Eurodollar Rate Loans
(i) has become unlawful as a result of compliance by such Lender in good
faith with any law, treaty, governmental rule, regulation, guideline or
order (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful) or (ii) has become
impracticable, or would cause such Lender material hardship, as a result of
contingencies occurring after the date of this Agreement which materially
and adversely affect the interbank Eurodollar market, or the position of
such Lender in that market, then, and in any such event, such Lender shall
be an ``AFFECTED LENDER'' and it shall on that day give notice (by
telefacsimile or by telephone confirmed in writing) to the Borrower and the
Agent of such determination (which notice the Agent shall promptly transmit
to each other Lender). Thereafter (a) the obligation of the Affected
Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans
shall be suspended until such notice shall be withdrawn by the Affected
Lender (which withdrawal shall be promptly accomplished by such Affected
Lender by notice to the Agent and the Borrower as soon as the circumstances
causing such Affected Lender to be so classified no longer exist), (b) to
the extent such determination by the Affected Lender relates to a
Eurodollar Rate Loan then being requested by the Borrower to be made or
continued hereunder, the Affected Lender shall make such Loan as, or
convert such Loan to, as applicable, a Base Rate Loan, (c) the Affected
Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the
``AFFECTED LOANS'') shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the
Affected Loans or when required by law and (d) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
Except as provided in the immediately preceding sentence, nothing in this
subsection 2.6C shall affect the obligation of any Lender other than an
Affected Lender to make or maintain Loans as, or to convert Loans to,
Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST
PERIODS. The Borrower shall compensate each Lender, upon written request
by that Lender (which request shall set forth the basis for requesting such
amounts), for all reasonable losses, expenses and liabilities (including
any interest paid by that Lender to lenders of funds borrowed by it to make
or carry its Eurodollar Rate Loans and any loss, expense or liability
sustained by that Lender in connection with the liquidation or re-
employment of such funds) which that Lender may sustain: (i) if for any
reason (other than a default by that Lender or events described in 2.6C
above with respect to such Lender) a borrowing or continuation of any
Eurodollar Rate Loan does not occur on a date specified therefor in a
Notice of Borrowing or a Notice of Continuance, as applicable, or a
telephonic request for borrowing, or a conversion to or continuation of any
Eurodollar Rate Loan does not occur on the date specified therefor, (ii) if
any prepayment or conversion of any of its Eurodollar Rate Loans occurs on
a date that is not the last day of an Interest Period applicable to that
Loan, (iii) if any prepayment (including any prepayment pursuant to
subsection 2.4B(i)) or other principal payment of any of its Eurodollar
Rate Loans is not made by the Borrower on any date specified in a notice of
prepayment given by the Borrower or (iv) as a consequence of any other
default by the Borrower in the repayment of its Eurodollar Rate Loans when
required by the terms of this Agreement.
E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its
branch offices or the office of an Affiliate of that Lender.
F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.
Calculation of all amounts payable to a Lender under this subsection 2.6
and under subsection 2.7A shall be made as though that Lender had actually
funded each of its relevant Eurodollar Rate Loans through the purchase of a
Eurodollar deposit bearing interest at the rate obtained pursuant to
clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal
to the amount of such Eurodollar Rate Loan and having a maturity comparable
to the relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of that Lender to a domestic office of that
Lender located in the United States of America; PROVIDED, HOWEVER, that
each Lender may fund each of its Eurodollar Rate Loans in any manner it
sees fit and the foregoing assumptions shall be utilized only for the
purposes of calculating amounts payable under this subsection 2.6 and under
subsection 2.7A.
2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the
provisions of subsection 2.7B (which shall be controlling with respect to
the matters covered thereby), in the event that any Lender shall in good
faith determine (which determination shall, absent manifest error, be final
and conclusive and binding upon all parties hereto but shall be made only
after consultation with the Agent) that any law, treaty or governmental
rule, regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any
new law, treaty or governmental rule, regulation or order), or any
determination of a Governmental Authority, in each case that becomes
effective after the date hereof, or compliance by such Lender with any
guideline, request or directive issued or made after the date hereof by any
central bank or other Governmental Authority or quasi-governmental
authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to
any additional Tax (other than any Tax on the overall net income of
such Lender), with respect to this Agreement or any of its obligations
hereunder or any payments to such Lender (or its applicable lending
office) of principal, interest, fees or any other amount payable
hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve),
special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities
in or for the account of, or advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of such
Lender (other than any such reserve or other requirements with respect
to Eurodollar Rate Loans that are reflected in the definition of
Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Lender (or its applicable lending
office) or its obligations hereunder or the interbank Eurodollar
market;
and the result of any of the foregoing is to increase the cost to such
Lender of agreeing to make, making or maintaining Loans hereunder or to
reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, the Borrower
shall promptly pay to such Lender, upon receipt of the statement referred
to in the next sentence, such additional amount or amounts (in the form of
an increased rate of, or a different method of calculating, interest or
otherwise as such Lender in its sole discretion shall determine) as may be
necessary to compensate such Lender for any such increased cost or
reduction in amounts received or receivable hereunder. Such Lender shall
deliver to the Borrower (with a copy to the Agent) a written statement
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Lender under this subsection 2.7A, which statement
shall be conclusive and binding upon all parties hereto absent manifest
error.
B. WITHHOLDING OF TAXES.
(i) PAYMENTS TO BE FREE AND CLEAR. All sums payable by the
Borrower under this Agreement and the other Loan Documents shall be
paid free and clear of and (except to the extent required by law)
without any deduction or withholding on account of any Tax (excluding
in the case of each Lender and the Agent, Taxes imposed on its income
by a jurisdiction under the laws of which it is organized or in which
its principal executive office is located or in which its applicable
lending office for funding or booking its Loans hereunder is located)
imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the
United States of America or any other jurisdiction from or to which a
payment is made by or on behalf of the Borrower or by any federation
or organization of which the United States of America or any such
jurisdiction is a member at the time of payment.
(ii) GROSSING-UP OF PAYMENTS. If the Borrower or any other
Person is required by law to make any deduction or withholding on
account of any such Tax from any sum paid or payable by the Borrower
to the Agent or any Lender under any of the Loan Documents:
(a) the Borrower shall notify the Agent of any such
requirement or any change in any such requirement as soon as the
Borrower becomes aware of it;
(b) the Borrower shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if the
liability to pay is imposed on the Borrower) for its own account
or (if that liability is imposed on the Agent or such Lender, as
the case may be) on behalf of and in the name of the Agent or
such Lender;
(c) the sum payable by the Borrower in respect of which the
relevant deduction, withholding or payment is required shall be
increased to the extent necessary to ensure that, after the
making of that deduction, withholding or payment, the Agent or
such Lender, as the case may be, receives on the due date a net
sum equal to what it would have received had no such deduction,
withholding or payment been required or made; and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within
30 days after the due date of payment of any Tax which it is
required by clause (b) above to pay, the Borrower shall deliver
to the Agent evidence satisfactory to the other affected parties
of such deduction, withholding or payment and of the remittance
thereof to the relevant taxing or other authority;
PROVIDED, HOWEVER, that no such additional amount shall be required to
be paid to any Lender under clause (c) above except to the extent that
any change after the date hereof (in the case of each Lender listed on
the signature pages hereof) or after the date such Lender became a
Lender pursuant to subsection 9.1 (in the case of each other Lender)
in any such requirement for a deduction, withholding or payment as is
mentioned therein shall result in an increase in the rate of such
deduction, withholding or payment from that in effect at the date of
this Agreement (in the case of each Lender listed on the signature
pages hereof) or at the date such Lender became a Lender pursuant to
subsection 9.1 (in the case of each other Lender) as the case may be,
in respect of payments to such Lender.
(iii) U.S. TAX CERTIFICATES. Each Lender that is organized under
the laws of any jurisdiction other than the United States of America
or any state or other political subdivision thereof shall deliver to
the Agent for transmission to the Borrower, on or prior to the Closing
Date (in the case of each Lender listed on the signature pages hereof)
or on the date it becomes a Lender pursuant to subsection 9.1 (in the
case of each other Lender), and at such other times as may be
necessary in the determination of the Borrower or the Agent (each in
the reasonable exercise of its discretion), such certificates,
documents or other evidence, properly completed and duly executed by
such Lender (including Internal Revenue Service Form 1001 or Form 4224
or any other certificate or statement of exemption required by
Treasury Regulations Section 1.1441-4(a) or Section 1.1441-6(c) or any
successor thereto) to establish that such Lender is not subject to
deduction or withholding of United States federal income tax under
Section 1441 or 1442 of the Internal Revenue Code or otherwise (or
under any comparable provisions of any successor statute) with respect
to any payments to such Lender of principal, interest, fees or other
amounts payable under any of the Loan Documents. The Borrower shall
not be required to pay any additional amount to any Lender under
clause (c) or perform with respect thereto under clause (d) of
subsection 2.7B(ii) at any time during which such Lender shall have
failed to satisfy the requirements of the immediately preceding
sentence; PROVIDED, HOWEVER, that if such Lender shall have satisfied
such requirements on the Closing Date (in the case of each Lender
listed on the signature pages hereof) or on the date it becomes a
Lender (in the case of each other Lender), nothing in this subsection
2.7B(iii) shall relieve the Borrower of its obligation to pay any
additional amounts pursuant to clause (c) or perform with respect
thereto under clause (d) of subsection 2.7B(ii) in the event that, as
a result of any change in any applicable law, treaty or governmental
rule, regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer
properly entitled to deliver forms, certificates or other evidence at
a subsequent date establishing the fact that such Lender is not
subject to withholding as described in the immediately preceding
sentence.
C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have reasonably
determined that the adoption, effectiveness, phase-in or applicability
(after the date of this Agreement) of any law, rule or regulation (or any
provision thereof) regarding capital adequacy, or any change therein or in
the interpretation or administration thereof by any Governmental Authority,
including any central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or
its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law (after
the date of this Agreement)) of any such Governmental Authority, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of, or
with reference to, such Lender's Loans or Commitment or Letters of Credit
or participations herein or other obligations hereunder with respect to the
Loans or the Letters of Credit to a level below that which such Lender or
such controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or such controlling corporation
with regard to capital adequacy), then from time to time, within five
Business Days after receipt by the Borrower from such Lender of the
statement referred to in the next sentence, the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender or
such controlling corporation on an after-tax basis for such reduction.
Such Lender shall deliver to the Borrower (with a copy to the Agent) a
written statement, setting forth in reasonable detail the basis of the
calculation of such additional amounts, which statement shall be conclusive
and binding upon all parties hereto absent manifest error.
2.8 OBLIGATION OF THE LENDERS TO MITIGATE.
Each Lender agrees that, as promptly as practicable after the officer
of such Lender responsible for administering the Loans becomes aware of the
occurrence of an event or the existence of a condition that would cause
such Lender to become an Affected Lender or that would entitle such Lender
to receive payments under subsection 2.7, it will, to the extent not
inconsistent with the internal policies of such Lender and any applicable
legal or regulatory restrictions, use reasonable efforts (i) to make, fund
or maintain the Commitment of such Lender or the affected Loans of such
Lender through another lending office of such Lender, or (ii) take such
other measures as such Lender may deem reasonable, if as a result thereof
the circumstances which would cause such Lender to be an Affected Lender
would cease to exist or the additional amounts which would otherwise be
required to be paid to such Lender pursuant to subsection 2.7 would be
materially reduced and if, as determined by such Lender in its reasonable
judgment, the making, funding or maintaining of such Commitment or Loans
through such other lending office or in accordance with such other
measures, as the case may be, would not otherwise materially adversely
affect such Commitment or Loans or the interests of such Lender; PROVIDED,
HOWEVER, that such Lender will not be obligated to utilize such other
lending office pursuant to this subsection 2.8 unless the Borrower agrees
to pay all incremental expenses incurred by such Lender as a result of
utilizing such other lending office as described in clause (i) above. A
certificate as to the amount of any such expenses payable by the Borrower
pursuant to this subsection 2.8 (setting forth in reasonable detail the
basis for requesting such amount) submitted by such Lender to the Borrower
(with a copy to the Agent) shall be conclusive absent manifest error.
2.9 ACQUISITION OF PROPERTIES.
A. ACQUISITION AND ADDITION OF POOL A PROPERTIES. The Borrower and
its Wholly Owned Subsidiaries may, with the prior written approval of the
Agent and Lenders holding 66-2/3% of the Commitments (or, if the
Commitments have been terminated, the Total Utilization of Commitments),
which approval may be granted, withheld, conditioned or delayed in the
Agent's and Lenders' sole discretion (PROVIDED that such determination
shall be made by the Agent and the Lenders within ten Business Days
following receipt by the Agent and the Lenders of all Property Information
or such other documents and other information required to be received by
the Agent and the Lenders in advance of such determination), make
Acquisitions of one or more hotel properties (each, an ``ADDITIONAL POOL A
PROPERTY'') as Pool A Properties; PROVIDED that, in any event:
(i) such Additional Pool A Property shall be owned either by the
Borrower or a Wholly Owned Subsidiary (other than a Pool B Subsidiary)
of the Borrower; PROVIDED that such Subsidiary shall have executed a
counterpart of the Affiliate Guaranty, the Security Agreement and the
Environmental Indemnity;
(ii) each Additional Pool A Property shall include the entire fee
interest or leasehold interest pursuant to a Ground Lease in an
upscale full service hotel located in the United States of America
and, to the extent provided in subsection 7.14B, Canada, and otherwise
be of a type, quality and character consistent with the Borrower's
business plan and strategy or, if not consistent, as approved by the
Agent, which approval may be granted, withheld, conditioned or delayed
in the Agent's sole discretion;
(iii) at least 30 days (or such shorter period as shall be
acceptable to the Agent) before the proposed Addition Date, the
Borrower, at its expense, shall deliver to the Agent the Property
Information with respect to such Additional Pool A Property, which
Property Information shall be satisfactory in form and substance to
the Agent, in its sole discretion;
(iv) on or before the closing date of the Acquisition of such
Additional Pool A Property, the Borrower, at its expense, shall
deliver to the Agent the following with respect to the applicable
Additional Pool A Property:
(a) evidence acceptable to the Agent, as contemplated by
subsection 6.10E, with respect to valid policies of insurance,
required by this Agreement or any other Loan Document,
(b) supplements to the Schedules to this Agreement and the
other Loan Documents reflecting the acquisition of such
Additional Pool A Property and the other actions taken by the
Loan Parties and their respective Subsidiaries in connection
therewith, which Schedules shall be acceptable to the Agent,
(c) to the extent applicable, each of the other documents
and satisfy each of the other conditions set forth in paragraphs
E, F, G, I, L and M(i) of subsection 4.1, MUTATIS MUTANDIS, with
respect to such Additional Pool A Property, PROVIDED that the
Agent shall not be required to approve such Engineering Report,
(d) executed or certified, conformed copies of any
applicable Acquisition Agreement, and such other documents,
certificates and opinions executed and delivered by or on behalf
of CapStar and any of its Subsidiaries as the Agent may
reasonably request, at least ten days prior to such closing date,
(e) if the Additional Pool A Property includes a leasehold
interest, original counterparts of a landlord estoppel
certificate and agreement with respect to each of the applicable
Ground Leases, reasonably satisfactory in form and substance to
the Agent, and duly executed and acknowledged by each lessor
under such Ground Lease, and
(f) payment pursuant to subsection 9.2 of the expenses
incurred by the Agent in connection with the matters subject to
this subsection 2.9;
(v) on or before the proposed Addition Date with respect to such
Additional Pool A Property, the Borrower at its expense, shall deliver
to the Agent:
(a) a statement of Property Gross Revenues and Operating
Expenses and any other expenses with respect to such Additional
Pool A Property for the 12 most recently completed calendar
months ending not less than 30 days before such Addition Date, in
reasonable detail satisfactory to the Agent and certified by the
Authorized Officer of the Borrower to the effect provided in
subsection 6.1(i), MUTATIS MUTANDIS, PROVIDED that such
certificate may be based upon his or her knowledge, after
reasonable inquiry,
(b) an Addition Certificate in reasonable detail
satisfactory to the Agent and together with the financial
statements and other information used by the Borrower to
calculate the Borrowing Base and certified by the Authorized
Officer of the Borrower and, if applicable, the Subsidiary
acquiring the Additional Pool A Property,
(c) an Appraisal with respect to such Additional Pool A
Property, which Appraisal shall satisfy all applicable regulatory
requirements and be satisfactory in form and substance to the
Agent,
(d) payment pursuant to subsection 9.2 of the expenses
incurred by the Agent in connection with the matters subject to
this subsection 2.9 and not previously paid pursuant to
clause (iv)(f) above, and
(e) to the extent applicable, each of the other documents
and satisfy each of the other conditions set forth in
paragraphs J, K and M of subsection 4.1 (PROVIDED that, without
limiting any other consent or approval rights, the Engineering
Report and related reliance letter shall be satisfactory in form
and substance to the Agent); and
(vi) Notwithstanding anything to the contrary contained herein,
the Addition Date with respect to such Additional Pool A Property
shall not occur without the prior written approval of the Agent, which
approval may be granted, withheld, conditioned or delayed in the
Agent's sole discretion.
B. ACQUISITION OF POOL B PROPERTIES. So long as no Event of Default
or Potential Event of Default has occurred and is continuing or would be
caused thereby, without the approval of the Agent (except as otherwise
expressly provided herein), any of the Pool B Subsidiaries may make
Acquisitions of Pool B Properties; PROVIDED that:
(i) each Pool B Property subject to such Acquisition shall
include the entire fee or leasehold interest pursuant to a Ground
Lease in an upscale full service hotel located in the United States of
America and, to the extent permitted in subsection 7.14B, Canada and
otherwise be of a type, quality and character consistent with the
Borrower's business plan and strategy or, if not consistent, as
approved by the Agent, which approval may be granted, withheld,
conditioned or delayed in the Agent's sole discretion;
(ii) at least 15 days before the proposed closing date of each
such Acquisition, the Borrower, at its expense, shall deliver to the
Agent (1) the Property Information with respect to such Pool B
Property that has not previously been delivered (PROVIDED that the
information delivered pursuant to clauses (iii) and (v) of the
definition of Property Information need not be approved by the Agent)
and (2) a statement of Property Gross Revenues and Operating Expenses
and any other expenses with respect to such Pool B Property for the 12
most recently completed calendar months ending not less than 30 days
before such closing date, in reasonable detail satisfactory to the
Agent and certified by the Chief Executive Officer or the Chief
Financial Officer of the Borrower to the effect provided in subsection
6.1(i), MUTATIS MUTANDIS, PROVIDED that such certificate may be based
upon his or her knowledge, after reasonable inquiry;
(iii) on or before such closing date, the Borrower or any of its
Wholly Owned Subsidiaries (other than Pool B Subsidiaries) shall have
entered into a Property Servicing Agreement with such Pool B
Subsidiary and, in the event a Liquor License exists with respect to
such Pool B Property or is acquired thereafter, and the Agent shall
reasonably determine that the same is necessary or advisable, the
appropriate parties shall have entered into a Liquor Operation
Servicing Agreement or a Liquor Lease, in each case substantially in
the form approved by the Agent on or before the Closing Date or in
such other form as may be reasonably acceptable to the Agent; and
(iv) on or before such closing date, the Borrower, at its
expense, shall deliver to the Agent
(a) evidence acceptable to the Agent with respect to valid
policies of insurance required by any Pool B Document, this
Agreement or any other Loan Document,
(b) an Addition Certificate, in reasonable detail
satisfactory to the Agent,
(c) supplements to the Schedules to this Agreement and the
other Loan Documents reflecting the acquisition of such Pool B
Property and the other actions taken by the Loan Parties and
their respective Subsidiaries in connection therewith, which
supplements shall be reasonably satisfactory to the Agent,
(d) unless previously delivered to the Agent pursuant to
subsection 7.7(ii), originally counterparts to the Environmental
Indemnity and the Affiliate Guaranty executed by such Pool B
Subsidiary; PROVIDED that such Pool B Subsidiary shall not be
acquired to execute an Affiliate Guaranty if and so long as doing
so would violate the provisions of any Pool B Indebtedness then
owed by such Pool B Subsidiary,
(e) executed or certified, conformed copies of the related
Acquisition Agreements and Pool B Documents and copies of such
other documents, certificates and opinions executed and delivered
by or on behalf of the Borrower and any of its Subsidiaries as
the Agent may reasonably request,
(f) to the extent applicable, copies of each of the
documents set forth in paragraphs F, I, J (other than the consent
agreement specified therein), K, L and M of subsection 4.1,
MUTATIS MUTANDIS, with respect to such Pool B Property, in each
case subject to the satisfaction of the Agent specified in such
subsections; PROVIDED that the Agent shall not be required to
approve the Franchise Agreements, Material Leases and Engineering
Reports delivered pursuant to this clause (f); PROVIDED, HOWEVER,
that the franchisors under the respective Franchise Agreements
shall have a national standing and reputation not less favorable
than the standing and reputation of the franchisors under
Franchise Agreements then covering the Pool A Properties,
(g) payment pursuant to subsection 9.2 of the expenses
incurred by the Agent in connection with the matters subject to
this subsection 2.9B, and
(h) if the Acquisition includes a leasehold interest, (i) a
leasehold mortgage reasonably satisfactory in form and substance
to the Agent and evidence reasonably satisfactory to the Agent
that all other documents have been executed and all actions that
the Agent reasonably requests taken in order to create, perfect
and maintain a valid and enforceable first priority Lien in the
leasehold interest of the applicable Loan Party or Subsidiary and
(ii) an estoppel certificate, reasonably satisfactory in form and
substance to the Agent, duly executed by the applicable lessor,
PROVIDED that such Pool B Subsidiary shall not be required to
execute such a leasehold mortgage if and so long as doing so
would violate the provisions of any Pool B Indebtedness then owed
by such Pool B Subsidiary, and
(i) any other information relating to such Acquisition or
such Additional Pool B Property as is reasonably requested by the
Agent;
(v) after giving effect to the proposed Acquisition, the
Borrower shall satisfy all conditions to the borrowing of an
additional $1.00 hereunder, without giving effect to limitations with
respect to the frequency and minimum amounts of Loans, the amount of
the Borrowing Base and the date of the borrowing; and
(vi) at no time shall a Pool B Subsidiary acquire and own more
than one Pool B Property unless such Pool B Properties are acquired in
a single transaction or series of related transactions.
C. DESIGNATION OF POOL A PROPERTIES. The Borrower may designate any
Removed Pool A Property as a Designated Pool A Property by delivering a
written notice of such designation to the Agent. Upon receipt of such
notice, the applicable Removed Pool A Property shall be a Designated Pool A
Property for all purposes of this Agreement, including without limitation,
the calculation of the Borrowing Base.
D. REMOVAL OF DESIGNATED PROPERTIES. The Borrower may, from time to
time after the Closing Date, deliver to the Agent written notice that it
elects to exclude the Property Amount of a specified Pool A Property from
the calculation of the Borrowing Base; PROVIDED that, after giving effect
to such exclusion, the Borrowing Base shall be an amount at least equal to
the remainder of (i) the Total Utilization MINUS (ii) the aggregate
principal amount of the Pool B Indebtedness. Upon receipt by the Agent of
such notice or upon a mandatory removal pursuant to subsection 6.11E, the
specified Pool A Property shall be a Removed Pool A Property for all
purposes of this Agreement and shall be excluded from the calculation of
the Borrowing Base unless, in the case of a voluntary removal, the Borrower
elects to again designate such Pool A Property as a Designated Pool A
Property pursuant to subsection 2.9C, but such Removed Pool A Property
shall remain a Pool A Property for all purposes of this Agreement unless
such Property is Released pursuant to subsection 2.10.
E. ATLANTA PROPERTY. Notwithstanding anything herein to the
contrary, the Atlanta Property shall cease to be a Pool A Property and
shall become a Pool B Property, in each case for all purposes under this
Agreement, immediately upon the earliest to occur of (i) the payment,
discharge, cancellation or transfer (other than pursuant to this Agreement
and the other Loan Documents) of the Atlanta Note, (ii) the failure of the
Atlanta Note to constitute a legally valid and binding obligation of the
Atlanta Airport Partnership, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally, and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or law), (iii) the existence or assertion of any defenses to
payment, counterclaims with respect to the Note or any right of set-off
against any payment due thereunder, (iv) the failure of the Atlanta
Mortgage to be a perfected, valid and enforceable first priority Lien on
the Atlanta Property and (v) the failure of the Atlanta Airport Property to
be free and clear of all Liens having priority over the first Lien of such
Mortgage, except for Permitted Encumbrances.
F. ADDITION OF MBL PROPERTIES. The Agent, each Lender, CapStar and
the Borrower hereby agree that if the Borrower, on or prior to December 17,
1996, (i) delivers each item required to be delivered pursuant to
subsection 2.9A with respect to any of the MBL Properties and (ii) deposits
in the Deferred Maintenance Account or establishes a reserve as provided in
the definition of Total Utilization in an amount not less than $391,750 in
the aggregate (which amount is the sum of the subtotals of the amounts in
the columns in SCHEDULE 6.16B annexed hereto entitled ``Immediate Repairs
of Deferred Items'' and ``Immediate Repairs of ADA Items'', respectively,
with respect to the MBL Properties), which amount shall be allocated among
the MBL Properties as provided on SCHEDULE 6.16B, then the Agent and each
Lender shall be deemed to have approved the addition of such MBL Property
as an Additional Pool A Property pursuant to subsection 2.9A.
G. VIRGINIA LOAN. Immediately prior to the sale of the Virginia
Loan to the Lenders as herein contemplated, CapStar will have good title to
the Virginia Loan, free and clear of all Liens, and will be the sole owner
thereof, with full power and authority to sell the Virginia Loan to the
Lenders. Upon the transfer of the Virginia Loan to the Lenders, as herein
contemplated, the Lenders will own the Virginia Loan free and clear of any
Lien thereon created by or through either CapStar or any predecessor-in-
interest of CapStar. Immediately prior to the sale and transfer of the
Virginia Loan to the Lenders, the aggregate outstanding principal balance
of the Virginia Loan is not less than $17,000,000.
2.10 RELEASES OF POOL A PROPERTIES AND OTHER COLLATERAL.
A. POOL A PROPERTIES. At any time and from time to time after the
Closing Date, in connection with the sale or other permanent disposition of
any Pool A Property, the Borrower may obtain a Release of the Lien of the
Security Documents in respect of all, but except as provided below not a
portion of, such Pool A Property, subject to the following terms and
conditions on the applicable Release Date:
(i) the Borrower shall have delivered written notice to the
Agent (a) not less than 30 days (or such shorter period as is
acceptable to the Agent) prior to the proposed Release Date specifying
the proposed Release Date and such Pool A Property and (b) not less
than 5 days (or such shorter period as is acceptable to the Agent)
prior to the actual Release Date specifying such actual Release Date
and such Pool A Property;
(ii) no Event of Default shall have occurred and be continuing as
of the date of the delivery of the notice pursuant to clause (i) above
(other than an Event of Default or Potential Event of Default that
pertains solely to the Pool A Property or portion thereof which is the
subject of such Release or which is cured by such Release) and no
Event of Default shall be continuing as of the Release Date after
giving effect to such Release;
(iii) concurrently with such Release, the Borrowing Base shall be
reduced by an amount equal to the then applicable Property Amount with
respect to such Pool A Property in effect immediately prior to giving
effect to such Release;
(iv) the Borrower shall concurrently prepay the Loans in an
amount equal to the Release Price in respect of such Pool A Property;
(v) the Borrower shall have delivered to the Agent for
distribution to the Lenders (a) an Officers' Certificate dated the
Release Date, certifying as to the matters referred to in clauses (ii)
and (iv) above and (b) a Borrowing Base Certificate, in reasonable
detail satisfactory to the Agent and together with the financial
statements and other information utilized by CapStar and the Borrower
to calculate the Borrowing Base, and certified by the Chief Executive
Officer or Chief Financial Officer of CapStar and the Borrower,
calculated as of the Release Date and giving effect to the Release,
and demonstrating that Total Utilization (excluding the aggregate
principal amount of Pool B Indebtedness) does not exceed the Borrowing
Base and that, without giving effect to the limitations in subsection
2.1 with respect to the frequency and minimum amounts of borrowings,
the Borrower would then be entitled to make a borrowing in an amount
not less than $1.00;
(vi) the Borrower, at its sole cost and expense, shall have
(a) with respect to any partial Release of the Lien of the Security
Documents in respect of such Pool A Property, delivered to the Agent
one or more endorsements to the Title Policy in respect of such Pool A
Property delivered to the Agent on the date hereof and, to the extent
generally available in each state, insuring that, after giving effect
to such partial Release and with respect to the portion of such Pool A
Property which is not being Released, the Liens created by the
applicable Mortgage and insured under the such Title Policy are in
full force and effect and unaffected by such partial Release,
(b) prepared any and all documents and instruments necessary to effect
such Release, all of which shall be reasonably satisfactory in form
and substance to the Agent, and (c) paid all costs and expenses
incurred by the Agent and its counsel in connection with the review,
execution and delivery of the release documents; PROVIDED that a
partial Release shall only be permitted hereunder in the event of a
partial condemnation of the applicable Pool A Property; and
(vii) all other proceedings taken or to be taken in connection
with such Release and all documents incidental thereto shall be
reasonably satisfactory in form and substance to the Agent and the
Agent's counsel, the Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as
the Agent may reasonably request and counsel for the Agent shall have
received such documents and evidence that such counsel shall require
in order to establish compliance with the conditions set forth in this
subsection.
The Borrower may obtain a Release of the Lien of the Security Documents in
respect of a portion of any Pool A Property, if title to such portion has
been permanently Taken, by complying with the foregoing terms and
conditions on the applicable Release Date.
B. OTHER COLLATERAL. At any time and from time to time after the
Closing Date, in connection with the sale or other permanent disposition of
any other item of Collateral that is not subject to subsection 2.10A, the
Borrower may obtain a Release of the Lien of the Security Documents in
respect of such other item of the Collateral that is not subject to
subsection 2.10A, subject to the following terms and conditions on the
applicable Release Date:
(i) the Company shall have delivered written notice to the Agent
not less than 5 days prior to proposed Release Date specifying the
proposed Release Date and such other item of Collateral to the extent
practical;
(ii) no Event of Default shall have occurred and be continuing as
of the date of the delivery of the notice pursuant to clause (i) above
(other than an Event of Default that pertains solely to the other item
of Collateral which is the subject of such Release or which is cured
by such Release) and no Event of Default shall be continuing as of the
Release Date after giving effect to such Release;
(iii) the Borrower shall have prepaid the Loans in an amount equal
to the Release Price, if any, in respect of such other item of
Collateral as the case may be;
(iv) if such item of Collateral is not being sold or otherwise
permanently disposed of in the ordinary course of business, the
Company shall have delivered to the Agent an Officers' Certificate
dated the Release Date, certifying as to the matters referred to in
clauses (ii) and (iii) above;
(v) the Borrower, at its sole cost and expense, shall have
(a) prepared any and all documents and instruments necessary to effect
such Release, all of which shall be reasonably satisfactory in form
and substance to the Agent, and (b) paid all reasonable costs and
expenses incurred by the Agent and its counsel in connection with the
review, execution and delivery of the release documents; and
(vi) all other proceedings taken or to be taken in connection
with such Release and all documents incidental thereto shall be
reasonably satisfactory in form and substance to the Agent and the
Agent's counsel, the Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents as
the Agent may reasonably request and counsel for the Agent shall have
received such documents and evidence that such counsel shall
reasonably require in order to establish compliance with the
conditions set forth in this subsection.
The failure of the Borrower to obtain a Release in respect of any such item
of Collateral that is not subject to subsection 2.10A shall not restrict
the right of the Loan Parties and their Subsidiaries to sell or otherwise
permanently dispose of such items pursuant to this Agreement, and each such
item of Collateral sold or otherwise permanently disposed of in the
ordinary course of business and in accordance with clauses (ii) and (iii)
of the preceding sentence shall be deemed to have been so Released.
C. EFFECT OF RELEASE. Except with respect to a Release in
connection with a sale and leaseback transaction pursuant to subsection
7.11, upon any Release of any Pool A Property or other items of Collateral
in accordance with this subsection 2.9, such property shall cease to be a
Property or other item of Collateral for the purposes of this Agreement
(other than for purposes of any indemnity contained herein or in any of the
other Loan Documents to the extent such indemnification applies to such
Property).
D. REVISED SCHEDULES. On or prior to each Release, the Borrower
shall deliver to the Agent revised Schedules to this Agreement and the
other Loan Documents, as applicable, reflecting the Release of any
Property, or other item of Collateral pursuant to this subsection 2.9,
which Schedules shall be reasonably satisfactory to the Agent.
SECTION 3
LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
THEREIN.
A. LETTERS OF CREDIT. In addition to the Borrower requesting that
the Lenders make Loans pursuant to subsection 2.1B, the Borrower may
request, in accordance with the provisions of this subsection 3.1, from
time to time during the period from the Closing Date to but excluding the
third Anniversary that one or more Lenders issue Letters of Credit for the
account of the Borrower for the purposes specified in the definitions of
Commercial Letters of Credit and Standby Letters of Credit and such other
general corporate purposes as may, in any instance, be approved in advance,
in writing, by the Agent. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the
Borrower herein set forth, any one or more Lenders may, but (except as
provided in subsection 3.1B(ii)) shall not be obligated to, issue such
Letters of Credit in accordance with the provisions of this subsection 3.1;
PROVIDED that the Borrower shall not request that any Lender issue (and no
Lender shall issue):
(i) any Letter of Credit if, after giving effect to such
issuance, (a) the Total Utilization (excluding the aggregate principal
amount of Pool B Indebtedness) would exceed the lesser of the
Commitments then in effect and the Borrowing Base or (b) the Total
Utilization would exceed the Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $10,000,000;
(iii) any Standby Letter of Credit having an expiration date later
than the earlier of (a) the third Anniversary and (b) the date which
is one year from the date of issuance of such Standby Letter of
Credit; PROVIDED that the immediately preceding clause (b) shall not
prevent any Issuing Lender from agreeing that a Standby Letter of
Credit will automatically be extended for one or more successive
periods not to exceed one year each unless such Issuing Lender elects
not to extend for any such additional period; and PROVIDED FURTHER,
that such Issuing Lender shall elect not to extend such Standby Letter
of Credit if it has knowledge that an Event of Default has occurred
and is continuing (and has not been waived in accordance with
subsection 9.6) at the time such Issuing Lender must elect whether or
not to allow such extension;
(iv) any Commercial Letter of Credit having an expiration date
(a) later than the earlier of (x) the date which is 30 days prior to
the third Anniversary and (y) the date which is 180 days from the date
of issuance of such Commercial Letter of Credit or (b) that is
otherwise unacceptable to the applicable Issuing Lender in its
reasonable discretion; or
(v) any Letter of Credit denominated in a currency other than
Dollars.
B. MECHANICS OF ISSUANCE.
(i) NOTICE OF ISSUANCE. Whenever the Borrower desires the
issuance of a Letter of Credit, it shall deliver to Agent a Notice of
Issuance of Letter of Credit substantially in the form of EXHIBIT IV
annexed hereto no later than 12:00 Noon (New York City time) at least
five Business Days, or such shorter period as may be agreed to by the
Issuing Lender in any particular instance, in advance of the proposed
date of issuance. Each Notice of Issuance of Letter of Credit shall
contain the information indicated on the form thereof attached hereto
as EXHIBIT IV; PROVIDED that the Issuing Lender, in its reasonable
discretion, may require changes in the text of the proposed Letter of
Credit or any such documents; and PROVIDED FURTHER, that no Letter of
Credit shall require payment against a conforming draft to be made
thereunder on the same business day (under the laws of the
jurisdiction in which the office of the Issuing Lender to which such
draft is required to be presented is located) that such draft is
presented if such presentation is made after 10:00 A.M. (in the time
zone of such office of the Issuing Lender) on such business day.
The Borrower shall notify the applicable Issuing Lender (and the
Agent, if the Agent is not such Issuing Lender) prior to the issuance
of any Letter of Credit in the event that any of the matters to which
the Borrower is required to certify in the applicable Notice of
Issuance of Letter of Credit is no longer true and correct as of the
proposed date of issuance of such Letter of Credit, and upon the
issuance of any Letter of Credit the Borrower shall be deemed to have
re-certified, as of the date of such issuance, as to the matters to
which the Borrower is required to certify in the applicable Notice of
Issuance of Letter of Credit.
(ii) DETERMINATION OF ISSUING LENDER. Upon receipt by the Agent
of a Notice of Issuance of Letter of Credit pursuant to subsection
3.1B(i) requesting the issuance of a Letter of Credit, in the event
the Agent elects to issue such Letter of Credit, the Agent shall
promptly so notify the Borrower, and the Agent shall be the Issuing
Lender with respect thereto. In the event that the Agent, in its sole
discretion, elects not to issue such Letter of Credit, the Agent shall
promptly so notify the Borrower, whereupon the Borrower may request
any other Lender to issue such Letter of Credit by delivering to such
Lender a copy of the applicable Notice of Issuance of Letter of
Credit. Any Lender so requested to issue such Letter of Credit shall
promptly notify the Borrower and the Agent whether or not, in its sole
discretion, it has elected to issue such Letter of Credit, and any
such Lender which so elects to issue such Letter of Credit shall be
the Issuing Lender with respect thereto. In the event that at least
two other Lenders shall have declined to issue such Letter of Credit,
notwithstanding the prior election of the Agent not to issue such
Letter of Credit, the Agent shall be obligated to issue such Letter of
Credit and shall be the Issuing Lender with respect thereto,
notwithstanding the fact that the Letter of Credit Usage with respect
to such Letter of Credit and with respect to all other Letters of
Credit issued by the Agent, when aggregated with the Agent's
outstanding Loans may exceed the Agent's Commitment then in effect.
(iii) ISSUANCE OF LETTER OF CREDIT. Upon satisfaction or waiver
(in accordance with subsection 9.6) of the conditions set forth in
subsection 4.3, the Issuing Lender shall issue the requested Letter of
Credit in accordance with the Issuing Lender's standard operating
procedures.
(iv) NOTIFICATION TO LENDERS. Upon the issuance or amendment of
any Standby Letter of Credit, the applicable Issuing Lender shall
promptly notify the Agent and each other Lender of such issuance or
amendment, which notice shall be accompanied by a copy of such Standby
Letter of Credit or amendment. Promptly after receipt of such notice
(or, if the Agent is the Issuing Lender, together with such notice),
the Agent shall notify each Lender of the amount of such Lender's
respective participation in such Standby Letter of Credit, determined
in accordance with subsection 3.1C.
(v) REPORTS TO LENDERS. Within 15 days after the end of each
month ending after the Closing Date, so long as any Commercial Letter
of Credit shall have been outstanding during such month, each Issuing
Lender shall deliver to each other Lender a report setting forth for
such month the daily aggregate amount available to be drawn under the
Commercial Letters of Credit issued by such Issuing Lender that were
outstanding during such month.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT.
Immediately upon the issuance of each Letter of Credit, each Lender shall
be deemed to, and hereby agrees to, have irrevocably purchased from the
Issuing Lender a participation in such Letter of Credit and any drawings
honored thereunder in an amount equal to such Lender's Pro Rata Share of
the maximum amount which is or at any time may become available to be drawn
thereunder.
3.2 LETTER OF CREDIT FEES.
The Borrower agrees to pay the following amounts with respect to
Letters of Credit issued hereunder:
(i) with respect to each Letter of Credit, (a) a fronting fee,
if any, payable directly to the applicable Issuing Lender for its own
account, equal to the amount specified by written agreement between
the Borrower and such Issuing Lender; and (b) a letter of credit fee,
payable to Agent for the account of Lenders, equal to 2.00% per annum
of the daily amount available to be drawn under such Letter of Credit,
each such fronting fee or letter of credit fee to be payable in
arrears on and to (but excluding) each March 15, June 15, September 15
and December 15 of each year and computed on the basis of a 360-day
year for the actual number of days elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder
(without duplication of the fees payable under clause (i) above),
documentary and processing charges payable directly to the applicable
Issuing Lender for its own account in accordance with such Issuing
Lender's standard schedule for such charges in effect at the time of
such issuance, amendment, transfer or payment, as the case may be.
For purposes of calculating any fees payable under clause (i) of this
subsection 3.2, the daily amount available to be drawn under any Letter of
Credit shall be determined as of the close of business on any date of
determination. Promptly upon receipt by the Agent of any amount described
in clause (i)(b) of this subsection 3.2, the Agent shall distribute to each
Lender its Pro Rata Share of such amount.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to
examine the documents delivered under such Letter of Credit with reasonable
care so as to ascertain whether they appear on their face to be in
accordance with the terms and conditions of such Letter of Credit.
B. REIMBURSEMENT BY THE BORROWER OF AMOUNTS PAID UNDER LETTERS OF
CREDIT. In the event an Issuing Lender has determined to honor a drawing
under a Letter of Credit issued by it, such Issuing Lender shall
immediately notify the Borrower and the Agent, and the Borrower shall
reimburse such Issuing Lender on or before the Business Day immediately
following the date on which such drawing is honored (the ``REIMBURSEMENT
DATE'') in an amount in Dollars and in same day funds equal to the amount
of such honored drawing; PROVIDED that, anything contained in this
Agreement to the contrary notwithstanding, (i) unless the Borrower shall
have notified the Agent and such Issuing Lender prior to 10:00 A.M. (New
York City time) on the date such drawing is honored that Borrower intends
to reimburse such Issuing Lender for the amount of such honored drawing
with funds other than the proceeds of Loans, the Borrower shall be deemed
to have given a timely Notice of Borrowing to the Agent requesting Lenders
to make Loans that are Base Rate Loans on the Reimbursement Date in an
amount in Dollars equal to the amount of such honored drawing and
(ii) subject to satisfaction or waiver of the conditions specified in
subsection 4.2B, the Lenders shall, on the Reimbursement Date, make Loans
that are Base Rate Loans in the amount of such honored drawing, the
proceeds of which shall be applied directly by the Agent to reimburse such
Issuing Lender for the amount of such honored drawing; and PROVIDED FURTHER
that if for any reason proceeds of Loans are not received by such Issuing
Lender on the Reimbursement Date in an amount equal to the amount of such
honored drawing, the Borrower shall reimburse such Issuing Lender, on
demand, in an amount in same day funds equal to the excess of the amount of
such honored drawing over the aggregate amount of such Loans, if any, which
are so received. Nothing in this subsection 3.3B shall be deemed to
relieve any Lender from its obligation to make Loans on the terms and
conditions set forth in this Agreement, and the Borrower shall retain any
and all rights it may have against any Lender resulting from the failure of
such Lender to make such Loans under this subsection 3.3B.
C. PAYMENT BY THE LENDERS OF UNREIMBURSED AMOUNTS PAID UNDER LETTERS
OF CREDIT.
(i) PAYMENT BY THE LENDERS. In the event that the Borrower
shall fail for any reason to reimburse any Issuing Lender as provided
in subsection 3.3B in an amount equal to the amount of any drawing
honored by such Issuing Lender under a Letter of Credit issued by it,
such Issuing Lender shall promptly notify each other Lender of the
unreimbursed amount of such honored drawing and of such other Lender's
respective participation therein based on such Lender's Pro Rata
Share. Each Lender shall make available to such Issuing Lender an
amount equal to its respective participation, in Dollars and in same
day funds, at the office of such Issuing Lender specified in such
notice, not later than 12:00 Noon (New York City time) on the first
business day (under the laws of the jurisdiction in which such office
of such Issuing Lender is located) after the date notified by such
Issuing Lender. In the event that any Lender fails to make available
to such Issuing Lender on such business day the amount of such
Lender's participation in such Letter of Credit as provided in this
subsection 3.3C, such Issuing Lender shall be entitled to recover such
amount on demand from such Lender together with interest thereon at
the Federal Funds Effective Rate for three Business Days and
thereafter at the Base Rate. Nothing in this subsection 3.3C shall be
deemed to prejudice the right of any Lender to recover from any
Issuing Lender any amounts made available by such Lender to such
Issuing Lender pursuant to this subsection 3.3C in the event that it
is determined by the final judgment of a court of competent
jurisdiction that the payment with respect to a Letter of Credit by
such Issuing Lender in respect of which payment was made by such
Lender constituted bad faith or recklessness on the part of such
Issuing Lender.
(ii) DISTRIBUTION TO THE LENDERS OF REIMBURSEMENTS RECEIVED FROM
THE BORROWER. In the event any Issuing Lender shall have been
reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or
any portion of any drawing honored by such Issuing Lender under a
Letter of Credit issued by it, such Issuing Lender shall distribute to
each other Lender which has paid all amounts payable by it under
subsection 3.3C(i) with respect to such honored drawing such other
Lender's proportionate share of all payments subsequently received by
such Issuing Lender from the Borrower in reimbursement of such honored
drawing when such payments are received. Any such distribution shall
be made to a Lender at its primary address set forth below its name on
the appropriate signature page hereof or at such other address as such
Lender may request.
D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT.
(i) PAYMENT OF INTEREST BY THE BORROWER. The Borrower agrees to
pay to each Issuing Lender, with respect to drawings honored under any
Letters of Credit issued by it, interest on the amount paid by such
Issuing Lender in respect of each such honored drawing from the date
such drawing is honored to but excluding the date such amount is
reimbursed by the Borrower (including any such reimbursement out of
the proceeds of Loans pursuant to subsection 3.3B) at a per annum rate
equal to the sum of the Base Rate PLUS 1%. Interest payable pursuant
to this subsection 3.3D(i) shall be computed on the basis of a 360-day
year for the actual number of days elapsed in the period during which
it accrues and shall be payable on demand or, if no demand is made, on
the date on which the related drawing under a Letter of Credit is
reimbursed in full.
(ii) DISTRIBUTION OF INTEREST PAYMENTS BY ISSUING LENDER.
Promptly upon receipt by any Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i) with respect to a drawing honored under
a Letter of Credit issued by it, (a) such Issuing Lender shall
distribute to each other Lender, out of the interest received by such
Issuing Lender in respect of the period from the date such drawing is
honored to but excluding the date on which such Issuing Lender is
reimbursed for the amount of such drawing (including any such
reimbursement out of the proceeds of Loans pursuant to subsection
3.3B), the amount that such other Lender would have been entitled to
receive in respect of the letter of credit fee that would have been
payable in respect of such Letter of Credit for such period pursuant
to subsection 3.2 if no drawing had been honored under such Letter of
Credit, and (b) in the event such Issuing Lender shall have been
reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or
any portion of such honored drawing, such Issuing Lender shall
distribute to each other Lender which has paid all amounts payable by
it under subsection 3.3C(i) with respect to such honored drawing such
other Lender's proportionate share of any interest received by such
Issuing Lender in respect of that portion of such honored drawing so
reimbursed by other Lenders for the period from the date on which such
Issuing Lender was so reimbursed by such other Lender to but excluding
the date on which such portion of such honored drawing is reimbursed
by the Borrower. Any such distribution shall be made to a Lender at
its primary address set forth below its name on the appropriate
signature page hereof or at such other address as such Lender may
request.
3.4 OBLIGATIONS ABSOLUTE.
The obligation of the Borrower to reimburse each Issuing Lender
for drawings honored under the Letters of Credit issued by it and to repay
any Loans made by the Lenders pursuant to subsection 3.3B and the
obligations of Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any Lender may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons
for whom any such transferee may be acting), any Issuing Lender or
other Lender or any other Person or, in the case of a Lender, against
the Borrower, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction
(including any underlying transaction between the Borrower or one of
its Subsidiaries and the beneficiary for which any Letter of Credit
was procured);
(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) payment by the applicable Issuing Lender under any Letter of
Credit against presentation of a draft or other document which does
not substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of CapStar,
the Borrower or any of their respective Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by
any party thereto;
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
PROVIDED, in each case, that payment by the applicable Issuing Lender under
the applicable Letter of Credit shall not have constituted bad faith or
recklessness of such Issuing Lender under the circumstances in question (as
determined by a final judgment of a court of competent jurisdiction).
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, the Borrower hereby agrees to protect, indemnify, pay and
save harmless each Issuing Lender from and against any and all losses,
claims, damages, liabilities, costs or expenses (including the reasonable
fees, charges and disbursements of counsel and the allocated costs and
expenses of internal counsel) which such Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance of any
Letter of Credit by such Issuing Lender, other than as a result of (a) the
bad faith or recklessness of such Issuing Lender as determined by a final
judgment of a court of competent jurisdiction or (b) subject to the
following clause (ii), the wrongful dishonor by such Issuing Lender of a
proper demand for payment made under any Letter of Credit issued by it or
(ii) the failure of such Issuing Lender to honor a drawing under any such
Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions herein called
``GOVERNMENTAL ACTS'').
B. NATURE OF ISSUING LENDERS' DUTIES. As between the Borrower and
any Issuing Lender, the Borrower assumes all risks of the acts and
omissions of, or misuse of the Letters of Credit issued by such Issuing
Lender by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, such Issuing Lender
shall not be responsible for: (i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any
party in connection with the application for and issuance of any such
Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason; (iii) failure of the
beneficiary of any such Letter of Credit to comply fully with any
conditions required in order to draw upon such Letter of Credit;
(iv) errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, telefacsimile, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (v) errors in interpretation
of technical terms; (vi) any loss or delay in the transmission or otherwise
of any document required in order to make a drawing under any such Letter
of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing
under such Letter of Credit; or (viii) any consequences arising from causes
beyond the control of such Issuing Lender, including without limitation any
Governmental Acts, and none of the above shall affect or impair, or prevent
the vesting of, any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth in the first paragraph of this subsection
3.5B, any action taken or omitted by any Issuing Lender under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good faith, shall
not put such Issuing Lender under any resulting liability to the Borrower.
Notwithstanding anything to the contrary contained in this
subsection 3.5, the Borrower shall retain any and all rights it may have
against any Issuing Lender to the extent such liability arises out of the
bad faith or recklessness of such Issuing Lender, as determined by a final
judgment of a court of competent jurisdiction.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
Subject to the provisions of subsection 2.7B (which shall be
controlling with respect to the matters covered thereby), in the event that
any Issuing Lender or Lender shall in good faith determine (which
determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto but shall be made only after consultation
with the Agent) that any law, treaty or governmental rule, regulation or
order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by any Issuing Lender or Lender with any guideline,
request or directive issued or made after the date hereof by any central
bank or other governmental or quasi-governmental authority (whether or not
having the force of law):
(i) subjects such Issuing Lender or Lender (or its applicable
lending or letter of credit office) to any additional Tax (other than
any Tax on the overall net income of such Issuing Lender or Lender)
with respect to the issuing or maintaining of any Letters of Credit or
the purchasing or maintaining of any participations therein or any
other obligations under this Section 3, whether directly or by such
being imposed on or suffered by any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or
similar requirement in respect of any Letters of Credit issued by any
Issuing Lender or participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Issuing Lender or Lender (or its
applicable lending or letter of credit office) regarding this Section
3 or any Letter of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such
Issuing Lender or Lender of agreeing to issue, issuing or maintaining any
Letter of Credit or agreeing to purchase, purchasing or maintaining any
participation therein or to reduce any amount received or receivable by
such Issuing Lender or Lender (or its applicable lending or letter of
credit office) with respect thereto; then, in any case, the Borrower shall
promptly pay to such Issuing Lender or Lender, upon receipt of the
statement referred to in the next sentence, such additional amount or
amounts as may be necessary to compensate such Issuing Lender or Lender for
any such increased cost or reduction in amounts received or receivable
hereunder. Such Issuing Lender or Lender shall deliver to the Borrower a
written statement within 120 days of such Lender obtaining knowledge of the
occurrence of any event resulting in such Lender's right to receive
compensation hereunder, setting forth in reasonable detail the basis for
calculating the additional amounts owed to such Issuing Lender or Lender
under this subsection 3.6, which statement shall be conclusive and binding
upon all parties hereto absent manifest error.
SECTION 4
CONDITIONS PRECEDENT
4.1 CONDITIONS TO EFFECTIVENESS OF COMMITMENTS.
The effectiveness of the Commitments of the Lenders is conditioned
upon the prior or concurrent satisfaction, at the expense of the Borrower,
of the conditions specified in subsection 4.2 and in this subsection 4.1,
in each case as determined by the Agent:
A. CORPORATE DOCUMENTS. Each Loan Party (other than any Partnership
Loan Party or LLC Loan Party) and each corporate general partner of a
Partnership Loan Party shall deliver or cause to be delivered to the Agent
(with sufficient originally executed copies for each Lender and the Agent's
counsel) the following, each unless otherwise noted dated the Closing Date:
(i) to the extent such Loan Party is a party thereto, executed
originals of this Agreement, the Affiliate Guaranty, the CapStar
Guaranty, the Security Agreement, and each other Loan Document to
which it is a party;
(ii) certified copies of its Certificate of Incorporation,
together with a good standing certificate (including verification,
where generally available, of tax good standing) from the Secretary of
State (or similar official) of its jurisdiction of incorporation and
each other state in which a Property owned or leased by such Loan
Party is located), each dated not more than 7 days prior to the
Closing Date;
(iii) copies of its Bylaws, certified as of the Closing Date by
its corporate secretary or an assistant secretary;
(iv) resolutions of its Board of Directors approving and
authorizing (a) the execution, delivery and performance of each Loan
Document to which it is a party and (b) the consummation of the
transactions contemplated hereby and thereby, in each case certified
as of the Closing Date by its corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment; and
(v) signature and incumbency certificates of its officers
executing this Agreement and the other Loan Documents to which it is a
party.
B. PARTNERSHIP AND LLC DOCUMENTS. Each Partnership Loan Party and
each LLC Loan Party, as applicable, shall deliver to the Agent (with
sufficient originally executed copies for each Lender and the Agent's
counsel) the following, each unless otherwise noted dated the Closing Date:
(i) to the extent such Loan Party is a party thereto, executed
originals of this Agreement, the Affiliate Guaranty, the Security
Agreement, a Note in favor of each Lender and each other Loan Document
to which it is a party;
(ii) with respect to each Partnership Loan Party, a conformed
copy of the partnership agreement, certified by each general partner
of such partnership as of the Closing Date as being in full force and
effect without modification or amendment;
(iii) with respect to each LLC Loan Party, a conformed copy of
the limited liability company agreement and each other organizational
document, certified by the manager of such LLC Loan Party as of the
Closing Date as being in full force and effect without modification or
amendment;
(iv) (a) with respect to each Partnership Loan Party, its
Certificate of Limited Partnership, certified by the Secretary of
State (or similar official) of its jurisdiction of formation and a
certificate of existence or good standing, as the case may be, from
the Secretary of State (or similar official) of such jurisdiction,
each dated not more than 7 days prior to the Closing Date, (b) with
respect to each LLC Loan Party, its Articles of Organization or
Certificate of Formation, certified by the Secretary of State (or
similar official) of its jurisdiction of its jurisdiction of
organization, each dated not more than 7 days prior to the Closing
Date, and (c) a good standing certificate or certificate of existence,
as the case may be, from the Secretary of State (or similar official)
of each state or other jurisdiction in which a Property owned or
leased by such entity is located;
(v) all documents of such Partnership Loan Party and its
partners (to the extent required by the applicable organizational
documents) or such LLC Loan Party and its members, as applicable,
approving or authorizing (a) the execution, delivery and performance
of the affiliate Guaranty and any other Loan Documents to which it is
a party, and (b) the consummation of the transactions contemplated
hereby and thereby, each certified as of the Closing Date by the
general partner of such Partnership Loan Party or other Loan Party;
and
(vi) unless otherwise required to be delivered pursuant to
subsection 4.1A(v), signature and incumbency certificate of the
Person(s) executing, on behalf of such partnership or limited
liability company, as applicable, any Loan Documents to which such
Partnership Loan Party or LLC Loan Party is a party.
C. FINANCIAL STATEMENTS; CERTIFICATES. The Borrower shall have
delivered to the Agent an Officers' Certificate of the Chief Executive
Officer or the Chief Financial Officer of the Borrower certifying as to the
following:
(i) the delivery to the Agent of the financial statements
referred to in subsection 5.3 on or before the Closing Date;
(ii) as of the Closing Date, CapStar has a Market Equity
Capitalization of not less than $200,000,000;
(iii) since June 30, 1996, no Material Adverse Effect has
occurred; and
(iv) the delivery to the Agent of a Borrowing Base Certificate
reasonably satisfactory to the Agent, together with a calculation of
the Borrowing Base attached thereto in a form reasonably satisfactory
to the Agent and a Compliance Certificate reasonably satisfactory to
the Agent, together with a calculation testing compliance with
financial and monetary covenants attached thereto in a form reasonably
satisfactory to the Agent, each as of the Closing Date.
D. NO MATERIAL ADVERSE EFFECT. Since June 30, 1996, in the sole
opinion of the Agent, no condition or event has occurred that has had or
could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
E. SECURITY INTERESTS. The Borrower shall have taken or caused to
be taken all such actions as may be necessary or reasonably requested by
the Agent to give the Agent a valid, enforceable and perfected first
priority Lien on or first priority security interest in the Collateral as
of the Closing Date, it being understood by each Lender that perfection
against Persons other than the Borrower of such Lien on the Rents may in
certain jurisdictions require the Agent to have possession of the Rents.
Such actions shall include the following:
(i) the delivery to the Agent of fully executed and acknowledged
counterparts of the Mortgage, the Assignment of Rents and Leases, the
Omnibus Management and Liquor License Agreement, the Security
Agreement, the Trademark Agreement, an assignment of the Atlanta
Documents and all other Security Documents with respect to the Pool A
Properties and the other Collateral as of the Closing Date, and the
delivery of evidence satisfactory to the Agent that counterparts of
the Mortgage, the Assignment of Rents and Leases and all other of such
documents the Agent desires to have recorded have been or will be
recorded in all places necessary or desirable to create and maintain
(a) valid and enforceable first priority Liens on the fee simple or
leasehold interests of the Borrower, as applicable, in the Pool A
Properties in favor of the Agent, as mortgagee (or as beneficiary in
those jurisdictions where the Lien is granted to a trustee for the
benefit of the Agent), (b) valid and enforceable first priority Liens
on the Rents and Leases in favor of the Agent, (c) valid and
enforceable first priority Liens in all fixtures at the Pool A
Properties, in favor of the Agent, as secured party and (d) valid and
enforceable first priority Liens in all other items of Collateral as
of the Closing Date in favor of the Agent;
(ii) (a) the delivery to the Agent for filing pursuant to the
Security Documents of properly executed financing statements under the
Uniform Commercial Code (or any equivalent or similar legislation), or
any other documents required to be filed by other Applicable Laws,
satisfactory in form and substance to the Agent in each jurisdiction
as may be necessary (in the Agent's reasonable judgment) effectively
to perfect and maintain the security interests in the Collateral
created by such Security Documents and (b) the delivery of evidence
that such financing statements or other documents will have been or
will be recorded in all places necessary or desirable, in the
reasonable judgment of the Agent, to create and maintain valid and
enforceable first priority Liens on the Collateral in favor of the
Agent;
(iii) the delivery to the Agent of a title report or commitment
(together with copies of all documents listed therein as exceptions to
title) dated not more than 90 days prior to the Closing Date with
respect to each Pool A Property and pro forma Title Policies dated not
more than 30 days prior to the Closing Date with respect to each such
Pool A Property, each reasonably satisfactory in form and substance to
the Agent;
(iv) the delivery to the Agent of an opinion of counsel in each
state or other jurisdiction in which each Pool A Property is located,
dated the Closing Date, addressed to the Agent and the Lenders and in
form and substance reasonably satisfactory to the Agent;
(v) the delivery to the Agent of the Title Policies or marked
title commitments insuring fee simple or leasehold title to each of
the Pool A Properties vested in the Borrower or the applicable
Subsidiary of the Borrower and insuring the first priority of the
Liens created under the Mortgages in an aggregate amount not less than
$178,942,515 with respect to the Pool A Properties (as such aggregate
amount may be increased after the Closing Date by the Agent in
connection with, and as a condition to the approval of, the
Acquisition of Additional Pool A Properties, including the MBL
Properties, pursuant to subsection 2.9A), in each case subject only to
Permitted Encumbrances, and such other title exceptions as are
satisfactory to the Agent. Such Title Policies shall be reinsured
with title insurance companies acceptable to the Agent in amounts as
required by the Agent subject to facultative reinsurance agreements in
form satisfactory to the Agent. Such Title Policies shall also
contain such endorsements and affirmative insurance provisions as the
Agent may reasonably require and to the extent the same are available
in the applicable jurisdiction, including ``comprehensive''
endorsements, revolving credit endorsements, affirmative insurance
against mechanic's liens, survey exceptions, violations of covenants,
conditions and restrictions, encroachments, gap insurance, contiguity
endorsements, tie-in endorsements, access endorsements, ``Last-
dollar'' endorsements, survey endorsements, contingent loss/first loss
endorsements, variable rate mortgage endorsements, leasehold
endorsement for Pool A Properties that are leaseholds, and any other
endorsements reasonably required by the Agent to address issues raised
by the Agent's due diligence or as a matter of Applicable Law. In
addition, the Borrower shall have paid to the Title Company or to the
appropriate Governmental Authority all expenses and premiums of the
Title Company in connection with the issuance of such Title Policies
or in connection with any Loan hereunder and an amount equal to the
recording and stamp taxes (including mortgage recording, intangible
and similar taxes) payable in connection with recording each Mortgage,
the Assignment of Rents and Leases and the Atlanta Collateral
Assignment in the appropriate county or parish land offices or in
connection with any Loans hereunder;
(vi) the delivery to the Title Company of such certificates and
affidavits as the Title Company may reasonably require in connection
with the issuance of the Title Policies;
(vii) the delivery to the Agent of a Survey with respect to each
of the Pool A Properties, dated or re-dated to within 120 days prior
to the Closing Date, which Surveys shall be reasonably satisfactory in
form and substance to the Agent;
(viii) unless a title insurance zoning endorsement is issued to
the Agent by the Title Company, the delivery to the Agent of a letter,
to the extent generally available, from the applicable Governmental
Authority with respect to each of the Pool A Properties and reasonably
satisfactory to the Agent stating that all Improvements on each such
Property have been constructed and are being used and operated in
material compliance with (a) all applicable zoning, subdivision, local
environmental, building and land use laws, ordinances, rules and
regulations of all Governmental Authorities or quasi-governmental
authorities having jurisdiction with respect to each such Property and
all applicable fire and building maintenance codes, and (b) all
building permits issued in respect of each such Property for work then
being conducted and the certificate of occupancy (if available) for
each such Property;
(ix) the delivery to the Agent pursuant to the Security Agreement
of the stock certificates (which certificates shall be accompanied by
irrevocable undated stock powers duly endorsed in blank and
irrevocable proxies, all satisfactory in form and substance to the
Agent), certificated partnership interests, certificated limited
liability company membership interests, promissory notes (including
the Atlanta Note) and other instruments, (in each case duly endorsed
to the order of the Agent, as secured party), representing the capital
stock, partnership interests, limited liability company membership
interests, promissory notes and other instruments to be pledged on the
Closing Date pursuant to the Security Agreement;
(x) the delivery to the Agent (i) of the Trademark Agreement, in
a form suitable for filing with the United States Trademark and Patent
Office and (ii) of the Trademark Agreement in a form suitable for
filing with the Canadian Trademark Office;
(xi) the delivery to the Agent of Cash Management Letters for
each financial institution at which a Deposit Account is located
pursuant to the Cash Management System, which Cash Management Letters
and the Cash Management System shall be in form and substance
reasonably satisfactory to the Agent; and
(xii) the delivery to the Agent of evidence reasonably
satisfactory to the Agent that all other filings, recordings and other
actions the Agent deems necessary or advisable to establish, perfect
and preserve the Liens granted to the Agent in the Collateral
(including any uncertificated partnership interests or uncertificated
limited liability company membership interests) as of the Closing Date
shall have been made.
F. INSURANCE. The Borrower shall have delivered to the Agent
(i) duplicate originals or true and complete copies of each policy or other
evidence of insurance required by this Agreement evidencing (a) the
issuance of such policies, (b) that the Borrower is not then in default in
the payment of any premium and (c) coverage which meets all of the
requirements set forth in this Agreement; and (ii) an Officers' Certificate
dated the Closing Date to the effect that the insurance coverage required
by this Agreement is in full force and effect and that all monthly premiums
therefor have been paid.
To the extent permitted by law, the Borrower hereby irrevocably
waives, releases and discharges any and all rights of action, demands and
other claims of any kind or nature against the Agent and the Lenders
arising from any failure of the Agent or the Lenders to comply with the
National Flood Insurance Act of 1968 (42 U.S.C. <section><section> 4001, et
seq.), the Flood Disaster Protection Act of 1973 or the National Flood
Insurance Reform Act of 1994, including any failure of the Agent or the
Lenders to provide the Borrower with written notification within ten days
prior to the Closing Date whether any Pool A Property is in a special flood
hazard area or whether federal disaster relief assistance will be available
in the event of flood damage to any Pool A Property.
G. POOL A GROUND LEASES; LANDLORD ESTOPPEL CERTIFICATES. The
Borrower shall have delivered to the Agent executed or conformed, certified
copies of each of the Pool A Ground Leases and all amendments thereto
entered into on or prior to the Closing Date, as listed on SCHEDULE 5.4B
annexed hereto, which Pool A Ground Leases shall be satisfactory in form
and substance to the Agent, in its sole discretion; the Pool A Ground
Leases, as so amended, shall be in full force and effect and no term or
condition thereof shall have been further amended or modified, or waived in
any material respect after the execution thereof; and no Person shall have
failed in any material respect to perform any material obligation or
covenant or satisfy any material condition required by the Pool A Ground
Leases to be performed or complied with on or before the Closing Date. On
or before the Closing Date, the Borrower shall have delivered to the Agent
original counterparts of an estoppel certificate and agreement with respect
to each Pool A Ground Lease, acceptable in form and substance to the Agent,
and duly executed by each lessor under such Pool A Ground Lease.
H. MANAGEMENT AGREEMENTS. The Borrower shall have delivered to the
Agent (i) executed or conformed, certified copies of each of the Management
Agreements and all amendments thereto entered into on or before the Closing
Date, as listed on SCHEDULE 5.4D annexed hereto, which Management
Agreements shall be reasonably satisfactory in form and substance to the
Agent; the Management Agreements, as so amended, shall be in full force and
effect and no term or condition thereof shall have been further amended or
modified, or waived in any material respect after the execution thereof
(other than the waiver of any Management Fee previously due and payable);
and (ii) an Officers' Certificate of the Borrower (a) listing each
operating deficit guaranty and each contract with any owner of a Property
regarding the provision of FF&E at a fixed cost to which any Loan Party is
a party on the Closing Date and (b) attaching copies (certified as true,
correct and complete) of each such guaranty and contract.
I. SERVICING AGREEMENTS. On or before the Closing Date, the
Borrower shall have delivered to the Agent executed or conformed, certified
copies of each of the Servicing Agreements and all amendments thereto
entered into on or before the Closing Date, as listed on SCHEDULE 5.4E
annexed hereto, which Servicing Agreements shall be satisfactory in form
and substance to the Agent, in its sole discretion; the Servicing
Agreements, as so amended, shall be in full force and effect and no term or
condition thereof shall have been further amended or modified, or waived
after the execution thereof; and no Person shall have failed in any
material respect to perform any material obligation or covenant or satisfy
any material condition required by the Servicing Agreements to be performed
or complied with on or before the Closing Date.
J. FRANCHISE AGREEMENTS; FRANCHISOR ESTOPPEL CERTIFICATES. The
Borrower shall have delivered to the Agent executed or conformed, certified
copies of each of the Franchise Agreements and all amendments thereto
entered into on or before the Closing Date, as listed on SCHEDULE 4.1J
annexed hereto, which Franchise Agreements shall be satisfactory in form
and substance to the Agent; the Franchise Agreements, as so amended, shall
be in full force and effect and no term or condition thereof shall have
been further amended or modified, or waived after the execution thereof;
and no Person shall have failed in any material respect to perform any
material obligation or covenant or satisfy any material condition required
by the Franchise Agreements to be performed or complied with on or before
the Closing Date, including, without limitation (but only if the same
constitute a material obligation, covenant or condition), obligations under
property improvement plans and quality control plans required by the
respective franchisors to be performed within specified periods. To the
extent not delivered by the Borrower prior to the Closing Date, on the
Closing Date, the Borrower shall have delivered to the Agent original
counterparts of a franchisor's estoppel certificate and consent agreement
with respect to each Franchise Agreement in respect of the Pool A
Properties, reasonably acceptable in form and substance to the Agent, and
duly executed by each franchisor under such Franchise Agreement.
K. MATERIAL LEASES; TENANT ESTOPPEL CERTIFICATES. The Borrower
shall have delivered to the Agent (i) executed or conformed, certified
copies of each Material Lease with respect to each Property and all
amendments thereto entered into on or before the Closing Date, as listed on
SCHEDULE 4.1K annexed hereto, which Material Leases shall be reasonably
satisfactory in form and substance to the Agent; the Material Leases, as so
amended, shall be in full force and effect and no term or condition thereof
shall have been further amended or modified, or waived after the execution
thereof; and no Person shall have failed in any material respect to perform
any material obligation or covenant or satisfy any material condition
required by the Material Leases to be performed or complied with on or
before the Closing Date; and (ii) original counterparts of estoppel
certificates with respect to each of the Material Leases specified on
SCHEDULE 4.1K, reasonably satisfactory in form and substance to the Agent,
duly executed and delivered by each Tenant party to such Material Lease.
L. ENVIRONMENTAL AUDITS. The Borrower shall have delivered to the
Agent evidence satisfactory to the Agent, in its sole discretion, that
(i) there are no material pending or threatened claims, suits, actions or
proceedings arising out of or relating to the existence of any Hazardous
Materials at, in, on, from, around or under any of the Properties;
(ii) each such Property is in compliance in all material respects with all
applicable Environmental Laws with respect to such Property; and (iii) no
Hazardous Materials exist at, in, on, from, around or under any such
Property, except in compliance in all material respects with applicable
Environmental Laws and all other Hazardous Materials have been removed from
each Property to the extent required by Applicable Law. Such evidence
shall include (a) a comprehensive environmental audit (which shall include
a Phase I environmental audit and, either if recommended or suggested by an
Approved Environmental Consultant or, if not so recommended or suggested,
if determined by the Agent in its sole discretion to be necessary or
desirable after considering factors reasonably related to such
determination, a Phase II environmental audit), satisfactory in form and
substance to the Agent, conducted and certified by an Approved
Environmental Consultant (the Borrower shall certify as of the Closing Date
that, as to any environmental audit delivered by the Borrower prior to the
Closing Date, to the Borrower's knowledge, the information contained in
such audit remains true, correct and complete), (b) a reliance letter from
such Approved Environmental Consultant with respect to each such
environmental audit addressed to the Agent and Lenders, which reliance
letter shall be satisfactory in form and substance to the Agent,
(c) certification that all required approvals from all Governmental
Authorities having jurisdiction with respect to the environmental condition
of the Properties, if any, have been obtained, and (d) such other
environmental reports, inspections and investigations as the Agent shall in
its sole discretion require after considering factors reasonably related to
such determination, prepared, in each instance, by an Approved
Environmental Consultant, which approvals, reports, inspections and
investigations shall be satisfactory in form and substance to the Agent, in
its sole discretion. On or before the Closing Date, the Borrower shall
have delivered to the Agent evidence satisfactory to the Agent, in its sole
discretion, that the Borrower has complied (or has made arrangements to
comply) with the recommendations and suggestions of all environmental
consultant(s) referred to above.
M. ENGINEERING REPORTS. The Borrower shall have delivered to the
Agent (i) a written Engineering Report with respect to each Pool A Property
dated not more than 45 days prior to the Closing Date and prepared by an
Engineer acceptable to the Agent, which Engineering Report shall contain
current repair recommendations for the first five years, and shall in all
other respects be reasonably satisfactory in form and substance to the
Agent; and (ii) a reliance letter from such Engineer with respect to each
such Engineering Report addressed to the Agent and Lenders, which letter
shall be in form and substance reasonably satisfactory to the Agent.
N. APPRAISALS. The Agent shall have received (i) an Appraisal of
each Pool A Property dated not more than 60 days prior to the Closing Date
and prepared by an Appraiser designated by the Agent, which Appraisal shall
be satisfactory in form and substance to the Agent and shall satisfy all
applicable regulatory requirements; and (ii) copies of all appraisals,
market studies, and similar information with respect to each of the Pool A
Properties in the possession or under the control of CapStar or any of its
Subsidiaries.
O. OPINIONS OF THE BORROWER'S COUNSEL; AUDITOR'S LETTER. On the
Closing Date the Borrower shall have delivered to the Agent, its counsel
and the Lenders (i) executed copies of each of the favorable written
opinions of DeCampo, Diamond & Ash and Paul, Weiss, Rifkin, Wharton &
Garrison, respectively, each counsel for the Borrower, which shall be
substantially in the forms of EXHIBIT XV annexed hereto, with such changes
as the Agent may approve and dated the Closing Date; (ii) executed copies
of a letter from the Borrower addressed to KPMG Peat Marwick LLP,
independent accountants for the Borrower, as to such matters as the Agent
and its counsel may reasonably request, satisfactory in form and substance
to the Agent; and (iii) evidence satisfactory to the Agent that the
Borrower has requested such counsel and auditor to deliver such opinions
and letter to the Agent and its counsel and the Lenders.
P. OPINION OF AGENT'S COUNSEL. The Lenders shall have received
executed copies of the favorable written opinion of O'Melveny & Myers LLP,
counsel to the Agent, dated as of the Closing Date.
Q. ORIGINAL ACQUISITION DOCUMENTS. The Borrower shall have
delivered to the Agent executed certified copies of each Original
Acquisition Agreement and all amendments thereto in effect on the Closing
Date.
R. NO ADVERSE LITIGATION. There shall not be pending or, to the
knowledge of the Borrower, threatened, any action, suit, proceeding,
governmental investigation or arbitration against or affecting CapStar or
any of its Subsidiaries or any property of CapStar or any of its
Subsidiaries that has not been disclosed by the Borrower in writing
pursuant to subsection 4.5 prior to the execution of this Agreement and
that is reasonably likely to have a Material Adverse Effect, and there
shall have occurred no development not so disclosed in any such action,
suit, proceeding, governmental investigation or arbitration so disclosed,
that, in either event, in the opinion of the Agent, is reasonably likely to
have a Material Adverse Effect; and no injunction or other restraining
order shall have been issued and no hearing to cause an injunction or other
restraining order to be issued shall be pending or noticed with respect to
any action, suit or proceeding seeking to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a result of,
the transactions contemplated by this Agreement or the making of the Loans
hereunder.
S. FORMATION; EQUITY OFFERING; PAYMENT OF CERTAIN INDEBTEDNESS. The
Borrower shall have delivered to the Agent (i) an executed or conformed,
certified copy of each of the Formation Documents entered into on or prior
to the Closing Date; such documents, as so amended, shall be in full force
and effect and no term or condition thereof shall have been further amended
or modified, or waived after the execution thereof; and no Person shall
have failed in any material respect to perform any material obligation or
covenant or satisfy any material obligation or covenant or satisfy any
material condition required thereunder to be performed or complied with on
or before the Closing Date; (ii) a copy of each agreement, legal opinion,
accountant's letter, certificate and each other document or instrument
delivered in connection with the formation of the Borrower and the
Formation; (iii) an Officers' Certificate of the Borrower certifying that,
as of the Closing Date, each transaction constituting the Formation has
been duly authorized by all necessary action of the Loan Parties, the
applicable current and former Subsidiaries of the Loan Parties and all
other Persons and has been consummated in accordance with, and is
enforceable pursuant to, all Applicable Laws; (iv) evidence satisfactory to
the Agent that the Equity Offering has been consummated pursuant to the
Equity Offering Documents and the gross proceeds thereof were not less than
$110,000,000; (v) executed or conformed, certified copies of each of the
Equity Offering Documents, all satisfactory in form and substance to the
Agent, which documents shall be in full force and effect; and (vi) the
Borrower shall have caused the holders of any Indebtedness that has been
paid by the Borrower to deliver properly executed termination statements
under the Uniform Commercial Code and any and all releases of mortgages and
subordination agreements benefitting such Persons.
T. DEFERRED MAINTENANCE ACCOUNT. On or before the Closing Date, the
Borrower shall have either (i) deposited into the Deferred Maintenance
Account or (ii) established a reserve as provided in the definition of
Total Utilization in an amount not less than $2,263,829 in the aggregate
(which amount is the sum of the subtotals of the amounts in the columns on
SCHEDULE 6.16B annexed hereto entitled ``Immediate Repair of Deferred
Items'' and ``Immediate Repair of ADA Items'', respectively), which amount
shall be allocated among the Mortgaged Properties as provided in
SCHEDULE 6.16B annexed hereto.
U. CONTINGENT OBLIGATIONS. The Agent and the Lenders shall have
received and approved a list of all Contingent Obligations substantially in
the form of SCHEDULE 5.3B annexed hereto.
V. PAYMENT OF FEES AND EXPENSES. The Borrower shall have paid to
the Agent, for distribution (as appropriate) to the Lenders and the Agent,
the fees payable pursuant to subsection 2.3 and the expenses payable
pursuant to subsection 9.2.
W. COMPLETION OF PROCEEDINGS. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated
hereby and all documents incidental thereto not previously found acceptable
by the Agent and its counsel shall be reasonably satisfactory in form and
substance to the Agent and such counsel, and the Agent and such counsel
shall have received all such counterpart originals or certified copies of
such documents as the Agent may reasonably request.
X. VIRGINIA DOCUMENTS. On or before the Closing Date, the Loan
Sellers shall deliver or cause to be delivered to the Lenders the
following:
(i) the original Virginia Note;
(ii) an original, or a copy certified by CapStar as being a true
and complete copy, of each of the other Virginia Documents;
(iii) original endorsement to the Virginia Note in favor of the
Lenders duly executed on behalf of CapStar and in form and substance
reasonably satisfactory to the Agent;
(iv) with respect to the deed of trust securing the Virginia
Loan, an original Assignment of Deed of Trust and Other Recorded Loan
Instruments duly executed and acknowledged on behalf of CapStar, as
assignor, in favor of the Agent, as assignee, and in form and
substance, and in a number of counterparts, reasonably satisfactory to
the Agent;
(v) an original Assignment of Virginia Documents duly executed
by CapStar, as assignor, in favor of the Agent, as assignee, and in
form and substance, and in a number of counterparts, reasonably
satisfactory to the Agent; and
(vi) for each Uniform Commercial Code UCC-1 Financing Statement
included in the Virginia Documents, a Uniform Commercial Code UCC-2 or
UCC-3 Assignment, as the case may be, duly executed on behalf of
CapStar, as assignor, in favor of the Agent, as assignee, and in form
and substance reasonably satisfactory to the Agent.
Y. OTHER DOCUMENTS. Each Loan Party shall have delivered to the
Agent such other information and documents as the Agent may reasonably
request.
4.2 CONDITIONS TO ALL LOANS.
The obligations of the Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. NOTICE OF BORROWING. The Agent shall have received before that
Funding Date, in accordance with the provisions of subsection 2.1C, (i) an
originally executed Notice of Borrowing, in each case signed by the chief
executive officer, the chief financial officer or the treasurer of the
Borrower or by any executive officer of the Borrower designated by any of
the above-described officers on behalf of the Borrower in a writing
delivered to the Agent and (ii) if any of the proceeds of such Loan are to
be applied to the Restoration of any Property, all lien waivers and search
reports then required to be delivered pursuant to subsection 6.11F
concurrently with the Notice of Borrowing.
B. OTHER CONDITIONS PRECEDENT. As of that Funding Date:
(i) the representations and warranties of the Loan Parties as
contained herein and in the other Loan Documents shall be true and
correct in all material respects on and as of that Funding Date to the
same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an
earlier date, in which case such representations and warranties shall
have been true and correct in all material respects on and as of such
earlier date;
(ii) no event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such
Notice of Borrowing that would constitute an Event of Default or a
Potential Event of Default;
(iii) each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement and the other Loan Documents provide shall be performed or
satisfied by it on or before that Funding Date;
(iv) no order, judgment or decree of any arbitrator or
Governmental Authority shall purport to enjoin or restrain any Lender
from making the Loans to be made by it on that Funding Date and the
making of the Loans requested on such Funding Date shall not violate
any law including, without limitation, Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System;
(v) the Borrower shall have purchased all interest rate
protection required as of the Funding Date to be purchased pursuant to
subsection 6.14 by such Funding Date or within 60 days thereafter;
(vi) there shall not be pending or, to the knowledge of the
Borrower, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Borrower of its
Subsidiaries that has not been disclosed by the Borrower in writing
pursuant to subsection 5.5 or 6.1(xii) prior to the making of such
Loans and that would be reasonably likely to have a Material Adverse
Effect, and there shall have occurred no development not so disclosed
in any such action, suit, proceeding, governmental investigation or
arbitration so disclosed, that, in either event, in the opinion of the
Agent, would be reasonably likely to have a Material Adverse Effect;
and no injunction or other restraining order shall have been issued
and no hearing to cause an injunction or other restraining order to be
issued shall be pending or noticed with respect to any action, suit or
proceeding seeking to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated by this Agreement or the making of Loans
hereunder;
(vii) after giving effect to the proposed borrowing, the Borrowing
Base shall not be less than the Total Utilization (excluding the
aggregate principal amount of Pool B Indebtedness outstanding on the
applicable date of determination) and the Borrower shall have
delivered to the Agent the Borrowing Base Certificate for the most
recent calendar month as required pursuant to subsection 6.1(ii);
(viii) after giving effect to the proposed borrowing, the Total
Utilization shall not be greater than the aggregate Commitments then
in effect; and
(ix) since June 30, 1996, no condition or event shall have
occurred that has had or could reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect.
4.3 CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder (whether or not
the applicable Issuing Lender is obligated to issue such Letter of Credit)
is subject to the following conditions precedent:
A. INITIAL LETTERS OF CREDIT. On or before the date of issuance of
the initial Letter of Credit pursuant to this Agreement, the conditions set
forth in subsection 4.1 for the making of the initial Loans shall have been
satisfied.
B. NOTICE OF ISSUANCE OF LETTER OF CREDIT. On or before the date of
issuance of such Letter of Credit, Agent shall have received, in accordance
with the provisions of subsection 3.1B(i), an originally executed Notice of
Issuance of Letter of Credit, in each case signed on behalf of the Borrower
by the chief executive officer, the chief financial officer or the
treasurer of the general partner of the Borrower or by any executive
officer of the general partner of the Borrower designated by any of the
above-described officers on behalf of the general partner of the Borrower
in a writing delivered to Agent, together with all other information
specified in subsection 3.1B(i) and such other documents or information as
the applicable Issuing Lender may reasonably require in connection with the
issuance of such Letter of Credit.
C. OTHER CONDITIONS PRECEDENT. On the date of issuance of such
Letter of Credit, all conditions precedent described in subsection 4.2B
shall be satisfied to the same extent as if the issuance of such Letter of
Credit were the making of a Loan and the date of issuance of such Letter of
Credit were a Funding Date.
SECTION 5
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this
Agreement and to make the Loans, to induce Issuing Lenders to issue Letters
of Credit and to induce other Lenders to purchase participations therein,
each of CapStar and the Borrower represents and warrants to the Agent and
the Lenders that, as of the Closing Date, each Funding Date and as of the
date of issuance of each Letter of Credit, the following statements in this
Section 5 are true, correct and complete on the Closing Date, on the
Closing Date, on each Funding Date and on the date of issuance of each
Letter of Credit, as the case may be.
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Each Loan Party and each of its
Subsidiaries (other than any Partnership Loan Party or any LLC Loan Party)
is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation (which jurisdiction is
set forth on SCHEDULE 5.1A annexed hereto). Each such Loan Party and each
such Subsidiary has the requisite corporate power and authority to own and
operate its properties (including the Properties identified as being owned
or leased by such Loan Party or such Subsidiary on SCHEDULE 5.4A1 and
SCHEDULE 5.4A2 annexed hereto), to carry on its business as now conducted
and as proposed to be conducted, to enter into the Loan Documents and the
Related Documents to which it is a party, to carry out the transactions
contemplated hereby and thereby. Each Partnership Loan Party is a limited
partnership duly formed and validly existing under the laws of its
jurisdiction of organization (which jurisdiction is set forth on SCHEDULE
5.1A) and each Partnership Loan Party has all requisite partnership power
and authority to own and operate its properties (including the Properties
identified on SCHEDULE 5.4A1 and SCHEDULE 5.4A2 as being owned or leased by
such Partnership Loan Party), to carry on its business as now conducted and
proposed to be conducted, to enter into each Loan Document and Related
Document to which it is a party and to carry out the transactions
contemplated hereby and thereby and, in the case of the Borrower, to issue
and pay the Notes. Each LLC Loan Party is a limited liability company duly
formed and validly existing under the laws of its jurisdiction of
organization (which jurisdiction is set forth on SCHEDULE 5.1A) and each
LLC Loan Party has all requisite power and authority to own and operate its
properties (including the Properties identified on SCHEDULE 5.4A1 and
SCHEDULE 5.4A2 as being owned or leased by such LLC Loan Party), to carry
on its business as now conducted and proposed to be conducted, to enter
into each Loan Document and Related Document to which it is a party and to
carry out the transactions contemplated thereby. The books and records of
each Loan Party and each of its Subsidiaries reflect the properties and
assets purported to be owned by such Loan Party or Subsidiary, as
applicable.
B. QUALIFICATION AND GOOD STANDING. Each Loan Party and each of its
Subsidiaries is qualified to do business and in good standing in every
jurisdiction necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has
not had and could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect. The jurisdictions in which
each Loan Party and each of its Subsidiaries owns property or otherwise
conducts business as of the Closing Date are set forth on SCHEDULE 5.1B
annexed hereto.
C. CONDUCT OF BUSINESS. CapStar, the Borrower and each of their
respective Subsidiaries are engaged only in the businesses permitted to be
engaged in by them pursuant to subsection 7.14.
D. SUBSIDIARIES. The Capital Stock of each of the Subsidiaries is
duly and validly authorized and issued and (with the exception of
partnership interests of general partners and except to the extent that the
limited liability company agreements governing the respective limited
liability companies provide otherwise) fully paid and nonassessable. All
of the Subsidiaries of each Loan Party are identified on SCHEDULE 5.1A
annexed hereto, as SCHEDULE 5.1A may be supplemented from time to time in
accordance with the terms of this Agreement. The capital stock of each
Person identified on SCHEDULE 5.1A (as so supplemented) is not Margin
Stock. SCHEDULE 5.1A correctly sets forth the ownership interests in each
Loan Party (other than the Borrower) and each of its Subsidiaries, as
SCHEDULE 5.1A may be supplemented from time to time in accordance with the
terms of this Agreement. Except as set forth on SCHEDULE 5.1A, each
Subsidiary of the Borrower is a Wholly Owned Subsidiary.
E. ACQUISITIONS. Each Loan Party shall have the corporate,
partnership or other applicable power to consummate each Acquisition to be
consummated by it upon the consummation thereof, on the terms set forth in
any applicable Acquisition Agreement or other operative agreement. Upon
the consummation of any Acquisition, such Acquisition shall have been duly
authorized by all necessary action of such Loan Party or Subsidiary, as the
case may be.
F. FORMATION. Each of the transactions constituting the Formation
has been duly authorized by all necessary corporate or partnership action
of CapStar, the Borrower and the applicable current and former Subsidiaries
of the Loan Parties and other Persons. Each of the transactions
constituting the Formation has been consummated in accordance with, and is
effective under, all Applicable Laws.
G. EQUITY OFFERING. Each of the transactions constituting the
issuance, sale and delivery by CapStar of 6,750,000 shares of Common Stock
in the Equity Offering pursuant to the Equity Offering Documents has been
duly authorized by all necessary action of CapStar. Each of such
transactions has been consummated in accordance with, and is effective
under, all Applicable Laws.
5.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and
performance of this Agreement and the other Loan Documents and the Related
Documents to which each Loan Party is a party and the issuance, delivery
and payment of the Notes have been duly authorized by all necessary
corporate, partnership or other action on the part of each Loan Party, as
the case may be.
B. NO CONFLICT. The execution, delivery and performance by each
Loan Party of each Loan Document and each Related Document to which it is a
party and the consummation of the transactions contemplated hereby and
thereby, do not and will not (i) violate any provision of law applicable to
any Loan Party or any of its Subsidiaries, the Certificate of Incorporation
or Bylaws, partnership agreement or other organizational document of any
Loan Party or any of its Subsidiaries or any order, judgment or decree of
any court or other agency of government binding on any Loan Party or any of
its Subsidiaries, (ii) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any Contractual
Obligation of any Loan Party, which default, individually or in the
aggregate, could have a Material Adverse Effect, (iii) result in or require
the creation or imposition of any Lien upon any of the properties or assets
of any Loan Party or any of its Subsidiaries (other than Liens securing the
Obligations), or (iv) require any approval of stockholders or any approval
or consent of any Person under any Contractual Obligation of any Loan Party
the absence of which could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, other than approvals or
consents which will be or have been obtained on or before the Closing Date
(or, in the case of an Acquisition, on or before the date such Acquisition
is consummated) and disclosed in writing to the Agent and the Lenders.
C. GOVERNMENTAL CONSENTS. Except as set forth on SCHEDULE 5.2C
annexed hereto, the execution, delivery and performance by each Loan Party
of each Loan Document and each Related Document to which it is a party and
the consummation of the transactions contemplated hereby and thereby do not
and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any Governmental Authority,
except for (i) such of the foregoing which will have been made or obtained
on or before the Closing Date (or, in the case of any Related Document
relating to an Acquisition, on or before the date of the closing of such
Acquisition) and (ii) the recordings and filings required to perfect the
Liens granted pursuant to the Security Documents. As of the Closing Date,
all consents or approvals from or notices to or filings with any federal,
state, or other (domestic or foreign) regulatory authorities required to be
obtained on or before such date in connection with the documents or
transactions described or referred to in the preceding sentence will have
been accomplished in all material respects in compliance in all material
respects with all Applicable Laws. None of the transactions constituting
the Formation, the issuance, sale and delivery of shares of Common Stock
pursuant to the Equity Offering Documents or the consummation of the other
transactions contemplated by this Agreement, the other Loan Documents and
the Related Documents violates any Applicable Law or regulation in any
respect, which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
D. BINDING OBLIGATION. This Agreement is, and the other Loan
Documents when executed and delivered hereunder will be, the legally valid
and binding obligations of the applicable Loan Parties, enforceable against
the applicable Loan Parties in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights
generally, and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law) and subject
to other qualifications, exceptions and assumptions such as are set forth
in the various legal opinions delivered to the Agent in connection with
such documents or other documents.
E. VALID ISSUANCE OF COMMON STOCK. All the issued and outstanding
Common Stock is duly and validly issued, fully paid and nonassessable.
Except as described in the Equity Prospectus, no other Securities of
CapStar are issued and outstanding, and no Person has any rights to
acquire Securities of CapStar or any partnership interest in the Borrower.
F. NEW YORK STOCK EXCHANGE LISTING. All outstanding shares of each
class of Capital Stock of CapStar shall at all times be duly listed on the
New York Stock Exchange, Inc. CapStar shall timely file all reports
required to be filed by it with the New York Stock Exchange, Inc. and the
Securities and Exchange Commission.
G. RELATED DOCUMENTS; REPRESENTATIONS AND WARRANTIES IN OTHER LOAN
DOCUMENTS. Each Related Document to which any Loan Party or any of its
Subsidiaries is a party is in full force and effect, except where any
failure to be in full force and effect could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, and no
term or condition thereof has been amended or modified in any material
respect except as in accordance with this Agreement. Each Related Document
is the legally valid and binding obligation of such parties, enforceable
against such parties in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally, and by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or law), except where any failure to
be enforceable could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. Each Loan Party has delivered to
the Agent complete and correct copies of all Related Documents to which
such Loan Party or any of its Subsidiaries is a party (including in each
case all exhibits and schedules thereto), as amended, modified or waived to
date, and of all material notices or other material writings delivered to
or by such Loan Party or such Subsidiary in connection therewith, in each
case to the extent that such documents are in the possession of, or may be
retrieved from storage by, such Loan Party or such Subsidiary.
5.3 FINANCIAL CONDITION; CONTINGENT OBLIGATIONS.
A. FINANCIAL CONDITION. The Borrower has heretofore delivered to
the Agent, at the Agent's request, the following financial statements and
information: (i) the audited consolidated balance sheet of CapStar and its
Subsidiaries as at June 30, 1996 and the related consolidated statements of
income, stockholders' equity and cash flows of CapStar and its Subsidiaries
for the 12 months then ended, (ii) the unaudited statements of Property
Gross Revenues and Operating Expenses for each of the Pool A Properties for
the calendar year ended December 31, 1993, December 31, 1994 and
December 31, 1995, respectively, and (iii) the consolidated financial
statements of CapStar and its Subsidiaries required to be delivered to the
Agent pursuant to subsections 6.1(i), (ii) and (iv). The statements
referred to in clause (i) of the preceding sentence were prepared in
conformity with GAAP and fairly present, in all material respects, the
consolidated financial position of CapStar and its Subsidiaries as at the
date thereof and the consolidated results of operations of CapStar and its
Subsidiaries for the period then ended, subject to changes resulting from
audit and normal year end adjustments and there are no material differences
between such consolidated financial position and consolidated results of
operations of CapStar and its Subsidiaries as presented in such
consolidated financial statements and the consolidated financial position
and consolidated results of operations of the Borrower and its Subsidiaries
as at the date of such consolidated financial statements and for the period
then ended. CapStar and its Subsidiaries do not (and will not following
the initial extension of credit hereunder) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual
forward or long-term commitment that is not reflected in the foregoing
financial statements, the notes thereto or SCHEDULE 5.3B annexed hereto and
which in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries.
B. CONTINGENT OBLIGATIONS. On the Closing Date, the Loan Parties
and their respective Subsidiaries will not be directly or indirectly liable
with respect to any Contingent Obligations other than as set forth on
SCHEDULE 5.3B annexed hereto. SCHEDULE 5.3B sets forth all Investments
made by the Loan Parties and their respective Subsidiaries and all
Guaranties with respect to which the Loan Parties and their respective
Subsidiaries are liable as of the Closing Date, including all such
Investments and Guaranties that would be subject to subsections 7.3 and 7.4
if the same were made or incurred on or after the Closing Date.
5.4 PROPERTIES; AGREEMENTS; LICENSES.
A. TITLE TO PROPERTIES; LIENS. Each of SCHEDULE 5.4A1 and SCHEDULE
5.4A2 correctly sets forth the interest of each Loan Party and each of its
Subsidiaries in each of the Pool A Properties and Pool B Properties,
respectively. There are no outstanding options, rights of first refusal,
rights of first offer or similar rights to purchase or otherwise acquire
such fee interest or leasehold interest, as the case may be, in any such
Property, other than options and rights owned by Loan Party or Subsidiary
thereof, as applicable. Such Loan Party or Subsidiary thereof, as
applicable, has good and marketable fee simple title to, or a valid
leasehold interest in, the Properties and good title to the remainder of
the Collateral purported to be owned by it, free and clear of all Liens, in
each case except Permitted Encumbrances and Liens permitted pursuant to
subsection 7.2A. All material fixtures, furnishings, attachments and
equipment necessary for the operation, use and occupancy of each such
Property have been installed or incorporated into such Property and each
Loan Party or Subsidiary thereof, as applicable, is the sole owner of all
of the same, free and clear of all chattel mortgages, conditional vendor's
liens and other liens, and security interests other than Permitted
Encumbrances and Liens permitted pursuant to subsection 7.2A. Except as
heretofore disclosed in writing by the Borrower to the Agent, no tax liens
have been filed against the Borrower or any of its Subsidiaries and/or any
of their respective properties, including any Property, other than Liens
for non-delinquent real property taxes.
B. POOL A GROUND LEASES. Each of the Pool A Ground Leases and all
amendments thereto are listed on SCHEDULE 5.4B annexed hereto. The Pool A
Ground Leases, as so amended, are in full force and effect and no term or
condition thereof will have been further amended or modified, or waived
after the execution thereof except in accordance with this Agreement; and
no Person will have failed in any material respect to perform any material
obligation or covenant or satisfy any condition required by the Pool A
Ground Leases to be performed or complied with.
C. POOL B DOCUMENTS. Each of the Pool B Documents and all
amendments thereto are listed on SCHEDULE 5.4C annexed hereto. Such
documents, as so amended, are in full force and effect and no term or
condition thereof have been amended or modified, or waived after the
execution thereof except in accordance with this Agreement, and no Person
will have failed in any respect to perform any obligation or covenant or
satisfy any condition required thereunder to be performed or complied with,
except where failure to so comply will not then have had and could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
D. MANAGEMENT AGREEMENTS. Each of the Management Agreements and all
amendments thereto that have been or will be entered into on or before the
Closing Date are listed on SCHEDULE 5.4D annexed hereto. As of each
applicable date of determination after the Management Agreement
Effectiveness Date, the Material Management Agreements, as so amended, are
in full force and effect and no term or condition thereof has been further
amended or modified, or waived after the execution thereof except in
accordance with this Agreement; and no Person will have failed in any
respect to perform any obligation or covenant or satisfy any condition
required by the Management Agreements to be performed or complied with,
except where failure to so comply will not then have had and could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
E. SERVICING AGREEMENTS. The Property Servicing Agreement with
respect to each Property and, if a Liquor License exists with respect to
such Property, the Liquor Operation Service Agreement with respect to such
Property, in each case with all amendments thereto, are listed on
SCHEDULE 5.4E annexed hereto. The Servicing Agreements, as so amended, are
in full force and effect and no term or condition thereof has been further
amended or modified, or waived after the execution thereof except in
accordance with this Agreement; and no Person will have failed in any
respect to perform any obligation or covenant or satisfy any condition
required by the Servicing Agreements to be performed or complied with,
except where failure to so comply will not then have had and could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
F. FRANCHISE AGREEMENTS. Each of the franchise agreements and all
amendments thereto are listed on SCHEDULE 4.1J annexed hereto. The
Franchise Agreements, as so amended, are in full force and effect and no
term or condition thereof have been further amended or modified, or waived
after the execution thereof except in accordance with this Agreement; and
no Person will have failed in any respect to perform any obligation or
covenant or satisfy any condition required by the Franchise Agreements to
be performed or complied with, except where failure to so comply will not
then have had and could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
G. MATERIAL LEASES. Each Material Lease with respect to each
Property and all amendments thereto that have been or shall be entered into
on or before the Closing Date are listed on SCHEDULE 4.1K annexed hereto.
The Material Leases, as so amended, shall be in full force and effect and
no term or condition thereof has been further amended or modified, or
waived after the execution thereof except in accordance with this
Agreement; and no Person will have failed in any respect to perform any
obligation or covenant or satisfy any condition required by the Material
Leases to be performed or complied with, except where failure to so comply
will not then have had and could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
H. LIQUOR LICENSES. Each Liquor License issued in connection with
each Property is set forth on SCHEDULE 5.4H annexed hereto, each such
Liquor License is validly issued and in full force and effect and the
holder of each such Liquor License is a party to the Omnibus Management and
Liquor License Agreement. The holder of each Liquor License has the legal
right to utilize each such Liquor License in connection with the operation
of any restaurant, bar or other alcoholic beverage service located at the
applicable Property. All cash and other revenues and receipts from the
operation of any owner of a Liquor License of an alcoholic beverage service
at any Property are collected either by the licensee thereof or the
Borrower or the applicable Loan Party owning the Property and are then
deposited directly into Deposit Accounts subject to the Cash Management
System.
5.5 LITIGATION; ADVERSE FACTS.
Except as set forth in SCHEDULE 5.5 annexed hereto, as amended or
supplemented from time to time (which amendment or supplement shall be
reasonably satisfactory to the Agent), there is no action, suit,
proceeding, arbitration or governmental investigation (whether or not
purportedly on behalf of CapStar or any of its Subsidiaries) at law or in
equity or before or by any Governmental Authority, or to the knowledge of
CapStar and the Borrower, changes to Applicable Law, pending or, to the
knowledge of CapStar and the Borrower, threatened against or affecting any
Loan Party or any of its Subsidiaries, any Property or any other property
of CapStar or any of its Subsidiaries that has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material
Adverse Effect. No Loan Party nor any of its Subsidiaries is (i) in
violation in any material respect of any Applicable Law or (ii) subject to
or in default with respect to any Applicable Law in either case that has
had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. To the knowledge of CapStar and the
Borrower, there are no pending or threatened actions, suits or proceedings
to revoke, attack, invalidate, rescind or modify the zoning affecting any
Property or any Authorizations heretofore issued with respect to any
Property or asserting that such Authorizations or the zoning affecting any
Property or any other property of any Loan Party or any of its Subsidiaries
do not permit the continued use of such Property or property as
contemplated by the Loan Documents. Except as set forth on SCHEDULE 5.5,
to the knowledge of CapStar and the Borrower, no Person has asserted any
claimed violation of Applicable Laws arising from the operation, use or
occupancy of the Properties which has not been cured which has had, or
could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
5.6 TAXES.
A. PAYMENT OF TAXES. Except to the extent permitted by
subsection 6.4 and as set forth on the financial statements delivered
pursuant to subsections 4.1C and 5.3, all federal, state and material local
Tax returns and reports relating to any Loan Party or any of its
Subsidiaries or the Properties required to be filed have been timely filed,
and all material Taxes, Impositions, assessments, fees and other
governmental charges upon any Loan Party or any of its Subsidiaries or upon
the Properties which are due and payable have been paid prior to
delinquency. Neither CapStar nor the Borrower knows of any proposed Tax
assessment against any Loan Party or any of its Subsidiaries or the
Properties that could reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect. Neither any Loan Party nor
any of its Subsidiaries (i) has executed or filed with the Internal Revenue
Service or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Taxes, assessments, fees or other governmental charges or
(ii) has any obligation under any written Tax sharing agreement or
agreement regarding payments in lieu of Taxes (other than obligations
pursuant to partnership agreements to make distributions of cash for the
payment of taxes).
B. CLASSIFICATION AS A PARTNERSHIP. Each of the Loan Parties that
is a Partnership Loan Party or LLC Loan Party is properly classified as a
partnership for federal income tax purposes.
5.7 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.
No Loan Party nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any Contractual Obligation, and no
condition exists that, with the giving of notice or the lapse of time or
both, would constitute such a default, except where the consequences,
direct or indirect, of such default or defaults, if any, could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Except as disclosed on SCHEDULE 5.7 annexed
hereto, no Loan Party nor any of its Subsidiaries is a party to or
otherwise subject to any agreement or instrument (other than the Loan
Documents), any charge or other internal restriction or any Contractual
Obligation which by its terms or effect (i) prohibits or restricts such
Loan Party or Subsidiary from acquiring, loaning or disposing of any
Property or other asset, or any interest therein, or acquiring or entering
into, or providing any services under any Management Agreement or other
management agreement or (ii) otherwise restricts the conduct by such Loan
Party or any of its Subsidiaries of any business, except in each case where
the consequences, direct or indirect, of any violation thereof could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Except as disclosed on SCHEDULE 5.7, no Loan
Party nor any of its Subsidiaries is a party to or is otherwise subject to
any agreement or instrument, any charter or other internal restriction or
any Contractual Obligation which has had, or could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse
Effect.
5.8 GOVERNMENTAL REGULATION; SECURITIES ACTIVITIES.
No Loan Party nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power
Act, the Interstate Commerce Act or the Investment Company Act of 1940 or
under any other federal or state statute or regulation which could limit
its ability to incur Indebtedness or which could otherwise render all or
any portion of the Obligations unenforceable. No Loan Party nor any of its
Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or
carrying any Margin Stock.
5.9 EMPLOYEE BENEFIT PLANS.
A. ERISA. Each Loan Party, each of its Subsidiaries and each of
their respective ERISA Affiliates are in compliance in all material
respects with all applicable provisions and requirements of ERISA and the
regulations and published interpretations thereunder with respect to each
Employee Benefit Plan, and have performed in all material respects their
respective obligations under each Employee Benefit Plan. The sponsor of
each Employee Benefit Plan (other than a Multiemployer Plan) which is
intended to qualify under Section 401(a) of the Internal Revenue Code has
received a determination letter from the Internal Revenue Service
concluding that such Employee Benefit Plan is so qualified, or has timely
filed (or will timely file) an application for a determination letter with
the IRS for such employee benefit plan and has not received an unfavorable
determination, and to the knowledge of each Loan Party, each of its
Subsidiaries and each of their respective ERISA Affiliates, no event has
occurred, amendment been adopted or action been taken that would cause such
Employee Benefit Plan to lose its qualified status.
B. ERISA EVENT. With respect to each Employee Benefit Plan, other
than a Multiemployer Plan, no ERISA Event has occurred or is reasonably
expected to occur. With respect to each Multiemployer Plan, to the
knowledge of each Loan Party, no ERISA Event has occurred or is reasonably
expected to occur.
C. UNFUNDED BENEFIT LIABILITIES. As of the most recent valuation
date for any Pension Plan, the accumulated benefit obligation (calculated
using reasonable actuarial assumptions employed by the Borrower's actuary
for funding purposes) individually for any Pension Plan, or in the
aggregate for all Pension Plans, does not exceed the assets of all such
Pension Plans by more than $5,000,000 (excluding for purposes of such
computation any Pension Plans with respect to which assets exceed benefit
obligations).
D. POTENTIAL WITHDRAWAL LIABILITY. As of the most recent valuation
date for each Multiemployer Plan for which the actuarial report is
available, the potential current liability of the Loan Parties, their
Subsidiaries and their respective ERISA Affiliates for a complete
withdrawal from such Multiemployer Plan (within the meaning of Section 4203
of ERISA), when aggregated with such potential current liability for a
complete withdrawal from all Multiemployer Plans, based on information
available pursuant to Section 4221(e) of ERISA, does not exceed $5,000,000.
5.10 CERTAIN FEES.
No broker's or finder's fee or commission will be payable by any Loan
Party or any of its Subsidiaries with respect to this Agreement or any of
the transactions contemplated hereby (other than the fees payable pursuant
to this Agreement), and the Borrower hereby indemnifies the Agent and the
Lenders against, and agrees that it will hold the Agent and the Lenders
harmless from, any claim, demand or liability for any such broker's or
finder's fees or commissions payable by the Borrower alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in
connection with any such claim, demand or liability.
5.11 SOLVENCY.
As of the date of this Agreement, and after giving effect to the
consummation of the other transactions contemplated by this Agreement and
the other Loan Documents, as of the Closing Date, with respect to each Loan
Party and each of its Subsidiaries, (i) (a) the then fair saleable value of
the property of such Person (including, without limitation, any rights to
contribution from the other Loan Parties under the Loan Documents) is
(y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such person;
(b) such Person's capital is (or will be, as the case may be), not
unreasonably small in relation to its business or any contemplated or
undertaken transaction; and (c) such Person does not intend to incur, or
believe (nor should it reasonably believe) that it will incur, debts beyond
its ability to pay such debts as they become due; and (ii) such Person is
(or will be, as the case may be), ``solvent'' within the meaning given that
term and similar terms under Applicable Laws relating to fraudulent
transfers and conveyances. For purposes of clause (i) of the preceding
sentence, the amount of any contingent liability at any time shall be
computed as the amount that, in light of all of the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
5.12 DISCLOSURE.
No representation or warranty of any Loan Party contained in this
Agreement, the other Loan Documents and the Related Documents to which it
is a party or in any other document, certificate or written statement
furnished to the Agent or the Lenders by or on behalf of any Loan Party for
use in connection with the transactions contemplated by the Loan Documents
and the Related Documents contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact (known to
such Loan Party, in the case of any document not furnished by it) necessary
in order to make the statements contained herein or therein not misleading
in light of the circumstances in which the same were made or will be made,
as the case may be. The projections and pro forma financial information
contained in such materials are based or will be based upon good faith
estimates and assumptions believed to be reasonable at the time made, it
being recognized by the Agent and the Lenders that such projections as to
future events are not to be viewed as facts and that actual results during
the period or periods covered by any such projections may differ materially
from the projected results. There is no fact known to CapStar or the
Borrower (other than matters of a general economic nature) that has had, or
could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect and that has not been disclosed in any
of the Loan Documents and the Related Documents to which any Loan Party is
a party as of the date hereof or in such other documents, certificates and
statements furnished to the Lenders for use in connection with the
transactions contemplated hereby.
5.13 LIENS ON THE COLLATERAL.
A. GENERAL. Except as expressly provided in the legal opinions
delivered pursuant to subsection 4.1O, the provisions of this Agreement and
the Security Documents are effective to create and maintain, upon proper
filing or recording or taking of possession, as applicable, in favor of the
Agent on behalf of the Lenders valid and legally enforceable Liens on all
of the Pool A Properties and all of the remainder of the Collateral and,
when all necessary and appropriate recordings and filings have been
effected in all necessary and appropriate public offices, and payment is
made of any applicable mortgage recording, intangible and/or similar taxes,
this Agreement and the Security Documents will constitute perfected Liens
on all of such Properties and all of the remainder of the Collateral prior
and superior to all other Liens except Liens permitted pursuant to
subsection 7.2; PROVIDED, HOWEVER, that the perfection against Persons
other than the Borrower of such a Lien on the Rents in respect of such
Properties may in certain jurisdictions require the Agent to have
possession of such Rents and/or control of such Properties.
B. MORTGAGES. Each Mortgage upon execution and delivery of such
Mortgage by the applicable Loan Party will be a valid and enforceable first
priority Lien on the Pool A Property that such Mortgage purports to
encumber, and such Mortgage, when such Mortgage is recorded in the real
property records of the county or parish in which such Property encumbered
by such Mortgage is located and upon payment of any applicable mortgage
recording, intangible and/or similar taxes, will be a perfected, valid and
enforceable first priority Lien on such Property in favor of the Agent,
which Property will then be free and clear of all Liens having priority
over the first Lien of such Mortgage, except for Permitted Encumbrances.
C. ASSIGNMENTS OF RENTS AND LEASES. Except as expressly provided
in the legal opinions delivered pursuant to subsection 4.1O, each
Assignment of Rents and Leases, upon execution and recordation of such
Assignment of Rents and Leases in the real property records of the county
or parish in which the Pool A Property affected by such Assignment of Rents
and Leases is located and upon payment of any applicable recording or
intangible taxes, will be, as to each Pool A Property, a perfected, valid
and enforceable first priority present assignment of or Lien on the Leases
affecting such Property and of the Rents of and from such Property, which
Pool A Properties will then otherwise be free and clear of all Liens having
priority over the Assignment of Rents and Leases, except for Permitted
Encumbrances. As of the Closing Date, the Borrower represents that upon
recordation of each Assignment of Rents and Leases the Agent has taken all
actions necessary to obtain, and as of the Closing Date the Agent has, a
valid and perfected first priority (or, to the extent described in the
immediately preceding sentence, second priority) assignment of or Lien on
the Rents from the Pool A Properties and of all security for the Leases
affecting such Properties, including cash or securities deposited as
security under such Leases subject to the prior right of the Tenants making
such deposits; PROVIDED, HOWEVER, that the perfection against Persons other
than the Borrower of such a Lien on the Rents in respect of such Properties
may in certain jurisdictions require the Agent to have possession of such
Rents and/or control of such Properties.
D. ATLANTA DOCUMENTS. The Atlanta Mortgage is a perfected, valid
and enforceable first priority Lien on the Atlanta Airport Property and the
Atlanta Airport Property is free and clear of all Liens having priority
over the first Lien of such Mortgage, except for Permitted Encumbrances.
The aggregate principal amount of the Atlanta Note as of the Closing Date
is $23,609,456 and the obligor on the Atlanta Note has no defenses to
payment, counterclaims with respect thereto or any right to set-off against
any payment due thereunder. The Atlanta Documents represent the entire
agreement between the Atlanta Airport Sub and the Borrower with respect to
the loan evidenced and secured thereby. The Borrower is the present holder
of the lender's interest in the Atlanta Documents and has all right, power
and authority to grant consents and to otherwise act as the lender
thereunder, subject to the terms and conditions thereof. The maturity date
of the Atlanta Note is August 1, 1999. No event has occurred and no
condition exists that constitutes, or that with the giving of notice or the
lapse of time or both would constitute, a material default under the
Atlanta Note, the Atlanta Mortgage or any of the other Atlanta Documents by
any party thereto.
E. MECHANICS' LIENS. Other than with respect to a Property
currently subject to a Renovation or Restoration, and except as bonded or
contested in accordance with the provisions of subsection 6.9 or as insured
over by Title Policies that are then in effect pursuant to subsection 4.1E,
no mechanic's liens have been filed against any Property.
F. FILINGS AND RECORDINGS. All filings (including all financing
statements and all assignments of financing statements under the Uniform
Commercial Code) have been delivered to the Agent for filing in each public
office in which such filings and recordings are required or advisable to
perfect the Liens on each of the Pool A Properties and the other Collateral
granted by the Loan Parties pursuant to the Security Documents and, except
for the filing of continuation statements with respect to such financing
statements as may be required or advisable to be filed at periodic
intervals, no periodic refiling or periodic recording is presently required
to protect and preserve such Liens and security interests.
5.14 ZONING; AUTHORIZATIONS.
A. ZONING. Except as set forth on SCHEDULE 5.14A annexed hereto,
the use and operation by each Loan Party or any of its Subsidiaries, as
applicable, of each Property as a commercial hotel with related uses,
separate and apart from any other properties, constitutes a legal use under
applicable zoning regulations (as the same may be modified by special use
permits or the granting of variances) and complies in all material respects
with all Applicable Laws and all applicable Insurance Requirements, and
does not violate any Authorizations or other material approvals, material
restrictions of record or any material agreement affecting any Property (or
any portion thereof) to which such Loan Party or such Subsidiary is a party
or by which such Loan Party, such Subsidiary or such Property (or portion
thereof) is bound, except for violations and failures to comply which could
not reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect. Except as set forth on the pro
forma Title Policies or the Surveys delivered pursuant to
subsections 4.1E(iii) and 4.1E(vii), respectively, neither the zoning nor
any right of access to or use of any Property is to any extent dependent
upon or related to any real property other than such Property.
B. AUTHORIZATIONS. There have been issued in respect of each
Property all Authorizations necessary to own, operate, use and occupy such
Property in the manner operated by the Loan Parties and their respective
Subsidiaries, and their respective predecessors in interest, as of the
Closing Date and contemplated by the Loan Parties and their respective
Subsidiaries to be operated on and after the Formation Date (including any
required permits relating to Hazardous Materials). CapStar and the
Borrower have no knowledge that any Authorization necessary or required to
own, operate, use and occupy any Property in the manner currently operated
by the Tenants under any Material Lease and contemplated to be operated by
the Tenants on and after the Closing Date (including any required permits
relating to Hazardous Materials) has not been issued and is not in full
force and effect, other than any such Authorizations which, if not
obtained, could not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect. No Loan Party nor any of its
Subsidiaries nor, to the knowledge of CapStar and the Borrower, any prior
owner thereof, has received any notice of violation or revocation thereof
except for those which could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
5.15 PHYSICAL CONDITION; ENCROACHMENT; CAPITAL EXPENDITURES.
A. PHYSICAL CONDITION; ENCROACHMENT. Except as disclosed on the
Engineering Reports delivered pursuant to subsection 2.9A, 2.9B or 4.1L and
the property improvement plans delivered pursuant to 4.1J, each Property is
free of material structural defects and is in good repair (normal wear and
tear excepted) and all building systems contained therein and all other
material items of Collateral are in good working order in all material
respects subject to ordinary wear and tear, except as disclosed in the
Engineering Reports, and is free and clear of any damage that would affect
materially and adversely the value of such Property or the use of such
Property for its intended purposes. To the knowledge of CapStar and the
Borrower, other than as described in the Title Policy and in any Survey, no
Improvement at any Property encroaches upon any building line, setback
line, side yard line or any recorded or visible easement.
B. CAPITAL EXPENDITURES. SCHEDULE 5.15B annexed hereto, as
supplemented from time to time by a written notice delivered to the Agent,
sets forth a complete and accurate list of the capital expenditure or
similar reserves required in respect of any Property pursuant to a Ground
Lease, any agreement pursuant to which any of the Loan Parties and their
respective Subsidiaries shall have incurred or may incur any Indebtedness
or any other agreement, instrument or other document, other than the Loan
Documents.
5.16 INSURANCE.
All insurance required to be maintained by the Loan Parties and their
respective Subsidiaries pursuant to this Agreement or any other Loan
Document is in full force and effect in accordance with the terms thereof.
As to each Property located in an area identified by the Federal Emergency
Management Agency as having special flood hazards, if flood insurance is
available, a flood insurance policy is in effect. All premiums have been
paid with respect to each insurance policy required to be maintained by
CapStar and its Subsidiaries pursuant to this Agreement or any other Loan
Document. SCHEDULE 5.16 annexed hereto contains a complete and accurate
description of all policies of insurance that will be in effect as of the
Closing Date.
5.17 LEASES.
There is no default or event which with notice or lapse of time or
both would constitute a default under any of the provisions of any Material
Lease affecting any Property that has had, or could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse
Effect. No litigation is currently pending or has been threatened by any
Tenant in connection with any Material Lease affecting any Property that
has had, or could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. All Material Leases and other
Leases material to the operation of the Properties as hotels are in full
force and effect, except to the extent such failure could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect.
5.18 ENVIRONMENTAL REPORTS; ENGINEERING REPORTS; APPRAISALS; MARKET
STUDIES.
The Borrower has delivered to the Agent and the Lenders correct and
complete copies of all environmental audits, engineering reports,
appraisals and market studies with respect to each Property that any Loan
Party or any of its Subsidiaries has in its possession.
5.19 NO CONDEMNATION OR CASUALTY.
No condemnation or other like proceedings (including relocation of any
roadways abutting any Property or change in grade of such roadways or
denial of access to any Property) that has had, or could reasonably be
expected to result in, a Material Adverse Effect, are pending and served
nor, to the knowledge of CapStar and the Borrower, threatened against any
Property in any manner whatsoever. No casualty has occurred to any
Property that has had or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
5.20 UTILITIES AND ACCESS.
To the extent necessary for the full utilization of each Pool A
Property in accordance with its current use, telephone services, gas,
steam, electric power, storm sewers, sanitary sewers and water facilities
and all other utility services are available to each Pool A Property, are
adequate to serve each such Property, exist at the boundaries of the Land
and are not subject to any conditions, other than normal charges to the
utility supplier, which would limit the use of such utilities. All streets
and easements necessary for the occupancy and operation of each Pool A
Property are available to the boundaries of the Land. All necessary
rights-of-way for all roads, which are sufficient to permit each Pool A
Property to be utilized fully for its current use, have been completed and
are serviceable, and, to the knowledge of CapStar and the Borrower, all
public rights-of-way through or adjacent to the Pool A Properties have been
acquired and dedicated and accepted for maintenance and public use by the
applicable Governmental Authorities.
5.21 INTELLECTUAL PROPERTY.
A. OWNERSHIP; IP LICENSE AGREEMENTS. The Loan Parties and their
respective Subsidiaries own, or are licensed to use or otherwise have the
lawful right to use, the Intellectual Property. Except as set forth on
SCHEDULE 5.21A annexed hereto, all such Intellectual Property (other than
rights under Franchise Agreements) is fully protected and duly and properly
registered, filed or issued in the appropriate office and jurisdictions for
such registrations, filing or issuances, except where the lack of the
lawful right to use such Intellectual Property could not reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect, and all registered Intellectual Property and all pending
applications and the jurisdictions in which such Intellectual Property is
registered or will be registered on or before the Closing Date, and in each
case the Loan Party holding rights therein, are identified in
SCHEDULE 5.21A annexed hereto. Each of the license agreements (together
with any such agreements entered into after the Closing Date, the ``IP
LICENSE AGREEMENTS''), other than the Franchise Agreements, pursuant to
which any Loan Party or any of its Subsidiaries has rights or will have
rights on or before the Closing Date to use any material Intellectual
Property as of the Closing Date is identified in SCHEDULE 5.21A. Each Loan
Party and each of its Subsidiaries is in compliance with the material terms
of each IP License Agreement to which it is a party and each such IP
License Agreement is in full force and effect, except where the failure to
be in compliance or the failure to be in full force and effect (i) has not
had and could not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect or (ii) result in an Event of
Default or Potential Event of Default hereunder.
B. NO ADVERSE CLAIMS. (i) No claim has been asserted with respect
to the use of any such Intellectual Property by the Loan Parties and their
respective Subsidiaries or, to the knowledge of CapStar or the Borrower, by
any other Person challenging or questioning the validity or effectiveness
of any such Intellectual Property, and neither CapStar nor the Borrower
knows of any valid basis for any such claim which, in either case, has had
or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect; and (ii) the use of such Intellectual
Property by each Loan Party and each of its Subsidiaries does not infringe
on the rights of any Person, subject to such claims and infringements as do
not, in the aggregate, give rise to any liability on the part of any Loan
Party or any of its Subsidiaries that has had or could reasonably be
expected to have, either individually or in the aggregate, a Material
Adverse Effect. The consummation of the transactions contemplated by this
Agreement will not in any manner or to any extent impair the ownership of
(or the license to use, as the case may be) any of such Intellectual
Property by any Loan Party or any of its Subsidiaries.
5.22 WETLANDS.
Except as disclosed on SCHEDULE 5.22 annexed hereto, none of the
Improvements on any Property are constructed on land designated by any
Governmental Authority having land use jurisdiction as wetlands.
5.23 CASH MANAGEMENT SYSTEM.
The summary of the Cash Management System attached hereto as
SCHEDULE 5.23 is accurate and complete in all material respects and does
not omit to state any material fact necessary to make the statements set
forth therein not misleading. No Loan Party nor any of its Subsidiaries
owns any Deposit Account which is not described in SCHEDULE 5.23 or
otherwise permitted pursuant to subsection 6.15. After the Closing Date,
there will be no change to the Cash Management System (other than as
permitted by subsection 6.15) except such changes as have been disclosed to
the Agent in writing and approved by the Agent in writing. Except as
disclosed on SCHEDULE 5.23, Cash Management Letter covering each Local
Account or Concentration Account included in the Cash Management System has
been delivered to the Agent.
5.24 LABOR MATTERS.
There are no strikes or other labor disputes against any Loan Party or
any of its Subsidiaries, pending or, to the knowledge of CapStar and the
Borrower, threatened that have had or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. Hours
worked by and payments made by any Loan Party or any of its Subsidiaries to
their respective employees are not in violation in any material respect of
the Fair Labor Standards Act or any other applicable law dealing with such
matters.
5.25 EMPLOYMENT AND LABOR AGREEMENTS.
Except as disclosed on SCHEDULE 5.25 annexed hereto, there are no
employment agreements covering management employees of any Loan Party or
any of its Subsidiaries and there are no collective labor agreements
covering any employees of any Loan Party or any of its Subsidiaries. Each
Loan Party and each of its Subsidiaries is in compliance in all material
respects with the terms and conditions of all such collective bargaining
agreements.
SECTION 6
AFFIRMATIVE COVENANTS
Each of CapStar and the Borrower covenants and agrees that, from and
after the Closing Date and so long thereafter as the Commitments hereunder
shall remain in effect and until payment in full of the Loans and the other
Obligations (other than indemnification obligations with respect to claims
that have not been asserted at the time that the Loans and all other
Obligations have been paid in full) and the cancellation or expiration of
all Letters of Credit, each of CapStar and the Borrower shall perform and
shall cause each of their respective Subsidiaries to perform all covenants
in this Section 6.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
CapStar shall maintain and cause each of its Subsidiaries to maintain
a system of accounting established and administered in accordance with
sound business practices to permit preparation of consolidated and
consolidating financial statements in conformity with GAAP. The Borrower
shall deliver to the Agent:
(i) MONTHLY PROPERTY OPERATING STATEMENTS: as soon as available
and in any event within 30 days after the end of each calendar month,
commencing with respect to the calendar month ending September 30,
1996, a statement of Property Gross Revenues and Operating Expenses
and any other expenses with respect to each Property separately, in
each case for the 12 month period ending on the last day of such
calendar month, in reasonable detail satisfactory to the Agent and
certified by the Chief Executive Officer or Chief Financial Officer of
CapStar and the Borrower stating that, subject to normal adjustments
following the preparation of the financial statements referred to
below in clauses (iii) and (iv), respectively, (x) such statements of
Property Gross Revenues and Operating Expenses and other expenses
fairly present, in all material respects, the results of operations of
the Properties indicated for the periods indicated and (y) all
Operating Expenses and any other expenses with respect to each
Property which have become due and payable as of the last day of the
calendar month next preceding the delivery of such income statement
have been fully paid or recognized by CapStar or any of its
Subsidiaries;
(ii) BORROWING BASE CERTIFICATES: from and after the Closing
Date, as soon as available and in any event (a) within 30 days after
the end of each calendar quarter of each calendar year (or, if
requested by the Agent, each calendar month), a Borrowing Base
Certificate, in the form attached hereto as EXHIBIT VI and together
with the financial statements and other information utilized by the
Borrower to calculate the Borrowing Base and the Total Utilization
(including the unexpended portion of budgets for Deferred Maintenance
required by subsection 6.16B and for Renovations permitted pursuant to
subsection 7.16), and certified by the Chief Executive Officer or
Chief Financial Officer of CapStar and the Borrower, calculated as of
the last day of such calendar month, (b) within 5 days after the
delivery of a written notice pursuant to subsection 2.9, 2.10 or 7.15B
(but in no event later than the occurrence or effectiveness of the
event or condition required to be specified in such written notice), a
Borrowing Base Certificate calculated as of the date of the occurrence
or effectiveness of the event or condition specified therein, and
together with the financial statements and other information used by
the Borrower to calculate the Borrowing Base, (c) within 5 days after
the delivery of a Notice of Renovation/Restoration pursuant to
subsection 6.11A, 6.11C, 6.12A or 7.16 (but in no event later than the
commencement of a Major Renovation/Restoration), a Borrowing Base
Certificate calculated as of the date of commencement of any related
Major Renovation/Restoration, and together with the financial
statements and other information used by the Borrower to calculate the
Borrowing Base, (d) within 5 days after a casualty or Taking with
respect to, or the Release of, any Pool A Property (or any portion
thereof), a Borrowing Base Certificate calculated as of the date of
such casualty, Taking, Release, expiration, cancellation or other
termination, as the case may be, and together with the financial
statements and other information used by the Borrower to calculate the
Borrowing Base, and (e) upon written request from the Agent or at the
option of the Borrower, a Borrowing Base Certificate calculated as of
the date requested by the Agent in such request or selected by the
Borrower, as the case may be, in reasonable detail satisfactory to the
Agent and together with the financial statements and other information
used by the Borrower to calculate the Borrowing Base;
(iii) QUARTERLY FINANCIAL STATEMENTS OF CAPSTAR AND ITS
SUBSIDIARIES: as soon as available and in any event within 50 days
after the end of each calendar quarter of each calendar year,
commencing with respect to the calendar quarter ending September 30,
1996, (a) the consolidated balance sheet of CapStar and its
Subsidiaries as at the end of such calendar quarter and the related
consolidated statements of income, stockholders' equity and cash flows
of CapStar and its Subsidiaries for such calendar quarter and for the
period from the beginning of the then current calendar year to the end
of such calendar quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding periods of the
previous year and the corresponding figures from the plan and
financial forecast for the current year delivered pursuant to this
subsection, and (b) the consolidating financial statements of CapStar
and its Subsidiaries (including balance sheets and income statements
segmenting any Subsidiaries of CapStar or groups of Subsidiaries of
CapStar, as requested by the Agent in its reasonable discretion)
together with any adjustments and/or eliminations needed to reconcile
such Subsidiary financial statements to the consolidated financial
statements of CapStar, all in reasonable detail (it being understood
and agreed that, to the extent CapStar's quarterly report filed on
Form 10-Q with the Securities and Exchange Commission for such period
contains the foregoing information, such quarterly report shall be
deemed to comply with the foregoing requirements) and certified by the
Chief Executive Officer or the Chief Financial Officer of CapStar and
the Borrower stating that (x) such consolidated and consolidating
financial statements fairly present, in all material respects, the
financial condition of CapStar and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for
the periods indicated, subject to changes resulting from audit and
normal year-end adjustments and (y) except as noted, there are no
material differences between such consolidated financial statements of
CapStar and its Subsidiaries and the consolidated financial statements
of the Borrower and its Subsidiaries with respect to such quarter;
(iv) YEAR-END FINANCIAL STATEMENTS: as soon as available and in
any event within 100 days after the end of each calendar year,
commencing with respect to the calendar year ending December 31, 1996,
(a) the consolidated balance sheet of CapStar and its Subsidiaries as
at the end of such calendar year and the related consolidated
statements of income, stockholders' equity and cash flows of CapStar
and its Subsidiaries for such calendar year, setting forth in each
case in comparative form the corresponding figures for the previous
calendar year and the corresponding figures from the plan and
financial forecast delivered pursuant to this subsection for the
calendar year covered by such consolidated financial statements,
(b) the balance sheets and related income statements of each Property,
(c) the consolidating financial statements of CapStar and its
Subsidiaries (including balance sheets and income statements
segmenting any Subsidiaries of CapStar or groups of Subsidiaries of
CapStar, as requested by the Agent in its reasonable discretion)
together with any adjustments and/or eliminations needed to reconcile
such Subsidiary financial statements to the consolidated financial
statements of CapStar, all of the foregoing in reasonable detail and
certified by the Chief Executive Officer or Chief Financial Officer of
CapStar and the Borrower stating that they present fairly, in all
material respects, the financial condition of CapStar and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, and (d) in
the case of the consolidated financial statements referred to in
clause (a), a report thereon of KPMG Peat Marwick LLP or other
independent accountants of recognized national standing selected by
CapStar and reasonably satisfactory to the Agent, which report shall
be unqualified, shall express no doubts about the ability of CapStar
and its Subsidiaries to continue as a going concern and shall state
that such consolidated financial statements fairly present, in all
material respects, the financial position of CapStar and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years
(except as otherwise disclosed in such financial statements) and that
the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards;
(v) OFFICERS' AND COMPLIANCE CERTIFICATES: together with each
delivery of financial statements of CapStar and its Subsidiaries
pursuant to subdivisions (i), (iii) and (iv) above, (a) an Officers'
Certificate of CapStar and the Borrower stating that (1) the signer
has reviewed the terms of this Agreement and has made, or caused to be
made under his or her supervision, a review in reasonable detail of
the transactions and condition of CapStar and its Subsidiaries and the
Collateral during the accounting period covered by such financial
statements, (2) such review has not disclosed the existence during or
at the end of such accounting period, (3) the signer does not have
knowledge of the existence as at the date of such Officers'
Certificate, of any condition or event that constitutes an Event of
Default or Potential Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof and what action CapStar and the Borrower have taken, are
taking and propose to take with respect thereto and (4) except for the
minority interest reflected on the balance sheet of the Borrower, such
financial statements do not differ in any material respect from the
corresponding consolidated financial statements of the Borrower and
its Subsidiaries; and (b) a Compliance Certificate demonstrating in
reasonable detail compliance during and at the end of the applicable
accounting periods with the covenants set forth in subsection 7.6;
(vi) ACCOUNTANTS' CERTIFICATION: together with each delivery of
financial statements of CapStar pursuant to subdivision (iv) above, a
written statement by KPMG Peat Marwick LLP or other independent
accountants of recognized national standing selected by CapStar and
reasonably satisfactory to the Agent giving the report thereon
(a) stating in substance that their audit examination has included a
review of the terms of this Agreement and the other Loan Documents as
they relate to accounting matters, and (b) stating whether, in
connection with their audit examination, any condition or event that
constitutes an Event of Default or Potential Event of Default has come
to their attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof;
PROVIDED, HOWEVER, that such accountants shall not be liable by reason
of any failure to obtain knowledge of any such Event of Default or
Potential Event of Default that would not be disclosed in the course
of their audit examination;
(vii) ACCOUNTANTS' REPORTS: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all
reports submitted to CapStar or any of its Subsidiaries by KPMG Peat
Marwick LLP or any other independent accountants in connection with
each annual, interim or special audit of the consolidated financial
statements of CapStar and its Subsidiaries made by such accountants,
including any comment letter submitted by such accountants to
management in connection with their annual audit;
(viii) RECONCILIATION STATEMENTS: if, as a result of any change in
accounting principles and policies from those used in the preparation
of the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of the CapStar and its Subsidiaries
delivered pursuant to subdivisions (i), (iii) or (iv) of this
subsection 6.1 differ in any material respect from the consolidated
financial statements that would have been delivered pursuant to such
subdivisions had no such change in accounting principles and policies
been made, then (a) together with the first delivery of financial
statements pursuant to subdivision (i), (iii) or (iv) of this
subsection 6.1 following such change, consolidated financial
statements of CapStar and its Subsidiaries for (1) the current
calendar year to the effective date of such change and (2) the two
full calendar years immediately preceding the calendar year in which
such change is made, in each case prepared on a pro forma basis as if
such change had been in effect during such periods, and (b) together
with each delivery of financial statements and Borrowing Base
Certificate pursuant to subdivision (i), (ii), (iii) or (iv) of this
subsection 6.1 following such change, a written statement of the Chief
Financial Officer or Chief Executive Officer of CapStar and the
Borrower setting forth the differences which would have resulted in
the calculation of the Borrowing Base and the covenants set forth in
Section 6 if such Borrowing Base Certificate or financial statements,
as the case may be, had been prepared without giving effect to such
change;
(ix) EVIDENCE OF INSURANCE: together with the delivery of the
statements pursuant to subsection 6.1(i) above, evidence reasonably
satisfactory to the Agent that the monthly premiums with respect to
the insurance required to be maintained pursuant to subsection 6.10
have been paid for the current month; PROVIDED that evidence
previously delivered pursuant to this clause (ix) with respect to the
prior payment of premiums for the current month need not be
redelivered;
(x) SEC FILINGS AND PRESS RELEASES: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
CapStar to its security holders, (b) all regular and periodic reports
and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by CapStar or the Borrower with
the New York Stock Exchange, Inc., any other securities exchange or
with the Securities and Exchange Commission or any Governmental
Authority or private regulatory authority, and (c) all press releases
and other statements made available generally by CapStar or any of its
Subsidiaries to the public or to the securityholders of CapStar;
(xi) EVENTS OF DEFAULT, ETC.: promptly upon CapStar or the
Borrower obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or
becoming aware that the Agent or any Lender has given any notice or
taken any other action with respect to a claimed Event of Default or
Potential Event of Default, (b) that any Person has given any notice
to CapStar or any of its Subsidiaries or taken any other action with
respect to a claimed default or event or condition of the type
referred to in subsection 8.1B, 8.1C, 8.1D, 8.1E, 8.1F, 8.1H or 8.1I,
(c) of any condition or event that constitutes or may (upon the giving
or receiving of notice or the lapse of time, later, or otherwise) a
default, a potential event of default, an event of default (in each
case, as defined in the agreement or instrument creating, evidencing
or governing any such Indebtedness) under or with respect to any
Indebtedness (other than the Indebtedness hereunder), any Pool B
Obligation or any Related Document (if, with respect to such Related
Document, the occurrence of a default, a potential event of default or
an event of default could reasonably be expected to result in a loss
or liability to a Loan Party or any of its Subsidiaries of more than
$1,000,000), or becoming aware that any agent, trustee, lender or
security holder with respect thereto has given any notice or taken any
other action with respect to such condition or event, (d) of any
condition or event that would be required to be disclosed in a current
report filed by CapStar with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, and 6 of such Form as in effect on the date
hereof) if CapStar were required to file such reports under the
Exchange Act, (e) that there has commenced, or is intended to be
commenced, a Major Renovation/Restoration of any Property with respect
to which a Notice of Renovation/Restoration shall not previously have
been delivered to the Agent or (f) of the occurrence of any event or
change that has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect, an
Officers' Certificate specifying the nature and period of existence of
such condition, event or change, or specifying the notice given or
action taken by any such Person and the nature of such claimed Event
of Default, Potential Event of Default, default, event or condition,
and what action CapStar and the Borrower have taken, are taking and
propose to take with respect thereto;
(xii) LITIGATION OR OTHER PROCEEDINGS: (a) promptly upon CapStar
or the Borrower obtaining knowledge of (x) the institution of any
action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration against or
affecting CapStar or any of its Subsidiaries, or any property of
CapStar or such Subsidiary (collectively, ``PROCEEDINGS'') not
previously disclosed in writing by CapStar or the Borrower to the
Lenders or (y) any material development in any Proceeding that, in any
case:
(1) if adversely determined, could reasonably be expected
to have, either individually or in the aggregate, a Material
Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of,
the transactions contemplated hereby; or
(3) threatens the validity or priority of the Liens granted
pursuant to the Loan Documents;
written notice thereof together with such other information as may be
reasonably available to CapStar or the Borrower to enable the Agent
and its counsel to evaluate such matters; and (b) within 20 days after
the end of each calendar quarter of CapStar, a schedule of all
Proceedings involving an alleged liability of, or claims against or
affecting, CapStar and its Subsidiaries which, if adversely
determined, could reasonably be expected to result in a money judgment
in excess of $1,000,000 individually or $5,000,000 in the aggregate
(in either case not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has accepted coverage), and
promptly after request by the Agent, such other information as may be
reasonably requested by the Agent to enable the Agent and its counsel
to evaluate any of such Proceedings;
(xiii) ERISA EVENTS AND NOTICES: (a) promptly upon becoming aware
of the occurrence of or forthcoming occurrence of any ERISA Event, a
written notice specifying the nature thereof, what action CapStar or
any of its Subsidiaries or any of their respective ERISA Affiliates
has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto;
(b) with reasonable promptness, copies of all notices received by
CapStar or any of its ERISA Affiliates from a Multiemployer Plan
sponsor concerning an ERISA Event; and (c) with reasonable promptness
following the Agent's reasonable request, (x) copies of any SCHEDULE B
(Actuarial Information) filed by CapStar or any of its ERISA
Affiliates with the Internal Revenue Service with respect to any
Pension Plan and (y) copies of such other documents or governmental
reports or filings relating to any Employee Benefit Plan as the Agent
shall reasonably request;
(xiv) FINANCIAL PLANS: as soon as practicable and in any event no
later than November 30 of each year, projected financial statements
for each Property for the three next succeeding calendar years setting
forth in detail each line item appearing in the form of financial
statement set forth in SCHEDULE 6.1 annexed hereto, together with an
explanation of the assumptions on which such forecasts are based, and
such other information and projections as the Agent may reasonably
request for any Property, all the Properties or CapStar or any of its
Subsidiaries;
(xv) INSURANCE: as soon as practicable and in any event by the
last day of each calendar year, a report in form and substance
reasonably satisfactory to the Agent outlining all material insurance
coverage maintained as of the date of such report by CapStar and its
Subsidiaries or, in lieu thereof, copies of such policies, and a
report as to all material insurance coverage planned to be maintained
by CapStar and its Subsidiaries in the next succeeding calendar year
to the extent varying from the description of that delivered or
described;
(xvi) ENVIRONMENTAL AUDITS AND REPORTS: as soon as practicable
following receipt thereof, copies of all environmental audits and
reports, whether prepared by personnel of CapStar or any of its
Subsidiaries or by independent consultants, with respect to material
environmental matters at any Property or which relate to an
Environmental Claim which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect;
(xvii) BOARD OF DIRECTORS: with reasonable promptness, written
notice of any change in the Board of Directors of CapStar;
(xviii) CHANGE IN NAME OR CHIEF PLACE OF BUSINESS: (a) notification
of any change in any Loan Party's name, identity or corporate
structure within 30 days of such change and (b) 30 days' prior written
notice of any change in any Loan Party's executive office or chief
place of business;
(xix) REDUCTION OF PROPERTY AMOUNT OR PROPERTY EBITDA: promptly
after the Borrower's acquiring actual knowledge of the same, an
Officers' Certificate with respect to the occurrence or effectiveness
of any event or condition (other than an event or condition that is
affecting the hospitality business generally) that could reasonably be
expected to cause the Property Amount or Property EBITDA with respect
to any Property, as of any date of determination thereafter, to be
reduced by more than the greater of (a) 10% as of such later date of
determination or for any period and (b) $100,000; and
(xx) RENOVATION INFORMATION: to the extent not delivered
pursuant to subsection 6.12, a project budget for each Renovation
permitted pursuant to subsection 7.16 and upon the reasonable request
of the Agent, and in any event not less frequently than quarterly, a
written report with respect to the progress and status of each such
Renovation, in scope and detail reasonably satisfactory to the Agent;
and
(xxi) OTHER INFORMATION: with reasonable promptness, (a)
information and other data revised to correct any erroneous
information and other data previously delivered by CapStar or the
Borrower to the Agent pursuant to this subsection 6.1 or included in
any statement, report or certificate previously delivered by CapStar
or the Borrower to the Agent pursuant to this subsection 6.1, together
with such statement, report or certificate that shall have been
revised to reflect such revised information and data, and (b) such
other information and data with respect to the Loan Parties and their
respective Subsidiaries, the Properties (separately and for all
Properties), the Managed Properties, the Ground Leases and Leases, the
Management Agreements, the other Collateral and the other assets and
liabilities of the Loan Parties and their respective Subsidiaries, all
in form reasonably satisfactory to the Agent, as from time to time may
be reasonably requested by the Agent.
6.2 COMMON STOCK.
CapStar shall (i) cause the Common Stock, and each class of preferred
stock of the Borrower permitted by subsection 7.20B, to be and to remain at
all times duly listed on the New York Stock Exchange, Inc. and (ii) file
timely all reports required to be filed by CapStar with the New York Stock
Exchange, Inc. and the Securities and Exchange Commission.
6.3 CORPORATE EXISTENCE; CORPORATE SEPARATENESS ETC.
A. CORPORATE EXISTENCE. Except as permitted pursuant to
subsection 7.7, each Loan Party shall, and shall cause each of its
Subsidiaries to, at all times preserve and keep in full force and effect
its corporate, partnership or limited liability company existence and all
Authorizations, rights and franchises material to its business.
B. FINANCIAL MATTERS. The Borrower shall, and shall cause each of
the Pool A Subsidiaries to, (i) maintain financial statements, payroll
records, accounting records and other corporate records and other documents
separate from each other and any other Person (other than the Borrower and
the Pool A Subsidiaries, but including CapStar and the Pool B
Subsidiaries); (ii) maintain its own bank accounts in its own name,
separate from each other and any other Person (other than the Borrower and
the Pool A Subsidiaries, but including CapStar and the Pool B
Subsidiaries); (iii) pay its own expenses and other liabilities from its
own assets and incur (or endeavor to incur) obligations to other Persons
(other than the Borrower and the Pool A Subsidiaries, but including CapStar
and the Pool B Subsidiaries) based solely upon its own assets and
creditworthiness and not upon the creditworthiness of each other or any
other Person (other than the Borrower and the Pool A Subsidiaries, but
including CapStar and the Pool B Subsidiaries); and (iv) file its own tax
returns or, if part of a consolidated group, join in the consolidated tax
return of such group as a separate member thereof.
C. INDEPENDENT BUSINESS. The Borrower shall manage the business of
the Borrower and each Pool A Subsidiary independently from the business of
CapStar and any other Person (other than the Borrower and the Pool A
Subsidiaries) and in accordance with the best interest of the Borrower or
such Pool A Subsidiary. The Borrower shall conduct the administrative
activities of the Borrower and the Pool A Subsidiaries separately from the
administrative activities of any other Person (other than the Borrower and
the Pool A Subsidiaries, but including CapStar and the Pool B
Subsidiaries). Any moneys earned by the Borrower or the Pool A
Subsidiaries on their assets or proceeds of the sale of any of their assets
shall be deposited in bank accounts separate from any of the assets of any
other Person (other than the Borrower and the Pool A Subsidiaries, but
including CapStar and the Pool B Subsidiaries), and no assets of the
Borrower and the Pool A Subsidiaries shall become commingled with assets of
such other Persons.
D. BUSINESS DEALINGS. Each of CapStar and the Borrower shall hold
itself out, and shall continue to hold itself out, to the public and to its
creditors as a legal entity, separate and distinct from all other entities
(other than, with respect to the Borrower, the Pool A Subsidiaries), and
shall continue to take all steps reasonably necessary to avoid
(i) misleading any other Person as to the identity of the entity with which
such Person is transacting business or (ii) implying that the Borrower is,
directly or indirectly, absolutely or contingently, responsible (if such is
not the case) for the Indebtedness or other obligations of any other
Person. CapStar and the Borrower shall not permit any Pool B Subsidiary to
imply that any other Loan Party or any of its Subsidiaries (other than such
Pool B Subsidiary) is directly or indirectly, absolutely or contingently,
responsible for the Indebtedness or other obligations of such Pool B
Subsidiary.
6.4 TAXES AND CLAIMS; TAX CONSOLIDATION.
A. TAXES AND CLAIMS. Each Loan Party shall, and shall cause each of
its Subsidiaries to, pay or discharge or cause to be paid or discharged all
Taxes and Impositions imposed upon any Loan Party or any of its
Subsidiaries, or payable by any Loan Party or any of its Subsidiaries with
respect to any Property or other assets or in respect of any of the
franchises, business, income or other property of any Loan Party or any of
its Subsidiaries before the same shall become delinquent and before any
penalty accrues thereon, and will pay, discharge or otherwise satisfy or
cause to be paid, discharged or otherwise satisfied at or before maturity
or before they become delinquent, all Indebtedness, obligations and other
claims (including claims for labor, supplies, materials and services that,
if unpaid, might become a Lien on the property of any Loan Party or any of
its Subsidiaries) of any Loan Party and its Subsidiaries; PROVIDED,
HOWEVER, that no such charge or claim needs to be paid if (i) such charge
or claim is being diligently contested in good faith by appropriate
proceedings, (ii) reserves consistent with GAAP or otherwise consented to
by the Agent shall have been made therefor by such Loan Party or such
Subsidiary, (iii) none of the Collateral is in jeopardy of being sold,
forfeited or lost during or as a result of such contest, (iv) none of any
Loan Party, or any of its Subsidiaries, the Agent or any Lender could
become subject to any civil fine or penalty not adequately reserved against
(in the case of any Loan Party or Subsidiary thereof) or criminal fine or
penalty, in each case as a result of non-payment of such charge or claim
and (v) such contest has not had and could not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect.
Each Loan Party shall, and shall cause each of its Subsidiaries to, deliver
to the Agent all receipts evidencing the payment of all such Taxes and
Impositions with respect to any Property and, upon written request by the
Agent, all other Taxes, Impositions, assessments, levies, permits, fees,
rents and other public charges imposed upon or in respect of or assessed
against any Loan Party, any of its Subsidiaries or any of their respective
properties or assets except for those being paid or contested as described
in the provisos above.
B. TAX CONSOLIDATION. Each Loan Party will not, and will not permit
any of its Subsidiaries to, file or consent to the filing of any
consolidated income tax return with any Person other than CapStar and its
Subsidiaries.
6.5 MAINTENANCE OF PROPERTIES; REPAIR; ALTERATION.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
(i) maintain or cause to be maintained each Property and all other items of
Collateral in a manner consistent for upscale full service hotel properties
and related property, and other property and assets constituting the
Collateral, in each case of the same quality and character, and shall keep
or cause to be kept every part thereof in good condition and repair,
reasonable wear and tear excepted, and make all reasonably necessary
repairs, renewals or replacements thereto as may be reasonably necessary to
conduct the business of such Loan Party and its Subsidiaries; (ii) not
remove, demolish or structurally alter, or permit or suffer the removal,
demolition or structural alteration of, any of the Improvements in respect
of a Pool A Property except as expressly permitted hereunder or in
connection with a Renovation or Restoration with the prior written consent
of the Agent, which consent shall not be unreasonably withheld, conditioned
or delayed; (iii) complete promptly and in a good and workmanlike manner
any Improvements which may be now or hereafter constructed on any Property
and, subject to subsection 6.11, promptly restore in like manner any
portion of the Improvements in respect of a Pool A Property which may be
damaged or destroyed thereon from any cause whatsoever, and pay when due
all claims for labor performed and materials furnished therefor (subject to
the right to contest the amount of validity thereof in good faith);
(iv) comply in all material respects with all Applicable Laws, applicable
Insurance Requirements and all covenants, conditions and restrictions now
or hereafter affecting any Property or other item of Collateral or any part
thereof or requiring any alterations or Improvements; and (v) not commit or
permit any waste of the Collateral; (vi) not remove any item of the
Collateral (other than in accordance with subsection 2.9, in connection
with a Restoration or Renovation permitted by this Agreement or otherwise
in the ordinary course of business) without replacing it with a comparable
item of equal or greater quality, value and usefulness, except that such
Loan Party or Subsidiary thereof, as applicable, may sell or dispose of in
the ordinary course of business any property which is obsolete or no longer
useful in its business.
6.6 INSPECTION; LENDERS' MEETING; APPRAISALS.
A. INSPECTION AND LENDER MEETING. As often as may be reasonably
requested, each Loan Party shall, and shall cause each of its Subsidiaries
to, permit (i) any authorized representatives designated by the Agent or
any Lender to visit and inspect any Property, and (ii) any authorized
representatives designated by the Agent to inspect the financial and
accounting records, tenant leasing files and other management books and
records of such Loan Party or Subsidiary, and to make copies and take
extracts therefrom, and to discuss its and their affairs, operations,
finances and accounts with its and their officers, property managers and
independent accountants; PROVIDED that each such visit, inspection and
discussion shall be made upon reasonable notice and at such reasonable
times during normal business hours, with as little disruption of such
party's business and operations as is reasonably practical. Without in any
way limiting the foregoing, CapStar and the Borrower will, upon the request
of the Agent, participate in a meeting with the Agent and the Lenders once
during each calendar year to be held at the Borrower's corporate offices
(or such other location as may be agreed to by the Borrower and the Agent)
at such time as may be agreed to by the Borrower and the Agent.
B. APPRAISALS. If the Agent shall advise the Borrower by written
notice that the Agent believes that the value of one or more Designated
Pool A Properties has been adversely affected, for any reason, since the
date of the most recent Appraisal thereof, promptly thereafter the Loan
Parties shall, or shall cause each of their respective Subsidiaries to, at
their expense, cause the preparation and delivery to the Agent of an
Appraisal of each such Pool A Property dated not more than 30 days prior to
the date of such delivery, which Appraisal shall be prepared by an
Appraiser designated by the Agent and shall be satisfactory in form and
substance to the Agent; PROVIDED that, unless an Event of Default shall
have occurred and be continuing, no Pool A Property shall be appraised
pursuant to this subsection 6.6B more than once each calendar year. If any
Loan Party or any of its Subsidiaries obtains an appraisal of one or more
of the Pool A Properties other than pursuant to this subsection, the
Borrower shall deliver a copy of such appraisal to the Agent promptly upon
the completion thereof and the Agent shall, subject to Applicable Laws and
provided that the Appraiser is satisfactory to the Agent and the appraisal
is satisfactory in form and substance to the Agent, treat such appraisal as
an ``Appraisal.'' In the event that the Agent obtains an Appraisal of one
or more of the Pool A Properties, the Agent shall deliver a copy of such
Appraisal to the Borrower upon the completion thereof.
6.7 COMPLIANCE WITH LAWS, AUTHORIZATIONS, ETC.
Each Loan Party shall, and shall cause each of its Subsidiaries and
all other Persons occupying any Properties to, comply in all material
respects with the requirements of all Applicable Laws. Each Loan Party
shall, and shall cause each of its Subsidiaries to, keep all Authorizations
which are from time to time required for the use and operation of each Pool
A Property in full force and effect.
6.8 PERFORMANCE OF LOAN DOCUMENTS AND RELATED DOCUMENTS.
A. LOAN DOCUMENTS. Each Loan Party shall, and shall cause each of
its Subsidiaries to, observe and perform, or cause to be observed and
performed, all its covenants, agreements, conditions and requirements
contained in each of the Loan Documents to which it is or will be a party
in accordance with the terms thereof and will maintain the validity and
effectiveness of such Loan Documents.
B. RELATED DOCUMENTS. Each Loan Party shall, and shall cause each
of its Subsidiaries to, observe and perform, or cause to be observed and
performed, all its material covenants, agreements, conditions and
requirements contained in each of the Related Documents to which it is a
party in accordance with the terms thereof and will maintain the validity
and effectiveness of such Related Documents, the violation or invalidity of
which could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. Each Loan Party shall take no
action, nor permit any action to be taken, which will release any party to
the Related Documents from any of such party's obligations or liabilities
thereunder, or will result in the termination, modification or amendment,
or will materially impair the validity or effectiveness, of any Related
Document except as expressly provided for herein and therein, which
release, invalidity or ineffectiveness could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect.
C. ATLANTA DOCUMENTS. Each Loan Party shall, and shall cause each
of its Subsidiaries to, observe and perform, or cause to be observed and
performed, all its covenants, agreements, conditions and requirements
contained in each of the Atlanta Documents to which it is a party in
accordance with the terms thereof and will maintain the validity and
effectiveness of such Atlanta Documents. Each Loan Party shall take no
action, nor permit any action to be taken, which will release any party to
the Atlanta Documents from any of such party's obligations or liabilities
thereunder, or will result in the termination, modification or amendment,
or will impair the validity or effectiveness, of any Atlanta Document.
CapStar and the Borrower shall give the Agent written notice of any default
by any party to any Atlanta Document promptly after such default becomes
known to CapStar or the Borrower.
D. ENFORCEMENT. At the request of the Agent and also following the
occurrence of a material breach or default under any Atlanta Document or,
if such breach or default either may reasonably be expected to have, either
individually or the aggregate, a Material Adverse Effect or may reasonably
be expected to result in a loss or liability to any Loan Party or any of
its Subsidiaries in an amount greater than $1,000,000 (or, upon the
occurrence of an Event of Default, zero), a breach or default under any
Related Document to which any Loan Party or any of its Subsidiaries is a
party, such Loan Party or such Subsidiary, as applicable, will, at its
expense but subject to the direction and control of the Agent, take such
action, or at the Agent's request furnish funds sufficient to enable the
Agent to take such action, as the Agent may reasonably request in
connection with enforcing such Atlanta Document or Related Document.
6.9 PAYMENT OF LIENS.
A. REMOVAL BY LOAN PARTIES. In the event that, notwithstanding the
covenants contained in subsection 7.2, a Lien not otherwise permitted under
subsection 7.2 may encumber any Property or other item of Collateral or any
portion thereof, CapStar and the Borrower shall promptly discharge or cause
to be discharged by payment to the lienor or lien claimant or promptly
secure removal by bonding or deposit with the county clerk or otherwise or,
at the Agent's option, promptly obtain insurance against, any such Lien or
mechanics' or materialmen's claims of lien filed or otherwise asserted
against any Property or any other item of Collateral or any portion thereof
within 30 days after the date of notice thereof; PROVIDED that, compliance
with the provisions of this subsection 6.9 shall not be deemed to
constitute a waiver of the provisions of subsection 7.2. CapStar and the
Borrower shall exhibit to the Agent upon request all receipts or other
satisfactory evidence of payment, bonding, deposit of taxes, assessments,
Liens or any other item which may cause any such Lien to be filed against
any Property or other item of Collateral of any Loan Party or any of its
Subsidiaries. Each Loan Party and each of its Subsidiaries shall fully
preserve the Lien and the priority of each of the Mortgages and the other
Security Documents without cost or expense to the Agent or the Lenders.
B. REMOVAL BY THE AGENT. If any Loan Party or any of its
Subsidiaries fails to promptly discharge, remove or bond off any such Lien
or mechanics' or materialmen's claim of lien as described above within
30 days after the receipt of notice thereof, then the Agent may, but shall
not be required to, procure the release and discharge of such Lien,
mechanics' or materialmen's claim of lien and any judgment or decree
thereon, and in furtherance thereof may, in its sole discretion, effect any
settlement or compromise with the lienor or lien claimant or post any bond
or furnish any security or indemnity as the Agent, in its sole discretion,
may elect. In settling, compromising or arranging for the discharge of any
Liens under this subsection, the Agent shall not be required to establish
or confirm the validity or amount of the Lien. The Borrower agrees that
all costs and expenses expended or otherwise incurred pursuant to this
subsection 6.9 (including reasonable attorneys' fees and disbursements) by
the Agent shall be paid by the Borrower in accordance with the terms
hereof.
C. TITLE SEARCHES. The Agent may, at any time and at the expense of
the Borrower, obtain an updated title and/or lien search regarding any
Property or Collateral, or any portion thereof; PROVIDED that, unless the
Agent reasonably believes that a Lien not otherwise permitted under
subsection 7.2 may encumber any Property or Collateral or any portion
thereof or an Event of Default shall have occurred and be continuing, the
Agent may so obtain such search with respect to such Property or Collateral
or portion thereof not more than once each calendar year.
6.10 INSURANCE.
A. RISKS TO BE INSURED. With respect to each Pool A Property, each
Loan Party shall procure or cause to be procured, and each Loan Party shall
maintain or cause to be maintained continuously in effect, insurance
coverage issued by an insurer (i) authorized to issue such insurance in all
applicable jurisdictions, (ii) rated ``A'' (or its equivalent) or better by
Alfred M. Best Company, Inc., (iii) with a financial size rating of VIII
(or its equivalent) or better, by Alfred M. Best Company, Inc., and
(iv) otherwise satisfactory to the Agent; PROVIDED, HOWEVER, that the
requirements set forth in clauses (ii) and (iii) above with respect to any
Pool A Property shall be subject to any requirements of any related Ground
Lease; PROVIDED FURTHER, HOWEVER, that (1) each insurer of CapStar's or any
of its Subsidiaries' umbrella liability insurance policies as of the
Closing Date (and any renewal thereof by such insurers), may be rated ``A-
'' (or its equivalent) by Alfred M. Best Company, Inc.; it being understood
and agreed that such carrier(s) shall comply with the requirement set forth
in clause (ii) above, and (2) as of the Closing Date, the insurers of
CapStar's or any of its Subsidiaries' earthquake, flood and wind insurance
policies (and any renewals thereof by such insurers, respectively) may be
rated ``A-'' (or its equivalent) by Alfred M. Best Company, Inc. and have a
financial size rating of ``VIII'' (or its equivalent) by Alfred M. Best
Company, Inc.; it being understood and agreed that, in the event CapStar or
any of its Subsidiaries procures any earthquake, flood or wind insurance
from a carrier other than the carrier providing such insurance on the
Closing Date, such carrier shall comply with the requirements set forth in
clauses (ii) and (iii) above unless otherwise approved by the Agent. Each
Loan Party shall pay, and shall cause each of its Subsidiaries to pay, in a
timely manner all premiums due in connection therewith. All insurance
policies shall be issued by insurers doing business as admitted licensed
carriers in the state where such Property is located, and shall be
authorized and licensed to issue insurance in such state unless otherwise
approved by the Agent in its sole discretion. The insurance to be procured
and maintained by CapStar and its Subsidiaries is the following:
(i) CASUALTY. CapStar shall keep, or shall cause its
Subsidiaries to keep, each Pool A Property insured for the benefit of
the Agent, in each case, as follows:
(a) ALL RISK OF PHYSICAL LOSS. Insurance with respect to
the Improvements now or hereafter located on the Pool A
Properties and any alterations or additions thereto and the
furniture, fixtures and equipment against any peril included
within the classification ``All Risks of Physical Loss'' with
extended coverage (including fire, lightning, windstorm,
sprinkler, hail, explosion, riot, riot attending a strike, civil
commotion, vandalism, malicious mischief, terrorist acts,
aircraft, vehicle, sinkholes and smoke) in an amount equal to the
full insurable value of such Improvements and such furniture,
fixtures and equipment. The term ``FULL INSURABLE VALUE'' shall
mean the actual replacement cost of such Improvements and such
furniture, fixtures and equipment (without taking into account
any depreciation, and exclusive of excavations, footings and
foundations, landscaping and paving) determined every five years
by an insurer upon the request of the Agent, a recognized
independent insurance broker or an appraiser selected (and
approved by the Agent) and paid by the applicable Loan Party or
its Subsidiary; PROVIDED, HOWEVER, that such amount shall be
sufficient to prevent such Loan Party or such Subsidiary from
becoming a co-insurer, and the policy shall contain a stated
value endorsement to that effect.
(b) BUILDER'S RISK. During any period of construction of
Improvements and any repair, Restoration, Renovation or
replacement thereof, a standard builder's all risk policy
(completed value non-reporting form) or equivalent coverage under
the policy described in subclause (i)(a) above for an amount at
least equal to the full insurable value of the work to be
performed and equipment, supplies and materials to be furnished,
as shall be reasonably approved by the Agent for such purpose,
the coverage of which shall include the hazards described in
subsection 6.10A(i)(a) and building collapse; PROVIDED, HOWEVER,
that such policy may be obtained by a contractor if it names the
Agent and CapStar and its applicable Subsidiaries as additional
named insureds and if it otherwise complies with this Agreement.
Such policy shall contain a stated value endorsement so that no
co-insurance provision shall be applicable to any loss
thereunder. Such policy shall contain the provision that
``permission is hereby granted to complete and/or occupy'' upon
the earlier to occur of substantial completion of any discrete
increment of the work or a Tenant taking occupancy of any Pool A
Property (or portion thereof) as to which work was being
performed.
(c) FLOOD. Insurance against damage or loss by flood as to
any Pool A Property that is located in an area now or
subsequently designated as an area having special flood hazards
and in which flood insurance has been made available under the
National Flood Insurance Act of 1968 or the Flood Disaster
Protection Act of 1973,or the National Flood Insurance Reform Act
of 1994, as such Acts may be amended, modified, supplemented or
replaced from time to time, on such basis and not less than such
amounts as shall be reasonably approved by the Agent, but not
less than the amount required by law. If any Loan Party or any
of its Subsidiaries fails to obtain flood insurance as required,
the Agent may purchase such flood insurance, and the Borrower
shall pay all premiums and other costs and expenses incurred by
the Agent.
(d) BOILERS. Broad form boiler and machinery insurance
(without exclusion for explosion) covering all boilers, boiler
tanks, heating and air conditioning equipment, pressure vessels,
auxiliary piping and similar apparatus, machinery and equipment
located in, on or about each Pool A Property insuring against
damage or loss from boilers, boiler tanks, heating and air
conditioning equipment, pressure vessels, auxiliary piping and
similar apparatus, machinery and equipment and insurance against
loss of occupancy or use arising from any such breakdown in such
amounts as are generally available at reasonable premiums and are
generally required by institutional lenders for properties
comparable to the Pool A Properties.
(e) BUSINESS INTERRUPTION OR RENTAL INCOME INSURANCE.
Business interruption and/or loss of rental value or use and
occupancy insurance insuring against business interruption at and
against loss of rental income from each Pool A Property due to
any of the hazards listed in subsection 6.10A(i)(a) above in an
amount sufficient to avoid any co-insurance penalty and to
provide proceeds for a period not less than one year of loss.
(f) EARTHQUAKE INSURANCE. With respect to any Pool A
Property located in California or other area at high risk for
earthquakes, as reasonably determined by the Agent, earthquake
insurance on such basis and in such amounts as shall be
reasonably required by the Agent; PROVIDED that each of the Pool
A Properties that are located in California on the Closing Date
shall have earthquake insurance as evidenced by the policies
delivered pursuant to subsection 4.1F and each of the MBL
Properties located in California shall have earthquake insurance
on the date of their acquisition by CapStar or any of its
subsidiaries in such amounts as shall be reasonably required by
the Agent; PROVIDED that each of the Pool A Properties that are
located in California on the Closing Date shall have earthquake
insurance as evidenced by the policies delivered pursuant to
subsection 4.1F and each of the MBL Properties located in
California shall have earthquake insurance on the date of their
acquisition by CapStar or any of its Subsidiaries in such amounts
as shall be reasonably required by the Agent.
(ii) WORKERS' COMPENSATION. Each Loan Party shall maintain, and
shall cause each of its Subsidiaries to maintain, for itself and for
each Pool A Property at which such Loan Party or such Subsidiary
maintains employees, statutory workers' compensation insurance (to the
extent the risks to be covered thereby are not already covered by
other policies of insurance maintained by such Loan Party or such
Subsidiary), in statutory amounts as required by law (including
employer's liability insurance), except in those states where such
Loan Party elects to not subscribe to the workers' compensation
statute. If the applicable Loan Party elects to not subscribe to the
workers' compensation statute, such Loan Party shall have a benefit
program and employees' legal liability coverage to respond to claims
that would otherwise be covered by a standard policy of workers'
compensation.
(iii) LIABILITY. CapStar and its Subsidiaries shall procure and
maintain:
(a) COMPREHENSIVE GENERAL LIABILITY INSURANCE.
Comprehensive general liability insurance, on an occurrence basis
in the amount of $1,000,000 per occurrence per Property and
$3,000,000 in the aggregate per Property covering each Loan
Party, each of its Subsidiaries and the Agent against claims for
bodily injury, death and property damage (including claims and
legal liability to the extent insurable imposed upon the Agent
and all court costs and attorneys' fees and expenses), arising
out of or connected with the possession, use, leasing, operation,
maintenance or condition of each Property or occurring in, upon
or about or resulting from each Property, or any drive, sidewalk,
curb or passageway adjacent thereto (to the extent insurable),
which insurance shall include blanket contractual liability
coverage which insures contractual liability (to the extent
insurable) under the indemnification set forth in subsection 9.3
of this Agreement (but such coverage or the amount thereof shall
in no way limit such indemnification), garage liability (if
applicable), products liability (if applicable) and elevator
liability (if applicable) coverage and during any period of
construction of any Improvements, owner's and contractor's
protective liability coverage, including completed operations
liability coverage. If any of the coverages referred to in this
subsection 6.10A(iii)(a) are obtained under a so called
``blanket'' policy with more than one Property covered, the
policy shall contain an ``individual aggregate per
location/project'' endorsement.
(b) GENERAL LIABILITY AND PROPERTY DAMAGE. Commercial
general liability and property damage insurance on an occurrence
basis in connection with any Renovation being performed at any
Pool A Property, to be carried by any contractor or construction
manager or by any Person, including any Loan Party or any of its
Subsidiaries, performing a similar function, including ``Builders
Risk'' coverage in the amount of $1,000,000 per occurrence and
$3,000,000 in the aggregate.
(c) LIQUOR LIABILITY AND DRAM SHOP INSURANCE. Liquor
liability and dram shop insurance on such basis and in such
amounts as shall be reasonably required by the Agent in a minimum
amount of $1,000,000 per occurrence and $3,000,000 in the
aggregate for Pool A Properties.
(d) UMBRELLA OR EXCESS LIABILITY INSURANCE. Umbrella or
excess liability insurance, on an incurrence basis in the amount
of at least $100,000,000 per occurrence and in the aggregate per
year covering each Loan Party, each of its Subsidiaries and the
Agent against claims for damages in excess of all primary
liability policies.
(iv) ADDITIONAL INSURANCE. Each Loan Party shall procure and
maintain, and shall cause each of its Subsidiaries to procure and
maintain, such other insurance with respect to the Pool A Properties
against loss or damage of the kinds from time to time customarily
insured against and in such amounts as are generally available at
reasonable premiums and are generally required by institutional
lenders for properties comparable to the Pool A Properties.
B. POLICY PROVISIONS. Each policy of insurance maintained in
respect of any Loan Party, any of its Subsidiaries and/or any Pool A
Property pursuant to this subsection 6.10 shall (a) in the case of each
category of public liability insurance, name such Loan Party or such
Subsidiary, as the case may be, as insured and name the Agent (for the
benefit of the Lenders) as an additional insured, and in the case of all
other insurance required under this Agreement (other than any such policy
maintained solely in respect of one or more Pool B Properties), name the
Agent (for the benefit of the Lenders) as an additional insured or as a
loss payee, as Agent shall require; (b) except in the case of public
liability insurance and workers' compensation insurance, provide that all
proceeds thereunder shall be payable to the Agent pursuant to a standard
first mortgagee endorsement, without contribution, that all losses with
respect to each Property shall be paid directly to the Agent, without
contribution by any similar insurance carried by the Agent and that
adjustment and settlement of any material loss shall be subject to the
reasonable approval of the Agent; (c) include effective waivers by the
insurer of all rights of subrogation against any loss payee, additional
insured or named insured; (d) permit the Agent to pay the premiums and
continue any insurance upon failure of such Loan Party or such Subsidiary,
as the case may be, to pay premiums when due, upon the insolvency of such
Loan Party or such Subsidiary, as the case may be, or through foreclosure;
(e) to the extent such provisions are reasonably obtainable, provide that
such insurance shall not be impaired or invalidated by virtue of (1) any
act, failure to act, negligence of, or violation of declarations,
warranties or conditions contained in such policy by such Loan Party or
such Subsidiary, as applicable, the Borrower, the Agent, the Lenders or any
other named insured, additional insured or loss payee, except for the
willful misconduct of the Agent or the Lenders knowingly in violation of
the conditions of such policy, (2) the occupation or use of such Pool A
Property for purposes more hazardous than permitted by the terms of the
policy, (3) any foreclosure or other proceeding or notice of sale relating
to such Property or (4) any change in the possession of such Pool A
Property without a change in the identity of the holder of actual title to
such Property (PROVIDED that with respect to items (3) and (4) any notice
requirements of the applicable policies are satisfied); (f) be subject to a
deductible, if any, not greater than $100,000 (or, with respect to coverage
for wind damage or earthquake damage, such greater amount as shall not
exceed 5.0% or 10.0%, respectively, of the affected Pool A Property's
agreed value); (g) contain an endorsement providing that none of the Agent,
the Lenders or such Loan Party or such Subsidiary, as applicable, shall be,
or shall be deemed to be, a co-insurer with respect to any risk insured by
such policy; and (h) provide that if all or any part of such policy shall
be canceled or terminated, or shall expire, the insurer will forthwith give
notice thereof to the Agent and each additional insured and loss payee and
that no cancellation, termination, expiration, reduction in amount of, or
material change (other than an increase) in, coverage thereof shall be
effective until at least 30 days (or 10 days in the case of non-payment for
premiums) after receipt by the Agent and each additional insured and loss
payee of written notice thereof; PROVIDED, HOWEVER, that the requirements
set forth in this subsection 6.10B with respect to any Pool A Property
shall be subject to any requirements of any Ground Lease affecting such
Pool A Property. Nothing contained herein shall be construed to prevent
CapStar or any of its Subsidiaries from satisfying the provisions of this
subsection 6.10 through the use of so-called blanket, manuscripted or loss
limit policies.
C. INCREASES IN COVERAGE. The policy limits of any policy of
insurance required hereunder shall be increased from time to time to
reflect what a reasonable prudent owner of land and improvements similar in
type and locality to each Pool A Property would carry.
D. PAYMENT OF PROCEEDS. If any such insurance proceeds required to
be paid to the Agent are instead made payable to the Borrower, CapStar or
any Subsidiary thereof, each of the Borrower and CapStar hereby appoints
the Agent as its attorney-in-fact, irrevocably and coupled with an
interest, to endorse and/or transfer any such payment to the Agent.
E. DELIVERY OF COUNTERPART POLICIES; EVIDENCE. Each Loan Party
shall deliver, and shall cause each of its Subsidiaries to deliver, to the
Agent on or before the Closing Date evidence acceptable to the Agent for
the valid policies of insurance required by this Agreement or any other
Loan Document to be carried evidencing (i) the issuance of such policies,
(ii) the payment of all premiums payable for the period ending not earlier
than the first Anniversary and (iii) coverage which meets all of the
requirements set forth in this Agreement. At each time after the Closing
Date that any Loan Party or any of its Subsidiaries is required by this
Agreement or by any Security Document or any other Loan Document to deliver
evidence of insurance, such Loan Party shall deliver, or shall cause such
Subsidiary to deliver, such evidence of valid policies of insurance
acceptable to the Agent evidencing (a) the issuance of the policies of
insurance required by this Agreement or other Loan Document to be carried,
(b) the payment of all premiums then due to the applicable insurer,
(c) coverage which meets all of the requirements set forth in this
Agreement or other Loan Document, and (d) that the required policies are in
full force and effect.
F. REPLACEMENT OR RENEWAL POLICIES. Not less than 20 days prior to
the expiration, termination or cancellation of any insurance policy which
any Loan Party or any of its Subsidiaries is required to maintain
hereunder, such Loan Party shall obtain, or shall cause such Subsidiary to
obtain, a replacement or renewal policy or policies (or a binding
commitment for such replacement or renewal policy or policies), which shall
be effective no later than the date of the expiration, termination or
cancellation of the previous policy, and shall deliver to the Agent a valid
binder in respect of such policy or policies in the same form and
containing the same information as the expiring policy or policies required
to be delivered by each Loan Party and its Subsidiaries pursuant to
subsection 6.10E or a copy of the binding commitment for such policy
complying with all the requirements of this subsection, followed by a
certified true copy of the policy or policies when issued.
G. MATERIAL CHANGE IN POLICY. Each Loan Party shall deliver, and
shall cause each of its Subsidiaries to deliver, to the Agent concurrently
with each material change in any insurance policy covering any part of the
Pool A Properties required to be maintained by each Loan Party and its
Subsidiaries hereunder, a valid binder or policy endorsement with respect
to such changed insurance policy certified by the insurance company issuing
such policy, in the same form and containing the same information as the
original evidence of insurance required to be delivered by each Loan Party
and its Subsidiaries pursuant to subsection 6.10E.
H. SEPARATE INSURANCE. Each Loan Party will not take out, nor will
it permit any of its Subsidiaries to take out, separate insurance
concurrent in form or contributing in the event of loss with that required
to be maintained pursuant to this subsection unless such insurance complies
with all of the requirements of this subsection.
6.11 CASUALTY AND CONDEMNATION; RESTORATION.
A. NOTICE OF CASUALTY. Upon the occurrence of any damage to or loss
or destruction of all or any portion of any Pool A Property, whether or not
covered by insurance, which will cost (or may reasonably be expected to
cost) more than $500,000 to Restore, as reasonably determined by the
Borrower and so certified in an Officers' Certificate delivered to the
Agent, (i) the Borrower shall promptly deliver to the Agent written notice
of the same which shall, among other things, describe such casualty, and
(ii) as soon as practicable but in any event prior to the commencement of
Restoration of such Pool A Property, the Borrower shall deliver to the
Agent a Notice of Renovation/Restoration in the form attached hereto as
EXHIBIT XVII.
B. INSURANCE PROCEEDS. All Insurance Proceeds in respect of a Pool
A Property (other than Insurance Proceeds attributable to insurance
required pursuant to subsection 6.10A(ii) and (iii)) and the right thereto
are hereby irrevocably assigned and pledged by each Loan Party to the Agent
for the benefit of the Lenders, and the Agent on behalf of the Lenders is
authorized, at its option, to collect and receive all of the same and to
give proper receipts and acquittances therefor; PROVIDED, however, that (x)
such assignment and pledge with respect to any such Pool A Property is
subject to any requirements of any Ground Lease affecting such Pool A
Property, (y) if no Event of Default shall have occurred and be continuing
such Loan Party shall have the right to direct the Agent to apply
Insurance Proceeds in accordance with subsections 6.11E and 6.11F and (z)
if no Event of Default shall have occurred and be continuing, to the extent
not inconsistent with the requirements of subsections 6.11E and 6.11F, such
Loan Party shall have the right to direct the Agent (1) to pay to such Loan
Party all Insurance Proceeds with respect to such casualty affecting a Pool
A Property which will cost (or may reasonably be expected to cost) less
than $500,000 to Restore and (2) to pay to such Loan Party all proceeds of
any related business interruption insurance. Each Loan Party agrees to
execute and to cause each of its Subsidiaries to execute such further
assignments and pledges of any Insurance Proceeds in respect of the Pool A
Properties as the Agent may reasonably require and shall otherwise
cooperate with the Agent in obtaining for the Agent and the Lenders the
benefit of any Insurance Proceeds lawfully or equitably payable in respect
of any such Pool A Property, subject to the provisos above. If, prior to
the receipt by the Agent of such Insurance Proceeds, any Pool A Property
shall have been transferred upon foreclosure of the applicable Mortgage (or
by deed in lieu thereof), the Agent shall have the right to receive such
Insurance Proceeds to the extent (x) such Insurance Proceeds are
attributable to a casualty occurring prior to foreclosure or delivery of
any deed in lieu thereof and (y) of any deficiency found to be due upon
such sale, with legal interest thereon, and reasonable counsel fees, costs
and disbursements incurred by the Agent in connection with the collection
of such Insurance Proceeds. The Agent may, but shall not be obligated to,
make proof of loss if not made promptly by the applicable Loan Party or
Subsidiary thereof. During the continuance of an Event of Default, the
Agent is hereby authorized and empowered by each of CapStar and the
Borrower to settle, adjust or compromise any claims for damage, destruction
or loss thereunder, with or without the consent of any Loan Party or any of
its Subsidiaries (and each of CapStar and the Borrower hereby irrevocably
appoints and constitutes the Agent as CapStar's and the Borrower's lawful
attorney-in-fact, coupled with an interest and with full power of
substitution, for such purpose). In no event shall any Loan Party or any
of its Subsidiaries settle, adjust or compromise any claim for Insurance
Proceeds in respect of any Pool A Property in excess of $500,000 without
the prior written consent of the Agent, which shall not be unreasonably
withheld, conditioned or delayed; PROVIDED, HOWEVER, that this provision
shall not restrict the right of the lessor under any applicable Ground
Lease (1) to settle, adjust or compromise any claim for Insurance Proceeds
to the extent such lessor is granted the power to do so under such Ground
Lease or (2) to approve any settlement, adjustment or compromise of any
claim for Insurance Proceeds to the extent the approval of such lessor is
required under such Ground Lease. Subject to the requirements of any
Ground Lease affecting any Pool A Property, each insurance company
concerned is hereby authorized and directed to make payment of all
Insurance Proceeds in respect of each of the Pool A Properties payable by
it directly to the Agent. If any Loan Party or any of its Subsidiaries
receives any Insurance Proceeds resulting from such casualty in respect of
any Pool A Property, such Loan Party or Subsidiary shall (subject to the
requirements of any Ground Lease affecting such Property) promptly endorse
and transfer, or cause such Subsidiary to endorse and transfer, such excess
Insurance Proceeds to the Agent and each Loan Party covenants that until so
paid over to the Agent, such Loan Party or such Subsidiary, as applicable,
shall hold such Insurance Proceeds in trust for the benefit of the Agent
and shall not commingle such Insurance Proceeds with any other funds or
assets of such Loan Party or Subsidiary or any other Person.
C. NOTICE OF CONDEMNATION; NEGOTIATION AND SETTLEMENT OF CLAIMS.
The Loan Parties shall, and shall cause their respective Subsidiaries to,
promptly deliver written notice to the Agent upon obtaining knowledge of
the institution, or the proposed institution, of any bona fide action or
proceeding for the Taking of all or any portion of any Pool A Property.
The Agent shall have the right to participate in any negotiation, action or
proceeding relating to any such action or proceeding affecting any Pool A
Property, and no settlement or compromise of any claim in connection with
any such action or proceeding shall be made without the consent of the
Agent, which consent shall not be unreasonably withheld, conditioned or
delayed; PROVIDED, HOWEVER, that this provision shall not restrict the
right of the lessor under any applicable Ground Lease (1) to settle or
compromise any such claim to the extent such lessor is granted the power to
do so under such Ground Lease or (2) to approve any settlement or
compromise of any such claim to the extent the approval of such lessor is
required under such Ground Lease. Upon the occurrence of any Taking with
respect to a Pool A Property which will cost (or may reasonably be expected
to cost) more than $500,000 to Restore, as reasonably determined by the
Borrower and so certified in an Officers' Certificate delivered to the
Agent, as soon as practicable thereafter but in any event not less than 20
days prior to the commencement of any Restoration of such Pool A Property,
the Borrower shall deliver to the Agent a Notice of Renovation/Restoration
in the form attached hereto as EXHIBIT XVII.
D. CONDEMNATION PROCEEDS. All Condemnation Proceeds in respect of
each of the Pool A Properties and the right thereto are hereby irrevocably
assigned and pledged by each Loan Party to the Agent for the benefit of the
Lenders, and the Agent on behalf of the Lenders is authorized, at its
option, to collect and receive all such Condemnation Proceeds and to give
proper receipts and acquittances therefor; PROVIDED, HOWEVER, (x) that such
assignment and pledge with respect to any such Pool A Property is subject
to any requirements of any Ground Lease affecting such Pool A Property, (y)
if no Event of Default shall have occurred and be continuing, such Loan
Party shall have the right to direct the Agent to apply Condemnation
Proceeds in accordance with subsections 6.11E and 6.11F and (z) if no Event
of Default shall have occurred and be continuing, to the extent not
inconsistent with the requirements of subsections 6.11E and 6.11F, such
Loan Party shall have the right to direct the Agent to pay such Loan Party
all Condemnation Proceeds with respect to a Taking affecting a Pool A
Property which will cost (or may reasonably be expected to cost) less than
$500,000 to Restore. Each Loan Party agrees to execute, and to cause each
of its Subsidiaries to execute, such further assignments of any
Condemnation Proceeds in respect of any Pool A Property as the Agent may
reasonably require and shall otherwise cooperate with the Agent in
obtaining for the Agent and the Lenders the benefit of any Condemnation
Proceeds lawfully or equitably payable in respect of such Pool A Property,
subject to the provisos above. If, prior to the receipt by the Agent of
such Condemnation Proceeds, the portion of the Pool A Property, subject to
such action or proceeding shall have been sold on foreclosure of the
applicable Mortgage (or by deed in lieu thereof), the Agent shall have the
right to receive such Condemnation Proceeds to the extent (x) such
Condemnation Proceeds are attributable to a Taking occurring prior to
foreclosure or delivery of any deed in lieu thereof and (y) of any
deficiency found to be due upon such sale, with legal interest thereon, and
reasonable counsel fees, costs and disbursements incurred by the Agent in
connection with the collection of such Condemnation Proceeds. The Agent
may, but shall not be obligated to, make proof of loss if not made promptly
by the applicable Loan Party or Subsidiary thereof. Upon the occurrence
and during the continuance of an Event of Default (but not otherwise), the
Agent is hereby authorized and empowered by each Loan Party to settle,
adjust or compromise any claims for Condemnation Proceeds with or without
the consent of such Loan Party or any of its Subsidiaries (and each of the
CapStar and the Borrower hereby irrevocably appoints and constitutes the
Agent as its lawful attorney-in-fact, coupled with an interest and with
full power of substitution, for such purpose). In no event shall any Loan
Party or any of its Subsidiaries settle, adjust or compromise any claim for
Condemnation Proceeds in respect of any Pool A Property without the prior
written consent of the Agent, which shall not be unreasonably withheld,
conditioned or delayed; PROVIDED, HOWEVER, that this provision shall not
restrict the right of the lessor under any applicable Ground Lease (1) to
settle or compromise any claim for Condemnation Proceeds to the extent such
lessor is granted the power to do so under such Ground Lease or (2) to
approve any settlement or compromise of any claim for Condemnation Proceeds
to the extent the approval of such lessor is required under such Ground
Lease. Subject to the requirements of any Ground Lease affecting any Pool
A Property, each condemnor concerned is hereby authorized and directed to
make payment of all Condemnation Proceeds in respect of each of the
Properties payable by it directly to the Agent. If any Loan Party or any
of its Subsidiaries receives any Condemnation Proceeds resulting from such
condemnation in respect of any Pool A Property, such Loan Party or such
Subsidiary shall (subject to the requirements of any Ground Lease affecting
such Pool A Property) promptly endorse and transfer such excess
Condemnation Proceeds to the Agent and each Loan Party covenants that until
so paid over to the Agent, such Loan Party or Subsidiary, as the case may
be, shall hold such Condemnation Proceeds in trust for the benefit of the
Agent and shall not commingle such Condemnation Proceeds with any other
funds or assets of such Loan Party or Subsidiary or any other Person.
E. REDUCTION OF BORROWING BASE; PAYMENT OF RELEASE PRICE. In the
event of any casualty or Taking with respect to a Pool A Property, which
will cost (or may reasonably be expected to cost) more than $500,000 to
Restore, as reasonably determined by the Borrower and so certified in an
Officers' Certificate delivered to the Agent, the Borrower shall elect by
written notice delivered to the Agent as soon as practicable thereafter,
but in any event before the earlier of (x) 10 days after the occurrence of
such casualty or Taking and (y) the commencement of the Restoration of such
Pool A Property, either:
(i) to remove the Pool A Property from the calculation of the
Borrowing Base pursuant to subsection 2.9D, prepay the Loans in an
amount equal to the Release Price with respect to such Pool A Property
and not Restore such Pool A Property;
(ii) if all the following conditions shall be satisfied, to
Restore such Pool A Property pursuant to subsection 6.11F:
(a) the Maturity Date shall then not have occurred;
(b) no Potential Event of Default (other than any Potential
Event of Default caused solely by an event or condition with
respect to another Property) or Event of Default shall have
occurred and be continuing or would be caused by such
Restoration;
(c) the Borrower is in compliance in all respects with the
provisions of subsection 6.11F;
(d) either (1) the Agent shall have determined, in its
reasonable discretion and after considering such written opinions
of architects and engineers and other written information as the
Borrower shall timely deliver to the Agent, that Restoration of
such Pool A Property is, under the circumstances then existing,
physically and economically feasible and can be completed in
accordance with subsection 6.11F on or before a date not less
than six months prior to the Maturity Date or (2) such
Restoration shall not constitute a Major Renovation/Restoration;
(e) the Loan Parties and their respective Subsidiaries
shall have business interruption insurance complying with
subsection 6.10 in an amount at least equal to the reduction in
Property EBITDA with respect to such Pool A Property, if any,
which the Borrower reasonably expects to suffer during the period
of Restoration;
(f) the Loan Parties and their respective Subsidiaries
shall have complied with all notice and other requirements under
any Ground Lease affecting such Pool A Property that must be
satisfied in respect of such Restoration, the Restoration is
permitted under the terms of such Ground Lease and the Ground
Lease remains in full force and effect; and
(g) either (1) the Net Insurance/Condemnation Proceeds
shall be sufficient to complete the costs of such Restoration, as
determined by the Agent in its reasonable discretion, or (2) the
Loan Parties and their respective Subsidiaries shall have
provided, at the Borrower's option, a cash deposit or a letter of
credit satisfactory to the Agent (other than a Letter of Credit),
in its reasonable discretion (or other collateral reasonably
satisfactory to the Agent), for the amount of any shortfall in
the amount of Net Insurance/Condemnation Proceeds necessary to
cover the costs to complete such Restoration; or
(iii) to prepay the Loans in an amount equal to the Release Price
with respect to such Pool A Property and Restore such Pool A Property
pursuant to subsection 6.11G.
If the Loan Parties and their respective Subsidiaries shall fail to satisfy
the conditions set forth in clause (ii) of the preceding sentence or in
subsection 6.11F with respect to the related Pool A Property, or shall fail
to diligently and continuously prosecute the Work to completion (other than
as a result of Excusable Delay), as determined by the Agent, in its
reasonable discretion, then, subject to the requirements of any Ground
Lease affecting such Pool A Property, the Pool A Property shall be removed
from the calculation of the Borrowing Base pursuant to subsection 2.9D, the
Borrower shall prepay the Loans in an amount equal to the Release Price
with respect to such Property and the Agent shall apply any or all
remaining Insurance Proceeds or Condemnation Proceeds, as applicable,
towards such prepayment.
F. RESTORATION WITH NET INSURANCE/CONDEMNATION PROCEEDS. In the
event of any casualty or Taking with respect to a Pool A Property, which
will cost (or may reasonably be expected to cost) more than $500,000 to
Restore, as reasonably determined by the Borrower and so certified in an
Officers' Certificate delivered to the Agent, if any of the Loan Parties
and their respective Subsidiaries elects to Restore a Pool A Property,
pursuant to this subsection 6.11F and the conditions set forth in
clause (ii) of the first sentence of subsection 6.11E are satisfied, all
Net Insurance/Condemnation Proceeds shall be held by the Agent (subject to
the requirements of any Ground Lease affecting such Pool A Property) in an
interest-bearing account at the Agent, with all interest to be held therein
until completion and final inspection of the Work, and shall be applied by
the Agent to the payment of the cost of Restoring such Pool A Property so
damaged or destroyed or of the portion or portions of such Property not so
Taken (the ``WORK'') and shall be paid out from time to time to the
Borrower as the Work progresses, subject to retainage as reasonably
determined by the Agent in accordance with construction lending practices
and otherwise in accordance with any conditions reasonably imposed by the
Agent but subject to each of the following conditions:
(i) Subject to Excusable Delays, the Borrower shall promptly
(and in any event within 120 days after the applicable casualty or
Taking) commence, or cause the commencement of, Restoration of such
Pool A Property.
(ii) If the Work is structural or if the cost of the Work, as
estimated by the Borrower, shall exceed the lesser of 10% of the
Property Amount with respect to such Property and $500,000, the Work
shall be in the charge of an architect or Engineer (who may be an
employee or Affiliate of CapStar or the Borrower only if the cost of
the Work does not exceed such lesser amount), and before any Loan
Party or any of its Subsidiaries commences any Work, other than
temporary work to protect property or prevent interference with
business, the Agent shall have approved the plans and specifications
and the general contract for the Work to be submitted by such Loan
Party or such Subsidiary, which approval shall not be unreasonably
withheld, conditioned or delayed. Such plans and specifications shall
provide for such Work that, upon completion thereof, the Improvements
shall (x) be in compliance in all material respects with all legal
requirements such that all representations or warranties of the Loan
Parties relating to the compliance of such Pool A Property with
Applicable Laws in this Agreement or any of the other Loan Documents
would then be true and correct, and (y) be at least equal in value and
general utility to the Improvements which were on such Pool A Property
prior to the damage, destruction or Taking. Such plans and
specifications shall be accompanied by (1) a signed estimate of the
Borrower, or, if an architect or Engineer is required to supervise the
Work, such architect or Engineer, stating the estimated cost of
completing the Work, which estimate shall bear the architect's or
Engineer's seal if not made by the Borrower and (2) to the extent
necessary at such stage of the Work, certified copies of all
Authorizations required in connection with the commencement and
performance of the Work.
(iii) Each request for payment shall be made on seven days' prior
notice to the Agent and shall be accompanied by paid invoices and by
(a) a certificate to be made by such architect or Engineer, if one be
required under clause (ii) above, otherwise by an Officers'
Certificate of the Borrower, stating that (1) all of the Work
completed has been done in substantial compliance with the approved
plans and specifications, if any be required under said clause (ii)
above, and (2) the sum requested is justly required to reimburse any
of the Loan Parties and their respective Subsidiaries for payments
made by the applicable Loan Party or Subsidiary thereof to, or is
justly due to, the contractor, subcontractors, materialmen, laborers,
engineers, architects or other Persons rendering services or materials
for the Work (giving a brief description of such services and
materials), and that when added to all sums previously paid out by the
Agent does not exceed the cost of the Work done to the date of such
certificate, and (b) an Officers' Certificate of the Borrower
stating either that (x) the amount of such proceeds remaining in the
hands of the Agent, or (y) the amount of such funds, PLUS funds in the
hands of the applicable Loan Party or Subsidiary thereof from other
sources irrevocably committed to the completion of the Work in a
manner reasonably satisfactory to the Agent (including delivery of
such funds to the Agent for application to pay the costs of the
Restoration), will be sufficient on completion of the Work to pay for
the same in full (giving in such reasonable detail as the Agent may
require an estimate of the cost of such completion). The Agent may
require that any such statements be independently verified by an
inspector approved by the Agent.
(iv) Each request shall be accompanied by waivers of lien
satisfactory to the Agent covering that part of the Work for which
payment or reimbursement has been made (or other evidence as shall be
satisfactory to the Agent in its sole discretion confirming that no
rights of mechanics, contractors, subcontractors, materialmen or
suppliers are outstanding in respect of such Work) and by a search
prepared by the Title Company reasonably satisfactory to the Agent
establishing that there has not been filed with respect to such Pool A
Property any mechanics' or other lien or instrument for the retention
of title in respect of any part of the Work not discharged of record
or bonded to the reasonable satisfaction of the Agent and evidencing
the continued priority of the Mortgage and Assignment of Rents and
Leases on such Pool A Property.
(v) The available Insurance Proceeds or Condemnation Proceeds
which are paid or will be payable by the insurance company (together
with any cash, irrevocable letter of credit, payment or performance
bond or United States government obligation assigned to the Agent as
collateral, in each case reasonably acceptable to the Agent as to
amount, obligor and maturity) are, in the reasonable judgment of the
Agent, sufficient to pay in full the costs of the Restoration.
(vi) There shall be no Event of Default or Potential Event of
Default (other than any Potential Event of Default caused solely by an
event or condition with respect to another Property).
(vii) The request for any payment after the Work has been
completed shall be accompanied by (a) a copy of any certificate or
certificates required by law to render occupancy of the improvements
being rebuilt, repaired or restored legal; and (b) final lien waivers
for all labor, materials and supplies from all contractors,
subcontractors and materialmen, except with respect to claims or
rights being contested or bonded in accordance with the provisions of
subsection 6.9.
(viii) After commencing the Work, the Borrower shall, subject to
Excusable Delays, perform, or shall cause the applicable Loan Party or
Subsidiary thereof to perform, the Work diligently and in good faith
in a good and workmanlike manner to completion in accordance with the
approved plans and specifications, if any.
(ix) The Agent shall have received ``agreements to complete'' of
the general contractor and any independent architects or Engineers,
which agreements to complete shall be in form and substance reasonably
satisfactory to the Agent.
(x) The Borrower shall have obtained and maintained, or shall
have caused the applicable Loan Party or Subsidiary thereof to obtain
and maintain, completed value builders' risk (all risk) insurance in
accordance with subsection 6.10A.
All costs and expenses of any Restoration, including, without
limitation, any Work, Engineer's fees, architect's fees or contractors fees
and the cost and expenses of complying with this subsection 6.11F, shall be
for the account of the Borrower. Upon completion of the Work and payment
in full therefor, the Borrower shall promptly deliver to the Agent a
Completion Certificate with respect thereto, together with all final lien
waivers in form and substance reasonably satisfactory to the Agent, and the
Agent shall return to the Borrower the amount of any unspent Insurance
Proceeds or Condemnation Proceeds then or thereafter in the hands of the
Agent on account of the casualty or Taking that necessitated such Work,
together with all undisbursed accrued interest thereon. Nothing in this
subsection shall prevent the Agent from applying at any time all or any
part of the Insurance Proceeds or Condemnation Proceeds to the curing of
any Event of Default under this Agreement or any other Loan Document.
G. OTHER RESTORATIONS. In the event of any casualty or Taking with
respect to a Pool A Property, which will cost (or may reasonably be
expected to cost) more than $500,000 to Restore, as reasonably determined
by the Borrower and so certified in an Officers' Certificate delivered to
the Agent, and either (x) the Borrower or any of its Subsidiaries elects to
Restore a Pool A Property pursuant to subsection 6.11F but the conditions
set forth in clause (ii) of the first sentence of subsection 6.11E are not
satisfied or (y) the Borrower or any of its Subsidiaries elects to Restore
any Pool A Property pursuant to this subsection 6.11G, the Borrower shall:
(i) prepay the Loans in an amount equal to the applicable
Release Price; PROVIDED that the Insurance Proceeds or Condemnation
Proceeds received in connection with such casualty or Taking may be
applied to such payment; and
(ii) together with the delivery of the Notice of
Renovation/Restoration pursuant to subsection 6.11A or 6.11C, deliver
to the Agent the following: (a) a project budget (as revised and
supplemented from time to time in accordance with this
subsection 6.11G, the ``RESTORATION BUDGET'') satisfactory in form to
the Agent and setting forth, among other things, the aggregate costs
for such Restoration, and the aggregate cost for each line item in
such budget; (b) an estimated time schedule for such Restoration,
reasonably satisfactory in form to the Agent and setting forth, among
other things, the projected completion date; (c) the final plans and
specifications for the Restoration (as revised and supplemented from
time to time in accordance with this subsection 6.11G, the
``RESTORATION PLANS'') which shall provide for the restoration of the
related Improvements such that, upon completion thereof, the
Improvements shall (x) be in compliance in all material respects with
all legal requirements such that all representations or warranties of
the Loan Parties relating to the compliance of such Pool A Property
with Applicable Laws in this Agreement or any of the other Loan
Documents would then be true and correct, and (y) be at least equal in
value and general utility to the Improvements which were on such Pool
A Property prior to the related damage, destruction or Taking, as the
case may be; and (d) all such other information or materials with
respect to the Restoration that the Agent may reasonably request.
If the Borrower or any applicable Subsidiary materially changes the scope
of the intended Restoration, materially revises the Restoration Budget
(including the estimated amounts contained therein), or materially revises
or modifies the Restoration Plans, the Borrower shall promptly deliver to
the Agent a supplement to the Restoration Budget or Restoration Plans or a
revised Restoration Budget or revised Restoration Plans, as applicable,
which, with respect to any Pool A Property, shall be reasonably
satisfactory in form and substance to the Agent. Subject to Excusable
Delays, the Borrower shall, and shall cause each applicable Subsidiary to,
commence such Restoration as soon as practicable, and in any event within
120 days of the applicable casualty or Taking, and complete the Restoration
promptly, in a good and workmanlike manner and in accordance with the
Restoration Plans. Upon the reasonable request of the Agent, and in any
event not less frequently than quarterly, the Borrower shall provide to the
Agent a written report with respect to the progress and status of each
Restoration, in scope and detail reasonably satisfactory to the Agent.
Upon completion of the Restoration, the Borrower shall promptly deliver to
the Agent a Completion Certificate with respect thereto, together with all
final lien waivers in form and substance reasonably satisfactory to the
Agent. All costs and expenses of any Restoration, including, without
limitation, the cost and expenses of complying with this subsection 6.11G,
shall be for the account of the Borrower. If the Agent determines at any
time that the Borrower is not in compliance with the provisions of this
subsection 6.11G or that the Pool A Property cannot be Restored as
contemplated by this subsection 6.11G, the Agent shall provide the Borrower
written notice of such determination and, within 10 Business Days after
delivery of such notice, the Borrower shall prepay the Loans (net of any
prior prepayments made by the Borrower in respect of such casualty or
Taking pursuant to this subsection) and the Borrowing Base shall be reduced
as provided in subsection 6.11E.
H. ENGINEER'S INSPECTION. At any time after the Agent becomes aware
of a casualty or Taking involving an aggregate amount in excess of $500,000
(as reasonably determined by the Borrower and so certified in an Officers'
Certificate delivered to the Agent) the Agent may hire an independent
engineer to inspect the applicable Property and the Agent may deem any
related Restoration not complete unless the engineer determines that the
Restoration was completed in accordance with this Agreement. The cost of
such inspection shall be for the account of the Borrower.
6.12 RENOVATIONS.
A. NOTICE OF RENOVATION; RENOVATION PLANS. If the Borrower or any
of its Subsidiaries intends to Renovate any Pool A Property (including any
expansion of Improvements to increase the number of available rooms) in a
project or series of related projects (other than the replacement of FF&E
in the ordinary course of business), the cost of which will exceed (or may
reasonably be expected to exceed) $250,000, as reasonably determined by the
Borrower and as so certified in an Officers' Certificate delivered to the
Agent, the Borrower shall, not less than 20 days prior to the commencement
of any such Renovation (or, if such approval shall be sought by the
Borrower in connection with the approval by the Agent of the Acquisition of
such Pool A Property pursuant to subsection 2.9A, not less than 20 days
prior to the proposed closing date of such Acquisition), deliver to the
Agent the following: (i) a Notice of Renovation/Restoration with respect
thereto, in the form of EXHIBIT XVII attached hereto; (ii) a project budget
for such Renovation (as revised and supplemented from time to time in
accordance with this subsection 6.12A, the ``RENOVATION BUDGET''),
reasonably satisfactory in form to the Agent and setting forth, among other
things, the aggregate costs for such Renovation, and the aggregate cost for
each line item in such budget; (iii) an estimated time schedule for such
Renovation, reasonably satisfactory in form to the Agent and setting forth,
among other things, the projected completion date, the number of rooms that
will be unavailable for business as a result of such Renovation and the
duration of such unavailability; (iv) the final plans and specifications
for the Renovation (as revised and supplemented from time to time in
accordance with this subsection 6.12A, the ``RENOVATION PLANS''), to the
extent appropriate for such project, which, shall be reasonably
satisfactory in form and substance to the Agent; and (v) all such other
information or materials with respect to the Renovation that the Agent may
reasonably request. The Agent has approved the Renovation Budgets and
Renovation Plans with respect to the Properties specified on SCHEDULE 6.12A
annexed hereto. In the event the Borrower, or any applicable Subsidiary
changes the scope of the intended Renovation, materially revises the
Renovation Budget (including the estimated amounts contained therein), or
materially revises or modifies the Renovation Plans, the Borrower shall
promptly deliver to the Agent a supplement to the Renovation Budget or
Renovation Plans or a revised Renovation Budget or revised Renovation
Plans, as applicable; which shall be reasonably satisfactory in form and
substance to the Agent; PROVIDED that, notwithstanding anything contained
in this Section 6.12A, all expenditures for Renovations shall be in
compliance with subsection 7.16. Upon the reasonable request of the Agent,
and in any event not less frequently than quarterly, the Borrower shall
provide to the Agent a written report with respect to the progress and
status of each Renovation, in scope and detail reasonably satisfactory to
the Agent.
B. CONDUCT OF RENOVATION; COSTS. Subject to Excusable Delays, the
Borrower shall, or shall cause its Subsidiaries to, complete the Renovation
promptly, in a good and workmanlike manner and in accordance with the
Renovation Plans. Upon the request of the Agent, and in any event not less
frequently than monthly, the Borrower shall advise the Agent in writing of
the progress and status of the Renovation in reasonable detail. All costs
and expenses of any Renovation, including, without limitation, the cost and
expenses of complying with this subsection 6.12, shall be for the account
of the Borrower.
C. COMPLETION CERTIFICATE. Upon completion of the Renovation, the
Borrower shall promptly deliver to the Agent a Completion Certificate with
respect thereto, together with all final lien waivers in form and substance
reasonably satisfactory to the Agent.
D. ENGINEER'S INSPECTION. At any time after the Agent becomes aware
of a Renovation involving an aggregate amount in excess of $500,000 (as
reasonably determined by the Borrower and so certified in an Officers'
Certificate delivered to the Agent), the Agent may hire an independent
engineer to inspect the applicable Pool A Property and the related
Renovation and the Agent may deem such Renovation not complete unless the
engineer determines that such Renovation was completed in accordance with
this Agreement. The cost of such inspection shall be for the account of
the Borrower.
6.13 BRUNDAGE CLAUSE.
In the event of the enactment of or change in (including a change in
interpretation of) any Applicable Law (i) deducting or allowing any Loan
Party or any of its Subsidiaries to deduct from the value of any Pool A
Property for the purpose of taxation any Lien thereon, (ii) subjecting any
Lender to any tax in respect of, or changing the basis of taxation in
respect of, the Mortgages, or the manner of collection of such taxes (other
than Taxes on net income, franchise taxes and doing business taxes), or
(iii) for the taxation of mortgages or debts secured by mortgages or in the
means of collection of any such tax, in each such case, so as to affect any
Lender or the Notes or the Mortgages or any other Loan Document, and the
result is to increase the taxes imposed upon or the cost to any Lender of
maintaining the Loans, or to reduce the amount of any payments receivable
under the Notes, the Mortgages or any other Loan Document, or to invalidate
the Lien created by any Security Document, then, in any such event, the
Borrower shall, within ten Business Days of receipt of a request therefor,
accompanied by documentation verifying the nature, amount and due date, pay
to such Lender additional amounts to compensate for such increased costs or
reduced amounts; PROVIDED, HOWEVER, that if any Lender makes such a
request, or if the Lien created by any Security Document may be
invalidated, then the Borrower shall have the right, and, in the case of
such invalidation, shall have the obligation, to reduce the Commitments and
prepay the Loans, in accordance with the provisions of this Agreement and
the Notes; PROVIDED FURTHER, HOWEVER, that if any such payment or
reimbursement shall be unlawful or would constitute usury or render the
Loans wholly or partially usurious under Applicable Law, then the Agent
may, in its sole discretion, declare the Loans so affected immediately due
and payable (without premium or penalty) and/or require the Borrower to pay
or reimburse the Lenders for payment of the lawful and non-usurious portion
thereof not less than 180 days after notice of such declaration.
6.14 INTEREST RATE PROTECTION.
If at any time the Total Utilization of Commitments exceeds
$100,000,000, then within 60 days, the Borrower shall obtain and thereafter
shall maintain (until such time as the Total Utilization of Commitments
does not exceed $100,000,000) interest rate protection through the Maturity
Date in an aggregate notional amount at least equal to 40% of the Total
Utilization of Commitments and on terms and with counterparties approved by
the Agent, which approval shall not be unreasonably withheld, conditioned
or delayed and which interest rate protection shall provide that the sum of
(i) the maximum per annum rate of interest payable hereunder by the
Borrower with respect to Loans PLUS (ii) the net cost of such interest rate
protection (expressed as a per annum percentage of the applicable notional
amount), shall not exceed 11% per annum.
6.15 CASH MANAGEMENT SYSTEM; AGENT RIGHTS; APPLICATION OF CASH FLOW;
DEPOSITORY ACCOUNT NAMES.
A. CASH MANAGEMENT SYSTEM. Each Loan Party shall, and shall cause
each of its Wholly Owned Subsidiaries (other than the Pool B Subsidiaries)
to, maintain the Cash Management System as described in SCHEDULE 5.23
annexed hereto; PROVIDED, HOWEVER, that each Loan Party may open and close
Local Accounts and make other changes to the Cash Management System in the
ordinary course of business upon prior written notice to the Agent as long
as (i) no Event of Default has occurred and is continuing or would result
therefrom, (ii) such changes, either individually or in the aggregate are
not adverse to either the Agent or any Lender (in its capacity as a Lender)
or impair any rights, priority or perfection of the Agent under the
Security Documents, (iii) in the case of any closing of any Local Account,
a replacement Local Account satisfactory to the Agent is opened by such
Loan Party or such Subsidiary, as the case may be, and a Cash Management
Letter is entered into with respect to such replacement Local Account prior
to the closing of such Local Account and (iv) all Receipts of each Loan
Party and each of its Wholly Owned Subsidiaries (other than the Pool B
Subsidiaries) continue to be collected and distributed pursuant to
procedures subject to Cash Management Letters at all times, except as
described on SCHEDULE 5.23; PROVIDED FURTHER, that the Borrower may close a
Concentration Account and open a substitute Concentration Account with any
Lender as long as (i) no Event of Default has occurred and is continuing or
would result therefrom and (ii) prior to opening any substitute
Concentration Account, the Borrower shall have delivered evidence
satisfactory to the Agent that the Agent shall have, for the benefit of the
Lenders, a perfected security interest in such Concentration Account. For
the purposes of this subsection 6.15, Receipts shall include, without
limitation, Receipts derived from the Atlanta Note, Investments in
Subsidiaries and Joint Ventures (including without limitation, the Atlanta
Sub and the Pool B Subsidiaries) and other Securities.
B. AGENT RIGHTS. Each Loan Party shall, and shall cause each of its
Wholly Owned Subsidiaries (other than Pool B Subsidiaries) to, comply with
the following:
(i) Notwithstanding any other provision of this Agreement or any
other Loan Document, except as described on SCHEDULE 5.23 annexed
hereto, all Receipts of each Loan Party and each of its Wholly Owned
Subsidiaries shall be deposited daily in Local Accounts that are
subject to Cash Management Letters or into the Concentration Account,
in each case on or before the first Business Day following receipt
thereof, by the accounting office of the Loan Party or such
Subsidiary, as applicable, and as soon as practical in the case of
Receipts received in any other manner. All funds on deposit in the
Local Accounts of each Loan Party and each of its Wholly Owned
Subsidiaries (other than the Pool B Subsidiaries) shall be transferred
to the Concentration Account in the manner described on SCHEDULE 5.23.
Receipts shall be received and held by such Loan Party and such
Subsidiary and any of their respective officers, employees, agents,
managers or other Persons acting for or in concert with such Loan
Party or such Subsidiary to make collections for or on behalf of such
Loan Party or such Subsidiary, in trust for the Agent as Collateral.
(ii) So long as no Event of Default shall have occurred and is
continuing, the Borrower may request that the Agent instruct the Cash
Manager to either apply Receipts on deposit in the Concentration
Account to pay Obligations or transfer such Receipts to accounts
designated by the Borrower in such amounts as the Borrower may
require, in each case by delivering such a request to the Agent. As
long as no Event of Default shall have occurred and be continuing,
upon receipt by the Agent of such a request, the Agent shall instruct
the Cash Manager to apply the Receipts on deposit in accordance with
such request; PROVIDED that the Agent may instruct the Cash Manager to
automatically apply Receipts on deposit in the Concentration Account
in accordance with the Borrower's instructions unless the Agent
notifies the Cash Manager that an Event of Default has occurred and is
continuing, subject to the availability of funds on deposit in the
Concentration Account.
(iii)So long as no Event of Default shall have occurred and is
continuing, the Borrower may instruct the Cash Manager to invest in
Cash Equivalents in accordance with the Borrower's instructions all or
any part of amounts from time to time on deposit in the Concentration
Account, other than amounts necessary to effectuate a request by the
Borrower as provided for in subsection 6.15B(ii) with respect to the
use of such Receipts, and the Agent shall authorize the Cash Manager
to follow the Borrower's instructions as long as no Event of Default
shall exist.
C. APPLICATION OF CASH FLOW BY AGENT. During the continuance of an
Event of Default, the Agent may, in its sole discretion in accordance with
subsection 6.15B(iii), apply funds on deposit in the Local Accounts and
other Receipts received by the Agent, (i) to the payment of Operating
Expenses of the Properties, federal, state and local taxes and other
expenses or liabilities of the Loan Parties and their respective
Subsidiaries and/or (ii) to the payment of the Obligations. In the event
that the Agent determines, during the continuance of an Event of Default,
to apply funds or Receipts to the payment of Operating Expenses of the
Properties, federal, state and local taxes and other expenses or
liabilities of the Loan Parties and their respective Subsidiaries promptly
after being notified of such determination by the Agent, the Borrower shall
deliver to the Agent (x) within five Business Days of the first day of each
calendar month during the continuance of an Event of Default, a budget
setting forth the estimated Operating Expenses and other amounts set forth
above for such calendar month (y) within three Business Days of the date on
which the Borrower desires a disbursement to be made, but not more
frequently than once in any calendar week, a written request for
disbursements with respect to Operating Expenses and amounts set forth
above for such calendar week and (z) such other budgets and related
information as the Agent may reasonably request. Upon receipt of any such
request for disbursements, the Agent may, in its sole discretion, instruct
the Cash Manager to transfer funds on deposit in the Concentration Account
to any other account of the Borrower or its Subsidiaries to be applied to
the payment of amounts set forth in such request for disbursements and
approved by the Agent.
D. NAMES ON DEPOSIT ACCOUNTS. The Borrower shall cause each Local
Account and Concentration Account listed on SCHEDULE 5.23 annexed hereto in
respect of a Pool A Property to be changed to the extent necessary so that
such Local Account is, promptly after the Closing Date but in no event
later than December 31, 1996, maintained by and in the name of the Borrower
or any of its Wholly Owned Subsidiaries.
E. CASH MANAGEMENT LETTER. Notwithstanding anything in this
Agreement or in any of the other Loan Documents to the contrary, including
any Cash Management Letter, except during the continuation of an Event of
Default, the Agent shall not withdraw any funds from, close or take any
other actions in connection with any Deposit Account (other than cause such
funds to be transferred to the Concentration Account) pursuant to any Cash
Management Letter without the Borrower's prior written consent or written
joinder. During the continuation of an Event of Default, the Agent shall
have the same rights with respect to any Local Account as are expressly
provided in this Agreement with respect to the Concentration Account during
the continuance of an Event of Default (or event subject to subsection 8.1A
that would be an Event of Default with the lapse of time). The
instructions given by any Loan Party to any depository institution in any
Cash Management Letter shall be made without prejudice to the rights of the
Borrower under this Agreement or any other Loan Document (other than such
Cash Management Letter). All Cash Management Letters with respect to the
Local Accounts listed on SCHEDULE 5.23 annexed hereto shall be delivered to
the Agent, in form and substance reasonably satisfactory to the Agent, on
or before December 31, 1996.
6.16 CAPITAL RESERVE ACCOUNT; DEFERRED MAINTENANCE.
A. CAPITAL RESERVE ACCOUNT. On or before the last day of the month
next following the end of each calendar quarter, commencing on January 31,
1997, the Borrower shall do the following:
(i) either (a) deposit into or cause to be deposited into the
Capital Reserve Account an amount equal to the remainder, which shall
not be less than zero, of (1) 4.00% of Property Gross Revenues for
each of the Properties for the four immediately preceding calendar
quarters; PROVIDED that such percentage shall be 3.00% with respect to
any Property at which a Renovation costing more than $1,000,000 (as
evidenced by written documentation reasonably satisfactory in form and
substance to the Agent) has been completed during the 12 consecutive
month period ending on the applicable date of determination, MINUS (2)
the aggregate cost of Capital Items that shall have been paid with
respect to such Property during such four calendar quarters, which
payments shall not have been funded from disbursements from the
Capital Reserve Account or from an Other Capital Reserve Account,
MINUS (3) the aggregate amount deposited in the Capital Reserve
Account pursuant to this subsection 6.16A(i)(a) with respect to such
four calendar quarter period (excluding all amounts required to be
deposited during such four calendar quarter period but calculated with
respect to a prior period), MINUS (4) if such Property is a Pool B
Property, the aggregate amount, if any, that shall then have been
deposited with respect to such Property in Other Capital Reserve
Accounts pursuant to the requirements of the related Pool B Obligation
for such calendar quarter or (b) if no Event of Default or Potential
Event of Default then exists, the amount calculated pursuant to clause
(a) above shall be included in Total Utilization; and
(ii) deliver to the Agent an Officers' Certificate with respect
to (a) the allocation of such amount among the Properties, which
allocation shall reflect the amounts determined with respect to the
Properties pursuant to the preceding clause (i), (b) the allocation of
the resulting balance in the Capital Reserve Account among the
Properties, which allocation shall reflect the allocation of all
deposits in the Capital Reserve Account pursuant to this subsection
6.16A and all transfers therefrom pursuant to this subsection 6.16A
and (c) the deposits in and withdrawals from each of the Other Capital
Reserve Accounts during the preceding calendar quarter and the
respective closing balances thereof.
On or before the thirtieth day after the end of each calendar year,
the Borrower shall deliver to the Agent an Officers' Certificate
summarizing amounts withdrawn from the Capital Reserve Account during the
preceding year and the application of such proceeds.
So long as no Event of Default has occurred and is continuing, upon
the Borrower's written request and not more frequently than once each
month, (x) the Agent shall transfer funds to the Borrower then on deposit
in the Capital Reserve Account for the payment of costs of Capital Items or
for the deposit of funds into Other Capital Reserve Accounts, in the case
of each such deposit an amount not greater than the amount of funds then
required by the terms of the related Pool B Obligation to be so deposited;
PROVIDED, HOWEVER, that the aggregate amount of such funds applied towards
Capital Items from the Capital Reserve Account in respect of any Property
shall not exceed the aggregate amount of funds deposited in the Capital
Reserve Account in respect of such Property and (y) on the last day of the
month next following the end of each calendar quarter, the aggregate amount
to be reserved pursuant to clause (iv) of the definition of Total
Utilization shall be reduced (to a number not less than zero) by an amount
equal to the remainder of (1) the sum of the aggregate amount of
expenditures for Capital Items during the preceding calendar quarter PLUS
the aggregate amount of deposits into Other Capital Reserve Accounts during
the preceding calendar, in each case in amounts not greater than the amount
of funds then required by the terms of the related Pool B Obligation to be
so deposited, MINUS (2) the sum of the aggregate amount of transfers
pursuant to clause (x) above during such calendar quarter PLUS the
aggregate amount of prior reductions pursuant to this subclause (2) during
such calendar quarter; PROVIDED that the aggregate reduction in reserves in
respect of any Property shall not exceed the aggregate amount reserved in
respect of such Property. Together with each such request, the Borrower
shall deliver to the Agent copies of bills and other documentation as may
be reasonably required by the Agent to establish that such Capital Items or
such deposits in such Other Capital Reserve Accounts, as the case may be,
are then due.
B. DEFERRED MAINTENANCE ACCOUNT. So long as no Event of Default or
Potential Event of Default has occurred and is continuing, upon the
Borrower's written request and not more frequently than once each month,
(i) the Agent shall transfer to the Borrower funds then on deposit in the
Deferred Maintenance Account for the payment of costs and expenses paid or
incurred by any of the Loan Parties and their respective Subsidiaries in
connection with the completion of Deferred Maintenance; PROVIDED, HOWEVER,
that the aggregate amount of funds applied towards Deferred Maintenance in
respect of any Pool A Property shall not exceed the aggregate amount of
funds deposited in the Deferred Maintenance Account in respect of such Pool
A Property and (ii) the aggregate amount required to be reserved pursuant
to clause (iii) of the definition of Total Utilization shall be reduced by
an amount equal to the remainder of (a) the aggregate amount of
expenditures or by any of the Loan Parties and their respective
Subsidiaries in connection with the completion of Deferred Maintenance
MINUS (b) the sum of (1) the aggregate amount of transfers pursuant to
clause (i) above PLUS (2) the aggregate amount of prior reductions pursuant
to this clause (ii); PROVIDED, HOWEVER that the aggregate reduction in
reserves in respect of any Property shall not exceed the aggregate amount
reserved in respect of such Property. Together with each such request for
a transfer from the Deferred Maintenance Account and each delivery of a
Borrowing Base Certificate pursuant to subsection 6.10(ii), the Borrower
shall deliver to the Agent (1) an Officers' Certificate of the Borrower,
reasonably satisfactory to the Agent, certifying as to (x) the completion
of the Deferred Maintenance described therein, (y) the amount budgeted
therefor on SCHEDULE 6.16B annexed hereto and (z) the actual amount of the
costs and expenses therefor incurred or paid by the Loan Parties and their
respective Subsidiaries, and (2) copies of bills and other documentation as
may be reasonably requested by the Agent to establish that payments in
respect of the related Deferred Maintenance have been made or are then due,
as the case may be.
C. COMPLETION OF DEFERRED MAINTENANCE. The Borrower shall complete
the Deferred Maintenance recommended therefor in the Engineering Reports
delivered by the Borrower pursuant to subsection 4.1T and with respect to
which amounts have been allocated in the columns on SCHEDULE 6.16B annexed
hereto entitled ``Immediate Repairs of Deferred Items'' and ``Immediate
Repairs of ADA Items'', respectively, promptly after the Closing Date (or,
with respect to the MBL Properties, promptly after the closing of the
acquisition thereof) and shall complete the Deferred Maintenance with
respect to which amounts have been allocated in the column on SCHEDULE
6.16B entitled ``Additional Repairs of Deferred Items During First Year''
on or before the First Anniversary.
6.17 O&M REQUIREMENTS; CERTAIN POST-CLOSING ENVIRONMENTAL COVENANTS.
A. Within 90 days after the Closing Date, the Borrower shall design
an operations and maintenance plan (``O&M PLAN'') which shall be reasonably
satisfactory to the Agent, for asbestos-bearing materials (``ABM'') that is
consistent with the recommendations in the Environmental Protection
Agency's ``Managing Asbestos in Place, A Building Owner's Guide to
Operations and Maintenance Programs for Asbestos-Containing Materials'' and
which shall include, without limitation, the following program elements:
(i) notification (a program to tell workers, tenants and building occupants
where ABM is located, and how and why to avoid disturbing the ABMs); (ii)
surveillance (regular ABM surveillance to note, assess, and document
changes in the ABM's condition); (iii) controls (work control/permit system
to control activities which might disturb ABMs); (iv) work practices (O&M
work practices to avoid or minimize fiber release during activities
affecting ABM); (v) recordkeeping (to document O&M activities); (vi) worker
protection (medical and respiratory protection programs, as applicable);
(vii) training (asbestos program manager and custodial and maintenance
staff training); and (viii) a plan for complying with all Applicable Laws
with respect to ABM. Each of the Loan Parties and their respective
Subsidiaries owning or leasing Properties that at any time are known to
contain, or for which there is a reasonable basis to believe that such
Properties may contain, ABM shall promptly implement such O&M Plan.
B. ASBESTOS ABATEMENT. CapStar and the Borrower hereby agree to
remove or otherwise abate, or cause to be removed or otherwise abated,
within 90 days after the closing date of the acquisition of the MBL
Properties, all ABM from the MBL Properties located on the Closing Date in
Colorado Springs, Colorado (the Holiday Inn Garden of the Gods) and
Lafayette, Louisiana, respectively.
C. UNDERGROUND STORAGE TANK. CapStar and the Borrower hereby agree
to cause, within 90 days after the closing date of the acquisition of the
MBL Properties, the underground storage tank located on the Closing Date on
the MBL Property in Lafayette, Louisiana, to be properly registered with
all applicable Governmental Authorities.
6.18 MANAGEMENT OF PROPERTIES.
The Borrower shall, or shall cause any of its Subsidiaries to, manage
and operate the Atlanta Property and the Pool B Properties pursuant to
Servicing Agreements in a commercially reasonable and prudent manner. No
Person other than the Borrower or any Wholly Owned Subsidiary shall have
substantial authority over the management and operation of any Property.
6.19 INTELLECTUAL PROPERTY.
CapStar and the Borrower shall cause each of their respective
Subsidiaries owning, licensed to use or otherwise having the lawful right
to use any Intellectual Property to execute and deliver the Trademark
Agreement for the purposes of becoming bound thereby, and the Borrower
shall deliver supplements to the Schedules to this Agreement, the Security
Agreement and the Trademark Agreement, which Schedules shall be reasonably
acceptable to the Agent.
6.20 FURTHER ASSURANCES.
A. ASSURANCES. Without expense or cost to the Agent or the Lenders,
each Loan Party shall, and shall cause each of its Subsidiaries to, from
time to time hereafter execute, acknowledge, file, record, do and deliver
all and any further acts, deeds, conveyances, mortgages, deeds of trust,
deeds to secure debt, security agreements, hypothecations, pledges,
charges, assignments, financing statements and continuations thereof,
notices of assignment, transfers, certificates, assurances and other
instruments as the Agent may from time to time reasonably require in order
to carry out more effectively the purposes of this Agreement or the other
Loan Documents, including to subject any Pool A Property or other items of
Collateral, intended to now or hereafter be covered, to the Liens created
by the Security Documents, to perfect and maintain such Liens, and to
assure, convey, assign, transfer and confirm unto the Agent the property
and rights hereby conveyed and assigned or intended to now or hereafter be
conveyed or assigned or which any Loan Party or any such Subsidiary may be
or may hereafter become bound to convey or to assign to the Agent or for
carrying out the intention of or facilitating the performance of the terms
of this Agreement, or any other Loan Documents or for filing, registering
or recording this Agreement or any other Loan Documents. Without limiting
the foregoing, each of CapStar and the Borrower shall, and shall cause each
other Loan Party to, deliver to Agent, promptly upon receipt thereof, all
instruments received by CapStar, the Borrower or any other Loan Party after
the Closing Date and take all actions and execute all documents necessary
or reasonably requested by the Agent to perfect the Agent's security
interest in any such instrument or any other Investment acquired by
CapStar, the Borrower or any other Loan Party. Promptly upon request or,
in an emergency, upon demand, each Loan Party shall execute and deliver,
and hereby authorizes the Agent to execute and file in the name of such
Loan Party, to the extent the Agent may lawfully do so, one or more
financing statements, chattel mortgages or comparable security instruments
to evidence more effectively the Lien hereof upon the Collateral.
B. FILING AND RECORDING OBLIGATIONS. Each Loan Party shall pay all
filing, registration and recording fees and all expenses incident to the
execution and acknowledgement of any Mortgage or other Loan Document,
including any instrument of further assurance described in subsection
6.21A, and shall pay all mortgage recording taxes, transfer taxes, general
intangibles taxes and governmental stamp and other taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution,
delivery, filing, recording or registration of any Mortgage or other Loan
Document, including any instrument of further assurance described in
subsection 6.21A, or by reason of its interest in, or measured by amounts
payable under, the Notes, the Mortgages or any other Loan Document,
including any instrument of further assurance described in subsection
6.21A, and shall pay all stamp taxes and other taxes required to be paid on
the Notes or any other Loan Document, but excluding in the case of each
Lender and the Agent, Taxes imposed on its income by a jurisdiction under
the laws of which it is organized or in which its principal executive
office is located or in which its applicable lender office for funding or
booking its Loans hereunder is located. If any Loan Party fails to make
any of the payments described in the preceding sentence within 10 days
after notice thereof from the Agent (or such shorter period as is necessary
to protect the loss of or diminution in value of any Collateral by reason
of tax foreclosure or otherwise, as determined by the Agent, in its sole
discretion) accompanied by documentation verifying the nature and amount of
such payments, the Agent may (but shall not be obligated to) pay the amount
due and such Loan Party shall reimburse all amounts in accordance with the
terms hereof. If Applicable Law prohibits any Loan Party from paying such
taxes, charges, filing, registration and recording fees, excises, levies,
stamp taxes or other taxes, then the Agent may declare the Loans
immediately due and payable in accordance with the terms of this Agreement,
without premium or penalty not less than 30 days after such declaration in
a principal amount equal to the Property Amount with respect to the
applicable Property, and such Property Amount shall thereafter be excluded
from the calculation of Borrowing Base until all such payments have been
made. Subject to the foregoing, and at its expense, the Borrower shall be
entitled to cause any Mortgage to be amended to increase the maximum
aggregate principal amount secured by such Mortgage. SCHEDULE 1.1B annexed
hereto shall be supplemented to reflect each such increase with respect to
which the Borrower shall have paid all applicable mortgage and recording
taxes.
C. COSTS OF DEFENDING AND UPHOLDING THE LIEN. The Agent may, upon
at least five days' prior notice to the Borrower, (i) appear in and defend
any action or proceeding, in the name and on behalf of the Agent, the
Lenders, any Loan Party or any of its Subsidiaries, in which the Agent or
any Lender is named or which the Agent in its sole discretion determines is
reasonably likely to materially adversely affect any Pool A Property, any
Management Agreement or other Collateral, any Mortgage, the Lien thereof or
any other Loan Document and (ii) institute any action or proceeding which
the Agent reasonably determines should be instituted to protect the
interest or rights of the Agent and the Lenders in any Property or other
Collateral or under this Agreement or any other Loan Document. The
Borrower agrees that all reasonable costs and expenses expended or
otherwise incurred pursuant to this subsection (including reasonable
attorneys' fees and disbursements) by the Agent shall be paid by the
Borrower or reimbursed to the Agent, as the case may be, promptly after
demand.
D. COSTS OF ENFORCEMENT. The Borrower agrees to bear and shall pay
or reimburse the Agent and the Lenders in accordance with the terms of
subsection 8.2 for all reasonable sums, costs and expenses incurred by the
Agent and the Lenders (including reasonable attorneys' fees and the
expenses and fees of any receiver or similar official) of or incidental to
the collection of any of the Obligations, any foreclosure (or Transfer in
lieu of foreclosure) of this Agreement, any Mortgage or any other Loan
Document or any sale of all or any portion of any Property or all or any
portion of the other Collateral.
SECTION 7
NEGATIVE COVENANTS
Each of CapStar and the Borrower covenants and agrees that, so long as
the Commitments hereunder shall remain in effect and until payment in full
of the Loans and the other Obligations (other than indemnification
obligations with respect to claims that have not been asserted at the time
that the Loans and all other Obligations have been paid in full) and the
cancellation or expiration of all Letters of Credit, CapStar and the
Borrower shall perform and shall cause each of their respective
Subsidiaries to perform all covenants in this Section 7.
7.1 INDEBTEDNESS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, create, incur, assume,
Guarantee, refinance, exchange, refund or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(i) the Loan Parties and their respective Subsidiaries may
become and remain liable with respect to the Obligations;
(ii) the Loan Parties and their respective Subsidiaries may
become and remain liable with respect to Interest Rate Agreements
required pursuant to subsection 6.14 or otherwise approved by the
Agent;
(iii) the Loan Parties and their respective Subsidiaries may
become and remain liable with respect to intercompany Indebtedness
owed to the Borrower or any of its Wholly Owned Subsidiaries that are
Loan Parties; PROVIDED that all such Indebtedness shall be evidenced
by one or more promissory notes that are pledged pursuant to the
Security Documents to secure the Obligations;
(iv) so long as at the time of incurrence, refinancing, exchange,
amendment or refunding thereof (a) no Event of Default or Potential
Event of Default has occurred and is continuing or would be caused
thereby and (b) such incurrence, refinancing, exchange, amendment or
refunding is permitted under the terms and provisions of all other
Indebtedness and each agreement pursuant to which such other
Indebtedness was incurred, the Borrower and its Subsidiaries may
incur, refinance, exchange, amend or refund Indebtedness or become
liable with respect to Guaranties in an aggregate principal amount not
to exceed $10,000,000 at any time; PROVIDED that (x) no such
Indebtedness (and, if applicable, any security into which such
Indebtedness is convertible or for which it is exchangeable), whether
upon the happening of any event (excluding the occurrence of an event
of default, if such event of default has not then occurred) or
otherwise, shall mature, become payable or require the payment of any
principal amount thereof (or any other amount in lieu thereof) or be
mandatorily redeemable, pursuant to a sinking fund or otherwise or
redeemable at the option of the holder thereof, or be redeemed,
purchased, retired or defeased (including in substance or legal
defeasance) or paid voluntarily by or on behalf of any obligor
thereunder, in any case in whole or in part, before the date that is
91 days after the Maturity Date and (y) no obligation that is
guaranteed by any such Guaranty, whether upon the happening of any
event (excluding the occurrence of an event of default, if such event
of default has not then occurred) or otherwise, shall mature, become
payable or require the payment of any amount thereof (or any other
amount in lieu thereof) or be mandatorily redeemable, pursuant to a
sinking fund or otherwise or redeemable at the option of the holder
thereof, in any case in whole or in part, before the date that is 91
days after the Maturity Date; PROVIDED, HOWEVER, that the preceding
proviso shall not be given effect with respect to any equipment lease
(or series of related equipment leases) covering equipment having a
value of less than $500,000 in the aggregate at the commencement of
such lease (or series of leases);
(v) so long as at the time of incurrence, refinancing, exchange
or refunding thereof (a) no Event of Default or Potential Event of
Default has occurred and is continuing or would be caused thereby and
(b) such incurrence, refinancing, exchange, amendment or refunding is
permitted under the terms and provisions of all other Indebtedness and
each agreement pursuant to which such other Indebtedness was incurred,
the Pool B Subsidiaries (other than a Pool B Subsidiary that has
acquired or shall acquire any leasehold interests in Pool B Properties
pursuant to the sale and leaseback transactions permitted by
subsection 7.11), may incur, refinance, exchange, amend or refund
Indebtedness in connection with the Acquisition or ownership of one or
more Pool B Properties acquired in a single transaction or series of
related transactions (as so incurred, refinanced, exchanged, amended
or refunded, ``POOL B INDEBTEDNESS''), in an aggregate principal
amount not to exceed $25,000,000 for all Pool B Subsidiaries at any
time; PROVIDED, HOWEVER, that (s) the aggregate outstanding principal
amount of any such Pool B Indebtedness shall not at any time exceed
55% of the sum of the aggregate cash purchase price of such Pool B
Properties PLUS the aggregate amount of expenditures actually made by
such Pool B Subsidiary in connection with the Renovation of such
Pool B Properties, (t) the ratio of Cash Available for Debt Service
(determined with reference to the 12 most recently completed calendar
months ending not less than 30 days before the date of such
incurrence, refinancing, exchange, amendment or refunding) to
Projected Interest Expense (determined with reference to the 12
complete calendar months commencing on the first day of the month
following the date of such incurrence, refinancing, exchange or
refunding) shall not be less than 1.60 to 1.00, (u) such Pool B
Indebtedness of any Pool B Subsidiary (and, if applicable, any
security into which such Indebtedness is convertible or for which it
is exchangeable) shall not mature or require the scheduled payment of
principal (or any other amount in lieu thereof) or be mandatorily
redeemable, pursuant to a sinking fund or otherwise, or redeemable at
the option of the holder thereof, or be redeemed, purchased, retired
or defeased (including in substance or legal defeasance) or paid
voluntarily by or on behalf of any obligor thereunder, in any case in
whole or in part, before the date that is 91 days after the Maturity
Date, except that such Indebtedness may require principal amortization
calculated on a level pay basis over a term of not less than 15 years,
(v) such Pool B Indebtedness shall be non-recourse to any Loan Party,
any of its Subsidiaries and any Joint Venture in which it has an
Investment (other than for any Guaranties provided with respect to
customary carve-outs for environmental and ``bad deed'' indemnities),
(w) such Pool B Indebtedness shall not be secured by (1) the assets of
any Loan Party or any of its Subsidiaries (other than the Properties
owned by such Pool B Subsidiary) or (2) the Transfer of or Lien on any
Intellectual Property, (x) so long as (1) such Pool B Indebtedness has
not been accelerated, (2) a receiver has not been appointed with
respect to a related Pool B Property or (3) no other remedy is being
exercised with respect to any collateral securing, or other property
subject to, such Pool B Indebtedness, such financing does not preclude
or limit the distribution of cash flow (after reserves for Capital
Items, Taxes, insurance and other customary reserves) to the Borrower
and its other Subsidiaries for the purposes set forth herein,
(y) after giving affect to such transaction, the Borrower is in
compliance with all of the provisions set forth herein and the other
Loan Documents and (z) the Borrower shall have delivered to the Agent
any Officers' Certificate demonstrating compliance with the provisions
of this subsection 7.1(v) by the applicable Pool B Subsidiary in
connection with such transaction; and
(vi) so long as at the time of incurrence, refinancing, exchange
or refunding thereof (a) no Event of Default or Potential Event of
Default has occurred and is continuing or would be caused thereby and
(b) such incurrence, refinancing, exchange, amendment or refunding is
permitted under the terms and provisions of all other Indebtedness and
each agreement pursuant to which such other Indebtedness was incurred,
the Borrower and its Subsidiaries may incur, refinance, exchange,
amend or refund Indebtedness in an aggregate principal amount not to
exceed $25,000,000 at any time (as so incurred, refinanced, exchanged,
amended or refunded, the ``SUBORDINATED INDEBTEDNESS''); PROVIDED that
(a) no such Subordinated Indebtedness (and, if applicable, any
security into which such Indebtedness is convertible or for which it
is exchangeable), whether upon the happening of any event (excluding
the occurrence of an event of default, PROVIDED that such event of
default has not occurred) or otherwise, shall mature, become payable
or require the payment of any principal amount thereof (or any other
amount in lieu thereof) or be mandatorily redeemable, pursuant to a
sinking fund or otherwise or redeemable at the option of the holder
thereof, or be redeemed, purchased, retired or defeased (including in
substance or legal defeasance) or paid voluntarily by or on behalf of
any obligor thereunder, in any case in whole or in part, before the
date that is 91 days after the Maturity Date and (b) such Subordinated
Indebtedness (and, if applicable, any security into which such
Indebtedness is convertible or for which it is exchangeable) shall be
junior and subordinate to the Obligations and subject to an
intercreditor agreement with terms and provisions in accordance with
the then prevailing customary market terms and conditions;
PROVIDED that the prohibition in clauses (iv), (v) and (vi) above against
actually defeasing or voluntarily prepaying Indebtedness, in whole or in
part, is not intended to prohibit, and shall not prohibit, the Borrower or
any of its Subsidiaries from incurring, refinancing, exchanging, amending
or refunding Indebtedness that by its terms entitles any Person to defease
or voluntarily prepay such Indebtedness, in whole or in part.
7.2 LIENS AND RELATED MATTERS.
A. PROHIBITION ON LIENS. The Loan Parties shall not, and shall not
permit any of their respective Subsidiaries to, directly or indirectly,
create, incur, assume or, except as permitted by subsection 6.9, permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods, furniture,
fixtures, equipment or accounts receivable) of CapStar or any of its
Subsidiaries, whether now owned or hereafter acquired, or any income or
profits therefrom, or file or permit the filing of, or permit to remain in
effect, any financing statement or other similar notice of any Lien with
respect to any such property, asset, income or profits under the Uniform
Commercial Code of any State or under any similar recording or notice
statute, except:
(i) Permitted Encumbrances;
(ii) the Atlanta Mortgage;
(iii) Liens on a Pool B Property and related assets granted or
assumed by a Pool B Subsidiary to secure the Pool B Obligations owed
by the Pool B Subsidiary; PROVIDED, that such Liens encumber only the
assets purchased, financed or refinanced with, or leased or otherwise
used pursuant to the terms of, such Pool B Obligations; and
(iv) Liens on FF&E granted to secure Indebtedness incurred
pursuant to subsection 7.1(iv); PROVIDED that such Liens encumber only
FF&E purchased, financed or refinanced with such Indebtedness.
B. EQUITABLE LIEN IN FAVOR OF LENDERS. If any Loan Party or any of
its Subsidiaries shall create or assume any Lien upon any of its properties
or assets, whether now owned or hereafter acquired, other than Liens
excepted by the provisions of subsection 7.2A, the Borrower shall make or
cause to be made effective provision whereby the Obligations will be
secured by such Lien equally and ratably with any and all other
Indebtedness secured thereby as long as any such Indebtedness shall be so
secured; PROVIDED, HOWEVER, that, notwithstanding the foregoing, this
covenant shall not be construed as a consent by the Agent or any Lender to
the creation or assumption of any such Lien not permitted by the provisions
of subsection 7.2A.
C. NO FURTHER NEGATIVE PLEDGES. Except with respect to (i) specific
property encumbered to secure payment of particular Indebtedness or to be
sold pursuant to an executed agreement with respect to a sale or other
disposition of assets permitted hereunder, (ii) specific property subject
to a Ground Lease, (iii) Management Agreements (to the extent that the
terms thereof prohibit the assignment of rights thereunder, but not any
other rights or interests and otherwise consistent with industry practices)
as security for the Obligations or otherwise and (iv) any other agreement
entered into in the ordinary course of business which by its terms
restricts the assignment of rights thereunder (but not any other rights or
interests and otherwise consistent with industry practices) as security for
the Obligations or otherwise, the Loan Parties shall not and shall not
permit any of their respective Subsidiaries to, directly or indirectly,
enter into any agreement prohibiting the creation or assumption of any Lien
upon any of its properties or assets (including, without limitation, any
interest in, or right to receive payments under, any of the Management
Agreements), whether now owned or hereafter acquired except to the extent
that Liens to secure the Obligations are excluded therefrom.
D. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO THE BORROWER OR
OTHER SUBSIDIARIES. Except as provided in this Agreement and the Pool B
Documents (with respect to the related Pool B Subsidiaries and Pool B
Properties), the Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any such Subsidiary to (i) pay
dividends or make any other distributions on any of such Subsidiary's
capital stock or other equity interest owned by the Borrower or any other
Subsidiary of the Borrower, (ii) repay or prepay any Indebtedness owed by
such Subsidiary to the Borrower or any other Subsidiary of the Borrower,
(iii) make loans or advances to the Borrower or any other Subsidiary of the
Borrower, or (iv) transfer any of its property or assets to the Borrower or
any other Subsidiary of the Borrower, except for specific property
encumbered to secure the payment of particular Indebtedness permitted
hereunder.
7.3 INVESTMENTS AND CERTAIN CAPITAL EXPENDITURES.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, make any Investment in
any Person, including any Affiliate or Joint Venture, any expenditure to
acquire any hotel or other real property or any expenditure to acquire,
secure, extend, renew or modify any Management Agreement, except:
(i) CapStar and its Subsidiaries may make Investments in Cash or
Cash Equivalents;
(ii) the Borrower, Atlanta GP and Atlanta LP may (a) permit to
exist the Investment in the Atlanta Airport Sub, (b) subject to
subsection 7.5, purchase outstanding limited partner interests from
other limited partners in the Atlanta Airport Sub and (c) subject to
clause (viii) below, purchase outstanding limited partner interests
from other limited partners in the Atlanta Airport Sub and make other
Investments in the Atlanta Airport Sub;
(iii) the Borrower, EAC and the Virginia Sub may (a) permit to
exist the Investment in the Virginia Parking Sub, (b) subject to
subsection 7.5, purchase outstanding general partner interests from
other limited partners in the Virginia Parking Sub and (c) subject to
clause (viii) below, purchase outstanding general partner interests
from other general partners in the Virginia Parking Sub and make other
Investments in the Virginia Parking Sub;
(iv) CapStar may make equity Investments in the Borrower, and the
Borrower and its Wholly Owned Subsidiaries may make equity and debt
Investments in their respective Wholly Owned Subsidiaries for the
acquisition, ownership, renovation, restoration, management, operation
and disposition of Properties;
(v) the Borrower and its Subsidiaries may make Acquisitions
permitted pursuant to subsection 2.9;
(vi) so long as no Event of Default has occurred and is
continuing and no Event of Default or Potential Event of Default would
be caused thereby, the Borrower and its Subsidiaries may acquire real
property that is contiguous with any Property for use in the expansion
of such Property, PROVIDED that the aggregate purchase price for such
real properties, measured on a cumulative basis from the Closing Date,
shall not exceed $10,000,000;
(vii) so long as no Event of Default or Potential Event of Default
has occurred and is continuing or would be caused thereby, the
Borrower and its Subsidiaries may acquire and own not more than two
debt Securities (other than the Atlanta Note) at any time, which debt
Securities shall be secured exclusively by first priority mortgages
encumbering 100% of the fee interest on hotel properties; PROVIDED
that the aggregate purchase price for such debt Securities shall not
exceed $30,000,000; and
(viii) so long as no Event of Default or Potential Event of Default
has occurred and is continuing or would be caused thereby, the
Borrower and the Pool A Subsidiaries may make and own equity or debt
Investments in, or acquire and own equity or debt Securities issued
by, the Atlanta Airport Sub, the Virginia Parking Sub and not more
than ten other Joint Ventures or other Persons (other than a Wholly
Owned Subsidiary of the Borrower); PROVIDED that (a) either (1) the
sole purpose of such Joint Venture or other Person (other than the
Virginia Parking Sub) is to acquire, own, Renovate, restore, manage,
operate and dispose of upscale, full-service hotels in the United
States of America and, to the extent permitted by subsection 7.14B
hereof, Canada or (2) such equity or debt Securities are registered
under the Exchange Act; (b) the aggregate amount of such Investments
in, or the aggregate purchase price of such Securities issued by, each
such Joint Venture or other Person (other than the Atlanta Airport Sub
and the Virginia Parking Sub) shall not exceed $2,000,000 at any time
and the aggregate amount of such Investments in, or the aggregate
purchase price of such Securities issued by, all such Joint Ventures
or other Persons (other than the Atlanta Airport Sub and the Virginia
Parking Sub) shall not exceed $20,000,000 at any time; (c) the sum of
(1) the aggregate principal amount of the Indebtedness of such Joint
Venture or other Person and, in either case, the Subsidiaries thereof
PLUS (2) the purchase price of any equity Investment made in, or
Securities issued by, such Joint Venture or other Person (other than
the aggregate amount of such Investments, or the aggregate purchase
price of such Securities issued by the Atlanta Airport Sub or the
Virginia Parking Sub as of the date of this Agreement) and, in either
case, its Subsidiaries that are preferred in right or priority of
payment (including any mandatory redemption or redemption at the
option of the holder) to any such investment or Securities (other than
a priority right to receive a return on Investment of up to 25% per
annum) shall at no time exceed 60% of the greater of (x) the
undepreciated book value of all properties owned or leased by such
Joint Venture or other Person and, in either case, the Subsidiaries
thereof and (y) the fair market value of all such properties and
asset, as reasonably determined by the Borrower as of the respective
dates of acquisition thereof; (d) the Joint Venture or other Person in
which such Investment is made or by which such Securities are issued
shall not be an Affiliate of more than four other Joint Ventures or
other Persons in which Investments are made or owned or whose
Securities are acquired or owned pursuant to this subsection
7.3(viii), and the Investment made in or Securities issued by each
such Joint Venture or other Person shall neither be secured by the
assets of more than four other Joint Ventures or other Persons in
which Investments are made or owned or whose Securities are acquired
or owned pursuant to this subsection 7.3(viii) nor cross-defaulted to
Investments in or Securities issued by more than four other Joint
Ventures or other Persons in which Investments are made or whose
Securities are acquired pursuant to this subsection 7.3(viii);
PROVIDED, HOWEVER, that (I) without the approval of the Agent, but
subject to all the other limitations set forth in this subsection
7.3(viii) (other than the requirement in clause (a) above that the
hotels be upscale, full-service hotels), the Borrower and its Wholly
Owned Subsidiaries (other than the Pool B Subsidiaries) may make and
own Investments in, or acquire and own equity or debt Securities
issued by, Joint Ventures and other Persons if the aggregate amount of
such Investments in, or the aggregate purchase price of such
Securities issued by, each such Joint Venture or other Person shall
not at any time exceed $500,000 and the aggregate amount of such
Investments in, or the aggregate purchase price of such securities
issued by, all such Joint Ventures or other Persons shall not at any
time exceed $2,500,000, (II) without the approval of the Agent, the
Borrower and its Wholly Owned Subsidiaries (other than the Pool B
Subsidiaries) may make Investments described in clause (iv) of the
definition of ``Investments'' and the provisions of clauses (a) and
(c) above shall not be given effect with respect to such Investments,
PROVIDED that, with the approval of the Agent, in its sole discretion,
the Borrower and its Wholly Owned Subsidiaries (other than Pool B
Subsidiaries) may make such Investments and the provisions of clauses
(a), (c) and (d) above shall not be given effect, and (III) with
respect to Investments in, or the acquisition of Securities issued by,
a Joint Venture or other Person that shall be identified in writing to
and approved by the Lenders before the Closing Date, the provisions of
clause (b) above shall not be given effect and the percentage amount
in clause (c) above shall be increased from 60% to 75%;
PROVIDED that (A) the aggregate amount of the consideration or Investment,
as the case may be, paid by the Borrower and the Pool A Subsidiaries to
acquire the real property, acquire the Securities and make the Investments
and expenditures referred to in clauses (vi), (vii), and (viii) above shall
not exceed $60,000,000 at any time, (B) except as provided to the contrary
in subclauses (I) and (II) to the proviso to clause (vii) above, each such
expenditure and acquisition or Investment referred to in clauses (vi),
(vii) and (viii) above shall be approved by the Agent, in its sole
discretion; and (C) each such Acquisition referred to in clause (iii) above
from a person that is an Affiliate or 5% stockholder of any of the Loan
Parties (other than other Loan Parties) or any entity in which such Person
has an equity or debt Investment shall be approved by a majority of the
independent directors of the board of directors of CapStar and by the
Agent, which approval shall not be unreasonably withheld, conditioned or
delayed.
For the purpose of this subsection 7.3 and without limiting any other
method of making an Investment, the Borrower and its Subsidiaries shall be
deemed to make an Investment in each Investment owned by a Person at the
time such Person becomes a Subsidiary of the Borrower or any of its
Subsidiaries.
7.4 CONTINGENT OBLIGATIONS.
The Loan Parties shall not and shall not permit any of their
respective Subsidiaries to, directly or indirectly, create or become liable
with respect to any Contingent Obligation, except that:
(i) the Borrower and its Subsidiaries may become liable with
respect to Contingent Obligations in respect of the Obligations and
the Indebtedness, Investments and Contingent Obligations in respect of
which the Borrower and the Pool A Subsidiaries are permitted by
subsections 7.1, 7.3 and 7.4 (other than pursuant to this clause (i)
to become liable;
(ii) the Borrower and its Subsidiaries may become liable with
respect to Contingent Obligations in respect of Letters of Credit;
(iii) the Borrower and its Subsidiaries may become liable with
respect to indemnification agreements and Guaranties (whether now or
existing or hereafter entered into) with respect to performance,
surety and similar bonds or guaranties of completion provided in the
ordinary course of business consistent with past practices in respect
of the Restoration or Renovation of any Property, but excluding any
such bonds with respect to any hotel property that is not then a
Property, in an aggregate maximum amount not at any time exceeding
$25,000,000 MINUS the sum, without duplication, of (1) the Letter of
Credit Usages that shall have been used, issued or made for or in
connection with the Restoration of the Properties or the Renovation of
Properties subject to subsection 7.16, in each case that shall have
been commenced but not completed, PLUS (2) the aggregate amount of
expenditures for the Restoration of Properties or the Renovation of
Properties subject to subsection 7.16, in each case that shall have
been commenced but not completed;
(iv) the Borrower and the Pool A Subsidiaries may become liable
to make Investments permitted by, and in accordance with the terms of,
subsection 7.3;
(v) such of the Borrower and its Subsidiaries as are specified
on SCHEDULE 5.3B annexed hereto may be liable (a) with respect to the
Contingent Obligations set forth on such Schedule, in each case in the
aggregate amount not greater than the maximum estimated amount
specified thereon with respect to such Continent Obligation and (b)
with respect to modifications to any such Contingent Obligation either
(1) that do not increase either the maximum possible amount, or the
maximum estimated amount thereof, or both, in each case as specified
on each list, add any obligors with respect thereto or increase,
decrease or otherwise vary the liabilities of the existing obligors
with respect thereto or (2) that increase either the maximum possible
amount or the maximum estimated amount thereof, or both, in each case
as specified on such list, add any obligors with respect thereto or
increaser, decrease or otherwise vary the liabilities of the existing
obligors; and
(vi) the Borrower and its Subsidiaries may become liable with
respect to other Contingent Obligations in an aggregate amount (not
less than zero) at any time not greater than the amount by which
$10,000,000 is greater than the amount referred to in the preceding
clause (iii) at such time.
7.5 RESTRICTED JUNIOR PAYMENTS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, declare, order, pay,
make, give or publish notice or fix a date in respect of or set apart any
sum for any Restricted Junior Payment, enter into an agreement or make any
commitment to effect any of the foregoing or take any other similar action
in furtherance of or otherwise in connection with the foregoing; PROVIDED,
HOWEVER, that, so long as no Event of Default or Potential Event of Default
has occurred or is continuing, the Loan Parties may make any of the
following payments:
(i) commencing on January 1, 2000, the Loan Parties may make
Restricted Junior Payments in respect of equity Securities, including
payments in respect of limited partner interests in the Borrower that
shall not be beneficially owned by CapStar or CapStar Sub); PROVIDED
that (a) the aggregate amount of Restricted Junior Payments pursuant
to this clause (i) during any calendar year shall not exceed an amount
equal to 25% of Consolidated Net Income for the immediately preceding
calendar year and (b) no payments of principal, or any redemption,
purchase or defeasance, of any Indebtedness of CapStar and its
Subsidiaries shall be permitted pursuant to this clause (i);
(ii) the Atlanta Airport Sub may make distributions to its
partners in accordance with the Atlanta Partnership Agreement;
PROVIDED that such distributions are made (x) pursuant to Section 5.1,
5.2 or 13.2 of the Atlanta Partnership Agreement in accordance with
the provisions thereof in effect on the date of this Agreement and (y)
with respect to Cash Flow from Operations and Capital Proceeds (in
each case as defined in the Atlanta Partnership Agreement on the date
of this Agreement); and
(iii) the Loan Parties may make Restricted Junior Payments in an
aggregate amount (measured on a cumulative basis from the Closing
Date) not to exceed $25,000,000 pursuant to the conversion, exercise
or redemption of the Preferred Limited Partner Interests.
7.6 FINANCIAL COVENANTS.
A. MINIMUM NET WORTH. The Borrower shall not permit at any time the
Net Worth of CapStar and its Subsidiaries to be less than Adjusted
Stockholders' Equity.
B. MAXIMUM CONSOLIDATED TOTAL INDEBTEDNESS. CapStar and the
Borrower shall not permit at any time Consolidated Total Indebtedness to
exceed the lesser of (i) 55% of the sum of (a) Consolidated Total
Indebtedness PLUS (b) the Market Equity Capitalization of CapStar and
(ii) 60% of the sum of (y) Consolidated Total Indebtedness PLUS (z) the Net
Worth of CapStar and its Subsidiaries.
C. MINIMUM INTEREST COVERAGE. As of the last day of any calendar
quarter ending during any of the periods set forth below, CapStar and the
Borrower shall not permit the ratio of Consolidated EBITDA to Consolidated
Interest Expense to be less than the correlative ratio indicated for the
periods set forth below (such amounts to be determined with reference to
the preceding 12-month period ending on such last day and to be adjusted to
the extent required by the respective provisos to the definitions of
Property EBITDA):
<TABLE>
<CAPTION>
MINIMUM
INTEREST
PERIOD COVERAGE RATIO
<S> <C>
Closing Date to but excluding 2.25 to 1.00
first Anniversary
first Anniversary to but excluding 2.50 to 1.00
second Anniversary
second Anniversary to but 2.75 to 1.00
excluding third Anniversary
if applicable, third Anniversary 3.00 to 1.00
to but excluding fourth
Anniversary
if applicable, fourth Anniversary 3.25 to 1.00
to but excluding fifth Anniversary
</TABLE>
D. MINIMUM INTEREST COVERAGE RATIO (EXCLUDING CAPITAL EXPENDITURES).
As of the last day of the calendar quarter ending during any of the periods
set forth below, CapStar and the Borrower shall not permit the ratio of
Consolidated EBITDA-Cap Ex to Consolidated Interest Expense to be less than
the correlative ratio indicated for the periods set forth below (such
amounts to be determined with reference to the preceding 12-month period
ending on such last day):
<TABLE>
<CAPTION>
MINIMUM
INTEREST
PERIOD COVERAGE RATIO
<S> <C>
Closing Date to but excluding 2.00 to 1.00
first Anniversary
first Anniversary to but excluding 2.25 to 1.00
second Anniversary
second Anniversary to but 2.50 to 1.00
excluding third Anniversary
if applicable, third Anniversary 2.75 to 1.00
to but excluding fourth
Anniversary
if applicable, fourth Anniversary 3.00 to 1.00
to but excluding fifth Anniversary
</TABLE>
E. MAXIMUM TOTAL DEBT LEVERAGE RATIO. As of the last day of the
calendar quarter ending during any of the periods set forth below, CapStar
and the Borrower shall not permit the ratio of Consolidated Total
Indebtedness to Consolidated EBITDA to exceed the correlative ratio
indicated for the periods set forth below (Consolidated Total Indebtedness
to be determined as of such last day, Consolidated EBITDA to be determined
with reference to the preceding 12-month period ending on such day):
<TABLE>
<CAPTION>
MAXIMUM
LEVERAGE
PERIOD RATIO
<S> <C>
Closing Date to but excluding 4.75 to 1.00
first Anniversary
first Anniversary to but excluding 4.50 to 1.00
second Anniversary
second Anniversary to but 4.25 to 1.00
excluding third Anniversary
if applicable, third Anniversary 4.00 to 1.00
to but excluding fourth
Anniversary
if applicable, fourth Anniversary 3.75 to 1.00
to but excluding fifth Anniversary
</TABLE>
F. MAXIMUM TOTAL DEBT LEVERAGE RATIO (EXCLUDING CAPITAL
EXPENDITURES). As of the last day of the calendar quarter (or, as so
provided in subsection 7.6D, on the last day of the calendar month) ending
during any of the periods set forth below, CapStar and the Borrower shall
not permit the ratio of Consolidated Total Indebtedness to Consolidated
EBITDA-Cap Ex to exceed the correlative ratio indicated for the periods set
forth below (Consolidated Total Indebtedness to be determined as of such
last day, Consolidated EBITDA-Cap Ex to be determined with reference to the
preceding 12-month period ending on such day):
<TABLE>
<CAPTION>
MAXIMUM
LEVERAGE
PERIOD RATIO
<S> <C>
Closing Date to but excluding 5.25 to 1.00
first Anniversary
first Anniversary to but excluding 5.00 to 1.00
second Anniversary
second Anniversary to but 4.50 to 1.00
excluding third Anniversary
if applicable, third Anniversary 4.25 to 1.00
to but excluding fourth
Anniversary
if applicable, fourth Anniversary 4.00 to 1.00
to but excluding fifth Anniversary
</TABLE>
7.7 FUNDAMENTAL CHANGES.
Without the prior written approval of the Agent, which approval may be
granted, withheld, conditioned or delayed in its sole discretion, the Loan
Parties shall not, and shall not permit any of their respective
Subsidiaries to, alter the legal structure of any Loan Party or any of its
Subsidiaries, to incorporate or otherwise organize any Subsidiaries, or
enter into any transaction of merger or consolidation, or liquidate, wind-
up or dissolve itself (or suffer any liquidation or dissolution), or make
or permit any Transfer or acquire by purchase or otherwise, directly or
indirectly, all or substantially all the business, property or fixed assets
of, or stock or other evidence of beneficial ownership of, any Person, make
any Acquisition, acquire or enter into any management agreement with
respect to any hotel property or Transfer any Property, except that, from
time to time after the Closing Date:
(i) the Loan Parties and their Subsidiaries may lease space in
Improvements and in accordance with subsection 6.5(vi) remove, sell or
otherwise dispose of items of Collateral and other property;
(ii) the Borrower and any Wholly Owned Subsidiary (other than a
Pool A Subsidiary or a Pool B Subsidiary) may incorporate or otherwise
organize one or more Subsidiaries; PROVIDED that (a) before the
Subsidiary shall conduct any business or acquire any asset, the
Borrower shall deliver to the Agent (1) supplements to the Schedules
to this Agreement and the other Loan Documents reflecting the
incorporation or other organization of such Subsidiary, which
supplements shall be reasonably satisfactory to the Agent, and (2)
originally executed counterparts to the Affiliate Guaranty (except as
may be provided to the contrary in subsection 2.9B) and to the
Environmental Indemnity, respectively, and, unless such Subsidiary is
a Pool B Subsidiary, the Security Agreement (b) the legal and tax
structure of each such Subsidiary shall be approved by the Agent,
which approval shall not be unreasonably withheld, conditioned or
delayed; PROVIDED FURTHER that, with respect to the restrictions on
the tax and legal structure of a Pool B Subsidiary, such structure may
include features intended by the Borrower to make such Pool B
Subsidiary ``bankruptcy-remote'' and (c) no Pool B Subsidiary shall at
any time (1) incur, assume or otherwise become liable for any
Indebtedness or Contingent Obligation except as permitted by
subsections 7.1 and 7.4, or (2) incur, assume or otherwise become
liable for any other liability or indebtedness except in the ordinary
course of business (PROVIDED that, in any event, each such liability
or obligation shall be non-recourse to each Loan Party, its
Subsidiaries and the Joint Ventures in which it has an Investment, in
each case other than such Pool B Subsidiary) or as shall have been
approved by the Agent in its sole discretion;
(iii) the Loan Parties and their respective Subsidiaries may make
Acquisitions to the extent permitted by, and in accordance with,
subsections 2.9A and 2.9B;
(iv) the Loan Parties and their respective Subsidiaries may
Transfer Properties to the extent permitted by, and in accordance
with, subsection 7.15B;
(v) the Loan Parties and their respective Subsidiaries may
acquire or enter into Management Agreements and Servicing Agreements
with respect to hotel properties to the extent permitted by, and in
accordance with, subsection 6.17 or 7.17;
(vi) the Loan Parties may make Investments and acquisitions of
real property to the extent permitted by, and in accordance with,
subsection 7.3;
(vii) the Loan Parties and their respective Subsidiaries may
dissolve one or more Inactive Subsidiaries and one or more other
Subsidiaries upon the Transfer of all or substantially all their
respective assets in a single transaction or series of transactions
not prohibited by subsection 7.15B.
7.8 ZONING AND CONTRACT CHANGES AND COMPLIANCE.
Without the prior written approval of the Agent, which approval shall
not be unreasonably withheld, conditioned or delayed, the Loan Parties
shall not and shall not permit any of their respective Subsidiaries to
initiate or consent to any zoning reclassification of any property or seek
any material variance under any existing zoning ordinance or use or permit
the use of any Property in any manner that could result in such use
becoming a non-conforming use (other than a non-conforming use permissible
under automatic grandfathering provisions) under any zoning ordinance or
any other applicable land use law, rule or regulation. The Loan Parties
shall not and shall not permit any of their respective Subsidiaries to
initiate or consent to any change in any laws, requirements of Governmental
Authorities or obligations created by private contracts and Material Leases
which now or hereafter could reasonably be likely to materially and
adversely affect the ownership, occupancy, use or operation of any Property
without the prior written consent of the Agent.
7.9 NO JOINT ASSESSMENT; SEPARATE LOTS.
Without the prior written approval of the Agent, which approval may be
granted, withheld, conditioned or delayed in its sole discretion, the Loan
Parties shall not suffer, permit or initiate, and shall not permit any of
their respective Subsidiaries to suffer, permit or initiate, the joint
assessment of any Property (i) with any other real property constituting a
separate tax lot (other than another Property) and (ii) with any portion of
any Property which may be deemed to constitute personal property, or any
other procedure whereby the lien of any Taxes which may be levied against
any such personal property shall be assessed or levied or charged to any
Property as a single lien. Each Property is comprised of one or more
parcels, each of which, to the knowledge of the Borrower, constitutes a
separate tax lot (except with respect to any lot constituting another
Property) and none of which constitutes a portion of any other tax lot.
7.10 TRANSACTIONS WITH AFFILIATED PERSONS.
Without the prior written approval of the Agent, which approval may be
granted, withheld, conditioned or delayed in its sole discretion, the Loan
Parties shall not, and shall not permit any of their respective
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property, the rendering of any service or the making of any
Investment or Guaranty, or the amendment, restatement, supplement or other
change of, or waiver or failure to enforce any obligations under, any
agreement) with any holder of 5% or more of any class of equity Securities
of the Borrower or CapStar or any Affiliate of the Borrower or CapStar
unless the terms thereof are not less favorable to such Loan Party or
Subsidiary, as the case may be, than those that might be obtained in a
comparable transaction at the time on an arms-length basis from Persons who
are not such a holder or Affiliate; PROVIDED, HOWEVER, that this subsection
7.10 shall not apply to (x) any transaction between the Borrower and any of
its Wholly Owned Subsidiaries that are Loan Parties or between any of its
Wholly Owned Subsidiaries that are Loan Parties, (y) any transaction listed
on SCHEDULE 7.10 annexed hereto (but not any amendment, restatement,
supplement or other change of, or waiver or failure to enforce any
obligations under, any agreement related thereto) and (z) the terms and
conditions of the compensation paid to any such holder or Affiliate in his
or her capacity as a director or employee of such Loan Party or Subsidiary
that shall be approved by a majority of the independent directors of
CapStar or by a majority of independent directors on a committee of the
Board of Directors of CapStar having at the time two or more independent
directors.
7.11 SALES AND LEASE-BACKS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, enter into any
arrangement with any Person providing for the leasing by any Loan Party or
any of its Subsidiaries of any real or tangible personal property, which
property has been or is to be sold or transferred by any Loan Party or any
of its Subsidiaries to such Person in contemplation of such leasing,
unless, with respect to a Pool B Property (including any Pool A Property
Released in connection with a sale and lease-back transaction permitted
pursuant to this subsection 7.11):
(i) the Loan Parties and their respective Subsidiaries shall
comply with the conditions set forth in subsection 2.9A with respect
thereto;
(ii) after giving effect to the proposed transaction, the
aggregate number of Properties subject to such sale and lease-back
transactions shall not exceed three;
(iii) the leasehold interests in each subject Property shall be
held by a separate Pool B Subsidiary of the Borrower unless such
leasehold interests were acquired in the same transaction or series of
related transactions;
(iv) the obligations of each such Pool B Subsidiary (including
obligations under the related leases) may be secured by the assets of
such Pool B Subsidiary but shall not be secured by the assets of, or
otherwise recourse to, the Borrower or any of the Borrower's other
Subsidiaries;
(v) no such Pool B Subsidiary may incur any Pool B Indebtedness
or become liable with respect to any Guaranty or other Contingent
Obligation with respect to the same;
(vi) the Borrower would not be in default, as of the date of such
leasing, of any of paragraphs E and F of subsection 7.6 if
Consolidated Total Indebtedness were to increase by an amount equal to
the Attributable Indebtedness with respect to such sale and lease-back
arrangement;
(vii) the aggregate amount of Attributable Indebtedness with
respect to all sale and lease-back transactions permitted by this
subsection 7.11 does not exceed $60,000,000 at any time;
(viii) the Borrower shall deliver or cause to be delivered to the
Agent (a) a leasehold mortgage reasonably satisfactory in form and
substance to the Agent and evidence reasonably satisfactory to the
Agent that all other documents have been executed and all actions
taken that the Agent reasonably requests to create, perfect and
maintain a valid and enforceable first priority Lien in the leasehold
interest of the applicable Loan Party or Subsidiary and (b) an
estoppel certificate, reasonably satisfactory in form and substance to
the Agent, duly executed by the applicable lessor; and
(ix) if applicable, a supplement to SCHEDULE 5.4C reflecting
the execution of the applicable Pool B Ground Lease.
A sale and lease-back transaction with respect to a Property permitted
by this subsection 7.11 shall be deemed to be a sale or other permanent
disposition of such Property for all purposes of this Agreement.
7.12 SALE OR DISCOUNT OF RECEIVABLES.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, sell with recourse or,
except in the ordinary course of business and consistent with past
practices, discount or otherwise sell for less than the face value thereof,
any of its notes or accounts receivable.
7.13 OWNERSHIP OF SUBSIDIARIES.
Except as expressly permitted pursuant to subsections 7.7(ii) and
7.15B, (i) the Loan Parties shall not permit any of their respective Wholly
Owned Subsidiaries to cease to be Wholly Owned Subsidiaries, except to
qualify directors if required by Applicable Laws or permit Investments by
foreign nationals mandated by Applicable Law; PROVIDED that,
notwithstanding anything to the contrary contained in this Agreement,
Atlanta GP shall not cease to be the sole general partner of the Atlanta
Airport Sub and Atlanta LP shall not own a lesser percentage of outstanding
limited partner interests in the Atlanta Airport Sub than it owns as of the
date hereof and (ii) the Borrower shall not cease to be a Subsidiary of
CapStar and the financial statements of the Borrower shall not cease to be
consolidated with the financial statements of CapStar in accordance with
GAAP.
7.14 CONDUCT OF BUSINESS; RESTRICTIONS ON OPERATIONS IN CANADA.
A. CONDUCT OF BUSINESS. The Loan Parties shall not, and shall not
permit any of their respective Subsidiaries to, directly or indirectly, do
the following:
(i) engage in any business other than (a) the acquisition,
ownership, Renovation, Restoration, management, operation and
disposition of Properties that are upscale full service hotels located
in the United States of America and, to the extent permitted by
subsection 7.14(B) below, Canada, excluding, without limitation, the
Development of real property, (b) the management of Managed Properties
that are hotels located in the United States of America and Canada and
(c) any business that is ancillary, in purpose and extent, to any
business referred to in the preceding clauses (a) and (b) (including,
for the purpose of this clause (c), the ownership of a parking
facility by the Virginia Parking Sub); PROVIDED that (x) CapStar shall
not engage in any business other than owning the Virginia Note and
selling the same to the Lenders hereunder and being the sole general
partner of the Borrower and the sole stockholder of CapStar Sub and
(y) CapStar Sub shall not engage in any business other than being a
limited partner of the Borrower; or
(ii) enter into any Material Lease or other agreement, or take
any other action, if such Material Lease or such other action would
materially change the business conducted at any Property, including
any such Material Lease, agreement or other action, that would convert
or reposition any Property into any hotel other than an upscale full
service hotel.
B. RESTRICTIONS ON OPERATIONS IN CANADA. Neither CapStar nor any of
its Subsidiaries shall make an Acquisition of any Property located in
Canada or make an Investment pursuant to subsection 7.3(vii) of a Security
issued by a Person that owns, manages or operates a hotel in Canada if,
after giving effect to such proposed Acquisition or Investment, the
aggregate amount expended by CapStar and its Subsidiaries (as of any
applicable date of determination) with respect to Properties located in
Canada or such Investments is greater than an amount equal to 10% of the
aggregate amount of the Commitments at any time.
7.15 PROPERTIES.
A. ACQUISITION OF PROPERTIES. The Loan Parties shall not, and shall
not permit any of their respective Subsidiaries to, make an Acquisition of
a fee or leasehold interest in any hotel property after the Closing Date
except in accordance with the provisions of subsection 2.9.
B. TRANSFER OF PROPERTIES. The Loan Parties shall not, and shall
not permit any of their respective Subsidiaries to, Transfer any Property;
PROVIDED that (i) the Loan Parties and their respective Subsidiaries may
create, incur, assume or permit to exist Liens in accordance with
subsection 7.2, and (ii) each Loan Party and each of its Subsidiaries may
sell or otherwise permanently dispose of any Property (whether directly or
by the sale or other permanent disposition of all, but not less than all,
the capital stock or other equity Securities of the Subsidiary that owns
such Property) if (a) each such sale or other permanent disposition of such
Property is made on an arms-length basis, (b) the consideration received by
such Loan Party or Subsidiary in any such transaction (net of any Pool B
Obligations forgiven or paid in connection therewith), in an amount not
less than the Release Price required to be paid pursuant to subsection 2.10
in connection with the Release of such Property, shall be Cash and shall be
received on the date of such sale or other permanent disposition, (c) with
respect to any Pool A Property, the Borrowing Base shall be reduced as
provided in subsection 2.4B(iii) and (d) with respect to any Pool A
Property, the Borrower complies with the provisions set forth in subsection
2.10 with respect to such Property, including the payment of any Release
Price required thereby.
7.16 RENOVATION EXPENDITURES.
So long as no Event of Default has occurred and is continuing and no
Event of Default or Potential Event of Default would be caused thereby, the
Borrower and its Subsidiaries may make expenditures for the Renovation of
Properties (including expanding Improvements to increase the number of
available rooms); PROVIDED that (i) neither the Borrower nor any of its
Subsidiaries shall make any such expenditure if, after giving effect to
such expenditure, the aggregate amount of expenditures as of any date of
determination for such Renovations that shall have been commenced but not
completed as of such date of determination shall at any time exceed the
amount by which $25,000,000 is greater than the outstanding amount of
Contingent Obligations then permitted pursuant to subsection 7.4(iii).
7.17 MANAGEMENT AGREEMENTS AND SERVICING AGREEMENTS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, enter into or otherwise become obligated with
respect to, any management agreement with respect to any hotel property
(other than a Property) after the Closing Date, except that, from time to
time:
(i) so long as no Event of Default has occurred and is
continuing and no Event of Default or Potential Event of Default would
be caused thereby, without the approval of the Agent (except as
provided to the contrary in this subsection 7.17A(i)), the Borrower or
any of its Wholly Owned Subsidiaries may enter into Management
Agreements with respect to the management and operation of hotel
properties, the related land and the improvements thereof (each a
``MANAGEMENT AGREEMENT'') and, subject to subsection 7.20H, amend,
restate, supplement or otherwise change such Management Agreements;
PROVIDED, however, that (a) each Managed Property subject to such
Management Agreement shall be a hotel located in the United States of
America or Canada; (b) such Management Agreement shall not constitute,
have the form of or contain provisions creating a leasehold interest
in any hotel Property or other real or personal property; (c) on or
before the effective date of such Management Agreement, the Borrower,
at its expense, shall deliver to the Agent (1) an executed or
conformed, certified copy of such Management Agreement,
(2) supplements to the Schedules to this Agreement and the other Loan
Documents, which schedules shall be reasonably acceptable to the
Agent, and (4) payment pursuant to subsection 9.2 of the reasonable
expenses incurred by the Agent in connection with the matters subject
to this subsection 7.17A(i); and (d) from and after the Management
Agreement Effectiveness Date and with respect to any Material
Management Agreement, on or before the effective date of such
Management Agreement the Agent shall have approved such Management
Agreement, which approval shall not be unreasonably withheld,
conditioned or delayed, and the Borrower, at its expense shall deliver
to the Agent an Addition Certificate; and
(ii) the Borrower and any of its Wholly Owned Subsidiaries shall
enter into Servicing Agreements with respect to the management and
operation of Pool B Properties as contemplated by subsection 2.9B.
7.18 INTELLECTUAL PROPERTY; FRANCHISE AGREEMENTS.
A. INTELLECTUAL PROPERTY. The Loan Parties shall not, and shall not
permit any of their respective Subsidiaries, to Transfer any Intellectual
Property unless the Borrower shall have reasonably determined that the
Intellectual Property so Transferred is no longer material to the business,
operations, condition (financial or otherwise) or prospects of the Borrower
and its Subsidiaries.
B. FRANCHISE AGREEMENTS. The Loan Parties shall not, and shall not
permit any of their respective Subsidiaries to, enter into or otherwise
become obligated with respect to, any franchise agreement (as franchisor),
license agreement (as licensor) or similar agreement (in a similar
capacity) with respect to any Intellectual Property of CapStar or any of
its Subsidiaries.
7.19 MATERIAL LEASES.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, (i) enter into any Lease other than Leases
incidental to the operation of the Properties as hotels or (ii) enter into
any Material Lease or any advanced booking of more than 51% of the rooms at
any Property for a period in excess of 30 days without the prior written
approval of the Agent, which approval shall not be unreasonably withheld,
conditioned or delayed; it being understood and agreed that if after the
Closing Date any Loan Party or any of its Subsidiaries enters into a
Material Lease or any such advanced booking, the Agent may require that the
Tenant thereunder enter into a Tenant Subordination Agreement reasonably
satisfactory in form and substance to the Agent. In the event any Lease
necessary to the operation of any Property as a hotel is terminated, the
applicable Loan Party or Subsidiary thereof shall either replace such Lease
with a suitable comparable Lease within a reasonable period of time
following such termination or shall itself provide the services intended to
be obtained under such Lease.
7.20 CHANGES IN CERTAIN OBLIGATIONS AND DOCUMENTS; ISSUANCE OF EQUITY
SECURITIES.
A. CREDIT AGREEMENT. Without the prior written approval of the
Agent, which approval may be granted, withheld, conditioned or delayed in
its sole discretion, the Loan Parties shall not, and shall not permit any
of their respective Subsidiaries to, enter into any agreement (other than
this Agreement) prohibiting or restricting the ability of any of the Loan
Parties and any of their respective Subsidiaries to amend or otherwise
modify this Agreement or any other Loan Document.
B. CAPSTAR PREFERRED STOCK. Without the prior written approval of
the Agent, which approval may be granted, withheld, conditioned or delayed
in its sole discretion, CapStar shall not amend, restate, supplement or
otherwise change its articles of incorporation if the effect of such
amendment, restatement, supplement or change is to provide for the issuance
of any preferred stock of CapStar or the filing of any certificate of
designation with respect thereto, except that CapStar may amend, restate,
supplement or change its certificate of incorporation to provide for the
issuance of non-cumulative preferred stock; PROVIDED, HOWEVER, that (i) the
certificate of incorporation of CapStar, as so amended, restated,
supplemented or changed, and any prospectus, certificate of designation or
other document delivered in connection with such issuance shall be in form
and substance satisfactory to the Agent, (ii) such preferred stock shall be
Qualified Capital Stock and (iii) such preferred stock shall be subordinate
in right and time of payment to the Obligations.
C. EQUITY SECURITIES. The Loan Parties shall not, and shall not
permit any of their respective Subsidiaries to, issue any Capital Stock or
other Security which, by its terms (or by the terms of any Security into
which it is convertible or for which it is exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund or otherwise, or redeemable in Cash at the option of the
holder thereof, in whole or in part, before the date that is 91 days after
the Maturity Date; PROVIDED that, so long as no Event of Default or
Potential Event of Default has occurred and is continuing:
(i) the Borrower may issue limited partner interests that may be
converted into shares of Common Stock of CapStar; and
(ii) the Borrower may issue limited partner interests
(``PREFERRED LIMITED PARTNER INTERESTS'') that by their terms may be
converted into or exercised or redeemed for Cash if (a) the aggregate
amount of Cash payable upon such conversion, exercise or redemption
shall not exceed $25,000,000 measured on a cumulative basis from the
Closing Date and (b) the terms of such Preferred Limited Partner
Interests shall have been approved by the Agent, which approval shall
not be unreasonably withheld, conditioned or delayed.
D. ORGANIZATION DOCUMENTS. Without the prior written approval of
the Agent, which approval may be granted, withheld, conditioned or delayed
in its sole discretion, except as expressly permitted hereunder, the Loan
Parties shall not, and shall not permit any of their respective
Subsidiaries to, amend or otherwise modify their respective charters or
partnership agreements in any material respect except in connection with an
activity permitted by subsection 7.7(vii); PROVIDED that, without the prior
written approval of the Agent (but only after giving written notice with
respect thereto to the Agent at least 5 Business Days before the effective
date of such modification or amendment), the Loan Parties and their
respective Subsidiaries may modify or amend the partnership agreement of
the Virginia Parking Sub in effect on the date of this Agreement if such
modification or amendment is required by the terms thereof and does not
adversely affect the interests or rights of the Lenders in or to, or the
value of, the partnership interest in the Virginia Parking Sub owned by the
Virginia Parking Sub.
E. POOL A GROUND LEASES. Without the prior written approval of the
Agent, which approval may be granted, withheld, conditioned or delayed in
its sole discretion, the Loan Parties shall not, and shall not permit any
of their respective Subsidiaries to, take any action or fail to take any
action, in either case as may be required or permitted by the terms of any
Pool A Ground Lease, with respect to the termination (by such Loan Party or
such Subsidiary, by the lessor or by any other Person, and for any reason),
renewal or extension thereof or to amend, restate, supplement or otherwise
change, or waive or fail to enforce any provision of, any Pool A Ground
Lease in any material respect.
F. FRANCHISE AGREEMENTS. Without the prior written approval of the
Agent, which approval shall not be unreasonably withheld, conditioned or
delayed, the Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, (i) take any action or fail to take any action,
in either case as may be required or permitted by the terms of any
Franchise Agreement with respect to a Pool A Property, with respect to the
termination (by such Loan Party or such Subsidiary, the franchisor or any
other Person, and for any reason), renewal or extension thereof, PROVIDED
that, without the approval of the Agent, each such Franchise Agreement may
be renewed or extended on substantially the same terms as then in effect,
(ii) amend, restate, supplement or otherwise change, or waive or fail to
enforce any provision of, any Franchise Agreement with respect to a Pool A
Property in any material respect, or (iii) enter into any new or
replacement Franchise Agreement with respect to a Pool A Property (with the
same franchisor or a different franchisor); PROVIDED that (x) with respect
to a replacement Franchise Agreement referred to in the preceding clause
(iii), the Agent's approval may be granted, withheld, conditioned or
delayed in the sole discretion of the Agent if, in its opinion, the
franchisor under such replacement Franchise Agreement shall have a national
standing and reputation less favorable than the general standing and
reputation of the franchisors under Franchise Agreements then covering the
Pool A Properties and (y) with respect to each matter referred to in the
preceding clauses (i), (ii) or (iii) for which the Agent may reasonably
require a franchisor's estoppel and consent agreement, the Agent's approval
may be conditioned upon its receipt of a franchisor's estoppel and consent
agreement in substantially the form of the estoppel and consent agreement
delivered to the Agent pursuant to subsection 4.1J or otherwise in form and
substance satisfactory to the Agent.
G. SERVICING AGREEMENTS; MANAGEMENT AGREEMENTS. Without the prior
written approval of the Agent, which approval shall not be unreasonably
withheld, conditioned or delayed, the Loan Parties shall not, and shall not
permit any of their respective Subsidiaries to, terminate, renew, extend,
amend, restate, supplement or otherwise change, or waive or fail to enforce
any provision of, any Servicing Agreement in any material respect or, after
the Management Agreement Effectiveness Date, any Material Management
Agreement in any material respect.
H. ATLANTA DOCUMENTS; MBL ACQUISITION DOCUMENTS. Without the prior
written approval of the Agent, which approval may be granted, withheld,
conditioned or delayed in its sole discretion, the Loan Parties shall not,
and shall not permit any of their respective Subsidiaries to, amend,
restate, supplement or otherwise modify any provision of the Atlanta
Documents or the MBL Acquisition Documents.
7.21 FISCAL YEAR.
Without the prior written approval of the Agent, which approval may be
granted, withheld, conditioned or delayed in its sole discretion, neither
CapStar nor any of its Subsidiaries shall change its fiscal year-end from
December 31.
SECTION 8
EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT.
If any of the following conditions or events (``EVENTS OF DEFAULT'')
shall occur:
A. FAILURE TO MAKE PAYMENTS WHEN DUE. Failure to pay any
installment of principal of any Loan, any reimbursement obligation in
respect of a Letter of Credit or any Release Price when due, whether at
stated maturity, by acceleration in accordance with the provisions of the
applicable Loan Document, by notice of voluntary prepayment, by mandatory
prepayment or otherwise; or failure to pay interest or any other amount due
under this Agreement (including any other amounts owed in respect of the
Letters of Credit) within five days after the date due; or
B. DEFAULT IN OTHER AGREEMENTS. (i) Failure of any Loan Party or
any of its Subsidiaries to pay when due any principal of or interest on any
Indebtedness the aggregate principal amount of which is equal to or greater
than $5,000,000 (other than Indebtedness referred to in subsection 8.1A,
but including, without limitation, any Indebtedness included in the Pool B
Obligations), in each case beyond the end of any grace period provided
therefor (without extension); (ii) occurrence of any other event or
condition (other than an event or condition expressly described in another
paragraph or provision of this subsection 8.1) which, with the giving of
notice or the lapse of time or both, with respect to (a) any Indebtedness
the aggregate principal amount of which is equal to or greater than
$5,000,000 (including, without limitation, any Indebtedness included in the
Pool B Obligations) or any Contingent Obligation(s) the aggregate amount of
which is equal to or greater than $5,000,000 or (b) any loan agreement,
mortgage, indenture or other agreement relating to such Indebtedness or
Contingent Obligation(s), would cause, or would permit the holder or
holders of that Indebtedness or Contingent Obligation(s) (or a trustee on
behalf of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable (upon the giving or
receiving of notice, lapse of time, both, or otherwise) prior to its stated
maturity or the stated maturity of any underlying obligation, as the case
may be, in each case beyond the end of any cure period therefor (without
any extension thereof) or (iii) any principal amount of Indebtedness of any
Loan Party or any of its Subsidiaries becoming or being declared due and
payable prior to its stated maturity; or
C. BREACH OF CERTAIN COVENANTS. Failure of CapStar or the Borrower
to perform or comply with any term or condition contained in any of
subsections 2.5, 6.3, 6.14, 6.15, 7.1, 7.2 (with respect to Liens
voluntarily created, incurred, assumed or permitted to exist), 7.3, 7.4,
7.5, 7.6, 7.7, 7.11, 7.12, 7.13, 7.14, 7.15 and 7.20; or
D. BREACH OF WARRANTY. Any representation, warranty, certification
or other statement of any Loan Party or any of its Subsidiaries made in
this Agreement or in any other Loan Document or in any statement or
certificate at any time given in writing pursuant hereto or thereto or in
connection herewith or therewith shall be false in any material respect on
the date as of which made and such default shall not have been remedied or
waived within 30 days after the earlier of (i) such Loan Party's or such
Subsidiary's obtaining knowledge of such default and (ii) receipt by such
Loan Party or such Subsidiary of notice from the Agent of such default;
PROVIDED, HOWEVER, that if such default cannot be cured solely by the
payment of money and the cure of such default requires a period in excess
of 30 days, and if such Loan Party or such Subsidiary, as applicable, is
diligently and continuously prosecuting such cure, then such default shall
not be an Event of Default unless such Loan Party or such Subsidiary fails
to cure such default within 90 days, after such Loan Party or such
Subsidiary obtain knowledge or notice thereof, as the case may be; or
E. INVALIDITY OF LOAN DOCUMENT; FAILURE OF SECURITY; REPUDIATION OF
OBLIGATIONS. At any time after the execution and delivery thereof, (i) any
Loan Document (other than a Security Document) or any material provision
thereof shall cease to be in full force and effect (other than in
accordance with its terms) or shall be declared null and void; (ii) any
Security Document or any material provision thereof shall cease to be in
full force and effect (other than by reason of a release of Collateral
thereunder in accordance with the terms hereof or thereof or any other
termination of such Security Document in accordance with the terms hereof
or thereof) or shall be declared null and void, or the Agent shall not have
or shall cease to have a valid and perfected first priority Lien or
security interest in any Collateral purported to be covered, in each case
for any reason other than the failure of the Agent to take any action
within its control; or (iii) any Loan Party shall contest in writing the
validity or enforceability of any Loan Document in writing or deny in
writing that it has any further liability, including with respect to future
advances by the Lenders, under any Loan Document to which it is a party; or
F. POOL A GROUND LEASES. (i) Failure by any Loan Party or any of
its Subsidiaries to pay when due any monetary obligation contained in any
Pool A Ground Lease, in each case beyond the end of any grace period
provided therefor (without extension); (ii) occurrence of any other event
or condition which, with the giving of notice or lapse of time or both,
would cause, or would permit the landlord under any Pool A Ground Lease to
cause, a cancellation or termination, as against any Loan Party or any of
its Subsidiaries party thereto, of such Pool A Ground Lease, in each case
beyond the end of any cure period therefor (without any extension);
(iii) election by any Loan Party or any of its Subsidiaries party to a
Pool A Ground Lease to terminate such Pool A Ground Lease in accordance
with the terms thereof or to reject such Pool A Ground Lease in any
bankruptcy proceeding; or (iv) failure by any Loan Party or any of its
Subsidiaries to permit the Agent and/or its representatives at all
reasonable times upon reasonable prior written notice to make investigation
or examination concerning such Loan Party's or such Subsidiary's
performance and observance of the terms, covenants and conditions of a
Pool A Ground Lease; or
G. POOL B OBLIGATIONS. (i) Failure by any Loan Party or any of its
Subsidiaries to pay when due any monetary obligation contained in any
Pool B Document (other than the principal of or interest on any
Indebtedness included in the Pool B Obligations, as the case may be), in
each case beyond the end of any grace period provided therefor, in each
case beyond the end of any cure period therefor (without any extension);
(ii) the occurrence of any event or condition which, with the giving of
notice or lapse of time or both, would cause, or would permit the holder or
holders of the related Pool B Obligation, as the case may be (including,
without limitation, a landlord under any related Pool B Ground Lease), to
cause, such Pool B Obligation to become or be declared due and payable
(upon the giving or receiving of notice, lapse of time, both, or otherwise)
prior to its stated maturity or the stated maturity of any underlying
obligation, as the case may be; or (iii) failure by any Loan Party or any
of its Subsidiaries to permit the Agent and/or its representatives at all
reasonable times upon reasonable prior written notice to make investigation
or examination concerning such Loan Party's or such Subsidiary's
performance and observance of the terms, covenants and conditions of the
Pool B Documents; or
H. PROHIBITED TRANSFERS. Any Loan Party attempts to assign its
rights under this Agreement or any other Loan Document or any interest
herein or therein; or
I. OTHER DEFAULTS UNDER LOAN DOCUMENTS. Any Loan Party or any of
its Subsidiaries shall default in the performance of or compliance with any
term contained in this Agreement or any other Loan Document other than any
such term in this Agreement or other Loan Document that is referred to in
any other clause of this subsection 8.1 and such default shall not have
been remedied or waived within 30 days after the earlier of (i) such Loan
Party's or such Subsidiary's obtaining knowledge of such default or
(ii) receipt by such Loan Party or such Subsidiary of notice from the Agent
of such default; PROVIDED, HOWEVER, that if such default cannot be cured
solely by the payment of money and the cure of such default requires a
period in excess of 30 days, and such default may reasonably be expected to
be cured on or before the 90th day after such Loan Party or such Subsidiary
obtains knowledge or notice thereof, and if and so long as such Loan Party
or such Subsidiary is diligently and continuously prosecuting such cure,
then such default shall not be an Event of Default unless such Loan Party
or such Subsidiary fails to cure such default before the 90th day after any
Loan Party or any of its Subsidiaries obtains knowledge or notice thereof,
as the case may be; or
J. INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of any Loan Party or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which
decree or order is not stayed; or any other similar relief shall be granted
under any applicable federal or state law; or (ii) an involuntary case
shall be commenced against any Loan Party or any of its Subsidiaries under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect; or a decree or order of a court
having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having
similar powers over any Loan Party or any of its Subsidiaries, or over all
or a substantial part of its property, shall have been entered; or there
shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of any Loan Party or any of its Subsidiaries for
all or a substantial part of its property; or a warrant of attachment,
execution or similar process shall have been issued against any substantial
part of the property of any Loan Party or any of its Subsidiaries, and any
such event described in this clause (ii) shall continue for 60 days unless
dismissed, bonded or discharged; or
K. VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) Any Loan
Party or any of its Subsidiaries shall have an order for relief entered
with respect to it or commence a voluntary case under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of
or taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or any Loan Party or any of its
Subsidiaries shall make any assignment for the benefit of creditors; or
(ii) any Loan Party or any of its Subsidiaries shall be unable, or shall
fail generally, or shall admit in writing its inability, to pay its debts
as such debts become due; or the Board of Directors of any Loan Party or
any of its Subsidiaries (or any committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii); or
L. JUDGMENTS AND ATTACHMENTS. Any money judgment, writ or warrant
of attachment or similar process involving individually or in the aggregate
at any time an amount in excess of $5,000,000 (in either case not
adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed
against the Borrower or any of its Subsidiaries or any of their respective
assets and shall remain undischarged, unvacated, unbonded or unstayed for a
period of 60 days (or in any event later than five days prior to the date
of any proposed sale thereunder); or
M. DISSOLUTION. Any order, judgment or decree shall be entered
against any Loan Party or any of its Subsidiaries decreeing the dissolution
or split up of such Loan Party or that Subsidiary and such order shall
remain undischarged or unstayed for a period in excess of 30 days; or
N. EMPLOYEE BENEFIT PLANS. There shall occur one or more ERISA
Events which individually or in the aggregate results in or could
reasonably be expected to result in liability of the Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates in excess of
$5,000,000 during the term of this Agreement; or (x) the accumulated
benefit obligation (calculated using reasonable actuarial assumptions
employed by the Borrower's actuary for funding purposes) individually for
any Pension Plan, or in the aggregate for all Pension Plans, exceeds the
assets of such Pension Plan or Pension Plans by more than $10,000,000
(excluding for purposes of such computation any Pension Plans with respect
to which assets exceed benefit obligations) (collectively, a ``MATERIAL
PLAN'') and (y) any event occurs which could reasonably be expected to
result in the termination of a Material Plan (other than a voluntary
standard termination under Section 4041(b) of ERISA).
O. MATERIAL ADVERSE EFFECT. Any event or change (including, without
limitation, any event or condition expressly described in another paragraph
or provision of this subsection 8.1) shall occur that has caused or
evidences, either in any case or in the aggregate, a Material Adverse
Effect; or
P. CHANGE IN CONTROL. (i) Paul W. Whetsell, any immediate family
member of Mr. Whetsell and any trusts established by Mr. Whetsell for the
benefit of Mr. Whetsell's immediate family members (PROVIDED that Mr.
Whetsell or an immediate family member is the trustee of such trust and
able to exercise voting rights in respect of the property of the trust)
shall cease for any reason, other than his death, to maintain beneficial
ownership (as defined under Section 13(d) of the Exchange Act) of, and an
Attributable Economic Interest in, 200,000 shares of Common Stock in the
aggregate at any time, of which not less than 100,000 shares shall be free
of any Lien created or granted by Persons that are the record owners of
such shares, PROVIDED that, without the prior approval of the Agent, which
approval may be granted, withheld, conditioned or delayed in its sole
discretion, Mr. Whetsell shall not grant any Lien on any option to acquire
common stock granted by any of the Loan Parties or shares of Common Stock
of CapStar that may be issued upon the exercise thereof; (ii) any Person
other than any of Acadia, its successors, its partners (individually or
jointly) and other Affiliates, Mr. Whetsell, his immediate family members
and the trusts referred to in the preceding clause (i), or any group (as
defined under Section 13(d)(3) of the Exchange Act) consisting of members
other than Acadia, its successors, its partners (individually or jointly)
and other Affiliates, Mr. Whetsell, his immediate family members and the
trusts referred to in the preceding clause (i), becomes the beneficial
owner of more than 30% of the total voting power in the aggregate of all
classes of Capital stock of CapStar normally entitled to vote in the
election of directors; (iii) a majority of the board of directors of
CapStar shall not consist of Persons who were members of such board of
directors on the Closing Date or who were nominated for election or elected
to such board of directors with the affirmative vote of at least a majority
of the members of such board of directors who were members on the Closing
Date or who were so nominated or elected; and (iv) the sale, lease or
transfer, in one transaction or a series of related transactions, of all or
substantially all of the Borrower's and its Subsidiaries' assets to any
person or group (as defined under Section 13(d)(3) of the Exchange Act)
other than to the Borrower or a Wholly Owned Subsidiary of the Borrower
that is a Loan Party;
Q. EMPLOYMENT OF PAUL W. WHETSELL. The Borrower shall cease to
employ Paul W. Whetsell in a senior position except in the event of death
or disability of Mr. Whetsell or the termination of his employment for
cause;
R. FRANCHISE AGREEMENTS. (i) Any Franchise Agreement with respect
to a Pool A Property or any consent delivered by any franchisor under any
such Franchise Agreement shall cease to be in full force and effect other
than with the express consent of the Agent pursuant to subsection 6.20G to
the extent required thereunder or (ii) any party thereto shall deny or
disaffirm its obligations thereunder or shall deny or disaffirm its
obligations thereunder or shall default in the due performance or
observance of any material term, covenant or agreement on its party to be
performed or observed pursuant thereto and any applicable cure period shall
have expired, and in any such event the Borrower shall have failed to
replace such Franchise Agreement within 60 days of such default (after the
expiration of any such cure period) or disaffirmation with a franchise
acceptable to the Agent, in its sole discretion;
THEN (i) upon the occurrence of any Event of Default described in
subsection 8.1J or 8.1K, each of (a) the unpaid principal amount of and
accrued interest on the Loans, (b) an amount equal to the maximum amount
that may at any time be drawn under all Letters of Credit then outstanding
(whether or not any beneficiary under any such Letter of Credit shall have
presented, or shall be entitled at such time to present, the drafts or
other documents or certificates required to draw under such Letter of
Credit), and (c) all other Obligations shall automatically become
immediately due and payable, without notice, presentment, demand, protest
or other requirements of any kind, all of which are hereby expressly waived
by the Borrower and the obligations of each Lender to make any Loan, the
obligation of Agent to issue any Letter of Credit and the right of any
Lender to issue any Letter of Credit hereunder shall thereupon terminate,
and (ii) during the continuance of any other Event of Default, the Agent
may, in its sole discretion, by written notice to the Borrower, declare all
or any portion of the amounts described in clauses (a) through (c) above to
be, and the same shall forthwith become, immediately due and payable and
the obligation of each Lender to make any Loan, the obligation of Agent to
issue any Letter of Credit and the right of any Lender to issue any Letter
of Credit hereunder shall thereupon terminate; PROVIDED that the foregoing
shall not affect in any way the obligations of Lenders under subsection
3.3C(i).
Any amounts described in clause (b) above, when received by
Agent, shall be held by Agent pursuant to the terms of the Collateral
Account Agreement and shall be applied as therein provided.
The occurrence of any condition or event may constitute an Event
of Default (or a Potential Event of Default) under more than one provision
of this subsection 8.1.
8.2 CERTAIN REMEDIES.
A. During the continuance of an Event of Default, all or any one or
more of the rights, powers, privileges and other remedies available to the
Agent or the Lenders against the Borrower under this Agreement, the Notes,
the Mortgages, the Security Documents or any of the other Loan Documents,
or at law or in equity, may be exercised by the Agent, acting in its own
sole discretion at any time and from time to time, whether or not all or
any portion of the Obligations shall be declared due and payable, and
whether or not the Agent shall have commenced any foreclosure proceeding or
other action for the enforcement of its rights and remedies under any of
the Loan Documents with respect to any Property or all or any portion of
the Mortgaged Property. Any such actions taken by the Agent shall be
cumulative and concurrent and may be pursued independently, singly,
successively, together or otherwise, at such time and in such order as the
Agent in its sole discretion may determine, to the fullest extent permitted
by law, without impairing or otherwise affecting the other rights and
remedies of the Agent or the Lenders permitted by law, equity or contract
or as set forth herein or in the other Loan Documents.
B. In the event of the foreclosure or other action by the Agent to
enforce its remedies in connection with one or more of the Pool A
Properties, the Ground Leases or any other Collateral or all or any portion
of the Properties, whether such foreclosure (or other remedy) yields net
proceeds in an amount less than, equal to or more than the Property Amount
with respect to such Property, the Agent shall apply all net proceeds
received to repay the Obligations, the Obligations shall be reduced to the
extent of such net proceeds and the remaining portion of the Obligations
shall remain outstanding and secured by the Mortgages and the other Loan
Documents, it being understood and agreed by the Borrower that the Borrower
is liable for the repayment of the Obligations and that any ``excess''
foreclosure proceeds are part of the cross-collateralized and cross-
defaulted security granted to the Agent on behalf of the Lenders pursuant
to the Mortgages; PROVIDED, HOWEVER, that, if the Agent so elects, the
Loans and the Notes shall be deemed to have been accelerated only to the
extent of the net proceeds actually received by the Lenders with respect to
any individual Property (or, in the event that the Agent on behalf of the
Lenders is the purchaser of such Property by Credit Bid at a foreclosure
sale, the Loans and the Notes shall be deemed to have been accelerated only
at such time as the Agent subsequently disposes of such Property and then
only to the extent of the amount of such Credit Bid) and applied in
reduction of the Obligations in accordance with the provisions of this
Agreement and the Notes, after payment by the Borrower of all transaction
costs and expenses and costs of enforcement.
C. It is intended that the Liens of the Mortgages shall each be
construed and treated as a separate, distinct Lien for the purpose of
securing the entire Obligations secured thereby and each Loan Party
acknowledges and agrees that each Property is mortgaged and transferred to
the Agent on behalf of the Lenders by a separate and distinct mortgage and
security agreement, so that if it should at any time appear or be held that
any Mortgage fails to mortgage, and transfer to the Agent on behalf of the
Lenders a Lien upon and the title to any Property, or any part thereof, as
against creditors of the Borrower other than the Lenders or otherwise, such
failure shall not operate to affect in any way the transfer of the other
Properties or Mortgaged Property or any part thereof to the Agent on behalf
of the Lenders; but nothing contained herein or in the Mortgages shall be
construed as requiring the Agent on behalf of the Lenders to resort to any
Property for the satisfaction of the Obligations secured thereby in
preference or priority to any other Mortgaged Property thereby conveyed,
but the Agent, acting in its sole discretion may seek satisfaction out of
all of the Mortgaged Property or any part thereof.
D. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default the Agent is
hereby authorized by the Borrower at any time or from time to time, without
notice to the Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including Indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including
trust accounts) and any other Indebtedness at any time held or owing by the
Agent to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Agent
under this Agreement and the Notes, including all claims of any nature or
description arising out of or connected with this Agreement or any other
Loan Document, irrespective of whether or not (i) the Agent shall have made
any demand hereunder or (ii) the principal of or the interest on the Loan
or any other amounts due hereunder shall have become due and payable
pursuant to subsection 8.1 and although said obligations and liabilities,
or any of them, may be contingent or unmatured.
E. During the continuance of an Event of Default, the Agent, in its
sole discretion, shall have the right, to the extent permitted by law, to
impound and take possession of books, records, notes, and other documents
evidencing the Borrower's Deposit Accounts, accounts receivable and other
claims for payment of money (including Rents) arising in connection with
the Properties, to give notice to the obligors thereunder of the Agent's
interest therein, and to make direct collections on such Deposit Accounts,
accounts receivable and claims.
F. During the occurrence of an Event of Default and upon the
occurrence and during the continuance of a default in the payment of any
principal or interest of any Indebtedness owed or alleged to be owed by
CapStar, the Borrower or any of their respective Subsidiaries, and
following the initiation of any proceeding or the taking of any other
action to collect the payment thereof by the Person entitled to such
payment, the Agent may, in its sole discretion, advance either to such
Person or to the Borrower, for payment to such Person, all or any portion
of the amount of such payment, whether or not the existence of such
obligation or amount thereof shall be disputed by the Borrower or such
Subsidiary. Each such advance, to the extent not paid out of from funds of
CapStar, the Borrower or any of their respective Subsidiaries, shall be
deemed a Loan hereunder and shall be subject to the provisions of this
Agreement.
G. The rights, powers and remedies of the Agent and the Lenders
under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which the Agent or the Lenders may have against any
Loan Party pursuant to this Agreement or the other Loan Documents executed
by or with respect to such Loan Party, or existing at law or in equity or
otherwise. The rights, powers and remedies of the Agent and the Lenders
may be pursued singly, concurrently or otherwise, at such time and in such
order as the Agent, acting in its own sole discretion, may determine. No
delay or omission to exercise any remedy, right or power accruing upon an
Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as may be deemed expedient. A
waiver of any Event of Default or Potential Event of Default with respect
to any Loan Party shall not be construed to be a waiver of any subsequent
Event of Default or Potential Event of Default by such Loan Party or to
impair any remedy, right or power consequent thereon.
SECTION 9
MISCELLANEOUS
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.
A. GENERAL. Each Lender shall have the right at any time to
(i) sell, assign, transfer or negotiate to any Eligible Assignee (PROVIDED
that such Eligible Assignee complies with the requirements of subsection
2.7B(iii) as of the date it becomes a Lender hereunder, to the extent
applicable), or (ii) sell to any Eligible Assignee participations to any
Person in, all or any part of its Commitment or any Loan or Loans made by
it or its Letters of Credit or participations therein or any other interest
herein or in any other Obligations owed to it; PROVIDED, HOWEVER, that
(w) no such sale, assignment, transfer or participation shall, without the
consent of the Borrower, require the Borrower to file a registration
statement with the Securities and Exchange Commission or apply to qualify
such sale, assignment, transfer or participation under the securities laws
of any state, (y) no such sale, assignment, transfer or participation of
any Letter of Credit or any participation therein may be made separately
from a sale, assignment, transfer or participation of a corresponding
interest in the Loan Commitment and the Loans of the Lender effecting such
sale, assignment, transfer or participation, and (z) no such sale,
assignment or transfer of an interest in the Loan Commitment of such Lender
shall be made in an amount less than $5,000,000 (or, if less, the aggregate
amount of the Commitment of such Lender). In the case of any assignment
authorized under this subsection 9.1, (i) the Agent shall notify the
Borrower of the effective date of such assignment, (ii) as of such
effective date, the assignee shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it or assumed
by it, as the case may be, shall have the rights and obligations of a
Lender hereunder, (iii) the assigning Lender shall, to the extent that its
rights and obligations hereunder have been assigned by it, relinquish its
rights and be released from its obligations under this Agreement after the
date of such assignment and (iv) if any such assignment occurs after the
issuance of a Note with respect to the Commitment so assigned, the
assigning Lender shall surrender its applicable Note and, upon such
surrender, new Notes shall be issued to the assignee and, if applicable,
the assigning Lender substantially in the form of EXHIBIT I annexed hereto,
with appropriate insertions. In the event of an assignment hereunder, the
Commitments shall be modified to reflect the Commitments of such assignee.
Except with respect to the portion of the Loans and Commitments assigned
pursuant to this subsection 9.1, no Lender shall, as between the Borrower
and such Lender, be relieved of any of its obligations hereunder as a
result of any sale, assignment, transfer or negotiation of, or any granting
of participations in, all or any part of its Commitment or the Loans, the
Letters of Credit or participations therein, or other Obligations owed to
such Lender.
B. PARTICIPATIONS. The Borrower and each Lender hereby acknowledge
and agree that, solely for purposes of subsections 2.6, 2.7, and 9.5,
(i) any participation will give rise to a direct obligation of the Borrower
to the participant and (ii) the participant shall be considered to be a
``Lender''.
C. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the
assignments and participations permitted under the foregoing provisions of
this subsection 9.1, any Lender may assign and pledge all or any portion of
its Loans and the other Obligations owed to such Lender to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board
of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank. No Lender shall, as between the
Borrower and such Lender, be relieved of any of its obligations hereunder
as a result of any such assignment and pledge.
D. INFORMATION. Each Lender may furnish any information concerning
the Borrower and its Subsidiaries in the possession of that Lender from
time to time to prospective assignees and participants who agree to be
bound by the provisions of subsection 9.24.
9.2 EXPENSES.
Whether or not the transactions contemplated hereby shall be
consummated, the Borrower agrees to pay promptly (i) all the costs of
furnishing all opinions of counsel for the Borrower and the other Loan
Parties (including any opinions reasonably requested by the Agent) as to
any legal matters arising hereunder and of each Loan Party's performance of
and compliance with all agreements and conditions on its part to be
performed or complied with under this Agreement and the other Loan
Documents including with respect to confirming compliance with
environmental, insurance and solvency requirements and with respect to the
Security Documents and the Liens created pursuant thereto; (ii) all the
actual costs and expenses of creating, perfecting and maintaining Liens in
favor of the Agent for the benefit of the Lenders pursuant to any Loan
Document, including filing and recording fees and expenses, mortgage
recording taxes, intangible taxes and transfer and stamp taxes, title
searches, title insurance premiums, UCC search and filing charges and
expenses (including charges and expenses for UCC searches evidencing the
proper filing, recording and indexing of UCC financing statements and
listing all other effective financing statements that name such Loan Party
as debtor, and copies of all such other financing statements); (iii) all
reasonable out-of-pocket costs and expenses incurred by the Agent
(including the reasonable fees, expenses and disbursements of any auditors,
accountants, architects, engineers or appraisers and any environmental or
other consultants, advisors and agents employed or retained by the Agent or
its counsel) in connection with performing due diligence, including
obtaining and reviewing any Appraisals, any environmental audits or
reports, market surveys, title reports, surveys and similar information;
(iv) all reasonable out-of-pocket fees, expenses and disbursements of
counsel for the Agent and its Affiliates (including allocated costs of
internal counsel) in connection with the negotiation, preparation,
execution and syndication of the Loan Documents and any consents,
amendments, waivers or other modifications thereto and any other documents
or matters requested by any Loan Party; (v) all reasonable out-of-pocket
costs and expenses incurred by the Agent in connection with (a) the
negotiation, preparation and execution of the Loan Documents, the
syndication of the Commitments and Loans and due diligence, (b) any
consents, amendments or waivers of or other modifications to any of the
Loan Documents, (c) any Acquisition, Transfer or release of any Property or
other Collateral or any proposal with respect to any of the foregoing, (d)
the custody or preservation of any of the Collateral and (e) the
preparation, delivery or review of other documents or matters requested by
any Loan Party, including, without limitation, all instruments, documents,
boundary surveys, footing or foundation surveys, certificates, plans and
specifications, Appraisals (but only to the extent required to be paid by
the Borrower pursuant to subsection 6.6B), title and other insurance
reports and agreements, and each and every other document, certificate,
agreement and instrument required to be furnished pursuant to the terms of
the Loan Documents; and (vi) after the occurrence of an Event of Default,
all costs and expenses, including reasonable attorneys' fees (including
allocated costs of internal counsel) and costs of settlement, incurred by
the Agent and the Lenders in enforcing any Obligations of or in collecting
any payments due from the Borrower hereunder or under the other Loan
Documents by reason of such Event of Default or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a ``work-out'' or pursuant to any insolvency or
bankruptcy proceedings. Except as expressly provided to the contrary in
this Agreement or any other Loan Document, costs or expenses that are
payable by the Borrower after the Closing Date shall be payable by the
Borrower within five Business Days after the Borrower's receipt of written
demand from the Agent to pay same, accompanied by documentation in
reasonable detail sufficient to verify the nature and amount.
9.3 INDEMNITY.
A. INDEMNITY. In addition to the payment of expenses as required by
subsection 9.2, whether or not the transactions contemplated hereby shall
be consummated, the Borrower agrees to defend, indemnify and hold harmless
the Agent, Lenders and Bankers and their respective Affiliates and Persons
deemed to be ``controlling persons'' thereof within the meaning of the
Securities Act or the Exchange Act and the respective directors, officers,
employees, agents, attorneys and representatives of the foregoing
(collectively, ``INDEMNIFIED PERSONS'' and individually, an ``INDEMNIFIED
PERSON''), to the full extent lawful, from and against any and all losses,
claims, damages, liabilities, costs and expenses or other obligations of
any kind or nature whatsoever incurred by each such Indemnified Person
(including fees, charges and disbursements of counsel and the allocated
costs and expenses of internal counsel for such Indemnified Person) which
are related to, arise out of or result from (a) any untrue statements or
alleged untrue statements or omissions or alleged omissions to state
therein a material fact necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, in each case
made or, to the extent contemplated by the Loan Documents, to be made, by
or on behalf of any Loan Party or any of its Affiliates, (x) in the
representations and warranties of the Loan Parties contained in the Loan
Documents, (y) in or pursuant to the Original Financing Letter, the Loan
Documents or the Related Documents or (z) otherwise in connection with the
Original Financing Letter, the Loan Documents or the Related Documents,
(b) information provided by or on behalf of any Loan Party or any of their
Affiliates for use in connection with any syndication, assignment or
participation of any portion of the Commitments, the Loans, the Notes, the
other Loan Documents or the Obligations, or in connection with the Original
Financing Letter, any Loan Document or any Related Document or any
transactions contemplated hereby or thereby, (c) the transactions
contemplated by the Loan Documents (including the Lenders' agreements to
make the Loans or the use or intended use of the proceeds thereof) or any
enforcement of any of the Loan Documents (including any sale of, collection
from, or other realization upon any of the Collateral or the enforcement of
the Affiliate Guaranty), (d) any actions taken or omitted to be taken by an
Indemnified Person with the consent of the Borrower or in conformity with
the instructions of the Borrower, or (e) any other transactions
contemplated by the Original Financing Letter, the Loan Documents or the
Related Documents, and the Borrower will reimburse each Indemnified Person
for all reasonable costs and expenses, including fees and disbursements of
both outside and internal counsel for such Indemnified Person, as they are
incurred, in connection with investigating, preparing for, or defending any
formal or informal claim, action, suit, investigation, inquiry or other
proceeding, whether or not in connection with pending or threatening
litigation, caused by or arising out of or in connection with the
foregoing, whether or not such Indemnified Person is named as a party
thereto and whether or not any liability results therefrom. The Borrower
shall not, however, be responsible for any losses, claims, damages,
liabilities, costs or expenses pursuant to clauses (c), (d) or (e) of the
preceding sentence which have resulted from the bad faith or recklessness
of such Indemnified Person as determined by a final judgment of a court of
competent jurisdiction. Neither the Agent nor any other Indemnified Person
shall have any liability (whether direct or indirect, in contract or tort
or otherwise) to any of the Loan Parties and their respective Affiliates or
any director, officer, employee, agent or representative of any of the
foregoing, or any other person, for or in connection with the foregoing, or
otherwise arising out of or in any way relating to the matters contemplated
by the Original Financing Letter, the Loan Documents, the Related Documents
or any commitment to lend except for such liability for losses, claims,
damages, liabilities, costs or expenses of any Indemnified Person pursuant
to clauses (c), (d) or (e) of the preceding sentence to the extent they are
determined to have resulted from the bad faith or recklessness of such
Indemnified Person as determined by a final judgment of a court of
competent jurisdiction and in no event shall the Agent or any other
Indemnified Person be responsible for or liable to any of the Loan Parties
or any of their respective Affiliates or any other Person for
consequential, punitive or exemplary damages. The Borrower further agrees
that the Loan Parties shall not, nor shall they permit their respective
Subsidiaries to, without the prior written consent of the Agent and
Bankers, settle or compromise or consent to the entry of any judgment in
any pending or threatened claim, action, suit, investigation, inquiry or
other proceeding in respect of which indemnification is actually sought
hereunder unless such settlement, compromise or consent includes an
unconditional release of the Agent and each other Indemnified Person
hereunder from all liability arising out of such claim, action, suit,
investigation, inquiry or other proceeding.
B. PROCEDURE. If any action, suit, investigation, inquiry or other
proceeding is commenced, as to which an Indemnified Person proposes to
demand indemnification hereunder, such Indemnified Person shall notify the
Borrower with reasonable promptness; PROVIDED, HOWEVER, that any failure by
such Indemnified Person to notify the Borrower shall not relieve the
Borrower or any of its Affiliates from its obligations hereunder (except to
the extent that the Borrower or such Affiliate is prejudiced by such
failure to so promptly notify). The Borrower shall be entitled to assume
the defense of any such action, suit, investigation, inquiry or other
proceeding, including the employment of counsel reasonably satisfactory to
the Indemnified Person and the payment of all reasonable fees and expenses
incurred in connection therewith. The Indemnified Person shall have the
right to employ separate counsel in any such action, suit, investigation,
inquiry or other proceeding, or to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the
Indemnified Person unless (i) the Borrower has agreed to pay such fees and
expenses, (ii) the Borrower shall have failed promptly upon written demand
therefor to assume the defense of such action, suit, investigation, inquiry
or other proceeding, and employ counsel reasonably satisfactory to the
Indemnified Person in connection therewith or (iii) such Indemnified Person
shall have been advised by counsel that there exists actual or potential
conflicting interests between the Borrower and such Indemnified Person,
including situations in which one or more legal defenses may be available
to such Indemnified Person that are different from or additional to those
available to the Borrower, in which case, if such Indemnified Person
notifies the Borrower in writing that it elects to employ separate counsel
at the expense of the Borrower, the Borrower shall not have the right to
assume the defense of such action or proceeding on behalf of such
Indemnified Person; PROVIDED, however, that the Borrower shall not, in
connection with any one such action, suit, investigation, inquiry or other
proceeding or separate but substantially similar or related actions, suits,
investigations, inquiries or other proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the fees and expenses of more than one separate firm of attorneys at any
time for all such Indemnified Persons (in addition to local counsel), which
firm shall be designated in writing by the Agent.
C. CONTRIBUTION. In order to provide for just and equitable
contribution with respect to matters subject to subsection 9.3A, if a claim
for indemnification is made pursuant to these provisions but is found in a
final judgment by a court of competent jurisdiction (not subject to further
appeal) that such indemnification is not available for any reason (except,
with respect to indemnification sought solely pursuant to subsection 9.3A,
for the reasons specified in the second sentence of subsection 9.3A), even
though the express provisions hereof provide for indemnification in such
case, or is insufficient to hold an Indemnified Party harmless, then the
Borrower, on the one hand, and the Agent, the Lenders or Bankers, on the
other hand, shall contribute to such loss, claim, damage, liability, cost
or expense for which such indemnification or reimbursement is held
unavailable or is insufficient in such proportion as is appropriate to
reflect the relative benefits to the Loan Parties and their respective
Affiliates, on the one hand, and the Agent, Lenders or Bankers, on the
other hand, in connection with the transactions described in the Original
Financing Letter, the Loan Documents and the Related Documents, as well as
any other equitable considerations. The parties agree that for the purpose
of this subsection 9.3C, the relative benefits to the Loan Parties and
their respective Affiliates, on the one hand, and the Agent, Lenders and
Bankers, on the other hand, shall be deemed to be in the same proportion as
the proceeds received or to be received by the Loan Parties from the Loan
Documents bears to the fees paid or to be paid to the Agent, Lenders and
Bankers under the Loan Documents. Notwithstanding the foregoing, the
Agent, Lenders and Bankers shall not be required to contribute under this
subsection 9.3C any amount in excess of the amount of fees actually
received by the Agent, Lenders and Bankers, respectively, in respect of the
Loan Documents. The Borrower, Agent, Bankers and the Lenders agree that it
would not be just and equitable if contribution pursuant to this subsection
9.3C were determined by pro rata allocation or by any other method which
does not take into account the equitable considerations referred to in this
subsection 9.3C.
D. NO LIMITATION. The foregoing rights to indemnity and
contribution shall be in addition to any rights that any Indemnified Person
and Loan Parties may have at common law or otherwise and shall remain in
full force and effect following the completion or any termination of the
transactions contemplated by the Original Financing Letter, the Loan
Documents and the Related Documents. In no event shall the Agent, the
Lenders, or Bankers be responsible or liable to any person for
consequential damages which may be alleged as a result of the Original
Financing Letter, the Loan Documents and the Related Documents or any
transaction contemplated thereby.
E. INDEPENDENCE OF INDEMNITY; NO ENLARGEMENT. The Borrower
acknowledges and agrees that the provisions of this subsection 9.3 are
separate from and in addition to the provisions contained in the Original
Financing Letter and contained in the Environmental Indemnity. The
provisions of this subsection 9.3 shall not enlarge or vary the obligations
of the Borrower under subsections 2.6D and 2.7.
9.4 NO JOINT VENTURE OR PARTNERSHIP.
The Lenders, CapStar and the Borrower acknowledge and agree that the
relationship created hereunder or under the other Loan Documents is that of
creditor/debtor. Each of CapStar and the Borrower acknowledges and agrees
that (a) the Borrower, through its partners and employees, is a
knowledgeable and sophisticated business practitioner with particular
expertise and broad experience in the area of hotel acquisition, finance
and management; (b) the Lenders individually and collectively, do not owe,
and have expressly disclaimed, any fiduciary or special obligation to the
Borrower and/or any of the Borrower's partners, agents, or representatives;
and (c) nothing contained in this Agreement or any other Loan Document
shall affect the relationship between the Lenders and the Borrower as that
of creditor/debtor hereunder and under the other Loan Documents. Nothing
herein or therein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between the Borrower, any
other Loan Party or Subsidiary thereof and the Lenders nor to grant the
Agent or the Lenders any interest in the Mortgaged Property other than that
of mortgagee or lender.
9.5 RATABLE SHARING.
The Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans
made and applied in accordance with this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the
Loan Documents or otherwise, or as adequate protection of a deposit treated
as cash collateral under the Bankruptcy Code, receive payment or reduction
of a proportion of the aggregate amount of principal, interest, amounts
payable in respect of Letters of Credit, fees and other amounts then due
and owing to that Lender hereunder or under the other Loan Documents
(collectively, the ``AGGREGATE AMOUNTS DUE'' to such Lender) which is
greater than the proportion received by any other Lender in respect of the
Aggregate Amounts Due to such other Lender, then the Lender receiving such
proportionately greater payment shall (i) notify the Agent and each other
Lender of the receipt of such payment and (ii) apply a portion of such
payment to purchase participations (which it shall be deemed to have
purchased from each seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; PROVIDED, HOWEVER, that if all or part of such
proportionately greater payment received by such purchasing Lender is
thereafter recovered from such Lender upon the bankruptcy or reorganization
of the Borrower or otherwise, those purchases shall be rescinded and the
purchase prices paid for such participations shall be returned to such
purchasing Lender ratably to the extent of such recovery, but without
interest. The Borrower expressly consents to the foregoing arrangement and
agrees that any holder of a participation so purchased may exercise any and
all rights of banker's lien, set-off or counterclaim with respect to any
and all monies owing by the Borrower to that holder with respect thereto as
fully as if that holder were owed the amount of the participation held by
that holder.
9.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of
this Agreement or any other Loan Document or consent to any departure by
any Loan Party therefrom, shall in any event be effective without the
written concurrence of the Agent. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 9.6 shall be binding upon each
Lender at the time outstanding, each future Lender and, if signed by the
Borrower, on the Borrower.
9.7 INDEPENDENCE OF COVENANTS.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants,
the fact that it would be permitted by an exception to, or would otherwise
be within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such
action is taken or condition exists.
9.8 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing
and may be personally served or sent by telefacsimile or courier service
and shall be deemed to have been given when delivered in person or by
courier service or upon receipt of the telefacsimile, as the case may be.
For the purposes hereof, the address of each party hereto shall be as set
forth under such party's name on the signature pages hereof or (i) as to
the Borrower and the Agent, such other address as shall be designated by
such Person in a written notice delivered to the other parties hereto and
(ii) as to each other party, such other address as shall be designated by
such party in a written notice delivered to the Agent.
9.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. Except as provided in subsection 9.9B below, all representations,
warranties and agreements made herein shall survive the execution and
delivery of this Agreement and the making of the Loans and the issuance of
the Letters of Credit hereunder and shall terminate upon indefeasible
payment in full of the Obligations and the expiration or termination of all
Commitments and Letters of Credit, notwithstanding anything in this
Agreement or implied by law to the contrary.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of the Borrower set forth in subsections 2.6,
2.7, 3.5A, 3.6, 5.2G (to the extent it incorporates the Environmental
Indemnity), 6.8 (to the extent it incorporates the Environmental
Indemnity), 9.2, 9.3 and 9.5 shall survive the payment in full of the
Obligations, the cancellation or expiration of the Letters of Credit and
the reimbursement of any amounts drawn thereunder, and the termination of
this Agreement.
9.10 AGENT'S DISCRETION; SUCCESSOR AGENTS.
Whenever pursuant to this Agreement or any other Loan Document the
Agent exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to the Agent, the decision of the
Agent to approve or disapprove or to decide whether arrangements or terms
are satisfactory or not satisfactory shall (except as is otherwise
specifically herein provided) be in the sole discretion of the Agent. The
Borrower acknowledges and agrees that, notwithstanding anything in this
Agreement to the contrary, certain decisions to be made by the Agent under,
or amendments, supplements or other modification to, this Agreement may be
subject to or determined by the further decision by the Lenders or a
percentage of the Lenders. The Borrower acknowledges that, in the event of
the resignation or removal of Bankers or a successor Agent hereunder, a
successor Agent may be appointed by the Lenders and agrees that such
successor Agent shall succeed to all of the rights and duties of the Agent
under the Loan Documents but shall not be liable for any breach of any Loan
Document by any predecessor Agent.
9.11 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF THE LENDERS' RIGHTS.
The obligations of the Lenders hereunder are several and no Lender
shall be responsible for the obligations or Commitment of any other Lender
hereunder. Nothing contained herein or in any other Loan Document, and no
action taken by the Lenders pursuant hereto or thereto, shall be deemed to
constitute the Lenders as a partnership, an association, a Joint Venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and each Lender shall be
entitled to protect and enforce its rights arising out of this Agreement
and it shall not be necessary for any other Lender to be joined as an
additional party in any proceeding for such purpose.
9.12 REMEDIES OF THE BORROWER.
In the event that a claim or adjudication is made that the Agent or
any Lender or their respective agents has acted unreasonably or
unreasonably delayed acting in any case where by law or under this
Agreement, the Notes, the Mortgages or the other Loan Documents, the Agent,
such Lender or such agent, as the case may be, has an obligation to act
reasonably or promptly, the Borrower agrees that none of the Agent, such
Lender or such agents, shall be liable for any monetary damages, and the
Borrower's sole remedies shall be limited to commencing an action seeking
injunctive relief or declaratory judgement. The parties hereto agree that
any action or proceeding to determine whether the Agent or any Lender has
acted reasonably shall be determined by an action seeking declaratory
judgment.
9.13 MARSHALLING; PAYMENTS SET ASIDE.
Neither the Agent nor any Lenders shall be under any obligation to
marshal any assets in favor of the Borrower, any other Loan Party or any
other party or against or in payment of any or all of the Obligations. To
the extent that the Borrower or any other Loan Party makes a payment or
payments to the Lenders or the Agent (or to the Agent for the benefit of
the Lenders), or the Agent or the Lenders enforce any security interests or
the Agent exercises its rights of setoff, and such payment or payments or
the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other
party under any bankruptcy law, any other state or federal law, common law
or any equitable cause of action, then, to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all
Liens, rights and remedies therefor or related thereto, shall be revived
and continued in full force and effect as if such payment or payments had
not been made or such enforcement or setoff had not occurred.
9.14 MAXIMUM AMOUNT.
A. It is the intention of the Borrower and the Lenders to conform
strictly to the usury and similar laws relating to interest from time to
time in force, and all agreements between the Loan Parties and their
respective Subsidiaries and the Lenders, 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 in the
aggregate to the Lenders as interest (whether or not designated as
interest, and including any amount otherwise designated but deemed to
constitute interest by a court of competent jurisdiction) hereunder or
under the other Loan Documents or in any other agreement given to secure
the indebtedness of the Borrower to the Lenders, or in any other document
evidencing, securing or pertaining to the indebtedness evidenced hereby,
exceed the maximum amount permissible under applicable usury or such other
laws (the ``MAXIMUM AMOUNT''). If under any circumstances whatsoever
fulfillment of any provision hereof, or any of the other Loan Documents, at
the time performance of such provision shall be due, shall involve
exceeding the Maximum Amount, then, ipso facto, the obligation to be
fulfilled shall be reduced to the Maximum Amount. For the purposes of
calculating the actual amount of interest paid and/or payable hereunder in
respect of laws pertaining to usury or such other laws, all sums paid or
agreed to be paid to the holder hereof for the use, forbearance or
detention of the indebtedness of the Borrower evidenced hereby, outstanding
from time to time shall, to the extent permitted by Applicable Law, be
amortized, pro-rated, allocated and spread from the date of disbursement of
the proceeds of the Notes until payment in full of all of such
indebtedness, so that the actual rate of interest on account of such
indebtedness is uniform through the term hereof. The terms and provisions
of this subsection shall control and supersede every other provision of all
agreements between the Borrower or any endorser of the Notes and the
Lenders.
B. If under any circumstances any Lender shall ever receive an
amount which would exceed the Maximum Amount, such amount shall be deemed a
payment in reduction of the principal amount of the Loans and shall be
treated as a voluntary prepayment under subsection 2.4B(i) and shall be so
applied in accordance with subsection 2.4 hereof or if such excessive
interest exceeds the unpaid balance of the Loans and any other indebtedness
of the Borrower in favor of such Lender, the excess shall be deemed to have
been a payment made by mistake and shall be refunded to the Borrower.
9.15 SEVERABILITY.
In case any provision in or obligation under this Agreement or any
Note or any other Loan Document shall be invalid, illegal or unenforceable
in any jurisdiction or under any set of circumstances, the validity,
legality and enforceability of the remaining provisions or obligations, or
of such provision or obligation in any other jurisdiction or under any
other set of circumstances, shall not in any way be affected or impaired
thereby.
9.16 HEADINGS.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
9.17 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE
STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.18 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the
parties hereto and the successors and assigns of the Agent and the Lenders
(it being understood that the Lenders' rights of assignment are subject to
subsection 9.1). Neither CapStar's and the Borrower's rights or
obligations hereunder nor any interest therein may be assigned or delegated
by CapStar or the Borrower, as the case may be.
9.19 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE BORROWER OR CAPSTAR
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY
EXECUTING AND DELIVERING THIS AGREEMENT, EACH OF THE BORROWER AND CAPSTAR,
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE
WITH SUBSECTION 9.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT THE AGENT RETAINS THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST THE
BORROWER OR CAPSTAR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 9.19 RELATING
TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
9.20 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN
TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED
HEREBY AND THEREBY. The scope of this waiver is intended to be all-
encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a
material inducement to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement and the other
Loan Documents, and that each will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants and represents
that it has reviewed this waiver with its legal counsel and that it
knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT
IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL
WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 9.20 AND EXECUTED
BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of
litigation, this Agreement may be filed as a written consent to a trial by
the court.
9.21 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same
instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature
pages are physically attached to the same document. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto and receipt by the Borrower and the Agent of written or
telephonic notification of such execution and authorization of delivery
thereof.
9.22 MATERIAL INDUCEMENT.
Each of the Borrower and CapStar acknowledges that its
representations, warranties, covenants and agreements contained in this
Agreement and the other Loan Documents, including its covenants and
agreements to pay Release Prices, are material inducements to the Lenders
to enter into this Agreement and to make the Loans and issue the Letters of
Credit, that the Lenders have already relied on such representations,
warranties, covenants and agreements in entering into this Agreement and
agreeing to make the Loans (notwithstanding any investigation heretofore or
hereafter made by or on behalf of the Lenders), and that the Lenders will
continue to rely on such representations, warranties, covenants and
agreements in their future dealings with the Borrower. The Borrower
understands that the Release Prices are designed to afford to the Lenders a
predictable return on their investment in the Loans, that the Release
Prices will be required to be paid by the Borrower in connection with
voluntary and involuntary prepayments of the principal amount of the Loans
and reductions in the Commitments to the extent provided in this Agreement
and that the payment of the Release Prices in connection with involuntary
prepayments beyond the Borrower's control (such as upon the occurrence of a
casualty or a Taking) may be required. The Borrower agrees that its
representations, warranties, covenants and agreements contained in this
Agreement and the other Loan Documents, including its covenants and
agreements to pay Release Prices, are reasonable in purpose and scope. The
Borrower represents and warrants that it has reviewed this Agreement and
the other Loan Documents with its legal counsel and that it knowingly and
voluntarily is entering into this Agreement and the other Loan Documents
following consultation with legal counsel.
9.23 ENTIRE AGREEMENT.
This Agreement is evidence of the indebtedness incurred pursuant
hereto and, taken together with all of the other Loan Documents and all
certificates and other documents delivered to the Agent and the Lenders
hereunder and thereunder, embodies the entire agreement and supersedes all
prior agreements, written and oral, relating to the subject matter hereof.
This Agreement and the other Loan Documents constitute the final expression
of the agreement between the parties hereto and this Agreement and such
other Loan Document may not be contradicted by evidence of any alleged oral
agreement.
9.24 CONFIDENTIALITY.
Each Lender and the Agent, severally and not jointly, agrees to
exercise commercially reasonable efforts (i) to keep any non-public
information delivered or made available to such Lender or the Agent
pursuant to the Loan Documents, which any Loan Party or its authorized
representative has identified as confidential information, confidential
from any Person other than Persons employed by or retained by such Lender
or the Agent or their respective Affiliates who are or are expected to
become engaged in evaluating, approving, structuring or administering the
Loans, Letters of Credit and other extensions of credit or Obligations
hereunder and (ii) to advise its employees who receive such information
that engaging in securities transactions involving the Common Stock while
in the possession of such non-public information may violate applicable
securities laws; PROVIDED that nothing herein shall prevent any Lender or
the Agent from disclosing such information to any bona fide Eligible
Assignee, transferee or Eligible Participant that has agreed to be bound by
the provisions of this subsection 9.24 in connection with the contemplated
assignment or transfer of any Commitments, Loans, Letters of Credit or
other extensions of credit or Obligations hereunder or participation
therein or as required or requested by any Governmental Authority or
representative thereof or pursuant to legal process or in connection with
the exercise of any remedy under the Loan Documents.
[Remainder of page intentionally left blank.]
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
CAPSTAR MANAGEMENT COMPANY, L.P.
By: CAPSTAR HOTEL COMPANY,
its general partner
By:
Name:
Title:
Notice Address:
CapStar Management Company, L.P.
1010 Wisconsin Avenue, N.W. - Suite 650
Washington, D.C. 20007
Attention: __________
GUARANTOR:
CAPSTAR HOTEL COMPANY
By:
Name:
Title:
Notice Address:
CapStar Hotel Company
1010 Wisconsin Avenue, N.W. - Suite 650
Washington, D.C. 20007
Attention: __________
S-1
<PAGE>
AGENT:
BANKERS TRUST COMPANY,
as Agent
By:
Name:
Title:
Notice Address:
Bankers Trust Company
280 Park Avenue, 23W
New York, New York 10017
Attention: Garrett Thelander
LENDERS:
BANKERS TRUST COMPANY,
as a Lender
By:
Name:
Title:
Notice Address:
Bankers Trust Company
280 Park Avenue, 23W
New York, New York 10017
Attention: Garrett Thelander
S-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
CAPSTAR HOTEL COMPANY
FINANCIAL DATA SCHEDULE
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF CAPSTAR HOTEL COMPANY AS OF SEPTEMBER 30,
1996 AND DECEMBER 31, 1995 AND THE RELATED STATEMENTS OF
OPERATIONS, AND CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,161
<SECURITIES> 0
<RECEIVABLES> 8,146
<ALLOWANCES> 125
<INVENTORY> 650
<CURRENT-ASSETS> 24,102
<PP&E> 222,516
<DEPRECIATION> 6,692
<TOTAL-ASSETS> 247,105
<CURRENT-LIABILITIES> 13,334
<BONDS> 73,554
<COMMON> 0
0
0
<OTHER-SE> 159,464
<TOTAL-LIABILITY-AND-EQUITY> 247,105
<SALES> 0
<TOTAL-REVENUES> 77,128
<CGS> 0
<TOTAL-COSTS> 63,647
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 34,000
<INTEREST-EXPENSE> 10,428
<INCOME-PRETAX> 3,073
<INCOME-TAX> 1,092
<INCOME-CONTINUING> 1,981
<DISCONTINUED> 0
<EXTRAORDINARY> 1,956
<CHANGES> 0
<NET-INCOME> 25
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
