UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission file number 1-14045
LASALLE HOTEL PROPERTIES
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 36-4219376
------------------------- ---------------------------------
(State or other jurisdic- (IRS Employer Identification No.)
tion of incorporation or
organization)
1401 Eye Street, NW, Suite 900, Washington, D.C. 20005
- ------------------------------------------------ ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 202/222-2600
Indicate by check mark whether 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 preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of common shares of beneficial interest of each class
outstanding as of the latest practicable date.
Outstanding at
Class November 9, 1999
----- ----------------
Common Shares of Beneficial 15,421,199
Interest ($0.01 par value)
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 17
Item 3. Quantitative and Qualitative Disclosures about
Market Risk . . . . . . . . . . . . . . . . . . . . . 26
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 27
Item 2. Changes in Securities and Use of Proceeds . . . . . . 27
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . 27
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . 27
Item 5. Other Matters . . . . . . . . . . . . . . . . . . . . 27
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 28
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LASALLE HOTEL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
ASSETS
------
Investment in hotel properties, net. . . . . $ 501,109 $ 467,552
Investment in Affiliated Lessee. . . . . . . 52 (21)
Cash and cash equivalents. . . . . . . . . . 862 1,570
Restricted cash reserves . . . . . . . . . . 10,567 9,789
Rent receivable from lessees:
Affiliated Lessee. . . . . . . . . . . . . 4,319 --
Other Lessees. . . . . . . . . . . . . . . 6,245 3,088
Notes receivable:
Affiliated Lessee. . . . . . . . . . . . . 3,900 1,500
Other Lessees. . . . . . . . . . . . . . . 3,618 3,451
Other. . . . . . . . . . . . . . . . . . . 413 --
Deferred financing costs, net. . . . . . . . 1,843 1,754
Prepaid expenses and other assets. . . . . . 1,574 7,655
---------- ----------
Total assets . . . . . . . . . . . $ 534,502 $ 496,338
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Borrowings under credit facility . . . . . . $ 158,100 $ 164,700
Bonds payable, net . . . . . . . . . . . . . 41,885 42,828
Mortgage loan. . . . . . . . . . . . . . . . 46,452 --
Due to JLL . . . . . . . . . . . . . . . . . 1,500 886
Due to Affiliated Lessee . . . . . . . . . . -- 614
Accounts payable and accrued expenses. . . . 7,416 4,320
Minority interest in Operating
Partnership. . . . . . . . . . . . . . . . 45,508 47,694
Minority interest in other partnerships. . . 10 10
Distributions payable. . . . . . . . . . . . -- 6,902
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Preferred shares of beneficial interest,
$.01 par value, 20,000,000 shares
authorized, no shares issued and
outstanding. . . . . . . . . . . . . . . -- --
Common shares of beneficial interest,
$.01 par value, 100,000,000 shares
authorized 15,421,199 shares
issued and outstanding . . . . . . . . . 154 152
Additional paid-in capital . . . . . . . . 234,186 231,376
Retained earnings. . . . . . . . . . . . . -- --
Distributions in excess of
Retained Earnings. . . . . . . . . . . . (709) (3,144)
---------- ----------
Total shareholders' equity . . . . 233,631 228,384
---------- ----------
Total liabilities and
shareholders' equity . . . . . . $ 534,502 $ 496,338
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
For the
period from
April 29,
1998
For the nine (inception)
months ended through
September 30, September 30,
1999 1998
------------- -------------
Revenues:
Participating lease revenue:
Affiliated Lessee. . . . . . . . . $ 21,846 $ 13,747
Other Lessees. . . . . . . . . . . 37,786 17,477
Interest income:
Affiliated Lessee. . . . . . . . . 171 33
Other Lessees. . . . . . . . . . . 153 84
Other. . . . . . . . . . . . . . . 392 231
Equity in income (loss) of
Affiliated Lessee . . . . . . . . . 73 (25)
Other income . . . . . . . . . . . . 11 --
---------- ----------
Total revenues . . . . . . . 60,432 31,547
---------- ----------
Expenses:
Depreciation and other amortization. 18,562 7,901
Real estate, personal property
taxes and insurance. . . . . . . . 6,118 3,168
Ground rent. . . . . . . . . . . . . 2,545 1,261
General and administrative . . . . . 949 315
Interest . . . . . . . . . . . . . . 11,558 4,998
Amortization of deferred financing
costs. . . . . . . . . . . . . . . 733 294
Advisory fee . . . . . . . . . . . . 3,034 1,376
Other. . . . . . . . . . . . . . . . 123 5
---------- ----------
Total expenses . . . . . . . 43,622 19,318
---------- ----------
Income before minority interest. . . . 16,810 12,229
Minority interest in Operating
Partnership. . . . . . . . . . . . . 2,869 2,121
---------- ----------
Net income . . . . . . . . . . . . . . $ 13,941 $ 10,108
========== ==========
Net income per weighted average
common share outstanding
- basic . . . . . . . . . . . . . . $ 0.91 $ 0.66
- diluted . . . . . . . . . . . . . $ 0.91 $ 0.66
Weighted average number of
common shares outstanding
- basic . . . . . . . . . . . . . . 15,262,241 15,200,637
- diluted . . . . . . . . . . . . . 15,271,024 15,200,637
The accompanying notes are an integral part of these
consolidated financial statements
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
For the three For the three
months ended months ended
September 30, September 30,
1999 1998
-------------- --------------
Revenues:
Participating lease revenue:
Affiliated Lessee. . . . . . . . $ 9,722 $ 8,736
Other Lessees. . . . . . . . . . 13,512 10,881
Interest Income:
Affiliated Lessee. . . . . . . . 57 21
Other Lessees. . . . . . . . . . 52 50
Other. . . . . . . . . . . . . . 144 170
Equity in income (loss) of
Affiliated Lessee. . . . . . . . 68 (38)
Other income . . . . . . . . . . . 21 --
---------- ----------
Total Revenues . . . . . . . 23,576 19,820
---------- ----------
Expenses:
Depreciation and other
amortization . . . . . . . . . . 6,604 5,470
Real estate, personal property
taxes and insurance. . . . . . . 2,165 1,972
Ground rent. . . . . . . . . . . . 1,033 999
General and administrative . . . . 247 189
Interest . . . . . . . . . . . . . 4,372 3,709
Amortization of deferred
financing costs. . . . . . . . . 253 188
Advisory fee . . . . . . . . . . . 1,336 869
Other. . . . . . . . . . . . . . . 118 5
---------- ----------
Total Expenses . . . . . . . 16,128 13,401
---------- ----------
Income before minority interest. . . 7,448 6,419
Minority interest in Operating
Partnership. . . . . . . . . . . . 1,249 1,116
---------- ----------
Net income . . . . . . . . . . . . . $ 6,199 $ 5,303
========== ==========
Net income per weighted average
common share outstanding
- basic. . . . . . . . . . . . . . $ 0.40 $ 0.35
- diluted. . . . . . . . . . . . . $ 0.40 $ 0.35
Weighted average number of
common shares outstanding
- basic. . . . . . . . . . . . . . 15,315,174 15,244,580
- diluted. . . . . . . . . . . . . 15,340,057 15,244,580
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share data)
(Unaudited)
For the
period from
April 29,
1998
For the nine (inception)
months ended through
September 30, September 30,
1999 1998
------------- -------------
Cash flows from operating
activities:
Net income . . . . . . . . . . . . . $ 13,941 $ 10,108
Adjustments to reconcile net
income to net cash flow
provided by operating
activities:
Depreciation and other
amortization . . . . . . . . . . 19,295 7,901
Amortization of deferred
financing costs. . . . . . . . . -- 294
Bond premium amortization. . . . . (943) (338)
Minority interest in
Operating Partnership. . . . . . 2,869 2,121
Equity in income (loss) of
Affiliated Lessee. . . . . . . . (73) 25
Changes in assets and
liabilities:
Rent receivable from lessees . . . (7,394) (8,950)
Prepaid expenses and
other assets . . . . . . . . . . 3,227 (1,496)
Due to JLL . . . . . . . . . . . . 769 1,541
Accounts payable and
accrued expenses . . . . . . . . 754 2,265
---------- ----------
Net cash flow provided
by operating
activities . . . . . . . . 32,445 13,471
---------- ----------
Cash flows from investing activities:
Acquisition of Hotel Properties. . . (28,233) (385,609)
Improvements and additions to
hotel properties . . . . . . . . . (21,918) (4,029)
Funding of notes receivable. . . . . (400) (4,951)
Funding of restricted cash
reserves . . . . . . . . . . . . . (14,411) (11,470)
Proceeds from restricted
cash reserves. . . . . . . . . . . 13,633 3,305
Proceeds from minority interest
in other partnerships. . . . . . . -- 10
---------- ----------
Net cash flow used in
investing activities . . . (51,329) (402,744)
---------- ----------
<PAGE>
LASALLE HOTEL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Dollars in thousands, except per share data)
(Unaudited)
For the
period from
April 29,
1998
For the nine (inception)
months ended through
September 30, September 30,
1999 1998
------------- -------------
Cash flows from financing
activities:
Borrowings under credit facility . . 66,530 162,900
Repayments under credit facility . . (73,130) --
Proceeds from mortgage loan. . . . . 46,500 --
Mortgage loan repayments . . . . . . (48) --
Payment of deferred financing
costs. . . . . . . . . . . . . . . (809) (1,702)
Proceeds from issuance of
common shares. . . . . . . . . . . -- 257,601
Offering costs paid. . . . . . . . . (57) (21,419)
Distributions. . . . . . . . . . . . (20,810) (4,786)
---------- ----------
Net cash flow provided by
financing activities . . . 18,176 392,594
---------- ----------
Net change in cash and
cash equivalents . . . . . . . . . . (708) 3,321
Cash and cash equivalents
at beginning of period . . . . . . . 1,570 --
---------- ----------
Cash and cash equivalents
at end of period . . . . . . . . . . $ 862 $ 3,321
========== ==========
The accompanying notes are an integral part of
these consolidated financial statements
<PAGE>
LASALLE HOTEL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Dollars in thousands, expect per share data)
(Unaudited)
1. ORGANIZATION AND INITIAL PUBLIC OFFERING
LaSalle Hotel Properties (the "Company") was organized in the state of
Maryland on January 15, 1998. The Company is a real estate investment
trust ("REIT") as defined in the Internal Revenue Code. The Company was
formed to own hotel properties and to continue and expand the hotel
investment activities of Jones Lang LaSalle Incorporated and certain of its
affiliates (collectively "JLL"). On April 23, 1998, the Company's
Registration Statement on Form S-11 was declared effective. The Company
had no operations prior to April 29, 1998. On April 29, 1998, the Company
completed an initial public offering (the "Initial Offering") of 14,200,000
common shares of beneficial interest (the "Common Shares"). The offering
price of all shares sold was $18 per common share, resulting in gross
proceeds of $255,600 and net proceeds (less the underwriters' discount and
offering expenses) of approximately $ 234,139. The Company contributed all
of the net proceeds of the Initial Offering to LaSalle Hotel Operating
Partnership, L.P., a limited partnership (the Operating Partnership), in
exchange for an approximate 82.6% general partnership interest in the
Operating Partnership. The Operating Partnership used the net proceeds
from the Company, the issuance of additional Common Shares of the Company
and the issuance of limited partnership interests (the "Units"),
representing approximately 17.4% of the Operating Partnership, to acquire
ten upscale and luxury full service hotels (the "Initial Hotels").
As of September 30, 1999, the Company owned interests in 13 hotels
with approximately 4,300 suites/rooms (the "Hotels") located in ten states.
The Company owns 100% equity interests in 12 of the hotels and a 95.1%
interest in a partnership which owns one hotel. All of the Hotels are
leased under participating leases ("Participating Leases") which provide
for rent based on hotel revenues and are managed by independent hotel
operators ("Hotel Operators"). Nine of the Hotels are leased to
unaffiliated lessees (affiliates of whom also operate these hotels) and
four of the Hotels are leased to LaSalle Hotel Lessee, Inc. (the
"Affiliated Lessee").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying interim consolidated financial statements and related
notes have been prepared in accordance with the financial information and
accounting policies described in the Company's 1998 Form 10-K and should be
read in conjunction with such financial statements and related notes. The
following notes to these interim financial statements highlight significant
changes to the notes included in the December 31, 1998 audited financial
statements included in the Company's 1998 form 10-K and present interim
disclosures as required by the Securities and Exchange Commission.
In the opinion of management, all adjustments consist of normal
recurring adjustments necessary to present fairly the financial position of
the Company as of September 30, 1999 and the results of its operations and
its cash flows for the three and nine months ended September 30, 1999, for
the three months ended September 30, 1998 and for the period from April 29,
1998 (inception) through September 30, 1998.
<PAGE>
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company, the Operating Partnership and its consolidated subsidiaries and
partnerships. All significant intercompany balances and transactions have
been eliminated.
USE OF ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of certain
assets and liabilities and disclosure of contingent assets and liabilities
at the balance sheet date and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. EARNINGS PER SHARE
The outstanding Units in the Operating Partnership have been excluded
from the diluted earnings per share calculation as there would be no effect
on the amounts since the minority interests' share of income would also be
added back to net income. The computation of basic and diluted EPS is
presented below:
For the
period from
April 29, 1998
Nine Months (inception) Three months Three months
Ended through ended ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
NUMERATOR:
Net income $ 13,941 $ 10,108 $ 6,199 $ 5,303
========== ========== ========== ==========
DENOMINATOR:
Weighted
average
shares -
Basic . 15,262,241 15,200,637 15,315,174 15,244,580
Effect of
Dilutive
Securities:
Common
Stock
Options 8,783 -- 24,883 --
---------- ---------- ---------- ----------
Weighted
average
shares -
Diluted 15,271,024 15,200,637 15,340,057 15,244,580
========== ========== ========== ==========
BASIC EPS:
Net Income
applicable
to Common
Share-
holders. $ 0.91 $ 0.66 $ 0.40 $ 0.35
========== ========== ========== ==========
DILUTED EPS:
Net Income
applicable
to Common
Share-
holders. $ 0.91 $ 0.66 $ 0.40 $ 0.35
========== ========== ========== ==========
<PAGE>
4. ACQUISITION OF HOTEL PROPERTIES
On June 2, 1999, the Company acquired a 100% interest in the 182 room
Hotel Viking in Newport, Rhode Island (the "Hotel") through an indirect
subsidiary, LHO Viking Hotel, L.L.C. (the "Subsidiary LLC"). The
Subsidiary LLC is a limited liability company, of which the Operating
Partnership is the sole member. The Hotel was acquired from Bellevue
Properties Inc. (Bellevue), for an aggregate purchase price of $28 million
funded with proceeds from a borrowing under the Company's 1998 Amended
Credit Facility. The Hotel is leased and operated by Viking Hotel
Corporation, an affiliate of Bellevue.
The Hotel is a full-service upscale resort located on Bellevue Avenue
in Newport, RI, a resort area that is rapidly becoming a year round hotel
market. The Hotel offers 29,000 square feet of meeting space, two
restaurants, a lounge and a rooftop bar. The sale also included the fully
restored Kay Chapel and Trinity Parish House, both adjacent to the Hotel,
as well as a 12 room inn located directly across the street.
5. LONG-TERM DEBT
CREDIT FACILITY
In 1998, the Company obtained a three-year commitment for a $235
million senior unsecured revolving credit facility (the "1998 Amended
Credit Facility") to be used for acquisitions, capital improvements,
working capital and general corporate purposes. Borrowings under the 1998
Amended Credit Facility bear interest at floating rates equal to LIBOR plus
an applicable margin or an "Adjusted Base Rate" plus an applicable margin,
at the election of the Company. For the three and nine months ended
September 30, 1999, the weighted average interest rate was approximately
6.7% and 6.6%, respectively. The Company did not have any Adjusted Base
Rate borrowings outstanding at September 30, 1999. Additionally, the
Company is required to pay an unused commitment fee which is variable,
determined from a ratings based pricing matrix, currently set at 25 basis
points. The Company has incurred an unused commitment fee of approximately
$39 and $116 for the three and nine months ended September 30, 1999,
respectively. As of September 30, 1999, the Company had outstanding
borrowings against the 1998 Amended Credit Facility of $158,100.
BONDS PAYABLE
At September 30, 1999, the Company had outstanding bonds payable of
$41,885, of which $40,000 represents the principal balance of the bonds and
the remaining $1,885 million represents unamortized premium. The bonds
bear interest at a fixed rate of 10% per annum. Interest expense, net of
the premium amortization, for the three and nine months ended September 30,
1999 totaled $686 and $2,057, respectively.
Pursuant to the bond agreement, certain cash reserves are required to
be held in trust for payments of interest, credit enhancement fees and
ground rent. As of September 30, 1999, these reserves totaled $5,527 and
are included in Restricted Cash Reserves.
MORTGAGE LOAN
On July 29, 1999, the Company, through the newly formed LHO Financing
Partnership I, L.P. (the "Financing Partnership"), entered into a $46,500
mortgage loan (the "1999 Mortgage Loan"). The 1999 Mortgage Loan is
secured by the Radisson Convention Hotel located in Bloomington, Minnesota
and the Le Meridien Dallas. The loan matures on July 31, 2009 and does not
allow for prepayment prior to January 31, 2009, without penalty. The loan
bears interest at a fixed rate of 8.1% and requires interest and principal
payments based on a 25-year amortization schedule. The loan agreement
requires the Financing Partnership to hold funds in escrow for the payment
of one half year's insurance and real estate taxes. The 1999 Mortgage Loan
also requires the Financing Partnership to maintain a certain debt service
coverage ratio.
<PAGE>
The 1999 Mortgage Loan has a principal balance of $46,452 at
September 30, 1999. Future scheduled debt principal payments at
September 30, 1999 are as follows (in thousands):
Remainder of 1999. . . . . . . $ 146
2000 . . . . . . . . . . . . . 616
2001 . . . . . . . . . . . . . 667
2002 . . . . . . . . . . . . . 723
2003 . . . . . . . . . . . . . 784
2004 . . . . . . . . . . . . . 850
Thereafter . . . . . . . . . . 42,666
-------
$46,452
=======
6. SHAREHOLDERS' EQUITY
On January 15, 1999, the Company paid its regular fourth quarter
distribution of $0.375 per share/unit on its Common Shares and Units.
On March 4, 1999, pursuant to the advisory agreement, the Company
issued 10,988 Common Shares to the Advisor for the incentive portion of the
1998 advisory fee, in lieu of the $155, which would have otherwise been due
to the Advisor.
On May 13, 1999, the Company's registration statement on Form S-3
under the Securities Act of 1933, as amended, (the "Securities Act")
registering $200,000 of Common Shares, Common Share Warrants, Preferred
Shares of Beneficial Interest (the "Preferred Shares") and Depositary
Shares representing Preferred Shares was declared effective.
On May 14, 1999, the Company paid its regular first quarter
distribution of $0.375 per share/unit on its Common Shares and Units.
On August 13, 1999, the Company paid its regular second quarter
distribution of $0.380 per share/unit on its Common Shares and Units.
On August 24, 1999, 180,636 Units were converted to Common Shares.
7. SHARE OPTION AND INCENTIVE PLAN
On January 19, 1999, the Company granted 305,700 non-qualified stock
options at a strike price of $13.19. On May 19, 1999, the Company also
granted 1,000 options to each of its five independent trustees at a strike
price of $13.88. All options granted during 1999 vest over three years and
have expiration dates ranging from seven to ten years from date of grant.
On February 22, 1999, the Company issued 4,995 Common Shares to its
Board of Trustees for 1998 compensation. The Common Shares were issued in
lieu of cash, at the trustee's election. These Common Shares were issued
from the 1998 Share Option and Incentive Plan (the "1998 SIP").
On May 19, 1999, the common shareholders approved an amendment to the
1998 SIP, increasing the number of Common Shares authorized for issuance
under the 1998 SIP from 757,000 to 1,500,000. On September 30, 1999,
1,104,805 Common Shares were available for future grant.
8. AFFILIATED LESSEE
A significant portion of the Company's participating lease revenue is
derived from the Participating Leases with the Affiliated Lessee. The
Affiliated Lessee is owned as follows: 9.0% by the Company, 45.5% by JLL
and 45.5% by LPI Charities, a charitable organization organized under the
laws of the state of Illinois. Certain condensed financial information,
related to the Affiliated Lessee's income statement, is as follows:
For the
period from
April 29, 1998
Nine Months (inception) Three months Three months
Ended through ended ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
Total
revenues $ 76,594 $ 43,932 $ 30,623 $ 26,929
Participating
lease
expense 21,846 13,747 9,722 8,736
Net
income
(loss) 815 (278) 757 (419)
On March 26, 1999, the Company executed lease amendments for its
leases with the Affiliated Lessee. The amendments were effective as of
January 1, 1999, and amended the participating rent thresholds of the
leases. Also, in conjunction with the lease amendments, the Affiliated
Lessee executed a promissory note in the amount of $2,400, for working
capital previously advanced to the Affiliated Lessee. The promissory note
bears interest at a rate of 6.0% per annum. The promissory note matures on
the earlier of April 30, 2009 or the date upon which any Affiliated Lessee
lease terminates. The effective date of the promissory note was also
January 1, 1999.
9. COMMITMENTS AND CONTINGENCIES
The Company is obligated to make funds available to the Hotels for
capital expenditures (the "Reserve Funds"), as determined in accordance
with the Participating Leases. The Reserve Funds have not been recorded on
the books and records of the Company as such amounts will be capitalized as
incurred. The amounts obligated under the Reserve Funds are subject to
increases ranging from 4.0% to 5.5% of the individual Hotel's total
revenues. The total amount obligated by the Company under the Reserve
Funds is approximately $8,830 at September 30, 1999, of which $4,093 is
available in restricted cash reserves for future capital expenditures.
Purchase orders and letters of commitment totaling approximately $11,851
have been issued for renovations at the Hotels.
The nature of the operations of the Hotels expose them to the risk of
claims and litigation in the normal course of their business. Although the
outcome of these matters cannot be determined, management does not expect
the ultimate resolution of these matters to have a material adverse effect
on the financial position, operations or liquidity of the Hotels.
On behalf of the Company, the Advisor seeks opportunities for the
purchase of additional full service hotel properties located primarily in
convention, resort, urban and major business markets. From time to time,
the Company may enter into purchase contracts for the acquisition of hotel
properties. The consummation of each acquisition will be subject to
satisfactory completion of due diligence.
10. RELATED PARTY TRANSACTIONS
At September 30, 1999, the Company had a payable to JLL of $1,500 for
the third quarter base advisory fee and the second and third quarter
incentive advisory fee.
<PAGE>
11. SUPPLEMENTAL CASH FLOW DISCLOSURE
For the
Period from
April 29, 1998
For the nine (inception)
months ended through
September 30, September 30,
1999 1998
-------------- --------------
Supplemental disclosure of
cash flow information:
Interest paid, net of
capitalized interest. . . . . . . $ 13,301 $ 4,890
Interest capitalized . . . . . . . 152 --
In conjunction with the hotel
acquisitions, the Company assumed
the following assets and liabilities:
Purchase of real estate. . . . . . $ 28,052 $476,079
Adjustment required to reflect
predecessor's basis. . . . . . . -- 33,012
Note receivable. . . . . . . . . . 167 --
Other assets purchased . . . . . . 14 --
Liabilities, net of other assets . -- (3,316)
Bonds payable. . . . . . . . . . . -- (43,480)
Issuance of shares/units . . . . . -- (76,686)
-------- --------
Acquisition of hotel properties. $ 28,233 $385,609
======== ========
12. SUBSEQUENT EVENTS
On October 18, 1999, the Company declared its third quarter
distribution of $0.38 per share/unit on its Common Shares and Units. The
distribution is payable on November 15, 1999 to shareholders and
unitholders of record at the close of business on October 29, 1999.
13. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information set forth below is presented as if
(i) the Initial Offering and the related formation transactions and (ii)
the subsequent acquisitions of the San Diego Paradise Point Resort, the
Harborside Hyatt Conference Center and Hotel and the Hotel Viking
(collectively, the "Subsequent Acquisitions") had been consummated and
leased as of January 1, 1998. The pro forma financial information is not
necessarily indicative of what actual results of operations of the Company
would have been assuming the Initial Offering and the related formation
transactions and the Subsequent Acquisitions had been consummated and all
the Hotels had been leased as of January 1, 1998, nor does it purport to
represent the results of operations for future periods.
For the For the
nine months nine months
ended ended
September 30, September 30,
1999 1998
------------- -------------
Total revenues . . . . . . . . . . $ 60,804 $ 59,535
---------- ----------
Depreciation . . . . . . . . . . . 18,956 15,821
Real estate and personal property
taxes and insurance. . . . . . . 6,198 5,847
<PAGE>
For the For the
nine months nine months
ended ended
September 30, September 30,
1999 1998
------------- -------------
Ground rent. . . . . . . . . . . . 2,545 2,530
General and administrative . . . . 949 531
Interest . . . . . . . . . . . . . 12,279 12,278
Amortization of deferred
financing costs. . . . . . . . . 733 563
Advisory fee . . . . . . . . . . . 3,049 3,037
Other. . . . . . . . . . . . . . . 123 5
---------- ----------
Income before minority interest. . 15,972 18,923
Minority interest in
Operating Partnership. . . . . . 2,737 3,293
---------- ----------
Net income . . . . . . . . . . . . $ 13,235 $ 15,630
========== ==========
Net income per weighted average
common share outstanding
- basic. . . . . . . . . . . . . $ 0.87 $ 1.03
- diluted. . . . . . . . . . . . $ 0.87 $ 1.03
Weighted average number of
common shares outstanding
- basic. . . . . . . . . . . . . 15,262,241 15,224,580
- diluted. . . . . . . . . . . . 15,271,024 15,224,580
14. PREDECESSOR INFORMATION
Pursuant to SEC regulations which require the presentation of
predecessor financial information for corresponding periods of the
preceding year, the following information represents condensed statements
of operations and cash flows information of LRP Bloomington Limited
Partnership, which is considered to be the predecessor of the Company, for
the period from January 1, 1998 through April 28, 1998.
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (PREDECESSOR)
STATEMENT OF OPERATIONS
(Unaudited, Dollar Amounts in Thousands)
For the period
from January 1,
1998 through
April 28, 1998
----------------
Revenues:
Rooms. . . . . . . . . . . . . . . . . . . . . $ 4,285
Food and beverage. . . . . . . . . . . . . . . 3,459
Telephone. . . . . . . . . . . . . . . . . . . 124
Other. . . . . . . . . . . . . . . . . . . . . 537
--------
Total revenue. . . . . . . . . . . . . 8,405
--------
Expenses:
Departmental expenses:
Rooms. . . . . . . . . . . . . . . . . . . . 1,096
Food and beverage. . . . . . . . . . . . . . 2,379
Telephone. . . . . . . . . . . . . . . . . . 88
Other operating departments. . . . . . . . . 307
General and administration . . . . . . . . . 571
Sales and marketing. . . . . . . . . . . . . 435
Real estate and personal property taxes. . . 405
Property operations and management . . . . . 400
Management fees. . . . . . . . . . . . . . . 336
Energy . . . . . . . . . . . . . . . . . . . 292
Insurance. . . . . . . . . . . . . . . . . . 71
Other fixed expenses . . . . . . . . . . . . 73
Interest expense . . . . . . . . . . . . . . 833
Depreciation and amortization. . . . . . . . 1,196
Advisory fees. . . . . . . . . . . . . . . . 53
--------
Total expenses . . . . . . . . . . . . 8,535
--------
Net loss . . . . . . . . . . . . . . . . . . . . $ (130)
========
<PAGE>
LRP BLOOMINGTON LIMITED PARTNERSHIP (PREDECESSOR)
STATEMENT OF CASH FLOWS
(Unaudited, Dollar Amounts in Thousands)
For the period
from January 1,
1998 through
April 28, 1998
----------------
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . $ (130)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . 1,196
Changes in assets and liabilities:
Guest and trade receivables,
net. . . . . . . . . . . . . . . . . . . (284)
Inventories. . . . . . . . . . . . . . . . 8
Prepaid expenses and other
current assets . . . . . . . . . . . . . (367)
Accounts payable . . . . . . . . . . . . . (133)
Accrued expenses and other
liabilities. . . . . . . . . . . . . . . 515
--------
Net cash provided by
operating activities . . . . . . . . 805
--------
Cash flows from investing activities:
Proceeds from restricted cash
reserves . . . . . . . . . . . . . . . . . . 148
Capital improvement expenditures . . . . . . . (611)
--------
Net cash used in
investing activities . . . . . . . . (463)
--------
Cash flows from financing activities:
Principal payments on long-term
debt . . . . . . . . . . . . . . . . . . . . (145)
--------
Net cash used in
financing activities . . . . . . . . (145)
--------
Increase in cash and cash equivalents. . . . . . 197
Cash and cash equivalents,
beginning of period. . . . . . . . . . . . . . 1,744
--------
Cash and cash equivalents,
end of period. . . . . . . . . . . . . . . . . $ 1,941
========
Cash paid for interest . . . . . . . . . . . . . $ 833
========
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in
this Form 10-Q. The Company has not included a discussion of LRP
Bloomington Limited Partnership (the "Predecessor") as its financial
information would not be deemed comparable to the Company. However, the
Predecessor's financial information has been included in the notes to the
consolidated financial statements.
The pro forma financial information of the Company in this analysis is
presented as if (i) the Initial Offering and the related formation
transactions and (ii) the Subsequent Acquisitions had been consummated as
of January 1, 1998. The pro forma financial information is not necessarily
indicative of what actual results of operations of the Company would have
been assuming the Initial Offering and the related formation transactions
and the Subsequent Acquisitions had been consummated and all the Hotels had
been leased as of January 1, 1998, nor does it purport to represent the
results of operations for future periods.
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999 TO THE PRO
FORMA NINE MONTHS ENDED SEPTEMBER 30, 1998
The Company earned approximately $59.6 million in participating lease
revenue during the nine months ended September 30, 1999. For the pro forma
nine months ended September 30, 1998, participating lease revenues would
have been $59.1 million. This increase is due to increases in
participating lease revenues from the LeMeridien Dallas and LeMeridien New
Orleans, which had increased hotel revenues for the nine months ended
September 30, 1999. The LeMeridien hotels benefitted from the renovations
which took place at each of the respective hotels during 1998.
Participating lease revenues for the Harborside Hyatt Conference Center and
Hotel ("Harborside Hyatt") also increased due to strong rate and occupancy
at the hotel. These increases were offset by a decrease in participating
lease revenues at the San Diego Paradise Port Resort in 1999 due to
decreased occupancy levels at the hotel resulting from the significant
renovations taking place at the property during the nine months ended
September 30, 1999.
Depreciation expense increased to $18.6 million or 17.3% for the nine
months ended September 30, 1999, compared to depreciation expense for the
pro forma nine months ended September 30, 1998, which would have been $15.8
million. This increase is attributable to the additional depreciation
expense incurred on capital improvements which occurred and were placed
into service during 1998 and through the first nine months of 1999.
Real estate and personal property taxes, insurance and ground rent
increased $0.3 million to $8.7 million for the nine months ended
September 30, 1999 from $8.4 million for the pro forma nine months ended
September 30, 1998. This increase is primarily attributable to increased
real estate taxes at the hotels.
General and administrative expense increased to $0.9 million for the
nine months ended September 30, 1999, from the pro forma nine months ended
September 30, 1998 general and administrative expense, which would have
been $0.5 million. This increase is attributable to additional
administrative costs incurred for the nine months ended September 30, 1999.
<PAGE>
Interest expense decreased $0.7 million to $11.6 million for the nine
months ended September 30, 1999 compared to the same pro forma period in
1998. Interest expense for the pro forma nine months ended September 30,
1998, assumes that the $27 million borrowing under the 1998 Amended Credit
Facility for the purchase of the Hotel Viking was outstanding for the
entire nine month period in 1998. For the actual nine months ended
September 30, 1999, the borrowing did not occur until the acquisition date
of the Hotel Viking, which was June 2, 1999. The decrease is also
attributable to lower average interest rates in the first nine months of
1999, compared to the comparable period in 1998.
Amortization of deferred financing costs increased to $0.7 million for
the nine months ended September 30, 1999, compared to the comparable pro
forma period in 1998, in which amortization costs would have been $0.6
million. This $0.1 million increase is attributable to the amortization in
1999 of costs incurred in late 1998 for the amendment to the credit
facility. These costs would not have been incurred in the pro forma nine
month period ended September 30, 1998.
Advisory fees for the nine months ended September 30, 1999 and the pro
forma nine months ended September were $3.0 million.
Minority interest was $2.9 million for the nine months ended
September 30, 1999 compared to $3.3 million for the pro forma nine months
ended September 30, 1998. This decrease is attributable to lower income
before minority interest of $2.1 million for the nine months ended
September 30, 1999 versus the comparable pro forma period in 1998.
As a result of the above, net income decreased approximately $1.7
million to $13.9 for the nine months ended September 30, 1999 compared to
net income of $15.6 million for the pro forma nine months ended
September 30, 1998.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1999 TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1998
For the quarter ended September 30, 1999, the Company earned
participating lease revenues of $23.2 million, while participating lease
revenues for the quarter ended September 30, 1998 were $19.6 million. A
significant portion of the $3.6 million or 18.4% increase is due to
participating revenues for the three months ended September 30,1999
including the Hotel Viking, while participating lease revenues for the
three months ended September 30, 1998 excluded the Hotel Viking.
Participating lease revenues also increased for Marriott Seaview Resort,
Harborside Hyatt, LeMeridien Dallas and LeMeridien New Orleans due to an
increase in revenues at these hotels.
Depreciation expense increased to $6.6 million or 20.7% for the three
months ended September 30, 1999 compared to the depreciation expense of
$5.5 million for the three months ended September 30, 1998. The increase
is attributable to the addition of the Hotel Viking and the additional
depreciation expense incurred on capital improvements placed into service
in late 1998 and in 1999.
Real estate and personal property taxes, insurance and ground rent
increased $0.2 million to $3.2 million for the three months ended September
30, 1999 from $3.0 million for the three months ended September 30, 1998.
The increase is primarily due to the inclusion of the Hotel Viking and
increased real estate taxes at the hotels.
General and administrative expense increased to $0.3 million for the
three months ended ended September 30, 1999 compared to the general and
administrative expense of $0.2 million for the three months ended
September 30, 1998. The increase is attributable to the additional costs
incurred in the third quarter 1999 compared to the third quarter 1998.
<PAGE>
Interest expense increased $0.7 million to $4.4 million for the three
months ended September 30, 1999 compared to interest expense for the three
months ended September 30, 1998, which was $3.7 million. The increase is
due to a greater amount of debt outstanding throughout the three months
ended September 30, 1999 versus the three months ended September 30, 1998.
The increase in the amount of debt outstanding is primarily due to the
purchase of the Hotel Viking, which was financed with a borrowing under the
1998 Amended Credit Facility of approximately $27 million.
Amortization of deferred financing costs increased to $0.3 million for
the three months ended September 30, 1999, compared to amortization costs
of $0.2 for the comparable period in 1998. The $0.1 million increase is
attributable to additional costs due to the amendment of the credit
facility in the fourth quarter of 1998 and the amortization of financing
costs incurred in connection with obtaining the 1999 Mortgage Loan.
Advisory fees for the three months ended September 30, 1999 were $1.4
million compared to $0.9 million for the three months ended September 30,
1998. The $0.5 million increase is a result of increased base advisory
fees due to higher net operating income for the three months ended
September 30, 1999. In addition, incentive advisory fees also increased in
the third quarter 1999 compared to the third quarter 1998. The incentive
fee increase is due to year over year growth in Funds From Operations
(FFO).
Minority interest was $1.3 million for the three months ended
September 30, 1999 compared to $1.1 million for the three months ended
September 30, 1998. The increase is attributable to a higher income
before minority interest of $1.0 million for the three months ended
September 30, 1999 versus the comparable period in 1998.
As a result of the above, net income for the quarter ended
September 30, 1999 was $6.2 million compared to $5.3 million for the
quarter ended September 30, 1998.
FUNDS FROM OPERATIONS (FFO)
The Company believes that FFO is helpful to investors as a measure of
the performance of an equity REIT because, along with cash flow from
operating activities, financing activities and investing activities, it
provides investors with an indication of the ability of the Company to
incur and service debt, to make capital expenditures and to fund other cash
needs. The White Paper on FFO approved by the Board of Governors of the
National Association of Real Estate Investment Trusts ("NAREIT") in March
1995 defines FFO as net income (loss) (computed in accordance with GAAP),
excluding gains (or losses) from debt restructuring and sales of
properties, plus real estate related depreciation and amortization and
after comparable adjustments for the Company's portion of these items
related to unconsolidated entities and joint ventures. The Company
computes FFO in accordance with standards established by NAREIT which may
not be comparable to FFO reported by other REITs that do not define the
term in accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently than the Company. FFO does not
represent cash generated from operating activities determined by GAAP and
should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial
performance or to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including
its ability to make cash distributions. FFO may include funds that may not
be available for management's discretionary use due to functional
requirements to conserve funds for capital expenditures and property
acquisitions, and other commitments and uncertainties. The following is a
reconciliation between net income and FFO for the nine and three months
ended September 30, 1999 (in thousands, except share data):
<PAGE>
For the nine For the three
months ended months ended
September 30, September 30,
1999 1999
------------- -------------
Net income applicable to
common shareholders. . . . . . . $ 13,941 $ 6,199
Depreciation . . . . . . . . . . . 18,557 6,602
Minority interest. . . . . . . . . 2,869 1,249
---------- ----------
FFO. . . . . . . . . . . . . . . . $ 35,367 $ 14,050
========== ==========
Weighted average common shares
and units outstanding
- basic. . . . . . . . . . . . . 18,418,821 18,422,286
- diluted. . . . . . . . . . . . 18,427,604 18,447,169
THE HOTELS
The following table sets forth historical comparative information with
respect to occupancy, average daily rate (ADR) and room revenue per
available room (RevPAR) for the comparable Hotels, the non-comparable
Hotels and the total Hotel portfolio, regardless of ownership, for the
three and nine month periods ended September 30, 1999 and 1998.
For the three months ended For the nine months ended
September 30, September 30,
--------------------------- ----------------------------
1999 1998 Variance 1999 1998 Variance
---- ---- -------- ---- ---- --------
COMPARABLE
HOTELS (1)
Occupancy 80.6% 80.0% 0.7% 77.9% 77.1% 1.0%
ADR $153.21 $138.33 10.8% $141.68 $133.35 6.2%
REVPAR $123.48 $110.70 11.5% $110.40 $102.85 7.3%
NON-COMPARABLE
HOTELS (1)
Occupancy 65.1% 62.4% 4.4% 62.9% 67.0% (6.2%)
ADR $106.51 $103.40 3.0% $123.59 $119.15 3.7%
REVPAR $69.36 $64.49 7.5% $77.70 $79.89 (2.7%)
TOTAL
PORTFOLIO
Occupancy 76.1% 74.8% 1.6% 73.3% 74.0% (1.0%)
ADR $141.47 $129.77 9.0% $136.89 $129.39 5.8%
REVPAR $107.59 $97.12 10.8% 100.31 $95.77 4.7%
(1) Non-Comparable hotels include the following:
For the three months ended September 30: LeMeridien Dallas,
Radisson Tampa, and Radisson Convention Hotel.
For the nine months ended September 30: Marriott Seaview
Resort, San Diego Paradise Point Resort, and Radisson Convention Hotel in
Quarters 1 and 2, and LeMeridien Dallas, Radisson Tampa, and Radisson
Convention Hotel in Quarter 3.
Comparable hotels include all Hotels excluding those in Non-
Comparable hotels.
<PAGE>
For the quarter ended September 30, 1999, RevPAR on a comparable basis
rose 11.5% to $123.48, compared to RevPAR of $110.70 for the quarter ended
September 30, 1998. Occupancy on a comparable basis increased 0.7% to
80.6% while ADR, also on a comparable basis, increased 10.8% to $153.21, as
compared to occupancy of 80.0% and ADR of $138.33 in the third quarter
1998. For the total portfolio, RevPAR and ADR increased 10.8% and 9.0% to
$107.59 and $141.47, respectively. Occupancy for the total portfolio was
up 1.6%.
The Company saw significant RevPAR gains during the quarter. Seven of
the Company's thirteen hotels experienced double-digit RevPAR growth during
the quarter. The Company continues to benefit from its focus on owning
high quality hotels in high barrier to entry urban, resort and convention
markets, and on its extensive internal reinvestment program. In addition,
the strong demand in the leisure and group business segments more than
offset the impact of Hurricane Floyd and overall bad weather on the East
coast during the quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash to meet its cash requirements,
including distributions to shareholders, is its pro rata share of the
Operating Partnership's cash flow from the Participating Leases. Except for
the security deposits required under the Participating Leases, the Lessees'
obligations under the Participating Leases are unsecured and the Lessees'
abilities to make rent payments to the Operating Partnership, and the
Company's liquidity, including its ability to make distributions to
shareholders, will be dependent on the Lessees' abilities to generate
sufficient cash flow from the operations of the Hotels.
In 1998, the Company entered into a $235 million senior unsecured
revolving credit facility (the "1998 Amended Credit Facility") to be used
for acquisitions, capital improvements, working capital and general
corporate purposes. Borrowings under the 1998 Amended Credit Facility bear
interest at floating rates equal to LIBOR plus an applicable margin or an
"Adjusted Base Rate" plus an applicable margin, at the election of the
Company. For the three and nine months ended September 30, 1999, the
weighted average interest rate was approximately 6.7% and 6.6%,
respectively. The Company did not have any Adjusted Base Rate borrowings
outstanding at September 30, 1999. Additionally, the Company is required
to pay an unused commitment fee which is variable, determined from a
ratings or leverage based pricing matrix, currently set at 25 basis points.
The Company incurred an unused commitment fee of approximately $39 and $116
for the three and nine months ended September 30, 1999, respectively. The
1998 Amended Credit Facility matures on April 30, 2001 and contains certain
financial covenants relating to debt service coverage, market value net
worth and total funded indebtedness.
In June 1998, the Company acquired the Harborside Hyatt Conference
Center and Hotel subject to $40,000 principal amount of special project
revenue bonds ("Massport Bonds") previously issued under the loan and trust
agreement with the Massachusetts Port Authority ("Massport"), as amended
("Massport Bond Agreement"). In conjunction with the Massport Bonds, the
Company recorded a premium of $3,480, of which $1,885 remains unamortized
at September 30, 1999. The Massport Bonds are collateralized by the
leasehold improvements and bear interest at 10% per annum through the date
of maturity, March 1, 2026. Interest payments are due semiannually on
March 1 and September 1. Interest expense, net of the premium
amortization, for the three and nine months ended September 30, 1999
totaled $686 and $2,057, respectively. The Massport Bonds shall be
redeemed in part commencing March 1, 2001 and annually until March 1, 2026,
at which time the remaining principal and any accrued interest thereon is
due in full. The Company has the option to prepay the Massport Bonds in
full beginning March 1, 2001 subject to a prepayment penalty which varies
depending on the date of prepayment.
<PAGE>
On July 29, 1999, the Company entered into a $46,500 mortgage loan
(the "1999 Mortgage Loan"). The loan is subject to a fixed interest rate
of 8.1%, matures in July 31, 2009, and requires interest and principal
payments based on a 25-year amortization schedule. The 1999 Mortgage Loan
is collateralized by the Radisson Convention hotel located in Bloomington,
Minnesota and the LeMeridien Dallas. Interest expense for the three and
nine months ended September 30, 1999 was $659. The 1999 Mortgage Loan had
a balance of $46,452 at September 30, 1999.
On September 30, 1999, the Company had $862 of cash and cash
equivalents and had utilized $158.1 million outstanding under its 1998
Amended Credit Facility.
Net cash provided by operating activities was approximately $32.4
million for the nine months ended September 30, 1999 primarily due to the
collections of Participating Lease revenues, which was offset by payments
for real estate taxes, personal property taxes, insurance, ground rent and
the fourth quarter 1998 and first and second quarter 1999 base advisory
fees.
Net cash used in investing activities was approximately $51.3 million
for the nine months ended September 30, 1999 due primarily to the
acquisition of the Hotel Viking, as well as outflows for improvements and
additions at the existing Hotels.
Net cash provided by financing activities was approximately $18.2
million for the nine months ended September 30, 1999 attributable to
borrowings under the 1998 Amended Credit Facility to finance the
acquisition of the Hotel Viking, proceeds from the 1999 Mortgage Loan and
the extensive hotel renovations. These inflows were offset by repayments
under the 1998 Amended Credit Facility, as well as the payment of the
fourth quarter 1998 and first and second quarter 1999 distributions.
During the nine months ended September 30, 1999, the Company granted
310,700 stock options from the 1998 SIP at strike prices ranging from
$13.1875 to $13.8750. These stock options vest over a period of three
years and have expiration dates ranging from seven to ten years from date
of grant.
The Company is obligated to make funds available to the Hotels for
capital expenditures (the Reserve Funds), as determined in accordance with
the Participating Leases. The Reserve Funds have not been recorded on the
books and records of the Company as such amounts will be capitalized as
incurred. The amounts obligated under the Reserve Funds are subject to
increases ranging from 4.0% to 5.5% of the individual Hotel's total
revenues. The total amount obligated by the Company under the Reserve
Funds is approximately $8.8 million at September 30, 1999, of which $4.1
million is available in restricted cash reserves for future capital
expenditures. Purchase orders and letters of commitment totaling
approximately $11.9 million have been issued for renovations at the Hotels.
The Company's debt policy is to incur debt only if upon such
incurrence the Company's total funded indebtedness would not exceed 50% of
"Aggregate Asset Value." For purposes of this policy, Aggregate Asset Value
is defined as the sum of (a) for all the Company's properties owned for
more than four quarters ("Seasoned Properties"), the EBITDA (reduced by the
aggregate FF&E reserves for the relevant period in respect of the Seasoned
Properties) of the Seasoned Properties for the proceeding four quarters
times 10, and (b) for all Properties owned for less than four quarters
("New Properties"), the investment amount (which shall include the purchase
price, including assumed indebtedness, and all acquisition costs) of the
New Properties and 95% of all the capital expenditures with respect to the
New Properties. The Board of Trustees can change this policy at any time
without the approval of the shareholders.
<PAGE>
The Company has considered its short-term (one year or less) liquidity
needs and the adequacy of its estimated cash flow from operations and other
expected liquidity sources to meet these needs. The Company believes that
its principal short-term liquidity needs are to fund normal recurring
expenses, debt service requirements and the minimum distribution required
to maintain the Company's REIT qualification under the Code. The Company
anticipates that these needs will be met with cash flows provided by
operating activities. The Company has also considered capital improvements
and property acquisitions as short-term needs that will be funded either
with cash flows provided by operating activities, under the 1998 Amended
Credit Facility or other indebtedness, or the issuance of additional equity
securities.
The Company expects to meet long-term (greater than one year)
liquidity requirements such as property acquisitions, scheduled debt
maturities, major renovations, expansions and other nonrecurring capital
improvements through long-term unsecured and secured indebtedness and the
issuance of additional equity securities. The Company will acquire or
develop additional hotel properties only as suitable opportunities arise,
and the Company will not undertake acquisition or development of properties
unless stringent acquisition criteria have been achieved.
INFLATION
The Company's revenues come primarily from the Participating Leases,
which will result in changes in the Company's revenues based on changes in
the underlying Hotels' revenues. Therefore, the Company relies entirely on
the performance of the Hotels and the lessees' abilities to increase
revenues to keep pace with inflation. Hotel Operators can change room
rates quickly, but competitive pressures may limit the Lessees' and the
Hotel Operators abilities to raise rates faster than inflation or even at
the same rate.
The Company's expenses are subject to inflation. These expenses (real
estate and personal property taxes, property and casualty insurance and
ground rent) are expected to grow with the general rate of inflation,
except for instances in which the properties are subject to periodic real
estate tax reassessments.
SEASONALITY
The Hotels' operations historically have been seasonal. Nine of the
Hotels maintain higher occupancy rates during the second and third
quarters. The Marriott Seaview Resort generates a large portion of its
revenue from golf related business and, as a result, revenues fluctuate
according to the season and the weather. Key West Beachside Resort,
Radisson Hotel Tampa and Le Meridien New Orleans experience their highest
occupancies in the first quarter. This seasonality pattern can be expected
to cause fluctuations in the Company's quarterly lease revenue under the
Participating Leases.
YEAR 2000 COMPLIANCE
The "Year 2000 Issue" is the result of computer programs and systems
having been designed and developed to use two digits, rather than four, to
define the applicable year. As a result, these computer programs and
systems may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, pay invoices or engage in similar normal
business activities.
<PAGE>
Under the guidance of a Year 2000 program team, whose strategy is
supported by senior management, the Company has a heightened sense of
awareness to the Year 2000 Issue. The Company has grouped its systems and
technology into three categories for purposes of Year 2000 readiness: (i)
commercial software purchased from third-party vendors; (ii) information
resource applications and technology (Operator IT Applications) - systems
supported by the hotel operators; and (iii) building systems -- non IT
equipment at hotels that use embedded computer chips, such as elevators,
automated room key systems and HVAC equipment. In conducting its system
assessment, the Company's Hotel Operators reviewed the Year 2000 readiness
of these systems in addition to creating an inventory of all other
applications, systems software and hardware including the related impact of
the Year 2000 Issue. The Company, working with its Hotel Operators, then
prioritized each of the hotel systems in terms of the degree of impact on
the operations of the hotel.
Based upon the results of the assessment, the Company's Hotel
Operators determined the appropriate levels of renovation that would be
required and the process for validating the effect of the renovations. The
order in which this process is occurring is based on a system priority
rating. The majority of the renovation process of converting, replacing or
eliminating selected platforms, applications, databases and utilities, as
well as the validation process of testing and verifying, is complete with
the remaining issues anticipated to be completed by the end of November
1999. The implementation phase, which involves returning the tested systems
to operational status, ongoing maintenance procedures to insure continued
readiness and development of contingency plans for critical business
systems, is also near completion, with the remaining outstanding issues
anticipated to be completed by November 1999.
The Company's business is heavily dependent upon the efforts of the
Company's Hotel Operators. The Company has assisted its Hotel Operators in
developing guidelines for determining the status of Year 2000 readiness for
the Hotels, planning for the remediation and testing of Year 2000 affected
systems, and the preparation for potential unanticipated issues through the
creation of contingency plans. The Company's Hotel Operators are
addressing Year 2000 issues in a predetermined sequence based on a
priority schedule which places life safety and mission critical issues as
immediate concerns and so-called "amenity" or non-operationally critical
systems as less immediate. The Company continues to rely on its Hotel
Operators to identify and enact appropriate measures to assure that any
adverse impact of the arrival of the Year 2000 will be minimized. The
Company's involvement in terms of issue prioritization, scheduled review
and on-going feedback are intended to ensure that adequate focus by the
Hotel Operators is maintained. The Company's senior management is, in
addition to reviewing Year 2000 status reports submitted by the Hotel
Operators, continuing to meet with hotel management regarding their
specific Year 2000 issues, reviewing first hand the situation, and
reiterating the importance of their efforts towards Year 2000 readiness.
The Company is optimistic that its portfolio will have made prudent
efforts towards the goal of Year 2000 readiness, and will be adequately
prepared for most foreseen problems before the end of 1999. At this time,
the majority of the Company's Hotel Operators have taken prudent measures
to prevent any foreseeable Year 2000 impact on systems classified as either
life safety related or mission critical for the on-going operation of the
hotels. As such, the Company believes that it has significantly reduced
its exposure to life safety related liability and has protected a
significant portion of its revenue and earnings streams. In addition, the
majority of the Company's Hotel Operators have also taken prudent measures
to prevent any foreseeable impact on systems related to the efficient
production of revenues and control of expenses. Of the few systems that
are still undergoing study and/or remediation, the vast majority are those
systems which have limited impact on revenue generation or expense control.
It is expected that all systems will be ready to the fullest extent
possible at the end of November 1999. There can be no guarantee that the
<PAGE>
Company's Hotel Operators have identified every system, nor can there be
any assurance that the steps taken to prepare for the Year 2000 will have
addressed all potential impact of Year 2000, especially those issues yet to
be identified.
Contingency plans for the majority of the Hotels' systems are
complete. The Company and its Hotel Operators expect to have the few
outstanding contingency plans in place by the end of November 1999. The
majority of the outstanding contingency plans are for "amenity" systems,
which have no impact on life safety, mission critical activities, or on
efficient production of revenue or control of expenses.
Additionally, there can be no guarantee that the systems of other
companies, including some of the Hotel Operator's parent companies, on
which the operators rely for certain data and services will be Year 2000
ready on a timely basis and that any such lack of readiness will not have a
material adverse effect on the Company.
The Company's hotels rely on a variety of third party suppliers to
provide critical operating services, including but not limited to utility
providers. These suppliers may utilize systems and embedded technologies
to control the operation of building systems such as utilities, lighting,
security, elevators, heating, ventilating and air conditioning systems.
The Company has been and will continue to obtain assurances from suppliers
as to their Year 2000 compliance and will continue to prepare contingency
plans, including the identification of alternative suppliers. The Company
does not control these third party suppliers, and for some suppliers, such
as utility companies, there may be no feasible alternative suppliers
available. The failure of these suppliers' systems could have a material
adverse effect on the operations of the affected hotel, and failures could
have a material adverse effect on the Company.
The actual costs to be incurred by the Company will depend on a number
of factors, many of which cannot currently be accurately predicted,
including the appearance of unforeseen issues and the reliance on
contingency planning to mitigate any non-compliant situations. At this
point in time, the Company is relying on the estimates of its Hotel
Operators who have projected the total costs related to Year 2000 issues
for the Company's hotels to be approximately $0.20 million. To date,
approximately $0.20 million has been incurred in connection with costs
related to Year 2000 issues.
The ability of third parties with whom the Company transacts business
to adequately address their Year 2000 issues is outside the Company's
control. The Company and its Hotel Operators continue to monitor the Year
2000 compliance of its major suppliers. There can be no assurance that
their failure to adequately address Year 2000 issues will not have a
material adverse effect on the Company's business, financial condition,
results of operations, or liquidity.
Although the Company is not aware of any threatened claims related to
the Year 2000, the Company may become subject to litigation arising from
such claims and, depending on the outcome, such litigation could have a
material adverse effect on the Company. It is not clear whether the
Company's insurance coverage would be adequate to offset these and other
business risks related to the Year 2000.
<PAGE>
Finally, the Company also cannot predict the potential impact on its
business of the failure of other third parties to achieve Year 2000
compliance. For example, failure by third parties to achieve Year 2000
compliance could cause short-term disruptions in travel patterns,
potentially caused by actual or perceived problems with travel system (such
as the air traffic control system), and potential temporary disruptions in
the supply of utility, telecommunications and financial services, which may
be local or regional in scope. These events could lead travelers to
accelerate travel to late 1999, postpone travel to later in 2000 or cancel
travel plans, which could in turn affect lodging patterns and occupancy.
These potential issues are out of the control of the Company and may have
material impact on the financial performance of the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During the second quarter of 1998, the FASB issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement, effective for fiscal
years beginning after June 15, 2000, establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments imbedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value.
The statement also requires that the changes in the derivative's fair value
be recognized in earnings unless specific hedge accounting criteria are
met. Currently, the pronouncement has no impact on the Company, as the
Company has not utilized derivative instruments or entered into any hedging
activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates.
The Company's policy is to manage interest rates through the use of a
combination of fixed and variable rate debt. The Company's interest rate
risk management objective is to limit the impact of interest rate changes
on earnings and cash flows and to lower its overall borrowing costs. To
achieve these objectives, the Company borrows at a combination of fixed and
variable rates.
In 1998, the Company obtained the 1998 Amended Credit Facility, which
provides for a maximum borrowing amount of up to $235 million. Borrowings
under the 1998 Amended Credit Facility bear interest at variable market
rates. At September 30, 1999, the Company's outstanding borrowings under
the 1998 Amended Credit Facility were $158.1 million. The weighted average
interest rate under the facility for the three and nine months ended
September 30, 1999 was 6.7% and 6.6%, respectively.
At September 30, 1999, the Company also had outstanding bonds payable
of $41.9 million, of which $40.0 million represents the principal balance
of the bonds and the remaining $1.9 million represents unamortized premium.
The bonds bear interest at a fixed rate. For fixed rate debt, changes in
interest rates generally affect the fair value of the debt, but not the
earnings or cash flows of the Company. Changes in the fair market value of
fixed rate debt generally will not have a significant impact on the
Company, unless the Company is required to refinance such debt. At
September 30, 1999, the carrying value of the bonds approximated their fair
value.
On July 29, 1999, the Company entered into a $46.5 million mortgage
loan (the "1999 Mortgage Loan"). The loan is subject to a fixed interest
rate of 8.1%, matures in July 31, 2009, and requires interest and principal
payments based on a 25-year amortization schedule. At September 30, 1999,
the 1999 Mortgage Loan balance was $46.5 million. At September 30, 1999,
the carrying value of the 1999 Mortgage Loan approximated its fair value.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Neither the Company nor the Operating Partnership is currently
involved in any litigation the ultimate resolution of which, in the opinion
of the Company, is expected to have a material adverse effect on the
financial position, operations or liquidity of the Company and the
Operating Partnership.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
NOT APPLICABLE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NOT APPLICABLE.
ITEM 5. OTHER MATTERS.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995: Certain statements in this filing and elsewhere (such as in
other filings by the Company with the Securities and Exchange Commission,
press releases, presentations and communications by the Company or its
management and written and oral statements) 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, achievements, plans and objectives of the Company to be
materially different from any future results, performance, achievements,
plans and objectives expressed or implied by such forward-looking
statements. Such factors are discussed under "Business", Management's
Discussion and Analysis of Financial Condition and Results of Operations",
"Quantitative and Qualitative Disclosure about Market Risk" and elsewhere
in the Company's annual report on Form 10-K for the year ended December 31,
1998, under "Management's Discussion and Analysis of Financial Condition
and Results of Operations", "Quantitative and Qualitative Disclosure About
Market Risk" and elsewhere in the Company's quarterly reports on Form 10-Q
for the quarters ended March 31, 1999 and June 30, 1999 and in this report,
under "Certain Relationships and Related Transactions" and elsewhere in the
Company's proxy statement with respect to the annual meeting of
shareholders held on May 19, 1999, under "Risk Factors" and elsewhere in
the Company's Registration Statement (No. 333-77371), and in other reports
filed by the Company with the Securities and Exchange Commission. The
Company expressly disclaims any obligation or undertaking to update or
revise any forward-looking statements to reflect any change in events or
circumstances or in the Company's expectations.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. A list of exhibits is set forth in the Exhibit
Index which immediately precedes the exhibits and which is incorporated by
reference herein.
(b) Reports of Form 8-K.
No reports on Form 8-K were filed during the third
quarter of 1999.
<PAGE>
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.
LASALLE HOTEL PROPERTIES
Dated: November 10, 1999 BY: /s/ HANS WEGER
------------------------------
Hans Weger
Executive Vice President,
Treasurer and Chief
Financial Officer
(Authorized Officer and
Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
10.1 Loan Agreement dated July 29, 1999 between
LHO Financing Partnership I, L.P. and General Electric Capital Corporation
(Radisson Convention Hotel)
10.2 Fee and Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Filing dated July 29, 1999
(Radisson Convention Hotel)
10.3 Second Fee and Leasehold Mortgage, Assignment
of Leases and Rents, Security Agreement and Fixture Filing dated July 29,
1999 (Radisson Convention Hotel)
10.4 Loan Agreement dated July 29, 1999 between
LHO Financing Partnership I, L.P. and General Electric Capital Corporation
(LeMeridien Dallas)
10.5 Deed of Trust, Assignment of Leases and
Rents, Security Agreement and Fixture Filing dated July 29, 1999
(LeMeridien Dallas)
27 Financial Data Schedule
EXHIBIT 10.1
- ------------
LHO FINANCING PARTNERSHIP I, L.P.
(Borrower)
to
GENERAL ELECTRIC CAPITAL CORPORATION
(Lender)
LOAN AGREEMENT
Dated: As of July 29, 1999
Property Location: 7800 Normandale Boulevard
Bloomington,
Hennepin County, Minnesota
DOCUMENT PREPARED BY:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Reese Mason, Esq.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions . . . . . . . . . . . . . . 1
ARTICLE II
LOAN TERMS
Section 2.1 The Loan. . . . . . . . . . . . . . . . . . . . 12
Section 2.2 Interest Rate . . . . . . . . . . . . . . . . . 13
Section 2.3 Terms of Payment. . . . . . . . . . . . . . . . 13
Section 2.4 Prepayment; Defeasance. . . . . . . . . . . . . 15
Section 2.5 Release of Property . . . . . . . . . . . . . . 17
ARTICLE III
SECURITY; RESERVES AND CASH MANAGEMENT
Section 3.1 Security; Establishment of Funds. . . . . . . . 18
Section 3.2 Pledge and Grant of Security Interest . . . . . 19
Section 3.3 Disbursement of Funds . . . . . . . . . . . . . 19
Section 3.4 Intentionally Deleted.. . . . . . . . . . . . . 20
Section 3.5 Cash Management Account.. . . . . . . . . . . . 20
Section 3.6 Payments Received Under the Cash
Management Agreement. . . . . . . . . . . . . . 21
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Closing Conditions. . . . . . . . . . . . . . . 22
ARTICLE V
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 5.1 Insurance; Casualty and Condemnation. . . . . . 25
Section 5.2 Condemnation. . . . . . . . . . . . . . . . . . 29
Section 5.3 Restoration . . . . . . . . . . . . . . . . . . 29
Section 5.4 Impounds. . . . . . . . . . . . . . . . . . . . 33
Section 5.5 Letters of Credit.. . . . . . . . . . . . . . . 35
ARTICLE VI
ENVIRONMENTAL MATTERS
Section 6.1 Certain Definitions . . . . . . . . . . . . . . 35
Section 6.2 Representations and Warranties on
Environmental Matters . . . . . . . . . . . . . 36
Section 6.3 Covenants on Environmental Matters. . . . . . . 36
Section 6.4 Allocation of Risks and Indemnity . . . . . . . 37
Section 6.5 No Waiver . . . . . . . . . . . . . . . . . . . 37
<PAGE>
PAGE
----
ARTICLE VII
LEASING MATTERS
Section 7.1 Representations and Warranties on Leases. . . . 38
Section 7.2 Approval Rights . . . . . . . . . . . . . . . . 38
Section 7.3 Covenants . . . . . . . . . . . . . . . . . . . 38
Section 7.4 Tenant Estoppels. . . . . . . . . . . . . . . . 38
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1 Organization, Power and Authority . . . . . . . 39
Section 8.2 Validity of Loan Documents. . . . . . . . . . . 39
Section 8.3 No Conflicts. . . . . . . . . . . . . . . . . . 39
Section 8.4 Liabilities; Litigation.. . . . . . . . . . . . 39
Section 8.5 Taxes and Assessments . . . . . . . . . . . . . 40
Section 8.6 Other Agreements; Defaults. . . . . . . . . . . 40
Section 8.7 Title . . . . . . . . . . . . . . . . . . . . . 40
Section 8.8 Compliance with Law.. . . . . . . . . . . . . . 41
Section 8.9 Location of Borrower. . . . . . . . . . . . . . 41
Section 8.10 ERISA.. . . . . . . . . . . . . . . . . . . . . 41
Section 8.11 Forfeiture. . . . . . . . . . . . . . . . . . . 41
Section 8.12 Tax Filings . . . . . . . . . . . . . . . . . . 42
Section 8.13 Solvency. . . . . . . . . . . . . . . . . . . . 42
Section 8.14 Full and Accurate Disclosure. . . . . . . . . . 42
Section 8.15 Flood Zone. . . . . . . . . . . . . . . . . . . 42
Section 8.16 Federal Reserve Regulations . . . . . . . . . . 43
Section 8.17 Not a Foreign Person. . . . . . . . . . . . . . 43
Section 8.18 Separate Lots . . . . . . . . . . . . . . . . . 43
Section 8.19 No Prior Assignment . . . . . . . . . . . . . . 43
Section 8.20 Insurance . . . . . . . . . . . . . . . . . . . 43
Section 8.21 Use of the Property . . . . . . . . . . . . . . 43
Section 8.22 Certificate of Occupancy; Licenses. . . . . . . 43
Section 8.23 Physical Condition. . . . . . . . . . . . . . . 43
Section 8.24 Boundaries. . . . . . . . . . . . . . . . . . . 44
Section 8.25 Intentionally Deleted.. . . . . . . . . . . . . 44
Section 8.26 Intentionally Deleted.. . . . . . . . . . . . . 44
Section 8.27 Filing and Recording Taxes. . . . . . . . . . . 44
Section 8.28 Single Purpose Entity/Separateness. . . . . . . 44
Section 8.29 Management Agreement. . . . . . . . . . . . . . 48
Section 8.30 Operating Leases. . . . . . . . . . . . . . . . 48
Section 8.31 Investment Company Act. . . . . . . . . . . . . 49
Section 8.32 Leases. . . . . . . . . . . . . . . . . . . . . 49
Section 8.33 SPE Compliance. . . . . . . . . . . . . . . . . 49
Section 8.34 Ground Lease Representations and Warranties . . 49
Section 8.35 Intentionally Deleted.. . . . . . . . . . . . . 50
Section 8.36 Parking Agreements. . . . . . . . . . . . . . . 50
ARTICLE IX
FINANCIAL REPORTING
Section 9.1 Financial Statements. . . . . . . . . . . . . . 51
Section 9.2 Accounting Principles . . . . . . . . . . . . . 52
Section 9.3 Other Information; Access . . . . . . . . . . . 52
Section 9.4 Format of Delivery. . . . . . . . . . . . . . . 52
<PAGE>
PAGE
----
ARTICLE X
COVENANTS
Section 10.1 Due on Sale and Encumbrance; Transfers
of Interests. . . . . . . . . . . . . . . . . . 53
Section 10.2 Taxes; Utility Charges. . . . . . . . . . . . . 53
Section 10.3 Operating Lease . . . . . . . . . . . . . . . . 53
Section 10.4 Operation; Maintenance; Inspection. . . . . . . 53
Section 10.5 Taxes on Security . . . . . . . . . . . . . . . 54
Section 10.6 Legal Existence; Name, Etc. . . . . . . . . . . 54
Section 10.7 Further Assurances. . . . . . . . . . . . . . . 54
Section 10.8 Estoppel Certificates.. . . . . . . . . . . . . 54
Section 10.9 Notice of Certain Events. . . . . . . . . . . . 55
Section 10.10 Indemnification . . . . . . . . . . . . . . . . 55
Section 10.11 Payment for Labor and Materials . . . . . . . . 57
Section 10.12 Alterations . . . . . . . . . . . . . . . . . . 56
Section 10.13 Handicapped Access. . . . . . . . . . . . . . . 56
Section 10.14 Certain Hotel/Operating Lease Covenants . . . . 57
Section 10.15 The Ground Lease. . . . . . . . . . . . . . . . 57
Section 10.16 O & M Agreement . . . . . . . . . . . . . . . . 57
ARTICLE XI
EVENTS OF DEFAULT
Section 11.1 Payments. . . . . . . . . . . . . . . . . . . . 58
Section 11.2 Insurance . . . . . . . . . . . . . . . . . . . 58
Section 11.3 Single Purpose Entity . . . . . . . . . . . . . 58
Section 11.4 Insolvency Opinion. . . . . . . . . . . . . . . 58
Section 11.5 Taxes . . . . . . . . . . . . . . . . . . . . . 58
Section 11.6 Sale, Encumbrance, Etc. . . . . . . . . . . . . 58
Section 11.7 Representations and Warranties. . . . . . . . . 58
Section 11.8 Additional Loan . . . . . . . . . . . . . . . . 58
Section 11.9 Involuntary Bankruptcy or Other Proceeding. . . 58
Section 11.10 Voluntary Petitions, Etc. . . . . . . . . . . . 58
Section 11.11 Covenants . . . . . . . . . . . . . . . . . . . 59
Section 11.12 Operating Lease.. . . . . . . . . . . . . . . . 59
Section 11.13 Management Agreement. . . . . . . . . . . . . . 59
Section 11.14 Ground Lease Rent . . . . . . . . . . . . . . . 59
Section 11.15 Ground Lease Default. . . . . . . . . . . . . . 59
ARTICLE XII
REMEDIES
Section 12.1 Remedies - Insolvency Events . . . . . . . . . 60
Section 12.2 Remedies - Other Events.. . . . . . . . . . . . 60
Section 12.3 Lender's Right to Perform the Obligations . . . 61
Section 12.4 Cross-Default; Cross-Collateralization;
Waiver of Marshalling of Assets.. . . . . . . . 61
ARTICLE XIII
LIMITATIONS ON LIABILITY
Section 13.1 Limitation on Liability . . . . . . . . . . . . 62
Section 13.2 Limitation on Liability of Lender's Officers
Employees, Etc. . . . . . . . . . . . . . . . . 63
<PAGE>
PAGE
----
ARTICLE XIV
SECURITIZATION
Section 14.1 Securitization. . . . . . . . . . . . . . . . . 63
Section 14.2 Securitization Indemnification. . . . . . . . . 64
Section 14.3 Servicer. . . . . . . . . . . . . . . . . . . . 66
Section 14.4 Uncrossing the Loan and the Additional Loan . . 66
ARTICLE XV
MISCELLANEOUS
Section 15.1 Notices . . . . . . . . . . . . . . . . . . . . 66
Section 15.2 Amendments and Waivers. . . . . . . . . . . . . 67
Section 15.3 Limitation on Interest. . . . . . . . . . . . . 67
Section 15.4 Invalid Provisions. . . . . . . . . . . . . . . 68
Section 15.5 Reimbursement of Expenses . . . . . . . . . . . 68
Section 15.6 Approvals; Third Parties; Conditions. . . . . . 68
Section 15.7 Lender Not in Control; No Partnership . . . . . 69
Section 15.8 Time of the Essence . . . . . . . . . . . . . . 69
Section 15.9 Successors and Assigns. . . . . . . . . . . . . 69
Section 15.10 Renewal, Extension or Rearrangement . . . . . . 69
Section 15.11 Waivers . . . . . . . . . . . . . . . . . . . . 69
Section 15.12 Cumulative Rights; Joint and Several Liability. 69
Section 15.13 Singular and Plural . . . . . . . . . . . . . . 70
Section 15.14 Phrases . . . . . . . . . . . . . . . . . . . . 70
Section 15.15 Exhibits and Schedules. . . . . . . . . . . . . 70
Section 15.16 Titles of Articles, Sections and Subsections. . 70
Section 15.17 Promotional Material. . . . . . . . . . . . . . 70
Section 15.18 Survival. . . . . . . . . . . . . . . . . . . . 70
Section 15.19 Waiver of Jury Trial. . . . . . . . . . . . . . 70
Section 15.20 Waiver of Punitive or Consequential Damages . . 70
Section 15.21 Governing Law.. . . . . . . . . . . . . . . . . 71
Section 15.22 Entire Agreement. . . . . . . . . . . . . . . . 71
Section 15.23 Counterparts. . . . . . . . . . . . . . . . . . 71
Section 15.24 Brokers and Financial Advisors. . . . . . . . . 72
Section 15.25 Conflicts . . . . . . . . . . . . . . . . . . . 72
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY
EXHIBIT B FORM OF FINANCIAL STATEMENTS
SCHEDULE I REQUIRED REPAIRS
SCHEDULE II OPERATING LEASE
SCHEDULE III RELEASE AMOUNTS
SCHEDULE IV LEASE PURCHASE OPTION
SCHEDULE V INSURANCE CLAIMS
<PAGE>
LOAN AGREEMENT
--------------
This Loan Agreement (this "Agreement") is entered into as of
July 29, 1999, between GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation ("Lender"), and LHO FINANCING PARTNERSHIP I, L.P., a Delaware
limited partnership ("Borrower").
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. As used herein, the following
terms have the meanings indicated:
"Access Laws" has the meaning assigned in Section 10.13.
"Accrued Interest" has the meaning assigned in Section 2.3(b).
"Additional Insolvency Opinion" has the meaning assigned in
Section 8.33.
"Additional Loan" means the loan (other than the Loan) made to
Borrower by Lender on the date hereof, which Additional Loan is secured by
a deed of trust encumbering the Meridien Property.
"Additional Loan Documents" shall mean all documents
evidencing, securing, governing or otherwise pertaining to the Additional
Loan, and all amendments, modifications, renewals, substitutions or
replacements of any of the foregoing.
"Additional Payment Stream" has the meaning assigned in
Section 2.4(c).
"Additional Property" means the property (other than the
Property) which is mortgaged by Borrower as of the date hereof to secure
the Additional Loan.
"Adjusted Rate" has the meaning assigned in Section 2.2.
"Adjusted Release Amount" shall mean the product of (a) the
quotient obtained by dividing the original Release Amount for the Property
by the sum of the original Release Amount for the Property and the
Additional Property, (b) the outstanding principal balance of the Loan
(i.e., the Note and the Defeased Note, if applicable) and the Additional
Loan, and (c) one hundred twenty-five percent (125%); provided, however,
that, the "Adjusted Release Amount" shall mean the outstanding principal
balance of the Loan (taking into account the "Additional Payment Stream"
(as defined in the Additional Loan Documents)) in the event that the
Additional Loan previously has been completely defeased in accordance with
the Additional Loan Documents.
"Affiliate" means (a) any corporation in which Borrower or any
partner, shareholder, director, officer, member, or manager of Borrower
directly or indirectly owns or controls more than ten percent (10%) of the
beneficial interest, (b) any partnership, joint venture or limited
liability company in which Borrower or any partner, shareholder, director,
officer, member, or manager of Borrower is a partner, joint venturer or
member, (c) any trust in which Borrower or any partner, shareholder,
director, officer, member or manager of Borrower is a trustee or
beneficiary, (d) any entity of any type which is directly or indirectly
owned or controlled by Borrower or any partner, shareholder, director,
officer, member or manager of Borrower, (e) any partner, shareholder,
director, officer, member, manager or employee of Borrower, (f) any Person
related by birth, adoption or marriage to any partner, shareholder,
director, officer, member, manager, or employee of Borrower, or (g) any
Borrower Party.
<PAGE>
"Agreement" means this Loan Agreement, as amended from time to
time.
"Annual Budget" shall mean the operating budget, including all
planned capital expenditures, for the Property prepared by Borrower, the
Operating Lessee or Manager for the applicable calendar year or other
period.
"Anticipated Payment Date" means August 1, 2009.
"Approved Annual Budget" has the meaning assigned in Section
2.3(h).
"Assignment of Leases and Rents" means the Assignment of Leases
and Rents, executed by Borrower for the benefit of Lender, and pertaining
to leases of space in the Property and any amendments, modifications,
renewals, substitutions or replacement thereof.
"Award" has the meaning assigned in Section 5.2.
"Bankruptcy Party" has the meaning assigned in Section 11.9.
"Basic Carrying Costs" shall mean the sum of Ground Rent, Taxes
and Insurance Premiums for the Property for the relevant calendar year or
payment period.
"Borrower Party" means any Joinder Party, any guarantor, any
general partner of Borrower, if Borrower is a partnership or limited
partnership, any general partner in any partnership or limited partnership
that is a general partner of Borrower, any managing member of Borrower if
Borrower is a limited liability company, and any managing member in any
limited liability company that is a managing member of Borrower, at any
level.
"Business Day" means a day other than a Saturday, a Sunday, or
a legal holiday on which national banks located in the State of New York
are not open for general banking business.
"Capital Expenditures" means, for any period, the amount
expended for items capitalized under generally accepted accounting
principles (including expenditures for building improvements or major
repairs, leasing commissions and tenant improvements).
"Cash Expenses" means, for any period, the operating expenses
for the operation of the Property as set forth in an Approved Annual
Budget, to the extent that such expenses are actually incurred by Borrower,
minus any payments into the Tax and Insurance Escrow Fund.
"Cash Management Account" has the meaning set forth in Section
3.5(a).
"Cash Management Agreement" has the meaning set forth in
Section 2.3(i).
"Casualty Consultant" has the meaning set forth in Section
5.3(b)(iii).
"Casualty Retainage" has the meaning set forth in Section
5.3(b)(iv).
"Closing Date" means the date the Loan is funded by Lender.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations
issued pursuant thereto in temporary or final form.
<PAGE>
"Condemnation" has the meaning assigned in Section 5.2.
"Condemnation Proceeds" has the meaning assigned in Section
5.3(b).
"Contract Rate" has the meaning assigned in Section 2.2.
"Debt" shall mean the outstanding principal amount set forth
in, and evidenced by, this Agreement and the Note, together with all
interest accrued and unpaid thereon and all other sums (including the Yield
Maintenance Premium) due to Lender in respect of the Loan under the Note,
this Agreement, the Mortgage or any other Loan Document and the Additional
Loan under the Additional Loan Documents.
"Debt Service" means the aggregate interest, fixed principal,
and other payments due under the Loan, and on any other outstanding
permitted Indebtedness approved by Lender for the period of time for which
calculated.
"Debt Service Coverage Ratio" shall mean a ratio for the
applicable period in which:
(a) the numerator is (i) for so long as the Operating Lease
is in effect, the Lease Term NOI and (ii) at all other times during the
term of the Loan, the Net Operating Income for the Property and/or the
Additional Property, as applicable,; and
(b) the denominator is the aggregate amount of principal and
interest due and payable on the Note (or in the event that a Defeasance
Event has occurred, the Undefeased Note) and/or the note executed in
connection with the Additional Loan secured by a mortgage and/or a deed of
trust encumbering the Additional Property referred to in the numerator, as
applicable, based on the actual loan constant.
"Default Rate" means the lesser of (a) the maximum rate of
interest allowed by applicable law, and (b) five percent (5%) per annum in
excess of the Contract Rate or the Adjusted Rate, whichever is then in
effect.
"Defeasance Date" has the meaning ascribed in Section
2.4(b)(i).
"Defeasance Deposit" shall mean an amount equal to the sum of
the Adjusted Release Amount (when in connection with a release, whether
pursuant to a partial defeasance or defeasance in full, provided that if in
connection with a partial defeasance, then the Defeasance Deposit shall
include any prior Defeasance Deposits deposited in connection with prior
Defeasance Events) or, in a partial defeasance where no release is sought,
the principal amount of the Defeased Note, as applicable, the Yield
Maintenance Premium, any costs and expenses incurred or to be incurred in
the purchase of U.S. Obligations necessary to meet the Scheduled Defeasance
Payments and any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection with the transfer of the Note or the
Defeased Note, as applicable, the creation of the Defeased Note and the
Undefeased Note, if applicable, or otherwise required to accomplish the
requirements of Sections 2.4 and 2.5 hereof.
"Defeasance Event" has the meaning assigned in Section 2.4(b).
"Defeased Note" has the meaning assigned in Section 2.4(b).
<PAGE>
"DSCR Event" means in the event that, at any time during the
Loan, the Debt Service Coverage Ratio for the Property and the Additional
Property, in the aggregate, for the immediately preceding twelve (12)
months shall be less than 1.4 to 1.0.; provided, however, that during the
continuance of a Restoration (and until the stabilization thereafter) a
DSCR Event shall only occur in the event that the Debt Service Coverage
Ratio for the Property and Additional Property, in the aggregate, for the
immediately preceding twelve (12) months shall be less than 1.2 to 1.0.
"DSCR Release Event" means in the event that, following the
occurrence of a DSCR Event, the Debt Service Coverage Ratio for the
Property and the Additional Property, in the aggregate, for the immediately
preceding twelve (12) months shall be equal to or greater than 1.4 or 1.0
for two consecutive calendar quarters.
"Eligible Account" shall mean a separate and identifiable
account from all other funds held by the holding institution that is either
(i) an account or accounts maintained with a federal or state-chartered
depository institution or trust company which complies with the definition
of Eligible Institution or (ii) a segregated trust account or accounts
maintained with a federal or state chartered depository institution or
trust company acting in its fiduciary capacity which, in the case of a
state chartered depository institution or trust company is subject to
regulations substantially similar to 12 C.F.R. Section 9.10(b), having in
either case a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal and state authority. An
Eligible Account will not be evidenced by a certificate of deposit,
passbook or other instrument.
"Eligible Institution" shall mean a depository institution or
trust company that satisfies the Rating Criteria.
"Environmental Laws" has the meaning assigned in
Section 6.1(a).
"ERISA" has the meaning assigned in Section 8.10(a).
"Event of Default" has the meaning assigned in Article 11.
"Extraordinary Expenses" means an extraordinary operating
expense or capital expense not set forth in an Approved Annual Budget.
"FFE Note" means that certain Promissory Note dated as of April
29, 1998 by Radisson Bloomington Corporation in favor of LaSalle Hotel
Operating Partnership, L.P., assigned to Borrower pursuant to that certain
Assignment of Note dated as of the date hereof.
"FFE Note Security Agreement" means that certain Security
Agreement (Pledge of Notes) given by Borrower to Lender dated as of the
date hereof.
"Funds" means the Required Repair Fund and the Replacement
Escrow Fund.
"Ground Lease" means that certain Lease dated March 14, 1980,
between Ground Lessor, as landlord, and Radisson South Company
(predecessor-in-interest to Borrower), as tenant, as amended by that
certain First Amendment to Lease dated as of November 24, 1995 by and
between Ground Lessor and Minnesota California Partners (predecessor-in-
interest to Borrower).
"Ground Lessor" shall mean Carlson Real Estate Company, a
Minnesota limited partnership, its successors and assigns.
<PAGE>
"Governmental Authority" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise) having jurisdiction over the Property, the Borrower and/or the
Loan, as applicable, whether now or hereafter in existence.
"Hazardous Materials" has the meaning assigned in
Section 6.1(b).
"Hazardous Materials Indemnity Agreement" shall mean that
certain hazardous materials indemnity agreement dated the date hereof by
the Borrower and Indemnitor in favor of Lender.
"Improvements" shall have the meaning assigned to such term in
the Mortgage.
"Indebtedness" means, for any Person, without duplication:
(a) all indebtedness of such Person for borrowed money, for amounts drawn
under a letter of credit, or for the deferred purchase price of property
for which such Person or its assets is liable, (b) all unfunded amounts
under a loan agreement, letter of credit, or other credit facility for
which such Person would be liable, if such amounts were advanced under the
credit facility, (c) all amounts required to be paid by such Person as a
guaranteed payment to partners or a preferred or special dividend,
including any mandatory redemption of shares or interests, (d) all
indebtedness guaranteed by such Person, directly or indirectly, (e) all
obligations under leases that constitute capital leases for which such
Person is liable, and (f) all obligations of such Person under interest
rate swaps, caps, floors, collars and other interest hedge agreements, in
each case whether such Person is liable contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such
Person otherwise assures a creditor against loss.
"Indemnitor" shall mean the Operating Partnership.
"Independent Director" means a Person who shall not have been
at the time of such individual's appointment or at any time while serving
as a director of the corporate general partner of Borrower, and may not
have been at any time during the preceding five years or thereafter (i) a
shareholder of, or an officer, director, partner or employee of, Borrower
or any of its shareholders, subsidiaries or affiliates, (ii) a customer of,
or supplier to, Borrower or any of its shareholders, subsidiaries or
affiliates, (iii) a person or other entity controlling or under common
control with any such shareholder, partner, supplier or customer, or (iv) a
member of the immediate family of any such shareholder, officer, director,
partner, employee, supplier or customer of Borrower. As used herein, the
term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a person
or entity, whether through ownership of voting securities, by contract or
otherwise.
"Insolvency Opinion" has the meaning assigned in Section 8.33.
"Installment Amount" has the meaning assigned in Section
5.4(b).
"Insurance Premiums" has the meaning assigned in Section
5.1(b).
"Insurance Proceeds" has the meaning assigned in Section
5.3(b).
"Joinder Party" means the Persons executing the Joinder hereto.
<PAGE>
"Lease" shall mean all leases, subleases, occupancy agreements,
licenses, concessions, rental contracts and other agreements (written or
oral) now or hereafter existing relating to the use or occupancy of the
project located on the Property, including the Operating Lease, together
with all guarantees, letters of credit and other credit support,
modifications, extensions and renewals thereof, whether before or after the
filing by or against Borrower of any petition of relief under 11 U.S.C.
Section 101 et seq., and all related security and other deposits.
"Lease Term NOI" means the amount obtained by subtracting Lease
Term Operating Expenses from Lease Term Operating Revenues.
"Lease Term Operating Expenses" means all Operating Expenses
incurred by Borrower for so long as the Operating Lease is in effect, which
Lease Term Operating Expenses shall not include any operating expenses paid
by Operating Lessee pursuant to its obligations under the Operating Lease.
"Lease Term Operating Revenues" means all operating Revenue of
Borrower for so long as the Operating Lease is in effect, which shall be
comprised of Operating Lease Rent and other Operating Revenues, if any,
derived by Borrower.
"Legal Requirements" shall mean federal, state, county,
municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting the Property or any part thereof or the construction,
use, alteration or operation thereof, or any part thereof, whether now or
hereafter enacted and in force, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments,
either of record or known to Borrower, at any time in force affecting the
Property or any part thereof, including, without limitation, any which may
(i) require repairs, modifications or alterations in or to the Property or
any part thereof, or (ii) any way limit the use and enjoyment thereof.
"Letter of Credit" shall mean an irrevocable, unconditional,
transferable, clean sight draft letter of credit in favor of Lender and
entitling Lender to draw thereon in New York, New York, issued by a
domestic Eligible Institution with an office in New York, New York.
"Liabilities" has the meaning assigned in Section 14.2(b).
"Lien" means any interest, or claim thereof, in the Property
securing an obligation owed to, or a claim by, any Person other than the
owner of the Property, whether such interest is based on common law,
statute or contract, including the lien or security interest arising from a
deed of trust, mortgage, assignment, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a Lease, consignment or
bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, Leases and other title exceptions and
encumbrances affecting the Property.
"Loan" means the loan made by Lender to Borrower under this
Agreement and all other amounts secured by the Loan Documents.
"Loan Documents" means: (a) this Agreement, (b) the Note,
(c) the Mortgage, (d) the Second Mortgage, (e) the Assignment of Leases and
Rents, (f) the Hazardous Materials Indemnity Agreement, (g) Uniform
Commercial Code financing statements, (h) such assignments of management
agreements, contracts and other rights as may be requested by
Lender, (i) the Cash Management Agreement, (j) the FFE Note Security
Agreement, (k) the O&M Agreement, (l) all other documents evidencing,
securing, governing or otherwise pertaining to the Loan, and (m) all
amendments, modifications, renewals, substitutions or replacements of any
of the foregoing.
<PAGE>
"Lockout Yield Maintenance Premium" shall mean an amount equal
to the greater of (a) one percent (1%) of the outstanding principal amount
of the Loan to be prepaid or satisfied, as applicable, or (b) the Yield
Maintenance Premium that would be required if a Defeasance Event had
occurred (whether or not permitted under this Agreement) in an amount equal
to the outstanding principal amount of the Loan to be satisfied or prepaid,
as applicable; plus if the prepayment of which the Lockout Yield
Maintenance Premium is a part is not paid on a Payment Date, the interest
that would have accrued on the Loan through the next Payment Date.
"LTV" means the outstanding principal balance of the Note to
the appraised or underwritten (based upon the underwriting procedures and
guidelines utilized as of the Closing Date) value of the Property,
determined by Lender in its reasonable discretion.
"Management Agreement" means the management agreement entered
into by and between Borrower or Operating Lessee, as applicable, and the
Manager pursuant to which the Manager is to provide management and other
services with respect to the Property.
"Manager" means Radisson Hotel Corporation, or any replacement
manager approved in accordance with the terms and provisions of the Loan
Documents.
"Maturity Date" means the earliest of (a) August 1, 2024;
(b) any earlier date on which the entire Loan is required to be paid in
full, by acceleration or otherwise, under this Agreement or any of the
other Loan Documents; or (c) if the Loan is not subject to a Securitization
on the Anticipated Payment Date, the Anticipated Payment Date.
"Meridien Property" shall mean the premises known as "Le
Meridien Dallas", located at 650 Pearl Street, Dallas, Texas.
"Monthly Debt Service Payment Amount" has the meaning assigned
in Section 2.3(a).
"Mortgage" the Fee and Leasehold Mortgage, Assignment of Leases
and Rents, Security Agreement and Fixture Filing, executed by Borrower in
favor of Lender, covering the Property and any amendments, modifications,
renewals, substitutions or replacement thereof.
"Net Operating Income" means the amount obtained by subtracting
Operating Expenses from Operating Revenues.
"Net Proceeds" has the meaning assigned in Section 5.3(b).
"Net Proceeds Deficiency" has the meaning assigned in Section
5.3(b)(vi).
"Note" means the Promissory Note of even date, in the stated
principal amount of $30,300,000.00, executed by Borrower, and payable to
the order of Lender in evidence of the Loan as the same may hereafter be
modified, amended, restated, renewed or replaced and including any Defeased
Note and Undefeased Note that may exist from time to time.
"O&M Agreement" means that certain Operation and Maintenance
Agreement dated the date hereof between Borrower and Lender given in
connection with the Loan, as the same may be amended, restated, replaced,
supplemental or otherwise modified from time to time.
"Offering Document" has the meaning assigned in Section
14.2(a).
<PAGE>
"Operating Expenses" means all reasonable and necessary
expenses of Borrower (not paid by Operating Lessee pursuant to the
obligations of Operating Lessee under the Operating Lease for so long as
the Operating Lease remains in effect) for operating the Property and the
Additional Property, if applicable, in the ordinary course of business
which are paid in cash by or on behalf of Borrower and which are directly
associated with and fairly allocable to the Property and the Additional
Property, if applicable, for the applicable period, including real estate
taxes and assessments, insurance premiums, maintenance costs, management
fees and costs for the Property and the Additional Property, if applicable,
accounting, legal, and other professional fees, fees relating to
environmental and net cash flow and audits, and other expenses incurred by
Lender and reimbursed by Borrower under this Agreement and the other Loan
Documents, deposits to the Replacement Escrow Fund, Tax and Insurance Fund,
deposits to the escrows required pursuant to the Additional Loan Documents,
deposits or "book-entries" for reserves required pursuant to Operating
Leases to which Borrower is a party, wages, salaries, and personnel
expenses, but excluding Debt Service and debt service paid in connection
with the Additional Loan, capital expenditures with respect to the Property
and the Additional Property, if applicable, any of the foregoing expenses
which are paid from deposits to cash reserves previously included as
Operating Expenses, any payment or expense for which Borrower was or is to
be reimbursed from proceeds of the Loan and the applicable Additional Loan,
or from proceeds of insurance or by any third party, and any non-cash
charges such as depreciation and amortization. Any management fee or other
expense payable to Borrower or to an Affiliate of Borrower with respect to
the Property and the Additional Property, if applicable shall be included
as an Operating Expense only with Lender's prior approval. Operating
Expenses shall not include any (i) expenses (including, without limitation,
federal, state or local income taxes or legal and other professional fees)
unrelated to the operation of the Property and the Additional Property, if
applicable.
"Operating Lease" means the lease agreement in effect between
the Borrower and the Operating Lessee for the use and operation of the
Property and all amendments, modifications, renewals, substitutions or
replacements of such lease. The initial Operating Lease in effect as of
the date hereof is identified on Schedule II attached hereto.
"Operating Lease Rent" shall mean collectively, (a) all rents,
revenues, issues, profits, income and proceeds due or to become due to
Borrower under the Operating Lease, and (b) any payments of principal
and/or interest on the FFE Note (whether denominated as principal, interest
or rent).
"Operating Lessee" means lessee under the Operating Lease. The
initial Operating Lessee under the Operating Lease in effect as of the date
hereof is identified on Schedule II attached hereto.
"Operating Partnership" shall mean LaSalle Hotel Operating
Partnership L.P., a Delaware limited partnership.
"Operating Revenues" means all gross revenues of Borrower
derived from the Property and the Additional Property, if applicable, or
otherwise arising in respect of the Property and the Additional Property,
if applicable, which are properly allocable to the Property and such
Additional Property for the applicable period, including Rent, Operating
Lease Rent, interest and other receipts from Leases and parking agreements,
concession fees and charges and other miscellaneous operating revenues at
the Property and the Additional Property, if applicable, but excluding
security deposits and earnest money deposits until they are forfeited by
the depositor, advance rentals until they are earned, and proceeds from a
sale or other disposition. Operating Revenues shall not include (a) any
condemnation or insurance proceeds, other than the proceeds of any business
<PAGE>
interruption or loss of income insurance received by Borrower, (b) any
proceeds resulting from the sale, exchange, transfer, financing or
refinancing of all or any part of the Property or the Additional Property,
(c) any rent accrued by Borrower but not received because of any free rent
provisions or other rental concessions in any Lease, (d) any repayments
received from tenants of principal loaned or advanced to tenants by
Borrower, (e) any payments due pursuant to the terms of any Lease in
connection with the cancellation or termination of a Lease, (f) investment
income on any reserves or funds not related to the normal operation of the
Property or the Additional Property, including, without limitation, funds
allocated to pay for construction expenses or (g) any type of income other
than Operating Lease Rent that would otherwise be considered Operating
Revenues pursuant to the provisions above but is paid directly by any
tenant to a Person or entity other than Borrower.
"Parking Agreements" shall mean, collectively, the Restaurant
Parking Agreement and the Sofitel Parking Agreement.
"Payment Date" shall mean the first day of each calendar month
commencing on the first day of September 1, 1999.
"Permitted Encumbrances" means outstanding liens, easements,
restrictions, security interests and other exceptions to title set forth in
the policies of title insurance insuring the lien of the Mortgage, together
with the liens and security interests in favor of Lender created by the
Loan Documents.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, trustee, estate, limited
liability company, unincorporated organization, real estate investment
trust, government or any agency or political subdivision thereof, or any
other form of entity.
"Personalty" shall have the meaning assigned to such term in
the Mortgage.
"Policies" has the meaning assigned in Section 5.1(b).
"Policy" has the meaning assigned in Section 5.1(b).
"Potential Default" means the occurrence of any event or
condition which, with the giving of notice, the passage of time, or both,
would constitute an Event of Default.
"Property" means each parcel of real property more particularly
described on Exhibit A attached hereto, and the improvements thereon owned
by Borrower and encumbered by the Mortgage, the Second Mortgage, and the
FFE Note, together with all rights pertaining to such property improvements
and FFE Note.
"Property Condition Report" means that certain Property
Condition Report dated March 17, 1999 prepared by International Valuation
and Inspection Inc..
"Rating Agencies" means each of Standard & Poor's, Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. and Fitch IBCA,
Inc., or any other nationally-recognized statistical rating agency which
has been approved by Lender; provided, that, after a Securitization,
"Rating Agencies" shall be deemed to mean the Rating Agencies that have
rated the Securities issued in connection with the Securitization.
<PAGE>
"Rating Criteria" with respect to any Person, shall mean the
short term unsecured debt obligations or commercial paper which are rated
at least A-1 by Standard & Poor's Ratings Group, P-1 by Moody's Investors
Service, Inc., D-1 by Duff & Phelps Credit Rating Co. and F-1+ by Fitch
IBCA, Inc. in the case of accounts in which funds are held for 30 days or
less (or, in the case of accounts in which funds are held for more than 30
days, the long term unsecured debt obligations of which are rated at least
"AA-" by Fitch, Duff and Standard & Poor's and "Aa3" by Moody's).
"Registration Statement" has the meaning assigned in Section
14.2(b).
"Release Amount" means, as applicable, the release amount for
the Property or the Additional Property as set forth on Schedule III
hereto.
"Release Date" shall mean the earlier of (i) the date that is
two (2) years from the "startup day" within the meaning of Section
860G(a)(9) of the Code of the REMIC Trust or (ii) three (3) years from the
first Payment Date.
"REMIC Trust" shall mean a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code that holds the
Note.
"Rent" shall mean all rents, revenues, issues, profits, income
and proceeds due or to become due from tenants of the Property, including
rentals and all other payments of any kind under the Operating Lease, and
Leases (if any) for using, leasing, licensing, possessing, operating from,
rendering in, selling or otherwise enjoying the Property actually received
by Borrower, including, without limitation, all hotel receipts, revenues
and credit card receipts collected from guest rooms, restaurants, bars,
meeting rooms, banquet rooms and recreational facilities, all receivables,
customer obligations, installment payment obligations and other obligations
now existing or hereafter arising or created out of the sale, lease,
sublease, license, concession or other grant of the right of the use and
occupancy of property or rendering of services by Borrower, any Operating
Lessee or any operator or manager of the hotel or the commercial space
located in the Improvements or acquired from others (including, without
limitation, from the rental of any office space, retail space, guest rooms
or other space, halls, stores, and offices, and deposits securing
reservations of such space), license, lease, sublease and concession fees
and rentals, health club membership fees, food and beverage wholesale and
retail sales, service charges, vending machine sales and proceeds, if any,
from business interruption or other loss of income insurance.
"Replacement Deposit" has the meaning assigned in Section
3.1(b).
"Replacement Escrow Fund" has the meaning assigned in Section
3.1(b).
"Replacement Fund Recoupment Amount" has the meaning assigned
in Section 3.1(b).
"Required Repair Fund" has the meaning assigned in Section
3.1(a).
"Restaurant Parking Agreement" means that certain Parking
Agreement dated November 2, 1995 by and between Minnesota California
Partners (predecessor-in-interest to Borrower), Carlson Real Estate Company
and the City of Bloomington.
<PAGE>
"Restoration" shall mean the repair and restoration of the
Property (including, without limitation, the preparation of designs and
plans for such repair and restoration) after a casualty or Condemnation as
nearly as possible to the condition the Property was in immediately prior
to such casualty or Condemnation, with such alterations as may be
reasonably approved by Lender.
"Scheduled Defeasance Payments" has the meaning assigned in
Section 2.4(c).
"Second Mortgage" means the Second Fee and Leasehold Mortgage,
Assignment of Leases and Rents, Security Agreement and Fixture Filing,
executed by Borrower in favor of Lender, securing the Additional Loan and
encumbering the Property and any amendments, modifications, renewals,
substitutions or replacements thereof.
"Securities" has the meaning assigned in Section 14.1.
"Securities Act" has the meaning assigned in Section 14.2.
"Securitization" has the meaning assigned in Section 14.1.
"Securitization Information" has the meaning assigned in
Section 14.1(a)(iii).
"Security Agreement" has the meaning assigned in Section
2.4(b)(vi).
"Servicer" has the meaning assigned in Section 14.3.
"Servicing Agreement" has the meaning assigned in Section 14.3.
"Severed Loan Documents" has the meaning assigned in Section
12.2(c).
"Severing Documentation" has the meaning assigned in Section
14.4.
"Single Purpose Bankruptcy Remote Entity" has the meaning
assigned in Section 8.28(a).
"Site Assessment" means an environmental engineering report for
the Property prepared at Borrower's expense by an engineer engaged by
Borrower and approved by Lender, and in a manner satisfactory to Lender,
based upon an investigation relating to and making appropriate inquiries
concerning the existence of Hazardous Materials on or about the Property,
and the past or present discharge, disposal, release or escape of any such
substances, all consistent with ASTM Standard E1527-93 or any successor
thereto published by ASTM and good customary and commercial practice.
"Sofitel Parking Agreement" means that certain Parking
Agreement between Minnesota California Partners (predecessor-in-interest to
Borrower) and Hotel Sofitel Minneapolis dated November 1, 1995.
"Standard and Poor's" shall mean Standard and Poor's Ratings
Group, a division of McGraw-Hill, Inc.
"State" means the State in which the Property is located.
"Static Cash Account" has the meaning assigned in Section
5.4(b).
<PAGE>
"Subordination Agreement" shall mean that certain Subordination
Agreement among Lender, Borrower and Operating Lessee dated as of July 29,
1999.
"Successor Borrower" has the meaning assigned in Section
2.5(6).
"T&I Letter of Credit" has the meaning assigned in Section
5.4(b).
"Tax and Insurance Escrow Fund" has the meaning assigned in
Section 5.4(a).
"Taxes" has the meaning assigned in Section 10.2.
"Threshold Amount" has the meaning assigned in Section 10.12.
"Treasury Rate" shall mean, as of the Anticipated Payment Date,
the yield, calculated by linear interpolation (rounded to the nearest one-
thousandth of one percent (i.e., 0.001%) of the yields of non-callable
United States Treasury obligations with terms (one longer and one shorter)
most nearly approximating the period from such date of determination to the
Maturity Date, as determined by Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized
source of financial market information selected by Lender.
"Trigger Event" means the first to occur, if any, of the
Anticipated Payment Date or a DSCR Event.
"Trigger Period" means the period of time during the term of
the Loan (a) following a DSCR Event until the occurrence of a DSCR Release
Event, and (b) following the Anticipated Payment Date; provided, that, a
Trigger Period existing after two (2) DSCR Release Events or the occurrence
of the Anticipated Payment Date shall remain in effect for the remainder of
the term of the Loan notwithstanding the subsequent occurrence of a DSCR
Release Event.
"Undefeased Note" has the meaning assigned in Section 2.4(b).
"USAH" shall mean the Uniform System of Accounts for Hotels,
Ninth Revised Edition, 1996, as the same may be revised, amended or
supplemented.
"U.S. Obligations" shall mean direct non-callable obligations
of the United States of America.
"Yield Maintenance Premium" shall mean the amount (if any)
which, when added to the Adjusted Release Amount or the principal amount of
the Defeased Note, as applicable, for the Property will be sufficient to
purchase U.S. Obligations providing the required Scheduled Defeasance
Payments.
ARTICLE II
LOAN TERMS
Section 2.1 The Loan. Lender agrees to make a Loan of THIRTY
MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($30,300,000.00) to the
Borrower, which shall be funded in one advance and repaid in accordance
with the terms of this Agreement and the Note. Borrower hereby agrees to
accept the Loan on the Closing Date, subject to and upon the terms and
conditions set forth herein.
<PAGE>
Section 2.2 Interest Rate. From the date hereof through but
not including the Anticipated Payment Date, the outstanding principal
balance of the Loan shall bear interest at a rate of interest equal to
eight and ten one hundredths percent (8.10%) per annum (the "Contract
Rate"). From and after the Anticipated Payment Date through and including
the Maturity Date, the outstanding principal balance of the Loan shall bear
interest at a rate per annum equal to the greater of (i) the Contract Rate
plus two percentage points (2%) or (ii) the Treasury Rate plus two
percentage points (2%); provided, however, if after the Anticipated Payment
Date at any time the Loan is not subject to a Securitization, such rate
shall be increased an additional three (3) percentage points (3%) per annum
for so long as the Loan is not subject to a Securitization (the Contract
Rate, as adjusted pursuant to this sentence, hereinafter referred to as the
"Adjusted Rate").
Section 2.3 Terms of Payment.
(a) Interest and Principal. The Loan shall be payable as
follows: (i) payment of interest only (computed at the Contract Rate) on
the date hereof for the period from the date hereof through the last day of
the current month (unless the Closing Date is the first day of a calendar
month, in which case no such interest is due); and (ii) thereafter a
constant payment of $235,871.08 (the "Monthly Debt Service Payment
Amount"), on the first day of September, 1999 and on each Payment Date
thereafter; each of such payments to be applied (A) to the payment of
interest computed at the Contract Rate and (B) the balance applied toward
reduction of the principal sum. The constant payment required hereunder is
based upon a twenty-five (25) year amortization schedule.
(b) To the extent the Loan is outstanding, from and after the
Anticipated Payment Date interest shall accrue on the unpaid principal
balance from time to time outstanding on the Loan at the Adjusted Rate.
Borrower shall continue to make payments of principal and interest in
monthly installments beginning on the Anticipated Payment Date and on the
first day of each calendar month thereafter up to and including the
Maturity Date in an amount equal to the Monthly Debt Service Payment Amount
and, notwithstanding the following provision with respect to Accrued
Interest, the failure to make any such payment as and when due shall
constitute an Event of Default. Each Monthly Debt Service Payment Amount
paid after the Anticipated Payment Date shall be applied to the payment of
interest computed at the Contract Rate with remainder applied to reduce the
outstanding principal balance of the Loan in accordance with Section 2.3(a)
above. Interest accrued at the Adjusted Rate and not paid shall be
deferred and added to the Debt and shall earn interest at the Adjusted Rate
to the extent permitted by applicable law (such accrued interest is
hereinafter defined as "Accrued Interest"). In addition to such payments
of principal and interest, from and after the Anticipated Payment Date,
Borrower shall make payments in reduction of the outstanding principal
balance of the Loan and accrued interest in monthly installments beginning
on the Anticipated Payment Date and on the first day of each calendar month
thereafter up to and including the Maturity Date in accordance with the
terms and provisions of Section 3.5 below.
(c) Maturity. On the Maturity Date, Borrower shall pay to
Lender all outstanding principal, accrued and unpaid interest (including
Accrued Interest, if any), default interest, late charges and any and all
other amounts due under the Loan Documents.
(d) Default Rate. Upon the occurrence and during the
continuance of an Event of Default, Lender shall be entitled to receive and
Borrower shall pay to Lender interest on the entire unpaid principal sum
and any other amounts due at the Default Rate. Interest at the Default
Rate shall be computed from the occurrence of the Event of Default until
the earlier to occur of (a) the permitted cure of such Event of Default by
<PAGE>
Borrower or (b) the actual receipt and collection of the Debt (or that
portion thereof that is then due). Interest at the Default Rate shall be
added to the Debt and shall be secured by the Mortgage. This section,
however, shall not be construed as an agreement or privilege to extend the
date of the payment of the Debt, nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of any Event of
Default.
(e) Making of Payments. Each payment by Borrower hereunder
or under the Note shall be made in funds settled through the New York
Clearing House Interbank Payments System or by check drawn on a New York
Clearing House bank by 1:00 p.m., New York City time, on the date such
payment is due. Whenever any payment hereunder or under the Note shall be
stated to be due on a day which is not a Business Day, such payment shall
be made on the first Business Day thereafter.
(f) Computations. Interest payable hereunder or under the
Note by Borrower shall be computed on the basis of a 360-day year
consisting of twelve (12) months of thirty (30) days each, except that
interest due and payable for a period less than a full month shall be
calculated by multiplying the actual number of days elapsed in such period
by a daily rate based on said 360-day year.
(g) Late Payment Charge. If any principal, interest or any
other sums due under the Loan Documents is not paid by Borrower within five
(5) days of (and including) the date it is due, Borrower shall pay to
Lender upon demand an amount equal to the lesser of five percent (5%) of
such unpaid sum or the maximum amount permitted by applicable law in order
to defray the expense incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment. Any such amount shall be secured by the Mortgage and
the other Loan Documents.
(h) Annual Budget. For the year commencing on January 1,
2000, and for each calendar year thereafter, Borrower shall submit to
Lender an Annual Budget not later than forty-five (45) days prior to the
commencement of such period or calendar year in form reasonably
satisfactory to Lender, or for so long as the Operating Lease remains in
effect, no later than three (3) days after a budget is delivered to
Borrower by Operating Lessee pursuant to the terms of the Operating Lease
in substantially the same form approved by Lender in connection with the
closing of the Loan. The Annual Budget submitted for the portion of the
calendar year beginning on the Anticipated Payment Date, and the Annual
Budget submitted for each calendar year thereafter, shall be subject to
Lender's written approval (each such Annual Budget as approved by Lender,
an "Approved Annual Budget"); provided, that, Borrower shall deliver to
Lender on or prior to twenty (20) days prior to the Anticipated Payment
Date, (a) the proposed Annual Budget for the remainder of the calendar year
beginning on the Anticipated Payment Date or (b) written notification that
Borrower intends to pay the Debt in full on or prior the Anticipated
Payment Date. In the event that Lender objects to a proposed Annual Budget
submitted by Borrower or Operating Lessee, Lender shall advise Borrower of
such objections within thirty (30) days after receipt thereof (and deliver
to such party a reasonably detailed description of such objections) and
Borrower shall promptly revise, or shall cause Operating Lessee to revise,
such Annual Budget and resubmit the same to Lender. Lender shall advise
Borrower of any objections to such revised Annual Budget within ten (10)
days after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall promptly revise, or
shall cause Operating Lessee to revise, the same in accordance with the
process described in this subsection until the Lender approves the Annual
Budget. Until such time that Lender approves a proposed Annual Budget, the
most recently Approved Annual Budget shall apply; provided that, such
Approved Annual Budget shall be adjusted to reflect actual increases in
real estate taxes, insurance premiums and utilities expenses.
<PAGE>
(i) Cash Management Agreement. Simultaneously with the
execution hereof Borrower has entered into a cash management agreement
among Borrower, Lender, Operating Lessee and one or more certain financial
institutions (together with any modifications or amendments thereof, are
hereinafter collectively referred to as the "Cash Management Agreement"),
which provide, among other things, that all Operating Lease Rent and any
other Operating Revenues which Borrower is entitled to receive, if any, and
other sums collected from, or arising with respect to, the Property be
deposited in accordance with the Cash Management Agreement and that such
amounts shall be disbursed in accordance with Section 3.5 hereof. The
Borrower shall pay all costs and expenses required under the Cash
Management Agreement. Upon the occurrence of an Event of Default, Lender
may apply any sums then held pursuant to the Cash Management Agreement to
the payment of the Debt in any order in its sole discretion. Until
expended or applied, amounts held pursuant to the Cash Management Agreement
shall constitute additional security for the Debt.
Section 2.4 Prepayment; Defeasance.
(a) Prepayment. Borrower shall repay any outstanding
principal indebtedness of the Loan in full on the Maturity Date, together
with interest thereon to (but excluding) the date of repayment. Other than
as set forth in this Section 2.4, Borrower shall have no right to prepay
all or any portion of the Loan prior to the Anticipated Payment Date. On
any scheduled Payment Date occurring no earlier than one hundred eighty
(180) days prior to the Anticipated Payment Date, Borrower may, at its
option and upon thirty (30) days prior written notice from Borrower to
Lender, prepay in whole or in part the Debt without payment of any premium.
Any such payment shall be applied to the last payments of principal and
interest due under the Loan. Each voluntary prepayment after one hundred
eighty (180) days prior to the Anticipated Payment Date shall be made on a
scheduled Payment Date and include all accrued and unpaid interest up to
but not including such scheduled Payment Date or, if not paid on a
scheduled Payment Date, include interest that would have accrued on such
prepayment through the next regularly scheduled Payment Date. If prior to
the Anticipated Payment Date and following the occurrence of any Event of
Default, Borrower shall tender payment of an amount sufficient to satisfy
all or any portion of the Debt, such tender by Borrower shall be deemed to
be voluntary and may be accepted or rejected by Lender in its sole
discretion. If Lender accepts such tender, Borrower shall pay, in addition
to the Debt, the Lockout Yield Maintenance Premium and any and all amounts
outstanding under the Additional Loan together with any prepayment
consideration to be paid in connection with a prepayment of such Additional
Loan following an Event of Default under such Additional Loan.
(b) Voluntary Defeasance of the Loan. Provided no Event of
Default exists, at any time after the Release Date and prior to the
Anticipated Payment Date Borrower may voluntarily defease all or any
portion of the Loan by providing Lender with U.S. Obligations that produce
payments which replicate the Scheduled Defeasance Payments (hereinafter, a
"Defeasance Event"). Each Defeasance Event by the Borrower shall be
subject to the satisfaction of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30)
days prior written notice to Lender specifying the Payment Date (the
"Defeasance Date") on which the Defeasance Event is to occur. Such notice
shall indicate the principal amount of the Note to be defeased;
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the principal balance of the Note to but not including the
Defeasance Date. If for any reason the Defeasance Date is not a Payment
Date, the Borrower shall also pay interest that would have accrued on the
Note through and including the day immediately preceding the next Payment
Date;
<PAGE>
(iii)Borrower shall pay to Lender all other sums, not
including scheduled interest or principal payments then remaining unpaid
under the Note, this Agreement, the Mortgage, and the other Loan Documents;
(iv) Borrower shall pay to Lender the required
Defeasance Deposit for the Defeasance Event;
(v) In the event only a portion of the Loan is the
subject of the Defeasance Event, Borrower shall prepare all necessary
documents to amend and restate the Note and issue two substitute notes, one
note having a principal balance equal to the defeased portion of the
original Note (the "Defeased Note") and the other note having a principal
balance equal to the undefeased portion of the Note (the "Undefeased
Note"). The Defeased Note and Undefeased Note shall have identical terms
as the Note except for the principal balance. A Defeased Note cannot be
the subject of any further Defeasance Event;
(vi) Borrower shall execute and deliver a security
agreement, in form and substance reasonably satisfactory to Lender,
creating a first priority lien on the Defeasance Deposit and the U.S.
Obligations purchased with the Defeasance Deposit in accordance with this
provision of this Section 2.4 (the "Security Agreement");
(vii)Borrower shall deliver an opinion of counsel for
Borrower in form reasonably satisfactory to Lender opining, among other
things, that Borrower has legally and validly transferred and assigned the
U.S. Obligations and all obligations, rights and duties under and to the
Note to the Successor Borrower, that Lender has a perfected first priority
security interest in the Defeasance Deposit and the U.S. Obligations
delivered by Borrower, and that any REMIC Trust formed pursuant to a
Securitization will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860D of the Code
as a result of such Defeasance Event;
(viii) Lender shall have received evidence in
writing from the applicable Rating Agencies to the effect that such release
will not result in a downgrading, withdrawal or qualification of the
respective ratings in effect immediately prior to such Defeasance Event for
the Securities issued in connection with the Securitization which are then
outstanding. If required by the applicable Rating Agencies or Lender, the
Borrower shall also deliver or cause to be delivered a non-consolidation
opinion with respect to the Successor Borrower in form and substance
reasonably satisfactory to Lender and the applicable Rating Agencies;
(ix) Borrower shall deliver an Officer's Certificate
certifying that the requirements set forth in this Section 2.4(b) have been
satisfied;
(x) Borrower shall deliver a certificate of a "big
five" or other nationally recognized public accounting firm reasonably
acceptable to Lender certifying that the U.S. Obligations purchased with
the Defeasance Deposit generate monthly amounts equal to or greater than
the required scheduled Defeasance Payments;
<PAGE>
(xi) Borrower shall, at the reasonable request of
Lender, deliver endorsements to the title insurance policies delivered to
Lender in connection with the Additional Loan and such other certificates,
documents or instruments as Lender may reasonably request; and
(xii)Borrower shall pay all reasonable costs and
expenses of Lender incurred in connection with the Defeasance Event,
including any reasonable costs and expenses associated with a release of
the Lien of the Mortgage as provided in Section 2.5 hereof as well as
reasonable attorneys' fees and expenses.
(c) In connection with each Defeasance Event, Borrower hereby
appoints Lender as its agent and attorney-in-fact for the purpose of using
the Defeasance Deposit to purchase U.S. Obligations which provide payments
on or prior to, but as close as possible to, all successive scheduled
payment dates after the Defeasance Date, such payments to be computed on a
principal balance equal to the Adjusted Release Amount with such payment
being equal to the amount of the corresponding installment of principal and
interest on such principal balance at the interest rate and on the then
remaining amortization schedule set forth herein, in the case of a
Defeasance Event for the entire Loan that is, or remains, undefeased, or
interest and principal payments to be required under the Defeasance Note
relating to the then current Defeasance Event, in the case of a Defeasance
Event for only a portion of the undefeased principal balance of the Loan,
as applicable, and assuming such principal balance is prepaid in full on
the Anticipated Payment Date (the "Scheduled Defeasance Payments").
Borrower, pursuant to the Security Agreement or other appropriate document,
shall authorize and direct that the payments received from the U.S.
Obligations shall be made directly to the Lender (unless otherwise directed
by Lender) and applied to satisfy the obligations of Borrower with respect
to the Loan (whether the Note or the Defeased Note) and the relevant
portion of the Additional Loan under this Section 2.4, if applicable. The
amount of payments received from the U.S. Obligations purchased in
connection with this Section 2.4 on each Payment Date after the Defeasance
Date in excess of the amounts due under the Note and this Agreement on such
Payment Date (the "Additional Payment Stream") shall be credited pro-rata
against the payments then due on the corresponding scheduled payment date
under the Additional Loan. Any portion of the Defeasance Deposit in excess
of the amount necessary to purchase the U.S. Obligations required by this
Section 2.4 and satisfy Borrower's obligations under this Section 2.4 and
Section 2.5 shall be promptly remitted to Borrower.
Section 2.5 Release of Property. Except as set forth in this
Section 2.5, no repayment, prepayment or defeasance of all or any portion
of the Note shall cause, give rise to a right to require, or otherwise
result in, the release of the Liens of the Mortgage or the Second Mortgage
on the Property.
(a) Release upon Defeasance.
(i) If the Borrower has elected to defease the entire
Loan and the requirements of Section 2.4 and this Section 2.5(a) and
(b) have been satisfied, the Property shall be released from the Liens of
the Mortgage and the Second Mortgage and the U.S. Obligations, pledged
pursuant to the Security Agreement or Security Agreements, as applicable,
shall be the sole source of collateral securing the Note; provided,
however, that, no release shall be granted unless, after giving effect to
such release, (A) the Debt Service Coverage Ratio for the Additional
Property then remaining subject to Liens in favor of
<PAGE>
Lender (taking into account the payment of the Additional
Payment Stream) shall be equal to the greater of (1) the Debt Service
Coverage Ratio for the Property and the Additional Property for the twelve
(12) full calendar months immediately preceding the release of the
Property, and (2) the Debt Service Coverage Ratio for the Property and the
Additional Property on the Closing Date, and (B) the LTV for the Additional
Loan remaining after the release of the Property (after subtracting from
the outstanding principal amount of the Additional Loan the principal
amounts of such Additional Loan that will be repaid over time pursuant to
the payment of the Scheduled Defeasance Payments) shall be the lesser of
(1) the combined LTV for the Property and the Additional Property on the
Closing Date and (2) the combined LTV for the Property and the Additional
Property immediately prior to the release.
(ii) In connection with the release of the Liens, the
Borrower shall submit to Lender, not less than thirty (30) days prior to
the Defeasance Date, a release of Liens (and related Loan Documents) for
execution by Lender. Such release shall be in a form appropriate in each
jurisdiction in which the Property is located and satisfactory to Lender in
its reasonable discretion. In addition, Borrower shall provide all other
documentation Lender reasonably requires to be delivered by Borrower in
connection with such release.
(b) Successor Borrower. In connection with any release of
the Liens under Section 2.5(a), Borrower may, or at the request of Lender
shall, establish or designate a successor entity (the "Successor Borrower")
which shall be a single purpose bankruptcy remote entity approved by
Lender, which approval shall not by unreasonably withheld, delayed or
conditioned, and Borrower shall transfer and assign all obligations, rights
and duties under and to the Note or the Defeased Note, as applicable,
together with the pledged U.S. Obligations to such Successor Borrower.
Such Successor Borrower shall assume the obligations under the Note or the
Defeased Note, as applicable, and the Security Agreement and Borrower shall
be relieved of its obligations under such documents. The Borrower shall
pay $1,000 to any such Successor Borrower as consideration for assuming the
obligations under the Note or the Defeased Note, as applicable, and the
Security Agreement. Notwithstanding anything in this Agreement to the
contrary, no other assumption fee shall be payable upon a transfer of the
Note or the Defeased Note, as applicable, in accordance with this Section
2.5, but Borrower shall pay all out-of-pocket costs and expenses reasonably
incurred by Lender, including Lender's attorneys' fees and expenses
incurred in connection therewith.
ARTICLE III
SECURITY; RESERVES AND CASH MANAGEMENT
Section 3.1 Security; Establishment of Funds. The Loan shall
be evidenced by the Note of Borrower, in the original principal amount of
the Loan. The Loan shall be secured by the Mortgage creating a first lien
(subject to Permitted Encumbrances) on the Property, the Assignment of
Leases and Rents and the other Loan Documents. As further security for the
Loan, Borrower agrees to establish the following reserves with Lender, to
be held by Lender as security for the Loan:
(a) Required Repairs Fund. On the date hereof, Borrower
shall deposit with Lender the amount of $17,500.00 (the "Required Repair
Fund") to perform the required repairs set forth on Schedule I annexed
hereto by the deadlines set forth in such Schedule (which deadlines shall
in no event be later than six (6) months from the date hereof);
<PAGE>
(b) Replacement Escrow Fund. Upon the occurrence of a DSCR
Event, Borrower shall deposit with Lender on each Payment Date, (i) four
percent (4%) of gross revenues from the Property for the full month
immediately preceding the month prior to the month during which such
Payment Date occurs (the "Replacement Deposit") for replacements and
repairs of the type required to be made to the Property during the calendar
year (the "Replacement Escrow Fund"), and (ii) until the amount on deposit
in the Replacement Escrow Fund is equal to the amount that would have been
there on deposit in the Replacement Escrow Fund if the Replacement Deposit
had been deposited in the Replacement Escrow Fund on each Payment Date
since the Closing Date (deducting amounts that would have been disbursed
pursuant to the terms hereof for replacements and repairs to the Property)
all amounts remaining after payment of Debt Service and Operating Expenses,
if any (the "Replacement Fund Recoupment Amount"), as determined pursuant
to (A) the Annual Budget approved by Lender in its reasonable discretion
until the first to occur of the Anticipated Payment Date or the amounts due
as the Replacement Fund Recoupment Amount are on deposit in the Replacement
Escrow Fund, or (B) the Approved Annual Budget following the Anticipated
Payment Date. Such computation of gross revenue shall be based upon the
actual gross revenue disclosed by the financial statements delivered to
Lender in connection herewith.
Section 3.2 Pledge and Grant of Security Interest. Borrower
hereby pledges to Lender, and grants a security interest in, any and all
monies now or hereafter deposited in the Funds as additional security for
the payment of the Loan. Borrower shall not, without obtaining the prior
written consent of Lender, further pledge, assign or grant any security
interest in the Funds or permit any lien or encumbrance to attached
thereto, or any levy to be made thereon, or any UCC-1 Financing Statements
(except those naming Lender as the secured party) to be filed with respect
thereto. The Funds shall (a) be held in Lender's name and may be
commingled with Lender's own funds at financial institutions selected by
Lender in its sole discretion, and (b) bear interest at available money
market rates. Any interest earned on the Funds shall be disbursed or
applied in the same manner and subject to the same terms and conditions as
the Funds. All earnings on the Funds shall be added to and become part of
the Funds and shall be the benefit of Borrower, subject to Lender's rights
pursuant to this Agreement. Lender shall not be responsible for any losses
resulting from the investment of the Funds or for obtaining any specific
level or percentage of earning on the Funds. Borrower shall be liable for
any income taxes due on the earnings from the Funds. Upon the occurrence
of an Event of Default, Lender may apply any sums then present in the Funds
to the payment of the Loan in any order in its sole discretion. Until
expended or applied as above provided, the Funds shall constitute
additional security for the Loan.
Section 3.3 Disbursement of Funds. After the occurrence of the
Anticipated Payment Date, Lender may reasonably reassess its estimate of
the amount necessary for the Funds from time to time and may adjust the
monthly amounts required to be deposited into the Funds upon thirty (30)
days notice to Borrower. Lender shall make disbursements from the Funds as
requested by Borrower, and approved by Lender in its sole discretion, no
more often than twice a month in increments of not less than $5,000.00 upon
delivery by Borrower of a draw request in a form reasonably acceptable to
Lender accompanied by copies of paid invoices for the amounts requested;
provided, however, that with respect to any unpaid invoice in an amount
exceeding $25,000 Lender shall, at the request of Borrower, issue a joint
check and provided further that, it shall be a condition to the next
requested disbursement that Borrower provide Lender with paid copies of
such unpaid invoices for which Lender has made disbursements. If required
by Lender, lien waivers and releases from all parties furnishing materials
and/or services in connection with the requested payment. Lender may, in
its reasonable discretion, require an inspection of the Property prior to
making a monthly disbursement in order to verify completion of replacements
<PAGE>
and repairs for which reimbursement is sought, which inspection shall be at
the expense of Borrower unless the replacement(s) and/or repair(s) for
which reimbursement is sought is non-structural and in the aggregate is in
an amount less than $50,000. Lender shall have no obligation to release
any of the Funds while any Event of Default then exists. All reasonable
costs and expenses incurred by Lender in the disbursement of any of the
Funds shall be paid by Borrower promptly upon demand.
Section 3.4 Intentionally Deleted.
Section 3.5 Cash Management Account.
(a) Borrower shall establish and maintain a segregated
Eligible Account (the "Cash Management Account") which Cash Management
Account shall be subject to the Cash Management Agreement. The Cash
Management Account shall be entitled "General Electric Capital Corporation,
as Lender to the LaSalle Borrower - Cash Management Account"; provided,
however, that, if the Loan is transferred or sold, the name of the Cash
Management Account shall be changed at the request of Lender to reflect the
legal name of Lender's successor. Borrower shall deposit, and shall direct
the Operating Lessee to deposit all Operating Lease Rent directly into the
Cash Management Account. Borrower shall deposit all amounts received by
Borrower constituting Rents into the Cash Management Account promptly upon
receipt. Borrower hereby grants to Lender a first priority security
interest in the Cash Management Account and all deposits at any time
contained therein and the proceeds thereof and will take all actions
necessary to maintain in favor of Lender a perfected first priority
security interest in the Cash Management Account, including, without
limitation, executing and filing UCC-1 Financing Statements and
continuations thereof. Borrower will not in any way alter or modify the
Cash Management Account and will notify Lender of the account number
thereof.
(b) Provided no Event of Default shall have occurred and be
continuing, following the occurrence and during the continuance of a
Trigger Event, on the first day of each calendar month (or, if such day is
not a Business Day, on the immediately preceding Business Day) all funds on
deposit in the Cash Management Account shall be applied by Lender to the
payment of the following items in the order indicated:
(i) First, for payment of Ground Rent to become due on
the first day of the next calendar month;
(ii) Second, payments to the Tax and Insurance Escrow
Fund in accordance with the terms and conditions of Section 5.4 hereof;
(iii)Third, payment of the Monthly Debt Service Payment
Amount, applied first to the payment of accrued and unpaid interest
computed at the Contract Rate with the remainder applied to the reduction
of the outstanding principal balance of the Note;
(iv) Fourth, payments to the Replacement Escrow Fund in
accordance with the terms and conditions hereof;
(v) Fifth, payment to Lender of any other amounts then
due and payable under the Loan Documents (other than Accrued Interest);
<PAGE>
(vi) Sixth, payment to Lender of any escrows, principal
or interest (other than "Accrued Interest" (as defined in the Additional
Loan Documents)) amounts then due and payable in connection with the
Additional Loan; provided, however, that no payments shall be applied in
accordance with this clause (vi) until Lender has reasonably determined
that there are not sufficient funds on deposit in the Cash Management
Account to pay the amounts due and payable with respect to such escrows,
principal and interest;
(vii)Seventh, on or after the Anticipated Payment Date,
payments for monthly Cash Expenses incurred in accordance with the related
Approved Annual Budget pursuant to a written request for payment submitted
by Borrower to Lender specifying the individual Cash Expenses in a form
reasonably acceptable to Lender;
(viii) Eighth, on or after the Anticipated Payment
Date, payments for Extraordinary Expenses approved by Lender, if any, which
approval shall not be unreasonably withheld, delayed or conditioned;
(ix) Ninth, payments to the Replacement Escrow Fund
until the Replacement Fund Recoupment Amount is on deposit therein.
(x) Tenth, on or after the Anticipated Payment Date,
payments to Lender in reduction of the outstanding principal balance of the
Loan;
(xi) Eleventh, on or after the Anticipated Payment Date,
payments to Lender for Accrued Interest;
(xii)Twelfth, payments to Lender of any additional
amounts then due and payable in connection with the Additional Loan; and
(xiii) Lastly, payment of any excess amounts to
Borrower.
(c) The insufficiency of funds on deposit in the Cash
Management Account shall not absolve Borrower of the obligation to make any
payments, as and when due pursuant to this Agreement and the other Loan
Documents, and such obligations shall be separate and independent, and not
conditioned on any event or circumstance whatsoever.
(d) All funds on deposit in the Cash Management Account
following the occurrence of an Event of Default may be applied by Lender in
such order and priority as Lender shall determine.
Section 3.6 Payments Received Under the Cash Management
Agreement. Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents, and provided no Event of Default has
occurred and is continuing, following the occurrence of a Trigger Event,
Borrower's obligations with respect to the monthly payment of principal and
interest and amounts due for the Tax and Insurance Escrow Fund, Required
Repair Fund, Replacement Escrow Fund, and any other payment reserves
established pursuant to this Agreement or any other Loan Document shall be
deemed satisfied to the extent sufficient amounts are deposited in the Cash
Management Account established pursuant to the Cash Management Agreement to
satisfy all such obligations on the dates each such payment is required,
regardless of whether any of such amounts are so applied by Lender.
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Closing Conditions. The obligation of Lender to
make the Loan hereunder and/or the Additional Loan is subject to the
fulfillment by Borrower or waiver by Lender of the following conditions
precedent no later than the Closing Date:
(a) Representations and Warranties; Compliance with
Conditions. The representations and warranties of Borrower contained in
this Agreement and the other Loan Documents shall be true and correct in
all material respects on and as of the Closing Date with the same effect as
if made on and as of such date, and no Event of Default shall have occurred
and be continuing as of the Closing Date; and Borrower shall be in
compliance in all material respects with all terms and conditions set forth
in this Agreement and in each other Loan Document on its part to be
observed or performed as of the Closing Date.
(b) Loan Agreement and Note. Lender shall have received a
copy of this Agreement and the Note, in each case, duly executed and
delivered on behalf of Borrower.
(c) Delivery of Loan Documents; Title Insurance; Reports;
Leases.
(i) Mortgage, Assignment of Leases, Assignments of
Agreements. Lender shall have received from Borrower fully executed and
acknowledged counterparts of the Mortgage, the Second Mortgage and the
Assignment of Leases and Rents relating to the Property and evidence that
counterparts of the Mortgage, the Second Mortgage and Assignment of Leases
and Rents have been delivered to the title company for recording, in the
reasonable judgment of Lender, so as to effectively create upon such
recording a valid and enforceable Lien upon the Property, of the requisite
priority, in favor of Lender (or such other trustee as may be required or
desired under local law), subject only to the Permitted Encumbrances and
such other Liens as are permitted pursuant to the Loan Documents. Lender
shall have also received from Borrower fully executed counterparts of the
other Loan Documents.
(ii) Title Insurance. Lender shall have received title
insurance policies (or marked and signed commitments to issue such title
insurance policies) issued by a title company reasonably acceptable to
Lender and dated as of the Closing Date. Such title insurance policies
shall (A) provide coverage in amounts reasonably satisfactory to Lender,
(B) insure Lender that the Mortgage creates a valid lien on the Property
encumbered thereby of the requisite priority, free and clear of all
exceptions from coverage other than Permitted Encumbrances and standard
exceptions and exclusions from coverage (as modified by the terms of any
endorsements), (C) contain such endorsements and affirmative coverages as
Lender may reasonably request, and (D) name Lender as the insured. The
title insurance policies shall be assignable. Lender also shall have
received evidence that all premiums in respect of such title insurance
policies have been paid.
<PAGE>
(iii)Survey. Lender shall have received a current title
survey for the Property, certified to the title company and Lender and
their successors and assigns, in form and content reasonably satisfactory
to Lender and prepared by a professional and properly licensed land
surveyor reasonably satisfactory to Lender in accordance the 1992 Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys. The survey
should meet the classification of an "Urban Survey" and the following
additional items from the list of "Optional Survey Responsibilities and
Specifications" (Table A) should be added to each survey: 2, 3, 4, 6, 7,
8, 9, 10, 11 and 13. Such survey shall reflect the same legal description
contained in the title insurance policy relating to the Property referred
to in clause (ii) above and shall include, among other things, a metes and
bounds description of the real property comprising part of the Property
reasonably satisfactory to Lender. The surveyor's seal shall be affixed to
each survey and the surveyor shall provide a certification for each survey
in form and substance reasonably acceptable to Lender.
(iv) Insurance. Lender shall have received valid
certificates of insurance for the policies of insurance required hereunder,
reasonably satisfactory to Lender, and evidence of the payment of all
premiums payable for the existing policy period.
(v) Environmental Reports. Lender shall have received
an environmental report in respect of the Property, which environmental
report shall be satisfactory to Lender.
(vi) Zoning. Lender shall have received, at Lender's
option, (i) letters or other evidence with respect to the Property from the
appropriate municipal authorities (or other Persons) concerning applicable
zoning and building laws, (ii) an ALTA 3.1 zoning endorsement for the
applicable title insurance policy, or (iii) a zoning opinion letter, in
substance reasonably satisfactory to Lender.
(vii)Encumbrances. Borrower shall have taken or caused
to be taken such actions in such a manner so that Lender has a valid and
perfected Lien of the requisite priority as of the Closing Date with
respect to the Mortgage and the Second Mortgage, subject only to applicable
Permitted Encumbrances and such other Liens as are permitted pursuant to
the Loan Documents, and Lender shall have received reasonably satisfactory
evidence thereof.
(d) Related Documents. Each additional document not
specifically referenced herein, but relating to the transactions
contemplated herein, shall have been duly authorized, executed and
delivered by all parties thereto and Lender shall have received and
approved certified copies thereof.
(e) Delivery of Organizational Documents. On or before the
Closing Date, Borrower shall deliver or cause to be delivered to Lender (i)
copies certified by Borrower of all organizational documentation related to
Borrower and/or the formation, structure, existence, good standing and/or
qualification to do business, as Lender may reasonably request, including,
without limitation, good standing certificates, qualifications to do
business in the appropriate jurisdictions, resolutions authorizing the
entering into of the Loan and incumbency certificates as may be reasonably
requested by Lender.
<PAGE>
(f) Opinions of Borrower's Counsel. Lender shall have
received opinions of Borrower's counsel (i) with respect to non-
consolidation, and (ii) with respect to due execution, authority,
enforceability of the Loan Documents and such other matters as Lender may
reasonably require, all such opinions in form, scope and substance
reasonably satisfactory to Lender and Lender's counsel.
(g) Completion of Proceedings. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be reasonably satisfactory in form and substance
to Lender, and Lender shall have received all such counterpart originals or
certified copies of such documents as Lender may reasonably request.
(h) Payments. All payments, deposits or escrows required to
be made or established by Borrower under this Agreement, the Note and the
other Loan Documents on or before the Closing Date shall have been paid.
(i) Intentionally Deleted.
(j) Ground Lease Estoppel. Lender shall have received an
executed estoppel from the Ground Lessor which shall be in form and
substance reasonably satisfactory to Lender.
(k) Budgets. Borrower shall have delivered, and Lender shall
have approved, the Annual Budget for the current calendar year.
(l) Basic Carrying Costs. Borrower shall have paid all Basic
Carrying Costs relating to the Property which are (i) in arrears, (ii) then
due and payable, and (iii) not being contested pursuant to the terms and
conditions of this Agreement.
(m) Transaction Costs. Borrower shall have paid or
reimbursed Lender for all title insurance premiums and recording and filing
fees incurred in connection with the origination of the Loan.
(n) Material Adverse Change. There shall have been no
material adverse change in the financial condition or business condition of
Borrower, Operating Lessee, or the Property or the Additional Property
since the date of the most recent financial statements delivered to Lender.
The income and expenses of the Property and the Additional Property, the
Operating Leases thereof, and all other features of the transaction shall
be as represented to Lender without material adverse change. Neither
Borrower nor Operating Lessee shall be the subject of any bankruptcy,
reorganization, or insolvency proceeding.
(o) Leases. Lender shall have received copies of all tenant
Leases, certified copies of any tenant Leases as requested by Lender and
certified copies of all ground Leases affecting the Property. Lender shall
have received a current certified rent roll of the Property, reasonably
satisfactory in form and substance to Lender.
(p) Subordination and Attornment. Lender shall have received
a Subordination Agreement with respect to the Operating Lease.
(q) Tax Lot. Lender shall have received evidence that the
Property constitutes a separate tax lot, which evidence shall be reasonably
satisfactory in form and substance to Lender.
(r) Physical Conditions Reports. Lender shall have received
a Physical Conditions Report with respect to the Property, which report
shall be reasonably satisfactory in form and substance to Lender.
(s) Management Agreement. Lender shall have received a
certified copy of the Management Agreement with respect to the Property
which shall be reasonably satisfactory in form and substance to Lender.
<PAGE>
(t) Appraisal. Lender shall have received an appraisal of
the Property, which shall be reasonably satisfactory in form and substance
to Lender.
(u) Financial Statements. Lender shall have received a
balance sheet with respect to the Property for the two most recent calendar
years and statements of income and statements of cash flows with respect to
the Property for the three most recent calendar years.
(v) Operating Lease. Lender shall have received a certified
copy of the Operating Lease between Borrower and the Operating Lessee with
respect to the Property, which shall be reasonably satisfactory in form and
substance to Lender.
(w) Further Documents. Lender or its counsel shall have
received such other and further approvals, opinions, documents and
information as Lender or its counsel may have reasonably requested and the
form and content of all the Loan Documents.
ARTICLE V
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 5.1 Insurance; Casualty and Condemnation.
(a) Borrower shall obtain and maintain, or cause to be
maintained, insurance for Borrower and the Property providing at least the
following coverages:
(i) comprehensive all risk insurance on the
Improvements and the Personalty, including contingent liability from
Operation of Building Laws, Demolition Costs and Increased Cost of
Construction Endorsements, in each case (A) in an amount equal to one
hundred percent (100%) of the "Full Replacement Cost," which for purposes
of this Agreement shall mean actual replacement value (exclusive of costs
of excavations, foundations, underground utilities and footings) with a
waiver of depreciation, but the amount shall in no event be less than the
outstanding principal balance of the Loan; (B) containing an agreed amount
endorsement with respect to the Improvements and Personalty waiving all co-
insurance provisions; (C) providing for no deductible in excess of Ten
Thousand and No/100 Dollars ($10,000) for all such insurance coverage; and
(D) containing an "Ordinance or Law Coverage" or "Enforcement" endorsement
if any of the Improvements or the use of the Property shall at any time
constitute legal non-conforming structures or uses. In addition, Borrower
shall obtain: (y) if any portion of the Improvements is currently or at any
time in the future located in a federally designated "special flood hazard
area", flood hazard insurance in an amount equal to the lesser of (1) the
outstanding principal balance of the Note or (2) the maximum amount of such
insurance available under the National Flood Insurance Act of 1968, the
Flood Disaster Protection Act of 1973 or the National Flood Insurance
Reform Act of 1994, as each may be amended or such greater amount as Lender
shall require; and (z) earthquake insurance in amounts and in form and
substance reasonably satisfactory to Lender in the event the Property is
located in an area with a high degree of seismic activity, provided that
the insurance pursuant to clauses (y) and (z) hereof shall be on terms
consistent with the comprehensive all risk insurance policy required under
this subsection (i);
<PAGE>
(ii) commercial general liability insurance against
claims for personal injury, bodily injury, death or property damage
occurring upon, in or about the Property, such insurance (A) to be on the
so-called "occurrence" form with a combined limit of not less than Two
Million and No/100 Dollars ($2,000,000) in the aggregate and One Million
and No/100 Dollars ($1,000,000) per occurrence (and, if on a blanket
policy, containing an "Aggregate Per Location" endorsement); (B) to
continue at not less than the aforesaid limit until reasonably required to
be changed by Lender in writing by reason of changed economic conditions
making such protection inadequate; and (C) to cover at least the following
hazards: (1) premises and operations; (2) products and completed operations
on an "if any" basis; (3) independent contractors; (4) blanket contractual
liability for all legal contracts; and (5) contractual liability covering
the indemnities contained in the Mortgage to the extent the same is
available;
(iii)business income insurance (A) with loss payable to
Lender; (B) covering all risks required to be covered by the insurance
provided for in subsection (i) above; (C) containing an extended period of
indemnity endorsement which provides that after the physical loss to the
Improvements and Personalty has been repaired, the continued loss of income
will be insured until such income either returns to the same level it was
at prior to the loss, or the expiration of twelve (12) months from the date
that the Property is repaired or replaced and operations are resumed,
whichever first occurs, and notwithstanding that the policy may expire
prior to the end of such period; (D) in an amount equal to one hundred
percent (100%) of the projected gross operating profit of Borrower plus the
management fee due under the Management Agreement for a period of twelve
(12) months from the date that the Property is repaired or replaced and
operations are resumed; and (E) providing for "extra expense" coverage in
an amount satisfactory to Lender. The amount of such business income
insurance shall be determined prior to the date hereof and at least once
each year thereafter based on Borrower's reasonable estimate of the gross
operating profit of Borrower plus the management fee due under the
Management Agreement for the succeeding twelve (12) month period. Subject
to Operating Lessee's right to receive any portion of the business income
insurance pursuant to the terms of the Operating Lease, all proceeds
payable to Lender pursuant to this subsection, including, at a minimum the
amounts representing Operating Lease Rent, shall be held by Lender and
shall be applied to the obligations secured by the Loan Documents from time
to time due and payable hereunder and under the Note; provided, however,
that nothing herein contained shall be deemed to relieve Borrower of its
obligations to pay the obligations secured by the Loan Documents on the
respective dates of payment provided for in the Note and the other Loan
Documents except to the extent such amounts are actually paid out of the
proceeds of such business income insurance;
(iv) at all times during which structural construction,
repairs or alterations are being made with respect to the Improvements, and
only if the Property coverage form does not otherwise apply, (A) owner's
contingent or protective liability insurance covering claims not covered by
or under the terms or provisions of the above mentioned commercial general
liability insurance policy; and (B) the insurance provided for in
subsection (i) above written in a so-called builder's risk completed value
form (1) on a non-reporting basis, (2) against all risks insured against
pursuant to subsection (i) above, (3) including permission to occupy the
Property, and (4) with an agreed amount endorsement waiving co-insurance
provisions;
<PAGE>
(v) workers' compensation, subject to the statutory
limits of the state in which the Property is located, and employer's
liability insurance with a limit of at least One Million and No/100 Dollars
($1,000,000) per accident and per disease per employee, and One Million and
No/100 Dollars ($1,000,000) for disease aggregate in respect of any work or
operations on or about the Property, or in connection with the Property or
its operation (if applicable);
(vi) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by Lender on terms
consistent with the commercial property insurance policy required under
subsection (i) above;
(vii)umbrella liability insurance in an amount not less
than Fifty Million and No/100 Dollars ($50,000,000) per occurrence on terms
consistent with the commercial general liability insurance policy required
under subsection (ii) above;
(viii) motor vehicle liability coverage for all
owned and non-owned vehicles, including rented and leased vehicles
containing minimum limits per occurrence, of One Million and No/100 Dollars
($1,000,000);
(ix) so-called "dramshop" insurance or other liability
insurance required in connection with the sale of alcoholic beverages;
(x) insurance against employee dishonesty in an amount
not less than one (1) month of gross revenue from the Property with a
deductible not greater than Ten Thousand and No/100 Dollars ($10,000); and
(xi) upon sixty (60) days' written notice, such other
reasonable insurance and in such reasonable amounts as Lender from time to
time may reasonably request against such other insurable hazards which at
the time are commonly insured against for property similar to the Property
located in or around the region in which the Property is located.
(b) All insurance provided for in Section 5.1(a) shall be
obtained under valid and enforceable policies (collectively, the "Policies"
or in the singular, the "Policy"), and shall be subject to the reasonable
approval of Lender as to insurance companies, amounts, deductibles, loss
payees and insureds. The Policies shall be issued by financially sound and
responsible insurance companies authorized to do business in the state in
which the Property is located with a rating of "A-X" or better as
established by Best's Rating Guide and having a claims paying ability
rating of "AA" or better by at least two (2) of the Rating Agencies (one of
which shall be (i) Standard & Poor's if Standard & Poor's is rating the
Securities issued in the Securitization of which this Loan is a part, and
(ii) Moody's if Moody's is rating the Securities issued in the
Securitization of which this Loan is a part). The Policies described in
Section 5.1 (with the exception of Section 5.1(ii)) shall designate Lender
as loss payee. Not less than ten (10) days prior to the expiration dates
of the Policies theretofore furnished to Lender, certificates of insurance
evidencing the Policies accompanied by evidence satisfactory to Lender of
payment of the premiums due thereunder (the "Insurance Premiums"), shall be
delivered by Borrower to Lender.
(c) Borrower shall deliver to Lender certificates of
insurance for blanket Policies delivered in connection with the Loan that
specify and set forth the declared replacement cost value and the declared
business income amount for the Property.
<PAGE>
(d) All Policies of insurance provided for or contemplated by
Section 5.1(a), except for the Policy referenced in Section 5.1(a)(v),
shall name Borrower as the insured and, if permitted by applicable law,
Lender as the additional insured, as its interests may appear, and in the
case of property damage, boiler and machinery, flood and earthquake
insurance, shall contain a so-called New York standard non-contributing
mortgagee clause in favor of Lender providing that the loss thereunder
shall be payable to Lender.
(e) All Policies of insurance provided for in Section 5.1(a)
shall contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting
for Borrower, or of any tenant or other occupant, or failure to comply with
the provisions of any Policy, which might otherwise result in a forfeiture
of the insurance or any part thereof, shall in any way affect the validity
or enforceability of the insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other
than to increase the coverage provided thereby) or canceled without at
least (A) ten (10) days' written notice to Lender and any other party named
therein an additional insured in the case of non-payment of Insurance
Premiums, and (B) in each other instance, thirty (30) days' written notice
to Lender and any other party named therein as an additional insured;
(iii)each Policy shall provide that the issuers thereof
shall give written notice to Lender if the Policy has not been renewed
fifteen (15) days prior to its expiration; and
(iv) Lender shall not be liable for any Insurance
Premiums thereon or subject to any assessments thereunder.
(f) If at any time Lender is not in receipt of written
evidence that all insurance required hereunder is in full force and effect,
Lender shall have the right, upon five (5) days notice to Borrower, to take
such action as Lender reasonably deems necessary to protect its interest in
the Property, including, without limitation, the obtaining of such
insurance coverage as Lender in its reasonable discretion deems appropriate
and all premiums incurred by Lender in connection with such action or in
obtaining such insurance and keeping it in effect shall be paid by Borrower
to Lender upon demand and until paid shall be secured by the Mortgage and
shall bear interest at the Default Rate.
(g) If the Property shall be damaged or destroyed, in whole
or in part, by fire or other casualty, Borrower shall give prompt notice of
such damage to Lender and shall promptly commence and diligently prosecute
the completion of the Restoration of the Property and otherwise in
accordance with Section 5.3. Borrower shall pay all costs of such
Restoration whether or not such costs are covered by insurance. Lender
may, but shall not be obligated to make proof of loss if not made promptly
by Borrower.
(h) In the event of foreclosure of the Mortgage with respect
to the Property, or other transfer of title to the Property in
extinguishment in whole or in part of the Debt all right, title and
interest of Borrower in and to the Policies that are not blanket Policies
then in force concerning the Property and all proceeds payable thereunder
shall thereupon vest in the purchaser at such foreclosure or Lender or
other transferee in the event of such other transfer of title.
<PAGE>
Section 5.2 Condemnation. Borrower shall promptly give Lender
notice of the actual or threatened commencement of any condemnation or
eminent domain proceeding (a "Condemnation") affecting the Property and
shall deliver to Lender copies of any and all papers served in connection
with such proceedings. Lender may participate in any such proceedings and
Borrower shall deliver to Lender all instruments required to permit
participation in such proceedings. Borrower shall, at its expense,
diligently prosecute any such proceedings, and shall consult with Lender,
its attorneys and experts, and cooperate with them in the carrying on or
defense of any such proceedings. Lender is hereby irrevocably appointed as
Borrower's attorney-in-fact, coupled with an interest, with exclusive power
to collect and receive any Award and, from and after an Event of Default,
to make any compromise or settlement in connection with any such
Condemnation. Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including but not limited to
any transfer made in lieu of or in anticipation of the exercise of such
taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the
Debt shall not be reduced until any award or payment therefor (an "Award")
shall have been actually received and applied by Lender, after the
deduction of reasonable expenses of collection, to the reduction or
discharge of the Debt without premium or penalty. Lender shall not be
limited to the interest paid on the Award by the condemning authority but
shall be entitled to receive out of the award interest at the rate or rates
provided herein or in the Note. If the Property or any portion thereof is
taken by a condemning authority, Borrower shall promptly commence and
diligently prosecute the Restoration of the Property and otherwise comply
with the provisions of Section 5.3. If the Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of the Award,
Lender shall have the right, whether or not a deficiency judgment on the
Note shall have been sought, recovered or denied, to receive the Award, or
a portion thereof sufficient to pay the Debt.
Section 5.3 Restoration. The following provisions shall apply
in connection with the Restoration of the Property:
(a) If the Net Proceeds shall be less than Three Hundred
Thousand and No/100 Dollars ($300,000) and the costs of completing the
Restoration shall be less than Three Hundred Thousand and No/100 Dollars
($300,000), the Net Proceeds will be disbursed by Lender to Borrower upon
receipt, provided that all of the conditions set forth in Section 5.3(b)(i)
are met and Borrower delivers to Lender a written undertaking to
expeditiously commence and to satisfactorily complete with due diligence
the Restoration in accordance with the terms of this Agreement.
(b) If the Net Proceeds are equal to or greater than Three
Hundred Thousand and No/100 Dollars ($300,000) or the costs of completing
the Restoration is equal to or greater than Three Hundred Thousand and
No/100 Dollars ($300,000) Lender shall make the Net Proceeds available for
the Restoration in accordance with the provisions of this Section 5.3. The
term "Net Proceeds" for purposes of this Section 5.3 shall mean: (i) the
net amount of all insurance proceeds received by Lender pursuant to Section
5.1 (a)(i), (iv), (vi) and (vii) as a result of such damage or destruction,
after deduction of its reasonable costs and expenses (including, but not
limited to, reasonable counsel fees), if any, in collecting same
("Insurance Proceeds"), or (ii) the net amount of the Award, after
deduction of its reasonable costs and expenses (including, but not limited
to, reasonable counsel fees), if any, in collecting same ("Condemnation
Proceeds"), whichever the case may be.
(i) The Net Proceeds shall be made available to
Borrower for Restoration provided that the Net Proceeds are received prior
to the Anticipated Payment Date and each of the following conditions are
met:
<PAGE>
(A) no Event of Default shall have occurred and
be continuing and the Ground Lease shall not have been cancelled or
terminated due to such casualty or Condemnation;
(B) (1) in the event the Net Proceeds are
Insurance Proceeds, less than fifty percent (50%) of the total floor area
of the Improvements of the Property that has been damaged, destroyed or
rendered unusable as a result of such fire or other casualty or (2) in the
event the Net Proceeds are Condemnation Proceeds, less than ten percent
(10%) of the land constituting the Property that is taken, and such land is
located along the perimeter or periphery of the Property, and no portion of
the Improvements is located in such land;
(C) the Operating Lease shall remain in full
force and effect during and after the completion of the Restoration,
notwithstanding the occurrence of any such fire or other casualty or
taking, whichever the case may be;
(D) Borrower shall commence the Restoration as
soon as reasonably practicable (but in no event later than sixty (60) days
after such damage or destruction or taking, whichever the case may be,
occurs) and shall diligently pursue the same to satisfactory completion;
(E) Lender shall be satisfied in its reasonable
discretion that any operating deficits, including all scheduled payments of
principal and interest under the Note, which will be incurred with respect
to the Property as a result of the occurrence of any such fire or other
casualty or taking, whichever the case may be, will be covered out of (1)
the Net Proceeds, (2) the insurance coverage referred to in Section
5.1(a)(iii), if applicable, or (3) by other funds of Borrower;
(F) Lender shall be satisfied in its reasonable
discretion that the Restoration will be completed on or before the earliest
to occur of (1) six (6) months prior to the Anticipated Payment Date, (2)
the earliest date required for such completion under the terms of the
Operating Lease or the Management Agreement, (3) such time as may be
required under applicable zoning law, ordinance, rule or regulation in
order to repair and restore the Property to the condition it was in
immediately prior to such fire or other casualty or to as nearly as
possible the condition it was in immediately prior to such taking, as
applicable or (4) the expiration of the insurance coverage referred to in
Section 5.1(a)(iii);
(G) the Property and the use thereof after the
Restoration will be in compliance with and permitted under all applicable
zoning laws, ordinances, rules and regulations and all necessary operating
or reciprocal easement agreements for the operation and maintenance of the
Property are, or remain, in effect;
(H) the Restoration shall be done and completed
by Borrower in an expeditious and diligent fashion and in compliance with
all applicable governmental laws, rules and regulations (including, without
limitation, all applicable environmental laws);
<PAGE>
(I) such fire or other casualty or taking, as
applicable, does not result in the loss of access to the Property or the
related Improvements;
(J) The projected Debt Service Coverage Ratio for
the Loan, in Lender's reasonable estimation, for the twelve (12) month
period immediately following the Restoration (and stabilization
thereafter), but not including the period commencing with the Casualty or
Condemnation and ending on the last day of stabilization, shall be equal to
the greater of (i) a Debt Service Coverage Ratio of 1.4 to 1.0, and (ii)
the Debt Service Coverage Ratio for the Loan for the twelve (12) full
calendar months immediately preceding the casualty or Condemnation of the
Property; and
(K) Lender shall be satisfied that, upon the
completion of the Restoration, the LTV shall be the lesser of (i) the LTV
on the Closing Date, and (ii) the LTV immediately prior to the casualty or
condemnation, as applicable.
(ii) The Net Proceeds shall be held by Lender in an interest-
bearing account and, until disbursed in accordance with the
provisions of this Section 5.3(b), shall constitute additional security for
the Debt and other obligations under the Loan Documents. The Net Proceeds
shall be disbursed by Lender to, or as directed by, Borrower from time to
time during the course of the Restoration, upon receipt of evidence
reasonably satisfactory to Lender that (A) all materials installed and work
and labor performed (except to the extent that they are to be paid for out
of the requested disbursement) in connection with the Restoration have been
paid for, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or
any other liens or encumbrances of any nature whatsoever on the Property
arising out of the Restoration which have not either been fully bonded to
the satisfaction of Lender and discharged of record or in the alternative
fully insured to the satisfaction of Lender by the title company issuing
the title insurance policy.
(iii)In the event that the Restoration involves
structural elements of the Improvements or the costs of completing the
Restoration shall exceed $300,000, then in each case, all plans and
specifications required in connection with the Restoration shall be subject
to prior review and reasonable acceptance in all respects by Lender and by
an independent consulting engineer selected by Borrower and approved by
Lender in its reasonable discretion (the "Casualty Consultant"), which
approval by Lender, if not granted or denied within fifteen (15) days of
Lender's receipt of a request therefor, together with any supporting
material reasonably requested by Lender or Casualty Consultant, shall be
deemed to be approved by Lender. Lender shall have the use of the plans
and specifications and all permits, licenses and approvals required or
obtained in connection with the Restoration. The identity of the
contractors, subcontractors and materialmen engaged in the Restoration, as
well as the contracts under which they have been engaged, shall be subject
to prior review and acceptance by Lender and the Casualty Consultant. All
out-of-pocket costs and expenses incurred by Lender in connection with
making the Net Proceeds available for the Restoration including, without
limitation, reasonable counsel fees and disbursements and the Casualty
Consultant's reasonable fees, shall be paid by Borrower.
<PAGE>
(iv) In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an amount equal to the costs
actually incurred from time to time for work in place as part of the
Restoration, as certified by the Casualty Consultant, minus the Casualty
Retainage. The term "Casualty Retainage" shall mean an amount equal to ten
percent (10%) of the costs actually incurred for work in place as part of
the Restoration, as certified by the Casualty Consultant, until the
Restoration has been completed. The Casualty Retainage shall in no event,
and notwithstanding anything to the contrary set forth above in this
Section 5.1(b), be less than the amount actually held back by Borrower from
contractors, subcontractors and materialmen engaged in the Restoration.
The Casualty Retainage shall not be released until the Casualty Consultant
certifies to Lender that the Restoration has been completed in accordance
with the provisions of this Section 5.1(b) and that all approvals necessary
for the re-occupancy and use of the Property have been obtained from all
appropriate governmental and quasi-governmental authorities, and Lender
receives evidence reasonably satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the
Casualty Retainage; provided, however, that Lender will release the portion
of the Casualty Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the Restoration as of the date upon
which the Casualty Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of the
contractor's, subcontractor's or materialman's contract, the contractor,
subcontractor or materialman delivers the lien waivers and evidence of
payment in full of all sums due to the contractor, subcontractor or
materialman as may be reasonably requested by Lender or by the title
company issuing the title insurance policy, and Lender receives an
endorsement to the title insurance policy insuring the continued priority
of the lien of the related Mortgage and evidence of payment of any premium
payable for such endorsement. If required by Lender, the release of any
such portion of the Casualty Retainage shall be approved by the surety
company, if any, which has issued a payment or performance bond with
respect to the contractor, subcontractor or materialman.
(v) Lender shall not be obligated to make disbursements
of the Net Proceeds more frequently than twice every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed
balance thereof shall not, in the reasonable opinion of Lender, be
sufficient to pay in full the balance of the costs which are estimated by
the Casualty Consultant to be incurred in connection with the completion of
the Restoration (to restore the Property to the condition prior to the
casualty and not any costs or expenses associated with the betterment of
the Property, which betterment shall be subject to the terms and conditions
of Section 10.12 hereof), Borrower shall cure the deficiency (the "Net
Proceeds Deficiency") by either depositing with Lender an amount equal to
the Net Proceeds Deficiency before any further disbursement of the Net
Proceeds shall be made or delivering to Lender a Letter of Credit in the
amount of the Net Proceeds Deficiency. The Net Proceeds Deficiency shall
be held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this
subsection
<PAGE>
shall constitute additional security for the Debt and Borrower
hereby authorizes Lender to draw upon any Letter of Credit delivered for
the Net Proceeds Deficiency for such purposes.
(vii)The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency deposited with
Lender after the Casualty Consultant certifies to Lender that the
Restoration has been completed in accordance with the provisions of this
Section 5.1(b), and the receipt by Lender of evidence reasonably
satisfactory to Lender that all costs incurred in connection with the
Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Loan Agreement or any of the other Loan
Documents.
(c) All Net Proceeds not required (i) to be made available
for the Restoration or (ii) to be returned to Borrower as excess Net
Proceeds pursuant to Section 5.1.(b)(vii) may be retained and applied by
Lender toward the payment of the Debt, without premium or penalty, whether
or not then due and payable in such order, priority and proportions as
Lender in its sole discretion shall deem proper, or, at the discretion of
Lender, the same may be paid, either in whole or in part, to Borrower for
such purposes as Lender shall designate, in its discretion; provided, that,
in the event that Lender applies any Insurance Proceeds toward the payment
of the Debt in accordance with this Section 5.3(c)(i), Borrower, so long as
no Event of Default shall have occurred and is continuing, shall be
permitted, within the one hundred twenty (120) day period immediately
following such application of Insurance Proceeds to the Debt, to prepay the
entire outstanding amount of the Loan (but not the Additional Loan) without
any prepayment consideration, fee, yield maintenance premium or penalty.
Section 5.4 Impounds.
(a) Borrower shall deposit with Lender, monthly, (a)
one-twelfth (1/12th) of the Taxes that Lender reasonably estimates will be
payable during the next ensuing twelve (12) months in order to accumulate
with Lender sufficient funds to pay all such Taxes at least thirty (30)
days prior to their respective due dates, and (b) one-twelfth of the
Insurance Premiums that Lender estimates will be payable for the renewal of
the coverage afforded by the insurance policies required by Lender upon the
expiration thereof in order to accumulate with Lender sufficient funds to
pay all such Insurance Premiums at least thirty (30) days prior to
expiration (said amounts in (a) and (b) above hereinafter called the "Tax
and Insurance Escrow Fund"). At or before the advance of the Loan,
Borrower shall deposit with Lender a sum of money which together with the
monthly installments will be sufficient to make each of such payments
thirty (30) days prior to the date any delinquency or penalty becomes due
with respect to such payments. Deposits shall be made on the basis of
Lender's reasonable estimate from time to time of the charges for the
current year (after giving effect to any reassessment or, at Lender's
election, on the basis of the charges for the prior year, with adjustments
when the charges are fixed for the then current year). All funds so
deposited shall (a) be held by Lender, (b) be commingled with Lender's
general funds, and (c) earn interest at available money market rates. Any
earnings on such funds shall be added to and be a part of the Tax and
Insurance Escrow Fund and shall be disbursed or applied in the same manner
and subject to the same terms as funds on deposit in the Tax and Insurance
<PAGE>
Escrow Fund. Any such earnings shall be for the benefit of the Borrower,
subject to the Lender's rights pursuant to this Agreement. Lender shall
not be responsible for any losses resulting from the investment of amounts
on deposit in the Tax and Insurance Escrow Fund or for obtaining any
specific level or percentage earnings on such amounts so invested.
Borrower shall be liable for any income taxes due on the earnings for the
amounts on deposit in the Tax and Insurance Escrow Fund. Borrower hereby
grants to Lender a security interest in all funds so deposited with Lender
for the purpose of securing the Loan. While an Event of Default exists,
the funds deposited may be applied in payment of the charges for which such
funds have been deposited, or to the payment of the Loan or any other
charges affecting the security of Lender, as Lender may elect, but no such
application shall be deemed to have been made by operation of law or
otherwise until actually made by Lender. Borrower shall furnish Lender
with bills for the charges for which such deposits are required at least
thirty (30) days prior to the date on which the charges first become
payable; provided, that, in the event that Borrower has not received such
bills at least thirty (30) days prior to the date on which the charges
first become payable, then Borrower shall deliver such bills to Lender
promptly upon the receipt thereof. If at any time the amount on deposit
with Lender, together with amounts to be deposited by Borrower before such
charges are payable, is insufficient to pay such charges, Borrower shall
deposit any deficiency with Lender immediately upon demand. Lender shall
pay such charges when the amount on deposit with Lender is sufficient to
pay such charges and Lender has received a bill for such charges.
(b) In lieu of making the required monthly payments to the
Tax and Insurance Escrow Fund and provided no Event of Default exists,
Borrower has the option to deliver to Lender (i) a cash deposit in an
amount reasonably estimated by Lender to be equal to fifty percent (50%) of
the estimated amount of annual Insurance Premiums and Taxes to be paid
during the calendar year (the "Installment Amount"), which cash deposit
shall be held by Lender as security for the Debt (the "Static Cash
Account") or (ii) a Letter of Credit in an amount reasonably estimated by
Lender to be equal to the Installment Amount (the "T&I Letter of Credit").
In the event that Borrower, after delivering a Static Cash Account or a T&I
Letter of Credit in accordance with this Section 5.4, elects to resume
making monthly payments required under the Tax and Insurance Escrow Fund,
Borrower shall make an initial deposit into such Tax and Insurance Escrow
Fund equal to the amount reasonably estimated by Lender to be the amount
that would have been on deposit in such Tax and Insurance Escrow Fund on
the date thereof if Borrower had not delivered such Static Cash Account or
a T&I Letter of Credit. Borrower shall give Lender thirty (30) days prior
written notice of such election and Borrower shall pay to Lender all of
Lender's reasonable out-of-pocket costs and expenses in connection
therewith. Borrower shall not be entitled to draw from such Static Cash
Account or a T&I Letter of Credit. During the time the appropriate amount
of funds are on deposit in the Static Cash Account or the T&I Letter of
Credit is outstanding, Borrower shall pay all Taxes and Insurance Premiums
as the same become due and payable and shall furnish to Lender evidence of
(i) payment of Taxes reasonably satisfactory to Lender on or prior to the
date when such Taxes are due, and (ii) payment of Insurance Premiums
reasonably satisfactory to Lender at least fifteen (15) days prior to the
date when such Insurance Premiums are due. Borrower shall provide Lender
with written notice of any increases in the Taxes and Insurance Premiums
thirty (30) days prior to the effective date of any such increase
(provided, that, if Borrower has not received notice of such increase at
least thirty (30) days prior to such effective date, then Borrower shall
notify Lender of such increase promptly upon receiving notice of such
increase) and the Static Cash Account or the T&I Letter of Credit, as
applicable, shall be increased to an amount equal to the new Installment
Amount at least ten (10) days prior to such increase.
<PAGE>
Section 5.5 Letters of Credit.
(a) Each Letter of Credit delivered under this Agreement or
any other Loan Document shall be additional security for the payment of the
Debt. Upon the occurrence of an Event of Default, Lender in its sole and
absolute discretion may, but shall not be obligated to, draw upon any
Letter of Credit for payments of any amounts then due and payable under the
Note, this Agreement, the Mortgage or the other Loan Documents.
(b) (1) In addition to any other right Lender may have to
draw upon a Letter of Credit pursuant to the terms and conditions of this
Agreement and the other Loan Documents, Lender shall have the additional
rights to draw in full upon any Letter of Credit: (A) if Lender has not
received at least thirty (30) days prior to the date on which the then
outstanding Letter of Credit is scheduled to expire, a notice from the
issuing bank that it has renewed the applicable Letter of Credit; (B) upon
receipt of notice from the issuing bank that the applicable Letter of
Credit will be terminated; and (C) thirty (30) days after Lender has
received notice and given notice to the Borrower that the bank issuing the
applicable Letter of Credit shall cease to be an Eligible Institution.
(2) In the event that Lender draws upon a Letter of
Credit in accordance with the provisions of subsection 5.5(b)(1) above, any
and all such amounts not otherwise expended by Lender shall be held by
Lender as cash collateral in an interest bearing account established and
maintained by Lender and Lender shall be entitled to draw upon and apply
such proceeds at the time and in the manner provided in this Agreement or
the other Loan Documents for draws upon the applicable Letter of Credit.
(3) Notwithstanding anything to the contrary contained
above, Lender is not obligated to draw on a Letter of Credit upon the
happening of an event specified in this subsection and shall not be liable
for any losses sustained by Borrower due to the insolvency of the bank
issuing a Letter of Credit if Lender has not drawn on the Letter of Credit.
ARTICLE VI
ENVIRONMENTAL MATTERS
Section 6.1 Certain Definitions. As used herein, the following
terms have the meanings indicated:
(a) "Environmental Laws" Any local, state, federal or other
governmental authority, statute, ordinance, code, order, decree, law, rule
or regulation pertaining to or imposing liability or standards of conduct
concerning environmental regulation, contamination or clean-up including,
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, the Resource Conservation and Recovery Act,
as amended, the Emergency Planning and Community Right-to-Know Act of 1986,
as amended, the Hazardous Substances Transportation Act, as amended, the
Solid Waste Disposal Act, as amended, the Clean Water Act, as amended, the
Clean Air Act, as amended, the Toxic Substances Control Act, as amended,
the Safe Drinking Water Act, as amended, the Occupational Safety and Health
Act, as amended, any state superlien and environmental clean-up statutes
and all regulations adopted in respect of the foregoing laws whether
presently in force or coming into being and/or effectiveness hereafter.
<PAGE>
(b) "Hazardous Materials" means (i) petroleum or chemical
products, whether in liquid, solid, or gaseous form, or any fraction or
by-product thereof, (ii) asbestos or asbestos-containing materials,
(iii) polychlorinated biphenyls (pcbs), (iv) radon gas, (v) underground
storage tanks, (vi) any explosive or radioactive substances, (vii) lead or
lead-based paint, or (viii) any other substance, material, waste or mixture
which is or shall be listed, defined, or otherwise determined by any
governmental authority to be hazardous, toxic, dangerous or otherwise
regulated, controlled or giving rise to liability under any Environmental
Laws.
Section 6.2 Representations and Warranties on Environmental
Matters. To Borrower's actual knowledge, except as set forth in the Site
Assessment delivered in connection with the origination of the Loan, (a) no
Hazardous Material is now or was formerly used, stored, generated,
manufactured, installed, treated, discharged, disposed of or otherwise
present at or about the Property or any property adjacent to the Property
(except for cleaning and other products currently used in connection with,
and necessary and appropriate for, the routine maintenance or repair of the
Property or the operation thereof as a hotel in material compliance with
Environmental Laws) and no Hazardous Material was removed or transported
from the Property, except in full compliance with any Environmental Laws,
(b) all permits, licenses, approvals and filings required by Environmental
Laws have been obtained, and the use, operation and condition of the
Property does not, and did not previously, violate any Environmental Laws,
(c) no civil, criminal or administrative action, suit, claim, hearing,
investigation or proceeding has been brought or been threatened (in
writing), nor have any settlements been reached by or with any parties or
any liens imposed in connection with the Property concerning Hazardous
Materials or Environmental Laws; and (d) no underground storage tanks exist
on any part of the Property.
Section 6.3 Covenants on Environmental Matters.
(a) Borrower shall, and shall cause the Operating Lessee and
Manager to, (i) comply in all material respects with applicable
Environmental Laws; (ii) notify Lender immediately upon Borrower's
discovery of any spill, discharge, release or presence of any Hazardous
Material at, upon, under, within, contiguous to or otherwise affecting the
Property which Borrower is required to report, repair or remediate pursuant
to any Environmental Laws; (iii) promptly remove such Hazardous Materials
and remediate the Property in compliance with Environmental Laws; and
(iv) promptly forward to Lender copies of all orders, notices, permits,
applications or other communications and reports in connection with any
spill, discharge, release or the presence of any Hazardous Material or any
other matters relating to the Environmental Laws or any similar laws or
regulations, as they may affect the Property or Borrower.
(b) Borrower shall not cause, shall prohibit any other Person
within the control of Borrower from causing, and shall use prudent,
commercially reasonable efforts to prohibit other Persons (including
tenants) from (i) causing any spill, discharge or release, or the use,
storage, generation, manufacture, installation, or disposal, of any
Hazardous Materials at, upon, under, within or about the Property or the
transportation of any Hazardous Materials to or from the Property (except
for cleaning and other products used in connection with, and necessary and
appropriate for, routine maintenance or repair of the Property or the
operation thereof as a hotel in compliance with Environmental Laws in all
material respects), (ii) installing any underground storage tanks at the
Property, or (iii) conducting any activity that requires a permit or other
authorization under Environmental Laws (other than activities in the
ordinary course of business consistent with the uses at the Property on the
date hereof).
<PAGE>
(c) Borrower shall provide to Lender, at Borrower's expense
promptly upon the written request of Lender from time to time, a Site
Assessment or, if required by Lender, an update to any existing Site
Assessment, to assess the presence or absence of any Hazardous Materials
and the potential costs in connection with abatement, cleanup or removal of
any Hazardous Materials found on, under, at or within the Property.
Borrower shall not be responsible for the cost of such Site Assessment or
update unless Lender's request for a Site Assessment is based on
information provided under Section 6.3(a), a reasonable suspicion of
Hazardous Materials at or near the Property, a breach of representations
under Section 6.2, or an Event of Default, in which case any such Site
Assessment or update shall be at Borrower's expense.
Section 6.4 Allocation of Risks and Indemnity. As between
Borrower, Lender and Indemnitor, all risk of loss associated with non-
compliance with Environmental Laws, or with the presence of any Hazardous
Material at, upon, within, contiguous to or otherwise affecting the
Property, shall lie solely with Borrower and Indemnitor; provided, however,
Borrower shall not be liable under such indemnification to the extent such
loss, liability, damage, claim, cost or expense results solely from
Lender's gross negligence or willful misconduct. Accordingly, Borrower and
Indemnitor shall bear all risks and costs associated with any loss
(including any loss in value attributable to Hazardous Materials), damage
or liability therefrom, including all costs of removal of Hazardous
Materials or other remediation required by Lender or by law. Borrower
shall indemnify, defend and hold Lender and its shareholders, directors,
officers, employees and agents harmless from and against all loss,
liabilities, damages, claims, costs and expenses (including reasonable
costs of defense and consultant fees, investigation and laboratory fees,
court costs, and other litigation expenses) arising out of or associated,
in any way, with (a) the non-compliance with Environmental Laws, or (b) the
existence of Hazardous Materials in, on, or about the Property, (c) any
personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to Hazardous Materials, (d) any lawsuit
brought or threatened, settlement reached, or government order relating to
such Hazardous Materials, (e) a breach of any representation, warranty or
covenant contained in this Article 6, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law, or (f) the imposition of any environmental lien encumbering the
Property; provided, however, Borrower shall not be liable under such
indemnification to the extent such loss, liability, damage, claim, cost or
expense results solely from Lender's gross negligence or willful
misconduct. Borrower's obligations under this Section 6.4 shall arise
whether or not any governmental authority has taken or threatened any
action in connection with the presence of any Hazardous Material, and
whether or not the existence of any such Hazardous Material or potential
liability on account thereof is disclosed in the Site Assessment and shall
continue notwithstanding the repayment of the Loan or any transfer or sale
of any right, title and interest in the Property (by foreclosure, deed in
lieu of foreclosure or otherwise). Any amounts payable to Lender by reason
of the application of this Section 6.4 shall become immediately due and
payable and shall bear interest at the Default Rate from the date loss or
damage is sustained by Lender until paid. The obligations and liabilities
of Borrower under this Section 6.4 shall survive any termination,
satisfaction, assignment, entry of a judgment of foreclosure or delivery of
a deed in lieu of foreclosure.
Section 6.5 No Waiver. Notwithstanding any provision in this
Article 6 or elsewhere in the Loan Documents, or any rights or remedies
granted by the Loan Documents, Lender does not waive and expressly reserves
all rights and benefits now or hereafter accruing to Lender under the
"security interest" or "secured creditor" exception under applicable
Environmental Laws, as the same may be amended. No action taken by Lender
pursuant to the Loan Documents shall be deemed or construed to be a waiver
or relinquishment of any such rights or benefits under the "security
interest exception."
<PAGE>
ARTICLE VII
LEASING MATTERS
Section 7.1 Representations and Warranties on Leases. Borrower
represents and warrants to Lender with respect to the Leases under which
Borrower is the Landlord, if any, that: (a) the rent roll delivered to
Lender is true, complete and correct, and the Leases are valid and in and
full force and effect; (b) the Leases (including amendments) are in
writing, and there are no oral agreements with respect thereto; (c) the
copies of the Leases delivered to Lender are true and complete; (d) neither
the landlord nor any tenant is in material default under any of the Leases;
(e) Borrower has no knowledge of any notice of termination or default with
respect to any Lease; (f) Borrower has not assigned or pledged any of the
Leases, the rents or any interests therein except to Lender; (g) except as
expressly disclosed on Schedule IV attached hereto, no tenant or other
party has an option or right of first refusal or offer, to purchase all or
any portion of the Property; (h) no tenant has the right to terminate its
Lease prior to expiration of the stated term of such Lease; (i) no tenant
has prepaid more than one month's rent in advance (except for bona fide
security deposits not in excess of an amount equal to two month's rent, or
as otherwise expressly provided in such Lease); (j) no tenant under any
Lease has any right or option for additional space; (k) all existing Leases
are subordinate to the Mortgage either pursuant to their terms or a
recorded subordination agreement; and (l) there are no long term subleases
in effect other than subleases of space for ancillary hotel uses such as
gift shops.
Section 7.2 Approval Rights. All material Leases under which
Borrower is the Landlord or under which the tenant otherwise will be
granted non-disturbance by the Borrower, and other rental arrangements
shall in all respects be approved by Lender, which approval (a) shall not
be unreasonably withheld, delayed or conditioned, and (b) shall be deemed
granted in the event that Lender does not respond within twenty (20) days
after receiving a request for such approval together with a copy of such
Lease and all other supporting materials reasonably requested by Lender.
Section 7.3 Covenants. Borrower (a) shall perform the
obligations which Borrower is required to perform under the Leases;
(b) shall enforce, in a commercially reasonable manner, the obligations to
be performed by the tenants; (c) shall promptly furnish to Lender any
notice of default or termination received by Borrower from any tenant, and
any notice of default or termination given by Borrower to any tenant;
(d) shall not collect any rents for more than thirty (30) days in advance
of the time when the same shall become due, except for bona fide security
deposits not in excess of an amount equal to two months rent, or as
otherwise expressly provided in such Lease; (e) shall not enter into any
new ground Lease or master Lease of any part of the Property; (f) shall not
further assign or encumber any Lease; (g) shall not, except with Lender's
prior written consent (i) cancel or accept surrender or termination of any
Lease or (ii) amend or modify any of the material terms of any Lease, which
consent (A) shall not be unreasonably withheld, delayed or conditioned, and
(B) shall be deemed granted in the event that Lender does not respond
within twenty (20) days after receiving a request for such consent together
with all supporting materials reasonably requested by Lender. Any action
in violation of clauses (e), (f) and (g) of this Section 7.3 shall be void
at the election of Lender.
Section 7.4 Tenant Estoppels. At Lender's request, Borrower
shall use commercially reasonable efforts to obtain and furnish to Lender,
written estoppels in form and substance reasonably satisfactory to Lender,
executed by tenants under Leases and the Operating Lessee under the
Operating Lease at the Property and confirming the term, rent, and other
provisions and matters relating to the Leases.
<PAGE>
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants to Lender that:
Section 8.1 Organization, Power and Authority. Borrower and
the Operating Lessee (a) are duly organized, validly existing and in good
standing under the laws of the state of their formation or existence, (b)
are in compliance with all material legal requirements applicable to doing
business in the State, and (c) have the necessary governmental approvals to
own and operate the Property and conduct the business now conducted or to
be conducted thereon. Each Borrower Party (a) is duly organized, validly
existing and in good standing under the laws of the state of its formation
or existence and (b) to the extent necessary, is in compliance with all
legal requirements applicable to doing business in the State. Borrower has
the full power, authority and right to execute, deliver and perform its
obligations pursuant to this Loan Agreement and the other Loan Documents,
and to mortgage the Property pursuant to the terms of the Mortgage and to
keep and observe all of the terms of this Loan Agreement and the other Loan
Documents on Borrower's part to be performed.
Section 8.2 Validity of Loan Documents. The execution,
delivery and performance by Borrower and each Borrower Party of the Loan
Documents: (a) are duly authorized and do not require the consent or
approval of any other party or governmental authority which has not been
obtained; and (b) will not violate any law or result in the imposition of
any lien, charge or encumbrance upon the assets of any such party, except
as contemplated by the Loan Documents. The Loan Documents constitute the
legal, valid and binding obligations of Borrower and each Borrower Party,
enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, or similar laws generally affecting the
enforcement of creditors' rights and general principles of equity.
Section 8.3 No Conflicts. The execution, delivery and
performance of this Agreement and the other Loan Documents by Borrower will
not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance (other than pursuant to the Loan
Documents) upon any of the property or assets of Borrower pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement,
partnership agreement or other agreement or instrument to which Borrower is
a party or by which any of Borrower's property or assets is subject, nor
will such action result in any violation of the provisions of any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over Borrower or any of Borrower's properties or
assets, and any consent, approval, authorization, order, registration or
qualification of or with any court or any such regulatory authority or
other governmental agency or body required for the execution, delivery and
performance by Borrower of this Agreement or any other Loan Documents has
been obtained and is in full force and effect.
Section 8.4 Liabilities; Litigation.
(a) All financial data, including, without limitation, the
statements of cash flow and income and operating expense, that have been
delivered by Borrower and each Borrower Party are (i) true, complete and
correct in all material respects, (ii) accurately represent the financial
condition of the Property as of the date of such reports, and (iii) to the
extent prepared or audited by an independent certified public accounting
firm, have been prepared in accordance with generally accepted accounting
principals throughout the periods covered, except as disclosed therein.
Borrower does not have any contingent liabilities, liabilities for taxes
due and payable, unusual forward or long-term commitments or unrealized or
<PAGE>
anticipated losses from any unfavorable commitments that are known to
Borrower and reasonably likely to have a materially adverse effect on the
Property or the operation thereof as a hotel, except as referred to or
reflected in said financial statements. Since the date of the financial
statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower from that set forth in said
financial statements. There is no litigation, administrative proceeding,
investigation or other legal action (including any proceeding under any
state or federal bankruptcy or insolvency law) pending or, to the knowledge
of Borrower, threatened, against the Property, Borrower or any Borrower
Party which if adversely determined could have a material adverse effect on
such party, the Property or the Loan.
(b) Neither Borrower nor any Borrower Party is contemplating
either the filing of a petition by it under state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets
or property, and neither Borrower nor any Borrower Party has knowledge of
any Person contemplating the filing of any such petition against it.
Section 8.5 Taxes and Assessments. There are no pending or, to
Borrower's best knowledge, proposed, special or other assessments for
public improvements or otherwise affecting the Property, nor are there any
contemplated improvements to the Property that may result in such special
or other assessments.
Section 8.6 Other Agreements; Defaults. Neither Borrower nor
any Borrower Party is a party to any agreement or instrument or subject to
any court order, injunction, permit, or restriction which might materially
and adversely affect the Property or the business, operations, or condition
(financial or otherwise) of Borrower or any Borrower Party. Neither
Borrower nor any Borrower Party is in violation of any agreement which
violation would have a material and adverse effect on the Property,
Borrower, or any Borrower Party or Borrower's or any Borrower Party's
business, properties, or assets, operations or condition, financial or
otherwise.
Section 8.7 Title. Borrower has good, marketable and insurable
title to the Property, free and clear of all Liens whatsoever except the
Permitted Encumbrances, such other Liens as are permitted pursuant to the
Loan Documents and the Liens created by the Loan Documents. The Mortgage
and the Second Mortgage create (i) a valid, perfected lien on the Property,
subject only to Permitted Encumbrances and the Liens created by the Loan
Documents and (ii) perfected security interests in and to, and perfected
collateral assignments of, all personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to any
applicable Permitted Encumbrances, such other Liens as are permitted
pursuant to the Loan Documents and the Liens created by the Loan Documents.
There are no claims for payment for work, labor or materials affecting the
Property which are or may become a lien prior to, or of equal priority
with, the liens created by the Loan Documents. None of the Permitted
Encumbrances, individually or in the aggregate, materially interfere with
the benefits of the security intended to be provided by the Mortgage, the
Second Mortgage and this Loan Agreement, materially and adversely affect
the value of the Property, impair the use or operations of the Property or
impair Borrower's ability to pay its obligations in a timely manner.
<PAGE>
Section 8.8 Compliance with Law.
(a) Borrower has, or pursuant to the Operating Lease, has
caused the Operating Lessee to have all requisite licenses, permits,
franchises, qualifications, certificates of occupancy or other governmental
authorizations to own, Lease and operate the Property and carry on its
business, and the Property is in compliance with all applicable legal
requirements and, to the best of Borrower's knowledge, except as expressly
set forth in the Property Condition Report, is free of structural defects,
and all building systems contained therein, to the best of Borrower's
knowledge, except as expressly set forth in the Property Condition Report,
are in good working order, subject to ordinary wear and tear. The Property
does not constitute, in whole or in part, a legally non-conforming use
under applicable legal requirements;
(b) No condemnation has been commenced or, to Borrower's
knowledge, is threatened with respect to all or any portion of the Property
or for the relocation of roadways providing access to the Property; and
(c) The Property has adequate rights of access to public ways
and is served by adequate water, sewer, sanitary sewer and storm drain
facilities. All public utilities necessary to the full use and enjoyment
of the Property are located in the public right-of-way abutting the
Property, and all such utilities are connected so as to serve the Property
without passing over other property, except to the extent such other
property is subject to a perpetual easement for such utility benefiting the
Property. All roads necessary for the utilization of the Property for its
current purpose have been completed and dedicated to public use and
accepted by all governmental authorities.
Section 8.9 Location of Borrower. Borrower's principal place
of business and chief executive offices are located at the address stated
in Section 15.1.
Section 8.10ERISA.
(a) To the best of Borrower's knowledge, as of the date
hereof and throughout the term of the Loan, (i) Borrower is not and will
not be an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
which is subject to Title I of ERISA, and (ii) the assets of Borrower do
not and will not constitute "plan assets" of one or more such plans for
purposes of Title I of ERISA; and
(b) As of the date hereof and throughout the term of the Loan
(i) Borrower is not and will not be a "governmental plan" within the
meaning of Section 3(32) of ERISA and (ii) transactions by or with Borrower
are not and will not be subject to state statutes applicable to Borrower
regulating investments of and fiduciary obligations with respect to
governmental plans.
Section 8.11Forfeiture. To the best of Borrower's knowledge,
there has not been and shall never be committed by Borrower or any other
person in occupancy of or involved with the operation or use of the
Property any act or omission affording the federal government or any state
or local government the right of forfeiture as against the Property or any
part thereof or any monies paid in performance of Borrower's obligations
under any of the Loan Documents. Borrower hereby covenants and agrees not
to commit, permit or suffer to exist any act or omission affording such
right of forfeiture.
<PAGE>
Section 8.12Tax Filings. Borrower and each Borrower Party have
filed (or have obtained effective extensions for filing) all federal, state
and local tax returns required to be filed and have paid or made adequate
provision for the payment of all federal, state and local taxes, charges
and assessments payable by Borrower and each Borrower Party, respectively.
Borrower and each Borrower Party believe that their respective tax returns
properly reflect the income and taxes of Borrower and each Borrower Party,
respectively, for the periods covered thereby, subject only to reasonable
adjustments required by the Internal Revenue Service or other applicable
tax authority upon audit.
Section 8.13Solvency. The Borrower (a) has not entered into
the transaction or any Loan Document with the actual intent to hinder,
delay, or defraud any creditor and (b) received reasonably equivalent value
in exchange for its obligations under the Loan Documents. Giving effect to
the Loan, the fair saleable value of Borrower's assets exceeds and will,
immediately following the making of the Loan, exceed Borrower's total
liabilities, including, without limitation, subordinated, unliquidated,
disputed and contingent liabilities. The fair saleable value of Borrower's
assets is and will, immediately following the making of the Loan, be
greater than Borrower's probable liabilities, including the maximum amount
of its contingent liabilities on its debts as such debts become absolute
and matured, Borrower's assets do not and, immediately following the making
of the Loan will not, constitute unreasonably small capital to carry out
its business as conducted or as proposed to be conducted. Borrower does
not intend to, and does not believe that it will, incur Indebtedness and
liabilities (including contingent liabilities and other commitments) beyond
its ability to pay such Indebtedness as they mature (taking into account
the timing and amounts of cash to be received by Borrower and the amounts
to be payable on or in respect of obligations of Borrower). Except as
expressly disclosed to Lender in writing, no petition in bankruptcy has
been filed against Borrower, Indemnitor, any guarantor or any Borrower
Party in the last seven (7) years, and neither Borrower, Indemnitor, any
guarantor nor any Borrower Party in the last seven (7) years has ever made
an assignment for the benefit of creditors or taken advantage of any
insolvency act for the benefit of debtors.
Section 8.14Full and Accurate Disclosure. All written
information submitted by Borrower or any Borrower Party to Lender in
connection with the Loan or in satisfaction of the terms thereof and all
statements of fact made by Borrower or any Borrower Party in this Agreement
or in any other Loan Document, are accurate, complete and correct in all
material respects. No statement of fact made by Borrower or any Borrower
Party, or, to the best of Borrower's knowledge, on behalf of Borrower or
any Borrower Party, in this Agreement or in any of the other Loan Documents
contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or therein not
misleading. There is no fact presently known to Borrower which has not
been disclosed to Lender which materially and adversely affects, nor as far
as Borrower can foresee, might materially and adversely affect, the
Property or the business, operations or condition (financial or otherwise)
of Borrower or any Borrower Party.
Section 8.15Flood Zone. No portion of the improvements
comprising the Property is located in an area identified by the Secretary
of Housing and Urban Development or any successor thereto as an area having
special flood hazards pursuant to the National Flood Insurance Act of 1968,
the Flood Disaster Protection Act of 1973 or the National Flood Insurance
Act of 1994, as amended, or any successor law, or, if located within any
such area, Borrower has obtained and will maintain the insurance prescribed
in Section 5.1 hereof.
<PAGE>
Section 8.16Federal Reserve Regulations. No part of the
proceeds of the Loan will be used for the purpose of purchasing or
acquiring any "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System or for any other purpose
which would be inconsistent with such Regulation U or any other Regulations
of such Board of Governors, or for any purposes prohibited by Legal
Requirements or by the terms and conditions of this Agreement or the other
Loan Documents.
Section 8.17Not a Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
Section 8.18Separate Lots. The Property is comprised of one
(1) or more parcels which constitutes a separate tax lot and does not
constitute a portion of any other tax lot not a part of the Property.
Section 8.19No Prior Assignment. There are no prior
assignments of the Leases, Operating Lease or any portion of the Rents or
Operating Lease Rent due and payable or to become due and payable which are
presently outstanding.
Section 8.20Insurance. Borrower has obtained and has delivered
to Lender Accord Certificates reflecting the insurance coverages, amounts
and other requirements set forth in this Agreement. Except as expressly
provided on Schedule V hereto, no material claims have been made under any
such Policy, and no Person, including Borrower, has done, by act or
omission, anything which would materially impair the coverage of any such
policy.
Section 8.21Use of the Property. The Property is used
exclusively as a full service, premium brand-name hotel and other
appurtenant and related uses including, but not limited to, restaurants and
lounges.
Section 8.22Certificate of Occupancy; Licenses. To the best of
Borrower's knowledge, all certifications, permits, licenses and approvals,
including without limitation, certificates of completion and occupancy
permits and any applicable liquor license required for the legal use,
occupancy and operation of the Property as a full service hotel
(collectively, the "Licenses"), have been obtained and are in full force
and effect. The Borrower shall keep and maintain, or cause to be kept and
maintained, all licenses necessary for the operation of the Property as a
full service hotel. The use being made of the Property is in conformity
with the certificate of occupancy issued for the Property.
Section 8.23Physical Condition. Except as expressly disclosed
in the Property Condition Report, to the best of Borrower's knowledge, the
Property, including, without limitation, all buildings, improvements,
parking facilities, sidewalks, storm drainage systems, roofs, plumbing
systems, HVAC systems, fire protection systems, electrical systems,
equipment, elevators, exterior sidings and doors, landscaping, irrigation
systems and all structural components, are in good condition, order and
repair in all material respects; there exists no structural or other
material defects or damages in the Property, whether latent or otherwise,
and Borrower has not received notice from any insurance company or bonding
company of any defects or inadequacies in the Property, or any part
thereof, which would adversely affect the insurability of the same or cause
the imposition of extraordinary premiums or charges thereon or of any
termination or threatened termination of any policy of insurance or bond.
<PAGE>
Section 8.24Boundaries. All of the improvements which were
included in determining the appraised value of the Property lie wholly
within the boundaries and building restriction lines of the Property, and
no improvements on adjoining properties encroach upon the Property, and no
easements or other encumbrances upon the Property encroach upon any of the
improvements, so as to affect the value or marketability of the Property
except those which are insured against by title insurance.
Section 8.25Intentionally Deleted.
Section 8.26Intentionally Deleted.
Section 8.27Filing and Recording Taxes. All transfer taxes,
deed stamps, intangible taxes or other amounts in the nature of transfer
taxes required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the transfer of the Property to
Borrower have been paid. To the best of Borrower's knowledge, all
mortgage, mortgage recording, stamp, intangible or other similar tax
required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement of any of the
Loan Documents, including, without limitation, the Mortgage encumbering the
Property have been paid, and, under current Legal Requirements, the
Mortgage encumbering the Property is enforceable in accordance with their
respective terms by Lender (or any subsequent holder thereof).
Section 8.28Single Purpose Entity/Separateness.
(a) Borrower hereby represents and warrants, and covenants
and agrees that Borrower is, shall be and shall continue to be a Special
Purpose Bankruptcy Remote Entity. A "Special Purpose Bankruptcy Remote
Entity" means a corporation, limited partnership or limited liability
company which at all times on and after the date hereof:
(i) is organized solely for the purpose of (A) acquiring,
developing, owning, holding, selling, leasing, transferring, exchanging,
managing and operating the Property and Additional Property, entering into
the Loan Agreement with the Lender, refinancing the Property in connection
with a permitted repayment of the Loan and transacting any and all lawful
business that is incident, necessary and appropriate to accomplish the
foregoing; or (B) acting as a general partner of the limited partnership
that owns the Property or acting as a member of the limited liability
company that owns the Property, as applicable;
(ii) has not engaged and will not engage in any business
unrelated to (A) the acquisition, development, ownership, management or
operation of the Property and Additional Property, or (B) acting as the
general partner of the limited partnership that owns the Property or acting
as a member of the limited liability company that owns the Property, as
applicable;
(iii) does not have and will not have any assets other than (A)
those related to the Property and Additional Property or (B) its
partnership interest in the limited partnership that owns the Property that
acts as the general partner thereof or its member interest in the limited
liability company that owns the Property that acts as a member thereof, as
applicable;
<PAGE>
(iv) has not engaged, sought or consented to and will not
engage in, seek or consent to (A) any dissolution, winding up, liquidation,
consolidation, merger, sale of all or substantially all of its assets,
transfer of partnership or membership interests (if such entity is a
general partner in a limited partnership or a member in a limited liability
company) or (B) any amendment of its limited partnership agreement,
articles of incorporation, articles of organization, certificate of
formation or operating agreement (as applicable) with respect to the
matters set forth in this Section;
(v) if such entity is a limited partnership, has, as its only
general partners, Special Purpose Bankruptcy Remote Entities that are
corporations, limited partnerships or limited liability companies (with
more than one member);
(vi) if such entity is a corporation, has at least one
Independent Director, and has not caused or allowed and will not cause or
allow the board of directors of such entity to take any action requiring
the unanimous affirmative vote of 100% of the members of its board of
directors unless an Independent Director shall have participated in such
vote;
(vii) if such entity is a limited liability company, has at
least one member that is a Special Purpose Bankruptcy Remote Entity that is
a corporation that has at least one Independent Director and that owns at
least one percent (1%) of the equity of the limited liability company;
(viii) if such entity is (a) a limited partnership, has a
limited partnership agreement, (b) a limited liability company, has
articles of organization, a certificate of formation and/or an operating
agreement, as applicable, or (c) a corporation, has a certificate of
incorporation or articles that, in each case, provides that such entity
will not: (1) dissolve, merge, liquidate, consolidate; (2) sell all or
substantially all of its assets or the assets of Borrower; (3) engage in
any other business activity, or amend its organizational documents with
respect to the matters set forth in this Section without the consent of the
Lender, which consent (A) shall not be unreasonably withheld or delayed and
(B) may be conditioned upon the receipt by Lender of a non-consolidation
opinion reasonably satisfactory to Lender and confirmation from the Rating
Agency that such activity or amendment will not result in a downgrade,
qualification or withdrawal of the then current ratings assigned to the
Securities issued pursuant to a Securitization or (4) without the
affirmative vote of an Independent Director and of all other directors of
the corporation that is the general partner or managing or co-managing
member of such entity, file, a bankruptcy or insolvency petition or
otherwise institute insolvency proceedings with respect to itself or to any
other entity in which it has a direct or indirect legal or beneficial
ownership interest;
(ix) if such entity is a limited partnership or limited
liability company that is the general partner of a limited partnership or
the member of a limited liability company that is the Special Purpose
Bankruptcy Remote Entity, has a corporation that owns at least one percent
(1%) of the equity of such entity as its general partner or managing
member, as applicable, that is a Special Purpose Bankruptcy Remote Entity;
(x) is and will remain solvent and pay its debts and
liability (including, as applicable, shared personnel and overhead
expenses) from its assets as the same shall become due, and is maintaining
and will maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations;
<PAGE>
(xi) to the best of Borrower's knowledge, has not failed and
will not fail to correct any known misunderstanding regarding the separate
identity of such entity;
(xii) has maintained and will maintain its accounts, books and
records separate from any other Person and will file its own tax returns,
except to the extent that it is required to file consolidated tax returns
by law;
(xiii) has maintained and will maintain its own records, books,
resolutions and agreements;
(xiv) has not commingled and will not commingle its funds or
assets with those of any other Person and, has not participated and will
not participate in any cash management system with any other Person;
(xv) has held and will hold its assets in its own name;
(xvi) has conducted and will conduct its business in its name
or in a name franchised or licensed to it by an entity other than an
Affiliate of Borrower, except for services rendered under a business
management services agreement with an Affiliate that complies with the
terms contained in Section 8.29 herein, so long as the manager, or
equivalent thereof, under such business management services agreement holds
itself out as an agent of the Borrower;
(xvii) has maintained and will maintain its financial
statements, accounting records and other entity documents separate from any
other Person and has not permitted and will not permit its assets to be
listed as assets on the financial statement of any other entity except as
required by generally accepted accounting principles; provided, however,
that any such consolidated financial statement shall contain a note
indicating that its separate assets and liabilities are neither available
to pay the debts of the consolidated entity nor constitute obligations of
the consolidated entity;
(xviii) has paid and will pay its own liabilities and
expenses, including the salaries of its own employees, out of its own funds
and assets, and has maintained and will maintain a sufficient number of
employees in light of its contemplated business operations;
(xix) has observed and will observe all partnership, corporate
or limited liability company formalities, as applicable;
(xx) has and will have no Indebtedness other than (i) the Loan
and the Additional Loan (ii) liabilities incurred in the ordinary course of
business relating to the ownership and operation of the Property which is
outstanding for not more than sixty (60) days with trade creditors, in the
aggregate provided such liabilities are not evidenced by a note and are
paid when due, and (iii) liabilities incurred in the financing or equipment
and other personal property used exclusively at the Property or the
Additional Properties, secured solely by such equipment or personal
property being financed, not to exceed at any one time two percent (2%) of
the Release Amount for the Property;
(xxi) has not and will not assume or guarantee or become
obligated for the debts of any other Person or hold out its credit as being
available to satisfy the obligations of any other Person except as
permitted pursuant to this Agreement;
(xxii) has not and will not acquire obligations or securities of
its partners, members or shareholders or any other Affiliate;
<PAGE>
(xxiii) has allocated and will allocate fairly and
reasonably any overhead expenses that are shared with any Affiliate,
including, but not limited to, paying for shared office space and services
performed by any employee of an affiliate;
(xxiv) maintains and uses and will maintain and use separate
stationery, invoices and checks bearing its name. The stationary,
invoices, and checks utilized by the Special Purpose Bankruptcy Remote
Entity or utilized to collect its funds or pay its expenses shall bear its
own name and shall not bear the name of any other entity unless such entity
is clearly designated as being the Special Purpose Bankruptcy Remote
Entity's agent;
(xxv) has not pledged and will not pledge its assets for the
benefit of any other Person;
(xxvi) has held itself out and identified itself and will hold
itself out and identify itself as a separate and distinct entity under its
own name;
(xxvii) has maintained and will maintain its assets in such
a manner that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any other Person;
(xxviii) has not made and will not make loans to any Person
or hold evidence of indebtedness issued by any other person or entity
(other than cash and investment-grade securities issued by an entity that
is not an Affiliate of or subject to common ownership with such entity);
(xxix) has not identified and will not identify its partners,
members or shareholders, or any Affiliate of any of them, as a division or
part of it, and has not identified itself and shall not identify itself as
a division of any other Person;
(xxx) has not entered into or been a party to, and will not
enter into or be a party to, any transaction with its partners, members,
shareholders or Affiliates except (A) in the ordinary course of its
business and on terms which are intrinsically fair, commercially reasonable
and are no less favorable to it than would be obtained in a comparable
arm's-length transaction with an unrelated third party and (B) in
connection with the Loan Agreement;
(xxxi) has not and will not have any obligation to, and will
not, indemnify its partners, officers, directors or members, as the case
may be, or has such an obligation that is fully subordinated to the Debt
and will not constitute a claim against it in the event that cash flow in
excess of the amount required to pay the Debt is insufficient to pay such
obligation;
(xxxii) if such entity is a corporation, it is required to
consider the interests of its creditors in connection with all corporate
actions;
(xxxiii) does not and will not have any of its obligations
guaranteed by any Affiliate except as contemplated herein; and
(xxxiv) has complied and will comply with all of the terms
and provisions contained in its organizational documents. The statement of
facts contained in its organizational documents are true and correct and
will remain true and correct.
(b) The representations and warranties set forth in Section
8.28(a) shall survive for so long as any amount remains payable to Lender
under this Agreement or any other Loan Document.
<PAGE>
Section 8.29Management Agreement.
(a) Borrower shall not (i) and shall not permit (if within
its powers under the Operating Lease) Operating Lessee to, enter into any
agreement relating to the management or operation of the Property with
Manager or any other party without the express written consent of Lender,
which consent shall not be unreasonably withheld, nor (ii) grant any form
of non-disturbance to any property manager engaged by the Operating Lessee
for the management or the operation of the Property without the express
written consent of Lender, which consent (A) shall not be unreasonably
withheld or delayed, and (B) except with respect to a new manager or the
grant of non-disturbance, shall be deemed granted in the event that Lender
does not respond within fifteen (15) days after receiving a request for
such consent together with all supporting materials reasonably requested by
Lender; provided, however, with respect to a new manager, or the grant of
non-disturbance, such consent may be conditioned upon Borrower delivering
evidence in writing from the applicable Rating Agencies to the effect that
such new manager and management agreement or non-disturbance will not
result in a downgrade, withdrawal or qualification of the respective
ratings then in effect for any Securities issued in connection with a
Securitization. At the request of Lender, Borrower shall, or shall use
commercially reasonable efforts to cause Operating Lessee, to deliver to
Lender copies of such information that Borrower, or Operating Lessee, as
applicable, is entitled to receive under the management agreement,
including, without limitation, any financial reporting.
(b) Borrower, upon the request of Lender (and with respect to
the Operating Lease in effect as of the date hereof, to the extent that
Borrower is empowered to do so under such Operating Lease), shall terminate
any Manager designated by Lender, without penalty or fee, if at any time
during the Loan (i) such Manager shall become insolvent or a debtor in any
bankruptcy or insolvency proceeding, (ii) there is continuing an Event of
Default, or (iii) the Anticipated Payment Date has occurred and the Loan
has not been repaid. The Management Agreement entered into by Borrower
shall provide that such Manager may be terminated, without penalty or fee,
upon the occurrence of any of the foregoing. At such time as the Manager
may be removed, a replacement manager acceptable to Lender and the
applicable Rating Agencies in their sole discretion shall assume management
of the Properties and shall receive a property management fee not to exceed
then current market rates.
Section 8.30Operating Leases.
(a) The Operating Lease, pursuant to which the Operating
Lessee operates the Property as a hotel, is in full force and effect and
there is no material default, breach or violation existing thereunder by
Borrower or to the best of Borrower's knowledge, any other party thereto
and no event has occurred (other than payments due but not yet delinquent)
that, with the passage of time or the giving of notice, or both, would
constitute a default, breach or violation by any party thereunder. The
Operating Lease Rent, and the terms and provisions of the Operating Lease,
are subordinate to this Agreement, the Mortgage and the Second Mortgage.
Subject to the terms of Section 10.14 hereof, any new Operating Lease or
Operating Lessee shall be approved or disapproved by Lender in its
reasonable discretion within fifteen (15) Business Days of Lender's receipt
thereof together with all supporting materials reasonably requested by
Lender in order to make such determination, and with respect to a new
Operating Lease or Operating Lessee, such consent may be conditioned upon
Borrower delivering evidence in writing from the applicable Rating Agencies
to the effect that such new Operating Lease and/or Operating Lessee will
not result in a downgrade, withdrawal or qualification of the respective
ratings then in effect for any Securities issued in connection with a
Securitization. Borrower shall send any request for Lender's approval of
<PAGE>
a new Operating Lease in an envelope labeled "PRIORITY" and shall state at
the top of the first page in bold lettering "LENDER'S RESPONSE IS REQUIRED
WITHIN TEN BUSINESS DAYS OF RECEIPT OF THIS REQUEST PURSUANT TO THE TERMS
OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER." If at any time
Lender consents to the appointment of a new Operating Lessee, such new
Operating Lessee and Borrower shall, as a condition of Lender's consent,
execute a subordination agreement reasonably satisfactory to Lender in form
and substance. In the event that Lender approves a new operating lease
with a Person other than Operating Lessee, on substantially the same terms
(or terms more favorable to Borrower) as the existing Operating Lease, then
Lender hereby agrees to enter into a subordination agreement with such
person in form and substance substantially similar to the Subordination
Agreement.
(b) Neither the execution and delivery of the Loan Documents,
Borrower's performance thereunder, nor the exercise of any remedies by
Lender, will adversely affect Borrower's rights under the Operating Lease
or any of the Licenses.
Section 8.31Investment Company Act. The Borrower is not (a) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (b) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within
the mean of the Public Utility Holding Company Act of 1935, as amended; or
(c) subject to any other federal or state law or regulation which purports
to restrict or regulate its ability to borrow money.
Section 8.32Leases. Except as expressly disclosed in Schedule
IV attached hereto, Borrower is not a party, either directly or as a
successor or assignee, to any Leases other than the Operating Lease.
Section 8.33SPE Compliance. (i) All of the assumptions made in
that certain substantive non-consolidation opinion letter dated the date
hereof, delivered by Borrower's counsel in connection with the Loan (the
"Insolvency Opinion"), including, but not limited to, any exhibits attached
thereto, are true and correct in all respects and any assumptions made in
any subsequent non-consolidation opinion delivered in connection with the
Loan Documents (an "Additional Insolvency Opinion"), including, but not
limited to, any exhibits attached thereto, will have been and shall be true
and correct in all respects. Borrower has complied and will comply with
all of the assumptions made with respect to it in the Insolvency Opinion.
Borrower will have complied and will comply with all of the assumptions
made with respect to it in any Additional Insolvency Opinion. Each entity
other than the Borrower with respect to which an assumption is made in the
Insolvency Opinion has complied and will comply with all of the assumptions
made with respect to it in the Insolvency Opinion. Each entity other than
Borrower with respect to which an assumption shall be made in any
Additional Insolvency Opinion will have complied and will comply with all
of the assumptions made with respect to it in any Additional Insolvency
Opinion and (ii) all the representations and warranties set forth in
Section 8.28 hereof are true and correct.
Section 8.34Ground Lease Representations and Warranties.
Borrower hereby represents and warrants to Lender the following with
respect to the Ground Lease:
(a) A memorandum of the Ground Lease has been duly recorded,
the Ground Lease permits the interest of Borrower to be encumbered by a
mortgage or the Ground Lessor has approved and consented to the encumbrance
of the Property by the Mortgage and the Second Mortgage and there have not
been amendments or modifications to the terms of the Ground Lease since its
recordation, with the exception of written instruments which have been
recorded. The Ground Lease may not be canceled, terminated, surrendered or
amended without the prior written consent of Lender.
<PAGE>
(b) Except for the Permitted Encumbrances, Borrower's
interest in the Ground Lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the Mortgage other than the Ground
Lessor's related fee interest.
(c) Borrower's interest in the Ground Lease is assignable to
Lender upon notice to, but without the consent of, the Ground Lessor (or,
if any such consent is required, it has been obtained prior to the Closing
Date). The Ground Lease is further assignable by Lender, its successors
and assigns without Ground Lessor's consent.
(d) As of the date hereof, the Ground Lease is in full force
and effect and no default beyond applicable notice of grace periods has
occurred and is continuing under the Ground Lease and there is no existing
condition which, but for the passage of time or the giving of notice, could
result in a default under the terms of the Ground Lease.
(e) The Ground Lease requires the Ground Lessor to give
notice of any default by Borrower to Lender. The Ground Lease, or an
estoppel letter received by Lender from Ground Lessor, further provides
that notice of termination given under the Ground Lease is not effective
against Lender unless a copy of the notice has been delivered to Lender in
the manner described in the Ground Lease.
(f) Lender is permitted the opportunity (including, where
necessary, sufficient time to gain possession of the interest of Borrower
under the Ground Lease) to cure any default under the Ground Lease, which
is curable after the receipt of notice of any of the default before the
landlord thereunder may terminate the Ground Lease.
(g) The Ground Lease has a term which extends, including
renewals exercisable at the option of Borrower, not less than ten (10)
years beyond the Maturity Date. During the term of the Loan, Borrower
shall exercise any renewal options to extend the Ground Lease in accordance
with the terms and conditions thereof.
(h) The Ground Lease requires Ground Lessor to enter into a
new lease upon termination of the Ground Lease for any reason, including
rejection of the Ground Lease in a bankruptcy proceeding.
(i) Under the terms of the Ground Lease and the Mortgage,
taken together, any related insurance and Borrower's interest in the
condemnation proceeds will be applied either to the repair or restoration
of all or part of the Property, with Lender having the right to hold and
disburse the proceeds as the repair or restoration progresses, or to the
payment of the outstanding principal balance of the Loan together with any
accrued interest thereon.
(j) The Ground Lease does not impose any restrictions on
subleasing.
Section 8.35Intentionally Deleted.
Section 8.36Parking Agreements. Borrower hereby represents
warrants, covenants and agrees that (a) the Parking Agreements are valid
and in full force and effect, (b) the Parking Agreements are in writing and
there are no oral agreements with respect thereto, (c) the copies of the
Parking Agreements delivered to Lender are true and complete, (d) none of
the parties thereto are in material default under the Parking Agreements,
(e) Borrower has no knowledge of any notice of termination or default with
<PAGE>
respect to the Parking Agreements, (f) Borrower shall perform all of the
obligations which Borrower is required to perform under the Parking
Agreements, (g) Borrower shall enforce, in a commercially reasonable
manner, the obligations to be performed by the parties to the Parking
Agreements other than Borrower, (h) Borrower shall promptly furnish to
Lender any notice delivered by any party under the Parking Agreements, (i)
Borrower shall not further assign or encumber the Parking Agreements, (j)
Borrower shall not, except with Lender's prior written consent (not to be
unreasonably withheld, conditioned or delayed) (A) cancel or accept any
surrender or termination of the Parking Agreements or (B) amend or modify
any term of the Parking Agreements, and (k) Borrower shall, at the request
of Lender, to the extent Borrower is permitted under the Parking
Agreements, exercise any options to extend the Parking Agreements in
accordance with the terms and conditions thereof.
ARTICLE IX
FINANCIAL REPORTING
Section 9.1 Financial Statements.
(a) Obligations of Borrower. Borrower will keep and maintain
or will cause to be kept and maintained, in accordance with generally
accepted accounting principles and USAH proper and accurate books, records
and accounts reflecting all of the financial affairs of Borrower and
Operating Lessee, all items of income and expense in connection with the
operation on an individual basis of the Property. Lender shall have the
right from time to time at all times during normal business hours upon
reasonable prior written notice to Borrower, and as permitted under the
Operating Lease to examine such books, records and accounts at the office
of Borrower, Operating Lessee or other Person maintaining such books,
records and accounts and, at Lender's cost and expense, to make such copies
or extracts thereof as Lender shall desire. After the occurrence of an
Event of Default, Borrower shall pay any costs and expenses incurred by
Lender to examine Borrower's accounting records with respect to the
Property, as Lender shall determine to be reasonably necessary or
appropriate in the protection of Lender's interest.
(b) Monthly Reports. Within ten (10) days of receipt, for so
long as the Operating Lease shall remain in effect, Borrower will deliver
to Lender the monthly reports furnished to Borrower by the Operating Lessee
pursuant to the terms of the Operating Lease in a form substantially
similar to the form attached hereto as Exhibit B. In the event that the
Operating Lease is no longer in effect, within forty-five (45) days after
the end of each calendar month, Borrower shall furnish to Lender a monthly
report in a form substantially similar to the form attached hereto as
Exhibit B.
(c) Quarterly Reports. Within sixty (60) days after the end
of each calendar quarter, Borrower shall furnish or cause Operating Lessee
to furnish, to Lender a detailed operating statement for the Borrower
(showing quarterly activity and year-to-date) containing a statement of
income and cash flow together with a balance sheet of Borrower for the
calendar quarter just ended. Borrower's quarterly statements shall be
accompanied by (i) a comparison of the budgeted income and expenses and the
actual income and expenses for the prior calendar quarter, and (ii) a
certificate executed by an officer of Borrower or the general partner of
Borrower stating that each such quarterly statement presents fairly the
financial condition and the results of operations of the Borrower and has
been prepared in accordance with general accepted accounting principles.
<PAGE>
(d) Annual Reports. Within one-hundred twenty (120) days
after the end of each calendar year, Borrower will furnish to Lender a
complete copy of Borrower's and Operating Lessee's (as required pursuant to
the terms of the Operating Lease) annual financial statements audited by a
"big five" accounting firm or other independent certified public accountant
acceptable to Lender in accordance with generally accepted accounting
principles for such calendar year which financial statements shall contain
a balance sheet and a detailed operating statement stating net cash flow.
Borrower's annual financial statements shall be accompanied by (i) a
certificate executed by an officer of Borrower or the general partner of
Borrower stating that each such annual financial statement presents fairly
the financial condition and the results of operations of the Borrower and
the Property and has been prepared in accordance with general accepted
accounting principles, and (ii) an unqualified opinion of a "big five"
accounting firm or other independent certified public accountant reasonably
acceptable to Lender.
(e) Certification; Supporting Documentation. Each such
financial statement shall be in scope and detail reasonably satisfactory to
Lender and certified by an officer of Borrower with sufficient knowledge
thereof; provided, however, that such certification shall be qualified to
the best of such representative's knowledge in the event that such
statement was prepared by the Operating Lessee pursuant to the terms of the
Operating Lease.
(f) Additional Reports. Borrower shall deliver to Lender as
soon as reasonably available but in no event later than thirty (30) days
after such items become available to Borrower in final form:
(i) copies of any final engineering or environmental reports
prepared for Borrower or the Operating Lessee with respect to the Property;
(ii) a copy of any notice received by Borrower from any
environmental authority having jurisdiction over the Property with respect
to a condition existing or alleged to exist or emanate from or at the
Property;
(iii) copies of any financial statements and reports required
to be delivered to Borrower by the Operating Lessee pursuant to the
Operating Lease.
Section 9.2 Accounting Principles. All financial statements
shall be prepared in accordance with generally accepted accounting
principles in the United States of America as in effect on the date so
indicated and consistently applied and the USAH (or such other accounting
basis reasonably acceptable for Lender).
Section 9.3 Other Information; Access. Borrower shall deliver
to Lender such additional information regarding Borrower, its subsidiaries,
its business, any Borrower Party, and the Property within 30 days after
Lender's reasonable request therefor. Borrower shall permit Lender to
examine such records, books and papers of Borrower which reflect upon its
financial condition and the income and expenses of the Property.
Section 9.4 Format of Delivery. Any reports, statements or
other information required to be delivered under this Agreement shall be
delivered in paper form.
<PAGE>
ARTICLE X
COVENANTS
Borrower covenants and agrees with Lender as follows:
Section 10.1Due on Sale and Encumbrance; Transfers of
Interests. Subject to Section 3.9 of the Mortgage, without the prior
written consent of Lender, neither Borrower nor any other Person having an
ownership or beneficial interest in Borrower shall sell, transfer, convey,
mortgage, pledge, or assign any interest in the Property or any part
thereof or further encumber, alienate, grant a Lien or grant any other
interest in any of the Property or any part thereof, whether voluntarily or
involuntarily, in violation of the covenants and conditions set forth in
the Mortgage.
Section 10.2Taxes; Utility Charges. Borrower shall pay before
any fine, penalty, interest or cost may be added thereto, and shall not
enter into any agreement to defer, any real estate taxes and assessments,
franchise taxes and charges, and other governmental charges (the "Taxes")
that may become a Lien upon the Property or become payable during the term
of the Loan; provided, however, Borrower may contest the validity of Taxes
so long as (a) Borrower notifies Lender that it intends to contest such
Taxes, (b) Borrower provides Lender with an indemnity, bond or other
security reasonably satisfactory to Lender assuring the discharge of
Borrower's obligations for such Taxes, including interest and penalties, to
the extent that the amount in question (together with all interest,
penalties and fees to accrue thereon) plus the next installment of Taxes
(then or subsequently to be paid) exceeds the amounts escrowed with Lender
and attributable to the payment of Taxes for the Property pursuant to
Section 5.4 hereof, (c) Borrower is diligently contesting the same by
appropriate legal proceedings in good faith and at its own expense and
concludes such contest prior to the tenth (10th) day preceding the earlier
to occur of the Maturity Date or the date on which the Property is
scheduled to be sold for non-payment, (d) Borrower promptly upon final
determination thereof pay the amount of any such Taxes, together with all
costs, interest and penalties which may be payable in connection therewith,
and (e) notwithstanding the foregoing, Borrower shall immediately upon
request of Lender pay any such Taxes notwithstanding such contest if, in
the reasonable opinion of Lender, the Property or any part thereof or
interest therein may be in danger of being sold, forfeited, foreclosed,
terminated, cancelled or lost. Lender may pay over any cash deposit or part
thereof to the claimant entitled thereto at any time when, in the judgment
of Lender, the entitlement of such claimant is established. Borrower's
compliance with Section 5.4 of this Agreement relating to impounds for
Taxes shall, with respect to payment of such Taxes, be deemed compliance
with this Section 10.2. Borrower shall not suffer or permit the joint
assessment of the Property with any other real property constituting a
separate tax lot or with any other real or personal property. Borrower
shall promptly pay for all utility services provided to the Property.
Section 10.3Operating Lease. The Borrower shall hold and
maintain, or cause Operating Lessee to hold and maintain, all necessary
licenses, certifications and permits required by law. Borrower shall fully
perform all of its covenants, agreements and obligations under the
Operating Lease.
Section 10.4Operation; Maintenance; Inspection. Borrower shall
observe and comply, or cause Operating Lessee to observe and comply, with
all legal requirements applicable to the ownership, use and operation of
the Property. Borrower shall maintain, or cause Operating Lessee to
maintain, the Property in good condition and promptly repair any damage or
casualty. Borrower shall permit Lender and its agents, representatives and
employees, upon reasonable prior notice to Borrower, to inspect the
Property and conduct such environmental and engineering studies as Lender
may require, provided such inspections and studies do not materially
interfere with the use and operation of the Property or violate the terms
and conditions of the Operating Lease.
<PAGE>
Section 10.5Taxes on Security. Borrower shall pay all taxes,
charges, filing, registration and recording fees, excises and levies
payable with respect to the Note or the Liens created or secured by the
Loan Documents, other than income, franchise and doing business taxes
imposed on Lender. If there shall be enacted any law (a) deducting the
Loan from the value of the Property for the purpose of taxation, (b)
affecting any Lien on the Property, or (c) changing existing laws of
taxation of mortgages, deeds of trust, security deeds, or debts secured by
real property, or changing the manner of collecting any such taxes,
Borrower shall promptly pay to Lender, on demand, all taxes, costs and
charges for which Lender is or may be liable as a result thereof; however,
if such payment would be prohibited by law or would render the Loan
usurious, then instead of collecting such payment, Lender may declare all
amounts owing under the Loan Documents to be due and payable within ninety
(90) days after demand by Lender.
Section 10.6Legal Existence; Name, Etc. Borrower and each SPC
Party shall preserve and keep in full force and effect its entity status,
franchises, rights and privileges under the laws of the state of its
formation, and all qualifications, licenses and permits applicable to the
ownership, use and operation of the Property. Except as permitted by the
Loan Documents, neither Borrower nor any general partner or managing member
of Borrower shall wind up, liquidate, dissolve, reorganize, merge, or
consolidate with or into, or convey, sell, assign, transfer, Lease, or
otherwise dispose of all or substantially all of its assets, or acquire all
or substantially all of the assets of the business of any Person, or permit
any subsidiary or Affiliate of Borrower to do so. Borrower shall not
change its name, identity, or organizational structure, or the location of
its chief executive office or principal place of business unless Borrower
(a) shall have obtained the prior written consent of Lender to such change,
and (b) shall have taken all actions reasonably necessary or reasonably
requested by Lender to file or amend any financing statement or
continuation statement to assure perfection and continuation of perfection
of security interests under the Loan Documents.
Section 10.7Further Assurances. Borrower shall promptly
(a) cure any defects in the execution and delivery of the Loan Documents,
and (b) execute and deliver, or cause to be executed and delivered, all
such other documents, agreements and instruments as Lender may reasonably
request to further evidence and more fully describe the collateral for the
Loan, to correct any omissions in the Loan Documents, to perfect, protect
or preserve any liens created under any of the Loan Documents, or to make
any recordings, file any notices, or obtain any consents, as may be
necessary or appropriate in connection therewith. Borrower grants Lender
an irrevocable power of attorney coupled with an interest for the purpose
of perfecting any and all rights available to Lender under the Loan
Documents, at law and in equity, including without limitation such rights
available to Lender pursuant to this Section 10.7; provided, however, that
Lender will not exercise such power of attorney until the expiration of
fifteen (15) days after Lender delivers to Borrower notice of Lender's
intention to exercise such power of attorney.
Section 10.8Estoppel Certificates.
(a) Borrower, within ten (10) days after request, shall
furnish to Lender a written statement, duly acknowledged, setting forth the
amount due on the Loan, the terms of payment of the Loan, the date to which
interest has been paid, whether any offsets or defenses exist against the
Loan and, if any are alleged to exist, the nature thereof in detail, and
such other matters as Lender reasonably may request.
(b) Lender, within ten (10) days after request, shall furnish
to Borrower a written statement, duly acknowledged, setting forth the
amount due on the Loan, the terms of payment on the Loan and the date to
which interest has been paid.
<PAGE>
Section 10.9Notice of Certain Events. Borrower shall promptly
notify Lender of (a) any Event of Default, together with a detailed
statement of the steps being taken to cure such Event of Default; (b) any
notice of default received by Borrower under other obligations relating to
the Property and otherwise material to Borrower's business; and (c) any
threatened or pending legal, judicial or regulatory proceedings, including
any dispute between Borrower and any governmental authority, affecting
Borrower or the Property.
Section 10.10Indemnification. Borrower shall protect, defend,
indemnify and save harmless Lender its shareholders, directors, officers,
employees and agents from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including without
limitation reasonable attorneys' fees and expenses), imposed upon or
incurred by or asserted against Lender (except for events caused by the
gross negligence of Lender and arising after the date that Lender takes
title and actual possession of the Property pursuant to a foreclosure or
deed-in-lieu thereof) by reason of (a) ownership of the Mortgage, the
Property or any interest therein or receipt of any rents; (b) any accident,
injury to or death of persons or loss of or damage to property occurring
in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or
ways; (c) any use, nonuse or condition in, on or about the Property or any
part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (d) performance of any labor or
services or the furnishing of any materials or other property in respect of
the Property or any part thereof; and (e) the failure of any Person to file
timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with this Agreement, or
to supply a copy thereof in a timely fashion to the recipient of the
proceeds of the transaction in connection with which this Agreement is
made. Any amounts payable to Lender by reason of the application of this
section shall become immediately due and payable and shall bear interest at
the Default Rate from the date loss or damage is sustained by Lender until
paid.
Section 10.11Payment for Labor and Materials. Borrower will
promptly pay when due all bills and costs for labor, materials, and
specifically fabricated materials incurred in connection with the Property
and never permit to exist beyond the due date thereof in respect of the
Property or any part thereof any lien or security interest, even though
inferior to the liens and the security interest hereof, and in any event
never permit to be created or exist in respect of the Property or any part
thereof any other or additional lien or security interest other than the
liens or security interests hereof, except for the Permitted Encumbrances;
provided, however, Borrower may contest the validity of such bills and
costs so long as (a) Borrower notifies Lender that it intends to contest
such bills and costs, (b) Borrower provides Lender with an indemnity, bond
or other security reasonably satisfactory to Lender assuring the discharge
of Borrower's obligations for such bills and costs, including interest and
penalties, to the extent that the amount in question exceeds amounts
already escrowed with Lender specifically for the related labor and/or
materials provided to Borrower and/or the Property and the payment of any
reasonably foreseeable related interest, costs or fees in connection
therewith, provided, that, in the event that the amount in question is less
than $50,000.00, such security shall take the form of an indemnity from the
Borrower and Joinder Party in form and substance reasonably acceptable to
Lender, (c) Borrower is diligently contesting the same by appropriate legal
proceedings in good faith and at its own expense and concludes such contest
prior to the tenth (10th) day preceding the earlier to occur of the
Anticipated Payment Date or the date on which the Property is scheduled to
be sold for non-payment, (d) Borrower promptly upon final determination
thereof pays the amount of any such bills and costs, together with all
costs, interest and penalties which may be payable in connection therewith;
<PAGE>
and (e) notwithstanding the foregoing, Borrower shall immediately upon
request of Lender pay any such bills and costs notwithstanding such contest
if, in the reasonable opinion of Lender, the Property or any part thereof
or interest therein may be in danger of being sold, forfeited, foreclosed,
terminated, canceled or lost.
Section 10.12Alterations. Borrower shall obtain Lender's prior
written consent to any alterations to any Improvements on the Property that
are reasonably likely to have a material adverse effect on Borrower's
financial condition, the use, operation or value of the Property or the Net
Operating Income with respect to the Property, other than alterations
performed in connection with the restoration of the Property after the
occurrence of a casualty in accordance with the terms and provisions of
this Agreement, provided, that, (a) Lender shall respond to Borrower's
request for consent to a proposed alteration within fifteen (15) days after
receiving such request together with all supporting materials reasonably
requested by Lender, and (b) such consent shall not be unreasonably
withheld conditioned or delayed. If the total unpaid amounts due and
payable with respect to alterations to the Improvements shall at any time
exceed $750,000 (the "Threshold Amount"), Borrower shall promptly deliver
to Lender as security for the payment of such amounts and as additional
security for Borrower's obligations under the Loan Documents any of the
following: (1) cash, (2) U.S. Obligations, (3) other securities having a
rating acceptable to Lender and that the applicable Rating Agencies have
confirmed in writing will not, in and of itself, result in a downgrade,
withdrawal or qualification of the initial, or, if higher, then current
ratings assigned in connection with any Securitization, or (4) a completion
bond or irrevocable letter of credit (payable on sight draft only) issued
by a financial institution having a rating by Standard & Poor's Ratings
Group of not less than A-1+ if the term of such bond or letter of credit is
no longer than three (3) months or, if such term is in excess of three (3)
months, issued by a financial institution having a rating that is
acceptable to Lender and that the applicable Rating Agencies have confirmed
in writing will not, in and of itself, result in a downgrade, withdrawal or
qualification of the initial, or, if higher, then current ratings assigned
in connection with any Securitization. Such security shall be in an amount
equal to the excess of the total unpaid amounts with respect to alterations
to the Improvements on the Property (other than such amounts to be paid or
reimbursed by tenants under the Leases) over the Threshold Amount and may
be reduced from time to time by the cost estimated by Lender to terminate
any of the alterations and restore the Property to the extent necessary to
prevent any material adverse effect on the use, operation or value of the
Property or the Net Operating Income with respect to the Property.
Section 10.13Handicapped Access.
(a) Borrower agrees that the Property shall at all times
materially comply to the extent applicable with the requirements of the
Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of
1988, all state and local laws and ordinances related to handicapped access
and all rules, regulations, and orders issued pursuant thereto including,
without limitation, the Americans with Disabilities Act Accessibility
Guidelines for Buildings and Facilities (collectively, "Access Laws").
(b) Notwithstanding any provisions set forth herein or in any
other document regarding Lender's approval of alterations of the Property,
Borrower shall not alter the Property in any manner which would increase
Borrower's responsibilities for compliance with the applicable Access Laws
without the prior written approval of Lender, which are not to be
unreasonably withheld, delayed or conditioned. The foregoing shall apply
to tenant improvements constructed by Borrower or by any of its tenants.
Lender may condition any such approval upon receipt of a certificate of
Access Law compliance from an architect, engineer, or other person
acceptable to Lender.
<PAGE>
(c) Borrower agrees to give prompt notice to Lender of the
receipt by Borrower of any complaints related to violation of any Access
Laws and of the commencement of any proceedings or investigations which
relate to compliance with applicable Access Laws.
Section 10.14Certain Hotel/Operating Lease Covenants. Borrower
further covenants and agrees with Lender as follows:
(a) Borrower shall cause the hotel located on the Property to
be operated pursuant to the Operating Lease and the Management Agreement.
(b) Borrower shall:
(i) to the extent that Borrower has the right or ability to
do so pursuant to any document or other agreement, not permit the
termination, extension or modification or entering into of any Operating
Lease or Management Agreement without Lender's prior written consent, which
consent shall not be unreasonably withheld or delayed;
(ii) notify Lender of any default under the Operating Lease or
Management Agreement of which it is aware within three (3) Business Days
after receiving notice of such default;
(iii) deliver to Lender a copy of each monthly financial
statement, final business plan, final capital expenditures plan, notice,
report (if any) and estimate (if any) received by it under the Operating
Lease or Management Agreement within three (3) Business Days after
receiving such items;
(iv) to the extent that Borrower has the right or ability to
do so pursuant to any document or other agreement, enforce, in a
commercially reasonable manner, the performance and observance of all of
the covenants and agreements required to be performed and/or observed by
the Operating Lessee under each Operating Lease and the Manager under each
Management Agreement within three (3) Business Days after becoming aware of
a violation of such covenants or agreements; and
(v) not change or alter, or permit the changing or altering
of, the brand-name hotel at the Property without Lender's prior written
consent, which consent shall not be unreasonably withheld or delayed.
(c) Notwithstanding anything herein to the contrary, Borrower
may, without the consent of Lender, renew or extend the Operating Lease
only with Operating Lessee on substantially the same terms (or terms more
favorable to Borrower) as the existing Operating Lease.
Section 10.15The Ground Lease. The provisions of Section 3.10
of the Mortgage are hereby incorporated herein by this reference, mutatis
mutandis, as if such Section was set forth herein in full.
Section 10.16O & M Agreement. Borrower will maintain, or cause
to be maintained, in conformity with all applicable laws, rules and
regulations regarding any materials containing asbestos located at the
Property and will comply with the O&M Agreement.
<PAGE>
ARTICLE XI
EVENTS OF DEFAULT
Each of the following shall constitute a default (each, an
"Event of Default") under the Loan:
Section 11.1Payments. Borrower's failure to pay any regularly
scheduled installment of principal, interest or other amount due under the
Loan Documents within five (5) days of (and including) the day it is due,
or Borrower's failure to pay the Loan at the Maturity Date, whether by
acceleration or otherwise.
Section 11.2Insurance. Borrower's failure to maintain
insurance as required under Section 5.1 of this Agreement.
Section 11.3Single Purpose Entity. If Borrower breaches any of
its covenants contained in Section 8.28 or 8.33 hereof.
Section 11.4Insolvency Opinion. If any of the assumptions
contained in the Insolvency Opinion, or any Additional Insolvency Opinion
is or shall become untrue in any material respect.
Section 11.5Taxes. If any of the Taxes are not paid when the
same are due and payable (subject to Borrower's right to contest Taxes
pursuant to Section 10.2 hereof).
Section 11.6Sale, Encumbrance, Etc. The sale, transfer,
conveyance, pledge, mortgage or assignment of any part or all of the
Property, or any interest therein, or of any interest in Borrower, in
violation of the Mortgage or the Second Mortgage.
Section 11.7Representations and Warranties. Any representation
or warranty made in any Loan Document proves to be untrue in any material
respect when made or deemed made.
Section 11.8Additional Loan. Any Event of Default as defined
under the Additional Loan.
Section 11.9Involuntary Bankruptcy or Other Proceeding.
Commencement of an involuntary case or other proceeding against Borrower,
any Borrower Party or any other Person having an ownership or security
interest in the Property (each, a "Bankruptcy Party") which seeks
liquidation, reorganization or other relief with respect to it or its debts
or other liabilities under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeks the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any of its
property, and such involuntary case or other proceeding shall remain
undismissed or unstayed for a period of 90 days; or an order for relief
against a Bankruptcy Party shall be entered in any such case under the
Federal Bankruptcy Code.
Section 11.10Voluntary Petitions, Etc. Commencement by a
Bankruptcy Party of a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts or other liabilities under any bankruptcy, insolvency or other
similar law or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official for it or any of its property, or
consent by a Bankruptcy Party to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or the making by a Bankruptcy Party of a
general assignment for the benefit of creditors, or the failure by a
Bankruptcy Party, or the admission by a Bankruptcy Party in writing of its
inability, to pay its debts generally as they become due, or any action by
a Bankruptcy Party to authorize or effect any of the foregoing;
<PAGE>
Section 11.11Covenants. Borrower's failure to perform or
observe any of the agreements and covenants contained in this Agreement or
in any of the other Loan Documents and not specified above in Sections 11.1
to 11.10, or below in Sections 11.12 to 11.15, and the continuance of such
failure for thirty (30) days after notice by Lender to Borrower; however,
subject to any shorter period for curing any failure by Borrower as
specified in any of the other Loan Documents, Borrower shall have an
additional sixty (60) days to cure such failure if (a) such failure does
not involve the failure to make payments on a monetary obligation; (b) such
failure cannot reasonably be cured within thirty (30) days; (c) Borrower is
diligently undertaking to cure such default; and (d) if reasonably
requested by Lender, Borrower has provided Lender with security reasonably
satisfactory to Lender against any interruption of payment or impairment of
collateral as a result of such continuing failure.
Section 11.12Operating Lease.
(a) If there is a material default by Borrower under the
Operating Lease beyond any applicable notice and cure period; or (b) if the
Operating Lease is amended, modified or terminated in violation of Section
10.14 hereof.
Section 11.13Management Agreement.
(a) If there is a material default by the Borrower or the
Operating Lessee under the Management Agreement (i) which is not cured by
Borrower or (ii) which Borrower is not enforcing its rights under the
Operating Lease with respect thereto; or (b) if the Management Agreement is
amended, modified, terminated or entered into in violation of Section 8.29
hereof.
Section 11.14Ground Lease Rent. If the payment of any rent,
additional rent or other charge mentioned in or made payable by the Ground
Lease as and when such rent or other charge is payable is not made by
Borrower, Operating Lessee or Manager.
Section 11.15Ground Lease Default. If there shall occur any
material default by Borrower, as tenant under the Ground Lease, in the
observance or performance of any term, covenant or condition of the Ground
Lease on the part of Borrower, to be observed or performed, and said
default is not cured within fifteen (15) days prior to the expiration of
any applicable grace period therein provided, or if any one or more of the
events referred to in the Ground Lease shall occur which would cause the
Ground Lease to terminate without notice or action by the landlord under
the Ground Lease or which would entitle the Ground Lessor to terminate the
Ground Lease and the term thereof by giving notice to Borrower, as tenant
thereunder, or if the leasehold estate created by the Ground Lease shall be
surrendered or the Ground Lease shall be terminated or canceled for any
reason or under any circumstances whatsoever, or if any of the terms,
covenants or conditions of the Ground Lease shall in any manner be
modified, changed, supplemented, altered, or amended without the written
consent of Lender.
<PAGE>
ARTICLE XII
REMEDIES
Section 12.1Remedies - Insolvency Events. Upon or during the
occurrence of any Event of Default described in Section 11.9 or 11.10, all
amounts due under the Loan Documents immediately shall become due and
payable, all without written notice and without presentment, demand,
protest, notice of protest or dishonor, notice of intent to accelerate the
maturity thereof, notice of acceleration of the maturity thereof, or any
other notice of default of any kind, all of which are hereby expressly
waived by Borrower.
Section 12.2Remedies - Other Events.
(a) Except as set forth in Section 12.1 above, while any
Event of Default exists, Lender may (i) declare the entire Loan to be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate the maturity thereof,
notice of acceleration of the maturity thereof, or other notice of default
of any kind, all of which are hereby expressly waived by Borrower, and (ii)
exercise all rights and remedies therefor under the Loan Documents and at
law or in equity.
(b) Subject to Section 13.1 hereof, with respect to Borrower
and the Property, nothing contained herein or in any other Loan Document
shall be construed as requiring Lender to resort to the Property for the
satisfaction of any of the Debt, and Lender may seek satisfaction out of
the Property or any part thereof, in its absolute discretion in respect of
the Debt. In addition, Lender shall have the right from time to time to
partially foreclose the Mortgage or the Second Mortgage in any manner and
for any amounts secured by the Mortgage or the Second Mortgage then due and
payable as determined by Lender in its sole discretion including, without
limitation, the following circumstances: (i) in the event Borrower defaults
beyond any applicable grace period in the payment of one or more scheduled
payments of principal and interest, Lender may foreclose the Mortgage to
recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose the Mortgage to recover so much of the principal
balance of the Loan as Lender may accelerate and such other sums secured by
the Mortgage as Lender may elect. Notwithstanding one or more partial
foreclosures, the Property shall remain subject to the Mortgage or the
Second Mortgage to secure payment of sums secured by the Mortgage or the
Second Mortgage and not previously recovered.
(c) Lender shall have the right from time to time to sever
the Note and the other Loan Documents into one or more separate notes,
mortgages and other security documents (the "Severed Loan Documents") in
such denominations as Lender shall determine in its sole discretion for
purposes of evidencing and enforcing its rights and remedies provided
hereunder. Borrower shall execute and deliver to Lender from time to time,
promptly after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably
satisfactory to Lender. Borrower hereby absolutely and irrevocably
appoints Lender as its true and lawful attorney, coupled with an interest,
in its name and stead to make and execute all documents necessary or
desirable to effect the aforesaid severance, Borrower ratifying all that
its said attorney shall do by virtue thereof; provided, however, Lender
shall not make or execute any such documents under such power until three
(3) days after notice has been given to Borrower by Lender of Lender's
intent to exercise its rights under such power.
<PAGE>
Section 12.3Lender's Right to Perform the Obligations. If
Borrower shall fail, refuse or neglect to make any payment or perform any
act required by the Loan Documents, then while any Event of Default exists,
and without notice to or demand upon Borrower and without waiving or
releasing any other right, remedy or recourse Lender may have because of
such Event of Default, Lender may (but shall not be obligated to) make such
payment or perform such act for the account of and at the expense of
Borrower, and shall have the right to enter upon the Property for such
purpose and to take all such action thereon and with respect to the
Property as it may deem necessary or appropriate. If Lender shall elect to
pay any sum due with reference to the Property, Lender may do so in
reliance on any bill, statement or assessment procured from the appropriate
governmental authority or other issuer thereof without inquiring into the
accuracy or validity thereof. Similarly, in making any payments to protect
the security intended to be created by the Loan Documents, Lender shall not
be bound to inquire into the validity of any apparent or threatened adverse
title, lien, encumbrance, claim or charge before making an advance for the
purpose of preventing or removing the same. Borrower shall indemnify
Lender for all losses, expenses, damages, claims and causes of action,
including reasonable attorneys' fees, incurred or accruing by reason of any
acts performed by Lender pursuant to the provisions of this Section 12.3;
provided, however, that Borrower shall not be liable under such
indemnification to the extent such losses, expenses, damages, claims and
causes of action result solely from Lender's gross negligence or willful
misconduct and arise after the point in time that Lender takes title and
actual possession of the Property. All sums paid by Lender pursuant to
this Section 12.3, and all other sums expended by Lender to which it shall
be entitled to be indemnified, together with interest thereon at the
Default Rate from the date of such payment or expenditure until paid, shall
constitute additions to the Loan, shall be secured by the Loan Documents
and shall be paid by Borrower to Lender upon demand.
Section 12.4Cross-Default; Cross-Collateralization; Waiver of
Marshalling of Assets.
(a) The Borrower acknowledges that Lender has made the Loan
and the Additional Loan to the Borrower upon the security of the collective
interest in the Property and the Additional Property of the Borrower, and
in reliance upon the aggregate of the Property and the Additional Property
taken together being of greater value as collateral security than the sum
of the Property and the Additional Property taken separately. The Borrower
agrees that the Loan is and will be cross-collateralized and cross-
defaulted with the Additional Loan so that (i) an Event of Default under
the Mortgage shall constitute an Event of Default with respect to the deed
of trust executed in connection with the Additional Loan and an Event of
Default under any of such other deed of trust executed in connection with
the Additional Loan shall be an Event of Default under the Mortgage; and
(ii) an Event of Default under the Note or this Loan Agreement shall
constitute an Event of Default under the Additional Loan and an Event of
Default under the Additional Loan shall constitute an Event of Default
under the Note and this Loan Agreement.
(b) To the fullest extent permitted by law, Borrower, for
itself and its successors and assigns, waives all rights to a marshalling
of the assets of Borrower, Borrower's partners and others with interests in
Borrower, and of the Property, or to a sale in inverse order of alienation
in the event of foreclosure of the Mortgage or the Second Mortgage, and
agrees not to assert any right under any laws pertaining to the marshalling
of assets, the sale in inverse order of alienation, homestead exemption,
the administration of estates of decedents, or any other matters whatsoever
to defeat, reduce or affect the right of Lender under the Loan Documents to
a sale of the Property for the collection of the Debt without any prior or
different resort for collection or of the right of Lender to the payment of
the Debt out of the net proceeds of the Property in preference to every
other claimant whatsoever.
<PAGE>
ARTICLE XIII
LIMITATIONS ON LIABILITY
Section 13.1Limitation on Liability. Except as provided below,
none of Borrower, any partner of Borrower, any partner, member,
shareholder, director, officer, employee or agent of Borrower or of any
such partner, and any legal representative, heir, estate, successor or
assign of any of the foregoing, shall be personally liable for amounts due
under the Loan Documents. Borrower, but not any partner, member,
shareholder, director, officer, employee or agent of Borrower or any such
partner, shall be personally liable to Lender for any deficiency, loss or
damage suffered by Lender because of: (a) Borrower's commission of a
criminal act; (b) the failure to comply with provisions of the Loan
Documents prohibiting the sale, transfer or encumbrance of the Property,
any other collateral, or any direct or indirect ownership interest in
Borrower; (c) the misapplication by Borrower or any Borrower Party of any
funds derived from the Property, including security deposits, insurance
proceeds and condemnation awards; (d) the fraud or intentional
misrepresentation by Borrower or any Borrower Party now or hereafter made
in or in connection with the Loan Documents or the Loan including any
statements or certificates delivered under the Loan Documents;
(e) Borrower's collection of rents more than one month in advance (except
for bona fide security deposits under the Operating Lease) or entering into
or modifying Leases, or receipt of monies by Borrower or any Borrower Party
in connection with the modification of any Leases, in violation of this
Agreement or any of the other Loan Documents; (f) Borrower's failure to
apply proceeds of rents or any other payments in respect of the Leases and
other income of the Property or any other collateral to the costs of
maintenance and operation of the Property and to the payment of taxes, lien
claims, insurance premiums, Debt Service and other amounts due under the
Loan Documents; (g) Borrower's interference with Lender's exercise of
rights under the Assignment of Leases and Rents; (h) Borrower's failure to
maintain insurance as required by this Agreement or to pay any taxes or
assessments affecting the Property; (i) waste to the Property caused by the
intentional acts or omissions of Borrower, its agents, employees, or
contractors; (j) Borrower's obligations with respect to environmental
matters under Article 6; (k) Borrower's failure to pay for any loss,
liability or expense (including reasonable attorneys' fees) incurred by
Lender arising out of any claim or allegation made by Borrower, its
successors or assigns, or any creditor of Borrower, that this Agreement or
the transactions contemplated by the Loan Documents establishes a joint
venture, partnership or other similar arrangement between Borrower and
Lender; (l) any brokerage commission or finder's fees claimed in connection
with the transactions contemplated by the Loan Documents or (m) Borrower's
indemnification of Lender set forth in Section 14.2 hereafter.
Notwithstanding anything to the contrary in this Agreement, the
Note or any of the Loan Documents, (i) Lender shall not be deemed to have
waived any right which Lender may have under Section 506(a), 506(b),
1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim
for the full amount of the Debt secured by the Mortgage or the Second
Mortgage or to require that all collateral shall continue to secure all of
the Debt owing to Lender in accordance with the Loan Documents, and (ii)
the Debt shall be fully recourse to Borrower, but not any partner, member,
shareholder, director, officer, employee or agent of Borrower or any such
partner, in the event that: (A) there is a default under Section 11.10
hereof; (B) Borrower fails to obtain Lender's prior written consent to any
subordinate financing or other voluntary lien encumbering the Property in
violation of the Loan Documents; or (C) Borrower fails to obtain Lender's
prior written consent to any assignment, transfer, or conveyance of the
Property or any interest therein as required by the Loan Documents.
<PAGE>
Section 13.2Limitation on Liability of Lender's Officers,
Employees, Etc. Any obligation or liability whatsoever of Lender which may
arise at any time under this Agreement or any other Loan Document shall be
satisfied, if at all, out of Lender's interest in the Property only. No
such obligation or liability shall be personally binding upon, nor shall
resort for the enforcement thereof be had to, the property of any of
Lender's shareholders, directors, officers, employees or agents, regardless
of whether such obligation or liability is in the nature of contract, tort
or otherwise.
ARTICLE XIV
SECURITIZATION
Section 14.1Securitization.
At the request of the holder of the Note and, to the extent not
already required to be provided by Borrower under this Agreement and to the
extent readily available to Borrower at no third-party cost, Borrower
shall, subject to the provisions of clause (b) hereof, use reasonable
efforts to satisfy the market standards to which the holder of the Note
customarily adheres or which may be reasonably required in the marketplace
or by the Rating Agencies in connection with the sale of the Note or
participation therein or the first successful securitization (such sale
and/or securitization, the "Securitization") of rated single or multi-class
securities (the "Securities") secured by or evidencing ownership interests
in the Note and the Mortgage, including, without limitation, to:
(a) (i) provide such financial and other information with respect to
the Property, the Borrower, the Operating Partnership, the Operating Lessee
and the Manager,
(ii) provide budgets relating to the Property, and
(iii) to, upon ten (10) days' prior written notice to Borrower,
perform or permit or cause to be performed or permitted such site
inspection, appraisals, market studies, environmental reviews and reports
(Phase I's and, if appropriate, Phase II's), engineering reports and other
due diligence investigations of the Property, as may be reasonably
requested by the holder of the Note or the Rating Agencies or as may be
necessary or appropriate in connection with the Securitization (the
"Securitization Information"), which items described in this subsection
(iii) shall be at the cost of Lender, together, if customary, with
appropriate verification and/or consents of the Securitization Information
through letters of auditors or opinions of counsel of independent attorneys
reasonably acceptable to the Lender and the Rating Agencies;
(b) execute such amendments to the Loan Documents and
organizational documents as may be reasonably requested by the holder of
the Note or the Rating Agencies or otherwise to effect the Securitization;
provided, however, that the Borrower shall not be required to modify or
amend any Loan Document if such modification or amendment would (i) change
the interest rate, the stated maturity or the amortization of principal set
forth in the Note, (ii) modify or amend any other material economic term of
the Loan, or (iii) otherwise materially reduce Borrower's rights or
materially increase its obligations under the Loan Documents.
All reasonable third party costs and expenses incurred by
Lender in connection with Borrower's complying with requests made under
this Section 14.1, including, without limitation, costs incurred in
connection with the Securitization Information, shall be paid by the
Lender; provided, that, Borrower shall be responsible for all costs and
expenses incurred by Borrower in complying with such requests, including
without limitation (i) any costs and expenses incurred by Borrower in
compiling the Securitization Information (except as set forth in clause (a)
(iii) above) or financial statements, and (ii) Borrower's attorney's fees.
<PAGE>
Section 14.2Securitization Indemnification.
(a) Borrower understands that certain of the Securitization
Information and the financial reports relating to the Property may be
included in disclosure documents in connection with the Securitization,
including, without limitation, a prospectus, prospectus supplement or
private placement memorandum (each, an "Offering Document") and may also be
included in filings with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Securities Act"), or the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or
provided or made available to investors or prospective investors in the
Securities, the Rating Agencies, and service providers relating to the
Securitization. In the event that the Offering Document is required to be
revised prior to the sale of all Securities, the Borrower will cooperate
with the holder of the Note in updating the Offering Document by providing
all current information reasonably necessary, but at no out-of-pocket cost
to Borrower, to keep the Offering Document accurate and complete in all
material respects.
(b) Borrower agrees to provide in connection with each of (i)
a preliminary and a private placement memorandum or (ii) a preliminary and
final prospectus or prospectus supplement, as applicable, upon receipt by
Borrower of a copy of such memorandum and/or prospectus, an indemnification
certificate (A) certifying that Borrower has carefully examined such
memorandum or prospectus, as applicable (such review being limited to those
sections of the memorandum or prospectus, as applicable, requested by
Lender in writing; provided, however, that, Borrower shall not be
responsible for any information supplied by third parties nor shall
Borrower be responsible for statistical or numerical information contained
therein) and the sections reviewed by Borrower do not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made, in the light of the circumstances under
which they were made, not misleading, (B) indemnifying Lender (and for
purposes of this Section 14.2, Lender hereunder shall include its officers
and directors), any affiliate of Lender that has filed or may file the
registration statement relating to the securitization (the "Registration
Statement"), each of its directors, each of its officers who have signed
the Registration Statement and each person or entity who controls the
affiliate within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, and Lender, each of its directors and each person
who controls Lender within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act (collectively, the "Underwriter Group")
for any losses, claims, damages or liabilities (the "Liabilities") to which
Lender, or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such sections for which
Borrower is responsible or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated in
such sections or necessary in order to make the statements in such sections
for which Borrower is responsible or in light of the circumstances under
which they were made, not misleading and (C) agreeing to reimburse Lender
and the Underwriter Group for any legal or other expenses reasonably
incurred by Lender in connection with investigating or defending the
Liabilities; provided, however, that Borrower will be liable in any such
case under clauses (B) or (C) above only to the extent that any such loss
claim, damage or liability arises out of or is based upon any such untrue
statement or omission made therein in reliance upon and in conformity with
information furnished to Lender by or on behalf of Borrower in connection
with the preparation of the memorandum or prospectus or in connection with
the underwriting of the debt, in connection with financial statements of
Borrower, operating statements, environmental site assessment reports and
property condition reports with respect to the Property, and only if such
sections are not materially revised after Borrower's review of same. This
indemnity agreement will be in addition to any liability which Borrower may
otherwise have.
<PAGE>
(c) In connection with filings under the Exchange Act,
Borrower agrees to indemnify (i) Lender, and the Underwriter Group for
Liabilities to which Lender, or the Underwriter Group may become subject
insofar as the Liabilities arise out of or are based upon the omission or
alleged omission to state in the Securitization Information or financial
reports relating to the Property a material fact required to be stated in
the Securitization Information or financial reports relating to the
Property in order to make the statements in the Securitization Information
or financial reports relating to the Property, in light of the
circumstances under which they were made not misleading and (ii) reimburse
Lender or the Underwriter Group for any legal or other expenses reasonably
incurred by Lender or the Underwriter Group in connection with defending or
investigating the Liabilities.
(d) Promptly after receipt by an indemnified party under this
Section 14.2 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 14.2, notify the indemnifying party
in writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from any
liability which the indemnifying party may have to any indemnified party
hereunder except to the extent that failure to notify causes prejudice to
the indemnifying party. In the event that any action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled, jointly with
any other indemnifying party, to participate therein and, to the extent
that it (or they) may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof with counsel reasonably satisfactory
to such indemnified party. After notice from the indemnifying party to
such indemnified party under this Section 14.2 the indemnifying party shall
be responsible for any reasonable legal or other reasonable expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there are any legal defenses available to it
and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. The indemnifying party shall
not be liable for the expenses of more than one separate counsel unless an
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or additional to those
available to another indemnified party.
(e) In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in Section
14.2(b) or (c) is for any reason held to be unenforceable by an indemnified
party in respect of any losses, claims, damages or liabilities (or action
in respect thereof) referred to therein which would otherwise be
indemnifiable under Section 14.2(b) or (c), the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages or liabilities (or action in respect
thereof); provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, the following
factors shall be considered: (i) Lender's and Borrower's relative knowledge
and access to information concerning the matter with respect to which claim
was asserted; (ii) the opportunity to correct and prevent any statement or
omission; and (iii) any other equitable considerations appropriate in the
circumstances.
<PAGE>
(f) The liabilities and obligations of both Borrower and
Lender under this Section 14.2 shall survive the termination of this
Agreement and the satisfaction and discharge of the Debt.
Section 14.3Servicer. At the option of Lender and at no cost
to Borrower, the Loan may be serviced by a Servicer/Trustee ("Servicer")
selected by Lender. Lender may delegate all or any portion of its
responsibilities under this Agreement and the other Loan Documents to the
Servicer pursuant to a servicing agreement ("Servicing Agreement") between
Lender and Servicer.
Section 14.4Uncrossing the Loan and the Additional Loan. At
the election of Lender in its sole discretion, the Loan and the Additional
Loan will no longer be cross-collateralized or cross-defaulted with each
other. Borrower, at Lender's sole cost and expense, hereby agrees to form
a new Single Purpose Bankruptcy Remote Entity borrower and to deliver to
Lender to effectuate such un-crossing of the Loan, and the Additional Loan,
as reasonably requested by Lender, (a) additional executed documents, or
amendments and modifications to the Loan Documents, (b) new opinions or
updates to the opinions delivered to Lender in connection with the closing
of the Loan, (c) endorsements and/or updates to the title insurance policy
delivered to Lender in connection with the closing of the Loan, and (d) any
other certificates, instruments and documentation reasonably determined by
Lender as necessary or appropriate to such uncrossing (the items described
in subsections (a) through (d) collectively hereinafter referred to as the
"Severing Documentation"), which Severing Documentation shall be acceptable
to Lender in form and substance in its reasonable discretion. Borrower
hereby covenants and agrees to be responsible for Borrower's attorney's
fees incurred in connection with the preparation and delivery of the
Severing Documentation and the effectuation of the uncrossing of the Loan
from the Additional Loan. Borrower hereby acknowledges and agrees that
upon such uncrossing of the Loan and the Additional Loan, Lender may
effect, in its sole discretion, one or more Securitizations of which the
Loan and/or the Additional Loan may be a part. Borrower and Lender hereby
acknowledge and agree that upon the uncrossing of the Loan from all of the
Additional Loan (i.e., the Loan being then a "stand alone" Loan), the
Severing Documentation shall, include an amendment to this Agreement
replacing the definition of "Adjusted Release Amount" to read "means the
outstanding principal balance of the Loan."
ARTICLE XV
MISCELLANEOUS
Section 15.1Notices. Any notice required or permitted to be
given under this Agreement shall be in writing and either shall be mailed
by certified mail, postage prepaid, return receipt requested, or sent by
overnight air courier service, or personally delivered to a representative
of the receiving party, or sent by telecopy (provided an identical notice
is also sent simultaneously by mail, overnight courier, or personal
delivery as otherwise provided in this Section 15.1). All such
communications shall be mailed, sent or delivered, addressed to the party
for whom it is intended at its address set forth below.
<PAGE>
If to Borrower: c/o LaSalle Hotel Properties
1401 Eye Street, NW
Washington, DC 20005
Attention: Mr. Hans Weger
Telecopy: (202) 222-2653
With a copy to: Brown & Wood LLP
One World Trade Center
New York, N.Y. 10048-0557
Attention: Michael F. Taylor, Esq.
Telecopy: (212) 839-5599
If to Lender: General Electric Capital Corporation
c/o GE Capital Loan Servicing, Inc.
363 North Sam Houston Parkway East, Suite 1200
Houston, Texas 77060
Attention: Legal Department
Telecopy: (281) 405-7153
With a copy to: General Electric Capital Corporation
92 Long Ridge Road
Stamford, Connecticut 06927
Attention: Paul Mundinger, Esq.
Telecopy: (203) 357-6364
Any communication so addressed and mailed shall be deemed to be given on
the earliest of (a) when actually delivered, (b) on the first Business Day
after deposit with an overnight air courier service, or (c) on the third
Business Day after deposit in the United States mail, postage prepaid, in
each case to the address of the intended addressee, and any communication
so delivered in person shall be deemed to be given when receipted for by,
or actually received by Lender or Borrower, as the case may be. If given
by telecopy, a notice shall be deemed given and received when the telecopy
is transmitted to the party's telecopy number specified above confirmation
of complete receipt is received by the transmitting party during normal
business hours or on the next Business Day if not confirmed during normal
business hours. Either party may designate a change of address by written
notice to the other by giving at least ten (10) days prior written notice
of such change of address.
Section 15.2Amendments and Waivers. No amendment or waiver of
any provision of the Loan Documents shall be effective unless in writing
and signed by the party against whom enforcement is sought.
Section 15.3Limitation on Interest. It is the intention of the
parties hereto to conform strictly to applicable usury laws. Accordingly,
all agreements between Borrower and Lender with respect to the Loan are
hereby expressly limited so that in no event, whether by reason of
acceleration of maturity or otherwise, shall the amount paid or agreed to
be paid to Lender or charged by Lender for the use, forbearance or
detention of the money to be lent hereunder or otherwise, exceed the
maximum amount allowed by law. If the Loan would be usurious under
applicable law (including the laws of the State and the laws of the United
States of America), then, notwithstanding anything to the contrary in the
Loan Documents: (a) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, taken, reserved,
charged or received under the Loan Documents shall under no circumstances
exceed the maximum amount of interest allowed by applicable law, and any
excess shall be credited on the Note by the holder thereof; and (b) if
maturity is accelerated by reason of an election by Lender, or in the event
of any prepayment, then any consideration which constitutes interest may
never include more than the maximum amount allowed by applicable law. In
<PAGE>
such case, excess interest, if any, provided for in the Loan Documents or
otherwise, to the extent permitted by applicable law, shall be amortized,
prorated, allocated and spread from the date of advance until payment in
full so that the actual rate of interest is uniform through the term
hereof. If such amortization, proration, allocation and spreading is not
permitted under applicable law, then such excess interest shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited on the Note. The terms and provisions
of this Section 15.3 shall control and supersede every other provision of
the Loan Documents. The Loan Documents are contracts made under and shall
be construed in accordance with and governed by the laws of the State,
except that if at any time the laws of the United States of America permit
Lender to contract for, take, reserve, charge or receive a higher rate of
interest than is allowed by the laws of the State (whether such federal
laws directly so provide or refer to the law of any state), then such
federal laws shall to such extent govern as to the rate of interest which
Lender may contract for, take, reserve, charge or receive under the Loan
Documents.
Section 15.4Invalid Provisions. If any provision of any Loan
Document is held to be illegal, invalid or unenforceable, such provision
shall be fully severable; the Loan Documents shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part thereof; the remaining provisions thereof shall remain in
full effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance therefrom; and in lieu of such
illegal, invalid or unenforceable provision there shall be added
automatically as a part of such Loan Document a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be
possible to be legal, valid and enforceable.
Section 15.5Reimbursement of Expenses. Borrower shall pay all
reasonable expenses incurred by Lender in connection with the Loan,
including reasonable fees and expenses of Lender's attorneys,
environmental, engineering and other consultants, and fees, charges or
taxes for the recording or filing of Loan Documents. Borrower shall pay
all expenses of Lender in connection with the administration of the Loan,
including audit costs, inspection fees, settlement of condemnation and
casualty awards, and premiums for title insurance and endorsements thereto.
Borrower shall, upon request, promptly reimburse Lender for all reasonable
amounts expended, advanced or incurred by Lender to collect the Note, or to
enforce the rights of Lender under this Agreement or any other Loan
Document, or to defend or assert the rights and claims of Lender under the
Loan Documents or with respect to the Property (by litigation or other
proceedings), which amounts will include all court costs, reasonable
attorneys' fees and expenses, reasonable fees of auditors and accountants,
and reasonable investigation expenses as may be incurred by Lender in
connection with any such matters (whether or not litigation is instituted),
together with interest at the Default Rate on each such amount from the
date of disbursement until the date of reimbursement to Lender, all of
which shall constitute part of the Loan and shall be secured by the Loan
Documents.
Section 15.6Approvals; Third Parties; Conditions. All approval
rights retained or exercised by Lender with respect to Leases, contracts,
plans, studies and other matters are solely to facilitate Lender's credit
underwriting, and shall not be deemed or construed as a determination that
Lender has passed on the adequacy thereof for any other purpose and may not
be relied upon by Borrower or any other Person. This Agreement is for the
sole and exclusive use of Lender and Borrower and may not be enforced, nor
relied upon, by any Person other than Lender and Borrower. All conditions
of the obligations of Lender hereunder, including the obligation to make
advances, are imposed solely and exclusively for the benefit of Lender, its
<PAGE>
successors and assigns, and no other Person shall have standing to require
satisfaction of such conditions or be entitled to assume that Lender will
refuse to make advances in the absence of strict compliance with any or all
of such conditions, and no other Person shall, under any circumstances, be
deemed to be a beneficiary of such conditions, any and all of which may be
freely waived in whole or in part by Lender at any time in Lender's sole
discretion.
Section 15.7Lender Not in Control; No Partnership. None of the
covenants or other provisions contained in this Agreement shall, or shall
be deemed to, give Lender the right or power to exercise control over the
affairs or management of Borrower, the power of Lender being limited to the
rights to exercise the remedies referred to in the Loan Documents. The
relationship between Borrower and Lender is, and at all times shall remain,
solely that of debtor and creditor. No covenant or provision of the Loan
Documents is intended, nor shall it be deemed or construed, to create a
partnership, joint venture, agency or common interest in profits or income
between Lender and Borrower or to create an equity in the Property in
Lender. Lender neither undertakes nor assumes any responsibility or duty
to Borrower or to any other person with respect to the Property or the
Loan, except as expressly provided in the Loan Documents; and
notwithstanding any other provision of the Loan Documents: (a) Lender is
not, and shall not be construed as, a partner, joint venturer, alter ego,
manager, controlling person or other business associate or participant of
any kind of Borrower or its stockholders, members, or partners and Lender
does not intend to ever assume such status; (b) Lender shall in no event be
liable for any debts, expenses or losses incurred or sustained by Borrower
unless such debts, expenses or losses are caused solely by Lender's gross
negligence or willful misconduct; and (c) Lender shall not be deemed
responsible for or a participant in any acts, omissions or decisions of
Borrower or its stockholders, members, or partners. Lender and Borrower
disclaim any intention to create any partnership, joint venture, agency or
common interest in profits or income between Lender and Borrower, or to
create an equity in the Property in Lender, or any sharing of liabilities,
losses, costs or expenses.
Section 15.8Time of the Essence. Time is of the essence with
respect to this Agreement.
Section 15.9Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of Lender and Borrower and their
respective successors and assigns of Lender and Borrower, provided that,
except as permitted under the Loan Documents, neither Borrower nor any
other Borrower Party shall, without the prior written consent of Lender,
assign any rights, duties or obligations hereunder.
Section 15.10Renewal, Extension or Rearrangement. All
provisions of the Loan Documents shall apply with equal effect to each and
all promissory notes and amendments thereof hereinafter executed which in
whole or in part represent a renewal, extension, increase or rearrangement
of the Loan.
Section 15.11Waivers. No course of dealing on the part of
Lender, its officers, employees, consultants or agents, nor any failure or
delay by Lender with respect to exercising any right, power or privilege of
Lender under any of the Loan Documents, shall operate as a waiver thereof.
Section 15.12Cumulative Rights; Joint and Several Liability.
Rights and remedies of Lender under the Loan Documents shall be cumulative,
and the exercise or partial exercise of any such right or remedy shall not
preclude the exercise of any other right or remedy. If more than one
person or entity has executed this Agreement as "Borrower," the obligations
of all such persons or entities hereunder shall be joint and several.
<PAGE>
Section 15.13Singular and Plural. Words used in this Agreement
and the other Loan Documents in the singular, where the context so permits,
shall be deemed to include the plural and vice versa. The definitions of
words in the singular in this Agreement and the other Loan Documents shall
apply to such words when used in the plural where the context so permits
and vice versa.
Section 15.14Phrases. When used in this Agreement and the other
Loan Documents, the phrase "including" shall mean "including, but not
limited to," the phrase "satisfactory to Lender" shall mean "in form and
substance satisfactory to Lender in all respects," the phrase "with
Lender's consent" or "with Lender's approval" shall mean such consent or
approval at Lender's discretion, and the phrase "acceptable to Lender"
shall mean "acceptable to Lender at Lender's sole discretion."
Section 15.15Exhibits and Schedules. The exhibits and schedules
attached to this Agreement are incorporated herein and shall be considered
a part of this Agreement for the purposes stated herein.
Section 15.16Titles of Articles, Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions of
this Agreement and the other Loan Documents or the exhibits hereto and
thereto are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other content
of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 15.17Promotional Material. Lender may issue press
releases, advertisements and other promotional materials in connection with
its respective promotional and marketing activities, and such materials may
describe the Loan in general terms or in detail. All references to Lender
or the REIT or the Operating Partnership contained in any press release,
advertisement or promotional material issued by Lender or Borrower shall be
approved in writing by Lender or Borrower shall be approved in writing by
the other party in advance of issuance, which approval shall not be
unreasonably withheld, delayed or conditioned. The provisions of this
Section 15.17 shall not, however, apply in any respect to references or
descriptions in disclosure, presentations or promotional material by Lender
or any other Person made in connection with a Securitization or any other
sale or marketing of the Loan for which no consent is required by Borrower
or any other Person.
Section 15.18Survival. All of the representations, warranties,
covenants, and indemnities hereunder (including environmental matters under
Article 6), and under the indemnification provisions of the other Loan
Documents shall survive the repayment in full of the Loan and the release
of the liens evidencing or securing the Loan, and shall survive the
transfer (by sale, foreclosure, conveyance in lieu of foreclosure or
otherwise) of any or all right, title and interest in and to the Property
to any party, whether or not an Affiliate of Borrower.
Section 15.19WAIVER OF JURY TRIAL. BORROWER HEREBY AGREES NOT
TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES
ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER
OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER,
AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
Section 15.20Waiver of Punitive or Consequential Damages.
Neither Lender nor Borrower shall be responsible or liable to the other or
to any other Person for any punitive, exemplary or consequential damages
which may be alleged as a result of the Loan or the transaction
contemplated hereby, including any breach or other default by any party
hereto.
<PAGE>
Section 15.21Governing Law.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK,
AND MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND
THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE
STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED
HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES
OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA,
EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND
ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND
PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT
BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH
STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION,
VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT
PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES
ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S
OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK,
COUNTY OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR
HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER
DOES HEREBY DESIGNATE AND APPOINT BROWN &WOOD LLP AS ITS AUTHORIZED AGENT
TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS
WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS
UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED
OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE
PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT
HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A
SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH
SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS
FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A
SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK,
NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 15.22Entire Agreement. This Agreement and the other
Loan Documents embody the entire agreement and understanding between Lender
and Borrower and supersede all prior agreements and understandings between
such parties relating to the subject matter hereof and thereof.
Accordingly, the Loan Documents may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties.
There are no unwritten oral agreements between the parties.
Section 15.23Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall constitute an original, but all
of which shall constitute one document.
<PAGE>
Section 15.24Brokers and Financial Advisors. Borrower hereby
represents that it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. Borrower hereby agrees to
indemnify, defend and hold Lender harmless from and against any and all
claims, liabilities, costs and expenses of any kind (including Lender's
attorneys' fees and expenses) in any way relating to or arising from a
claim by any Person that such Person acted on behalf of Borrower or Lender
in connection with the transactions contemplated herein. The provisions of
this Section 15.24 shall survive the expiration and termination of this
Agreement and the payment of the Debt.
Section 15.25Conflicts. In the event of any conflict between
the provisions of this Agreement and any of the other Loan Documents, the
provisions of this Agreement shall control.
EXECUTED as of the date first written above.
LENDER: GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation
By: /s/ Peter Tzelios
------------------------------
Name:Peter Tzelios
------------------------------
Title: Authorized Signatory
------------------------------
BORROWER: LHO FINANCING PARTNERSHIP I, L.P.,
a Delaware limited partnership
By: LHO Financing, Inc.,
a Delaware corporation
By: /s/ Hans Weger
------------------------
Name: Hans Weger
------------------------
Title: Chief Financial Officer
------------------------
<PAGE>
JOINDER
-------
By executing this Joinder (the "Joinder"), the undersigned
("Joinder Party") guarantees the performance by Borrower of all obligations
and liabilities for which Borrower is personally liable under Section 13.1
of this Agreement. This Joinder is a guaranty of full and complete payment
and performance and not of collectibility.
1. Waivers. To the fullest extent permitted by applicable
law, the Joinder Party waives all rights and defenses of sureties,
guarantors, accommodation parties and/or co-makers and agrees that its
obligations under this Joinder shall be primary, absolute and
unconditional, and that its obligations under this Joinder shall be
unaffected by any of such rights or defenses, including:
(a) the unenforceability of any Loan Document against
Borrower and/or any guarantor or the Joinder Party;
(b) any release or other action or inaction taken by Lender
with respect to the collateral, the Loan, Borrower, any guarantor and/or
the Joinder Party, whether or not the same may impair or destroy any
subrogation rights of the Joinder Party, or constitute a legal or equitable
discharge of any surety or indemnitor;
(c) the existence of any collateral or other security for the
Loan, and any requirement that Lender pursue any of such collateral or
other security, or pursue any remedies it may have against Borrower, any
guarantor and/or the Joinder Party;
(d) any requirement that Lender provide notice to or obtain
the Joinder Party's consent to any modification, increase, extension or
other amendment of the Loan, including the guaranteed obligations;
(e) any right of subrogation (until payment in full of the
Loan, including the guaranteed obligations, and the expiration of any
applicable preference period and statute of limitations for fraudulent
conveyance claims);
(f) any defense based on any statute of limitations;
(g) any payment by Borrower to Lender if such payment is held
to be a preference or fraudulent conveyance under bankruptcy laws or Lender
is otherwise required to refund such payment to Borrower or any other
party; and
(h) any voluntary or involuntary bankruptcy, receivership,
insolvency, reorganization or similar proceeding affecting Borrower or any
of its assets.
2. Agreements. The Joinder Party further represents,
warrants and agrees that:
(a) The obligations under this Joinder are enforceable
against Joinder Party and are not subject to any defenses, offsets or
counterclaims;
(b) The provisions of this Joinder are for the benefit of
Lender and its successors and assigns;
<PAGE>
(c) Lender shall have the right to (i) renew, modify, extend
or accelerate the Loan, (ii) pursue some or all of its remedies against
Borrower, any guarantor or the Joinder Party, (iii) add, release or
substitute any collateral for the Loan or party obligated thereunder, and
(iv) release Borrower, any guarantor or the Joinder Party from liability,
all without notice to or consent of the Joinder Party (or other Joinder
Party) and without affecting the obligations of the Joinder Party
hereunder;
(d) The Joinder Party covenants and agrees to furnish to
Lender, within ninety (90) days after the end of each calendar year, a
current (as of the end of such calendar year) balance sheet of the Joinder
Party, in scope and detail reasonably satisfactory to Lender, certified by
an officer of the Joinder Party and, if required by Lender, prepared on a
review basis and certified by an independent public accountant reasonably
satisfactory to Lender; and
(e) To the maximum extent permitted by law, the Joinder Party
hereby knowingly, voluntarily and intentionally waives the right to a trial
by jury in respect of any litigation based hereon. This waiver is a
material inducement to Lender to enter into this Agreement.
This Joinder shall be governed by the laws of the State of New
York.
Executed as of July 29, 1999.
[Signature appears on the following page]
<PAGE>
JOINDER PARTY: LASALLE HOTEL OPERATING PARTNERSHIP,
a Delaware limited partnership
By: /s/ Hans Weger
------------------------------
Name:Hans Weger
------------------------------
Title: Chief Financial Officer
------------------------------
EXHIBIT 10.2
- ------------
LHO FINANCING PARTNERSHIP I, L.P.
(Borrower)
to
GENERAL ELECTRIC CAPITAL CORPORATION
(Lender)
______________________________________________________________
FEE AND LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
______________________________________________________________
Dated: As of July 29, 1999
Property Location: 7800 Normandale Boulevard
Bloomington
Hennepin County, Minnesota
DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Reese Mason, Esq.
<PAGE>
FEE AND LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES
AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING
-------------------------------------------------
This Fee and Leasehold Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing (this "Mortgage") is executed
as of July 29, 1999, by LHO FINANCING PARTNERSHIP I, L.P., a Delaware
limited partnership ("Borrower"), whose address for notice hereunder is
1401 Eye Street, N.W., Suite 900, Washington, D.C. 20005 for the benefit of
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("Lender"),
whose address for notice is 292 Long Ridge Road, Stamford, Connecticut
06927.
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used herein, the following terms
shall have the following meanings:
"Debt": The sum of all (a) principal, interest and all other
amounts due under or secured by the Loan Documents (b) any and all advances
or disbursements made by Lender of funds other than funds deposited with
Lender by Borrower to protect and preserve the Property, or the lien hereof
on the Property, including without limitation, advances or disbursements
made for the payment of taxes, levies or insurance on the Property,
advances or disbursements made under the Loan Agreement to enable
completion of improvements on or to the Property and advances or
disbursements made to repair or maintain the Property, with interest on all
such advances or disbursements, and (c) all other indebtedness, obligations
and liabilities now or hereafter existing of any kind of Borrower to Lender
under documents which recite that they are intended to be secured by this
Mortgage.
"Ground Lease": The Ground Lease dated March 14, 1980, between
Arleen M. Carlson, Burton W. Bauernfeind and Matthew J. Levitt, as trustees
of the Curtis L. Carlson Hennepin Trust, as lessor (such lessor and its
respective successors and assigns are hereinafter collectively referred to
as the "Ground Lessor"), and Radisson South Company, as lessee, a
memorandum of which was recorded on December 31, 1989 as Document No.
4954763 of the records of Hennepin County, Minnesota, as subsequently
assigned to Borrower by Assignment of Lease dated April 29, 1998.
"Loan": The Loan made to the Borrower by the Lender as
evidenced and secured by the Loan Documents.
"Loan Documents": The (a) Loan Agreement of even date
herewith, between Borrower and Lender (the "Loan Agreement"),
(b) Promissory Note of even date, executed by Borrower, payable to the
order of Lender, in the stated principal amount of $30,300,000.00, (the
"Note") (c) this Mortgage, (d) Second Fee and Leasehold Mortgage,
Assignment of Leases and Rents, Security Agreement and Fixture Filing of
even date herewith, executed by Borrower in favor of Lender (the "Second
Mortgage"), (e) all other documents now or hereafter executed by Borrower,
or any other person or entity, to evidence, secure or guaranty the payment
of all or any portion of the Debt or the performance of all or any portion
of the Obligations or otherwise executed in connection with the Note or
this Mortgage, and (f) all amendments, modifications, restatements,
extensions, renewals or replacements of the foregoing.
"Obligations": All of the agreements, covenants, conditions,
warranties, representations and other obligations (other than to repay the
Debt) made or undertaken by Borrower or any other person or entity to
Lender or others as set forth in the Loan Documents.
<PAGE>
"Permitted Encumbrances": The outstanding liens, easements,
restrictions, security interests and other exceptions to title set forth in
the policy of title insurance insuring the lien of this Mortgage, together
with (i) the liens and security interests in favor of Lender created by the
Loan Documents, (ii) the liens for taxes, not yet delinquent, which are
being contested in accordance with Loan Agreement and (iii) any rights
under Leases entered into in accordance with the Loan Agreement.
"Property": (a) the real property described in Exhibits A-1,
A-2 and A-3, together with any greater estate therein as hereafter may be
acquired by Borrower (the "Land"), (b) all buildings, structures and other
improvements, now or at any time situated, placed or constructed upon the
Land (the "Improvements"), (c) the Ground Lease and the leasehold estate
created thereby, (d) all modifications, extensions and renewals of the
Ground Lease and all credits, deposits (including, without limitation, any
deposit of cash or securities or any other property which may be held to
secure Borrower's performance of its obligations under the Ground Lease),
options, privileges and rights of Borrower as lessee under the Ground
Lease, including, but not limited to, the right, if any, to renew or extend
the Ground Lease for a succeeding term or terms, (e) all the estate, right,
title, claim or demand whatsoever of Borrower either in law or in equity,
in possession or expectancy, of, in and to the Property or any part
thereof, (f) the Parking Agreements and all modifications, extensions and
renewals thereof, (g) all materials, supplies, equipment, apparatus and
other items of personal property now owned or hereafter acquired by
Borrower and now or hereafter attached to, installed in or used in
connection with any of the Improvements or the Land, and all the right,
title and interest of Borrower in and to water, gas, electrical, storm and
sanitary sewer facilities and all other utilities whether or not situated
in easements (the "Fixtures"), including, without limitation, Borrower's
reversionary interest in Fixtures pursuant to the Operating Lease, if any,
(h) all right, title and interest of Borrower in and to all goods,
accounts, general intangibles, instruments, documents, chattel paper and
all other personal property of any kind or character, including such items
of personal property as defined in the UCC, now owned or hereafter acquired
by Borrower and now or hereafter affixed to, placed upon, used in
connection with, arising from or otherwise related to the Land and
Improvements or which may be used in or relating to the planning,
development, financing or operation of the Property, including, without
limitation, furniture, furnishings, equipment, machinery, money, insurance
proceeds, accounts, contract rights, trademarks, goodwill, chattel paper,
documents, trade names, licenses and/or franchise agreements, rights of
Borrower under leases of Fixtures or other personal property or equipment,
inventory, all refundable, returnable or reimbursable fees, deposits or
other funds or evidences of credit or indebtedness deposited by or on
behalf of Borrower with any governmental authorities, boards, corporations,
providers of utility services, public or private, including specifically,
but without limitation, all refundable, returnable or reimbursable tap
fees, utility deposits, commitment fees and development costs (the
"Personalty"), (i) all right, title and interest of Borrower in and to
that certain Promissory Note dated as of April 29, 1998 by Operating Lessee
(as defined in the Loan Agreement) in favor of Operating Partnership (as
defined in the Loan Agreement), predecessor-in-interest to Borrower,
(j) all reserves, escrows or impounds required under the Loan Agreement and
all deposit accounts maintained by Borrower with respect to the Property
including without limitation any lockbox account and cash management
account and all securities, investments, property and financial assets held
from time to time, all accounts and monies held by Operating Lessee and/or
Manager which Borrower has an interest in and is entitled to receive and
all proceeds, products, distributions or dividends or substitutions thereon
<PAGE>
and thereof (the "Accounts"), (k) all the right, title and interest of
Borrower in and to all plans, specifications, shop drawings and other
technical descriptions prepared for construction, repair or alteration of
the Improvements, and all amendments and modifications thereof (the
"Plans"), (l) all the right, title and interest of Borrower in and to all
leases, subleases, operating leases, licenses, concessions, occupancy
agreements, rental contracts, or other agreements (written or oral) now or
hereafter existing relating to the use or occupancy of all or any part of
the Property, together with all guarantees, letters of credit and other
credit support, modifications, extensions and renewals thereof, whether
before or after the filing by or against Borrower of any petition of relief
under 11 U.S.C. Section 101 et. seq. (as same may be amended from time to
time, the "Bankruptcy Code") and all related security and other deposits
(the "Leases") and all of Borrower's claims and rights (the "Bankruptcy
Claims") to the payment of damages arising from any rejection by a lessee
of any Lease under the Bankruptcy Code, (m) all of the Operating Lease Rent
(as defined in the Loan Agreement) and, if any, all of the rents, revenues,
issues, income, proceeds, profits, and all other payments of any kind under
the Leases actually received by Borrower for using, leasing, licensing,
possessing, operating from, residing in, selling or otherwise enjoying the
Property whether paid or accruing before or after the filing by or against
Borrower of any petition for relief under the Bankruptcy Code including,
without limitation, all hotel receipts, revenues and credit card receipts
collected from guest rooms, restaurants, bars, meeting rooms, banquet rooms
and recreational facilities, all receivables, customer obligations,
installment payment obligations and other obligations now existing or
hereafter arising or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of property
or rendering of services by Borrower or any operator or manager of the
hotel or the commercial space located in the Improvements or acquired from
others (including, without limitation, from the rental of any office space,
retail space, guest rooms or other space, halls, stores, and offices, and
deposits securing reservations of such space), license, lease, sublease and
concession fees and rentals, health club membership fees, food and beverage
wholesale and retail sales, service charges, vending machine sales and
security deposits under Leases (collectively, the "Rents"), (n) all other
agreements, such as construction contracts, architects' agreements,
operating agreements, engineers' contracts, utility contracts, maintenance
agreements, franchise agreements, service contracts, permits, licenses,
certificates and entitlements in any way relating to the development,
construction, use, occupancy, operation, maintenance, enjoyment,
acquisition or ownership of the Property (the "Property Agreements"),
(o) all rights, privileges, tenements, hereditaments, rights-of-way,
easements, reciprocal easement agreements, appendages and appurtenances
appertaining to the foregoing, and all right, title and interest, if any,
of Borrower in and to any streets, ways, alleys, strips or gores of land
adjoining the Land or any part thereof, including, but not limited to, any
right, title and interest created by virtue of the Ground Lease, (p) all
accessions, replacements and substitutions for any of the foregoing and all
proceeds thereof, (q) all insurance policies, unearned premiums therefor
and proceeds from such policies covering any of the above property now or
hereafter acquired by Borrower, (r) all mineral, water, oil and gas rights
now or hereafter acquired and relating to all or any part of the Property,
(s) all tradenames, trademarks, service marks, logos, copyrights, goodwill,
books and records and all other general intangibles relating to or used in
connection with the operation of the Property, (t) all of Borrower's right,
title and interest in and to all inventory and articles of personal
property and accessions thereof and renewals and replacements thereof and
substitutions therefor, if any (including, but not limited to, beds,
bureaus, chiffoniers, chests, chairs, desks, lamps, mirrors, bookcases,
tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian
blinds, screens, paintings, hangings, pictures, divans, couches, luggage
carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets,
<PAGE>
glassware, foodcarts, cookware, dry cleaning facilities, dining room
wagons, keys or other entry systems, bars, bar fixtures, liquor and other
drink dispensers, icemakers, radios, television sets, intercom and paging
equipment, electric and electronic equipment, dictating equipment, private
telephone systems, medical equipment, potted plants, heating, lighting and
plumbing fixtures, fire prevention and extinguishing apparatus, cooling and
air-conditioning systems, elevators, escalators, fittings, plants,
apparatus, stoves, ranges, refrigerators, laundry machines, tools,
machinery, engines, dynamos, motors, boilers, incinerators, switchboards,
conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and
polishing equipment, call systems, brackets, electrical signs, bulbs,
bells, ash and fuel, conveyors, cabinets, lockers, shelving, spotlighting
equipment, dishwashers, garbage disposals, washers and dryers), other
customary hotel equipment, and (u) all of Borrower's right, title and
interest in and to any awards, remunerations, reimbursements, settlements
or compensation heretofore made or hereafter to be made by any governmental
authority pertaining to the Land, Improvements, Fixtures or Personalty. As
used in this Mortgage, the term "Property" shall mean all or, where the
context permits or requires, any portion of the above or any interest
therein.
"UCC": The Uniform Commercial Code of Minnesota or, if the
creation, perfection and enforcement of any security interest herein
granted is governed by the laws of a state other than Minnesota then, as to
the matter in question, the Uniform Commercial Code in effect in that
state.
Section 1.2Other Terms. Capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Loan
Agreement.
ARTICLE II
GRANT
Section 2.1Grant. To secure the full and timely payment of
the Debt and the full and timely performance of the Obligations, Borrower
hereby MORTGAGES, GRANTS, BARGAINS, SELLS and CONVEYS to Lender all of
Borrower's right, title and interest in and to the Property, subject,
however, to the Permitted Encumbrances; TO HAVE AND TO HOLD the Property to
Lender, its successors and assigns, and Borrower does hereby bind itself,
its successors and assigns to WARRANT AND FOREVER DEFEND the title to the
Property unto Lender.
ARTICLE III
WARRANTIES, REPRESENTATIONS AND COVENANTS
Borrower warrants, represents and covenants to Lender as
follows:
Section 3.1Title to Property and Lien of this Instrument.
Borrower owns the Property free and clear of any liens, claims or
interests, except the Permitted Encumbrances. This Mortgage creates valid,
enforceable first priority liens and security interests against the
Property. Borrower warrants that Borrower has good, marketable and
insurable title to the Property and has the full power, authority and right
to execute, deliver and perform its obligations under this Mortgage. None
of the Permitted Encumbrances, individually or in the aggregate, materially
interfere with the benefits of the security intended to be provided by this
Mortgage, materially and adversely affect the value of the Property,
materially impair the use or operations of the Property or impair
Borrower's ability to pay its obligations in a timely manner.
Notwithstanding anything to the contrary contained in this Section 3.1,
Borrower and Lender hereby acknowledge and agree that Borrower owns
leasehold title to a portion of the Land more particularly described on
Exhibit A-2 (the "Lease Property") as created by virtue of the Ground Lease
and does not own fee title to such portion of the Land.
<PAGE>
Section 3.2First Lien Status. Borrower shall preserve and
protect the first lien and security interest status of this Mortgage, the
Second Mortgage and the other Loan Documents. If any lien or security
interest other than the Permitted Encumbrances is asserted against the
Property, Borrower shall promptly, and at its expense, (a) give Lender a
detailed written notice of such lien or security interest (including
origin, amount and other terms), and (b) pay the underlying claim in full
or take such other action so as to cause it to be released or, in Lender's
discretion, provide a bond or other security satisfactory to Lender for the
payment of such claim or contest such claim in accordance with the Loan
Agreement.
Section 3.3Payment and Performance. Borrower shall pay the
Debt when due under the Loan Documents and shall perform the Obligations in
full when they are required to be performed.
Section 3.4Replacement of Fixtures and Personalty. Borrower
shall not, without the prior written consent of Lender, permit any of the
Fixtures or Personalty to be removed at any time from the Land or
Improvements unless the removed item is removed temporarily for maintenance
and repair or, if removed permanently, is obsolete and is replaced by an
article of equal or better suitability and value, owned by Borrower subject
to the liens and security interests of this Mortgage and the other Loan
Documents, and free and clear of any other lien or security interest except
such as may be first approved in writing by Lender.
Section 3.5Maintenance of Rights of Way, Easements and
Licenses. Borrower shall maintain all rights of way, easements, grants,
privileges, licenses, certificates, permits, entitlements and franchises
necessary for the use of the Property and will not, without the prior
consent of Lender, consent to any public restriction (including any zoning
ordinance) or private restriction as to the use of the Property. Borrower
shall comply in all material respects with all restrictive covenants
affecting the Property, and all zoning ordinances and other public or
private restrictions as to the use of the Property.
Section 3.6Inspection. Borrower shall permit Lender, and
Lender's agents, representatives and employees, upon reasonable prior
notice to Borrower and during normal business hours, to inspect the
Property and conduct such environmental and engineering studies as Lender
may require, provided that such inspections and studies shall not
materially interfere with the use and operation of the Property.
Section 3.7Other Covenants. All of the covenants in the Loan
Agreement are incorporated herein by reference and, together with covenants
in this Article 3, shall be covenants running with the land. The covenants
set forth in the Loan Agreement include, among other provisions: (a) the
obligation to pay (subject to Borrower's right to contest pursuant to the
terms of the Loan Agreement) when due all taxes on the Property or assessed
against Lender with respect to the Loan, (b) the right of Lender to inspect
the Property, (c) the obligation to keep the Property insured as set forth
therein, (d) the obligation to comply with all legal requirements
(including environmental laws), maintain the Property in good condition,
and promptly repair any damage or casualty, and (e) except as otherwise
permitted under the Loan Agreement, the obligation of Borrower to obtain
Lender's consent prior to entering into, modifying or taking other actions
with respect to Leases.
Section 3.8Condemnation Awards and Insurance Proceeds.
(a) Condemnation Awards. Borrower assigns all awards and
compensation for any condemnation or other taking, or any purchase in lieu
thereof, to Lender and authorizes Lender to collect and receive such awards
and compensation and to give proper receipts and acquittances therefor,
subject to the terms of the Loan Agreement.
<PAGE>
(b) Insurance Proceeds. Borrower assigns to Lender all
proceeds of any insurance policies insuring against loss or damage to the
Property. Borrower authorizes Lender to collect and receive such proceeds
and authorizes and directs the issuer of each of such insurance policies to
make payment for all such losses directly to Lender, instead of to Borrower
and Lender jointly in accordance with Section 5.1 of the Loan Agreement.
Section 3.9Transfer or Encumbrance of Property.
(a) Without the prior written consent of Lender, neither
Borrower nor any other Person having a direct or indirect ownership or
beneficial interest in Borrower shall (i) directly or indirectly sell,
transfer, convey, mortgage, pledge, or assign the Property, any part
thereof or any interest therein (including any partnership or any other
ownership interest in Borrower); (ii) further encumber, alienate, grant a
Lien or grant any other interest in the Property or any part thereof
(including any partnership or other ownership interest in Borrower),
whether voluntarily or involuntarily; or (iii) enter into any easement or
other agreement granting rights in or restricting the use or development of
the Property.
(b) As used in this Section 3.9, "transfer" shall include,
without limitation, (i) an installment sales agreement wherein Borrower
agrees to sell the Property or any part thereof for a price to be paid in
installments; (ii) an agreement by Borrower leasing all or a substantial
part of the Property for other than actual occupancy by a space tenant
thereunder or a sale, assignment or other transfer of, or the grant of a
security interest in, Borrower's right, title and interest in and to any
Leases or any Rents, (iii) if Borrower or any general partner or managing
member of Borrower is a corporation, the voluntary or involuntary sale,
conveyance or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by
operation of law or otherwise) or the creation or issuance of new stock
such that such corporation's stock shall be vested in a party or parties
who are not now stockholders or any change in the control of such
corporation; and (iv) if Borrower or any general partner or managing member
of Borrower is a limited or general partnership, joint venture or limited
liability company, the change, removal, resignation or addition of a
general partner, managing partner, limited partner, joint venturer or
member or the transfer of the partnership interest of any general partner,
managing partner or limited partner or the transfer of the interest of any
joint venture or member.
(c) Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in
order to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property without Lender's consent. This provision shall apply to every
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the Property regardless of whether voluntary or not, or whether or not
Lender has consented to any previous sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property.
(d) Lender's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property shall not be
deemed to be a waiver of Lender's right to require such consent to any
future occurrence of same. Any sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property made in contravention of
this paragraph shall be null and void and of no force and effect.
(e) Borrower agrees to bear and shall pay or reimburse Lender
on demand for all reasonable expenses (including, without limitation,
reasonable attorneys' fees and disbursements, title search costs and title
insurance endorsement premiums) incurred by Lender in connection with the
review, approval and documentation of any such sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer.
<PAGE>
(f) Lender's consent to a one-time sale or transfer of the
Property will not be unreasonably withheld if such sale occurs in
connection with the sale of the Additional Property (as defined in the Loan
Agreement) together with the Property to one purchaser and after
consideration of all relevant factors, provided that:
(i) no Event of Default or event which with the giving
of notice or the passage of time would constitute an Event of Default shall
have occurred and remain uncured;
(ii) the proposed transferee ("Transferee") and any
indemnitor for non-recourse carveouts shall each be a reputable entity or
person of good character, creditworthy, with sufficient financial worth as
determined by Lender in its reasonable discretion considering the
obligations assumed and undertaken, as evidenced by financial statements
and other information reasonably requested by Lender;
(iii)the Transferee and its property manager shall have
sufficient experience in the ownership and management of properties similar
to the Property and the Additional Property, and Lender shall be provided
with reasonable evidence thereof (and Lender reserves the right to approve
the Transferee without approving the substitution of the property manager);
(iv) (a) the Manager (as defined in the Loan Agreement)
for the Property shall be either (1) the manager immediately prior to such
transfer, (2) a professional management company, which at the time of its
engagement as manager shall be the property manager for at least ten (10)
hotel properties containing at least two thousand (2000) rooms, exclusive
of the Property and Additional Property or (3) such other manager
reasonably satisfactory to Lender and (b) any new Management Agreement (as
defined in the Loan Agreement) shall be satisfactory to Lender in its
reasonable discretion;
(v) (a) the Operating Lessee shall be either (1) the
operating lessee immediately prior to such transfer, (2) an affiliate of
hotel operating company, which such operating company at the time of
engagement shall be operating and controlling, as owner, manager or
operating lessee, at least ten (10) hotel properties consisting of at least
two thousand (2000) rooms, exclusive of the Property and Additional
Property, and a single purpose bankruptcy-remote entity in accordance with
the then-current standards of the Rating Agencies or (3) such other
operating lessee reasonably satisfactory to Lender and (b) any new
Operating Lease (as defined in the Loan Agreement) shall be satisfactory to
Lender in its reasonable discretion;
<PAGE>
(vi) Lender shall have confirmation in writing from the
Rating Agencies (as hereinafter defined) to the effect that such transfer
will not result in a re-qualification, reduction or withdrawal of the then
current rating assigned in a Securitization (as defined in the Loan
Agreement). The term "Rating Agencies" as used herein shall mean each of
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. and Fitch IBCA,
Inc., or any other nationally-recognized statistical rating agency which
has been selected by Lender;
(vii)Lender shall have received evidence satisfactory to
it (which shall include a legal non-consolidation opinion reasonably
acceptable to Lender) that the single purpose nature and bankruptcy
remoteness of Transferee, its shareholders, partners, or members, as the
case may be, following such transfers are in accordance with the standards
of the Rating Agencies;
(viii) the Transferee shall have executed and
delivered to Lender an assumption agreement in form and substance
reasonably acceptable to Lender, evidencing such Transferee's agreement to
abide and be bound by the terms of the Note, this Mortgage and the other
Loan Documents, together with such legal opinions and title insurance
endorsements as may be reasonably requested by Lender;
(ix) the franchise or franchise system for the Property
shall be either the franchise or franchise system in place immediately
prior to such transfer or a franchise or franchise system reasonably
satisfactory to Lender; and
(x) Lender shall have received the payment of all out
of pocket costs and expenses incurred by Lender in connection with such
assumption (including reasonable attorney's fees and costs).
(g) Notwithstanding anything to the contrary contained herein
or any other Loan Documents, Lender's consent shall not be required for any
of the following sales, transfers, assignments, pledges, conveyances or
encumbrances, provided that Lender has received payment in full of all its
costs and expenses incurred in connection therewith:
(i) with respect to the REIT, (A) any transfer of all
or any portion of any shares of beneficial interests of the REIT for so
long as the shares of the REIT continues to be publicly traded on a
national stock exchange and (B) the issuance of additional shares of the
REIT;
(ii) with respect to the Operating Partnership, (A) any
transfer of limited partnership interests in the Operating Partnership and
(B) the issuance of additional limited partnership units or other
securities, even if such issuance results in a reduction of the partnership
interest of the REIT in the Operating Partnership, provided that, after
giving effect to such transfer or series of transfers described in (A) or
(B), the REIT owns more than fifty-one percent (51%) of the partnership
interests of the Operating Partnership.
<PAGE>
Section 3.10 Ground Lease. Borrower shall (a) pay all
rents, additional rents and other sums required to be paid by Borrower, as
tenant under and pursuant to the provisions of the Ground Lease as and when
such rent or other charge is payable, (b) diligently perform and observe
all of the terms, covenants and conditions of the Ground Lease on the part
of Borrower, as tenant thereunder, to be performed and observed at least
thirty (30) days prior to the expiration of any applicable grace period
therein provided, and (c) promptly notify Lender of the giving of any
notice by the Ground Lessor to Borrower of any default by Borrower in the
performance or observance of any of the terms, covenants or conditions of
the Ground Lease on the part of Borrower, as tenant thereunder, to be
performed or observed and deliver to Lender a true copy of each such
notice. Borrower shall not, without the prior consent of Lender, surrender
the leasehold estate created by the Ground Lease or terminate or cancel the
Ground Lease or modify, change, supplement, alter or amend the Ground
Lease, in any material respect, either orally or in writing, and Borrower
hereby assigns to Lender, as further security for the payment of the Debt
and for the performance and observance of the terms, covenants and
conditions of this Mortgage, the Second Mortgage and the Loan Agreement,
all of the rights, privileges and prerogatives of Borrower, as tenant under
the Ground Lease, to surrender the leasehold estate created by the Ground
Lease or to terminate, cancel, modify in any material respect, change in
any material respect, supplement in any material respect, alter or amend in
any material respect the Ground Lease, and any such surrender of the
leasehold estate created by the Ground Lease or termination, cancellation,
modification, change, supplement, alteration or amendment of the Ground
Lease without the prior consent of Lender shall be void and of no force and
effect. Borrower shall not exercise any option to purchase the Lease
Property granted to Borrower pursuant to the Ground Lease, without the
prior written consent of Lender, which consent shall not be unreasonably
withheld, conditioned or delayed. If Borrower shall default in the
performance or observance of any term, covenant or condition of the Ground
Lease on the part of Borrower, as tenant thereunder, to be performed or
observed, then, without limiting the generality of the other provisions of
this Mortgage, the Second Mortgage and the Loan Agreement, and without
waiving or releasing Borrower from any of its obligations hereunder or
thereunder, Lender shall have the right, but shall be under no obligation,
to pay any sums and to perform any act or take any action as may be
appropriate to cause all of the terms, covenants and conditions of the
Ground Lease on the part of Borrower, as tenant thereunder, to be performed
or observed or to be promptly performed or observed on behalf of Borrower,
to the end that the rights of Borrower in, to and under the Ground Lease
shall be kept unimpaired and free from default (subject to Borrower's right
to contest in accordance with the Loan Agreement). If Lender shall make
any payment or perform any act or take action in accordance with the
preceding sentence, Lender will notify Borrower of the making of any such
payment, the performance of any such act, or the taking of any such action.
In any such event, subject to the rights of tenants, subtenants and other
occupants under the Leases, Lender and any person designated by Lender
shall have, and are hereby granted, the right to enter upon the Property at
any time and from time to time for the purpose of taking any such action.
Lender may pay and expend such sums of money as Lender deems reasonably
necessary for any such purpose and upon so doing shall be subrogated to any
and all rights of the Ground Lessor. Borrower hereby agrees to pay to
Lender immediately upon demand therefor, all such sums so paid and expended
by Lender, together with interest thereon from the day of such payment at
the Default Rate. All sums so paid and expended by Lender and the interest
thereon shall be secured by the legal operation and effect of the Mortgage
and Second Mortgage. If the Ground Lessor shall deliver to Lender a copy
of any notice of default sent by said Ground Lessor to Borrower, as tenant
under the Ground Lease, such notice shall constitute full protection to
Lender for any action taken or omitted to be taken by Lender, in good
faith, in reliance thereon. Borrower shall exercise each individual
option, if any, to extend or renew the term of the Ground Lease upon demand
<PAGE>
by Lender made at any time within one (1) year of the last day upon which
any such option may be exercised, and, if Borrower fails to exercise such
option, Borrower hereby expressly authorizes and appoints Lender its
attorney-in-fact to exercise any such option in the name of and upon behalf
of Borrower, which power of attorney shall be irrevocable and shall be
deemed to be coupled with an interest. Borrower will not subordinate or
consent to the subordination of the Ground Lease to any mortgage, security
deed, lease or other interest on or in the Ground Lessor's interest in all
or any part of the Property, unless, in each such case, the written consent
of Lender shall have been first had and obtained, which consent shall be in
Lender's sole and absolute discretion. Each Lease hereafter made and each
renewal of any existing Lease shall provide that, (i) in the event of the
termination of the Ground Lease, the Lease shall not terminate or be
terminated by the tenant; (ii) in the event of any action for the
foreclosure of the Mortgage or Second Mortgage, the Lease shall not
terminate or be terminable by the tenant by reason of the foreclosure of
the Ground Lease unless the tenant is specifically named and joined in any
such action and unless a judgment is obtained therein against the tenant;
and (iii) in the event that the Ground Lease is terminated as aforesaid,
the tenant shall attorn to the Ground Lessor or to the purchaser at the
sale of the Property on such foreclosure, as the case may be.
Section 3.11 No Merger of Fee and Leasehold Estates;
Releases. So long as any portion of the Debt shall remain unpaid, unless
Lender shall otherwise consent, the fee title to the Lease Property and the
leasehold estate therein created pursuant to the provisions of the Ground
Lease shall not merge but shall always be kept separate and distinct,
notwithstanding the union of such estates in Borrower, Lender, or in any
other person by purchase, operation of law or otherwise. Lender reserves
the right, at any time, to release portions of the Lease Property,
including, but not limited to, the leasehold estate created by the Ground
Lease, with or without consideration, at Lender's election, without waiving
or affecting any of its rights hereunder or under the Note or the other
Loan Documents and any such release shall not affect Lender's rights in
connection with the portion of the Lease Property not so released.
Section 3.12 Borrower's Acquisition of Fee Estate. In the
event that Borrower, so long as any portion of the Debt remains unpaid,
shall be the owner and holder of the fee title to the Lease Property, the
liens of the Mortgage and Second Mortgage shall be spread to cover
Borrower's fee title to the Lease Property and said fee title shall be
deemed to be included in the Property. Borrower agrees, at its sole cost
and expense, including without limitation Lender's reasonable attorneys'
fees, to (a) execute any and all documents or instruments reasonably
necessary to subject its fee title to the Lease Property to the liens of
the Mortgage and Second Mortgage; and (b) provide a title insurance policy,
or endorsement thereto, which shall insure that the lien of the Mortgage is
a first lien on Borrower's fee title to the Lease Property and the lien of
the Second Mortgage is a second lien on Borrower's fee title to the Lease
Property. Notwithstanding the foregoing, if the Ground Lease is for any
reason whatsoever terminated prior to the natural expiration of its term,
and if, pursuant to any provisions of the Ground Lease or otherwise, Lender
<PAGE>
or its designee shall acquire from the Ground Lessor thereunder another
lease of the Lease Property, Borrower shall have no right, title or
interest in or to such other lease or the leasehold estate created thereby.
Section 3.13 Rejection of the Ground Lease.
(a) If the Ground Lease is terminated for any reason in the
event of the rejection or disaffirmance of the Ground Lease pursuant to the
Bankruptcy Code, or any other law affecting creditor's rights, (i) the
Borrower, immediately after obtaining notice thereof, shall give notice
thereto to Lender, (ii) Borrower, without the prior written consent of
Lender, shall not elect to treat the Ground Lease as terminated pursuant to
Section 365(h) of the Bankruptcy Code or any comparable federal or state
statute or law, and any election by Borrower made without such consent
shall be void and (iii) this Mortgage, the Second Mortgage and the Loan
Agreement and all the liens, terms, covenants and conditions of this
Mortgage, the Second Mortgage and the Loan Agreement hereby extends to and
covers Borrower's possessory rights under Section 365(h) of the Bankruptcy
Code and to any claim for damages due to the rejection of the Ground Lease
or other termination of the Ground Lease. In addition, Borrower hereby
assigns irrevocably to Lender, Borrower's rights to treat the Ground Lease
as terminated pursuant to Section 365(h) of the Bankruptcy Code and to
offset rents under such Ground Lease in the event any case, proceeding or
other action is commenced by or against the Ground Lessor under the
Bankruptcy Code or any comparable federal or state statute or law.
(b) Borrower hereby assigns to Lender, (i) Borrower's right
to reject the Ground Lease under Section 365 of the Bankruptcy Code or any
comparable federal or state statute or law with respect to any case,
proceeding or other action commenced by or against Borrower under the
Bankruptcy Code or comparable federal or state statute or law and (ii)
Borrower's right to seek an extension of the 60-day period within which
Borrower must accept or reject the Ground Lease under Section 365 of the
Code or any comparable federal or state statute or law with respect to any
case, proceeding or other action commenced by or against Borrower under the
Bankruptcy Code or comparable federal or state statute or law. Further, if
the foregoing assignment is not effective under applicable law and Borrower
shall desire to so reject the Ground Lease, at Lender's request, Borrower
shall assign its interest in the Ground Lease to Lender in lieu of
rejecting such Ground Lease as described above, upon receipt by Borrower of
written notice from Lender of such request together with Lender's agreement
to cure any existing defaults of Borrower under such Ground Lease.
(c) Borrower hereby agrees that if the Ground Lease is
terminated for any reason in the event of the rejection or disaffirmance of
the Ground Lease pursuant to the Bankruptcy Code or any other law affecting
creditor's rights, any property not removed by the Borrower as permitted or
required by the Ground Lease, shall at the option of Lender be deemed
abandoned by Borrower, provided that Lender may remove any such property
required to be removed by Borrower pursuant to the Ground Lease and all
reasonable costs and expenses associated with such removal shall be paid by
Borrower within five (5) days of receipt by Borrower of an invoice for such
removal costs and expenses.
ARTICLE IV
DEFAULT AND FORECLOSURE
Section 4.1Remedies. If an Event of Default (as defined in
the Loan Agreement) exists, Lender may, at Lender's election, exercise any
or all of the following rights, remedies and recourses:
(a) Acceleration. Declare the Debt to be immediately due and
payable, without further notice, presentment, protest, notice of intent to
accelerate, notice of acceleration, demand or action of any nature
whatsoever (each of which hereby is expressly waived by Borrower),
whereupon the same shall become immediately due and payable.
<PAGE>
(b) Entry on Property. Enter the Property and take exclusive
possession thereof and of all books, records and accounts relating thereto.
If Borrower remains in possession of the Property after an Event of Default
and without Lender's prior written consent, Lender may invoke any legal
remedies to dispossess Borrower.
(c) Operation of Property. Hold, lease, develop, manage,
operate or otherwise use the Property upon such terms and conditions as
Lender may deem reasonable under the circumstances (making such repairs,
alterations, additions and improvements and taking other actions, from time
to time, as Lender deems necessary or desirable), and apply all Rents and
other amounts collected by Lender in connection therewith in accordance
with the provisions of Section 4.6.
(d) Foreclosure and Sale. Institute proceedings for the
complete foreclosure of this Mortgage, in which case the Property may be
sold for cash or credit in one or more parcels. At any such sale by virtue
of any judicial proceedings or any other legal right, remedy or recourse,
the title to and right of possession of any such property shall pass to the
purchaser thereof, and to the fullest extent permitted by law, Borrower
shall be completely and irrevocably divested of all of its right, title,
interest, claim and demand whatsoever, either at law or in equity, in and
to the property sold and such sale shall be a perpetual bar both at law and
in equity against Borrower, and against all other persons claiming the
property sold or any part thereof, by, through or under Borrower. Lender
may be a purchaser at such sale and if Lender is the highest bidder, may
credit the portion of the purchase price that would be distributed to
Lender against the Debt in lieu of paying cash.
(e) Receiver. Make application to a court of competent
jurisdiction for, and obtain from such court as a matter of strict right
and without notice to Borrower or regard to the adequacy of the Property
for the repayment of the Debt, the appointment of a receiver of the
Property, and Borrower irrevocably consents to such appointment. Any such
receiver shall have all the usual powers and duties of receivers in similar
cases, including the full power to rent, maintain and otherwise operate the
Property upon such terms as may be approved by the court, and shall apply
such Rents in accordance with the provisions of Section 4.6.
(f) UCC. Exercise any and all rights and remedies granted to
a secured party upon default under the Uniform Commercial Code, including,
without limiting the generality of the foregoing: (i) the right to take
possession of the Personalty or any part thereof, and to take such other
measures as Lender may deem necessary for the care, protection and
preservation of the Personalty, and (ii) request Borrower at its expense to
assemble the Personalty and make it available to Lender at a convenient
place acceptable to Lender. Any notice of sale, disposition or other
intended action by Lender with respect to the Personalty sent to Borrower
in accordance with the provisions hereof at least ten (10) days prior to
such action, shall constitute commercially reasonable notice to Borrower;
(g) Other. Exercise all other rights, remedies and recourses
granted under the Loan Documents or otherwise available at law or in equity
(including an action for specific performance of any covenant contained in
the Loan Documents, or a judgment on the Note either before, during or
after any proceeding to enforce this Mortgage).
Section 4.2Separate Sales. The Property may be sold in one or
more parcels and in such manner and order as Lender in its sole discretion,
may elect; the right of sale arising out of any Event of Default shall not
be exhausted by any one or more sales.
<PAGE>
Section 4.3Remedies Cumulative, Concurrent and Nonexclusive.
Lender shall have all rights, remedies and recourses granted in the Loan
Documents and available at law or equity (including the UCC), which rights
(a) shall be cumulative and concurrent, (b) may be pursued separately,
successively or concurrently against Borrower or others obligated under the
Note and the other Loan Documents, or against the Property, or against any
one or more of them, at the sole discretion of Lender, (c) may be exercised
as often as occasion therefor shall arise, and the exercise or failure to
exercise any of them shall not be construed as a waiver or release thereof
or of any other right, remedy or recourse, and (d) are intended to be, and
shall be, nonexclusive. No action by Lender in the enforcement of any
rights, remedies or recourses under the Loan Documents or otherwise at law
or equity shall be deemed to cure any Event of Default.
Section 4.4Release of and Resort to Collateral. Lender may
release, regardless of consideration and without the necessity for any
notice to or consent by the holder of any subordinate lien on the Property,
any part of the Property without, as to the remainder, in any way
impairing, affecting, subordinating or releasing the lien or security
interests created in or evidenced by the Loan Documents or their status as
a first and prior lien and security interest in and to the Property. For
payment of the Debt, Lender may resort to any other security in such order
and manner as Lender may elect.
Section 4.5Discontinuance of Proceedings. If Lender shall
have proceeded to invoke any right, remedy or recourse permitted under the
Loan Documents and shall thereafter elect to discontinue or abandon it for
any reason, Lender shall have the unqualified right to do so and, in such
an event, Borrower and Lender shall be restored to their former positions
with respect to the Debt, the Obligations, the Loan Documents, the Property
and otherwise, and the rights, remedies, recourses and powers of Lender
shall continue as if the right, remedy or recourse had never been invoked,
but no such discontinuance or abandonment shall waive any Event of Default
which may then exist or the right of Lender thereafter to exercise any
right, remedy or recourse under the Loan Documents for such Event of
Default.
Section 4.6Application of Proceeds. The proceeds of any sale
of, and the Rents and other amounts generated by the holding, leasing,
management, operation or other use of the Property, shall be applied by
Lender (or the receiver, if one is appointed) in the following order unless
otherwise required by applicable law:
(a) to the payment of the reasonable costs and expenses of
taking possession of the Property and of holding, using, leasing,
repairing, and selling the same, including, without limitation (i)
receiver's fees and expenses, (ii) court costs, (iii) attorneys' and
accountants' fees and expenses, (iv) costs of advertisement, (v) insurance
premiums and (vi) the payment of all ground rent, real estate taxes and
assessments, except any taxes, assessments or other charges subject to
which the Property shall have been sold;
(b) to the payment of all amounts (including interest), other
than the unpaid principal balance of the Note and accrued but unpaid
interest, which may be due to Lender under the Loan Documents;
(c) to the payment of the Debt in such manner and order of
preference as Lender in its sole discretion may determine; and
(d) the balance, if any, to the payment of the persons
legally entitled thereto.
<PAGE>
Section 4.7Occupancy After Foreclosure. The purchaser at any
foreclosure sale pursuant to Section 4.1(d) shall become the legal owner of
the Property. All occupants of the Property shall, at the option of such
purchaser and subject to the rights of tenants to remain in possession,
become tenants of the purchaser at the foreclosure sale and shall deliver
possession thereof immediately to the purchaser upon demand. It shall not
be necessary for the purchaser at said sale to bring any action for
possession of the Property other than the statutory action of forcible
detainer in any justice court having jurisdiction over the Property.
Section 4.8 Additional Advances and Disbursements, Costs of
Enforcement.
(a) If any Event of Default exists, Lender shall have the
right, but not the obligation, to cure such Event of Default in the name
and on behalf of Borrower. All sums advanced and expenses incurred at any
time by Lender under this Section 4.8, or otherwise under this Mortgage or
any of the other Loan Documents or applicable law, shall bear interest from
the date that such sum is advanced or expense incurred, to and including
the date of reimbursement, computed at the Default Rate (as defined in the
Loan Agreement), and all such sums, together with interest thereon, shall
be secured by this Mortgage.
(b) Borrower shall pay all reasonable expenses (including
reasonable attorneys' fees and expenses) of or incidental to the perfection
and enforcement of this Mortgage and the other Loan Documents, or the
enforcement, compromise or settlement of the Debt or any claim under this
Mortgage and the other Loan Documents, and for the curing thereof, or for
defending or asserting the rights and claims of Lender in respect thereof,
by litigation or otherwise.
Section 4.9No Lender in Possession. Neither the enforcement
of any of the remedies under this Article 4, the assignment of the Rents
and Leases under Article 5, the security interests under Article 6, nor any
other remedies afforded to Lender under the Loan Documents, at law or in
equity shall cause Lender to be deemed or construed to be a mortgagee in
possession of the Property, to obligate Lender to lease the Property or
attempt to do so, or to take any action, incur any expense, or perform or
discharge any obligation, duty or liability whatsoever under any of the
Leases or otherwise.
Section 4.10 Actions and Proceedings. Lender has the
right to appear in and defend any action or proceeding brought with respect
to the Property, if reasonably necessary to protect Lender's interest in
the Property, and to bring any action or proceeding, in the name and on
behalf of Borrower, which Lender, in its reasonable discretion, decides
should be brought to protect its interest in the Property.
Section 4.11 Waiver of Redemption, Notice and Marshalling
of Assets. To the fullest extent permitted by law, Borrower hereby
irrevocably and unconditionally waives and releases (a) all benefit that
might accrue to Borrower by virtue of any present or future statute of
limitations or law or judicial decision exempting the Property from
attachment, levy or sale on execution or providing for any appraisement,
valuation, stay of execution, exemption from civil process, redemption or
extension of time for payment, (b) all notices of any Event of Default or
of Lender's election to exercise or its actual exercise of any right,
remedy or recourse provided for under the Loan Documents, and (c) any right
to a marshalling of assets or a sale in inverse order of alienation.
<PAGE>
ARTICLE V
ASSIGNMENT OF RENTS AND LEASES
Section 5.1Assignment. Borrower acknowledges and confirms
that it has executed and delivered to Lender an Assignment of Leases and
Rents of even date herewith (the "Assignment of Leases and Rents"),
intending that such instrument create a present, absolute assignment to
Lender of the Leases and Rents. Without limiting the intended benefits or
the remedies provided under the Assignment of Leases and Rents, Borrower
hereby assigns to Lender, as further security for the Debt and the
Obligations, the Leases and Rents. While any Event of Default exists,
Lender shall be entitled to exercise any or all of the remedies provided in
the Assignment of Leases and Rents and in Article 4 hereof including,
without limitation, the right to have a receiver appointed. If any
conflict or inconsistency exists between the assignment of the Rents and
the Leases in this Mortgage and the absolute assignment of the Leases and
Rents in the Assignment of Leases and Rents, the terms of the Assignment of
Leases and Rents shall control.
Section 5.2No Merger of Estates. So long as any part of the
Debt and the Obligations secured hereby remain unpaid and undischarged, the
fee and leasehold estates to the Property shall not merge, but shall remain
separate and distinct, notwithstanding the union of such estates either in
Borrower, Lender, any lessee or any third party by purchase or otherwise.
ARTICLE VI
SECURITY AGREEMENT
Section 6.1Security Interest. This Mortgage constitutes a
"Security Agreement" on personal property within the meaning of the UCC and
other applicable law and with respect to the Personalty, Fixtures, Plans,
Leases, Rents, Accounts and Property Agreements. To this end, Borrower
grants to Lender, a first and prior security interest in the Personalty,
Fixtures, Plans, Leases, Rents, Accounts and Property Agreements and all
other Property which is personal property to secure the payment of the Debt
and performance of the Obligations, and agrees that Lender shall have all
the rights and remedies of a secured party under the UCC with respect to
such property. Any notice of sale, disposition or other intended action by
Lender with respect to the Personality, Fixtures, Plans, Leases, Rents,
Accounts and Property Agreements sent to Borrower at least ten (10) days
prior to any action under the UCC shall constitute reasonable notice to
Borrower.
Section 6.2Financing Statements. Borrower shall execute and
deliver to Lender, in form and substance reasonably satisfactory to Lender,
such financing statements and such further assurances as Lender may, from
time to time, reasonably consider necessary to perfect and preserve
Lender's security interest hereunder and Lender may cause such statements
and assurances to be recorded and filed, at such times and places as may be
required or permitted by law to so create, perfect and preserve such
security interest. Borrower's chief executive office is in the District of
Columbia at the address set forth in the first paragraph of this Mortgage.
Section 6.3Fixture Filing. This Mortgage shall also
constitute a "fixture filing" for the purposes of the UCC against all of
the Property which is or is to become fixtures. Information concerning the
security interest herein granted may be obtained at the addresses of Debtor
(Borrower) and Secured Party (Lender) as set forth in the first paragraph
of this Mortgage.
<PAGE>
ARTICLE VII
MISCELLANEOUS
Section 7.1Limitation on Interest. It is the intention of the
parties hereto to conform strictly to applicable usury laws. Accordingly,
all agreements between Borrower and Lender with respect to the Loan are
hereby expressly limited so that in no event, whether by reason of
acceleration of maturity or otherwise, shall the amount paid or agreed to
be paid to Lender or charged by Lender for the use, forbearance or
detention of the money to be lent hereunder or otherwise, exceed the
maximum amount allowed by law. If the Loan would be usurious under
applicable law (including the laws of the state where the Property is
located and the laws of the United States of America), then,
notwithstanding anything to the contrary in the Loan Documents: (a) the
aggregate of all consideration which constitutes interest under applicable
law that is contracted for, taken, reserved, charged or received under the
Loan Documents shall under no circumstances exceed the maximum amount of
interest allowed by applicable law, and any excess shall be credited on the
Debt; and (b) if maturity is accelerated by reason of an election by
Lender, or in the event of any prepayment, then any consideration which
constitutes interest may never include more than the maximum amount allowed
by applicable law. In such case, excess interest, if any, provided for in
the Loan Documents or otherwise, to the extent permitted by applicable law,
shall be amortized, prorated, allocated and spread from the date of advance
until payment in full so that the actual rate of interest is uniform
through the term hereof. If such amortization, proration, allocation and
spreading is not permitted under applicable law, then such excess interest
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited on the Debt. The
Loan Documents are contracts made under and shall be construed in
accordance with and governed by the laws of the State of New York, except
that if at any time the laws of the United States of America permit Lender
to contract for, take, reserve, charge or receive a higher rate of interest
than is allowed by the laws of the State of New York (whether such federal
laws directly so provide or refer to the law of any state), then such
federal laws shall to such extent govern as to the rate of interest which
Lender may contract for, take, reserve, charge or receive under the Loan
Documents.
Section 7.2Notices. Any notice required or permitted to be
given under this Mortgage shall be (a) in writing, (b) sent in the manner
set forth in the Loan Agreement, and (c) effective in accordance with the
terms of the Loan Agreement.
Section 7.3Covenants Running with the Land. All Obligations
contained in this Mortgage are intended by Borrower and Lender to be, and
shall be construed as, covenants running with the Property. As used
herein, "Borrower" shall refer to the party named in the first paragraph of
this Mortgage and to any subsequent owner of all or any portion of the
Property (without in any way implying that Lender has or will consent to
any such conveyance or transfer of the Property). All persons or entities
who may have or acquire an interest in the Property shall be deemed to have
notice of, and be bound by, the terms of the Loan Agreement and the other
Loan Documents; however, no such party shall be entitled to any rights
thereunder without the prior written consent of Lender.
Section 7.4Attorney-in-Fact. Borrower hereby irrevocably
appoints Lender and its successors and assigns, as its attorney-in-fact,
which agency is coupled with an interest, (a) to execute and/or record any
notices of completion, cessation of labor or any other notices that Lender
deems reasonably necessary to protect Lender's interest, if Borrower shall
fail to do so within ten (10) days after written request by Lender, (b)
upon the issuance of a deed pursuant to the foreclosure of this Mortgage or
<PAGE>
the delivery of a deed in lieu of foreclosure, to execute all instruments
of assignment, conveyance or further assurance with respect to the Leases,
Rents, Personalty, Fixtures, Plans and Property Agreements in favor of the
grantee of any such deed and as may be reasonably necessary for such
purpose, (c) to prepare, execute and file or record financing statements,
continuation statements, applications for registration and like papers
necessary to create, perfect or preserve Lender's security interests and
rights in or to any of the collateral and (d) while any Event of Default
exists, to perform any obligation of Borrower hereunder; however: (i)
Lender shall not under any circumstances be obligated to perform any
obligation of Borrower; (ii) any sums advanced by Lender in such
performance shall be added to and included in the Debt and shall bear
interest at the Default Rate; (iii) Lender as such attorney-in-fact shall
only be accountable for such funds as are actually received by Lender; and
(iv) Lender shall not be liable to Borrower or any other person or entity
for any failure to take any action which it is empowered to take under this
Section.
Section 7.5Successors and Assigns. This Mortgage shall be
binding upon and inure to the benefit of Lender and Borrower and their
respective successors and assigns. Borrower shall not, without the prior
written consent of Lender, except as expressly permitted pursuant to
Section 3.9 hereof, assign any rights, duties or obligations hereunder.
Section 7.6No Waiver. Any failure by Lender to insist upon
strict performance of any of the terms, provisions or conditions of the
Loan Documents shall not be deemed to be a waiver of same, and Lender shall
have the right at any time to insist upon strict performance of all of such
terms, provisions and conditions.
Section 7.7Subrogation. To the extent proceeds of the Note
have been used to extinguish, extend or renew any indebtedness against the
Property, then Lender shall be subrogated to all of the rights, liens and
interests existing against the Property and held by the holder of such
indebtedness and such former rights, liens and interests, if any, are not
waived, but are continued in full force and effect in favor of Lender.
Section 7.8Loan Agreement. If any conflict or inconsistency
exists between this Mortgage and the Loan Agreement, the Loan Agreement
shall govern.
Section 7.9Release. Upon payment in full of the Debt and
performance in full of the Obligations, Lender, at Borrower's expense,
shall release the liens and security interests created by this Mortgage.
Section 7.10 Waiver of Stay, Moratorium and Similar
Rights. Borrower agrees, to the full extent that it may lawfully do so,
that it will not at any time insist upon or plead or in any way take
advantage of any appraisement, valuation, stay, marshaling of assets,
extension, redemption or moratorium law now or hereafter in force and
effect so as to prevent or hinder the enforcement of the provisions of this
Mortgage or the Debt secured hereby, or any agreement between Borrower and
Lender or any rights or remedies of Lender.
Section 7.11 Limitation on Liability. Borrower's
liability hereunder is subject to the limitation on liability provisions of
Article 13 of the Loan Agreement.
Section 7.12 Obligations of Borrower, Joint and Several.
If more than one person or entity has executed this Mortgage as "Borrower,"
the obligations of all such persons or entities hereunder shall be joint
and several.
<PAGE>
Section 7.13 Governing Law. THIS MORTGAGE WAS NEGOTIATED
IN THE STATE OF NEW YORK, AND MADE BY LENDER AND ACCEPTED BY BORROWER IN
THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE SECURED HEREBY WERE
DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A
SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION
EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS MORTGAGE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT
REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED
STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS
CREATED ON REAL PROPERTY (INCLUDING FIXTURES) PURSUANT HERETO AND PURSUANT
TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD
THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF
THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER
HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE
LAW OF ANY OTHER JURISDICTION GOVERNS THIS MORTGAGE, AND THIS MORTGAGE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.
Section 7.14 Headings. The Article, Section and
Subsection titles hereof are inserted for convenience of reference only and
shall in no way alter, modify or define, or be used in construing, the text
of such Articles, Section or Subsections.
Section 7.15 Entire Agreement. This Mortgage and the
other Loan Documents embody the entire agreement and understanding between
Lender and Borrower and supersede all prior agreements and understandings
between such parties relating to the subject matter hereof and thereof.
Accordingly, the Loan Documents may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties. There
are no unwritten oral agreements between the parties.
ARTICLE VIII
INTENTIONALLY DELETED
ARTICLE IX
SPECIAL STATE PROVISIONS
Section 9.1 Principles of Construction. In the event of any
inconsistencies between the terms and conditions of this Article IX and the
terms and conditions of this Mortgage, the terms and conditions of this
Article IX shall control and be binding.
Section 9.2 Application to Minnesota Property. Notwithstanding
anything in this Mortgage to the contrary, to the extent the applicable
portion of the Property is situated in the State of Minnesota or to the
extent the application, interpretation or treatment of this Mortgage is
subject to Minnesota laws, the following shall apply:
(a) Definitions.
(i) "Collateral": The Personalty, Plans, Leases, Rents, Property
Agreements and any other Property which may not be deemed real property or
may not constitute a "fixture" (within the meaning of Minn. Stat. Section
336.9-313 of the UCC) and all replacements, substitutions, and additions
of, for and to the same, and the proceeds thereof.
<PAGE>
(ii) "Property": The definition of Property shall be as set forth
in this Mortgage, except that for purposes of Lender exercising its
remedies hereunder in Minnesota, all references herein to the Property or
any component of the Property shall refer to the Property or component
thereof in Minnesota.
(b) Drafting Information. This instrument was drafted by:
Reese Mason, Esq.
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
(c) Multistate Affidavit Allocation. Attached hereto as
Exhibit B is an Affidavit for purposes of determining mortgage registration
tax pursuant to Minn. Stat. Section 287.05, Subd. 1.
(d) Exhibit A. All references to Exhibit A shall include
reference to Exhibits A-1, A-2 and A-3 attached hereto, with Exhibits A-1
and A-2 to be the "Minnesota Property" and Exhibit A-3 to be the "Non-
Minnesota Property."
(e) Secured Obligations. Notwithstanding anything in this
Mortgage to the contrary, this Mortgage shall secure the following
Obligations:
(i) The debt evidenced by the Note in the principal face amount of
THIRTY MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($30,300,000.00);
(ii) any and all other charges and amounts payable under the Note,
this Mortgage or the Loan Documents, as are exempt from Minnesota mortgage
registry tax (the "Registry Tax") under Minn. Stat. Section 287.05, Subd.
4;
(iii) any and all charges, amounts and non-monetary obligations under
the Note, this Mortgage or the Loan Documents, which are not otherwise
subject to Registry Tax;
(iv) any and all charges and amounts payable under the Note, this
Mortgage or the Loan Documents, not referred to in clauses (i), (ii) or
(iii) on which the Registry Tax has been paid; and
(v) interest from time to time payable on any or all of the
foregoing.
(f) Minnesota Remedies. If an Event of Default exists,
Lender may, at Lender's election, exercise any of the following rights,
remedies and recourses:
(i) Foreclosure and Sale. Foreclose this Mortgage by judicial
proceedings or by advertisement with full authority to sell the Property at
public auction and convey the same to the purchaser in fee simple, either
in one parcel or separate lots and parcels, all in accordance with and in
the manner prescribed by law, and out of the proceeds arising from sale and
foreclosure to retain the principal, prepayment fees, and interest due on
the Note, the Debt and the Obligations, together with all sums of money as
Lender shall have expended or advanced pursuant to this Mortgage or
pursuant to statute, together with interest thereon as herein provided, and
all costs and expenses of such foreclosure, including lawful attorneys'
fees with the balance, if any, due to paid to the person entitled thereto
by law.
<PAGE>
(ii) Receiver. As a matter of right, without notice and without
regard to the solvency or insolvency of Borrower, or the existence of waste
of the Property or adequacy of the security of the Property, and without
giving bond, apply for the appointment of a receiver in accordance with the
statutes and law made and provided for who shall have all the rights,
powers and remedies as provided by such statute or law, including without
limitation the rights of receiver pursuant to Minn. Stat. Section 576.01,
as amended, and who shall from the date of its appointment through any
period of redemption existing at law collect the Rents, manage the Property
so as to prevent waste, execute leases within or beyond the period of
receivership, pay all expenses for normal maintenance of the Property, and
perform the terms of this Mortgage and apply the Rents to the payment of
the expenses enumerated in Minn. Stat. Section 576.01, Subd. 2 in the
priority mentioned therein and to all expenses for maintenance of the
Property and to the costs and expenses of the receivership, including
attorneys' fees, to the repayment of the Debt and Obligations and as
further provided in the Assignment of Leases and Rents executed by Borrower
to Lender whether contained in this Mortgage or in a separate instrument.
Borrower does hereby irrevocably consent to such appointment.
(iii) UCC. Exercise all rights, remedies and recourse available to a
secured party under the UCC (in addition to the rights available to a
Lender of real property), including the right to proceed under the
provisions of the UCC governing default as to any Collateral as defined in
this Mortgage which may be included on the Property or which may be deemed
non-realty in a foreclosure of this Mortgage or to proceed as to such
Collateral in accordance with the procedures and remedies available
pursuant to a foreclosure of real estate.
(g) Acknowledgment of Waiver of Hearing Before Sale.
Borrower understands and agrees that if an Event of Default shall occur,
Lender has the right, inter alia, to foreclose this Mortgage by
advertisement pursuant to Minn. Stat. Chapter 580, as hereafter amended, or
pursuant to any similar or replacement statute hereafter enacted; that if
Lender elects to foreclose by advertisement, it may cause the Property or
any part thereof to be sold at public action; that notice of such sale must
be published for six (6) successive weeks at least once a week in a
newspaper of general circulation, and that no personal notice is required
to be served upon Borrower. Borrower further understands that upon the
occurrence of an Event of Default, Lender may also elect its rights under
the UCC and take possession of the non-real estate items of the Property
and dispose of the same by sale or otherwise in one or more parcels,
provided that at least ten (10) days' prior notice of such disposition must
be given, all as provided for by the UCC, as hereinafter amended or by any
similar or replacement statute hereafter enacted. Borrower further
understands that under the Constitution of the United States and the
Constitution of the State of Minnesota it may have the right to notice and
hearing before the Property may be sold and that the procedure for
foreclosure by advertisement described above does not insure that notice
will be given to Borrower and neither said procedure for foreclosure by
advertisement nor the UCC requires any hearing or other judicial
proceeding. BORROWER HEREBY EXPRESSLY CONSENTS AND AGREES THAT THE
PROPERTY MAY BE FORECLOSED BY ADVERTISEMENT AND THAT THE PERSONAL PROPERTY
MAY BE DISPOSED OF PURSUANT TO THE CODE, ALL AS DESCRIBED ABOVE. BORROWER
ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE SIGNING
THIS DOCUMENT THIS SECTION AND BORROWER'S CONSTITUTIONAL RIGHTS WERE FULLY
EXPLAINED BY SUCH COUNSEL AND THAT BORROWER UNDERSTANDS THE NATURE AND
EXTENT OF THE RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.
<PAGE>
(h) Additional Minnesota Waiver of Redemption, Notice and
Marshaling of Assets Provision. The following shall be added to the last
sentence of Section 4.11 hereof:
", (d) any appraisal before a sale of any portion of the
Property, and (e) any extension of time for the enforcement and collection
of the Note, the Loan or the Obligations, or creating or extending a period
of redemption from any sale made in collecting said debt. To the full
extent Borrower may do so, Borrower agrees that the Borrower will not at
any time insist upon, plead, claim or take the benefit or advantage of any
law now or hereafter enforced providing for any appraisal, evaluation,
stay, extension or redemption, and Borrower, to the extent permitted by
law, waives and releases all rights of redemption, valuation, appraisal,
stay of execution or notice of election to mature or declare due the whole
of this Mortgage."
(i) Leases and Rents. (i) Upon the occurrence of any Event
of Default, Borrower's revocable license to collect the Rents set forth in
Section 5 shall immediately cease and terminate. Upon or at any time
during the continuance of an Event of Default, including but not limited to
failure of the Borrower to pay any of the items set forth in subparagraphs
9.2(i)(iii)(A)-(E) below, or if any material representation or warranty
herein proves to be untrue, then the Lender, without regard to waste,
adequacy of the security or solvency of the Borrower, may declare all
Obligations (as defined in the Loan Agreement) immediately due and payable
and may, at its option, without notice:
(A) In person or by agent, with or without taking
possession of or entering the Property, with or without bringing any action
or proceeding, give, or require the Borrower to give, notice to the tenants
under the Leases authorizing and directing the tenants to pay all Rents
directly to the Lender; collect all of the Rents; enforce the payment
thereof and exercise all of the rights of the Borrower under the Leases and
all of the rights of the Lender hereunder; and may enter upon, take
possession of, manage and operate the Property, or any part thereof; may
cancel, enforce or modify the Leases, and fix or modify Rents, and do any
acts which the Lender deems proper to protect the security hereof; and/or
(B) Apply for appointment of a receiver in accordance
with the statutes and law made and provided for, which Receivership hereby
consents to, who shall collect the Rents; manage the Property so to prevent
waste; execute Leases within or beyond the period of receivership; perform
the terms of this Mortgage and apply the Rents as hereinafter provided.
(ii) The exercise of any of the foregoing rights or
remedies and the application of the Rents pursuant to this Section, shall
not cure or waive any Event of Default (or notice of default) or invalidate
any act done pursuant to such notice nor in any way operate to prevent the
Lender from pursuing any remedy which now or hereafter it may have under
the terms and conditions of the Loan Agreement, Mortgage, or the Note
secured thereby or any other instruments securing the same. The rights and
powers of the Lender hereunder shall remain in full force and effect both
prior to and after any foreclosure of the Mortgage and any sale pursuant
thereto and until expiration of the period of redemption from said sale,
regardless of whether a deficiency remains from said sale. The purchaser
at any foreclosure sale, including the Lender, shall have the right, at any
time and without limitation as provided in Minn. Stat. Section 582.03, to
advance money to any receiver appointed hereunder to pay any part or all of
<PAGE>
the items which the receiver would otherwise be authorized to pay if cash
were available from the Property and the sum so advanced, with interest at
the rate then in effect under the terms of the Note, shall be a part of the
sum required to be paid to redeem from any foreclosure sale. The rights
under this Section 9.2(i)(ii) shall in no way be dependent upon and shall
apply without regard to whether the Property is in danger of being lost,
materially injured or damaged or whether the Property is adequate to
discharge the Debt and the Obligations. To the extent inconsistent with
the terms of this section 9.2(i)(ii), the terms of the Assignment of Rents
and Leases shall control.
(iii)Notwithstanding anything in this Mortgage or the
other Loan Documents to the contrary, and specifically replacing contrary
provisions in this Mortgage, all Rents collected by Lender or the receiver
each month following the occurrence and continuance of an Event of Default
shall be applied as follows:
(A) to payment of all reasonable fees of the
receiver approved by the court;
(B) to payment of all tenant security deposits
then owing to tenants under any of the Leases pursuant to the provisions of
Minn. Stat. Section 504.20;
(C) to payment of all prior or current real
estate taxes and special assessments with respect to the Property, or if
this Mortgage or any other instrument relating to the Obligations requires
periodic escrow payments for such taxes and assessments, to the escrow
payments then due;
(D) to payment of all premiums then due for the
insurance required with respect to the Property, or if this Mortgage or any
other instrument relating to the Obligations requires periodic escrow
payments for such premiums, to the escrow payments then due;
(E) to payment of expenses incurred for normal
maintenance of the Property;
(F) if received prior to any foreclosure sale of
the Property pursuant to this Mortgage, to Lender for payment of the
indebtedness secured hereby, but no such payment made after acceleration of
the indebtedness secured hereby shall affect such acceleration; and
(G) If the Property shall be foreclosed and sold
pursuant to a foreclosure sale, then:
(1) If the Lender is the purchaser at the foreclosure sale, the
Rents shall be paid to the Lender to be applied to the extent of any
deficiency remaining after the sale, the balance to be retained by the
Lender, and if the Property be redeemed by the Borrower or any other party
entitled to redeem, to be applied as a credit against the redemption price
with any remaining excess Rents to be paid to the Borrower, provided, if
the Property not be redeemed, any remaining excess Rents to belong to the
Lender, whether or not a deficiency exists; and
<PAGE>
(2) If the Lender is not the purchaser at the foreclosure sale, the
Rents shall be paid to the Lender to be applied first, to the extent of any
deficiency remaining after the sale, the balance to be retained by the
purchaser, and if the Property be redeemed by the Borrower or any other
party entitled to redeem, to be applied as a credit against the redemption
price with any remaining excess Rents to be paid to the Borrower, provided,
if the Property not be redeemed any remaining excess Rents shall be paid
first, to the purchaser at the foreclosure sale in an amount equal to the
interest accrued upon the sale price pursuant to Minn. Stat. Section 580.23
or Section 581.10, then to the Lender to the extent of any deficiency
remaining unpaid and the remainder to the purchaser.
The rights and powers of Lender and receivers under this Mortgage and the
application of Rents under this Section shall continue until expiration of
the redemption period from any foreclosure sale, whether or not any
deficiency remains after a foreclosure sale.
(j) Borrower's Federal Taxpayer Identification Number. The
following information supplements that given in Sections 6.1 and 6.3 of
this Mortgage:
The Federal taxpayer identification number of
Borrower (Debtor) is 52-2182213.
(k) Non-Agricultural Use. Borrower represents and warrants
that as of the date of this Mortgage the Property is not in agricultural
use as defined in Minn. Stat. Section 40A.02, Subd. 3 and is not used for
agricultural purposes.
(l) Maturity Date. The latest obligation secured by this
Mortgage matures on August 1, 2024 (the "Maturity Date").
(m) Future Advances. To the extent that this Mortgage is
deemed to secure future advances including, but not limited to, Accrued
Interest (as defined in the Loan Agreement), the amount of such advances is
not currently known. The delivery and acceptance of this Mortgage by
Borrower and Lender, however, constitutes an acknowledgment that Borrower
and Lender are aware of the provisions of Minn. Stat. Section 287.05,
Subd. 5, and intend to comply with the requirements contained therein. The
maximum principal amount of indebtedness secured by this Mortgage at any
one time, excluding any amounts constituting an "indeterminate amount"
under Minn. Stat. Section 287.05, Subd. 5, and excluding advances made by
the Lender in protection of the Property or the lien of this Mortgage,
shall be $30,300,000. The representations contained in this Section are
made solely for the benefit of county recording authorities in determining
the mortgage registry tax payable as a prerequisite to the recording of
this Mortgage. Borrower acknowledges that such representations do not
constitute or imply an agreement by Lender to make any future advances to
Borrower.
(n) Waiver of Jury Trial. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL, BY JURY IN ANY ACTION,
PROCEEDING OR COUNTER-CLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT,
TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE APPLICATION, THE
LOAN, THE LOAN DOCUMENTS, THE HAZARDOUS MATERIALS INDEMNITY AGREEMENT, OR
ANY ACTS OR OMISSIONS OF LENDER IN CONNECTION THEREWITH.
(o) Note Rate. The rate of interest accruing on the unpaid
principal balance of the Note is eight and ten one hundredths percent
(8.10%) per annum.
<PAGE>
(p) No Affect on Other Instruments. Nothing in this Mortgage
and no foreclosure or enforcement of this Mortgage in any state shall limit
or impair any other mortgages, deeds of trusts or other instruments
(collectively, the "Other Mortgages"), or any liens, rights or remedies
under or the provisions of any of the Other Mortgages, notwithstanding that
this Mortgage and the Other Mortgages may encumber the same property, and
this Mortgage and the Other Mortgages may be separately foreclosed or
otherwise enforced concurrently or in any order of priority. For purposes
of exercising rights and remedies, including but not limited to foreclosure
in a state, all references herein to Property or any component thereof
shall be to the Property or component thereof in that state.
[NO FURTHER TEXT ON THIS PAGE]
<PAGE>
IN WITNESS WHEREOF, THIS MORTGAGE has been executed by Borrower
as of the day and year first above written.
LHO FINANCING PARTNERSHIP I, L.P.,
a Delaware limited partnership
By: LHO Financing, Inc.,
a Delaware corporation
By: /s/ Hans Weger
------------------------------
Name: Hans Weger
------------------------------
Title: Chief Financial Officer
------------------------------
EXHIBIT 10.3
- ------------
LHO FINANCING PARTNERSHIP I, L.P.
(Borrower)
to
GENERAL ELECTRIC CAPITAL CORPORATION
(Lender)
______________________________________________________________
SECOND FEE AND LEASEHOLD MORTGAGE,
ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
______________________________________________________________
Dated: As of July 29, 1999
Property Location: 7800 Normandale Boulevard
Bloomington
Hennepin County, Minnesota
DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Reese Mason, Esq.
<PAGE>
SECOND FEE AND LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES
AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING
This Second Fee and Leasehold Mortgage, Assignment of Leases
and Rents, Security Agreement and Fixture Filing (this "Mortgage") is
executed as of July 29, 1999, by LHO FINANCING PARTNERSHIP I, L.P., a
Delaware limited partnership ("Borrower"), whose address for notice
hereunder is 1401 Eye Street, N.W., Suite 900, Washington, D.C. 20005 for
the benefit of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
("Lender"), whose address for notice is 292 Long Ridge Road, Stamford,
Connecticut 06927.
R E C I T A L S
---------------
WHEREAS, Lender is prepared to make a first mortgage loan in
the original principal amount of $30,300,000.00 (the "Loan") to Borrower
pursuant to that certain Loan Agreement of even date herewith between
Borrower and Lender (the "Loan Agreement") to be evidenced by that certain
Promissory Note of even date herewith made by Borrower to Lender payable to
the order of Lender in the stated principal amount of $30,300,000.00 (the
"Note") and is secured by, among other things, that certain Fee and
Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing of even date herewith made by Borrower for the benefit of
Lender (the "First Mortgage");
WHEREAS, concurrently herewith, Lender has made an additional
first deed of trust loan in the aggregate principal amount of
$16,200,000.00 (the "Other Loan") to Borrower, pursuant to a Loan Agreement
of even date herewith between Lender and Borrower (the "Other Loan
Agreement");
WHEREAS, the Other Loan is evidenced by a promissory note of
even date herewith with a maturity date of August 1, 2024 from Borrower to
Lender (the "Other Note") and is secured by, among other things, a Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing dated of even date herewith and made by Borrower to Lender (the
"Other First Mortgage") on certain property defined in the Other Loan
Agreement as the "Property"; and
WHEREAS, in order to secure the full and punctual payment and
performance of all of the obligations of Borrower to Lender now or
hereafter existing, whether for principal, interest, fees, expenses or
otherwise (collectively, the "Obligations") under the Other Loan Agreement,
the Other Note, the Other First Mortgage and all other documents evidencing
or securing the Other Loan (collectively, the "Other Loan Documents"),
Borrower has deeded, mortgaged, given, granted, bargained, sold, alienated,
enfeoffed, conveyed, confirmed, warranted, pledged, assigned and
hypothecated and by these presents does hereby deed, mortgage, give, grant,
bargain, sell, alien, enfeoff, convey, confirm, warrant, pledge, assign and
hypothecate unto Lender all of Borrower's right, title and interest in and
to the real property described in Exhibit A-1, A-2 and A-3 attached hereto
(the "Land") and the buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and
improvements now or hereafter located thereon (the "Improvements").
NOW, THEREFORE, in consideration of the mutual promises herein
contained and other good and valuable consideration, the receipt and legal
sufficiency whereof are hereby acknowledged, and as an inducement to Lender
to enter into the Loan and the Other Loan, Borrower hereby represents and
warrants to and covenants and agrees with Lender as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1Definitions. As used herein, the following terms
shall have the following meanings:
"Ground Lease": The Ground Lease dated March 14, 1980, between
Arleen M. Carlson, Burton W. Bauernfeind and Matthew J. Levitt, as trustees
of the Curtis L. Carlson Hennepin Trust, as lessor (such lessor and its
respective successors and assigns are hereinafter collectively referred to
as the "Ground Lessor"), and Radisson South Company, as lessee, a
memorandum of which was recorded on December 31, 1989 as Document No.
4954763 of the records of Hennepin County, Minnesota, as subsequently
assigned to Borrower by Assignment of Lease dated April 29, 1998.
"Loan Documents": (a) the Other Loan Documents, and (b) all
amendments, modifications, restatements, extensions, renewals or
replacements of the foregoing.
"Permitted Encumbrances": The outstanding liens, easements,
restrictions, security interests and other exceptions to title set forth in
the policy of title insurance insuring the lien of the First Mortgage,
together with (i) the liens and security interests in favor of Lender
created by the Loan Documents, (ii) the liens for taxes, not yet
delinquent, which are being contested in accordance with Loan Agreement and
(iii) any rights under Leases entered into in accordance with the Loan
Agreement.
"Property": (a) the Land, together with any greater estate
therein as hereafter may be acquired by Borrower, (b) the Improvements,
(c) the Ground Lease and the leasehold estate created thereby, (d) all
modifications, extensions and renewals of the Ground Lease and all credits,
deposits (including, without limitation, any deposit of cash or securities
or any other property which may be held to secure Borrower's performance of
its obligations under the Ground Lease), options, privileges and rights of
Borrower as lessee under the Ground Lease, including, but not limited to,
the right, if any, to renew or extend the Ground Lease for a succeeding
term or terms, (e) all the estate, right, title, claim or demand whatsoever
of Borrower either in law or in equity, in possession or expectancy, of, in
and to the Property or any part thereof, (f) the Parking Agreements and all
modifications, extensions and renewals thereof (g) all materials, supplies,
equipment, apparatus and other items of personal property now owned or
hereafter acquired by Borrower and now or hereafter attached to, installed
in or used in connection with any of the Improvements or the Land, and all
the right, title and interest of Borrower in and to water, gas, electrical,
storm and sanitary sewer facilities and all other utilities whether or not
situated in easements (the "Fixtures"), including, without limitation,
Borrower's reversionary interest in Fixtures pursuant to the Operating
Lease, if any, (h) all right, title and interest of Borrower in and to all
goods, accounts, general intangibles, instruments, documents, chattel paper
and all other personal property of any kind or character, including such
items of personal property as defined in the UCC, now owned or hereafter
acquired by Borrower and now or hereafter affixed to, placed upon, used in
connection with, arising from or otherwise related to the Land and
Improvements or which may be used in or relating to the planning,
development, financing or operation of the Property, including, without
limitation, furniture, furnishings, equipment, machinery, money, insurance
proceeds, accounts, contract rights, trademarks, goodwill, chattel paper,
documents, trade names, licenses and/or franchise agreements, rights of
Borrower under leases of Fixtures or other personal property or equipment,
inventory, all refundable, returnable or reimbursable fees, deposits or
other funds or evidences of credit or indebtedness deposited by or on
behalf of Borrower with any governmental authorities, boards, corporations,
<PAGE>
providers of utility services, public or private, including specifically,
but without limitation, all refundable, returnable or reimbursable tap
fees, utility deposits, commitment fees and development costs (the
"Personalty"), (i) all right, title and interest of Borrower in and to
that certain Promissory Note dated as of April 29, 1998 by Operating Lessee
(as defined in the Loan Agreement) in favor of Operating Partnership (as
defined in the Loan Agreement), predecessor-in-interest to Borrower,
(j) all reserves, escrows or impounds required under the Loan Agreement and
all deposit accounts maintained by Borrower with respect to the Property
including without limitation any lockbox account and cash management
account, all accounts and monies held by Operating Lessee and/or Manager
which Borrower has an interest in and is entitled to receive and all
securities, investments, property and financial assets held from time to
time and all proceeds, products, distributions or dividends or
substitutions thereon and thereof (the "Accounts"), (k) all the right,
title and interest of Borrower in and to all plans, specifications, shop
drawings and other technical descriptions prepared for construction, repair
or alteration of the Improvements, and all amendments and modifications
thereof (the "Plans"), (l) all the right, title and interest of Borrower in
and to all leases, subleases, operating leases, licenses, concessions,
occupancy agreements, rental contracts, or other agreements (written or
oral) now or hereafter existing relating to the use or occupancy of all or
any part of the Property, together with all guarantees, letters of credit
and other credit support, modifications, extensions and renewals thereof,
whether before or after the filing by or against Borrower of any petition
of relief under 11 U.S.C. Section 101 et seq. (as same may be amended from
time to time, the "Bankruptcy Code") and all related security and other
deposits (the "Leases") and all of Borrower's claims and rights (the
"Bankruptcy Claims") to the payment of damages arising from any rejection
by a lessee of any Lease under the Bankruptcy Code, (m) all of the
Operating Lease Rent (as defined in the Loan Agreement) and, if any, all of
the rents, revenues, issues, income, proceeds, profits, and all other
payments of any kind under the Leases actually received by Borrower for
using, leasing, licensing, possessing, operating from, residing in, selling
or otherwise enjoying the Property whether paid or accruing before or after
the filing by or against Borrower of any petition for relief under the
Bankruptcy Code including, without limitation, all hotel receipts, revenues
and credit card receipts collected from guest rooms, restaurants, bars,
meeting rooms, banquet rooms and recreational facilities, all receivables,
customer obligations, installment payment obligations and other obligations
now existing or hereafter arising or created out of the sale, lease,
sublease, license, concession or other grant of the right of the use and
occupancy of property or rendering of services by Borrower or any operator
or manager of the hotel or the commercial space located in the Improvements
or acquired from others (including, without limitation, from the rental of
any office space, retail space, guest rooms or other space, halls, stores,
and offices, and deposits securing reservations of such space), license,
lease, sublease and concession fees and rentals, health club membership
fees, food and beverage wholesale and retail sales, service charges,
vending machine sales and security deposits under Leases (the "Rents"),
(n) all other agreements, such as construction contracts, architects'
agreements, operating agreements, engineers' contracts, utility contracts,
maintenance agreements, franchise agreements, service contracts, permits,
licenses, certificates and entitlements in any way relating to the
development, construction, use, occupancy, operation, maintenance,
enjoyment, acquisition or ownership of the Property (the "Property
Agreements"), (o) all rights, privileges, tenements, hereditaments, rights-
of-way, easements, reciprocal easement agreements, appendages and
appurtenances appertaining to the foregoing, and all right, title and
interest, if any, of Borrower in and to any streets, ways, alleys, strips
or gores of land adjoining the Land or any part thereof, including, but not
limited to, any right, title and interest created by virtue of the Ground
Lease, (p) all accessions, replacements and substitutions for any of the
foregoing and all proceeds thereof, (q) all insurance policies, unearned
premiums therefor and proceeds from such policies covering any of the above
<PAGE>
property now or hereafter acquired by Borrower, (r) all mineral, water, oil
and gas rights now or hereafter acquired and relating to all or any part of
the Property, (s) all tradenames, trademarks, service marks, logos,
copyrights, goodwill, books and records and all other general intangibles
relating to or used in connection with the operation of the Property, (t)
all of Borrower's right, title and interest in and to all inventory and
articles of personal property and accessions thereof and renewals and
replacements thereof and substitutions therefor, if any (including, but not
limited to, beds, bureaus, chiffoniers, chests, chairs, desks, lamps,
mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains,
shades, venetian blinds, screens, paintings, hangings, pictures, divans,
couches, luggage carts, luggage racks, stools, sofas, chinaware, linens,
pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities,
dining room wagons, keys or other entry systems, bars, bar fixtures, liquor
and other drink dispensers, icemakers, radios, television sets, intercom
and paging equipment, electric and electronic equipment, dictating
equipment, private telephone systems, medical equipment, potted plants,
heating, lighting and plumbing fixtures, fire prevention and extinguishing
apparatus, cooling and air-conditioning systems, elevators, escalators,
fittings, plants, apparatus, stoves, ranges, refrigerators, laundry
machines, tools, machinery, engines, dynamos, motors, boilers,
incinerators, switchboards, conduits, compressors, vacuum cleaning systems,
floor cleaning, waxing and polishing equipment, call systems, brackets,
electrical signs, bulbs, bells, ash and fuel, conveyors, cabinets, lockers,
shelving, spotlighting equipment, dishwashers, garbage disposals, washers
and dryers), other customary hotel equipment, and (u) all of Borrower's
right, title and interest in and to any awards, remunerations,
reimbursements, settlements or compensation heretofore made or hereafter to
be made by any governmental authority pertaining to the Land, Improvements,
Fixtures or Personalty. As used in this Mortgage, the term "Property"
shall mean all or, where the context permits or requires, any portion of
the above or any interest therein.
"UCC": The Uniform Commercial Code of Minnesota or, if the
creation, perfection and enforcement of any security interest herein
granted is governed by the laws of a state other than Minnesota then, as to
the matter in question, the Uniform Commercial Code in effect in that
state.
Section 1.2Other Terms. Capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Loan
Agreement.
ARTICLE II
GRANT
Section 2.1Grant. To secure the full and timely payment and
performance of the Obligations, Borrower hereby MORTGAGES, GRANTS,
BARGAINS, SELLS and CONVEYS to Lender all of Borrower's right, title and
interest in and to the Property, subject, however, to the Permitted
Encumbrances and the First Mortgage; TO HAVE AND TO HOLD the Property to
Lender, its successors and assigns, and Borrower does hereby bind itself,
its successors and assigns to WARRANT AND FOREVER DEFEND the title to the
Property unto Lender.
<PAGE>
ARTICLE III
WARRANTIES, REPRESENTATIONS AND COVENANTS
Borrower warrants, represents and covenants to Lender as
follows:
Section 3.1Title to Property and Lien of this Instrument.
Borrower owns the Property free and clear of any liens, claims or
interests, except the First Mortgage and Permitted Encumbrances. This
Mortgage creates valid, enforceable second priority liens and security
interests against the Property. Borrower warrants that Borrower has good,
marketable and insurable title to the Property and has the full power,
authority and right to execute, deliver and perform its obligations under
this Mortgage. The First Mortgage and the Permitted Encumbrances,
individually or in the aggregate, do not materially interfere with the
benefits of the security intended to be provided by this Mortgage,
materially and adversely affect the value of the Property, materially
impair the use or operations of the Property or impair Borrower's ability
to pay its obligations in a timely manner. Notwithstanding anything to the
contrary contained in this Section 3.1, Borrower and Lender hereby
acknowledge and agree that Borrower owns leasehold title to a portion of
the Land more particularly described on Exhibit A-2 (the "Lease Property")
as created by virtue of the Ground Lease and does not own fee title to such
portion of the Land.
Section 3.2Lien Status. Borrower shall preserve and protect
the lien and security interest status of this Mortgage, the First Mortgage
and the Other Loan Documents. If any lien or security interest other than
the First Mortgage and the Permitted Encumbrances are asserted against the
Property, Borrower shall promptly, and at its expense, (a) give Lender a
detailed written notice of such lien or security interest (including
origin, amount and other terms), and (b) pay the underlying claim in full
or take such other action so as to cause it to be released or, in Lender's
discretion, provide a bond or other security satisfactory to Lender for the
payment of such claim or contest such claim in accordance with the Loan
Agreement.
Section 3.3Payment and Performance. Borrower shall perform
and pay the Obligations in full when they are required to be so performed
and paid.
Section 3.4Replacement of Fixtures and Personalty. Borrower
shall not, without the prior written consent of Lender, permit any of the
Fixtures or Personalty to be removed at any time from the Land or
Improvements, unless the removed item is removed temporarily for
maintenance and repair or, if removed permanently, is obsolete and is
replaced by an article of equal or better suitability and value, owned by
Borrower subject to the liens and security interests of this Mortgage and
the other Loan Documents, and free and clear of any other lien or security
interest except such as may be first approved in writing by Lender.
Section 3.5Maintenance of Rights of Way, Easements and
Licenses. Borrower shall maintain all rights of way, easements, grants,
privileges, licenses, certificates, permits, entitlements and franchises
necessary for the use of the Property and will not, without the prior
consent of Lender, consent to any public restriction (including any zoning
ordinance) or private restriction as to the use of the Property. Borrower
shall comply in all material respects with all restrictive covenants
affecting the Property, and all zoning ordinances and other public or
private restrictions as to the use of the Property.
Section 3.6Inspection. Borrower shall permit Lender, and
Lender's agents, representatives and employees, upon reasonable prior
notice to Borrower and during normal business hours, to inspect the
Property and conduct such environmental and engineering studies as Lender
may require, provided that such inspections and studies shall not
materially interfere with the use and operation of the Property.
<PAGE>
Section 3.7Other Covenants. All of the covenants in the Loan
Agreement are incorporated herein by reference and, together with covenants
in this Article 3, shall be covenants running with the land. The covenants
set forth in the Loan Agreement include, among other provisions: (a) the
obligation to pay (subject to Borrower's right to contest pursuant to the
terms of the Loan Agreement) when due all taxes on the Property or assessed
against Lender with respect to the Loan, (b) the right of Lender to inspect
the Property, (c) the obligation to keep the Property insured as set forth
therein, (d) the obligation to comply with all legal requirements
(including environmental laws), maintain the Property in good condition,
and promptly repair any damage or casualty, and (e) except as otherwise
permitted under the Loan Agreement, the obligation of Borrower to obtain
Lender's consent prior to entering into, modifying or taking other actions
with respect to Leases.
Section 3.8Condemnation Awards and Insurance Proceeds.
(a) Condemnation Awards. Subject to the terms of the Loan
Agreement and the First Mortgage, Borrower assigns all awards and
compensation for any condemnation or other taking, or any purchase in lieu
thereof, to Lender and authorizes Lender to collect and receive such awards
and compensation and to give proper receipts and acquittances therefor,
subject to the terms of the Loan Agreement.
(b) Insurance Proceeds. Subject to the terms of the Loan
Agreement and the First Mortgage, Borrower assigns to Lender all proceeds
of any insurance policies insuring against loss or damage to the Property.
Borrower authorizes Lender to collect and receive such proceeds and
authorizes and directs the issuer of each of such insurance policies to
make payment for all such losses directly to Lender, instead of to Borrower
and Lender jointly in accordance with Section 5.1 of the Loan Agreement.
Section 3.9Transfer or Encumbrance of Property.
(a) Without the prior written consent of Lender, neither
Borrower nor any other Person having a direct or indirect ownership or
beneficial interest in Borrower shall (i) directly or indirectly sell,
transfer, convey, mortgage, pledge, or assign the Property, any part
thereof or any interest therein (including any partnership or any other
ownership interest in Borrower); (ii) further encumber, alienate, grant a
Lien or grant any other interest in the Property or any part thereof
(including any partnership or other ownership interest in Borrower),
whether voluntarily or involuntarily; or (iii) enter into any easement or
other agreement granting rights in or restricting the use or development of
the Property.
(b) As used in this Section 3.9, "transfer" shall include,
without limitation, (i) an installment sales agreement wherein Borrower
agrees to sell the Property or any part thereof for a price to be paid in
installments; (ii) an agreement by Borrower leasing all or a substantial
part of the Property for other than actual occupancy by a space tenant
thereunder or a sale, assignment or other transfer of, or the grant of a
security interest in, Borrower's right, title and interest in and to any
Leases or any Rents, (iii) if Borrower or any general partner or managing
member of Borrower is a corporation, the voluntary or involuntary sale,
conveyance or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by
operation of law or otherwise) or the creation or issuance of new stock
such that such corporation's stock shall be vested in a party or parties
who are not now stockholders or any change in the control of such
corporation; and (iv) if Borrower or any general partner or managing member
of Borrower is a limited or general partnership, joint venture or limited
liability company, the change, removal, resignation or addition of a
general partner, managing partner, limited partner, joint venturer or
member or the transfer of the partnership interest of any general partner,
managing partner or limited partner or the transfer of the interest of any
joint venture or member.
<PAGE>
(c) Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in
order to declare the Obligations immediately due and payable upon
Borrower's sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Property without Lender's consent. This provision shall
apply to every sale, conveyance, alienation, mortgage, encumbrance, pledge
or transfer of the Property regardless of whether voluntary or not, or
whether or not Lender has consented to any previous sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Property.
(d) Lender's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property shall not be
deemed to be a waiver of Lender's right to require such consent to any
future occurrence of same. Any sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property made in contravention of
this paragraph shall be null and void and of no force and effect.
(e) Borrower agrees to bear and shall pay or reimburse Lender
on demand for all reasonable expenses (including, without limitation,
reasonable attorneys' fees and disbursements, title search costs and title
insurance endorsement premiums) incurred by Lender in connection with the
review, approval and documentation of any such sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer.
(f) Lender's consent to a one-time sale or transfer of the
Property will not be unreasonably withheld if such sale occurs in
connection with the sale of the Additional Property (as defined in the Loan
Agreement) together with the Property to one purchaser and after
consideration of all relevant factors, provided that:
(i) no Event of Default or event which with the giving of notice or
the passage of time would constitute an Event of Default shall have
occurred and remain uncured;
(ii) the proposed transferee ("Transferee") and any indemnitor for
non-recourse carveouts shall each be a reputable entity or person of good
character, creditworthy, with sufficient financial worth as determined by
Lender in its reasonable discretion considering the obligations assumed and
undertaken, as evidenced by financial statements and other information
reasonably requested by Lender;
(iii) the Transferee and its property manager shall have sufficient
experience in the ownership and management of properties similar to the
Property and the Additional Property, and Lender shall be provided with
reasonable evidence thereof (and Lender reserves the right to approve the
Transferee without approving the substitution of the property manager);
(iv) (a) the Manager (as defined in the Loan Agreement) for the
Property shall be either (1) the manager immediately prior to such
transfer, (2) a professional management company, which at the time of its
engagement as manager shall be the property manager for at least ten (10)
hotel properties containing at least two thousand (2000) rooms, exclusive
of the Property and Additional Property or (3) such other manager
reasonably satisfactory to Lender and (b) any new Management Agreement (as
defined in the Loan Agreement) shall be satisfactory to Lender in its
reasonable discretion;
<PAGE>
(v) (a) the Operating Lessee shall be either (1) the operating
lessee immediately prior to such transfer, (2) an affiliate of hotel
operating company, which such operating company at the time of engagement
shall be operating and controlling, as owner, manager or operating lessee,
at least ten (10) hotel properties consisting of at least two thousand
(2000) rooms, exclusive of the Property and Additional Property, and a
single purpose bankruptcy-remote entity in accordance with the then-current
standards of the Rating Agencies or (3) such other operating lessee
reasonably satisfactory to Lender and (b) any new Operating Lease (as
defined in the Loan Agreement) shall be satisfactory to Lender in its
reasonable discretion;
(vi) Lender shall have confirmation in writing from the Rating
Agencies (as hereinafter defined) to the effect that such transfer will not
result in a re-qualification, reduction or withdrawal of the then current
rating assigned in a Securitization (as defined in the Loan Agreement).
The term "Rating Agencies" as used herein shall mean each of Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc., Moody's Investors
Service, Inc., Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., or any
other nationally-recognized statistical rating agency which has been
selected by Lender;
(vii) Lender shall have received evidence satisfactory to it (which
shall include a legal non-consolidation opinion reasonably acceptable to
Lender) that the single purpose nature and bankruptcy remoteness of
Transferee, its shareholders, partners, or members, as the case may be,
following such transfers are in accordance with the standards of the Rating
Agencies;
(viii) the Transferee shall have executed and delivered to
Lender an assumption agreement in form and substance reasonably acceptable
to Lender, evidencing such Transferee's agreement to abide and be bound by
the terms of the Note, this Mortgage and the other Loan Documents, together
with such legal opinions and title insurance endorsements as may be
reasonably requested by Lender;
(ix) the franchise or franchise system for the Property shall be
either the franchise or franchise system in place immediately prior to such
transfer or a franchise or franchise system reasonably satisfactory to
Lender; and
(x) Lender shall have received the payment of all out of pocket
costs and expenses incurred by Lender in connection with such assumption
(including reasonable attorney's fees and costs).
Section 3.10 Ground Lease. Borrower shall (a) pay all
rents, additional rents and other sums required to be paid by Borrower, as
tenant under and pursuant to the provisions of the Ground Lease as and when
such rent or other charge is payable, (b) diligently perform and observe
all of the terms, covenants and conditions of the Ground Lease on the part
of Borrower, as tenant thereunder, to be performed and observed at least
thirty (30) days prior to the expiration of any applicable grace period
therein provided, and (c) promptly notify Lender of the giving of any
notice by the Ground Lessor to Borrower of any default by Borrower in the
performance or observance of any of the terms, covenants or conditions of
the Ground Lease on the part of Borrower, as tenant thereunder, to be
performed or observed and deliver to Lender a true copy of each such
notice. Borrower shall not, without the prior consent of Lender, surrender
the leasehold estate created by the Ground Lease or terminate or cancel the
<PAGE>
Ground Lease or modify, change, supplement, alter or amend the Ground
Lease, in any material respect, either orally or in writing, and Borrower
hereby assigns to Lender, as further security for the payment of the
Obligations and for the performance and observance of the terms, covenants
and conditions of this Mortgage, the First Mortgage, and the Loan
Agreement, all of the rights, privileges and prerogatives of Borrower, as
tenant under the Ground Lease, to surrender the leasehold estate created by
the Ground Lease or to terminate, cancel, modify in any material respect,
change in any material respect, supplement in any material respect, alter
or amend in any material respect the Ground Lease, and any such surrender
of the leasehold estate created by the Ground Lease or termination,
cancellation, modification, change, supplement, alteration or amendment of
the Ground Lease without the prior consent of Lender shall be void and of
no force and effect. Borrower shall not exercise any option to purchase
the Lease Property granted to Borrower pursuant to the Ground Lease,
without the prior written consent of Lender, which consent shall not be
unreasonably withheld, conditioned or delayed. If Borrower shall default
in the performance or observance of any term, covenant or condition of the
Ground Lease on the part of Borrower, as tenant thereunder, to be performed
or observed, then, without limiting the generality of the other provisions
of this Mortgage, the First Mortgage and the Loan Agreement, and without
waiving or releasing Borrower from any of its obligations hereunder or
thereunder, Lender shall have the right, but shall be under no obligation,
to pay any sums and to perform any act or take any action as may be
appropriate to cause all of the terms, covenants and conditions of the
Ground Lease on the part of Borrower, as tenant thereunder, to be performed
or observed or to be promptly performed or observed on behalf of Borrower,
to the end that the rights of Borrower in, to and under the Ground Lease
shall be kept unimpaired and free from default (subject to Borrower's right
to contest in accordance with the Loan Agreement). If Lender shall make
any payment or perform any act or take action in accordance with the
preceding sentence, Lender will notify Borrower of the making of any such
payment, the performance of any such act, or the taking of any such action.
In any such event, subject to the rights of tenants, subtenants and other
occupants under the Leases, Lender and any person designated by Lender
shall have, and are hereby granted, the right to enter upon the Property at
any time and from time to time for the purpose of taking any such action.
Lender may pay and expend such sums of money as Lender deems reasonably
necessary for any such purpose and upon so doing shall be subrogated to any
and all rights of the Ground Lessor. Borrower hereby agrees to pay to
Lender immediately and upon demand therefor, all such sums so paid and
expended by Lender, together with interest thereon from the day of such
payment at the Default Rate. All sums so paid and expended by Lender and
the interest thereon shall be secured by the legal operation and effect of
the First Mortgage and this Mortgage. If the Ground Lessor shall deliver
to Lender a copy of any notice of default sent by said Ground Lessor to
Borrower, as tenant under the Ground Lease, such notice shall constitute
full protection to Lender for any action taken or omitted to be taken by
Lender, in good faith, in reliance thereon. Borrower shall exercise each
individual option, if any, to extend or renew the term of the Ground Lease
upon demand by Lender made at any time within one (1) year of the last day
upon which any such option may be exercised, and, if Borrower fails to
exercise such option, Borrower hereby expressly authorizes and appoints
Lender its attorney-in-fact to exercise any such option in the name of and
upon behalf of Borrower, which power of attorney shall be irrevocable and
shall be deemed to be coupled with an interest. Borrower will not
subordinate or consent to the subordination of the Ground Lease to any
mortgage, security deed, lease or other interest on or in the Ground
Lessor's interest in all or any part of the Property, unless, in each such
case, the written consent of Lender shall have been first had and obtained,
which consent shall be in Lender's sole and absolute discretion. Each
Lease hereafter made and each renewal of any existing Lease shall provide
that, (i) in the event of the termination of the Ground Lease, the Lease
shall not terminate or be terminated by the tenant; (ii) in the event of
any action for the foreclosure of the First Mortgage or this Mortgage, the
<PAGE>
Lease shall not terminate or be terminable by the tenant by reason of the
foreclosure of the Ground Lease unless the tenant is specifically named and
joined in any such action and unless a judgment is obtained therein against
the tenant; and (iii) in the event that the Ground Lease is terminated as
aforesaid, the tenant shall attorn to the Ground Lessor or to the purchaser
at the sale of the Property on such foreclosure, as the case may be.
Section 3.11No Merger of Fee and Leasehold Estates; Releases.
So long as any portion of the Obligations shall remain outstanding, unless
Lender shall otherwise consent, the fee title to the Lease Property and the
leasehold estate therein created pursuant to the provisions of the Ground
Lease shall not merge but shall always be kept separate and distinct,
notwithstanding the union of such estates in Borrower, Lender, or in any
other person by purchase, operation of law or otherwise. Lender reserves
the right, at any time, to release portions of the Lease Property,
including, but not limited to, the leasehold estate created by the Ground
Lease, with or without consideration, at Lender's election, without waiving
or affecting any of its rights hereunder or under the Note or the other
Loan Documents and any such release shall not affect Lender's rights in
connection with the portion of the Lease Property not so released.
Section 3.12Borrower's Acquisition of Fee Estate. In the event
that Borrower, so long as any portion of the Obligations remains
outstanding, shall be the owner and holder of the fee title to the Lease
Property, the liens of the First Mortgage and this Mortgage shall be spread
to cover Borrower's fee title to the Lease Property and said fee title
shall be deemed to be included in the Property. Borrower agrees, at its
sole cost and expense, including without limitation Lender's reasonable
attorneys' fees, to (a) execute any and all documents or instruments
reasonably necessary to subject its fee title to the Lease Property to the
liens of the First Mortgage and this Mortgage; and (b) provide a title
insurance policy, or endorsement thereto, which shall insure that the lien
of the First Mortgage is a first lien on Borrower's fee title to the Lease
Property and the lien of this Mortgage is a second lien on Borrower's fee
title to the Lease Property. Notwithstanding the foregoing, if the Ground
Lease is for any reason whatsoever terminated prior to the natural
expiration of its term, and if, pursuant to any provisions of the Ground
Lease or otherwise, Lender or its designee shall acquire from the Ground
Lessor thereunder another lease of the Lease Property, Borrower shall have
no right, title or interest in or to such other lease or the leasehold
estate created thereby.
Section 3.13Rejection of the Ground Lease.
(a) If the Ground Lease is terminated for any reason in the
event of the rejection or disaffirmance of the Ground Lease pursuant to the
Bankruptcy Code, or any other law affecting creditor's rights, (i) the
Borrower, immediately after obtaining notice thereof, shall give notice
thereto to Lender, (ii) Borrower, without the prior written consent of
Lender, shall not elect to treat the Ground Lease as terminated pursuant to
Section 365(h) of the Bankruptcy Code or any comparable federal or state
statute or law, and any election by Borrower made without such consent
shall be void and (iii) this Mortgage, the First Mortgage and the Loan
Agreement and all the liens, terms, covenants and conditions of this
Mortgage, the First Mortgage and the Loan Agreement hereby extends to and
covers Borrower's possessory rights under Section 365(h) of the Bankruptcy
Code and to any claim for damages due to the rejection of the Ground Lease
or other termination of the Ground Lease. In addition, Borrower hereby
assigns irrevocably to Lender, Borrower's rights to treat the Ground Lease
as terminated pursuant to Section 365(h) of the Bankruptcy Code and to
offset rents under such Ground Lease in the event any case, proceeding or
other action is commenced by or against the Ground Lessor under the
Bankruptcy Code or any comparable federal or state statute or law.
<PAGE>
(b) Borrower hereby assigns to Lender, (i) Borrower's right
to reject the Ground Lease under Section 365 of the Bankruptcy Code or any
comparable federal or state statute or law with respect to any case,
proceeding or other action commenced by or against Borrower under the
Bankruptcy Code or comparable federal or state statute or law and (ii)
Borrower's right to seek an extension of the 60-day period within which
Borrower must accept or reject the Ground Lease under Section 365 of the
Code or any comparable federal or state statute or law with respect to any
case, proceeding or other action commenced by or against Borrower under the
Bankruptcy Code or comparable federal or state statute or law. Further, if
the foregoing assignment is not effective under applicable law and Borrower
shall desire to so reject the Ground Lease, at Lender's request, Borrower
shall assign its interest in the Ground Lease to Lender in lieu of
rejecting such Ground Lease as described above, upon receipt by Borrower of
written notice from Lender of such request together with Lender's agreement
to cure any existing defaults of Borrower under such Ground Lease.
(c) Borrower hereby agrees that if the Ground Lease is
terminated for any reason in the event of the rejection or disaffirmance of
the Ground Lease pursuant to the Bankruptcy Code or any other law affecting
creditor's rights, any property not removed by the Borrower as permitted or
required by the Ground Lease, shall at the option of Lender be deemed
abandoned by Borrower, provided that Lender may remove any such property
required to be removed by Borrower pursuant to the Ground Lease and all
reasonable costs and expenses associated with such removal shall be paid by
Borrower within five (5) days of receipt by Borrower of an invoice for such
removal costs and expenses.
ARTICLE IV
DEFAULT AND FORECLOSURE
Section 4.1Remedies. If an Event of Default (as defined in
the Other Loan Agreement) exists, Lender may, at Lender's election,
exercise any or all of the following rights, remedies and recourses:
(a) Acceleration. Declare the Obligations to be immediately
due and payable and/or performable, without further notice, presentment,
protest, notice of intent to accelerate, notice of acceleration, demand or
action of any nature whatsoever (each of which hereby is expressly waived
by Borrower), whereupon the same shall become immediately due and payable.
(b) Entry on Property. Enter the Property and take exclusive
possession thereof and of all books, records and accounts relating thereto.
If Borrower remains in possession of the Property after an Event of Default
and without Lender's prior written consent, Lender may invoke any legal
remedies to dispossess Borrower.
(c) Operation of Property. Hold, lease, develop, manage,
operate or otherwise use the Property upon such terms and conditions as
Lender may deem reasonable under the circumstances (making such repairs,
alterations, additions and improvements and taking other actions, from time
to time, as Lender deems necessary or desirable), and apply all Rents and
other amounts collected by Lender in connection therewith in accordance
with the provisions of Section 4.6.
(d) Foreclosure and Sale. Institute proceedings for the
complete foreclosure of this Mortgage, in which case the Property may be
sold for cash or credit in one or more parcels. At any such sale by virtue
of any judicial proceedings or any other legal right, remedy or recourse,
the title to and right of possession of any such property shall pass to the
<PAGE>
purchaser thereof, and to the fullest extent permitted by law, Borrower
shall be completely and irrevocably divested of all of its right, title,
interest, claim and demand whatsoever, either at law or in equity, in and
to the property sold and such sale shall be a perpetual bar both at law and
in equity against Borrower, and against all other persons claiming the
property sold or any part thereof, by, through or under Borrower. Lender
may be a purchaser at such sale and if Lender is the highest bidder, may
credit the portion of the purchase price that would be distributed to
Lender against the Obligations in lieu of paying cash.
(e) Receiver. Make application to a court of competent
jurisdiction for, and obtain from such court as a matter of strict right
and without notice to Borrower or regard to the adequacy of the Property
for the repayment of the Obligations, the appointment of a receiver of the
Property, and Borrower irrevocably consents to such appointment. Any such
receiver shall have all the usual powers and duties of receivers in similar
cases, including the full power to rent, maintain and otherwise operate the
Property upon such terms as may be approved by the court, and shall apply
such Rents in accordance with the provisions of Section 4.6.
(f) UCC. Exercise any and all rights and remedies granted to
a secured party upon default under the Uniform Commercial Code, including,
without limiting the generality of the foregoing: (i) the right to take
possession of the Personalty or any part thereof, and to take such other
measures as Lender may deem necessary for the care, protection and
preservation of the Personalty, and (ii) request Borrower at its expense to
assemble the Personalty and make it available to Lender at a convenient
place acceptable to Lender. Any notice of sale, disposition or other
intended action by Lender with respect to the Personalty sent to Borrower
in accordance with the provisions hereof at least ten (10) days prior to
such action, shall constitute commercially reasonable notice to Borrower;
(g) Other. Exercise all other rights, remedies and recourses
granted under this Mortgage and Other Loan Documents or otherwise available
at law or in equity (including an action for specific performance of any
covenant contained in the Other Loan Documents, or a judgment on the Other
Note either before, during or after any proceeding to enforce this
Mortgage).
Section 4.2Separate Sales. The Property may be sold in one or
more parcels and in such manner and order as Lender in its sole discretion,
may elect; the right of sale arising out of any Event of Default shall not
be exhausted by any one or more sales.
Section 4.3Remedies Cumulative, Concurrent and Nonexclusive.
Lender shall have all rights, remedies and recourses granted in the Loan
Documents and available at law or equity (including the UCC), which rights
(a) shall be cumulative and concurrent, (b) may be pursued separately,
successively or concurrently against Borrower or others obligated under the
Other Note and the Other Loan Documents, or against the Property, or
against any one or more of them, at the sole discretion of Lender, (c) may
be exercised as often as occasion therefor shall arise, and the exercise or
failure to exercise any of them shall not be construed as a waiver or
release thereof or of any other right, remedy or recourse, and (d) are
intended to be, and shall be, nonexclusive. No action by Lender in the
enforcement of any rights, remedies or recourses under the Other Loan
Documents or otherwise at law or equity shall be deemed to cure any Event
of Default.
Section 4.4Release of and Resort to Collateral. Lender may
release, regardless of consideration and without the necessity for any
notice to or consent by the holder of any subordinate lien on the Property,
any part of the Property without, as to the remainder, in any way
impairing, affecting, subordinating or releasing the lien or security
interests created in or evidenced by this Mortgage its status as a second
lien and security interest in and to the Property. For payment of the
Obligations, Lender may resort to any other security in such order and
manner as Lender may elect.
<PAGE>
Section 4.5Discontinuance of Proceedings. If Lender shall
have proceeded to invoke any right, remedy or recourse permitted under this
Mortgage and shall thereafter elect to discontinue or abandon it for any
reason, Lender shall have the unqualified right to do so and, in such an
event, Borrower and Lender shall be restored to their former positions with
respect to the Obligations, the Property and otherwise, and the rights,
remedies, recourses and powers of Lender shall continue as if the right,
remedy or recourse had never been invoked, but no such discontinuance or
abandonment shall waive any Event of Default which may then exist or the
right of Lender thereafter to exercise any right, remedy or recourse under
the Other Loan Documents for such Event of Default.
Section 4.6Application of Proceeds. The proceeds of any sale
of, and the Rents and other amounts generated by the holding, leasing,
management, operation or other use of the Property, shall be applied by
Lender (or the receiver, if one is appointed) in the following order unless
otherwise required by applicable law or the First Mortgage:
(a) to the payment of the reasonable costs and expenses of
taking possession of the Property and of holding, using, leasing, repairing
and selling the same, including, without limitation (i) receiver's fees and
expenses, (ii) court costs, (iii) attorneys' and accountants' fees and
expenses, (iv) costs of advertisement, (v) insurance premiums and (vi) the
payment of all ground rent, real estate taxes and assessments, except any
taxes, assessments or other charges subject to which the Property shall
have been sold;
(b) to the payment of all amounts (including interest), other
than the unpaid principal balance of the Other Note and accrued but unpaid
interest, which may be due to Lender under the Other Loan Documents;
(c) to the payment and performance of the Obligations in such
manner and order of preference as Lender in its sole discretion may
determine; and
(d) the balance, if any, to the payment of the persons
legally entitled thereto.
Section 4.7Occupancy After Foreclosure. The purchaser at any
foreclosure sale pursuant to Section 4.1(d) shall become the legal owner of
the Property. All occupants of the Property shall, at the option of such
purchaser and subject to the rights of tenants to remain in possession,
become tenants of the purchaser at the foreclosure sale and shall deliver
possession thereof immediately to the purchaser upon demand.
Section 4.8 Additional Advances and Disbursements, Costs of
Enforcement.
(a) If any Event of Default exists, Lender shall have the
right, but not the obligation, to cure such Event of Default in the name
and on behalf of Borrower. All sums advanced and expenses incurred at any
time by Lender under this Section 4.8, or otherwise under this Mortgage or
any of the other Loan Documents or applicable law, shall bear interest from
the date that such sum is advanced or expense incurred, to and including
the date of reimbursement, computed at the Default Rate (as defined in the
Other Loan Agreement), and all such sums, together with interest thereon,
shall be secured by this Mortgage.
(b) Borrower shall pay all reasonable expenses (including
reasonable attorneys' fees and expenses) of or incidental to the perfection
and enforcement of this Mortgage and the other Loan Documents, or the
enforcement, compromise or settlement of the Debt (as defined in the Other
Loan Agreement) or any claim under this Mortgage and the Other Loan
Documents, and for the curing thereof, or for defending or asserting the
rights and claims of Lender in respect thereof, by litigation or otherwise.
<PAGE>
Section 4.9No Lender in Possession. Neither the enforcement
of any of the remedies under this Article 4, the assignment of the Rents
and Leases under Article 5, the security interests under Article 6, nor any
other remedies afforded to Lender under this Mortgage, at law or in equity
shall cause Lender to be deemed or construed to be a mortgagee in
possession of the Property, to obligate Lender to lease the Property or
attempt to do so, or to take any action, incur any expense, or perform or
discharge any obligation, duty or liability whatsoever under any of the
Leases or otherwise.
Section 4.10 Actions and Proceedings. Lender has the
right to appear in and defend any action or proceeding brought with respect
to the Property, if reasonably necessary to protect Lender's interest in
the Property, and to bring any action or proceeding, in the name and on
behalf of Borrower, which Lender, in its reasonable discretion, decides
should be brought to protect its interest in the Property.
Section 4.11 Waiver of Redemption, Notice and Marshalling
of Assets. To the fullest extent permitted by law, Borrower hereby
irrevocably and unconditionally waives and releases (a) all benefit that
might accrue to Borrower by virtue of any present or future statute of
limitations or law or judicial decision exempting the Property from
attachment, levy or sale on execution or providing for any appraisement,
valuation, stay of execution, exemption from civil process, redemption or
extension of time for payment, (b) all notices of any Event of Default or
of Lender's election to exercise or its actual exercise of any right,
remedy or recourse provided for under the Loan Documents and the Other Loan
Documents, and (c) any right to a marshalling of assets or a sale in
inverse order of alienation.
ARTICLE V
ASSIGNMENT OF RENTS AND LEASES
Section 5.1Assignment. Borrower hereby assigns to Lender, as
further security for the Obligations, the Leases and Rents, subject to the
First Mortgage. While any Event of Default exists, Lender shall be
entitled to exercise any or all of the remedies provided in Article 4
hereof including, without limitation, the right to have a receiver
appointed.
ARTICLE VI
SECURITY AGREEMENT
Section 6.1Security Interest. This Mortgage constitutes a
"Security Agreement" on personal property within the meaning of the UCC and
other applicable law and with respect to the Personalty, Fixtures, Plans,
Leases, Rents, Accounts and Property Agreements. To this end, Borrower
grants to Lender, a second and prior security interest in the Personalty,
Fixtures, Plans, Leases, Rents, Accounts and Property Agreements and all
other Property which is personal property to secure the payment and
performance of the Obligations, and agrees that Lender shall have all the
rights and remedies of a secured party under the UCC with respect to such
property. Any notice of sale, disposition or other intended action by
Lender with respect to the Personalty, Fixtures, Plans, Leases, Rents,
Accounts and Property Agreements sent to Borrower at least ten (10) days
prior to any action under the UCC shall constitute reasonable notice to
Borrower.
<PAGE>
Section 6.2Financing Statements. Borrower shall execute and
deliver to Lender, in form and substance reasonably satisfactory to Lender,
such financing statements and such further assurances as Lender may, from
time to time, reasonably consider necessary to create, perfect and preserve
Lender's security interest hereunder and Lender may cause such statements
and assurances to be recorded and filed, at such times and places as may be
required or permitted by law to so create, perfect and preserve such
security interest. Borrower's chief executive office is in the District of
Columbia at the address set forth in the first paragraph of this Mortgage.
Section 6.3Fixture Filing. This Mortgage shall also
constitute a "fixture filing" for the purposes of the UCC against all of
the Property which is or is to become fixtures. Information concerning the
security interest herein granted may be obtained at the addresses of Debtor
(Borrower) and Secured Party (Lender) as set forth in the first paragraph
of this Mortgage.
ARTICLE VII
MISCELLANEOUS
Section 7.1Limitation on Interest. It is the intention of the
parties hereto to conform strictly to applicable usury laws. Accordingly,
all agreements between Borrower and Lender with respect to the Other Loan
are hereby expressly limited so that in no event, whether by reason of
acceleration of maturity or otherwise, shall the amount paid or agreed to
be paid to Lender or charged by Lender for the use, forbearance or
detention of the money to be lent hereunder or otherwise, exceed the
maximum amount allowed by law. If the Loan would be usurious under
applicable law (including the laws of the state where the Property is
located and the laws of the United States of America), then,
notwithstanding anything to the contrary in the Other Loan Documents: (a)
the aggregate of all consideration which constitutes interest under
applicable law that is contracted for, taken, reserved, charged or received
under the Other Loan Documents shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall
be credited on the Obligations; and (b) if maturity is accelerated by
reason of an election by Lender, or in the event of any prepayment, then
any consideration which constitutes interest may never include more than
the maximum amount allowed by applicable law. In such case, excess
interest, if any, provided for in the Other Loan Documents or otherwise, to
the extent permitted by applicable law, shall be amortized, prorated,
allocated and spread from the date of advance until payment in full so that
the actual rate of interest is uniform through the term hereof. If such
amortization, proration, allocation and spreading is not permitted under
applicable law, then such excess interest shall be canceled automatically
as of the date of such acceleration or prepayment and, if theretofore paid,
shall be credited on the Obligations. This Mortgage and the Other Loan
Documents are contracts made under and shall be construed in accordance
with and governed by the laws of the State of New York, except that if at
any time the laws of the United States of America permit Lender to contract
for, take, reserve, charge or receive a higher rate of interest than is
allowed by the laws of the State of New York (whether such federal laws
directly so provide or refer to the law of any state), then such federal
laws shall to such extent govern as to the rate of interest which Lender
may contract for, take, reserve, charge or receive under this Mortgage and
the Other Loan Documents.
Section 7.2Notices. Any notice required or permitted to be
given under this Mortgage shall be (a) in writing, (b) sent in the manner
set forth in the Other Loan Agreement, and (c) effective in accordance with
the terms of the Other Loan Agreement.
<PAGE>
Section 7.3Covenants Running with the Land. All Obligations
contained in this Mortgage are intended by Borrower and Lender to be, and
shall be construed as, covenants running with the Property. As used
herein, "Borrower" shall refer to the party named in the first paragraph of
this Mortgage and to any subsequent owner of all or any portion of the
Property (without in any way implying that Lender has or will consent to
any such conveyance or transfer of the Property). All persons or entities
who may have or acquire an interest in the Property shall be deemed to have
notice of, and be bound by, the terms of the Other Loan Documents; however,
no such party shall be entitled to any rights thereunder without the prior
written consent of Lender.
Section 7.4Attorney-in-Fact. Borrower hereby irrevocably
appoints Lender and its successors and assigns, as its attorney-in-fact,
which agency is coupled with an interest, (a) to execute and/or record any
notices of completion, cessation of labor or any other notices that Lender
deems reasonably necessary to protect Lender's interest, if Borrower shall
fail to do so within ten (10) days after written request by Lender, (b)
upon the issuance of a deed pursuant to the foreclosure of this Mortgage or
the delivery of a deed in lieu of foreclosure, to execute all instruments
of assignment, conveyance or further assurance with respect to the Leases,
Rents, Personalty, Fixtures, Plans and Property Agreements in favor of the
grantee of any such deed and as may be reasonably necessary for such
purpose, (c) to prepare, execute and file or record financing statements,
continuation statements, applications for registration and like papers
necessary to create, perfect or preserve Lender's security interests and
rights in or to any of the collateral and (d) while any Event of Default
exists, to perform any obligation of Borrower hereunder; however: (i)
Lender shall not under any circumstances be obligated to perform any
obligation of Borrower; (ii) any sums advanced by Lender in such
performance shall be added to and included in the Obligations and shall
bear interest at the Default Rate; (iii) Lender as such attorney-in-fact
shall only be accountable for such funds as are actually received by
Lender; and (iv) Lender shall not be liable to Borrower or any other person
or entity for any failure to take any action which it is empowered to take
under this Section.
Section 7.5Successors and Assigns. This Mortgage shall be
binding upon and inure to the benefit of Lender and Borrower and their
respective successors and assigns. Borrower shall not, without the prior
written consent of Lender, except as expressly permitted pursuant to
Section 3.9 hereof, assign any rights, duties or obligations hereunder.
Section 7.6No Waiver. Any failure by Lender to insist upon
strict performance of any of the terms, provisions or conditions of the
Loan Documents or Other Loan Documents shall not be deemed to be a waiver
of same, and Lender shall have the right at any time to insist upon strict
performance of all of such terms, provisions and conditions.
Section 7.7Subrogation. To the extent proceeds of the Other
Note have been used to extinguish, extend or renew any indebtedness against
the Property, then Lender shall be subrogated to all of the rights, liens
and interests existing against the Property and held by the holder of such
indebtedness and such former rights, liens and interests, if any, are not
waived, but, subject to all applicable provisions of the Other Loan
Documents, are continued in full force and effect in favor of Lender.
Section 7.8Other Loan Agreement. If any conflict or
inconsistency exists between this Mortgage and the Other Loan Agreement,
the Other Loan Agreement shall govern.
Section 7.9Release. Upon payment and performance in full of
the Obligations, Lender, at Borrower's expense, shall release the liens and
security interests created by this Mortgage.
<PAGE>
Section 7.10 Waiver of Stay, Moratorium and Similar
Rights. Borrower agrees, to the full extent that it may lawfully do so,
that it will not at any time insist upon or plead or in any way take
advantage of any appraisement, valuation, stay, marshaling of assets,
extension, redemption or moratorium law now or hereafter in force and
effect so as to prevent or hinder the enforcement of the provisions of this
Mortgage or the Obligations secured hereby, or any agreement between
Borrower and Lender or any rights or remedies of Lender.
Section 7.11 Limitation on Liability. Borrower's
liability hereunder is subject to the limitation on liability provisions of
Article 12 of the Other Loan Agreement.
Section 7.12 Obligations of Borrower, Joint and Several.
If more than one person or entity has executed this Mortgage as "Borrower,"
the obligations of all such persons or entities hereunder shall be joint
and several.
Section 7.13Governing Law. THIS MORTGAGE WAS NEGOTIATED IN THE
STATE OF NEW YORK, AND MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE
OF NEW YORK, AND THE PROCEEDS OF THE NOTE SECURED HEREBY WERE DISBURSED
FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED
HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
MORTGAGE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES
OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA,
EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND
ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED ON REAL PROPERTY
(INCLUDING FIXTURES) PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE
STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF
NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL
LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER.
TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER
JURISDICTION GOVERNS THIS MORTGAGE, AND THIS MORTGAGE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT
TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
Section 7.14 Headings. The Article, Section and
Subsection titles hereof are inserted for convenience of reference only and
shall in no way alter, modify or define, or be used in construing, the text
of such Articles, Section or Subsections.
Section 7.15 Entire Agreement. This Mortgage embodies the
entire agreement and understanding between Lender and Borrower with respect
to the Other Loan and supersedes all prior agreements and understandings
between such parties relating to the subject matter hereof and thereof.
Accordingly, this Mortgage may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. There are no
unwritten oral agreements between the parties.
Section 7.16 Interpretation. To the extent that this
Mortgage references provisions in the Loan Agreement and/or the First
Mortgage, such Loan Agreement and First Mortgage shall be deemed to remain
in existence for the purpose of the interpretation of this Mortgage whether
or not the Loan is outstanding or has been paid in full.
ARTICLE VIII
INTENTIONALLY DELETED
<PAGE>
ARTICLE IX
SPECIAL STATE PROVISIONS
Section 9.1 Principles of Construction. In the event of any
inconsistencies between the terms and conditions of this Article IX and the
terms and conditions of this Mortgage, the terms and conditions of this
Article IX shall control and be binding.
Section 9.2 Application to Minnesota Property. Notwithstanding
anything in this Mortgage to the contrary, to the extent the applicable
portion of the Property is situated in the State of Minnesota or to the
extent the application, interpretation or treatment of this Mortgage is
subject to Minnesota laws, the following shall apply:
(a) Definitions.
(i) "Collateral": The Personalty, Plans, Leases, Rents, Property
Agreements and any other Property which may not be deemed real property or
may not constitute a "fixture" (within the meaning of Minn. Stat. Section
336.9-313 of the UCC) and all replacements, substitutions, and additions
of, for and to the same, and the proceeds thereof.
(ii) "Property": The definition of Property shall be as set forth
in this Mortgage, except that for purposes of Lender exercising its
remedies hereunder in Minnesota, all references herein to the Property or
any component of the Property shall refer to the Property or component
thereof in Minnesota.
(b) Drafting Information. This instrument was drafted by:
Reese Mason, Esq.
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
(c) Multistate Affidavit Allocation. Attached hereto as
Exhibit B is an Affidavit for purposes of determining mortgage registration
tax pursuant to Minn. Stat. Section 287.05, Subd. 1.
(d) Exhibit A. All references to Exhibit A shall include
reference to Exhibits A-1, A-2 and A-3 attached hereto, with Exhibits A-1
and A-2 to be the "Minnesota Property" and Exhibit A-3 to be the "Non-
Minnesota Property."
(e) Secured Obligations. Notwithstanding anything in this
Mortgage to the contrary, this Mortgage shall secure the following
Obligations:
(i) The debt evidenced by the Other Note in the principal face
amount of SIXTEEN MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($16,200,000.00);
(ii) any and all other charges and amounts payable under the Other
Note, this Mortgage, the Other Mortgage or the Other Loan Documents, as are
exempt from Minnesota mortgage registry tax (the "Registry Tax") under
Minn. Stat. Section 287.05, Subd. 4;
(iii) any and all charges, amounts and non-monetary obligations under
the Other Note, this Mortgage, the Other Mortgage or the Other Loan
Documents, which are not otherwise subject to Registry Tax;
<PAGE>
(iv) any and all charges and amounts payable under the Other Note,
this Mortgage, the Other Mortgage or the Other Loan Documents, not referred
to in clauses (i), (ii) or (iii) on which the Registry Tax has been paid;
and
(v) interest from time to time payable on any or all of the
foregoing.
(f) Minnesota Remedies. If an Event of Default exists,
Lender may, at Lender's election, exercise any of the following rights,
remedies and recourses:
(i) Foreclosure and Sale. Foreclose this Mortgage by judicial
proceedings or by advertisement with full authority to sell the Property at
public auction and convey the same to the purchaser in fee simple, either
in one parcel or separate lots and parcels, all in accordance with and in
the manner prescribed by law, and out of the proceeds arising from sale and
foreclosure to retain the principal, prepayment fees, and interest due on
the Other Note, the Debt and the Obligations, together with all sums of
money as Lender shall have expended or advanced pursuant to this Mortgage
or pursuant to statute, together with interest thereon as herein provided,
and all costs and expenses of such foreclosure, including lawful attorneys'
fees with the balance, if any, due to paid to the person entitled thereto
by law.
(ii) Receiver. As a matter of right, without notice and without
regard to the solvency or insolvency of Borrower, or the existence of waste
of the Property or adequacy of the security of the Property, and without
giving bond, apply for the appointment of a receiver in accordance with the
statutes and law made and provided for who shall have all the rights,
powers and remedies as provided by such statute or law, including without
limitation the rights of receiver pursuant to Minn. Stat. Section 576.01,
as amended, and who shall from the date of its appointment through any
period of redemption existing at law collect the Rents, manage the Property
so as to prevent waste, execute leases within or beyond the period of
receivership, pay all expenses for normal maintenance of the Property, and
perform the terms of this Mortgage and apply the Rents to the payment of
the expenses enumerated in Minn. Stat. Section 576.01, Subd. 2 in the
priority mentioned therein and to all expenses for maintenance of the
Property and to the costs and expenses of the receivership, including
attorneys' fees, to the repayment of the Debt and Obligations and as
further provided in the Assignment of Leases and Rents executed by Borrower
to Lender whether contained in this Mortgage or in a separate instrument.
Borrower does hereby irrevocably consent to such appointment.
(iii) UCC. Exercise all rights, remedies and recourse available to a
secured party under the UCC (in addition to the rights available to a
Lender of real property), including the right to proceed under the
provisions of the UCC governing default as to any Collateral as defined in
this Mortgage which may be included on the Property or which may be deemed
non-realty in a foreclosure of this Mortgage or to proceed as to such
Collateral in accordance with the procedures and remedies available
pursuant to a foreclosure of real estate.
<PAGE>
(g) Acknowledgment of Waiver of Hearing Before Sale.
Borrower understands and agrees that if an Event of Default shall occur,
Lender has the right, inter alia, to foreclose this Mortgage by
advertisement pursuant to Minn. Stat. Chapter 580, as hereafter amended, or
pursuant to any similar or replacement statute hereafter enacted; that if
Lender elects to foreclose by advertisement, it may cause the Property or
any part thereof to be sold at public action; that notice of such sale must
be published for six (6) successive weeks at least once a week in a
newspaper of general circulation, and that no personal notice is required
to be served upon Borrower. Borrower further understands that upon the
occurrence of an Event of Default, Lender may also elect its rights under
the UCC and take possession of the non-real estate items of the Property
and dispose of the same by sale or otherwise in one or more parcels,
provided that at least ten (10) days' prior notice of such disposition must
be given, all as provided for by the UCC, as hereinafter amended or by any
similar or replacement statute hereafter enacted. Borrower further
understands that under the Constitution of the United States and the
Constitution of the State of Minnesota it may have the right to notice and
hearing before the Property may be sold and that the procedure for
foreclosure by advertisement described above does not insure that notice
will be given to Borrower and neither said procedure for foreclosure by
advertisement nor the UCC requires any hearing or other judicial
proceeding. BORROWER HEREBY EXPRESSLY CONSENTS AND AGREES THAT THE
PROPERTY MAY BE FORECLOSED BY ADVERTISEMENT AND THAT THE PERSONAL PROPERTY
MAY BE DISPOSED OF PURSUANT TO THE CODE, ALL AS DESCRIBED ABOVE. BORROWER
ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE SIGNING
THIS DOCUMENT THIS SECTION AND BORROWER'S CONSTITUTIONAL RIGHTS WERE FULLY
EXPLAINED BY SUCH COUNSEL AND THAT BORROWER UNDERSTANDS THE NATURE AND
EXTENT OF THE RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.
(h) Additional Minnesota Waiver of Redemption, Notice and
Marshaling of Assets Provision. The following shall be added to the last
sentence of Section 4.11 hereof:
", (d) any appraisal before a sale of any portion of the
Property, and (e) any extension of time for the enforcement and collection
of the Other Note, the Other Loan or the Obligations, or creating or
extending a period of redemption from any sale made in collecting said
debt. To the full extent Borrower may do so, Borrower agrees that the
Borrower will not at any time insist upon, plead, claim or take the benefit
or advantage of any law now or hereafter enforced providing for any
appraisal, evaluation, stay, extension or redemption, and Borrower, to the
extent permitted by law, waives and releases all rights of redemption,
valuation, appraisal, stay of execution or notice of election to mature or
declare due the whole of this Mortgage."
(i) Leases and Rents. (i) Upon the occurrence of any Event
of Default, Borrower's revocable license to collect the Rents set forth in
Section 5 shall immediately cease and terminate. Upon or at any time
during the continuance of an Event of Default, including but not limited to
failure of the Borrower to pay any of the items set forth in subparagraphs
9.2(i)(iii)(A)-(E) below, or if any material representation or warranty
herein proves to be untrue, then the Lender, without regard to waste,
adequacy of the security or solvency of the Borrower, may declare all
Obligations (as defined in the Loan Agreement) immediately due and payable
and may, at its option, without notice:
(A) In person or by agent, with or without taking
possession of or entering the Property, with or without bringing any action
or proceeding, give, or require the Borrower to give, notice to the tenants
under the Leases authorizing and directing the tenants to pay all Rents
directly
<PAGE>
to the Lender; collect all of the Rents; enforce the payment
thereof and exercise all of the rights of the Borrower under the Leases and
all of the rights of the Lender hereunder; and may enter upon, take
possession of, manage and operate the Property, or any part thereof; may
cancel, enforce or modify the Leases, and fix or modify Rents, and do any
acts which the Lender deems proper to protect the security hereof; and/or
(B) Apply for appointment of a receiver in accordance
with the statutes and law made and provided for, which Receivership hereby
consents to, who shall collect the Rents; manage the Property so to prevent
waste; execute Leases within or beyond the period of receivership; perform
the terms of this Mortgage and apply the Rents as hereinafter provided.
(ii) The exercise of any of the foregoing rights or
remedies and the application of the Rents pursuant to this Section, shall
not cure or waive any Event of Default (or notice of default) or invalidate
any act done pursuant to such notice nor in any way operate to prevent the
Lender from pursuing any remedy which now or hereafter it may have under
the terms and conditions of the Other Loan Agreement, the Other Mortgage,
this Mortgage or the Other Note secured thereby or any other instruments
securing the same. The rights and powers of the Lender hereunder shall
remain in full force and effect both prior to and after any foreclosure of
this Mortgage and any sale pursuant thereto and until expiration of the
period of redemption from said sale, regardless of whether a deficiency
remains from said sale. The purchaser at any foreclosure sale, including
the Lender, shall have the right, at any time and without limitation as
provided in Minn. Stat. Section 582.03, to advance money to any receiver
appointed hereunder to pay any part or all of the items which the receiver
would otherwise be authorized to pay if cash were available from the
Property and the sum so advanced, with interest at the rate then in effect
under the terms of the Note, shall be a part of the sum required to be paid
to redeem from any foreclosure sale. The rights under this Section
9.2(i)(ii) shall in no way be dependent upon and shall apply without regard
to whether the Property is in danger of being lost, materially injured or
damaged or whether the Property is adequate to discharge the Debt and the
Obligations. To the extent inconsistent with the terms of this section
9.2(i)(ii), the terms of the Assignment of Rents and Leases shall control.
(iii) Notwithstanding anything in this Mortgage or the
Other Loan Documents to the contrary, and specifically replacing contrary
provisions in this Mortgage, all Rents collected by Lender or the receiver
each month following the occurrence and continuance of an Event of Default
shall be applied as follows:
(A) to payment of all reasonable fees of the receiver
approved by the court;
(B) to payment of all tenant security deposits then
owing to tenants under any of the Leases pursuant to the provisions of
Minn. Stat. Section 504.20;
(C) to payment of all prior or current real estate
taxes and special assessments with respect to the Property, or if this
Mortgage or any other instrument relating to the Obligations requires
periodic escrow payments for such taxes and assessments, to the escrow
payments then due;
(D) to payment of all premiums then due for the
insurance required with respect to the Property, or if this Mortgage or any
other instrument relating to the Obligations requires periodic escrow
payments for such premiums, to the escrow payments then due;
(E) to payment of expenses incurred for normal
maintenance of the Property;
<PAGE>
(F) if received prior to any foreclosure sale of the
Property pursuant to this Mortgage, to Lender for payment of the
indebtedness secured hereby, but no such payment made after acceleration of
the indebtedness secured hereby shall affect such acceleration; and
(G) If the Property shall be foreclosed and sold
pursuant to a foreclosure sale, then:
(1) If the Lender is the purchaser at the foreclosure sale,
the Rents shall be paid to the Lender to be applied to the extent of any
deficiency remaining after the sale, the balance to be retained by the
Lender, and if the Property be redeemed by the Borrower or any other party
entitled to redeem, to be applied as a credit against the redemption price
with any remaining excess Rents to be paid to the Borrower, provided, if
the Property not be redeemed, any remaining excess Rents to belong to the
Lender, whether or not a deficiency exists; and
(2) If the Lender is not the purchaser at the foreclosure
sale, the Rents shall be paid to the Lender to be applied first, to the
extent of any deficiency remaining after the sale, the balance to be
retained by the purchaser, and if the Property be redeemed by the Borrower
or any other party entitled to redeem, to be applied as a credit against
the redemption price with any remaining excess Rents to be paid to the
Borrower, provided, if the Property not be redeemed any remaining excess
Rents shall be paid first, to the purchaser at the foreclosure sale in an
amount equal to the interest accrued upon the sale price pursuant to Minn.
Stat. Section 580.23 or Section 581.10, then to the Lender to the extent of
any deficiency remaining unpaid and the remainder to the purchaser.
The rights and powers of Lender and receivers under this Mortgage and the
application of Rents under this Section shall continue until expiration of
the redemption period from any foreclosure sale, whether or not any
deficiency remains after a foreclosure sale.
(j) Borrower's Federal Taxpayer Identification Number. The
following information supplements that given in Sections 6.1 and 6.3 of
this Mortgage:
The Federal taxpayer identification number of
Borrower (Debtor) is 52-2182213.
(k) Non-Agricultural Use. Borrower represents and warrants
that as of the date of this Mortgage the Property is not in agricultural
use as defined in Minn. Stat. Section 40A.02, Subd. 3 and is not used for
agricultural purposes.
(l) Maturity Date. The latest obligation secured by this
Mortgage matures on August 1, 2024 (the "Maturity Date").
(m) Future Advances. To the extent that this Mortgage is
deemed to secure future advances including, but not limited to, Accrued
Interest (as defined in the Loan Agreement), the amount of such advances is
not currently known. The delivery and acceptance of this Mortgage by
Borrower and Lender, however, constitutes an acknowledgment that Borrower
and Lender are aware of the provisions of Minn. Stat. Section 287.05,
Subd. 5, and intend to comply with the requirements contained therein. The
<PAGE>
maximum principal amount of indebtedness secured by this Mortgage at any
one time, excluding any amounts constituting an "indeterminate amount"
under Minn. Stat. Section 287.05, Subd. 5, and excluding advances made by
the Lender in protection of the Property or the lien of this Mortgage,
shall be $16,200,000. The representations contained in this Section are
made solely for the benefit of county recording authorities in determining
the mortgage registry tax payable as a prerequisite to the recording of
this Mortgage. Borrower acknowledges that such representations do not
constitute or imply an agreement by Lender to make any future advances to
Borrower.
(n) Waiver of Jury Trial. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL, BY JURY IN ANY ACTION,
PROCEEDING OR COUNTER-CLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT,
TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE APPLICATION, THE
LOAN, THE LOAN DOCUMENTS, THE HAZARDOUS MATERIALS INDEMNITY AGREEMENT, OR
ANY ACTS OR OMISSIONS OF LENDER IN CONNECTION THEREWITH.
(o) Note Rate. The rate of interest accruing on the unpaid
principal balance of the Other Note is eight and ten one hundredths percent
(8.10%) per annum.
(p) No Affect on Other Instruments. Nothing in this Mortgage
and no foreclosure or enforcement of this Mortgage in any state shall limit
or impair any other mortgages, deeds of trusts or other instruments
(collectively, the "Other Mortgages"), or any liens, rights or remedies
under or the provisions of any of the Other Mortgages, notwithstanding that
this Mortgage and the Other Mortgages may encumber the same property, and
this Mortgage and the Other Mortgages may be separately foreclosed or
otherwise enforced concurrently or in any order of priority. For purposes
of exercising rights and remedies, including but not limited to foreclosure
in a state, all references herein to Property or any component thereof
shall be to the Property or component thereof in that state.
[NO FURTHER TEXT ON THIS PAGE]
<PAGE>
IN WITNESS WHEREOF, THIS MORTGAGE has been executed by Borrower
as of the day and year first above written.
LHO FINANCING PARTNERSHIP I, L.P.,
a Delaware limited partnership
By: LHO Financing, Inc.,
a Delaware corporation
By: /s/ Hans Weger
------------------------------
Name: Hans Weger
------------------------------
Title: Chief Financial Officer
------------------------------
EXHIBIT 10.4
- ------------
LHO FINANCING PARTNERSHIP I, L.P.
(Borrower)
to
GENERAL ELECTRIC CAPITAL CORPORATION
(Lender)
LOAN AGREEMENT
Dated: As of July 29, 1999
Property Location: 650 Pearl Street
Dallas,
Dallas County, Texas
DOCUMENT PREPARED BY:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Reese Mason, Esq.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions . . . . . . . . . . . . 1
ARTICLE II
LOAN TERMS
Section 2.1 The Loan. . . . . . . . . . . . . . . . . . 12
Section 2.2 Interest Rate . . . . . . . . . . . . . . . 12
Section 2.3 Terms of Payment. . . . . . . . . . . . . . 13
Section 2.4 Prepayment; Defeasance. . . . . . . . . . . 15
Section 2.5 Release of Property . . . . . . . . . . . . 17
ARTICLE III
SECURITY; RESERVES AND CASH MANAGEMENT
Section 3.1 Security; Establishment of Funds. . . . . . 18
Section 3.2 Pledge and Grant of Security Interest . . . 19
Section 3.3 Disbursement of Funds . . . . . . . . . . . 19
Section 3.4 Intentionally Deleted.. . . . . . . . . . . 19
Section 3.5 Cash Management Account.. . . . . . . . . . 19
Section 3.6 Payments Received Under the Cash
Management Agreement. . . . . . . . . . . . 21
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Closing Conditions. . . . . . . . . . . . . 21
ARTICLE V
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 5.1 Insurance; Casualty and Condemnation. . . . 24
Section 5.2 Condemnation. . . . . . . . . . . . . . . . 28
Section 5.3 Restoration . . . . . . . . . . . . . . . . 28
Section 5.4 Impounds. . . . . . . . . . . . . . . . . . 32
Section 5.5 Letters of Credit.. . . . . . . . . . . . . 33
ARTICLE VI
ENVIRONMENTAL MATTERS
Section 6.1 Certain Definitions . . . . . . . . . . . . 34
Section 6.2 Representations and Warranties on
Environmental Matters . . . . . . . . . . . 34
Section 6.3 Covenants on Environmental Matters. . . . . 35
Section 6.4 Allocation of Risks and Indemnity . . . . . 35
Section 6.5 No Waiver . . . . . . . . . . . . . . . . . 36
<PAGE>
Page
----
ARTICLE VII
LEASING MATTERS
Section 7.1 Representations and Warranties on Leases. . 36
Section 7.2 Approval Rights . . . . . . . . . . . . . . 37
Section 7.3 Covenants . . . . . . . . . . . . . . . . . 37
Section 7.4 Tenant Estoppels. . . . . . . . . . . . . . 37
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1 Organization, Power and Authority . . . . . 37
Section 8.2 Validity of Loan Documents. . . . . . . . . 38
Section 8.3 No Conflicts. . . . . . . . . . . . . . . . 38
Section 8.4 Liabilities; Litigation.. . . . . . . . . . 38
Section 8.5 Taxes and Assessments . . . . . . . . . . . 38
Section 8.6 Other Agreements; Defaults. . . . . . . . . 39
Section 8.7 Title . . . . . . . . . . . . . . . . . . . 39
Section 8.8 Compliance with Law.. . . . . . . . . . . . 39
Section 8.9 Location of Borrower. . . . . . . . . . . . 39
Section 8.10 ERISA.. . . . . . . . . . . . . . . . . . . 40
Section 8.11 Forfeiture. . . . . . . . . . . . . . . . . 40
Section 8.12 Tax Filings . . . . . . . . . . . . . . . . 40
Section 8.13 Solvency. . . . . . . . . . . . . . . . . . 40
Section 8.14 Full and Accurate Disclosure. . . . . . . . 41
Section 8.15 Flood Zone. . . . . . . . . . . . . . . . . 41
Section 8.16 Federal Reserve Regulations . . . . . . . . 41
Section 8.17 Not a Foreign Person. . . . . . . . . . . . 41
Section 8.18 Separate Lots . . . . . . . . . . . . . . . 41
Section 8.19 No Prior Assignment . . . . . . . . . . . . 41
Section 8.20 Insurance . . . . . . . . . . . . . . . . . 41
Section 8.21 Use of the Property . . . . . . . . . . . . 41
Section 8.22 Certificate of Occupancy; Licenses. . . . . 42
Section 8.23 Physical Condition. . . . . . . . . . . . . 42
Section 8.24 Boundaries. . . . . . . . . . . . . . . . . 42
Section 8.25 Intentionally Deleted.. . . . . . . . . . . 42
Section 8.26 Intentionally Deleted.. . . . . . . . . . . 42
Section 8.27 Filing and Recording Taxes. . . . . . . . . 42
Section 8.28 Single Purpose Entity/Separateness. . . . . 42
Section 8.29 Management Agreement. . . . . . . . . . . . 46
Section 8.30 Operating Leases. . . . . . . . . . . . . . 47
Section 8.31 Investment Company Act. . . . . . . . . . . 47
Section 8.32 Leases. . . . . . . . . . . . . . . . . . . 47
Section 8.33 SPE Compliance. . . . . . . . . . . . . . . 48
Section 8.34 Intentionally Deleted.. . . . . . . . . . . 48
Section 8.35 Condominium.. . . . . . . . . . . . . . . . 48
Section 8.36 Intentionally Deleted.. . . . . . . . . . . 49
ARTICLE IX
FINANCIAL REPORTING
Section 9.1 Financial Statements. . . . . . . . . . . . 50
Section 9.2 Accounting Principles . . . . . . . . . . . 51
Section 9.3 Other Information; Access . . . . . . . . . 51
Section 9.4 Format of Delivery. . . . . . . . . . . . . 51
<PAGE>
Page
----
ARTICLE X
COVENANTS
Section 10.1 Due on Sale and Encumbrance;
Transfers of Interests. . . . . . . . . . . 51
Section 10.2 Taxes; Utility Charges. . . . . . . . . . . 51
Section 10.3 Operating Lease . . . . . . . . . . . . . . 52
Section 10.4 Operation; Maintenance; Inspection. . . . . 52
Section 10.5 Taxes on Security . . . . . . . . . . . . . 52
Section 10.6 Legal Existence; Name, Etc. . . . . . . . . 53
Section 10.7 Further Assurances. . . . . . . . . . . . . 53
Section 10.8 Estoppel Certificates.. . . . . . . . . . . 53
Section 10.9 Notice of Certain Events. . . . . . . . . . 53
Section 10.10 Indemnification . . . . . . . . . . . . . . 54
Section 10.11 Payment for Labor and Materials . . . . . . 54
Section 10.12 Alterations . . . . . . . . . . . . . . . . 55
Section 10.13 Handicapped Access. . . . . . . . . . . . . 55
Section 10.14 Certain Hotel/Operating Lease Covenants . . 56
Section 10.15 Intentionally Deleted.. . . . . . . . . . . 56
Section 10.16 O & M Agreement . . . . . . . . . . . . . . 56
ARTICLE XI
EVENTS OF DEFAULT
Section 11.1 Payments. . . . . . . . . . . . . . . . . . 56
Section 11.2 Insurance . . . . . . . . . . . . . . . . . 57
Section 11.3 Single Purpose Entity . . . . . . . . . . . 57
Section 11.4 Insolvency Opinion. . . . . . . . . . . . . 57
Section 11.5 Taxes . . . . . . . . . . . . . . . . . . . 57
Section 11.6 Sale, Encumbrance, Etc. . . . . . . . . . . 57
Section 11.7 Representations and Warranties. . . . . . . 57
Section 11.8 Additional Loan . . . . . . . . . . . . . . 57
Section 11.9 Involuntary Bankruptcy or Other Proceeding. 57
Section 11.10 Voluntary Petitions, Etc. . . . . . . . . . 57
Section 11.11 Covenants . . . . . . . . . . . . . . . . . 57
Section 11.12 Operating Lease.. . . . . . . . . . . . . . 58
Section 11.13 Management Agreement. . . . . . . . . . . . 58
Section 11.14 Intentionally Deleted.. . . . . . . . . . . 58
Section 11.15 Intentionally Deleted.. . . . . . . . . . . 58
ARTICLE XII
REMEDIES
Section 12.1 Remedies - Insolvency Events . . . . . . . 58
Section 12.2 Remedies - Other Events.. . . . . . . . . . 58
Section 12.3 Lender's Right to Perform the Obligations . 59
Section 12.4 Cross-Default; Cross-Collateralization;
Waiver of Marshalling of Assets.. . . . . . 59
ARTICLE XIII
LIMITATIONS ON LIABILITY
Section 13.1 Limitation on Liability . . . . . . . . . . 60
Section 13.2 Limitation on Liability of Lender's Officers,
Employees, Etc. . . . . . . . . . . . . . . 61
<PAGE>
Page
----
ARTICLE XIV
SECURITIZATION
Section 14.1 Securitization. . . . . . . . . . . . . . . 61
Section 14.2 Securitization Indemnification. . . . . . . 62
Section 14.3 Servicer. . . . . . . . . . . . . . . . . . 64
Section 14.4 Uncrossing the Loan and the Additional Loan 64
ARTICLE XV
MISCELLANEOUS
Section 15.1 Notices . . . . . . . . . . . . . . . . . . 65
Section 15.2 Amendments and Waivers. . . . . . . . . . . 65
Section 15.3 Limitation on Interest. . . . . . . . . . . 65
Section 15.4 Invalid Provisions. . . . . . . . . . . . . 66
Section 15.5 Reimbursement of Expenses . . . . . . . . . 66
Section 15.6 Approvals; Third Parties; Conditions. . . . 67
Section 15.7 Lender Not in Control; No Partnership . . . 67
Section 15.8 Time of the Essence . . . . . . . . . . . . 67
Section 15.9 Successors and Assigns. . . . . . . . . . . 67
Section 15.10 Renewal, Extension or Rearrangement . . . . 67
Section 15.11 Waivers . . . . . . . . . . . . . . . . . . 67
Section 15.12 Cumulative Rights; Joint and Several
Liability . . . . . . . . . . . . . . . . . 68
Section 15.13 Singular and Plural . . . . . . . . . . . . 68
Section 15.14 Phrases . . . . . . . . . . . . . . . . . . 68
Section 15.15 Exhibits and Schedules. . . . . . . . . . . 68
Section 15.16 Titles of Articles, Sections and Subsections 68
Section 15.17 Promotional Material. . . . . . . . . . . . 68
Section 15.18 Survival. . . . . . . . . . . . . . . . . . 68
Section 15.19 Waiver of Jury Trial. . . . . . . . . . . . 68
Section 15.20 Waiver of Punitive or Consequential Damages 69
Section 15.21 Governing Law.. . . . . . . . . . . . . . . 69
Section 15.22 Entire Agreement. . . . . . . . . . . . . . 69
Section 15.23 Counterparts. . . . . . . . . . . . . . . . 70
Section 15.24 Brokers and Financial Advisors. . . . . . . 70
Section 15.25 Conflicts . . . . . . . . . . . . . . . . . 70
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY
EXHIBIT B FORM OF FINANCIAL STATEMENTS
SCHEDULE I OPERATING LEASE
SCHEDULE II RELEASE AMOUNTS
SCHEDULE III LEASE PURCHASE OPTION
SCHEDULE IV INSURANCE CLAIMS
<PAGE>
LOAN AGREEMENT
--------------
This Loan Agreement (this "Agreement") is entered into as of
July 29, 1999, between GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation ("Lender"), and LHO FINANCING PARTNERSHIP I, L.P., a Delaware
limited partnership ("Borrower").
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. As used herein, the following
terms have the meanings indicated:
"Access Laws" has the meaning assigned in Section 10.13.
"Accrued Interest" has the meaning assigned in Section 2.3(b).
"Additional Insolvency Opinion" has the meaning assigned in
Section 8.33.
"Additional Loan" means the loan (other than the Loan) made to
Borrower by Lender on the date hereof, which Additional Loan is secured by
the Mortgage and a mortgage encumbering the Radisson Property.
"Additional Loan Documents" shall mean all documents
evidencing, securing, governing or otherwise pertaining to the Additional
Loan, and all amendments, modifications, renewals, substitutions or
replacements of any of the foregoing.
"Additional Payment Stream" has the meaning assigned in Section
2.4(c).
"Additional Property" means the property (other than the
Property) which is mortgaged by Borrower as of the date hereof to secure
the Additional Loan.
"Adjusted Rate" has the meaning assigned in Section 2.2.
"Adjusted Release Amount" shall mean the product of (a) the
quotient obtained by dividing the original Release Amount for the Property
by the sum of the original Release Amount for the Property and the
Additional Property, (b) the outstanding principal balance of the Loan
(i.e., the Note and the Defeased Note, if applicable) and the Additional
Loan, and (c) one hundred twenty-five percent (125%); provided, however,
that, the "Adjusted Release Amount" shall mean the outstanding principal
balance of the Loan (taking into account the "Additional Payment Stream"
(as defined in the Additional Loan Documents)) in the event that the
Additional Loan previously has been completely defeased in accordance with
the Additional Loan Documents.
"Affiliate" means (a) any corporation in which Borrower or any
partner, shareholder, director, officer, member, or manager of Borrower
directly or indirectly owns or controls more than ten percent (10%) of the
beneficial interest, (b) any partnership, joint venture or limited
liability company in which Borrower or any partner, shareholder, director,
officer, member, or manager of Borrower is a partner, joint venturer or
member, (c) any trust in which Borrower or any partner, shareholder,
director, officer, member or manager of Borrower is a trustee or
beneficiary, (d) any entity of any type which is directly or indirectly
owned or controlled by Borrower or any partner, shareholder, director,
officer, member or manager of Borrower, (e) any partner, shareholder,
director, officer, member, manager or employee of Borrower, (f) any Person
related by birth, adoption or marriage to any partner, shareholder,
director, officer, member, manager, or employee of Borrower, or (g) any
Borrower Party.
<PAGE>
"Agreement" means this Loan Agreement, as amended from time to
time.
"Annual Budget" shall mean the operating budget, including all
planned capital expenditures, for the Property prepared by Borrower, the
Operating Lessee or Manager for the applicable calendar year or other
period.
"Anticipated Payment Date" means August 1, 2009.
"Approved Annual Budget" has the meaning assigned in Section
2.3(h).
"Assignment of Leases and Rents" means the Assignment of Leases
and Rents, executed by Borrower for the benefit of Lender, and pertaining
to leases of space in the Property and any amendments, modifications,
renewals, substitutions or replacement thereof.
"Award" has the meaning assigned in Section 5.2.
"Bankruptcy Party" has the meaning assigned in Section 11.9.
"Basic Carrying Costs" shall mean the sum of Taxes and
Insurance Premiums for the Property for the relevant calendar year or
payment period.
"Borrower Party" means any Joinder Party, any guarantor, any
general partner of Borrower, if Borrower is a partnership or limited
partnership, any general partner in any partnership or limited partnership
that is a general partner of Borrower, any managing member of Borrower if
Borrower is a limited liability company, and any managing member in any
limited liability company that is a managing member of Borrower, at any
level.
"Business Day" means a day other than a Saturday, a Sunday, or
a legal holiday on which national banks located in the State of New York
are not open for general banking business.
"Capital Expenditures" means, for any period, the amount
expended for items capitalized under generally accepted accounting
principles (including expenditures for building improvements or major
repairs, leasing commissions and tenant improvements).
"Cash Expenses" means, for any period, the operating expenses
for the operation of the Property as set forth in an Approved Annual
Budget, to the extent that such expenses are actually incurred by Borrower,
minus any payments into the Tax and Insurance Escrow Fund.
"Cash Management Account" has the meaning set forth in Section
3.5(a).
"Cash Management Agreement" has the meaning set forth in
Section 2.3(i).
"Casualty Consultant" has the meaning set forth in Section
5.3(b)(iii).
"Casualty Retainage" has the meaning set forth in Section
5.3(b)(iv).
"Closing Date" means the date the Loan is funded by Lender.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations
issued pursuant thereto in temporary or final form.
<PAGE>
"Condemnation" has the meaning assigned in Section 5.2.
"Condemnation Proceeds" has the meaning assigned in Section
5.3(b).
"Condominium" means that certain condominium regime created
pursuant to the Condominium Documents.
"Condominium Documents" means, collectively, (a) that certain
Declaration of Covenants, Conditions and Restrictions for Plaza of the
Americas, a Condominium Regime, dated as of September 6, 1991, as amended
by that certain First Amendment to Declaration of Covenants, Conditions and
Restrictions for Plaza of the Americas dated September 6, 1991, by and
between K-P Plaza Limited Partnership and Forte Hotels, Inc., (b) that
certain Article of Incorporation of Plaza of the Americas Condominium
Association, a Texas Non-Profit Corporation, and (c) those certain By-Laws
of Plaza of the Americas Condominium Association, a Texas Non-Profit
Corporation.
"Contract Rate" has the meaning assigned in Section 2.2.
"Debt" shall mean the outstanding principal amount set forth
in, and evidenced by, this Agreement and the Note, together with all
interest accrued and unpaid thereon and all other sums (including the Yield
Maintenance Premium) due to Lender in respect of the Loan under the Note,
this Agreement, the Mortgage or any other Loan Document and the Additional
Loan under the Additional Loan Documents.
"Debt Service" means the aggregate interest, fixed principal,
and other payments due under the Loan, and on any other outstanding
permitted Indebtedness approved by Lender for the period of time for which
calculated.
"Debt Service Coverage Ratio" shall mean a ratio for the
applicable period in which:
(a) the numerator is (i) for so long as the Operating Lease
is in effect, the Lease Term NOI and (ii) at all other times during the
term of the Loan, the Net Operating Income for the Property and/or the
Additional Property, as applicable,; and
(b) the denominator is the aggregate amount of principal and
interest due and payable on the Note (or in the event that a Defeasance
Event has occurred, the Undefeased Note) and/or the note executed in
connection with the Additional Loan secured by a mortgage and/or a deed of
trust encumbering the Additional Property referred to in the numerator, as
applicable, based on the actual loan constant.
"Default Rate" means the lesser of (a) the maximum rate of
interest allowed by applicable law, and (b) five percent (5%) per annum in
excess of the Contract Rate or the Adjusted Rate, whichever is then in
effect.
"Defeasance Date" has the meaning ascribed in Section
2.4(b)(i).
"Defeasance Deposit" shall mean an amount equal to the sum of
the Adjusted Release Amount (when in connection with a release, whether
pursuant to a partial defeasance or defeasance in full, provided that if in
connection with a partial defeasance, then the Defeasance Deposit shall
include any prior Defeasance Deposits deposited in connection with prior
Defeasance Events) or, in a partial defeasance where no release is sought,
the principal amount of the Defeased Note, as applicable, the Yield
Maintenance Premium, any costs and expenses incurred or to be incurred in
the purchase of U.S. Obligations necessary to meet the Scheduled Defeasance
<PAGE>
Payments and any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection with the transfer of the Note or the
Defeased Note, as applicable, the creation of the Defeased Note and the
Undefeased Note, if applicable, or otherwise required to accomplish the
requirements of Sections 2.4 and 2.5 hereof.
"Defeasance Event" has the meaning assigned in Section 2.4(b).
"Defeased Note" has the meaning assigned in Section 2.4(b).
"DSCR Event" means in the event that, at any time during the
Loan, the Debt Service Coverage Ratio for the Property and the Additional
Property, in the aggregate, for the immediately preceding twelve (12)
months shall be less than 1.4 to 1.0.; provided, however, that during the
continuance of a Restoration (and until the stabilization thereafter) a
DSCR Event shall only occur in the event that the Debt Service Coverage
Ratio for the Property and Additional Property, in the aggregate, for the
immediately preceding twelve (12) months shall be less than 1.2 to 1.0.
"DSCR Release Event" means in the event that, following the
occurrence of a DSCR Event, the Debt Service Coverage Ratio for the
Property and the Additional Property, in the aggregate, for the immediately
preceding twelve (12) months shall be equal to or greater than 1.4 or 1.0
for two consecutive calendar quarters.
"Eligible Account" shall mean a separate and identifiable
account from all other funds held by the holding institution that is either
(i) an account or accounts maintained with a federal or state-chartered
depository institution or trust company which complies with the definition
of Eligible Institution or (ii) a segregated trust account or accounts
maintained with a federal or state chartered depository institution or
trust company acting in its fiduciary capacity which, in the case of a
state chartered depository institution or trust company is subject to
regulations substantially similar to 12 C.F.R. Section 9.10(b), having in
either case a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal and state authority. An
Eligible Account will not be evidenced by a certificate of deposit,
passbook or other instrument.
"Eligible Institution" shall mean a depository institution or
trust company that satisfies the Rating Criteria.
"Environmental Laws" has the meaning assigned in
Section 6.1(a).
"ERISA" has the meaning assigned in Section 8.10(a).
"Event of Default" has the meaning assigned in Article 11.
"Extraordinary Expenses" means an extraordinary operating
expense or capital expense not set forth in an Approved Annual Budget.
"FFE Note" means that certain Promissory Note dated as of April
29, 1998 by MHI Leasco Dallas, Inc. in favor of LaSalle Hotel Operating
Partnership, L.P., assigned to Borrower pursuant to that certain Assignment
of Note dated as of the date hereof.
"FFE Note Security Agreement" means that certain Security
Agreement (Pledge of Notes) given by Borrower to Lender dated as of the
date hereof.
"Funds" means the Replacement Escrow Fund.
<PAGE>
"Governmental Authority" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise) having jurisdiction over the Property, the Borrower and/or the
Loan, as applicable, whether now or hereafter in existence.
"Hazardous Materials" has the meaning assigned in
Section 6.1(b).
"Hazardous Materials Indemnity Agreement" shall mean that
certain hazardous materials indemnity agreement dated the date hereof by
the Borrower and Indemnitor in favor of Lender.
"Improvements" shall have the meaning assigned to such term in
the Mortgage.
"Indebtedness" means, for any Person, without duplication:
(a) all indebtedness of such Person for borrowed money, for amounts drawn
under a letter of credit, or for the deferred purchase price of property
for which such Person or its assets is liable, (b) all unfunded amounts
under a loan agreement, letter of credit, or other credit facility for
which such Person would be liable, if such amounts were advanced under the
credit facility, (c) all amounts required to be paid by such Person as a
guaranteed payment to partners or a preferred or special dividend,
including any mandatory redemption of shares or interests, (d) all
indebtedness guaranteed by such Person, directly or indirectly, (e) all
obligations under leases that constitute capital leases for which such
Person is liable, and (f) all obligations of such Person under interest
rate swaps, caps, floors, collars and other interest hedge agreements, in
each case whether such Person is liable contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such
Person otherwise assures a creditor against loss.
"Indemnitor" shall mean the Operating Partnership.
"Independent Director" means a Person who shall not have been
at the time of such individual's appointment or at any time while serving
as a director of the corporate general partner of Borrower, and may not
have been at any time during the preceding five years or thereafter (i) a
shareholder of, or an officer, director, partner or employee of, Borrower
or any of its shareholders, subsidiaries or affiliates, (ii) a customer of,
or supplier to, Borrower or any of its shareholders, subsidiaries or
affiliates, (iii) a person or other entity controlling or under common
control with any such shareholder, partner, supplier or customer, or (iv) a
member of the immediate family of any such shareholder, officer, director,
partner, employee, supplier or customer of Borrower. As used herein, the
term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a person
or entity, whether through ownership of voting securities, by contract or
otherwise.
"Insolvency Opinion" has the meaning assigned in Section 8.33.
"Installment Amount" has the meaning assigned in Section
5.4(b).
"Insurance Premiums" has the meaning assigned in Section
5.1(b).
"Insurance Proceeds" has the meaning assigned in Section
5.3(b).
"Joinder Party" means the Persons executing the Joinder hereto.
<PAGE>
"Lease" shall mean all leases, subleases, occupancy agreements,
licenses, concessions, rental contracts and other agreements (written or
oral) now or hereafter existing relating to the use or occupancy of the
project located on the Property, including the Operating Lease, together
with all guarantees, letters of credit and other credit support,
modifications, extensions and renewals thereof, whether before or after the
filing by or against Borrower of any petition of relief under 11 U.S.C.
Section 101 et seq., and all related security and other deposits.
"Lease Term NOI" means the amount obtained by subtracting Lease
Term Operating Expenses from Lease Term Operating Revenues.
"Lease Term Operating Expenses" means all Operating Expenses
incurred by Borrower for so long as the Operating Lease is in effect, which
Lease Term Operating Expenses shall not include any operating expenses paid
by Operating Lessee pursuant to its obligations under the Operating Lease.
"Lease Term Operating Revenues" means all operating Revenue of
Borrower for so long as the Operating Lease is in effect, which shall be
comprised of Operating Lease Rent and other Operating Revenues, if any,
derived by Borrower.
"Legal Requirements" shall mean federal, state, county,
municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting the Property or any part thereof or the construction,
use, alteration or operation thereof, or any part thereof, whether now or
hereafter enacted and in force, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments,
either of record or known to Borrower, at any time in force affecting the
Property or any part thereof, including, without limitation, any which may
(i) require repairs, modifications or alterations in or to the Property or
any part thereof, or (ii) any way limit the use and enjoyment thereof.
"Letter of Credit" shall mean an irrevocable, unconditional,
transferable, clean sight draft letter of credit in favor of Lender and
entitling Lender to draw thereon in New York, New York, issued by a
domestic Eligible Institution with an office in New York, New York.
"Liabilities" has the meaning assigned in Section 14.2(b).
"Lien" means any interest, or claim thereof, in the Property
securing an obligation owed to, or a claim by, any Person other than the
owner of the Property, whether such interest is based on common law,
statute or contract, including the lien or security interest arising from a
deed of trust, mortgage, assignment, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a Lease, consignment or
bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, Leases and other title exceptions and
encumbrances affecting the Property.
"Loan" means the loan made by Lender to Borrower under this
Agreement and all other amounts secured by the Loan Documents.
"Loan Documents" means: (a) this Agreement, (b) the Note,
(c) the Mortgage, (d) the Assignment of Leases and Rents, (e) the Hazardous
Materials Indemnity Agreement, (f) Uniform Commercial Code financing
statements, (g) such assignments of management agreements, contracts and
other rights as may be requested by Lender, (h) the Cash Management
Agreement, (i) the FFE Note Security Agreement, (j) the O&M Agreement,
(k) all other documents evidencing, securing, governing or otherwise
pertaining to the Loan, and (l) all amendments, modifications, renewals,
substitutions or replacements of any of the foregoing.
<PAGE>
"Lockout Yield Maintenance Premium" shall mean an amount equal
to the greater of (a) one percent (1%) of the outstanding principal amount
of the Loan to be prepaid or satisfied, as applicable, or (b) the Yield
Maintenance Premium that would be required if a Defeasance Event had
occurred (whether or not permitted under this Agreement) in an amount equal
to the outstanding principal amount of the Loan to be satisfied or prepaid,
as applicable; plus if the prepayment of which the Lockout Yield
Maintenance Premium is a part is not paid on a Payment Date, the interest
that would have accrued on the Loan through the next Payment Date.
"LTV" means the outstanding principal balance of the Note to
the appraised or underwritten (based upon the underwriting procedures and
guidelines utilized as of the Closing Date) value of the Property,
determined by Lender in its reasonable discretion.
"Management Agreement" means the management agreement entered
into by and between Borrower or Operating Lessee, as applicable, and the
Manager pursuant to which the Manager is to provide management and other
services with respect to the Property.
"Manager" means Meridien Hotels, Inc., or any replacement
manager approved in accordance with the terms and provisions of the Loan
Documents.
"Maturity Date" means the earliest of (a) August 1, 2024;
(b) any earlier date on which the entire Loan is required to be paid in
full, by acceleration or otherwise, under this Agreement or any of the
other Loan Documents; or (c) if the Loan is not subject to a Securitization
on the Anticipated Payment Date, the Anticipated Payment Date.
"Monthly Debt Service Payment Amount" has the meaning assigned
in Section 2.3(a).
"Mortgage" the Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing executed by Borrower in favor of
Lender, covering the Property and any amendments, modifications, renewals,
substitutions or replacement thereof.
"Net Operating Income" means the amount obtained by subtracting
Operating Expenses from Operating Revenues.
"Net Proceeds" has the meaning assigned in Section 5.3(b).
"Net Proceeds Deficiency" has the meaning assigned in Section
5.3(b)(vi).
"Note" means the Promissory Note of even date, in the stated
principal amount of $16,200,000.00, executed by Borrower, and payable to
the order of Lender in evidence of the Loan as the same may hereafter be
modified, amended, restated, renewed or replaced and including any Defeased
Note and Undefeased Note that may exist from time to time.
"O&M Agreement" means that certain Operation and Maintenance
Agreement dated the date hereof between Borrower and Lender given in
connection with the Loan, as the same may be amended, restated, replaced,
supplemental or otherwise modified from time to time.
"Offering Document" has the meaning assigned in Section
14.2(a).
<PAGE>
"Operating Expenses" means all reasonable and necessary
expenses of Borrower (not paid by Operating Lessee pursuant to the
obligations of Operating Lessee under the Operating Lease for so long as
the Operating Lease remains in effect) for operating the Property and the
Additional Property, if applicable, in the ordinary course of business
which are paid in cash by or on behalf of Borrower and which are directly
associated with and fairly allocable to the Property and the Additional
Property, if applicable, for the applicable period, including real estate
taxes and assessments, insurance premiums, maintenance costs, management
fees and costs for the Property and the Additional Property, if applicable,
accounting, legal, and other professional fees, fees relating to
environmental and net cash flow and audits, and other expenses incurred by
Lender and reimbursed by Borrower under this Agreement and the other Loan
Documents, deposits to the Replacement Escrow Fund, Tax and Insurance Fund,
deposits to the escrows required pursuant to the Additional Loan Documents,
deposits or "book-entries" for reserves required pursuant to Operating
Leases to which Borrower is a party, wages, salaries, and personnel
expenses, but excluding Debt Service and debt service paid in connection
with the Additional Loan, capital expenditures with respect to the Property
and the Additional Property, if applicable, any of the foregoing expenses
which are paid from deposits to cash reserves previously included as
Operating Expenses, any payment or expense for which Borrower was or is to
be reimbursed from proceeds of the Loan and the applicable Additional Loan,
or from proceeds of insurance or by any third party, and any non-cash
charges such as depreciation and amortization. Any management fee or other
expense payable to Borrower or to an Affiliate of Borrower with respect to
the Property and the Additional Property, if applicable shall be included
as an Operating Expense only with Lender's prior approval. Operating
Expenses shall not include any (i) expenses (including, without limitation,
federal, state or local income taxes or legal and other professional fees)
unrelated to the operation of the Property and the Additional Property, if
applicable.
"Operating Lease" means the lease agreement in effect between
the Borrower and the Operating Lessee for the use and operation of the
Property and all amendments, modifications, renewals, substitutions or
replacements of such lease. The initial Operating Lease in effect as of
the date hereof is identified on Schedule I attached hereto.
"Operating Lease Rent" shall mean collectively, (a) all rents,
revenues, issues, profits, income and proceeds due or to become due to
Borrower under the Operating Lease, and (b) any payments of principal
and/or interest on the FFE Note (whether denominated as principal, interest
or rent).
"Operating Lessee" means lessee under the Operating Lease. The
initial Operating Lessee under the Operating Lease in effect as of the date
hereof is identified on Schedule I attached hereto.
"Operating Partnership" shall mean LaSalle Hotel Operating
Partnership L.P., a Delaware limited partnership.
"Operating Revenues" means all gross revenues of Borrower
derived from the Property and the Additional Property, if applicable, or
otherwise arising in respect of the Property and the Additional Property,
if applicable, which are properly allocable to the Property and such
Additional Property for the applicable period, including Rent, Operating
Lease Rent, interest and other receipts from Leases and parking agreements,
concession fees and charges and other miscellaneous operating revenues at
the Property and the Additional Property, if applicable, but excluding
security deposits and earnest money deposits until they are forfeited by
the depositor, advance rentals until they are earned, and proceeds from a
sale or other disposition. Operating Revenues shall not include (a) any
condemnation or insurance proceeds, other than the proceeds of any business
<PAGE>
interruption or loss of income insurance received by Borrower, (b) any
proceeds resulting from the sale, exchange, transfer, financing or
refinancing of all or any part of the Property or the Additional Property,
(c) any rent accrued by Borrower but not received because of any free rent
provisions or other rental concessions in any Lease, (d) any repayments
received from tenants of principal loaned or advanced to tenants by
Borrower, (e) any payments due pursuant to the terms of any Lease in
connection with the cancellation or termination of a Lease, (f) investment
income on any reserves or funds not related to the normal operation of the
Property or the Additional Property, including, without limitation, funds
allocated to pay for construction expenses or (g) any type of income other
than Operating Lease Rent that would otherwise be considered Operating
Revenues pursuant to the provisions above but is paid directly by any
tenant to a Person or entity other than Borrower.
"Payment Date" shall mean the first day of each calendar month
commencing on the first day of September 1, 1999.
"Permitted Encumbrances" means outstanding liens, easements,
restrictions, security interests and other exceptions to title set forth in
the policies of title insurance insuring the lien of the Mortgage, together
with the liens and security interests in favor of Lender created by the
Loan Documents.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, trustee, estate, limited
liability company, unincorporated organization, real estate investment
trust, government or any agency or political subdivision thereof, or any
other form of entity.
"Personalty" shall have the meaning assigned to such term in
the Mortgage.
"Policies" has the meaning assigned in Section 5.1(b).
"Policy" has the meaning assigned in Section 5.1(b).
"Potential Default" means the occurrence of any event or
condition which, with the giving of notice, the passage of time, or both,
would constitute an Event of Default.
"Property" means each parcel of real property more particularly
described on Exhibit A attached hereto, and the improvements thereon owned
by Borrower and encumbered by the Mortgage and the FFE Note, together with
all rights pertaining to such property improvements and FFE Note.
"Property Condition Report" means that certain Property
Condition Report dated March 17, 1999 prepared by International Valuation
and Inspection Inc..
"Radisson Property" shall mean the premises known as the
"Radisson South", located at 7800 Normandale Boulevard, Bloomington,
Minnesota.
"Rating Agencies" means each of Standard & Poor's, Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. and Fitch IBCA,
Inc., or any other nationally-recognized statistical rating agency which
has been approved by Lender; provided, that, after a Securitization,
"Rating Agencies" shall be deemed to mean the Rating Agencies that have
rated the Securities issued in connection with the Securitization.
<PAGE>
"Rating Criteria" with respect to any Person, shall mean the
short term unsecured debt obligations or commercial paper which are rated
at least A-1 by Standard & Poor's Ratings Group, P-1 by Moody's Investors
Service, Inc., D-1 by Duff & Phelps Credit Rating Co. and F-1+ by Fitch
IBCA, Inc. in the case of accounts in which funds are held for 30 days or
less (or, in the case of accounts in which funds are held for more than 30
days, the long term unsecured debt obligations of which are rated at least
"AA-" by Fitch, Duff and Standard & Poor's and "Aa3" by Moody's).
"Registration Statement" has the meaning assigned in Section
14.2(b).
"Release Amount" means, as applicable, the release amount for
the Property or the Additional Property as set forth on Schedule II hereto.
"Release Date" shall mean the earlier of (i) the date that is
two (2) years from the "startup day" within the meaning of Section
860G(a)(9) of the Code of the REMIC Trust or (ii) three (3) years from the
first Payment Date.
"REMIC Trust" shall mean a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code that holds the
Note.
"Rent" shall mean all rents, revenues, issues, profits, income
and proceeds due or to become due from tenants of the Property, including
rentals and all other payments of any kind under the Operating Lease, and
Leases (if any) for using, leasing, licensing, possessing, operating from,
rendering in, selling or otherwise enjoying the Property actually received
by Borrower, including, without limitation, all hotel receipts, revenues
and credit card receipts collected from guest rooms, restaurants, bars,
meeting rooms, banquet rooms and recreational facilities, all receivables,
customer obligations, installment payment obligations and other obligations
now existing or hereafter arising or created out of the sale, lease,
sublease, license, concession or other grant of the right of the use and
occupancy of property or rendering of services by Borrower, any Operating
Lessee or any operator or manager of the hotel or the commercial space
located in the Improvements or acquired from others (including, without
limitation, from the rental of any office space, retail space, guest rooms
or other space, halls, stores, and offices, and deposits securing
reservations of such space), license, lease, sublease and concession fees
and rentals, health club membership fees, food and beverage wholesale and
retail sales, service charges, vending machine sales and proceeds, if any,
from business interruption or other loss of income insurance.
"Replacement Deposit" has the meaning assigned in Section
3.1(b).
"Replacement Escrow Fund" has the meaning assigned in Section
3.1(b).
"Replacement Fund Recoupment Amount" has the meaning assigned
in Section 3.1(b).
"Restoration" shall mean the repair and restoration of the
Property (including, without limitation, the preparation of designs and
plans for such repair and restoration) after a casualty or Condemnation as
nearly as possible to the condition the Property was in immediately prior
to such casualty or Condemnation, with such alterations as may be
reasonably approved by Lender.
"Scheduled Defeasance Payments" has the meaning assigned in
Section 2.4(c).
<PAGE>
"Securities" has the meaning assigned in Section 14.1.
"Securities Act" has the meaning assigned in Section 14.2.
"Securitization" has the meaning assigned in Section 14.1.
"Securitization Information" has the meaning assigned in
Section 14.1(a)(iii).
"Security Agreement" has the meaning assigned in Section
2.4(b)(vi).
"Servicer" has the meaning assigned in Section 14.3.
"Servicing Agreement" has the meaning assigned in Section 14.3.
"Severed Loan Documents" has the meaning assigned in Section
12.2(c).
"Severing Documentation" has the meaning assigned in Section
14.4.
"Single Purpose Bankruptcy Remote Entity" has the meaning
assigned in Section 8.28(a).
"Site Assessment" means an environmental engineering report for
the Property prepared at Borrower's expense by an engineer engaged by
Borrower and approved by Lender, and in a manner satisfactory to Lender,
based upon an investigation relating to and making appropriate inquiries
concerning the existence of Hazardous Materials on or about the Property,
and the past or present discharge, disposal, release or escape of any such
substances, all consistent with ASTM Standard E1527-93 or any successor
thereto published by ASTM and good customary and commercial practice.
"Standard and Poor's" shall mean Standard and Poor's Ratings
Group, a division of McGraw-Hill, Inc.
"State" means the State in which the Property is located.
"Static Cash Account" has the meaning assigned in Section
5.4(b).
"Subordination Agreement" shall mean that certain Subordination
Agreement among Lender, Borrower and Operating Lessee dated as of July 29,
1999.
"Successor Borrower" has the meaning assigned in Section
2.5(6).
"T&I Letter of Credit" has the meaning assigned in Section
5.4(b).
"Tax and Insurance Escrow Fund" has the meaning assigned in
Section 5.4(a).
"Taxes" has the meaning assigned in Section 10.2.
"Threshold Amount" has the meaning assigned in Section 10.12.
<PAGE>
"Treasury Rate" shall mean, as of the Anticipated Payment Date,
the yield, calculated by linear interpolation (rounded to the nearest one-
thousandth of one percent (i.e., 0.001%) of the yields of non-callable
United States Treasury obligations with terms (one longer and one shorter)
most nearly approximating the period from such date of determination to the
Maturity Date, as determined by Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized
source of financial market information selected by Lender.
"Trigger Event" means the first to occur, if any, of the
Anticipated Payment Date or a DSCR Event.
"Trigger Period" means the period of time during the term of
the Loan (a) following a DSCR Event until the occurrence of a DSCR Release
Event, and (b) following the Anticipated Payment Date; provided, that, a
Trigger Period existing after two (2) DSCR Release Events or the occurrence
of the Anticipated Payment Date shall remain in effect for the remainder of
the term of the Loan notwithstanding the subsequent occurrence of a DSCR
Release Event.
"Undefeased Note" has the meaning assigned in Section 2.4(b).
"USAH" shall mean the Uniform System of Accounts for Hotels,
Ninth Revised Edition, 1996, as the same may be revised, amended or
supplemented.
"U.S. Obligations" shall mean direct non-callable obligations
of the United States of America.
"Yield Maintenance Premium" shall mean the amount (if any)
which, when added to the Adjusted Release Amount or the principal amount of
the Defeased Note, as applicable, for the Property will be sufficient to
purchase U.S. Obligations providing the required Scheduled Defeasance
Payments.
ARTICLE II
LOAN TERMS
Section 2.1 The Loan. Lender agrees to make a Loan of SIXTEEN
MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($16,200,000.00) to the
Borrower, which shall be funded in one advance and repaid in accordance
with the terms of this Agreement and the Note. Borrower hereby agrees to
accept the Loan on the Closing Date, subject to and upon the terms and
conditions set forth herein.
Section 2.2 Interest Rate. From the date hereof through but
not including the Anticipated Payment Date, the outstanding principal
balance of the Loan shall bear interest at a rate of interest equal to
eight and ten one hundredths percent (8.10%) per annum (the "Contract
Rate"). From and after the Anticipated Payment Date through and including
the Maturity Date, the outstanding principal balance of the Loan shall bear
interest at a rate per annum equal to the greater of (i) the Contract Rate
plus two percentage points (2%) or (ii) the Treasury Rate plus two
percentage points (2%); provided, however, if after the Anticipated Payment
<PAGE>
Date at any time the Loan is not subject to a Securitization, such rate
shall be increased an additional three (3) percentage points (3%) per annum
for so long as the Loan is not subject to a Securitization (the Contract
Rate, as adjusted pursuant to this sentence, hereinafter referred to as the
"Adjusted Rate").
Section 2.3 Terms of Payment.
(a) Interest and Principal. The Loan shall be payable as
follows: (i) payment of interest only (computed at the Contract Rate) on
the date hereof for the period from the date hereof through the last day of
the current month (unless the Closing Date is the first day of a calendar
month, in which case no such interest is due); and (ii) thereafter a
constant payment of $126,109.29 (the "Monthly Debt Service Payment
Amount"), on the first day of September, 1999 and on each Payment Date
thereafter; each of such payments to be applied (A) to the payment of
interest computed at the Contract Rate and (B) the balance applied toward
reduction of the principal sum. The constant payment required hereunder is
based upon a twenty-five (25) year amortization schedule.
(b) To the extent the Loan is outstanding, from and after the
Anticipated Payment Date interest shall accrue on the unpaid principal
balance from time to time outstanding on the Loan at the Adjusted Rate.
Borrower shall continue to make payments of principal and interest in
monthly installments beginning on the Anticipated Payment Date and on the
first day of each calendar month thereafter up to and including the
Maturity Date in an amount equal to the Monthly Debt Service Payment Amount
and, notwithstanding the following provision with respect to Accrued
Interest, the failure to make any such payment as and when due shall
constitute an Event of Default. Each Monthly Debt Service Payment Amount
paid after the Anticipated Payment Date shall be applied to the payment of
interest computed at the Contract Rate with remainder applied to reduce the
outstanding principal balance of the Loan in accordance with Section 2.3(a)
above. Interest accrued at the Adjusted Rate and not paid shall be
deferred and added to the Debt and shall earn interest at the Adjusted Rate
to the extent permitted by applicable law (such accrued interest is
hereinafter defined as "Accrued Interest"). In addition to such payments
of principal and interest, from and after the Anticipated Payment Date,
Borrower shall make payments in reduction of the outstanding principal
balance of the Loan and accrued interest in monthly installments beginning
on the Anticipated Payment Date and on the first day of each calendar month
thereafter up to and including the Maturity Date in accordance with the
terms and provisions of Section 3.5 below.
(c) Maturity. On the Maturity Date, Borrower shall pay to
Lender all outstanding principal, accrued and unpaid interest (including
Accrued Interest, if any), default interest, late charges and any and all
other amounts due under the Loan Documents.
(d) Default Rate. Upon the occurrence and during the
continuance of an Event of Default, Lender shall be entitled to receive and
Borrower shall pay to Lender interest on the entire unpaid principal sum
and any other amounts due at the Default Rate. Interest at the Default
Rate shall be computed from the occurrence of the Event of Default until
the earlier to occur of (a) the permitted cure of such Event of Default by
Borrower or (b) the actual receipt and collection of the Debt (or that
portion thereof that is then due). Interest at the Default Rate shall be
added to the Debt and shall be secured by the Mortgage. This section,
however, shall not be construed as an agreement or privilege to extend the
date of the payment of the Debt, nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of any Event of
Default.
<PAGE>
(e) Making of Payments. Each payment by Borrower hereunder
or under the Note shall be made in funds settled through the New York
Clearing House Interbank Payments System or by check drawn on a New York
Clearing House bank by 1:00 p.m., New York City time, on the date such
payment is due. Whenever any payment hereunder or under the Note shall be
stated to be due on a day which is not a Business Day, such payment shall
be made on the first Business Day thereafter.
(f) Computations. Interest payable hereunder or under the
Note by Borrower shall be computed on the basis of a 360-day year
consisting of twelve (12) months of thirty (30) days each, except that
interest due and payable for a period less than a full month shall be
calculated by multiplying the actual number of days elapsed in such period
by a daily rate based on said 360-day year.
(g) Late Payment Charge. If any principal, interest or any
other sums due under the Loan Documents is not paid by Borrower within five
(5) days of (and including) the date it is due, Borrower shall pay to
Lender upon demand an amount equal to the lesser of five percent (5%) of
such unpaid sum or the maximum amount permitted by applicable law in order
to defray the expense incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment. Any such amount shall be secured by the Mortgage and
the other Loan Documents.
(h) Annual Budget. For the year commencing on January 1,
2000, and for each calendar year thereafter, Borrower shall submit to
Lender an Annual Budget not later than forty-five (45) days prior to the
commencement of such period or calendar year in form reasonably
satisfactory to Lender, or for so long as the Operating Lease remains in
effect, no later than three (3) days after a budget is delivered to
Borrower by Operating Lessee pursuant to the terms of the Operating Lease
in substantially the same form approved by Lender in connection with the
closing of the Loan. The Annual Budget submitted for the portion of the
calendar year beginning on the Anticipated Payment Date, and the Annual
Budget submitted for each calendar year thereafter, shall be subject to
Lender's written approval (each such Annual Budget as approved by Lender,
an "Approved Annual Budget"); provided, that, Borrower shall deliver to
Lender on or prior to twenty (20) days prior to the Anticipated Payment
Date, (a) the proposed Annual Budget for the remainder of the calendar year
beginning on the Anticipated Payment Date or (b) written notification that
Borrower intends to pay the Debt in full on or prior the Anticipated
Payment Date. In the event that Lender objects to a proposed Annual Budget
submitted by Borrower or Operating Lessee, Lender shall advise Borrower of
such objections within thirty (30) days after receipt thereof (and deliver
to such party a reasonably detailed description of such objections) and
Borrower shall promptly revise, or shall cause Operating Lessee to revise,
such Annual Budget and resubmit the same to Lender. Lender shall advise
Borrower of any objections to such revised Annual Budget within ten (10)
days after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall promptly revise, or
shall cause Operating Lessee to revise, the same in accordance with the
process described in this subsection until the Lender approves the Annual
Budget. Until such time that Lender approves a proposed Annual Budget, the
most recently Approved Annual Budget shall apply; provided that, such
Approved Annual Budget shall be adjusted to reflect actual increases in
real estate taxes, insurance premiums and utilities expenses.
(i) Cash Management Agreement. Simultaneously with the
execution hereof Borrower has entered into a cash management agreement
among Borrower, Lender, Operating Lessee and one or more certain financial
institutions (together with any modifications or amendments thereof, are
hereinafter collectively referred to as the "Cash Management Agreement"),
which provide, among other things, that all Operating Lease Rent and any
other Operating Revenues which Borrower is entitled to receive, if any, and
<PAGE>
other sums collected from, or arising with respect to, the Property be
deposited in accordance with the Cash Management Agreement and that such
amounts shall be disbursed in accordance with Section 3.5 hereof. The
Borrower shall pay all costs and expenses required under the Cash
Management Agreement. Upon the occurrence of an Event of Default, Lender
may apply any sums then held pursuant to the Cash Management Agreement to
the payment of the Debt in any order in its sole discretion. Until
expended or applied, amounts held pursuant to the Cash Management Agreement
shall constitute additional security for the Debt.
Section 2.4 Prepayment; Defeasance.
(a) Prepayment. Borrower shall repay any outstanding
principal indebtedness of the Loan in full on the Maturity Date, together
with interest thereon to (but excluding) the date of repayment. Other than
as set forth in this Section 2.4, Borrower shall have no right to prepay
all or any portion of the Loan prior to the Anticipated Payment Date. On
any scheduled Payment Date occurring no earlier than one hundred eighty
(180) days prior to the Anticipated Payment Date, Borrower may, at its
option and upon thirty (30) days prior written notice from Borrower to
Lender, prepay in whole or in part the Debt without payment of any premium.
Any such payment shall be applied to the last payments of principal and
interest due under the Loan. Each voluntary prepayment after one hundred
eighty (180) days prior to the Anticipated Payment Date shall be made on a
scheduled Payment Date and include all accrued and unpaid interest up to
but not including such scheduled Payment Date or, if not paid on a
scheduled Payment Date, include interest that would have accrued on such
prepayment through the next regularly scheduled Payment Date. If prior to
the Anticipated Payment Date and following the occurrence of any Event of
Default, Borrower shall tender payment of an amount sufficient to satisfy
all or any portion of the Debt, such tender by Borrower shall be deemed to
be voluntary and may be accepted or rejected by Lender in its sole
discretion. If Lender accepts such tender, Borrower shall pay, in addition
to the Debt, the Lockout Yield Maintenance Premium and any and all amounts
outstanding under the Additional Loan together with any prepayment
consideration to be paid in connection with a prepayment of such Additional
Loan following an Event of Default under such Additional Loan.
(b) Voluntary Defeasance of the Loan. Provided no Event of
Default exists, at any time after the Release Date and prior to the
Anticipated Payment Date Borrower may voluntarily defease all or any
portion of the Loan by providing Lender with U.S. Obligations that produce
payments which replicate the Scheduled Defeasance Payments (hereinafter, a
"Defeasance Event"). Each Defeasance Event by the Borrower shall be
subject to the satisfaction of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30) days
prior written notice to Lender specifying the Payment Date (the "Defeasance
Date") on which the Defeasance Event is to occur. Such notice shall
indicate the principal amount of the Note to be defeased;
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the principal balance of the Note to but not including the
Defeasance Date. If for any reason the Defeasance Date is not a Payment
Date, the Borrower shall also pay interest that would have accrued on the
Note through and including the day immediately preceding the next Payment
Date;
(iii) Borrower shall pay to Lender all other sums, not
including scheduled interest or principal payments then remaining unpaid
under the Note, this Agreement, the Mortgage, and the other Loan Documents;
<PAGE>
(iv) Borrower shall pay to Lender the required Defeasance
Deposit for the Defeasance Event;
(v) In the event only a portion of the Loan is the subject of
the Defeasance Event, Borrower shall prepare all necessary documents to
amend and restate the Note and issue two substitute notes, one note having
a principal balance equal to the defeased portion of the original Note (the
"Defeased Note") and the other note having a principal balance equal to the
undefeased portion of the Note (the "Undefeased Note"). The Defeased Note
and Undefeased Note shall have identical terms as the Note except for the
principal balance. A Defeased Note cannot be the subject of any further
Defeasance Event;
(vi) Borrower shall execute and deliver a security agreement,
in form and substance reasonably satisfactory to Lender, creating a first
priority lien on the Defeasance Deposit and the U.S. Obligations purchased
with the Defeasance Deposit in accordance with this provision of this
Section 2.4 (the "Security Agreement");
(vii) Borrower shall deliver an opinion of counsel for Borrower
in form reasonably satisfactory to Lender opining, among other things, that
Borrower has legally and validly transferred and assigned the U.S.
Obligations and all obligations, rights and duties under and to the Note to
the Successor Borrower, that Lender has a perfected first priority security
interest in the Defeasance Deposit and the U.S. Obligations delivered by
Borrower, and that any REMIC Trust formed pursuant to a Securitization will
not fail to maintain its status as a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code as a result of such
Defeasance Event;
(viii) Lender shall have received evidence in writing from the
applicable Rating Agencies to the effect that such release will not result
in a downgrading, withdrawal or qualification of the respective ratings in
effect immediately prior to such Defeasance Event for the Securities issued
in connection with the Securitization which are then outstanding. If
required by the applicable Rating Agencies or Lender, the Borrower shall
also deliver or cause to be delivered a non-consolidation opinion with
respect to the Successor Borrower in form and substance reasonably
satisfactory to Lender and the applicable Rating Agencies;
(ix) Borrower shall deliver an Officer's Certificate
certifying that the requirements set forth in this Section 2.4(b) have been
satisfied;
(x) Borrower shall deliver a certificate of a "big five" or
other nationally recognized public accounting firm reasonably acceptable to
Lender certifying that the U.S. Obligations purchased with the Defeasance
Deposit generate monthly amounts equal to or greater than the required
scheduled Defeasance Payments;
(xi) Borrower shall, at the reasonable request of Lender,
deliver endorsements to the title insurance policies delivered to Lender in
connection with the Additional Loan and such other certificates, documents
or instruments as Lender may reasonably request; and
(xii) Borrower shall pay all reasonable costs and expenses of
Lender incurred in connection with the Defeasance Event, including any
reasonable costs and expenses associated with a release of the Lien of the
Mortgage as provided in Section 2.5 hereof as well as reasonable attorneys'
fees and expenses.
<PAGE>
(c) In connection with each Defeasance Event, Borrower hereby
appoints Lender as its agent and attorney-in-fact for the purpose of using
the Defeasance Deposit to purchase U.S. Obligations which provide payments
on or prior to, but as close as possible to, all successive scheduled
payment dates after the Defeasance Date, such payments to be computed on a
principal balance equal to the Adjusted Release Amount with such payment
being equal to the amount of the corresponding installment of principal and
interest on such principal balance at the interest rate and on the then
remaining amortization schedule set forth herein, in the case of a
Defeasance Event for the entire Loan that is, or remains, undefeased, or
interest and principal payments to be required under the Defeasance Note
relating to the then current Defeasance Event, in the case of a Defeasance
Event for only a portion of the undefeased principal balance of the Loan,
as applicable, and assuming such principal balance is prepaid in full on
the Anticipated Payment Date (the "Scheduled Defeasance Payments").
Borrower, pursuant to the Security Agreement or other appropriate document,
shall authorize and direct that the payments received from the U.S.
Obligations shall be made directly to the Lender (unless otherwise directed
by Lender) and applied to satisfy the obligations of Borrower with respect
to the Loan (whether the Note or the Defeased Note) and the relevant
portion of the Additional Loan under this Section 2.4, if applicable. The
amount of payments received from the U.S. Obligations purchased in
connection with this Section 2.4 on each Payment Date after the Defeasance
Date in excess of the amounts due under the Note and this Agreement on such
Payment Date (the "Additional Payment Stream") shall be credited pro-rata
against the payments then due on the corresponding scheduled payment date
under the Additional Loan. Any portion of the Defeasance Deposit in excess
of the amount necessary to purchase the U.S. Obligations required by this
Section 2.4 and satisfy Borrower's obligations under this Section 2.4 and
Section 2.5 shall be promptly remitted to Borrower.
Section 2.5 Release of Property. Except as set forth in this
Section 2.5, no repayment, prepayment or defeasance of all or any portion
of the Note shall cause, give rise to a right to require, or otherwise
result in, the release of the Lien of the Mortgage on the Property.
(a) Release upon Defeasance.
(i) If the Borrower has elected to defease the entire Loan
and the requirements of Section 2.4 and this Section 2.5(a) and (b) have
been satisfied, the Property shall be released from the Lien of the
Mortgage and the U.S. Obligations, pledged pursuant to the Security
Agreement or Security Agreements, as applicable, shall be the sole source
of collateral securing the Note; provided, however, that, no release shall
be granted unless, after giving effect to such release, (A) the Debt
Service Coverage Ratio for the Additional Property then remaining subject
to Liens in favor of Lender (taking into account the payment of the
Additional Payment Stream) shall be equal to the greater of (1) the Debt
Service Coverage Ratio for the Property and the Additional Property for the
twelve (12) full calendar months immediately preceding the release of the
Property, and (2) the Debt Service Coverage Ratio for the Property and the
Additional Property on the Closing Date, and (B) the LTV for the Additional
Loan remaining after the release of the Property (after subtracting from
the outstanding principal amount of the Additional Loan the principal
amounts of such Additional Loan that will be repaid over time pursuant to
the payment of the Scheduled Defeasance Payments) shall be the lesser of
(1) the combined LTV for the Property and the Additional Property on the
Closing Date and (2) the combined LTV for the Property and the Additional
Property immediately prior to the release.
<PAGE>
(ii) In connection with the release of the Liens, the Borrower
shall submit to Lender, not less than thirty (30) days prior to the
Defeasance Date, a release of Liens (and related Loan Documents) for
execution by Lender. Such release shall be in a form appropriate in each
jurisdiction in which the Property is located and satisfactory to Lender in
its reasonable discretion. In addition, Borrower shall provide all other
documentation Lender reasonably requires to be delivered by Borrower in
connection with such release.
(b) Successor Borrower. In connection with any release of
the Liens under Section 2.5(a), Borrower may, or at the request of Lender
shall, establish or designate a successor entity (the "Successor Borrower")
which shall be a single purpose bankruptcy remote entity approved by
Lender, which approval shall not by unreasonably withheld, delayed or
conditioned, and Borrower shall transfer and assign all obligations, rights
and duties under and to the Note or the Defeased Note, as applicable,
together with the pledged U.S. Obligations to such Successor Borrower.
Such Successor Borrower shall assume the obligations under the Note or the
Defeased Note, as applicable, and the Security Agreement and Borrower shall
be relieved of its obligations under such documents. The Borrower shall
pay $1,000 to any such Successor Borrower as consideration for assuming the
obligations under the Note or the Defeased Note, as applicable, and the
Security Agreement. Notwithstanding anything in this Agreement to the
contrary, no other assumption fee shall be payable upon a transfer of the
Note or the Defeased Note, as applicable, in accordance with this Section
2.5, but Borrower shall pay all out-of-pocket costs and expenses reasonably
incurred by Lender, including Lender's attorneys' fees and expenses
incurred in connection therewith.
ARTICLE III
SECURITY; RESERVES AND CASH MANAGEMENT
Section 3.1 Security; Establishment of Funds. The Loan shall
be evidenced by the Note of Borrower, in the original principal amount of
the Loan. The Loan shall be secured by the Mortgage creating a first lien
(subject to Permitted Encumbrances) on the Property, the Assignment of
Leases and Rents and the other Loan Documents. As further security for the
Loan, Borrower agrees to establish the following reserves with Lender, to
be held by Lender as security for the Loan:
(a) Intentionally Deleted.
(b) Replacement Escrow Fund. Upon the occurrence of a DSCR
Event, Borrower shall deposit with Lender on each Payment Date, (i) four
percent (4%) of gross revenues from the Property for the full month
immediately preceding the month prior to the month during which such
Payment Date occurs (the "Replacement Deposit") for replacements and
repairs of the type required to be made to the Property during the calendar
year (the "Replacement Escrow Fund"), and (ii) until the amount on deposit
in the Replacement Escrow Fund is equal to the amount that would have been
there on deposit in the Replacement Escrow Fund if the Replacement Deposit
had been deposited in the Replacement Escrow Fund on each Payment Date
since the Closing Date (deducting amounts that would have been disbursed
pursuant to the terms hereof for replacements and repairs to the Property)
all amounts remaining after payment of Debt Service and Operating Expenses,
if any (the "Replacement Fund Recoupment Amount"), as determined pursuant
to (A) the Annual Budget approved by Lender in its reasonable discretion
until the first to occur of the Anticipated Payment Date or the amounts due
as the Replacement Fund Recoupment Amount are on deposit in the Replacement
Escrow Fund, or (B) the Approved Annual Budget following the Anticipated
Payment Date. Such computation of gross revenue shall be based upon the
actual gross revenue disclosed by the financial statements delivered to
Lender in connection herewith.
<PAGE>
Section 3.2 Pledge and Grant of Security Interest. Borrower
hereby pledges to Lender, and grants a security interest in, any and all
monies now or hereafter deposited in the Funds as additional security for
the payment of the Loan. Borrower shall not, without obtaining the prior
written consent of Lender, further pledge, assign or grant any security
interest in the Funds or permit any lien or encumbrance to attached
thereto, or any levy to be made thereon, or any UCC-1 Financing Statements
(except those naming Lender as the secured party) to be filed with respect
thereto. The Funds shall (a) be held in Lender's name and may be
commingled with Lender's own funds at financial institutions selected by
Lender in its sole discretion, and (b) bear interest at available money
market rates. Any interest earned on the Funds shall be disbursed or
applied in the same manner and subject to the same terms and conditions as
the Funds. All earnings on the Funds shall be added to and become part of
the Funds and shall be the benefit of Borrower, subject to Lender's rights
pursuant to this Agreement. Lender shall not be responsible for any losses
resulting from the investment of the Funds or for obtaining any specific
level or percentage of earning on the Funds. Borrower shall be liable for
any income taxes due on the earnings from the Funds. Upon the occurrence
of an Event of Default, Lender may apply any sums then present in the Funds
to the payment of the Loan in any order in its sole discretion. Until
expended or applied as above provided, the Funds shall constitute
additional security for the Loan.
Section 3.3 Disbursement of Funds. After the occurrence of the
Anticipated Payment Date, Lender may reasonably reassess its estimate of
the amount necessary for the Funds from time to time and may adjust the
monthly amounts required to be deposited into the Funds upon thirty (30)
days notice to Borrower. Lender shall make disbursements from the Funds as
requested by Borrower, and approved by Lender in its sole discretion, no
more often than twice a month in increments of not less than $5,000.00 upon
delivery by Borrower of a draw request in a form reasonably acceptable to
Lender accompanied by copies of paid invoices for the amounts requested;
provided, however, that with respect to any unpaid invoice in an amount
exceeding $25,000 Lender shall, at the request of Borrower, issue a joint
check and provided further that, it shall be a condition to the next
requested disbursement that Borrower provide Lender with paid copies of
such unpaid invoices for which Lender has made disbursements. If required
by Lender, lien waivers and releases from all parties furnishing materials
and/or services in connection with the requested payment. Lender may, in
its reasonable discretion, require an inspection of the Property prior to
making a monthly disbursement in order to verify completion of replacements
and repairs for which reimbursement is sought, which inspection shall be at
the expense of Borrower unless the replacement(s) and/or repair(s) for
which reimbursement is sought is non-structural and in the aggregate is in
an amount less than $50,000. Lender shall have no obligation to release
any of the Funds while any Event of Default then exists. All reasonable
costs and expenses incurred by Lender in the disbursement of any of the
Funds shall be paid by Borrower promptly upon demand.
Section 3.4 Intentionally Deleted.
Section 3.5 Cash Management Account.
(a) Borrower shall establish and maintain a segregated
Eligible Account (the "Cash Management Account") which Cash Management
Account shall be subject to the Cash Management Agreement. The Cash
Management Account shall be entitled "General Electric Capital Corporation,
as Lender to the LaSalle Borrower - Cash Management Account"; provided,
however, that, if the Loan is transferred or sold, the name of the Cash
Management Account shall be changed at the request of Lender to reflect the
legal name of Lender's successor. Borrower shall deposit, and shall direct
the Operating Lessee to deposit all Operating Lease Rent directly into the
Cash Management Account. Borrower shall deposit all amounts received by
Borrower constituting Rents into the Cash Management Account promptly upon
<PAGE>
receipt. Borrower hereby grants to Lender a first priority security
interest in the Cash Management Account and all deposits at any time
contained therein and the proceeds thereof and will take all actions
necessary to maintain in favor of Lender a perfected first priority
security interest in the Cash Management Account, including, without
limitation, executing and filing UCC-1 Financing Statements and
continuations thereof. Borrower will not in any way alter or modify the
Cash Management Account and will notify Lender of the account number
thereof.
(b) Provided no Event of Default shall have occurred and be
continuing, following the occurrence and during the continuance of a
Trigger Event, on the first day of each calendar month (or, if such day is
not a Business Day, on the immediately preceding Business Day) all funds on
deposit in the Cash Management Account shall be applied by Lender to the
payment of the following items in the order indicated:
(i) First, payments to the Tax and Insurance Escrow Fund in
accordance with the terms and conditions of Section 5.4 hereof;
(ii) Second, payment of the Monthly Debt Service Payment
Amount, applied first to the payment of accrued and unpaid interest
computed at the Contract Rate with the remainder applied to the reduction
of the outstanding principal balance of the Note;
(iii) Third, payments to the Replacement Escrow Fund in
accordance with the terms and conditions hereof;
(iv) Fourth, payment to Lender of any other amounts then due
and payable under the Loan Documents (other than Accrued Interest);
(v) Fifth, payment to Lender of any escrows, principal or
interest (other than "Accrued Interest" (as defined in the Additional Loan
Documents)) amounts then due and payable in connection with the Additional
Loan; provided, however, that no payments shall be applied in accordance
with this clause (vi) until Lender has reasonably determined that there are
not sufficient funds on deposit in the Cash Management Account to pay the
amounts due and payable with respect to such escrows, principal and
interest;
(vi) Sixth, on or after the Anticipated Payment Date, payments
for monthly Cash Expenses incurred in accordance with the related Approved
Annual Budget pursuant to a written request for payment submitted by
Borrower to Lender specifying the individual Cash Expenses in a form
reasonably acceptable to Lender;
(vii) Seventh, on or after the Anticipated Payment Date,
payments for Extraordinary Expenses approved by Lender, if any, which
approval shall not be unreasonably withheld, delayed or conditioned;
(viii) Eighth, payments to the Replacement Escrow Fund until the
Replacement Fund Recoupment Amount is on deposit therein.
(ix) Ninth, on or after the Anticipated Payment Date, payments
to Lender in reduction of the outstanding principal balance of the Loan;
(x) Tenth, on or after the Anticipated Payment Date, payments
to Lender for Accrued Interest;
(xi) Eleventh, payments to Lender of any additional amounts
then due and payable in connection with the Additional Loan; and
(xii) Lastly, payment of any excess amounts to Borrower.
<PAGE>
(c) The insufficiency of funds on deposit in the Cash
Management Account shall not absolve Borrower of the obligation to make any
payments, as and when due pursuant to this Agreement and the other Loan
Documents, and such obligations shall be separate and independent, and not
conditioned on any event or circumstance whatsoever.
(d) All funds on deposit in the Cash Management Account
following the occurrence of an Event of Default may be applied by Lender in
such order and priority as Lender shall determine.
Section 3.6 Payments Received Under the Cash Management
Agreement. Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents, and provided no Event of Default has
occurred and is continuing, following the occurrence of a Trigger Event,
Borrower's obligations with respect to the monthly payment of principal and
interest and amounts due for the Tax and Insurance Escrow Fund, Replacement
Escrow Fund, and any other payment reserves established pursuant to this
Agreement or any other Loan Document shall be deemed satisfied to the
extent sufficient amounts are deposited in the Cash Management Account
established pursuant to the Cash Management Agreement to satisfy all such
obligations on the dates each such payment is required, regardless of
whether any of such amounts are so applied by Lender.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Closing Conditions. The obligation of Lender to
make the Loan hereunder and/or the Additional Loan is subject to the
fulfillment by Borrower or waiver by Lender of the following conditions
precedent no later than the Closing Date:
(a) Representations and Warranties; Compliance with
Conditions. The representations and warranties of Borrower contained in
this Agreement and the other Loan Documents shall be true and correct in
all material respects on and as of the Closing Date with the same effect as
if made on and as of such date, and no Event of Default shall have occurred
and be continuing as of the Closing Date; and Borrower shall be in
compliance in all material respects with all terms and conditions set forth
in this Agreement and in each other Loan Document on its part to be
observed or performed as of the Closing Date.
(b) Loan Agreement and Note. Lender shall have received a
copy of this Agreement and the Note, in each case, duly executed and
delivered on behalf of Borrower.
(c) Delivery of Loan Documents; Title Insurance; Reports;
Leases.
(i) Mortgage, Assignment of Leases, Assignments of
Agreements. Lender shall have received from Borrower fully executed and
acknowledged counterparts of the Mortgage and the Assignment of Leases and
Rents relating to the Property and evidence that counterparts of the
Mortgage and Assignment of Leases and Rents have been delivered to the
title company for recording, in the reasonable judgment of Lender, so as to
effectively create upon such recording a valid and enforceable Lien upon
the Property, of the requisite priority, in favor of Lender (or such other
trustee as may be required or desired under local law), subject only to the
Permitted Encumbrances and such other Liens as are permitted pursuant to
the Loan Documents. Lender shall have also received from Borrower fully
executed counterparts of the other Loan Documents.
<PAGE>
(ii) Title Insurance. Lender shall have received title
insurance policies (or marked and signed commitments to issue such title
insurance policies) issued by a title company reasonably acceptable to
Lender and dated as of the Closing Date. Such title insurance policies
shall (A) provide coverage in amounts reasonably satisfactory to Lender,
(B) insure Lender that the Mortgage creates a valid lien on the Property
encumbered thereby of the requisite priority, free and clear of all
exceptions from coverage other than Permitted Encumbrances and standard
exceptions and exclusions from coverage (as modified by the terms of any
endorsements), (C) contain such endorsements and affirmative coverages as
Lender may reasonably request, and (D) name Lender as the insured. The
title insurance policies shall be assignable. Lender also shall have
received evidence that all premiums in respect of such title insurance
policies have been paid.
(iii) Survey. Lender shall have received a current title
survey for the Property, certified to the title company and Lender and
their successors and assigns, in form and content reasonably satisfactory
to Lender and prepared by a professional and properly licensed land
surveyor reasonably satisfactory to Lender in accordance the 1992 Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys. The survey
should meet the classification of an "Urban Survey" and the following
additional items from the list of "Optional Survey Responsibilities and
Specifications" (Table A) should be added to each survey: 2, 3, 4, 6, 7,
8, 9, 10, 11 and 13. Such survey shall reflect the same legal description
contained in the title insurance policy relating to the Property referred
to in clause (ii) above and shall include, among other things, a metes and
bounds description of the real property comprising part of the Property
reasonably satisfactory to Lender. The surveyor's seal shall be affixed to
each survey and the surveyor shall provide a certification for each survey
in form and substance reasonably acceptable to Lender.
(iv) Insurance. Lender shall have received valid certificates
of insurance for the policies of insurance required hereunder, reasonably
satisfactory to Lender, and evidence of the payment of all premiums payable
for the existing policy period.
(v) Environmental Reports. Lender shall have received an
environmental report in respect of the Property, which environmental report
shall be satisfactory to Lender.
(vi) Zoning. Lender shall have received, at Lender's option,
(i) letters or other evidence with respect to the Property from the
appropriate municipal authorities (or other Persons) concerning applicable
zoning and building laws, (ii) an ALTA 3.1 zoning endorsement for the
applicable title insurance policy, or (iii) a zoning opinion letter, in
substance reasonably satisfactory to Lender.
(vii) Encumbrances. Borrower shall have taken or caused to be
taken such actions in such a manner so that Lender has a valid and
perfected Lien of first priority as of the Closing Date with respect to the
Mortgage, subject only to applicable Permitted Encumbrances and such other
Liens as are permitted pursuant to the Loan Documents, and Lender shall
have received reasonably satisfactory evidence thereof.
(d) Related Documents. Each additional document not
specifically referenced herein, but relating to the transactions
contemplated herein, shall have been duly authorized, executed and
delivered by all parties thereto and Lender shall have received and
approved certified copies thereof.
<PAGE>
(e) Delivery of Organizational Documents. On or before the
Closing Date, Borrower shall deliver or cause to be delivered to Lender (i)
copies certified by Borrower of all organizational documentation related to
Borrower and/or the formation, structure, existence, good standing and/or
qualification to do business, as Lender may reasonably request, including,
without limitation, good standing certificates, qualifications to do
business in the appropriate jurisdictions, resolutions authorizing the
entering into of the Loan and incumbency certificates as may be reasonably
requested by Lender.
(f) Opinions of Borrower's Counsel. Lender shall have
received opinions of Borrower's counsel (i) with respect to non-
consolidation, and (ii) with respect to due execution, authority,
enforceability of the Loan Documents and such other matters as Lender may
reasonably require, all such opinions in form, scope and substance
reasonably satisfactory to Lender and Lender's counsel.
(g) Completion of Proceedings. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be reasonably satisfactory in form and substance
to Lender, and Lender shall have received all such counterpart originals or
certified copies of such documents as Lender may reasonably request.
(h) Payments. All payments, deposits or escrows required to
be made or established by Borrower under this Agreement, the Note and the
other Loan Documents on or before the Closing Date shall have been paid.
(i) Intentionally Deleted.
(j) Intentionally Deleted.
(k) Budgets. Borrower shall have delivered, and Lender shall
have approved, the Annual Budget for the current calendar year.
(l) Basic Carrying Costs. Borrower shall have paid all Basic
Carrying Costs relating to the Property which are (i) in arrears, (ii) then
due and payable, and (iii) not being contested pursuant to the terms and
conditions of this Agreement.
(m) Transaction Costs. Borrower shall have paid or
reimbursed Lender for all title insurance premiums and recording and filing
fees incurred in connection with the origination of the Loan.
(n) Material Adverse Change. There shall have been no
material adverse change in the financial condition or business condition of
Borrower, Operating Lessee, or the Property or the Additional Property
since the date of the most recent financial statements delivered to Lender.
The income and expenses of the Property and the Additional Property, the
Operating Leases thereof, and all other features of the transaction shall
be as represented to Lender without material adverse change. Neither
Borrower nor Operating Lessee shall be the subject of any bankruptcy,
reorganization, or insolvency proceeding.
(o) Leases. Lender shall have received copies of all tenant
Leases, certified copies of any tenant Leases as requested by Lender and
certified copies of all ground Leases affecting the Property. Lender shall
have received a current certified rent roll of the Property, reasonably
satisfactory in form and substance to Lender.
(p) Subordination and Attornment. Lender shall have received
a Subordination Agreement with respect to the Operating Lease.
(q) Tax Lot. Lender shall have received evidence that the
Property constitutes a separate tax lot, which evidence shall be reasonably
satisfactory in form and substance to Lender.
<PAGE>
(r) Physical Conditions Reports. Lender shall have received
a Physical Conditions Report with respect to the Property, which report
shall be reasonably satisfactory in form and substance to Lender.
(s) Management Agreement. Lender shall have received a
certified copy of the Management Agreement with respect to the Property
which shall be reasonably satisfactory in form and substance to Lender.
(t) Appraisal. Lender shall have received an appraisal of
the Property, which shall be reasonably satisfactory in form and substance
to Lender.
(u) Financial Statements. Lender shall have received a
balance sheet with respect to the Property for the two most recent calendar
years and statements of income and statements of cash flows with respect to
the Property for the three most recent calendar years.
(v) Operating Lease. Lender shall have received a certified
copy of the Operating Lease between Borrower and the Operating Lessee with
respect to the Property, which shall be reasonably satisfactory in form and
substance to Lender.
(w) Further Documents. Lender or its counsel shall have
received such other and further approvals, opinions, documents and
information as Lender or its counsel may have reasonably requested and the
form and content of all the Loan Documents.
ARTICLE V
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 5.1 Insurance; Casualty and Condemnation.
(a) Borrower shall obtain and maintain, or cause to be
maintained, insurance for Borrower and the Property providing at least the
following coverages:
(i) comprehensive all risk insurance on the Improvements and
the Personalty, including contingent liability from Operation of Building
Laws, Demolition Costs and Increased Cost of Construction Endorsements, in
each case (A) in an amount equal to one hundred percent (100%) of the "Full
Replacement Cost," which for purposes of this Agreement shall mean actual
replacement value (exclusive of costs of excavations, foundations,
underground utilities and footings) with a waiver of depreciation, but the
amount shall in no event be less than the outstanding principal balance of
the Loan; (B) containing an agreed amount endorsement with respect to the
Improvements and Personalty waiving all co-insurance provisions; (C)
providing for no deductible in excess of Ten Thousand and No/100 Dollars
($10,000) for all such insurance coverage; and (D) containing an "Ordinance
or Law Coverage" or "Enforcement" endorsement if any of the Improvements or
the use of the Property shall at any time constitute legal non-conforming
structures or uses. In addition, Borrower shall obtain: (y) if any portion
of the Improvements is currently or at any time in the future located in a
federally designated "special flood hazard area", flood hazard insurance in
an amount equal to the lesser of (1) the outstanding principal balance of
the Note or (2) the maximum amount of such insurance available under the
National Flood Insurance Act of 1968, the Flood Disaster Protection Act of
1973 or the National Flood Insurance Reform Act of 1994, as each may be
amended or such greater amount as Lender shall require; and (z) earthquake
insurance in amounts and in form and substance reasonably satisfactory to
Lender in the event the Property is located in an area with a high degree
of seismic activity, provided that the insurance pursuant to clauses (y)
and (z) hereof shall be on terms consistent with the comprehensive all risk
insurance policy required under this subsection (i);
<PAGE>
(ii) commercial general liability insurance against claims for
personal injury, bodily injury, death or property damage occurring upon, in
or about the Property, such insurance (A) to be on the so-called
"occurrence" form with a combined limit of not less than Two Million and
No/100 Dollars ($2,000,000) in the aggregate and One Million and No/100
Dollars ($1,000,000) per occurrence (and, if on a blanket policy,
containing an "Aggregate Per Location" endorsement); (B) to continue at not
less than the aforesaid limit until reasonably required to be changed by
Lender in writing by reason of changed economic conditions making such
protection inadequate; and (C) to cover at least the following hazards: (1)
premises and operations; (2) products and completed operations on an "if
any" basis; (3) independent contractors; (4) blanket contractual liability
for all legal contracts; and (5) contractual liability covering the
indemnities contained in the Mortgage to the extent the same is available;
(iii) business income insurance (A) with loss payable to
Lender; (B) covering all risks required to be covered by the insurance
provided for in subsection (i) above; (C) containing an extended period of
indemnity endorsement which provides that after the physical loss to the
Improvements and Personalty has been repaired, the continued loss of income
will be insured until such income either returns to the same level it was
at prior to the loss, or the expiration of twelve (12) months from the date
that the Property is repaired or replaced and operations are resumed,
whichever first occurs, and notwithstanding that the policy may expire
prior to the end of such period; (D) in an amount equal to one hundred
percent (100%) of the projected gross operating profit of Borrower plus the
management fee due under the Management Agreement for a period of twelve
(12) months from the date that the Property is repaired or replaced and
operations are resumed; and (E) providing for "extra expense" coverage in
an amount satisfactory to Lender. The amount of such business income
insurance shall be determined prior to the date hereof and at least once
each year thereafter based on Borrower's reasonable estimate of the gross
operating profit of Borrower plus the management fee due under the
Management Agreement for the succeeding twelve (12) month period. Subject
to Operating Lessee's right to receive any portion of the business income
insurance pursuant to the terms of the Operating Lease, all proceeds
payable to Lender pursuant to this subsection, including, at a minimum the
amounts representing Operating Lease Rent, shall be held by Lender and
shall be applied to the obligations secured by the Loan Documents from time
to time due and payable hereunder and under the Note; provided, however,
that nothing herein contained shall be deemed to relieve Borrower of its
obligations to pay the obligations secured by the Loan Documents on the
respective dates of payment provided for in the Note and the other Loan
Documents except to the extent such amounts are actually paid out of the
proceeds of such business income insurance;
(iv) at all times during which structural construction,
repairs or alterations are being made with respect to the Improvements, and
only if the Property coverage form does not otherwise apply, (A) owner's
contingent or protective liability insurance covering claims not covered by
or under the terms or provisions of the above mentioned commercial general
liability insurance policy; and (B) the insurance provided for in
subsection (i) above written in a so-called builder's risk completed value
form (1) on a non-reporting basis, (2) against all risks insured against
pursuant to subsection (i) above, (3) including permission to occupy the
Property, and (4) with an agreed amount endorsement waiving co-insurance
provisions;
<PAGE>
(v) workers' compensation, subject to the statutory limits of
the state in which the Property is located, and employer's liability
insurance with a limit of at least One Million and No/100 Dollars
($1,000,000) per accident and per disease per employee, and One Million and
No/100 Dollars ($1,000,000) for disease aggregate in respect of any work or
operations on or about the Property, or in connection with the Property or
its operation (if applicable);
(vi) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by Lender on terms
consistent with the commercial property insurance policy required under
subsection (i) above;
(vii) umbrella liability insurance in an amount not less than
Fifty Million and No/100 Dollars ($50,000,000) per occurrence on terms
consistent with the commercial general liability insurance policy required
under subsection (ii) above;
(viii) motor vehicle liability coverage for all owned and non-
owned vehicles, including rented and leased vehicles containing
minimum limits per occurrence, of One Million and No/100 Dollars
($1,000,000);
(ix) so-called "dramshop" insurance or other liability
insurance required in connection with the sale of alcoholic beverages;
(x) insurance against employee dishonesty in an amount not
less than one (1) month of gross revenue from the Property with a
deductible not greater than Ten Thousand and No/100 Dollars ($10,000); and
(xi) upon sixty (60) days' written notice, such other
reasonable insurance and in such reasonable amounts as Lender from time to
time may reasonably request against such other insurable hazards which at
the time are commonly insured against for property similar to the Property
located in or around the region in which the Property is located.
(b) All insurance provided for in Section 5.1(a) shall be
obtained under valid and enforceable policies (collectively, the "Policies"
or in the singular, the "Policy"), and shall be subject to the reasonable
approval of Lender as to insurance companies, amounts, deductibles, loss
payees and insureds. The Policies shall be issued by financially sound and
responsible insurance companies authorized to do business in the state in
which the Property is located with a rating of "A-X" or better as
established by Best's Rating Guide and having a claims paying ability
rating of "AA" or better by at least two (2) of the Rating Agencies (one of
which shall be (i) Standard & Poor's if Standard & Poor's is rating the
Securities issued in the Securitization of which this Loan is a part, and
(ii) Moody's if Moody's is rating the Securities issued in the
Securitization of which this Loan is a part). The Policies described in
Section 5.1 (with the exception of Section 5.1(ii)) shall designate Lender
as loss payee. Not less than ten (10) days prior to the expiration dates
of the Policies theretofore furnished to Lender, certificates of insurance
evidencing the Policies accompanied by evidence satisfactory to Lender of
payment of the premiums due thereunder (the "Insurance Premiums"), shall be
delivered by Borrower to Lender.
(c) Borrower shall deliver to Lender certificates of
insurance for blanket Policies delivered in connection with the Loan that
specify and set forth the declared replacement cost value and the declared
business income amount for the Property.
<PAGE>
(d) All Policies of insurance provided for or contemplated by
Section 5.1(a), except for the Policy referenced in Section 5.1(a)(v),
shall name Borrower as the insured and, if permitted by applicable law,
Lender as the additional insured, as its interests may appear, and in the
case of property damage, boiler and machinery, flood and earthquake
insurance, shall contain a so-called New York standard non-contributing
mortgagee clause in favor of Lender providing that the loss thereunder
shall be payable to Lender.
(e) All Policies of insurance provided for in Section 5.1(a)
shall contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting for
Borrower, or of any tenant or other occupant, or failure to comply with the
provisions of any Policy, which might otherwise result in a forfeiture of
the insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other than to
increase the coverage provided thereby) or canceled without at least (A)
ten (10) days' written notice to Lender and any other party named therein
an additional insured in the case of non-payment of Insurance Premiums, and
(B) in each other instance, thirty (30) days' written notice to Lender and
any other party named therein as an additional insured;
(iii) each Policy shall provide that the issuers thereof shall
give written notice to Lender if the Policy has not been renewed fifteen
(15) days prior to its expiration; and
(iv) Lender shall not be liable for any Insurance Premiums
thereon or subject to any assessments thereunder.
(f) If at any time Lender is not in receipt of written
evidence that all insurance required hereunder is in full force and effect,
Lender shall have the right, upon five (5) days notice to Borrower, to take
such action as Lender reasonably deems necessary to protect its interest in
the Property, including, without limitation, the obtaining of such
insurance coverage as Lender in its reasonable discretion deems appropriate
and all premiums incurred by Lender in connection with such action or in
obtaining such insurance and keeping it in effect shall be paid by Borrower
to Lender upon demand and until paid shall be secured by the Mortgage and
shall bear interest at the Default Rate.
(g) If the Property shall be damaged or destroyed, in whole
or in part, by fire or other casualty, Borrower shall give prompt notice of
such damage to Lender and shall promptly commence and diligently prosecute
the completion of the Restoration of the Property and otherwise in
accordance with Section 5.3. Borrower shall pay all costs of such
Restoration whether or not such costs are covered by insurance. Lender
may, but shall not be obligated to make proof of loss if not made promptly
by Borrower.
(h) In the event of foreclosure of the Mortgage with respect
to the Property, or other transfer of title to the Property in
extinguishment in whole or in part of the Debt all right, title and
interest of Borrower in and to the Policies that are not blanket Policies
then in force concerning the Property and all proceeds payable thereunder
shall thereupon vest in the purchaser at such foreclosure or Lender or
other transferee in the event of such other transfer of title.
<PAGE>
Section 5.2 Condemnation. Borrower shall promptly give Lender
notice of the actual or threatened commencement of any condemnation or
eminent domain proceeding (a "Condemnation") affecting the Property and
shall deliver to Lender copies of any and all papers served in connection
with such proceedings. Lender may participate in any such proceedings and
Borrower shall deliver to Lender all instruments required to permit
participation in such proceedings. Borrower shall, at its expense,
diligently prosecute any such proceedings, and shall consult with Lender,
its attorneys and experts, and cooperate with them in the carrying on or
defense of any such proceedings. Lender is hereby irrevocably appointed as
Borrower's attorney-in-fact, coupled with an interest, with exclusive power
to collect and receive any Award and, from and after an Event of Default,
to make any compromise or settlement in connection with any such
Condemnation. Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including but not limited to
any transfer made in lieu of or in anticipation of the exercise of such
taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the
Debt shall not be reduced until any award or payment therefor (an "Award")
shall have been actually received and applied by Lender, after the
deduction of reasonable expenses of collection, to the reduction or
discharge of the Debt without premium or penalty. Lender shall not be
limited to the interest paid on the Award by the condemning authority but
shall be entitled to receive out of the award interest at the rate or rates
provided herein or in the Note. If the Property or any portion thereof is
taken by a condemning authority, Borrower shall promptly commence and
diligently prosecute the Restoration of the Property and otherwise comply
with the provisions of Section 5.3. If the Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of the Award,
Lender shall have the right, whether or not a deficiency judgment on the
Note shall have been sought, recovered or denied, to receive the Award, or
a portion thereof sufficient to pay the Debt.
Section 5.3 Restoration. The following provisions shall apply
in connection with the Restoration of the Property:
(a) If the Net Proceeds shall be less than Three Hundred
Thousand and No/100 Dollars ($300,000) and the costs of completing the
Restoration shall be less than Three Hundred Thousand and No/100 Dollars
($300,000), the Net Proceeds will be disbursed by Lender to Borrower upon
receipt, provided that all of the conditions set forth in Section 5.3(b)(i)
are met and Borrower delivers to Lender a written undertaking to
expeditiously commence and to satisfactorily complete with due diligence
the Restoration in accordance with the terms of this Agreement.
(b) If the Net Proceeds are equal to or greater than Three
Hundred Thousand and No/100 Dollars ($300,000) or the costs of completing
the Restoration is equal to or greater than Three Hundred Thousand and
No/100 Dollars ($300,000) Lender shall make the Net Proceeds available for
the Restoration in accordance with the provisions of this Section 5.3. The
term "Net Proceeds" for purposes of this Section 5.3 shall mean: (i) the
net amount of all insurance proceeds received by Lender pursuant to Section
5.1 (a)(i), (iv), (vi) and (vii) as a result of such damage or destruction,
after deduction of its reasonable costs and expenses (including, but not
limited to, reasonable counsel fees), if any, in collecting same
("Insurance Proceeds"), or (ii) the net amount of the Award, after
deduction of its reasonable costs and expenses (including, but not limited
to, reasonable counsel fees), if any, in collecting same ("Condemnation
Proceeds"), whichever the case may be.
<PAGE>
(i) The Net Proceeds shall be made available to Borrower for
Restoration provided that the Net Proceeds are received prior to the
Anticipated Payment Date and each of the following conditions are met:
(A) no Event of Default shall have occurred and
be continuing;
(B) (1) in the event the Net Proceeds are
Insurance Proceeds, less than fifty percent (50%) of the total floor area
of the Improvements of the Property that has been damaged, destroyed or
rendered unusable as a result of such fire or other casualty or (2) in the
event the Net Proceeds are Condemnation Proceeds, less than ten percent
(10%) of the land constituting the Property that is taken, and such land is
located along the perimeter or periphery of the Property, and no portion of
the Improvements is located in such land;
(C) the Operating Lease shall remain in full
force and effect during and after the completion of the Restoration,
notwithstanding the occurrence of any such fire or other casualty or
taking, whichever the case may be;
(D) Borrower shall commence the Restoration as
soon as reasonably practicable (but in no event later than sixty (60) days
after such damage or destruction or taking, whichever the case may be,
occurs) and shall diligently pursue the same to satisfactory completion;
(E) Lender shall be satisfied in its reasonable
discretion that any operating deficits, including all scheduled payments of
principal and interest under the Note, which will be incurred with respect
to the Property as a result of the occurrence of any such fire or other
casualty or taking, whichever the case may be, will be covered out of (1)
the Net Proceeds, (2) the insurance coverage referred to in Section
5.1(a)(iii), if applicable, or (3) by other funds of Borrower;
(F) Lender shall be satisfied in its reasonable
discretion that the Restoration will be completed on or before the earliest
to occur of (1) six (6) months prior to the Anticipated Payment Date, (2)
the earliest date required for such completion under the terms of the
Operating Lease or the Management Agreement, (3) such time as may be
required under applicable zoning law, ordinance, rule or regulation in
order to repair and restore the Property to the condition it was in
immediately prior to such fire or other casualty or to as nearly as
possible the condition it was in immediately prior to such taking, as
applicable or (4) the expiration of the insurance coverage referred to in
Section 5.1(a)(iii);
(G) the Property and the use thereof after the
Restoration will be in compliance with and permitted under all applicable
zoning laws, ordinances, rules and regulations and all necessary operating
or reciprocal easement agreements for the operation and maintenance of the
Property are, or remain, in effect;
<PAGE>
(H) the Restoration shall be done and completed
by Borrower in an expeditious and diligent fashion and in compliance with
all applicable governmental laws, rules and regulations (including, without
limitation, all applicable environmental laws);
(I) such fire or other casualty or taking, as
applicable, does not result in the loss of access to the Property or the
related Improvements;
(J) The projected Debt Service Coverage Ratio for
the Loan, in Lender's reasonable estimation, for the twelve (12) month
period immediately following the Restoration (and stabilization thereafter)
, but not including the period commencing with the Casualty or Condemnation
and ending on the last day of stabilization, shall be equal to the greater
of (i) a Debt Service Coverage Ratio of 1.4 to 1.0, and (ii) the Debt
Service Coverage Ratio for the Loan for the twelve (12) full calendar
months immediately preceding the casualty or Condemnation of the Property;
and
(K) Lender shall be satisfied that, upon the
completion of the Restoration, the LTV shall be the lesser of (i) the LTV
on the Closing Date, and (ii) the LTV immediately prior to the casualty or
condemnation, as applicable.
(ii) The Net Proceeds shall be held by Lender in an interest-
bearing account and, until disbursed in accordance with the
provisions of this Section 5.3(b), shall constitute additional security for
the Debt and other obligations under the Loan Documents. The Net Proceeds
shall be disbursed by Lender to, or as directed by, Borrower from time to
time during the course of the Restoration, upon receipt of evidence
reasonably satisfactory to Lender that (A) all materials installed and work
and labor performed (except to the extent that they are to be paid for out
of the requested disbursement) in connection with the Restoration have been
paid for, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or
any other liens or encumbrances of any nature whatsoever on the Property
arising out of the Restoration which have not either been fully bonded to
the satisfaction of Lender and discharged of record or in the alternative
fully insured to the satisfaction of Lender by the title company issuing
the title insurance policy.
(iii) In the event that the Restoration involves structural
elements of the Improvements or the costs of completing the Restoration
shall exceed $300,000, then in each case, all plans and specifications
required in connection with the Restoration shall be subject to prior
review and reasonable acceptance in all respects by Lender and by an
independent consulting engineer selected by Borrower and approved by Lender
in its reasonable discretion (the "Casualty Consultant"), which approval by
Lender, if not granted or denied within fifteen (15) days of Lender's
receipt of a request therefor, together with any supporting material
reasonably requested by Lender or Casualty Consultant, shall be deemed to
be approved by Lender. Lender shall have the use of the plans and
specifications and all permits, licenses and approvals required or obtained
in connection with the Restoration. The identity of the contractors,
subcontractors and materialmen engaged in the Restoration, as well as the
contracts under which they have been engaged, shall be subject to prior
review and acceptance by Lender and the Casualty Consultant. All out-of-
pocket costs and expenses incurred by Lender in connection with making the
Net Proceeds available for the Restoration including, without limitation,
reasonable counsel fees and disbursements and the Casualty Consultant's
reasonable fees, shall be paid by Borrower.
<PAGE>
(iv) In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an amount equal to the costs
actually incurred from time to time for work in place as part of the
Restoration, as certified by the Casualty Consultant, minus the Casualty
Retainage. The term "Casualty Retainage" shall mean an amount equal to ten
percent (10%) of the costs actually incurred for work in place as part of
the Restoration, as certified by the Casualty Consultant, until the
Restoration has been completed. The Casualty Retainage shall in no event,
and notwithstanding anything to the contrary set forth above in this
Section 5.1(b), be less than the amount actually held back by Borrower from
contractors, subcontractors and materialmen engaged in the Restoration.
The Casualty Retainage shall not be released until the Casualty Consultant
certifies to Lender that the Restoration has been completed in accordance
with the provisions of this Section 5.1(b) and that all approvals necessary
for the re-occupancy and use of the Property have been obtained from all
appropriate governmental and quasi-governmental authorities, and Lender
receives evidence reasonably satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the
Casualty Retainage; provided, however, that Lender will release the portion
of the Casualty Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the Restoration as of the date upon
which the Casualty Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of the
contractor's, subcontractor's or materialman's contract, the contractor,
subcontractor or materialman delivers the lien waivers and evidence of
payment in full of all sums due to the contractor, subcontractor or
materialman as may be reasonably requested by Lender or by the title
company issuing the title insurance policy, and Lender receives an
endorsement to the title insurance policy insuring the continued priority
of the lien of the related Mortgage and evidence of payment of any premium
payable for such endorsement. If required by Lender, the release of any
such portion of the Casualty Retainage shall be approved by the surety
company, if any, which has issued a payment or performance bond with
respect to the contractor, subcontractor or materialman.
(v) Lender shall not be obligated to make disbursements of
the Net Proceeds more frequently than twice every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed
balance thereof shall not, in the reasonable opinion of Lender, be
sufficient to pay in full the balance of the costs which are estimated by
the Casualty Consultant to be incurred in connection with the completion of
the Restoration (to restore the Property to the condition prior to the
casualty and not any costs or expenses associated with the betterment of
the Property, which betterment shall be subject to the terms and conditions
of Section 10.12 hereof), Borrower shall cure the deficiency (the "Net
Proceeds Deficiency") by either depositing with Lender an amount equal to
the Net Proceeds Deficiency before any further disbursement of the Net
Proceeds shall be made or delivering to Lender a Letter of Credit in the
amount of the Net Proceeds Deficiency. The Net Proceeds Deficiency shall
be held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this
subsection shall constitute additional security for the Debt and Borrower
hereby authorizes Lender to draw upon any Letter of Credit delivered for
the Net Proceeds Deficiency for such purposes.
<PAGE>
(vii) The excess, if any, of the Net Proceeds and the remaining
balance, if any, of the Net Proceeds Deficiency deposited with Lender after
the Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Section 5.1(b), and the
receipt by Lender of evidence reasonably satisfactory to Lender that all
costs incurred in connection with the Restoration have been paid in full,
shall be remitted by Lender to Borrower, provided no Event of Default shall
have occurred and shall be continuing under the Note, this Loan Agreement
or any of the other Loan Documents.
(c) All Net Proceeds not required (i) to be made available
for the Restoration or (ii) to be returned to Borrower as excess Net
Proceeds pursuant to Section 5.1.(b)(vii) may be retained and applied by
Lender toward the payment of the Debt, without premium or penalty, whether
or not then due and payable in such order, priority and proportions as
Lender in its sole discretion shall deem proper, or, at the discretion of
Lender, the same may be paid, either in whole or in part, to Borrower for
such purposes as Lender shall designate, in its discretion; provided, that,
in the event that Lender applies any Insurance Proceeds toward the payment
of the Debt in accordance with this Section 5.3(c)(i), Borrower, so long as
no Event of Default shall have occurred and is continuing, shall be
permitted, within the one hundred twenty (120) day period immediately
following such application of Insurance Proceeds to the Debt, to prepay the
entire outstanding amount of the Loan (but not the Additional Loan) without
any prepayment consideration, fee, yield maintenance premium or penalty.
Section 5.4 Impounds.
(a) Borrower shall deposit with Lender, monthly, (a)
one-twelfth (1/12th) of the Taxes that Lender reasonably estimates will be
payable during the next ensuing twelve (12) months in order to accumulate
with Lender sufficient funds to pay all such Taxes at least thirty (30)
days prior to their respective due dates, and (b) one-twelfth of the
Insurance Premiums that Lender estimates will be payable for the renewal of
the coverage afforded by the insurance policies required by Lender upon the
expiration thereof in order to accumulate with Lender sufficient funds to
pay all such Insurance Premiums at least thirty (30) days prior to
expiration (said amounts in (a) and (b) above hereinafter called the "Tax
and Insurance Escrow Fund"). At or before the advance of the Loan,
Borrower shall deposit with Lender a sum of money which together with the
monthly installments will be sufficient to make each of such payments
thirty (30) days prior to the date any delinquency or penalty becomes due
with respect to such payments. Deposits shall be made on the basis of
Lender's reasonable estimate from time to time of the charges for the
current year (after giving effect to any reassessment or, at Lender's
election, on the basis of the charges for the prior year, with adjustments
when the charges are fixed for the then current year). All funds so
deposited shall (a) be held by Lender, (b) be commingled with Lender's
general funds, and (c) earn interest at available money market rates. Any
earnings on such funds shall be added to and be a part of the Tax and
Insurance Escrow Fund and shall be disbursed or applied in the same manner
and subject to the same terms as funds on deposit in the Tax and Insurance
Escrow Fund. Any such earnings shall be for the benefit of the Borrower,
subject to the Lender's rights pursuant to this Agreement. Lender shall
not be responsible for any losses resulting from the investment of amounts
on deposit in the Tax and Insurance Escrow Fund or for obtaining any
specific level or percentage earnings on such amounts so invested.
Borrower shall be liable for any income taxes due on the earnings for the
amounts on deposit in the Tax and Insurance Escrow Fund. Borrower hereby
grants to Lender a security interest in all funds so deposited with Lender
for the purpose of securing the Loan. While an Event of Default exists,
the funds deposited may be applied in payment of the charges for which such
funds have been deposited, or to the payment of the Loan or any other
charges affecting the security of Lender, as Lender may elect, but no such
application shall be deemed to have been made by operation of law or
otherwise until actually made by Lender. Borrower shall furnish Lender
with bills for the charges for which such deposits are required at least
<PAGE>
thirty (30) days prior to the date on which the charges first become
payable; provided, that, in the event that Borrower has not received such
bills at least thirty (30) days prior to the date on which the charges
first become payable, then Borrower shall deliver such bills to Lender
promptly upon the receipt thereof. If at any time the amount on deposit
with Lender, together with amounts to be deposited by Borrower before such
charges are payable, is insufficient to pay such charges, Borrower shall
deposit any deficiency with Lender immediately upon demand. Lender shall
pay such charges when the amount on deposit with Lender is sufficient to
pay such charges and Lender has received a bill for such charges.
(b) In lieu of making the required monthly payments to the
Tax and Insurance Escrow Fund and provided no Event of Default exists,
Borrower has the option to deliver to Lender (i) a cash deposit in an
amount reasonably estimated by Lender to be equal to fifty percent (50%) of
the estimated amount of annual Insurance Premiums and Taxes to be paid
during the calendar year (the "Installment Amount"), which cash deposit
shall be held by Lender as security for the Debt (the "Static Cash
Account") or (ii) a Letter of Credit in an amount reasonably estimated by
Lender to be equal to the Installment Amount (the "T&I Letter of Credit").
In the event that Borrower, after delivering a Static Cash Account or a T&I
Letter of Credit in accordance with this Section 5.4, elects to resume
making monthly payments required under the Tax and Insurance Escrow Fund,
Borrower shall make an initial deposit into such Tax and Insurance Escrow
Fund equal to the amount reasonably estimated by Lender to be the amount
that would have been on deposit in such Tax and Insurance Escrow Fund on
the date thereof if Borrower had not delivered such Static Cash Account or
a T&I Letter of Credit. Borrower shall give Lender thirty (30) days prior
written notice of such election and Borrower shall pay to Lender all of
Lender's reasonable out-of-pocket costs and expenses in connection
therewith. Borrower shall not be entitled to draw from such Static Cash
Account or a T&I Letter of Credit. During the time the appropriate amount
of funds are on deposit in the Static Cash Account or the T&I Letter of
Credit is outstanding, Borrower shall pay all Taxes and Insurance Premiums
as the same become due and payable and shall furnish to Lender evidence of
(i) payment of Taxes reasonably satisfactory to Lender on or prior to the
date when such Taxes are due, and (ii) payment of Insurance Premiums
reasonably satisfactory to Lender at least fifteen (15) days prior to the
date when such Insurance Premiums are due. Borrower shall provide Lender
with written notice of any increases in the Taxes and Insurance Premiums
thirty (30) days prior to the effective date of any such increase
(provided, that, if Borrower has not received notice of such increase at
least thirty (30) days prior to such effective date, then Borrower shall
notify Lender of such increase promptly upon receiving notice of such
increase) and the Static Cash Account or the T&I Letter of Credit, as
applicable, shall be increased to an amount equal to the new Installment
Amount at least ten (10) days prior to such increase.
Section 5.5 Letters of Credit.
(a) Each Letter of Credit delivered under this Agreement or
any other Loan Document shall be additional security for the payment of the
Debt. Upon the occurrence of an Event of Default, Lender in its sole and
absolute discretion may, but shall not be obligated to, draw upon any
Letter of Credit for payments of any amounts then due and payable under the
Note, this Agreement, the Mortgage or the other Loan Documents.
(b) (1) In addition to any other right Lender may have to
draw upon a Letter of Credit pursuant to the terms and conditions of this
Agreement and the other Loan Documents, Lender shall have the additional
rights to draw in full upon any Letter of Credit: (A) if Lender has not
received at least thirty (30) days prior to the date on which the then
outstanding Letter of Credit is scheduled to expire, a notice from the
issuing bank that it has renewed the applicable Letter of Credit; (B) upon
receipt of notice from the issuing bank that the applicable Letter of
Credit will be terminated; and (C) thirty (30) days after Lender has
received notice and given notice to the Borrower that the bank issuing the
applicable Letter of Credit shall cease to be an Eligible Institution.
<PAGE>
(2) In the event that Lender draws upon a Letter of
Credit in accordance with the provisions of subsection 5.5(b)(1) above, any
and all such amounts not otherwise expended by Lender shall be held by
Lender as cash collateral in an interest bearing account established and
maintained by Lender and Lender shall be entitled to draw upon and apply
such proceeds at the time and in the manner provided in this Agreement or
the other Loan Documents for draws upon the applicable Letter of Credit.
(3) Notwithstanding anything to the contrary contained
above, Lender is not obligated to draw on a Letter of Credit upon the
happening of an event specified in this subsection and shall not be liable
for any losses sustained by Borrower due to the insolvency of the bank
issuing a Letter of Credit if Lender has not drawn on the Letter of Credit.
ARTICLE VI
ENVIRONMENTAL MATTERS
Section 6.1 Certain Definitions. As used herein, the following
terms have the meanings indicated:
(a) "Environmental Laws" Any local, state, federal or other
governmental authority, statute, ordinance, code, order, decree, law, rule
or regulation pertaining to or imposing liability or standards of conduct
concerning environmental regulation, contamination or clean-up including,
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, the Resource Conservation and Recovery Act,
as amended, the Emergency Planning and Community Right-to-Know Act of 1986,
as amended, the Hazardous Substances Transportation Act, as amended, the
Solid Waste Disposal Act, as amended, the Clean Water Act, as amended, the
Clean Air Act, as amended, the Toxic Substances Control Act, as amended,
the Safe Drinking Water Act, as amended, the Occupational Safety and Health
Act, as amended, any state superlien and environmental clean-up statutes
and all regulations adopted in respect of the foregoing laws whether
presently in force or coming into being and/or effectiveness hereafter.
(b) "Hazardous Materials" means (i) petroleum or chemical
products, whether in liquid, solid, or gaseous form, or any fraction or
by-product thereof, (ii) asbestos or asbestos-containing materials,
(iii) polychlorinated biphenyls (pcbs), (iv) radon gas, (v) underground
storage tanks, (vi) any explosive or radioactive substances, (vii) lead or
lead-based paint, or (viii) any other substance, material, waste or mixture
which is or shall be listed, defined, or otherwise determined by any
governmental authority to be hazardous, toxic, dangerous or otherwise
regulated, controlled or giving rise to liability under any Environmental
Laws.
Section 6.2 Representations and Warranties on Environmental
Matters. To Borrower's actual knowledge, except as set forth in the Site
Assessment delivered in connection with the origination of the Loan, (a) no
Hazardous Material is now or was formerly used, stored, generated,
manufactured, installed, treated, discharged, disposed of or otherwise
present at or about the Property or any property adjacent to the Property
(except for cleaning and other products currently used in connection with,
and necessary and appropriate for, the routine maintenance or repair of the
Property or the operation thereof as a hotel in material compliance with
Environmental Laws) and no Hazardous Material was removed or transported
from the Property, except in full compliance with any Environmental Laws,
(b) all permits, licenses, approvals and filings required by Environmental
Laws have been obtained, and the use, operation and condition of the
Property does not, and did not previously, violate any Environmental Laws,
(c) no civil, criminal or administrative action, suit, claim, hearing,
investigation or proceeding has been brought or been threatened (in
writing), nor have any settlements been reached by or with any parties or
any liens imposed in connection with the Property concerning Hazardous
Materials or Environmental Laws; and (d) no underground storage tanks exist
on any part of the Property.
<PAGE>
Section 6.3 Covenants on Environmental Matters.
(a) Borrower shall, and shall cause the Operating Lessee and
Manager to, (i) comply in all material respects with applicable
Environmental Laws; (ii) notify Lender immediately upon Borrower's
discovery of any spill, discharge, release or presence of any Hazardous
Material at, upon, under, within, contiguous to or otherwise affecting the
Property which Borrower is required to report, repair or remediate pursuant
to any Environmental Laws; (iii) promptly remove such Hazardous Materials
and remediate the Property in compliance with Environmental Laws; and
(iv) promptly forward to Lender copies of all orders, notices, permits,
applications or other communications and reports in connection with any
spill, discharge, release or the presence of any Hazardous Material or any
other matters relating to the Environmental Laws or any similar laws or
regulations, as they may affect the Property or Borrower.
(b) Borrower shall not cause, shall prohibit any other Person
within the control of Borrower from causing, and shall use prudent,
commercially reasonable efforts to prohibit other Persons (including
tenants) from (i) causing any spill, discharge or release, or the use,
storage, generation, manufacture, installation, or disposal, of any
Hazardous Materials at, upon, under, within or about the Property or the
transportation of any Hazardous Materials to or from the Property (except
for cleaning and other products used in connection with, and necessary and
appropriate for, routine maintenance or repair of the Property or the
operation thereof as a hotel in compliance with Environmental Laws in all
material respects), (ii) installing any underground storage tanks at the
Property, or (iii) conducting any activity that requires a permit or other
authorization under Environmental Laws (other than activities in the
ordinary course of business consistent with the uses at the Property on the
date hereof).
(c) Borrower shall provide to Lender, at Borrower's expense
promptly upon the written request of Lender from time to time, a Site
Assessment or, if required by Lender, an update to any existing Site
Assessment, to assess the presence or absence of any Hazardous Materials
and the potential costs in connection with abatement, cleanup or removal of
any Hazardous Materials found on, under, at or within the Property.
Borrower shall not be responsible for the cost of such Site Assessment or
update unless Lender's request for a Site Assessment is based on
information provided under Section 6.3(a), a reasonable suspicion of
Hazardous Materials at or near the Property, a breach of representations
under Section 6.2, or an Event of Default, in which case any such Site
Assessment or update shall be at Borrower's expense.
Section 6.4 Allocation of Risks and Indemnity. As between
Borrower, Lender and Indemnitor, all risk of loss associated with non-
compliance with Environmental Laws, or with the presence of any Hazardous
Material at, upon, within, contiguous to or otherwise affecting the
Property, shall lie solely with Borrower and Indemnitor; provided, however,
Borrower shall not be liable under such indemnification to the extent such
loss, liability, damage, claim, cost or expense results solely from
Lender's gross negligence or willful misconduct. Accordingly, Borrower and
Indemnitor shall bear all risks and costs associated with any loss
(including any loss in value attributable to Hazardous Materials), damage
or liability therefrom, including all costs of removal of Hazardous
Materials or other remediation required by Lender or by law. Borrower
shall indemnify, defend and hold Lender and its shareholders, directors,
officers, employees and agents harmless from and against all loss,
liabilities, damages, claims, costs and expenses (including reasonable
costs of defense and consultant fees, investigation and laboratory fees,
court costs, and other litigation expenses) arising out of or associated,
in any way, with (a) the non-compliance with Environmental Laws, or (b) the
<PAGE>
existence of Hazardous Materials in, on, or about the Property, (c) any
personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to Hazardous Materials, (d) any lawsuit
brought or threatened, settlement reached, or government order relating to
such Hazardous Materials, (e) a breach of any representation, warranty or
covenant contained in this Article 6, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law, or (f) the imposition of any environmental lien encumbering the
Property; provided, however, Borrower shall not be liable under such
indemnification to the extent such loss, liability, damage, claim, cost or
expense results solely from Lender's gross negligence or willful
misconduct. Borrower's obligations under this Section 6.4 shall arise
whether or not any governmental authority has taken or threatened any
action in connection with the presence of any Hazardous Material, and
whether or not the existence of any such Hazardous Material or potential
liability on account thereof is disclosed in the Site Assessment and shall
continue notwithstanding the repayment of the Loan or any transfer or sale
of any right, title and interest in the Property (by foreclosure, deed in
lieu of foreclosure or otherwise). Any amounts payable to Lender by reason
of the application of this Section 6.4 shall become immediately due and
payable and shall bear interest at the Default Rate from the date loss or
damage is sustained by Lender until paid. The obligations and liabilities
of Borrower under this Section 6.4 shall survive any termination,
satisfaction, assignment, entry of a judgment of foreclosure or delivery of
a deed in lieu of foreclosure.
Section 6.5 No Waiver. Notwithstanding any provision in this
Article 6 or elsewhere in the Loan Documents, or any rights or remedies
granted by the Loan Documents, Lender does not waive and expressly reserves
all rights and benefits now or hereafter accruing to Lender under the
"security interest" or "secured creditor" exception under applicable
Environmental Laws, as the same may be amended. No action taken by Lender
pursuant to the Loan Documents shall be deemed or construed to be a waiver
or relinquishment of any such rights or benefits under the "security
interest exception."
ARTICLE VII
LEASING MATTERS
Section 7.1 Representations and Warranties on Leases. Borrower
represents and warrants to Lender with respect to the Leases under which
Borrower is the Landlord, if any, that: (a) the rent roll delivered to
Lender is true, complete and correct, and the Leases are valid and in and
full force and effect; (b) the Leases (including amendments) are in
writing, and there are no oral agreements with respect thereto; (c) the
copies of the Leases delivered to Lender are true and complete; (d) neither
the landlord nor any tenant is in material default under any of the Leases;
(e) Borrower has no knowledge of any notice of termination or default with
respect to any Lease; (f) Borrower has not assigned or pledged any of the
Leases, the rents or any interests therein except to Lender; (g) except as
expressly disclosed on Schedule III attached hereto, no tenant or other
party has an option or right of first refusal or offer, to purchase all or
any portion of the Property; (h) no tenant has the right to terminate its
Lease prior to expiration of the stated term of such Lease; (i) no tenant
has prepaid more than one month's rent in advance (except for bona fide
security deposits not in excess of an amount equal to two month's rent, or
as otherwise expressly provided in such Lease); (j) no tenant under any
Lease has any right or option for additional space; (k) all existing Leases
are subordinate to the Mortgage either pursuant to their terms or a
recorded subordination agreement; and (l) there are no long term subleases
in effect other than subleases of space for ancillary hotel uses such as
gift shops.
<PAGE>
Section 7.2 Approval Rights. All material Leases under which
Borrower is the Landlord or under which the tenant otherwise will be
granted non-disturbance by the Borrower, and other rental arrangements
shall in all respects be approved by Lender, which approval (a) shall not
be unreasonably withheld, delayed or conditioned, and (b) shall be deemed
granted in the event that Lender does not respond within twenty (20) days
after receiving a request for such approval together with a copy of such
Lease and all other supporting materials reasonably requested by Lender.
Section 7.3 Covenants. Borrower (a) shall perform the
obligations which Borrower is required to perform under the Leases;
(b) shall enforce, in a commercially reasonable manner, the obligations to
be performed by the tenants; (c) shall promptly furnish to Lender any
notice of default or termination received by Borrower from any tenant, and
any notice of default or termination given by Borrower to any tenant;
(d) shall not collect any rents for more than thirty (30) days in advance
of the time when the same shall become due, except for bona fide security
deposits not in excess of an amount equal to two months rent, or as
otherwise expressly provided in such Lease; (e) shall not enter into any
new ground Lease or master Lease of any part of the Property; (f) shall not
further assign or encumber any Lease; (g) shall not, except with Lender's
prior written consent (i) cancel or accept surrender or termination of any
Lease or (ii) amend or modify any of the material terms of any Lease, which
consent (A) shall not be unreasonably withheld, delayed or conditioned, and
(B) shall be deemed granted in the event that Lender does not respond
within twenty (20) days after receiving a request for such consent together
with all supporting materials reasonably requested by Lender. Any action
in violation of clauses (e), (f) and (g) of this Section 7.3 shall be void
at the election of Lender.
Section 7.4 Tenant Estoppels. At Lender's request, Borrower
shall use commercially reasonable efforts to obtain and furnish to Lender,
written estoppels in form and substance reasonably satisfactory to Lender,
executed by tenants under Leases and the Operating Lessee under the
Operating Lease at the Property and confirming the term, rent, and other
provisions and matters relating to the Leases.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants to Lender that:
Section 8.1 Organization, Power and Authority. Borrower and
the Operating Lessee (a) are duly organized, validly existing and in good
standing under the laws of the state of their formation or existence, (b)
are in compliance with all material legal requirements applicable to doing
business in the State, and (c) have the necessary governmental approvals to
own and operate the Property and conduct the business now conducted or to
be conducted thereon. Each Borrower Party (a) is duly organized, validly
existing and in good standing under the laws of the state of its formation
or existence and (b) to the extent necessary, is in compliance with all
legal requirements applicable to doing business in the State. Borrower has
the full power, authority and right to execute, deliver and perform its
obligations pursuant to this Loan Agreement and the other Loan Documents,
and to mortgage the Property pursuant to the terms of the Mortgage and to
keep and observe all of the terms of this Loan Agreement and the other Loan
Documents on Borrower's part to be performed.
<PAGE>
Section 8.2 Validity of Loan Documents. The execution,
delivery and performance by Borrower and each Borrower Party of the Loan
Documents: (a) are duly authorized and do not require the consent or
approval of any other party or governmental authority which has not been
obtained; and (b) will not violate any law or result in the imposition of
any lien, charge or encumbrance upon the assets of any such party, except
as contemplated by the Loan Documents. The Loan Documents constitute the
legal, valid and binding obligations of Borrower and each Borrower Party,
enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, or similar laws generally affecting the
enforcement of creditors' rights and general principles of equity.
Section 8.3 No Conflicts. The execution, delivery and
performance of this Agreement and the other Loan Documents by Borrower will
not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance (other than pursuant to the Loan
Documents) upon any of the property or assets of Borrower pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement,
partnership agreement or other agreement or instrument to which Borrower is
a party or by which any of Borrower's property or assets is subject, nor
will such action result in any violation of the provisions of any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over Borrower or any of Borrower's properties or
assets, and any consent, approval, authorization, order, registration or
qualification of or with any court or any such regulatory authority or
other governmental agency or body required for the execution, delivery and
performance by Borrower of this Agreement or any other Loan Documents has
been obtained and is in full force and effect.
Section 8.4 Liabilities; Litigation.
(a) All financial data, including, without limitation, the
statements of cash flow and income and operating expense, that have been
delivered by Borrower and each Borrower Party are (i) true, complete and
correct in all material respects, (ii) accurately represent the financial
condition of the Property as of the date of such reports, and (iii) to the
extent prepared or audited by an independent certified public accounting
firm, have been prepared in accordance with generally accepted accounting
principals throughout the periods covered, except as disclosed therein.
Borrower does not have any contingent liabilities, liabilities for taxes
due and payable, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are known to
Borrower and reasonably likely to have a materially adverse effect on the
Property or the operation thereof as a hotel, except as referred to or
reflected in said financial statements. Since the date of the financial
statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower from that set forth in said
financial statements. There is no litigation, administrative proceeding,
investigation or other legal action (including any proceeding under any
state or federal bankruptcy or insolvency law) pending or, to the knowledge
of Borrower, threatened, against the Property, Borrower or any Borrower
Party which if adversely determined could have a material adverse effect on
such party, the Property or the Loan.
(b) Neither Borrower nor any Borrower Party is contemplating
either the filing of a petition by it under state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets
or property, and neither Borrower nor any Borrower Party has knowledge of
any Person contemplating the filing of any such petition against it.
Section 8.5 Taxes and Assessments. There are no pending or, to
Borrower's best knowledge, proposed, special or other assessments for
public improvements or otherwise affecting the Property, nor are there any
contemplated improvements to the Property that may result in such special
or other assessments.
<PAGE>
Section 8.6 Other Agreements; Defaults. Neither Borrower nor
any Borrower Party is a party to any agreement or instrument or subject to
any court order, injunction, permit, or restriction which might materially
and adversely affect the Property or the business, operations, or condition
(financial or otherwise) of Borrower or any Borrower Party. Neither
Borrower nor any Borrower Party is in violation of any agreement which
violation would have a material and adverse effect on the Property,
Borrower, or any Borrower Party or Borrower's or any Borrower Party's
business, properties, or assets, operations or condition, financial or
otherwise.
Section 8.7 Title. Borrower has good, marketable and insurable
title to the Property, free and clear of all Liens whatsoever except the
Permitted Encumbrances, such other Liens as are permitted pursuant to the
Loan Documents and the Liens created by the Loan Documents. The Mortgage
creates (i) a valid, perfected lien on the Property, subject only to
Permitted Encumbrances and the Liens created by the Loan Documents and (ii)
perfected security interests in and to, and perfected collateral
assignments of, all personalty (including the Leases), all in accordance
with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances, such other Liens as are permitted pursuant to the
Loan Documents and the Liens created by the Loan Documents. There are no
claims for payment for work, labor or materials affecting the Property
which are or may become a lien prior to, or of equal priority with, the
liens created by the Loan Documents. None of the Permitted Encumbrances,
individually or in the aggregate, materially interfere with the benefits of
the security intended to be provided by the Mortgage and this Loan
Agreement, materially and adversely affect the value of the Property,
impair the use or operations of the Property or impair Borrower's ability
to pay its obligations in a timely manner.
Section 8.8 Compliance with Law.
(a) Borrower has, or pursuant to the Operating Lease, has
caused the Operating Lessee to have all requisite licenses, permits,
franchises, qualifications, certificates of occupancy or other governmental
authorizations to own, Lease and operate the Property and carry on its
business, and the Property is in compliance with all applicable legal
requirements and, to the best of Borrower's knowledge, except as expressly
set forth in the Property Condition Report, is free of structural defects,
and all building systems contained therein, to the best of Borrower's
knowledge, except as expressly set forth in the Property Condition Report,
are in good working order, subject to ordinary wear and tear. The Property
does not constitute, in whole or in part, a legally non-conforming use
under applicable legal requirements;
(b) No condemnation has been commenced or, to Borrower's
knowledge, is threatened with respect to all or any portion of the Property
or for the relocation of roadways providing access to the Property; and
(c) The Property has adequate rights of access to public ways
and is served by adequate water, sewer, sanitary sewer and storm drain
facilities. All public utilities necessary to the full use and enjoyment
of the Property are located in the public right-of-way abutting the
Property, and all such utilities are connected so as to serve the Property
without passing over other property, except to the extent such other
property is subject to a perpetual easement for such utility benefiting the
Property. All roads necessary for the utilization of the Property for its
current purpose have been completed and dedicated to public use and
accepted by all governmental authorities.
Section 8.9 Location of Borrower. Borrower's principal place
of business and chief executive offices are located at the address stated
in Section 15.1.
<PAGE>
Section 8.10ERISA.
(a) To the best of Borrower's knowledge, as of the date
hereof and throughout the term of the Loan, (i) Borrower is not and will
not be an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
which is subject to Title I of ERISA, and (ii) the assets of Borrower do
not and will not constitute "plan assets" of one or more such plans for
purposes of Title I of ERISA; and
(b) As of the date hereof and throughout the term of the Loan
(i) Borrower is not and will not be a "governmental plan" within the
meaning of Section 3(32) of ERISA and (ii) transactions by or with Borrower
are not and will not be subject to state statutes applicable to Borrower
regulating investments of and fiduciary obligations with respect to
governmental plans.
Section 8.11Forfeiture. To the best of Borrower's knowledge,
there has not been and shall never be committed by Borrower or any other
person in occupancy of or involved with the operation or use of the
Property any act or omission affording the federal government or any state
or local government the right of forfeiture as against the Property or any
part thereof or any monies paid in performance of Borrower's obligations
under any of the Loan Documents. Borrower hereby covenants and agrees not
to commit, permit or suffer to exist any act or omission affording such
right of forfeiture.
Section 8.12 Tax Filings. Borrower and each Borrower
Party have filed (or have obtained effective extensions for filing) all
federal, state and local tax returns required to be filed and have paid or
made adequate provision for the payment of all federal, state and local
taxes, charges and assessments payable by Borrower and each Borrower Party,
respectively. Borrower and each Borrower Party believe that their
respective tax returns properly reflect the income and taxes of Borrower
and each Borrower Party, respectively, for the periods covered thereby,
subject only to reasonable adjustments required by the Internal Revenue
Service or other applicable tax authority upon audit.
Section 8.13 Solvency. The Borrower (a) has not entered
into the transaction or any Loan Document with the actual intent to hinder,
delay, or defraud any creditor and (b) received reasonably equivalent value
in exchange for its obligations under the Loan Documents. Giving effect to
the Loan, the fair saleable value of Borrower's assets exceeds and will,
immediately following the making of the Loan, exceed Borrower's total
liabilities, including, without limitation, subordinated, unliquidated,
disputed and contingent liabilities. The fair saleable value of Borrower's
assets is and will, immediately following the making of the Loan, be
greater than Borrower's probable liabilities, including the maximum amount
of its contingent liabilities on its debts as such debts become absolute
and matured, Borrower's assets do not and, immediately following the making
of the Loan will not, constitute unreasonably small capital to carry out
its business as conducted or as proposed to be conducted. Borrower does
not intend to, and does not believe that it will, incur Indebtedness and
liabilities (including contingent liabilities and other commitments) beyond
its ability to pay such Indebtedness as they mature (taking into account
the timing and amounts of cash to be received by Borrower and the amounts
to be payable on or in respect of obligations of Borrower). Except as
expressly disclosed to Lender in writing, no petition in bankruptcy has
been filed against Borrower, Indemnitor, any guarantor or any Borrower
Party in the last seven (7) years, and neither Borrower, Indemnitor, any
guarantor nor any Borrower Party in the last seven (7) years has ever made
an assignment for the benefit of creditors or taken advantage of any
insolvency act for the benefit of debtors.
<PAGE>
Section 8.14Full and Accurate Disclosure. All written
information submitted by Borrower or any Borrower Party to Lender in
connection with the Loan or in satisfaction of the terms thereof and all
statements of fact made by Borrower or any Borrower Party in this Agreement
or in any other Loan Document, are accurate, complete and correct in all
material respects. No statement of fact made by Borrower or any Borrower
Party, or, to the best of Borrower's knowledge, on behalf of Borrower or
any Borrower Party, in this Agreement or in any of the other Loan Documents
contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or therein not
misleading. There is no fact presently known to Borrower which has not
been disclosed to Lender which materially and adversely affects, nor as far
as Borrower can foresee, might materially and adversely affect, the
Property or the business, operations or condition (financial or otherwise)
of Borrower or any Borrower Party.
Section 8.15Flood Zone. No portion of the improvements
comprising the Property is located in an area identified by the Secretary
of Housing and Urban Development or any successor thereto as an area having
special flood hazards pursuant to the National Flood Insurance Act of 1968,
the Flood Disaster Protection Act of 1973 or the National Flood Insurance
Act of 1994, as amended, or any successor law, or, if located within any
such area, Borrower has obtained and will maintain the insurance prescribed
in Section 5.1 hereof.
Section 8.16Federal Reserve Regulations. No part of the
proceeds of the Loan will be used for the purpose of purchasing or
acquiring any "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System or for any other purpose
which would be inconsistent with such Regulation U or any other Regulations
of such Board of Governors, or for any purposes prohibited by Legal
Requirements or by the terms and conditions of this Agreement or the other
Loan Documents.
Section 8.17Not a Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
Section 8.18Separate Lots. The Property is comprised of one
(1) or more parcels which constitutes a separate tax lot and does not
constitute a portion of any other tax lot not a part of the Property.
Section 8.19No Prior Assignment. There are no prior
assignments of the Leases, Operating Lease or any portion of the Rents or
Operating Lease Rent due and payable or to become due and payable which are
presently outstanding.
Section 8.20Insurance. Borrower has obtained and has delivered
to Lender Accord Certificates reflecting the insurance coverages, amounts
and other requirements set forth in this Agreement. Except as expressly
provided on Schedule IV hereto, no material claims have been made under any
such Policy, and no Person, including Borrower, has done, by act or
omission, anything which would materially impair the coverage of any such
policy.
Section 8.21Use of the Property. The Property is used
exclusively as a full service, premium brand-name hotel and other
appurtenant and related uses including, but not limited to, restaurants and
lounges.
<PAGE>
Section 8.22Certificate of Occupancy; Licenses. To the best of
Borrower's knowledge, all certifications, permits, licenses and approvals,
including without limitation, certificates of completion and occupancy
permits and any applicable liquor license required for the legal use,
occupancy and operation of the Property as a full service hotel
(collectively, the "Licenses"), have been obtained and are in full force
and effect. The Borrower shall keep and maintain, or cause to be kept and
maintained, all licenses necessary for the operation of the Property as a
full service hotel. The use being made of the Property is in conformity
with the certificate of occupancy issued for the Property.
Section 8.23Physical Condition. Except as expressly disclosed
in the Property Condition Report, to the best of Borrower's knowledge, the
Property, including, without limitation, all buildings, improvements,
parking facilities, sidewalks, storm drainage systems, roofs, plumbing
systems, HVAC systems, fire protection systems, electrical systems,
equipment, elevators, exterior sidings and doors, landscaping, irrigation
systems and all structural components, are in good condition, order and
repair in all material respects; there exists no structural or other
material defects or damages in the Property, whether latent or otherwise,
and Borrower has not received notice from any insurance company or bonding
company of any defects or inadequacies in the Property, or any part
thereof, which would adversely affect the insurability of the same or cause
the imposition of extraordinary premiums or charges thereon or of any
termination or threatened termination of any policy of insurance or bond.
Section 8.24Boundaries. All of the improvements which were
included in determining the appraised value of the Property lie wholly
within the boundaries and building restriction lines of the Property, and
no improvements on adjoining properties encroach upon the Property, and no
easements or other encumbrances upon the Property encroach upon any of the
improvements, so as to affect the value or marketability of the Property
except those which are insured against by title insurance.
Section 8.25Intentionally Deleted.
Section 8.26Intentionally Deleted.
Section 8.27Filing and Recording Taxes. All transfer taxes,
deed stamps, intangible taxes or other amounts in the nature of transfer
taxes required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the transfer of the Property to
Borrower have been paid. To the best of Borrower's knowledge, all
mortgage, mortgage recording, stamp, intangible or other similar tax
required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement of any of the
Loan Documents, including, without limitation, the Mortgage encumbering the
Property have been paid, and, under current Legal Requirements, the
Mortgage encumbering the Property is enforceable in accordance with their
respective terms by Lender (or any subsequent holder thereof).
Section 8.28Single Purpose Entity/Separateness.
(a) Borrower hereby represents and warrants, and covenants
and agrees that Borrower is, shall be and shall continue to be a Special
Purpose Bankruptcy Remote Entity. A "Special Purpose Bankruptcy Remote
Entity" means a corporation, limited partnership or limited liability
company which at all times on and after the date hereof:
<PAGE>
(i) is organized solely for the purpose of (A) acquiring,
developing, owning, holding, selling, leasing, transferring, exchanging,
managing and operating the Property and Additional Property, entering into
the Loan Agreement with the Lender, refinancing the Property in connection
with a permitted repayment of the Loan and transacting any and all lawful
business that is incident, necessary and appropriate to accomplish the
foregoing; or (B) acting as a general partner of the limited partnership
that owns the Property or acting as a member of the limited liability
company that owns the Property, as applicable;
(ii) has not engaged and will not engage in any business
unrelated to (A) the acquisition, development, ownership, management or
operation of the Property and Additional Property, or (B) acting as the
general partner of the limited partnership that owns the Property or acting
as a member of the limited liability company that owns the Property, as
applicable;
(iii) does not have and will not have any assets other than (A)
those related to the Property and Additional Property or (B) its
partnership interest in the limited partnership that owns the Property that
acts as the general partner thereof or its member interest in the limited
liability company that owns the Property that acts as a member thereof, as
applicable;
(iv) has not engaged, sought or consented to and will not
engage in, seek or consent to (A) any dissolution, winding up, liquidation,
consolidation, merger, sale of all or substantially all of its assets,
transfer of partnership or membership interests (if such entity is a
general partner in a limited partnership or a member in a limited liability
company) or (B) any amendment of its limited partnership agreement,
articles of incorporation, articles of organization, certificate of
formation or operating agreement (as applicable) with respect to the
matters set forth in this Section;
(v) if such entity is a limited partnership, has, as its only
general partners, Special Purpose Bankruptcy Remote Entities that are
corporations, limited partnerships or limited liability companies (with
more than one member);
(vi) if such entity is a corporation, has at least one
Independent Director, and has not caused or allowed and will not cause or
allow the board of directors of such entity to take any action requiring
the unanimous affirmative vote of 100% of the members of its board of
directors unless an Independent Director shall have participated in such
vote;
(vii)if such entity is a limited liability company, has
at least one member that is a Special Purpose Bankruptcy Remote Entity that
is a corporation that has at least one Independent Director and that owns
at least one percent (1%) of the equity of the limited liability company;
(viii) if such entity is (a) a limited partnership,
has a limited partnership agreement, (b) a limited liability company, has
articles of organization, a certificate of formation and/or an operating
agreement, as applicable, or (c) a corporation, has a certificate of
incorporation or articles that, in each case, provides that such entity
will not: (1) dissolve, merge, liquidate, consolidate; (2) sell all or
substantially all of its assets or the assets of Borrower; (3) engage in
any other business activity, or amend its organizational documents with
respect to the matters set forth in this Section without the consent of the
Lender, which consent (A) shall not be unreasonably withheld or delayed and
<PAGE>
(B) may be conditioned upon the receipt by Lender of a non-
consolidation opinion reasonably satisfactory to Lender and
confirmation from the Rating Agency that such activity or amendment will
not result in a downgrade, qualification or withdrawal of the then current
ratings assigned to the Securities issued pursuant to a Securitization or
(4) without the affirmative vote of an Independent Director and of all
other directors of the corporation that is the general partner or managing
or co-managing member of such entity, file, a bankruptcy or insolvency
petition or otherwise institute insolvency proceedings with respect to
itself or to any other entity in which it has a direct or indirect legal or
beneficial ownership interest;
(ix) if such entity is a limited partnership or limited
liability company that is the general partner of a limited partnership or
the member of a limited liability company that is the Special Purpose
Bankruptcy Remote Entity, has a corporation that owns at least one percent
(1%) of the equity of such entity as its general partner or managing
member, as applicable, that is a Special Purpose Bankruptcy Remote Entity;
(x) is and will remain solvent and pay its debts and
liability (including, as applicable, shared personnel and overhead
expenses) from its assets as the same shall become due, and is maintaining
and will maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations;
(xi) to the best of Borrower's knowledge, has not failed and
will not fail to correct any known misunderstanding regarding the separate
identity of such entity;
(xii) has maintained and will maintain its accounts, books and
records separate from any other Person and will file its own tax returns,
except to the extent that it is required to file consolidated tax returns
by law;
(xiii) has maintained and will maintain its own records, books,
resolutions and agreements;
(xiv) has not commingled and will not commingle its funds or
assets with those of any other Person and, has not participated and will
not participate in any cash management system with any other Person;
(xv) has held and will hold its assets in its own name;
(xvi) has conducted and will conduct its business in its name
or in a name franchised or licensed to it by an entity other than an
Affiliate of Borrower, except for services rendered under a business
management services agreement with an Affiliate that complies with the
terms contained in Section 8.29 herein, so long as the manager, or
equivalent thereof, under such business management services agreement holds
itself out as an agent of the Borrower;
(xvii) has maintained and will maintain its financial
statements, accounting records and other entity documents separate from any
other Person and has not permitted and will not permit its assets to be
listed as assets on the financial statement of any other entity except as
required by generally accepted accounting principles; provided, however,
that any such consolidated financial statement shall contain a note
indicating that its separate assets and liabilities are neither available
to pay the debts of the consolidated entity nor constitute obligations of
the consolidated entity;
<PAGE>
(xviii) has paid and will pay its own liabilities and
expenses, including the salaries of its own employees, out of its own funds
and assets, and has maintained and will maintain a sufficient number of
employees in light of its contemplated business operations;
(xix) has observed and will observe all partnership, corporate
or limited liability company formalities, as applicable;
(xx) has and will have no Indebtedness other than (i) the Loan
and the Additional Loan (ii) liabilities incurred in the ordinary course of
business relating to the ownership and operation of the Property which is
outstanding for not more than sixty (60) days with trade creditors, in the
aggregate provided such liabilities are not evidenced by a note and are
paid when due, and (iii) liabilities incurred in the financing or equipment
and other personal property used exclusively at the Property or the
Additional Properties, secured solely by such equipment or personal
property being financed, not to exceed at any one time two percent (2%) of
the Release Amount for the Property;
(xxi) has not and will not assume or guarantee or become
obligated for the debts of any other Person or hold out its credit as being
available to satisfy the obligations of any other Person except as
permitted pursuant to this Agreement;
(xxii) has not and will not acquire obligations or securities of
its partners, members or shareholders or any other Affiliate;
(xxiii) has allocated and will allocate fairly and
reasonably any overhead expenses that are shared with any Affiliate,
including, but not limited to, paying for shared office space and services
performed by any employee of an affiliate;
(xxiv) maintains and uses and will maintain and use separate
stationery, invoices and checks bearing its name. The stationary,
invoices, and checks utilized by the Special Purpose Bankruptcy Remote
Entity or utilized to collect its funds or pay its expenses shall bear its
own name and shall not bear the name of any other entity unless such entity
is clearly designated as being the Special Purpose Bankruptcy Remote
Entity's agent;
(xxv) has not pledged and will not pledge its assets for the
benefit of any other Person;
(xxvi) has held itself out and identified itself and will hold
itself out and identify itself as a separate and distinct entity under its
own name;
(xxvii) has maintained and will maintain its assets in such
a manner that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any other Person;
(xxviii) has not made and will not make loans to any Person
or hold evidence of indebtedness issued by any other person or entity
(other than cash and investment-grade securities issued by an entity that
is not an Affiliate of or subject to common ownership with such entity);
(xxix) has not identified and will not identify its partners,
members or shareholders, or any Affiliate of any of them, as a division or
part of it, and has not identified itself and shall not identify itself as
a division of any other Person;
<PAGE>
(xxx) has not entered into or been a party to, and will not
enter into or be a party to, any transaction with its partners, members,
shareholders or Affiliates except (A) in the ordinary course of its
business and on terms which are intrinsically fair, commercially reasonable
and are no less favorable to it than would be obtained in a comparable
arm's-length transaction with an unrelated third party and (B) in
connection with the Loan Agreement;
(xxxi) has not and will not have any obligation to, and will
not, indemnify its partners, officers, directors or members, as the case
may be, or has such an obligation that is fully subordinated to the Debt
and will not constitute a claim against it in the event that cash flow in
excess of the amount required to pay the Debt is insufficient to pay such
obligation;
(xxxii) if such entity is a corporation, it is required to
consider the interests of its creditors in connection with all corporate
actions;
(xxxiii) does not and will not have any of its obligations
guaranteed by any Affiliate except as contemplated herein; and
(xxxiv) has complied and will comply with all of the terms
and provisions contained in its organizational documents. The statement of
facts contained in its organizational documents are true and correct and
will remain true and correct.
(b) The representations and warranties set forth in Section
8.28(a) shall survive for so long as any amount remains payable to Lender
under this Agreement or any other Loan Document.
Section 8.29Management Agreement.
(a) Borrower shall not (i) and shall not permit (if within
its powers under the Operating Lease) Operating Lessee to, enter into any
agreement relating to the management or operation of the Property with
Manager or any other party without the express written consent of Lender,
which consent shall not be unreasonably withheld, nor (ii) grant any form
of non-disturbance to any property manager engaged by the Operating Lessee
for the management or the operation of the Property without the express
written consent of Lender, which consent (A) shall not be unreasonably
withheld or delayed, and (B) except with respect to a new manager or the
grant of non-disturbance, shall be deemed granted in the event that Lender
does not respond within fifteen (15) days after receiving a request for
such consent together with all supporting materials reasonably requested by
Lender; provided, however, with respect to a new manager, or the grant of
non-disturbance, such consent may be conditioned upon Borrower delivering
evidence in writing from the applicable Rating Agencies to the effect that
such new manager and management agreement or non-disturbance will not
result in a downgrade, withdrawal or qualification of the respective
ratings then in effect for any Securities issued in connection with a
Securitization. At the request of Lender, Borrower shall, or shall use
commercially reasonable efforts to cause Operating Lessee, to deliver to
Lender copies of such information that Borrower, or Operating Lessee, as
applicable, is entitled to receive under the management agreement,
including, without limitation, any financial reporting.
(b) Borrower, upon the request of Lender (and with respect to
the Operating Lease in effect as of the date hereof, to the extent that
Borrower is empowered to do so under such Operating Lease), shall terminate
any Manager designated by Lender, without penalty or fee, if at any time
during the Loan (i) such Manager shall become insolvent or a debtor in any
<PAGE>
bankruptcy or insolvency proceeding, (ii) there is continuing an Event of
Default, or (iii) the Anticipated Payment Date has occurred and the Loan
has not been repaid. The Management Agreement entered into by Borrower
shall provide that such Manager may be terminated, without penalty or fee,
upon the occurrence of any of the foregoing. At such time as the Manager
may be removed, a replacement manager acceptable to Lender and the
applicable Rating Agencies in their sole discretion shall assume management
of the Properties and shall receive a property management fee not to exceed
then current market rates.
Section 8.30Operating Leases.
(a) The Operating Lease, pursuant to which the Operating
Lessee operates the Property as a hotel, is in full force and effect and
there is no material default, breach or violation existing thereunder by
Borrower or to the best of Borrower's knowledge, any other party thereto
and no event has occurred (other than payments due but not yet delinquent)
that, with the passage of time or the giving of notice, or both, would
constitute a default, breach or violation by any party thereunder. The
Operating Lease Rent, and the terms and provisions of the Operating Lease,
are subordinate to this Agreement and the Mortgage. Subject to the terms
of Section 10.14 hereof, any new Operating Lease or Operating Lessee shall
be approved or disapproved by Lender in its reasonable discretion within
fifteen (15) Business Days of Lender's receipt thereof together with all
supporting materials reasonably requested by Lender in order to make such
determination, and with respect to a new Operating Lease or Operating
Lessee, such consent may be conditioned upon Borrower delivering evidence
in writing from the applicable Rating Agencies to the effect that such new
Operating Lease and/or Operating Lessee will not result in a downgrade,
withdrawal or qualification of the respective ratings then in effect for
any Securities issued in connection with a Securitization. Borrower shall
send any request for Lender's approval of a new Operating Lease in an
envelope labeled "PRIORITY" and shall state at the top of the first page in
bold lettering "LENDER'S RESPONSE IS REQUIRED WITHIN TEN BUSINESS DAYS OF
RECEIPT OF THIS REQUEST PURSUANT TO THE TERMS OF A LOAN AGREEMENT BETWEEN
THE UNDERSIGNED AND LENDER." If at any time Lender consents to the
appointment of a new Operating Lessee, such new Operating Lessee and
Borrower shall, as a condition of Lender's consent, execute a subordination
agreement reasonably satisfactory to Lender in form and substance. In the
event that Lender approves a new operating lease with a Person other than
Operating Lessee, on substantially the same terms (or terms more favorable
to Borrower) as the existing Operating Lease, then Lender hereby agrees to
enter into a subordination agreement with such person in form and substance
substantially similar to the Subordination Agreement.
(b) Neither the execution and delivery of the Loan Documents,
Borrower's performance thereunder, nor the exercise of any remedies by
Lender, will adversely affect Borrower's rights under the Operating Lease
or any of the Licenses.
Section 8.31Investment Company Act. The Borrower is not (a) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (b) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within
the mean of the Public Utility Holding Company Act of 1935, as amended; or
(c) subject to any other federal or state law or regulation which purports
to restrict or regulate its ability to borrow money.
Section 8.32Leases. Except as expressly disclosed in Schedule
III attached hereto, Borrower is not a party, either directly or as a
successor or assignee, to any Leases other than the Operating Lease.
<PAGE>
Section 8.33SPE Compliance. (i) All of the assumptions made in
that certain substantive non-consolidation opinion letter dated the date
hereof, delivered by Borrower's counsel in connection with the Loan (the
"Insolvency Opinion"), including, but not limited to, any exhibits attached
thereto, are true and correct in all respects and any assumptions made in
any subsequent non-consolidation opinion delivered in connection with the
Loan Documents (an "Additional Insolvency Opinion"), including, but not
limited to, any exhibits attached thereto, will have been and shall be true
and correct in all respects. Borrower has complied and will comply with
all of the assumptions made with respect to it in the Insolvency Opinion.
Borrower will have complied and will comply with all of the assumptions
made with respect to it in any Additional Insolvency Opinion. Each entity
other than the Borrower with respect to which an assumption is made in the
Insolvency Opinion has complied and will comply with all of the assumptions
made with respect to it in the Insolvency Opinion. Each entity other than
Borrower with respect to which an assumption shall be made in any
Additional Insolvency Opinion will have complied and will comply with all
of the assumptions made with respect to it in any Additional Insolvency
Opinion and (ii) all the representations and warranties set forth in
Section 8.28 hereof are true and correct.
Section 8.34Intentionally Deleted.
Section 8.35Condominium.
(a) Borrower hereby represents and warrants to Lender that
the Condominium Documents are in full compliance with all applicable local,
state and federal laws, rules and regulations which effect the
establishment and maintenance of condominiums in the State of Texas
(collectively, the "Condominium Law").
(b) Borrower hereby covenants and agrees that:
(i) it will not, without the Lender's prior written consent (not to
be unreasonably withheld, delayed or conditioned), amend, modify or
supplement, or consent to or suffer the amendment, modification or
supplementation of any of the Condominium Documents;
(ii) it will pay, or cause to be paid, (subject to contest rights
herein and therein exercised in accordance with applicable law) all
assessments for common charges and expenses made against those condominium
units then owned by the Borrower pursuant to the Condominium Documents as
the same shall become due and payable;
(iii) it will comply in all material respects with all of the terms,
covenants and conditions on the Borrower's part to be complied with,
pursuant to the Condominium Documents and any rules and regulations that
may be adopted for the Condominium, as the same shall be in force and
effect from time to time;
(iv) it will take all actions as may be reasonably necessary from
time to time to preserve and maintain the Condominium in accordance with
the Condominium Law;
(v) it will not, without the prior written consent of Lender (not
to be unreasonably withheld or delayed), take (and hereby assigns to Lender
any right it may have to take) any action to terminate the Condominium,
withdraw the Condominium from the Condominium Law, or cause a partition of
the Condominium;
<PAGE>
(vi) it shall be an Event of Default if (A) any provision of the
Condominium Documents or any section, sentence, clause, phrase or word or
the application thereof in any circumstance is held invalid and such
invalidity shall materially and adversely affect the lien of the Mortgage
or the Lender's rights under this Agreement or any other Loan Documents, or
(B) except in conformance with subsection (v) above, the Condominium shall
become subject to any action for partition by any condominium unit owner
and said action has been commenced and not dismissed within thirty (30)
days after commencement thereof, or (C) except in conformance with
subsection (v) above, the Condominium is withdrawn from the condominium
regime established under the Condominium Law;
(vii) it will not, without the Lender's prior written consent
exercise any right it may have to vote for, (A) any additions or
improvements to the common elements of the Condominium, except as such
additions or improvements may be required by law, (B) any borrowing on
behalf of the Condominium or (C) the expenditure of any insurance proceeds
or condemnation awards for the repair or restoration of the Improvements;
provided, that, the consent required herein (1) shall not be unreasonably
conditioned, withheld or delayed, and (2) shall be deemed granted in the
event that Lender does not respond within twenty (20) days after receiving
a request therefor together with all supporting materials reasonably
requested by Lender;
(viii) it will cause the association of the Condominium to
maintain insurance on the common elements of the Condominium in accordance
with the Condominium Documents; and
(ix) it will, in accordance with Borrower's rights under the
Condominium Documents, enforce the Management Agreement (as defined in the
Condominium Documents), if any.
(c) The provisions of Sections 5.1(g), 5.2 and 5.3 hereof
shall apply to the entire Property, notwithstanding the submission of the
Land and Improvements to the Condominium Law. Without limiting the
generality of the foregoing, Borrower, for and on behalf of itself and its
direct and indirect successors and assigns as owner(s) of condominium units
in the Condominium or any of them, (i) irrevocably waives, to the extent
permitted by law, any applicable law which grants to the trustees of the
Condominium and/or the owners of the condominium units rights in the event
of a casualty or a condemnation which are inconsistent with the provisions
of Sections 5.1(g), 5.2 and 5.3 hereof and (ii) expressly agrees to the
application of the insurance proceeds and condemnation awards in accordance
with Section 5.3 hereof.
Section 8.36Intentionally Deleted.
<PAGE>
ARTICLE IX
FINANCIAL REPORTING
Section 9.1 Financial Statements.
(a) Obligations of Borrower. Borrower will keep and maintain
or will cause to be kept and maintained, in accordance with generally
accepted accounting principles and USAH proper and accurate books, records
and accounts reflecting all of the financial affairs of Borrower and
Operating Lessee, all items of income and expense in connection with the
operation on an individual basis of the Property. Lender shall have the
right from time to time at all times during normal business hours upon
reasonable prior written notice to Borrower, and as permitted under the
Operating Lease to examine such books, records and accounts at the office
of Borrower, Operating Lessee or other Person maintaining such books,
records and accounts and, at Lender's cost and expense, to make such copies
or extracts thereof as Lender shall desire. After the occurrence of an
Event of Default, Borrower shall pay any costs and expenses incurred by
Lender to examine Borrower's accounting records with respect to the
Property, as Lender shall determine to be reasonably necessary or
appropriate in the protection of Lender's interest.
(b) Monthly Reports. Within ten (10) days of receipt, for so
long as the Operating Lease shall remain in effect, Borrower will deliver
to Lender the monthly reports furnished to Borrower by the Operating Lessee
pursuant to the terms of the Operating Lease in a form substantially
similar to the form attached hereto as Exhibit B. In the event that the
Operating Lease is no longer in effect, within forty-five (45) days after
the end of each calendar month, Borrower shall furnish to Lender a monthly
report in a form substantially similar to the form attached hereto as
Exhibit B.
(c) Quarterly Reports. Within sixty (60) days after the end
of each calendar quarter, Borrower shall furnish or cause Operating Lessee
to furnish, to Lender a detailed operating statement for the Borrower
(showing quarterly activity and year-to-date) containing a statement of
income and cash flow together with a balance sheet of Borrower for the
calendar quarter just ended. Borrower's quarterly statements shall be
accompanied by (i) a comparison of the budgeted income and expenses and the
actual income and expenses for the prior calendar quarter, and (ii) a
certificate executed by an officer of Borrower or the general partner of
Borrower stating that each such quarterly statement presents fairly the
financial condition and the results of operations of the Borrower and has
been prepared in accordance with general accepted accounting principles.
(d) Annual Reports. Within one-hundred twenty (120) days
after the end of each calendar year, Borrower will furnish to Lender a
complete copy of Borrower's and Operating Lessee's (as required pursuant to
the terms of the Operating Lease) annual financial statements audited by a
"big five" accounting firm or other independent certified public accountant
acceptable to Lender in accordance with generally accepted accounting
principles for such calendar year which financial statements shall contain
a balance sheet and a detailed operating statement stating net cash flow.
Borrower's annual financial statements shall be accompanied by (i) a
certificate executed by an officer of Borrower or the general partner of
Borrower stating that each such annual financial statement presents fairly
the financial condition and the results of operations of the Borrower and
the Property and has been prepared in accordance with general accepted
accounting principles, and (ii) an unqualified opinion of a "big five"
accounting firm or other independent certified public accountant reasonably
acceptable to Lender.
<PAGE>
(e) Certification; Supporting Documentation. Each such
financial statement shall be in scope and detail reasonably satisfactory to
Lender and certified by an officer of Borrower with sufficient knowledge
thereof; provided, however, that such certification shall be qualified to
the best of such representative's knowledge in the event that such
statement was prepared by the Operating Lessee pursuant to the terms of the
Operating Lease.
(f) Additional Reports. Borrower shall deliver to Lender as
soon as reasonably available but in no event later than thirty (30) days
after such items become available to Borrower in final form:
(i) copies of any final engineering or environmental reports
prepared for Borrower or the Operating Lessee with respect to the Property;
(ii) a copy of any notice received by Borrower from any
environmental authority having jurisdiction over the Property with respect
to a condition existing or alleged to exist or emanate from or at the
Property;
(iii) copies of any financial statements and reports required
to be delivered to Borrower by the Operating Lessee pursuant to the
Operating Lease.
Section 9.2 Accounting Principles. All financial statements
shall be prepared in accordance with generally accepted accounting
principles in the United States of America as in effect on the date so
indicated and consistently applied and the USAH (or such other accounting
basis reasonably acceptable for Lender).
Section 9.3 Other Information; Access. Borrower shall deliver
to Lender such additional information regarding Borrower, its subsidiaries,
its business, any Borrower Party, and the Property within 30 days after
Lender's reasonable request therefor. Borrower shall permit Lender to
examine such records, books and papers of Borrower which reflect upon its
financial condition and the income and expenses of the Property.
Section 9.4 Format of Delivery. Any reports, statements or
other information required to be delivered under this Agreement shall be
delivered in paper form.
ARTICLE X
COVENANTS
Borrower covenants and agrees with Lender as follows:
Section 10.1Due on Sale and Encumbrance; Transfers of
Interests. Subject to Section 3.9 of the Mortgage, without the prior
written consent of Lender, neither Borrower nor any other Person having an
ownership or beneficial interest in Borrower shall sell, transfer, convey,
mortgage, pledge, or assign any interest in the Property or any part
thereof or further encumber, alienate, grant a Lien or grant any other
interest in any of the Property or any part thereof, whether voluntarily or
involuntarily, in violation of the covenants and conditions set forth in
the Mortgage.
Section 10.2Taxes; Utility Charges. Borrower shall pay before
any fine, penalty, interest or cost may be added thereto, and shall not
enter into any agreement to defer, any real estate taxes and assessments,
franchise taxes and charges, and other governmental charges (the "Taxes")
that may become a Lien upon the Property or become payable during the term
of the Loan; provided, however, Borrower may contest the validity of Taxes
<PAGE>
so long as (a) Borrower notifies Lender that it intends to contest such
Taxes, (b) Borrower provides Lender with an indemnity, bond or other
security reasonably satisfactory to Lender assuring the discharge of
Borrower's obligations for such Taxes, including interest and penalties, to
the extent that the amount in question (together with all interest,
penalties and fees to accrue thereon) plus the next installment of Taxes
(then or subsequently to be paid) exceeds the amounts escrowed with Lender
and attributable to the payment of Taxes for the Property pursuant to
Section 5.4 hereof, (c) Borrower is diligently contesting the same by
appropriate legal proceedings in good faith and at its own expense and
concludes such contest prior to the tenth (10th) day preceding the earlier
to occur of the Maturity Date or the date on which the Property is
scheduled to be sold for non-payment, (d) Borrower promptly upon final
determination thereof pay the amount of any such Taxes, together with all
costs, interest and penalties which may be payable in connection therewith,
and (e) notwithstanding the foregoing, Borrower shall immediately upon
request of Lender pay any such Taxes notwithstanding such contest if, in
the reasonable opinion of Lender, the Property or any part thereof or
interest therein may be in danger of being sold, forfeited, foreclosed,
terminated, cancelled or lost. Lender may pay over any cash deposit or part
thereof to the claimant entitled thereto at any time when, in the judgment
of Lender, the entitlement of such claimant is established. Borrower's
compliance with Section 5.4 of this Agreement relating to impounds for
Taxes shall, with respect to payment of such Taxes, be deemed compliance
with this Section 10.2. Borrower shall not suffer or permit the joint
assessment of the Property with any other real property constituting a
separate tax lot or with any other real or personal property. Borrower
shall promptly pay for all utility services provided to the Property.
Section 10.3Operating Lease. The Borrower shall hold and
maintain, or cause Operating Lessee to hold and maintain, all necessary
licenses, certifications and permits required by law. Borrower shall fully
perform all of its covenants, agreements and obligations under the
Operating Lease.
Section 10.4Operation; Maintenance; Inspection. Borrower shall
observe and comply, or cause Operating Lessee to observe and comply, with
all legal requirements applicable to the ownership, use and operation of
the Property. Borrower shall maintain, or cause Operating Lessee to
maintain, the Property in good condition and promptly repair any damage or
casualty. Borrower shall permit Lender and its agents, representatives and
employees, upon reasonable prior notice to Borrower, to inspect the
Property and conduct such environmental and engineering studies as Lender
may require, provided such inspections and studies do not materially
interfere with the use and operation of the Property or violate the terms
and conditions of the Operating Lease.
Section 10.5Taxes on Security. Borrower shall pay all taxes,
charges, filing, registration and recording fees, excises and levies
payable with respect to the Note or the Liens created or secured by the
Loan Documents, other than income, franchise and doing business taxes
imposed on Lender. If there shall be enacted any law (a) deducting the
Loan from the value of the Property for the purpose of taxation, (b)
affecting any Lien on the Property, or (c) changing existing laws of
taxation of mortgages, deeds of trust, security deeds, or debts secured by
real property, or changing the manner of collecting any such taxes,
Borrower shall promptly pay to Lender, on demand, all taxes, costs and
charges for which Lender is or may be liable as a result thereof; however,
if such payment would be prohibited by law or would render the Loan
usurious, then instead of collecting such payment, Lender may declare all
amounts owing under the Loan Documents to be due and payable within ninety
(90) days after demand by Lender.
<PAGE>
Section 10.6Legal Existence; Name, Etc. Borrower and each SPC
Party shall preserve and keep in full force and effect its entity status,
franchises, rights and privileges under the laws of the state of its
formation, and all qualifications, licenses and permits applicable to the
ownership, use and operation of the Property. Except as permitted by the
Loan Documents, neither Borrower nor any general partner or managing member
of Borrower shall wind up, liquidate, dissolve, reorganize, merge, or
consolidate with or into, or convey, sell, assign, transfer, Lease, or
otherwise dispose of all or substantially all of its assets, or acquire all
or substantially all of the assets of the business of any Person, or permit
any subsidiary or Affiliate of Borrower to do so. Borrower shall not
change its name, identity, or organizational structure, or the location of
its chief executive office or principal place of business unless Borrower
(a) shall have obtained the prior written consent of Lender to such change,
and (b) shall have taken all actions reasonably necessary or reasonably
requested by Lender to file or amend any financing statement or
continuation statement to assure perfection and continuation of perfection
of security interests under the Loan Documents.
Section 10.7Further Assurances. Borrower shall promptly
(a) cure any defects in the execution and delivery of the Loan Documents,
and (b) execute and deliver, or cause to be executed and delivered, all
such other documents, agreements and instruments as Lender may reasonably
request to further evidence and more fully describe the collateral for the
Loan, to correct any omissions in the Loan Documents, to perfect, protect
or preserve any liens created under any of the Loan Documents, or to make
any recordings, file any notices, or obtain any consents, as may be
necessary or appropriate in connection therewith. Borrower grants Lender
an irrevocable power of attorney coupled with an interest for the purpose
of perfecting any and all rights available to Lender under the Loan
Documents, at law and in equity, including without limitation such rights
available to Lender pursuant to this Section 10.7; provided, however, that
Lender will not exercise such power of attorney until the expiration of
fifteen (15) days after Lender delivers to Borrower notice of Lender's
intention to exercise such power of attorney.
Section 10.8Estoppel Certificates.
(a) Borrower, within ten (10) days after request, shall
furnish to Lender a written statement, duly acknowledged, setting forth the
amount due on the Loan, the terms of payment of the Loan, the date to which
interest has been paid, whether any offsets or defenses exist against the
Loan and, if any are alleged to exist, the nature thereof in detail, and
such other matters as Lender reasonably may request.
(b) Lender, within ten (10) days after request, shall furnish
to Borrower a written statement, duly acknowledged, setting forth the
amount due on the Loan, the terms of payment on the Loan and the date to
which interest has been paid.
Section 10.9Notice of Certain Events. Borrower shall promptly
notify Lender of (a) any Event of Default, together with a detailed
statement of the steps being taken to cure such Event of Default; (b) any
notice of default received by Borrower under other obligations relating to
the Property and otherwise material to Borrower's business; and (c) any
threatened or pending legal, judicial or regulatory proceedings, including
any dispute between Borrower and any governmental authority, affecting
Borrower or the Property.
<PAGE>
Section 10.10Indemnification. Borrower shall protect, defend,
indemnify and save harmless Lender its shareholders, directors, officers,
employees and agents from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including without
limitation reasonable attorneys' fees and expenses), imposed upon or
incurred by or asserted against Lender (except for events caused by the
gross negligence of Lender and arising after the date that Lender takes
title and actual possession of the Property pursuant to a foreclosure or
deed-in-lieu thereof) by reason of (a) ownership of the Mortgage, the
Property or any interest therein or receipt of any rents; (b) any accident,
injury to or death of persons or loss of or damage to property occurring
in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or
ways; (c) any use, nonuse or condition in, on or about the Property or any
part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (d) performance of any labor or
services or the furnishing of any materials or other property in respect of
the Property or any part thereof; and (e) the failure of any Person to file
timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with this Agreement, or
to supply a copy thereof in a timely fashion to the recipient of the
proceeds of the transaction in connection with which this Agreement is
made. Any amounts payable to Lender by reason of the application of this
section shall become immediately due and payable and shall bear interest at
the Default Rate from the date loss or damage is sustained by Lender until
paid.
Section 10.11Payment for Labor and Materials. Borrower will
promptly pay when due all bills and costs for labor, materials, and
specifically fabricated materials incurred in connection with the Property
and never permit to exist beyond the due date thereof in respect of the
Property or any part thereof any lien or security interest, even though
inferior to the liens and the security interest hereof, and in any event
never permit to be created or exist in respect of the Property or any part
thereof any other or additional lien or security interest other than the
liens or security interests hereof, except for the Permitted Encumbrances;
provided, however, Borrower may contest the validity of such bills and
costs so long as (a) Borrower notifies Lender that it intends to contest
such bills and costs, (b) Borrower provides Lender with an indemnity, bond
or other security reasonably satisfactory to Lender assuring the discharge
of Borrower's obligations for such bills and costs, including interest and
penalties, to the extent that the amount in question exceeds amounts
already escrowed with Lender specifically for the related labor and/or
materials provided to Borrower and/or the Property and the payment of any
reasonably foreseeable related interest, costs or fees in connection
therewith, provided, that, in the event that the amount in question is less
than $50,000.00, such security shall take the form of an indemnity from the
Borrower and Joinder Party in form and substance reasonably acceptable to
Lender, (c) Borrower is diligently contesting the same by appropriate legal
proceedings in good faith and at its own expense and concludes such contest
prior to the tenth (10th) day preceding the earlier to occur of the
Anticipated Payment Date or the date on which the Property is scheduled to
be sold for non-payment, (d) Borrower promptly upon final determination
thereof pays the amount of any such bills and costs, together with all
costs, interest and penalties which may be payable in connection therewith;
and (e) notwithstanding the foregoing, Borrower shall immediately upon
request of Lender pay any such bills and costs notwithstanding such contest
if, in the reasonable opinion of Lender, the Property or any part thereof
or interest therein may be in danger of being sold, forfeited, foreclosed,
terminated, canceled or lost.
<PAGE>
Section 10.12Alterations. Borrower shall obtain Lender's prior
written consent to any alterations to any Improvements on the Property that
are reasonably likely to have a material adverse effect on Borrower's
financial condition, the use, operation or value of the Property or the Net
Operating Income with respect to the Property, other than alterations
performed in connection with the restoration of the Property after the
occurrence of a casualty in accordance with the terms and provisions of
this Agreement, provided, that, (a) Lender shall respond to Borrower's
request for consent to a proposed alteration within fifteen (15) days after
receiving such request together with all supporting materials reasonably
requested by Lender, and (b) such consent shall not be unreasonably
withheld conditioned or delayed. If the total unpaid amounts due and
payable with respect to alterations to the Improvements shall at any time
exceed $500,000 (the "Threshold Amount"), Borrower shall promptly deliver
to Lender as security for the payment of such amounts and as additional
security for Borrower's obligations under the Loan Documents any of the
following: (1) cash, (2) U.S. Obligations, (3) other securities having a
rating acceptable to Lender and that the applicable Rating Agencies have
confirmed in writing will not, in and of itself, result in a downgrade,
withdrawal or qualification of the initial, or, if higher, then current
ratings assigned in connection with any Securitization, or (4) a completion
bond or irrevocable letter of credit (payable on sight draft only) issued
by a financial institution having a rating by Standard & Poor's Ratings
Group of not less than A-1+ if the term of such bond or letter of credit is
no longer than three (3) months or, if such term is in excess of three (3)
months, issued by a financial institution having a rating that is
acceptable to Lender and that the applicable Rating Agencies have confirmed
in writing will not, in and of itself, result in a downgrade, withdrawal or
qualification of the initial, or, if higher, then current ratings assigned
in connection with any Securitization. Such security shall be in an amount
equal to the excess of the total unpaid amounts with respect to alterations
to the Improvements on the Property (other than such amounts to be paid or
reimbursed by tenants under the Leases) over the Threshold Amount and may
be reduced from time to time by the cost estimated by Lender to terminate
any of the alterations and restore the Property to the extent necessary to
prevent any material adverse effect on the use, operation or value of the
Property or the Net Operating Income with respect to the Property.
Section 10.13Handicapped Access.
(a) Borrower agrees that the Property shall at all times
materially comply to the extent applicable with the requirements of the
Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of
1988, all state and local laws and ordinances related to handicapped access
and all rules, regulations, and orders issued pursuant thereto including,
without limitation, the Americans with Disabilities Act Accessibility
Guidelines for Buildings and Facilities (collectively, "Access Laws").
(b) Notwithstanding any provisions set forth herein or in any
other document regarding Lender's approval of alterations of the Property,
Borrower shall not alter the Property in any manner which would increase
Borrower's responsibilities for compliance with the applicable Access Laws
without the prior written approval of Lender, which are not to be
unreasonably withheld, delayed or conditioned. The foregoing shall apply
to tenant improvements constructed by Borrower or by any of its tenants.
Lender may condition any such approval upon receipt of a certificate of
Access Law compliance from an architect, engineer, or other person
acceptable to Lender.
(c) Borrower agrees to give prompt notice to Lender of the
receipt by Borrower of any complaints related to violation of any Access
Laws and of the commencement of any proceedings or investigations which
relate to compliance with applicable Access Laws.
<PAGE>
Section 10.14Certain Hotel/Operating Lease Covenants. Borrower
further covenants and agrees with Lender as follows:
(a) Borrower shall cause the hotel located on the Property to
be operated pursuant to the Operating Lease and the Management Agreement.
(b) Borrower shall:
(i) to the extent that Borrower has the right or ability to
do so pursuant to any document or other agreement, not permit the
termination, extension or modification or entering into of any Operating
Lease or Management Agreement without Lender's prior written consent, which
consent shall not be unreasonably withheld or delayed;
(ii) notify Lender of any default under the Operating Lease or
Management Agreement of which it is aware within three (3) Business Days
after receiving notice of such default;
(iii) deliver to Lender a copy of each monthly financial
statement, final business plan, final capital expenditures plan, notice,
report (if any) and estimate (if any) received by it under the Operating
Lease or Management Agreement within three (3) Business Days after
receiving such items;
(iv) to the extent that Borrower has the right or ability to
do so pursuant to any document or other agreement, enforce, in a
commercially reasonable manner, the performance and observance of all of
the covenants and agreements required to be performed and/or observed by
the Operating Lessee under each Operating Lease and the Manager under each
Management Agreement within three (3) Business Days after becoming aware of
a violation of such covenants or agreements; and
(v) not change or alter, or permit the changing or altering
of, the brand-name hotel at the Property without Lender's prior written
consent, which consent shall not be unreasonably withheld or delayed.
(c) Notwithstanding anything herein to the contrary, Borrower
may, without the consent of Lender, renew or extend the Operating Lease
only with Operating Lessee on substantially the same terms (or terms more
favorable to Borrower) as the existing Operating Lease.
Section 10.15 Intentionally Deleted.
Section 10.16O & M Agreement. Borrower will maintain, or cause
to be maintained, in conformity with all applicable laws, rules and
regulations regarding any materials containing asbestos located at the
Property and will comply with the O&M Agreement.
ARTICLE XI
EVENTS OF DEFAULT
Each of the following shall constitute a default (each, an
"Event of Default") under the Loan:
Section 11.1 Payments. Borrower's failure to pay any
regularly scheduled installment of principal, interest or other amount due
under the Loan Documents within five (5) days of (and including) the day it
is due, or Borrower's failure to pay the Loan at the Maturity Date, whether
by acceleration or otherwise.
<PAGE>
Section 11.2Insurance. Borrower's failure to maintain
insurance as required under Section 5.1 of this Agreement.
Section 11.3Single Purpose Entity. If Borrower breaches any of
its covenants contained in Section 8.28 or 8.33 hereof.
Section 11.4Insolvency Opinion. If any of the assumptions
contained in the Insolvency Opinion, or any Additional Insolvency Opinion
is or shall become untrue in any material respect.
Section 11.5Taxes. If any of the Taxes are not paid when the
same are due and payable (subject to Borrower's right to contest Taxes
pursuant to Section 10.2 hereof).
Section 11.6Sale, Encumbrance, Etc. The sale, transfer,
conveyance, pledge, mortgage or assignment of any part or all of the
Property, or any interest therein, or of any interest in Borrower, in
violation of the Mortgage.
Section 11.7Representations and Warranties. Any representation
or warranty made in any Loan Document proves to be untrue in any material
respect when made or deemed made.
Section 11.8Additional Loan. Any Event of Default as defined
under the Additional Loan.
Section 11.9Involuntary Bankruptcy or Other Proceeding.
Commencement of an involuntary case or other proceeding against Borrower,
any Borrower Party or any other Person having an ownership or security
interest in the Property (each, a "Bankruptcy Party") which seeks
liquidation, reorganization or other relief with respect to it or its debts
or other liabilities under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeks the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any of its
property, and such involuntary case or other proceeding shall remain
undismissed or unstayed for a period of 90 days; or an order for relief
against a Bankruptcy Party shall be entered in any such case under the
Federal Bankruptcy Code.
Section 11.10Voluntary Petitions, Etc. Commencement by a
Bankruptcy Party of a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts or other liabilities under any bankruptcy, insolvency or other
similar law or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official for it or any of its property, or
consent by a Bankruptcy Party to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or the making by a Bankruptcy Party of a
general assignment for the benefit of creditors, or the failure by a
Bankruptcy Party, or the admission by a Bankruptcy Party in writing of its
inability, to pay its debts generally as they become due, or any action by
a Bankruptcy Party to authorize or effect any of the foregoing;
Section 11.11Covenants. Borrower's failure to perform or
observe any of the agreements and covenants contained in this Agreement or
in any of the other Loan Documents and not specified above in Sections 11.1
to 11.10, or below in Sections 11.12 to 11.15, and the continuance of such
failure for thirty (30) days after notice by Lender to Borrower; however,
subject to any shorter period for curing any failure by Borrower as
specified in any of the other Loan Documents, Borrower shall have an
additional sixty (60) days to cure such failure if (a) such failure does
not involve the failure to make payments on a monetary obligation; (b) such
failure cannot reasonably be cured within thirty (30) days; (c) Borrower is
diligently undertaking to cure such default; and (d) if reasonably
requested by Lender, Borrower has provided Lender with security reasonably
satisfactory to Lender against any interruption of payment or impairment of
collateral as a result of such continuing failure.
<PAGE>
Section 11.12Operating Lease.
(a) If there is a material default by Borrower under the
Operating Lease beyond any applicable notice and cure period; or (b) if the
Operating Lease is amended, modified or terminated in violation of Section
10.14 hereof.
Section 11.13Management Agreement.
(a) If there is a material default by the Borrower or the
Operating Lessee under the Management Agreement (i) which is not cured by
Borrower or (ii) which Borrower is not enforcing its rights under the
Operating Lease with respect thereto; or (b) if the Management Agreement is
amended, modified, terminated or entered into in violation of Section 8.29
hereof.
Section 11.14 Intentionally Deleted.
Section 11.15 Intentionally Deleted.
ARTICLE XII
REMEDIES
Section 12.1Remedies - Insolvency Events. Upon or during the
occurrence of any Event of Default described in Section 11.9 or 11.10, all
amounts due under the Loan Documents immediately shall become due and
payable, all without written notice and without presentment, demand,
protest, notice of protest or dishonor, notice of intent to accelerate the
maturity thereof, notice of acceleration of the maturity thereof, or any
other notice of default of any kind, all of which are hereby expressly
waived by Borrower.
Section 12.2Remedies - Other Events.
(a) Except as set forth in Section 12.1 above, while any
Event of Default exists, Lender may (i) declare the entire Loan to be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate the maturity thereof,
notice of acceleration of the maturity thereof, or other notice of default
of any kind, all of which are hereby expressly waived by Borrower, and (ii)
exercise all rights and remedies therefor under the Loan Documents and at
law or in equity.
(b) Subject to Section 13.1 hereof, with respect to Borrower
and the Property, nothing contained herein or in any other Loan Document
shall be construed as requiring Lender to resort to the Property for the
satisfaction of any of the Debt, and Lender may seek satisfaction out of
the Property or any part thereof, in its absolute discretion in respect of
the Debt. In addition, Lender shall have the right from time to time to
partially foreclose the Mortgage in any manner and for any amounts secured
by the Mortgage then due and payable as determined by Lender in its sole
discretion including, without limitation, the following circumstances: (i)
in the event Borrower defaults beyond any applicable grace period in the
payment of one or more scheduled payments of principal and interest, Lender
may foreclose the Mortgage to recover such delinquent payments, or (ii) in
the event Lender elects to accelerate less than the entire outstanding
principal balance of the Loan, Lender may foreclose the Mortgage to recover
so much of the principal balance of the Loan as Lender may accelerate and
such other sums secured by the Mortgage as Lender may elect.
Notwithstanding one or more partial foreclosures, the Property shall remain
subject to the Mortgage to secure payment of sums secured by the Mortgage
and not previously recovered.
<PAGE>
(c) Lender shall have the right from time to time to sever
the Note and the other Loan Documents into one or more separate notes,
mortgages and other security documents (the "Severed Loan Documents") in
such denominations as Lender shall determine in its sole discretion for
purposes of evidencing and enforcing its rights and remedies provided
hereunder. Borrower shall execute and deliver to Lender from time to time,
promptly after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the severance
described in the preceding sentence, all in form and substance reasonably
satisfactory to Lender. Borrower hereby absolutely and irrevocably
appoints Lender as its true and lawful attorney, coupled with an interest,
in its name and stead to make and execute all documents necessary or
desirable to effect the aforesaid severance, Borrower ratifying all that
its said attorney shall do by virtue thereof; provided, however, Lender
shall not make or execute any such documents under such power until three
(3) days after notice has been given to Borrower by Lender of Lender's
intent to exercise its rights under such power.
Section 12.3Lender's Right to Perform the Obligations. If
Borrower shall fail, refuse or neglect to make any payment or perform any
act required by the Loan Documents, then while any Event of Default exists,
and without notice to or demand upon Borrower and without waiving or
releasing any other right, remedy or recourse Lender may have because of
such Event of Default, Lender may (but shall not be obligated to) make such
payment or perform such act for the account of and at the expense of
Borrower, and shall have the right to enter upon the Property for such
purpose and to take all such action thereon and with respect to the
Property as it may deem necessary or appropriate. If Lender shall elect to
pay any sum due with reference to the Property, Lender may do so in
reliance on any bill, statement or assessment procured from the appropriate
governmental authority or other issuer thereof without inquiring into the
accuracy or validity thereof. Similarly, in making any payments to protect
the security intended to be created by the Loan Documents, Lender shall not
be bound to inquire into the validity of any apparent or threatened adverse
title, lien, encumbrance, claim or charge before making an advance for the
purpose of preventing or removing the same. Borrower shall indemnify
Lender for all losses, expenses, damages, claims and causes of action,
including reasonable attorneys' fees, incurred or accruing by reason of any
acts performed by Lender pursuant to the provisions of this Section 12.3;
provided, however, that Borrower shall not be liable under such
indemnification to the extent such losses, expenses, damages, claims and
causes of action result solely from Lender's gross negligence or willful
misconduct and arise after the point in time that Lender takes title and
actual possession of the Property. All sums paid by Lender pursuant to
this Section 12.3, and all other sums expended by Lender to which it shall
be entitled to be indemnified, together with interest thereon at the
Default Rate from the date of such payment or expenditure until paid, shall
constitute additions to the Loan, shall be secured by the Loan Documents
and shall be paid by Borrower to Lender upon demand.
Section 12.4Cross-Default; Cross-Collateralization; Waiver of
Marshalling of Assets.
(a) The Borrower acknowledges that Lender has made the Loan
and the Additional Loan to the Borrower upon the security of the collective
interest in the Property and the Additional Property of the Borrower, and
in reliance upon the aggregate of the Property and the Additional Property
taken together being of greater value as collateral security than the sum
of the Property and the Additional Property taken separately. The Borrower
agrees that the Loan is and will be cross-collateralized and cross-
defaulted with the Additional Loan so that (i) an Event of Default under
the Mortgage shall constitute an Event of Default with respect to the
mortgage executed in connection with the Additional Loan and an Event of
Default under any of such other mortgage executed in connection with the
Additional Loan shall be an Event of Default under the Mortgage; and (ii)
an Event of Default under the Note or this Loan Agreement shall constitute
an Event of Default under the Additional Loan and an Event of Default under
the Additional Loan shall constitute an Event of Default under the Note and
this Loan Agreement.
<PAGE>
(b) To the fullest extent permitted by law, Borrower, for
itself and its successors and assigns, waives all rights to a marshalling
of the assets of Borrower, Borrower's partners and others with interests in
Borrower, and of the Property, or to a sale in inverse order of alienation
in the event of foreclosure of the Mortgage, and agrees not to assert any
right under any laws pertaining to the marshalling of assets, the sale in
inverse order of alienation, homestead exemption, the administration of
estates of decedents, or any other matters whatsoever to defeat, reduce or
affect the right of Lender under the Loan Documents to a sale of the
Property for the collection of the Debt without any prior or different
resort for collection or of the right of Lender to the payment of the Debt
out of the net proceeds of the Property in preference to every other
claimant whatsoever.
ARTICLE XIII
LIMITATIONS ON LIABILITY
Section 13.1Limitation on Liability. Except as provided below,
none of Borrower, any partner of Borrower, any partner, member,
shareholder, director, officer, employee or agent of Borrower or of any
such partner, and any legal representative, heir, estate, successor or
assign of any of the foregoing, shall be personally liable for amounts due
under the Loan Documents. Borrower, but not any partner, member,
shareholder, director, officer, employee or agent of Borrower or any such
partner, shall be personally liable to Lender for any deficiency, loss or
damage suffered by Lender because of: (a) Borrower's commission of a
criminal act; (b) the failure to comply with provisions of the Loan
Documents prohibiting the sale, transfer or encumbrance of the Property,
any other collateral, or any direct or indirect ownership interest in
Borrower; (c) the misapplication by Borrower or any Borrower Party of any
funds derived from the Property, including security deposits, insurance
proceeds and condemnation awards; (d) the fraud or intentional
misrepresentation by Borrower or any Borrower Party now or hereafter made
in or in connection with the Loan Documents or the Loan including any
statements or certificates delivered under the Loan Documents;
(e) Borrower's collection of rents more than one month in advance (except
for bona fide security deposits under the Operating Lease) or entering into
or modifying Leases, or receipt of monies by Borrower or any Borrower Party
in connection with the modification of any Leases, in violation of this
Agreement or any of the other Loan Documents; (f) Borrower's failure to
apply proceeds of rents or any other payments in respect of the Leases and
other income of the Property or any other collateral to the costs of
maintenance and operation of the Property and to the payment of taxes, lien
claims, insurance premiums, Debt Service and other amounts due under the
Loan Documents; (g) Borrower's interference with Lender's exercise of
rights under the Assignment of Leases and Rents; (h) Borrower's failure to
maintain insurance as required by this Agreement or to pay any taxes or
assessments affecting the Property; (i) waste to the Property caused by the
intentional acts or omissions of Borrower, its agents, employees, or
contractors; (j) Borrower's obligations with respect to environmental
matters under Article 6; (k) Borrower's failure to pay for any loss,
liability or expense (including reasonable attorneys' fees) incurred by
Lender arising out of any claim or allegation made by Borrower, its
successors or assigns, or any creditor of Borrower, that this Agreement or
the transactions contemplated by the Loan Documents establishes a joint
venture, partnership or other similar arrangement between Borrower and
Lender; (l) any brokerage commission or finder's fees claimed in connection
with the transactions contemplated by the Loan Documents or (m) Borrower's
indemnification of Lender set forth in Section 14.2 hereafter.
<PAGE>
Notwithstanding anything to the contrary in this Agreement, the
Note or any of the Loan Documents, (i) Lender shall not be deemed to have
waived any right which Lender may have under Section 506(a), 506(b),
1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim
for the full amount of the Debt secured by the Mortgage or to require that
all collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Loan Documents, and (ii) the Debt shall be fully
recourse to Borrower, but not any partner, member, shareholder, director,
officer, employee or agent of Borrower or any such partner, in the event
that: (A) there is a default under Section 11.10 hereof; (B) Borrower fails
to obtain Lender's prior written consent to any subordinate financing or
other voluntary lien encumbering the Property in violation of the Loan
Documents; or (C) Borrower fails to obtain Lender's prior written consent
to any assignment, transfer, or conveyance of the Property or any interest
therein as required by the Loan Documents.
Section 13.2Limitation on Liability of Lender's Officers,
Employees, Etc. Any obligation or liability whatsoever of Lender which may
arise at any time under this Agreement or any other Loan Document shall be
satisfied, if at all, out of Lender's interest in the Property only. No
such obligation or liability shall be personally binding upon, nor shall
resort for the enforcement thereof be had to, the property of any of
Lender's shareholders, directors, officers, employees or agents, regardless
of whether such obligation or liability is in the nature of contract, tort
or otherwise.
ARTICLE XIV
SECURITIZATION
Section 14.1Securitization.
At the request of the holder of the Note and, to the extent not
already required to be provided by Borrower under this Agreement and to the
extent readily available to Borrower at no third-party cost, Borrower
shall, subject to the provisions of clause (b) hereof, use reasonable
efforts to satisfy the market standards to which the holder of the Note
customarily adheres or which may be reasonably required in the marketplace
or by the Rating Agencies in connection with the sale of the Note or
participation therein or the first successful securitization (such sale
and/or securitization, the "Securitization") of rated single or multi-class
securities (the "Securities") secured by or evidencing ownership interests
in the Note and the Mortgage, including, without limitation, to:
(a) (i) provide such financial and other information with respect to
the Property, the Borrower, the Operating Partnership, the Operating Lessee
and the Manager,
(ii) provide budgets relating to the Property, and
(iii) to, upon ten (10) days' prior written notice to Borrower,
perform or permit or cause to be performed or permitted such site
inspection, appraisals, market studies, environmental reviews and reports
(Phase I's and, if appropriate, Phase II's), engineering reports and other
due diligence investigations of the Property, as may be reasonably
requested by the holder of the Note or the Rating Agencies or as may be
necessary or appropriate in connection with the Securitization (the
"Securitization Information"), which items described in this subsection
(iii) shall be at the cost of Lender, together, if customary, with
appropriate verification and/or consents of the Securitization Information
through letters of auditors or opinions of counsel of independent attorneys
reasonably acceptable to the Lender and the Rating Agencies;
<PAGE>
(b) execute such amendments to the Loan Documents and
organizational documents as may be reasonably requested by the holder of
the Note or the Rating Agencies or otherwise to effect the Securitization;
provided, however, that the Borrower shall not be required to modify or
amend any Loan Document if such modification or amendment would (i) change
the interest rate, the stated maturity or the amortization of principal set
forth in the Note, (ii) modify or amend any other material economic term of
the Loan, or (iii) otherwise materially reduce Borrower's rights or
materially increase its obligations under the Loan Documents.
All reasonable third party costs and expenses incurred by
Lender in connection with Borrower's complying with requests made under
this Section 14.1, including, without limitation, costs incurred in
connection with the Securitization Information, shall be paid by the
Lender; provided, that, Borrower shall be responsible for all costs and
expenses incurred by Borrower in complying with such requests, including
without limitation (i) any costs and expenses incurred by Borrower in
compiling the Securitization Information (except as set forth in clause (a)
(iii) above) or financial statements, and (ii) Borrower's attorney's fees.
Section 14.2Securitization Indemnification.
(a) Borrower understands that certain of the Securitization
Information and the financial reports relating to the Property may be
included in disclosure documents in connection with the Securitization,
including, without limitation, a prospectus, prospectus supplement or
private placement memorandum (each, an "Offering Document") and may also be
included in filings with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Securities Act"), or the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or
provided or made available to investors or prospective investors in the
Securities, the Rating Agencies, and service providers relating to the
Securitization. In the event that the Offering Document is required to be
revised prior to the sale of all Securities, the Borrower will cooperate
with the holder of the Note in updating the Offering Document by providing
all current information reasonably necessary, but at no out-of-pocket cost
to Borrower, to keep the Offering Document accurate and complete in all
material respects.
(b) Borrower agrees to provide in connection with each of (i)
a preliminary and a private placement memorandum or (ii) a preliminary and
final prospectus or prospectus supplement, as applicable, upon receipt by
Borrower of a copy of such memorandum and/or prospectus, an indemnification
certificate (A) certifying that Borrower has carefully examined such
memorandum or prospectus, as applicable (such review being limited to those
sections of the memorandum or prospectus, as applicable, requested by
Lender in writing; provided, however, that, Borrower shall not be
responsible for any information supplied by third parties nor shall
Borrower be responsible for statistical or numerical information contained
therein) and the sections reviewed by Borrower do not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made, in the light of the circumstances under
which they were made, not misleading, (B) indemnifying Lender (and for
purposes of this Section 14.2, Lender hereunder shall include its officers
and directors), any affiliate of Lender that has filed or may file the
registration statement relating to the securitization (the "Registration
Statement"), each of its directors, each of its officers who have signed
the Registration Statement and each person or entity who controls the
affiliate within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, and Lender, each of its directors and each person
who controls Lender within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act (collectively, the "Underwriter Group")
for any losses, claims, damages or liabilities (the "Liabilities") to which
Lender, or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
<PAGE>
untrue statement of any material fact contained in such sections for which
Borrower is responsible or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated in
such sections or necessary in order to make the statements in such sections
for which Borrower is responsible or in light of the circumstances under
which they were made, not misleading and (C) agreeing to reimburse Lender
and the Underwriter Group for any legal or other expenses reasonably
incurred by Lender in connection with investigating or defending the
Liabilities; provided, however, that Borrower will be liable in any such
case under clauses (B) or (C) above only to the extent that any such loss
claim, damage or liability arises out of or is based upon any such untrue
statement or omission made therein in reliance upon and in conformity with
information furnished to Lender by or on behalf of Borrower in connection
with the preparation of the memorandum or prospectus or in connection with
the underwriting of the debt, in connection with financial statements of
Borrower, operating statements, environmental site assessment reports and
property condition reports with respect to the Property, and only if such
sections are not materially revised after Borrower's review of same. This
indemnity agreement will be in addition to any liability which Borrower may
otherwise have.
(c) In connection with filings under the Exchange Act,
Borrower agrees to indemnify (i) Lender, and the Underwriter Group for
Liabilities to which Lender, or the Underwriter Group may become subject
insofar as the Liabilities arise out of or are based upon the omission or
alleged omission to state in the Securitization Information or financial
reports relating to the Property a material fact required to be stated in
the Securitization Information or financial reports relating to the
Property in order to make the statements in the Securitization Information
or financial reports relating to the Property, in light of the
circumstances under which they were made not misleading and (ii) reimburse
Lender or the Underwriter Group for any legal or other expenses reasonably
incurred by Lender or the Underwriter Group in connection with defending or
investigating the Liabilities.
(d) Promptly after receipt by an indemnified party under this
Section 14.2 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 14.2, notify the indemnifying party
in writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from any
liability which the indemnifying party may have to any indemnified party
hereunder except to the extent that failure to notify causes prejudice to
the indemnifying party. In the event that any action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled, jointly with
any other indemnifying party, to participate therein and, to the extent
that it (or they) may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof with counsel reasonably satisfactory
to such indemnified party. After notice from the indemnifying party to
such indemnified party under this Section 14.2 the indemnifying party shall
be responsible for any reasonable legal or other reasonable expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there are any legal defenses available to it
and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. The indemnifying party shall
not be liable for the expenses of more than one separate counsel unless an
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or additional to those
available to another indemnified party.
<PAGE>
(e) In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in Section
14.2(b) or (c) is for any reason held to be unenforceable by an indemnified
party in respect of any losses, claims, damages or liabilities (or action
in respect thereof) referred to therein which would otherwise be
indemnifiable under Section 14.2(b) or (c), the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages or liabilities (or action in respect
thereof); provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, the following
factors shall be considered: (i) Lender's and Borrower's relative knowledge
and access to information concerning the matter with respect to which claim
was asserted; (ii) the opportunity to correct and prevent any statement or
omission; and (iii) any other equitable considerations appropriate in the
circumstances.
(f) The liabilities and obligations of both Borrower and
Lender under this Section 14.2 shall survive the termination of this
Agreement and the satisfaction and discharge of the Debt.
Section 14.3Servicer. At the option of Lender and at no cost
to Borrower, the Loan may be serviced by a Servicer/Trustee ("Servicer")
selected by Lender. Lender may delegate all or any portion of its
responsibilities under this Agreement and the other Loan Documents to the
Servicer pursuant to a servicing agreement ("Servicing Agreement") between
Lender and Servicer.
Section 14.4Uncrossing the Loan and the Additional Loan. At
the election of Lender in its sole discretion, the Loan and the Additional
Loan will no longer be cross-collateralized or cross-defaulted with each
other. Borrower, at Lender's sole cost and expense, hereby agrees to form
a new Single Purpose Bankruptcy Remote Entity borrower and to deliver to
Lender to effectuate such un-crossing of the Loan, and the Additional Loan,
as reasonably requested by Lender, (a) additional executed documents, or
amendments and modifications to the Loan Documents, (b) new opinions or
updates to the opinions delivered to Lender in connection with the closing
of the Loan, (c) endorsements and/or updates to the title insurance policy
delivered to Lender in connection with the closing of the Loan, and (d) any
other certificates, instruments and documentation reasonably determined by
Lender as necessary or appropriate to such uncrossing (the items described
in subsections (a) through (d) collectively hereinafter referred to as the
"Severing Documentation"), which Severing Documentation shall be acceptable
to Lender in form and substance in its reasonable discretion. Borrower
hereby covenants and agrees to be responsible for Borrower's attorney's
fees incurred in connection with the preparation and delivery of the
Severing Documentation and the effectuation of the uncrossing of the Loan
from the Additional Loan. Borrower hereby acknowledges and agrees that
upon such uncrossing of the Loan and the Additional Loan, Lender may
effect, in its sole discretion, one or more Securitizations of which the
Loan and/or the Additional Loan may be a part. Borrower and Lender hereby
acknowledge and agree that upon the uncrossing of the Loan from all of the
Additional Loan (i.e., the Loan being then a "stand alone" Loan), the
Severing Documentation shall, include an amendment to this Agreement
replacing the definition of "Adjusted Release Amount" to read "means the
outstanding principal balance of the Loan."
<PAGE>
ARTICLE XV
MISCELLANEOUS
Section 15.1Notices. Any notice required or permitted to be
given under this Agreement shall be in writing and either shall be mailed
by certified mail, postage prepaid, return receipt requested, or sent by
overnight air courier service, or personally delivered to a representative
of the receiving party, or sent by telecopy (provided an identical notice
is also sent simultaneously by mail, overnight courier, or personal
delivery as otherwise provided in this Section 15.1). All such
communications shall be mailed, sent or delivered, addressed to the party
for whom it is intended at its address set forth below.
If to Borrower: c/o LaSalle Hotel Properties
1401 Eye Street, NW
Washington, DC 20005
Attention: Mr. Hans Weger
Telecopy: (202) 222-2653
With a copy to: Brown & Wood LLP
One World Trade Center
New York, N.Y. 10048-0557
Attention: Michael F. Taylor, Esq.
Telecopy: (212) 839-5599
If to Lender: General Electric Capital Corporation
c/o GE Capital Loan Servicing, Inc.
363 North Sam Houston Parkway East, Suite 1200
Houston, Texas 77060
Attention: Legal Department
Telecopy: (281) 405-7153
With a copy to: General Electric Capital Corporation
292 Long Ridge Road
Stamford, Connecticut 06927
Attention: Paul Mundinger, Esq.
Telecopy: (203) 357-6364
Any communication so addressed and mailed shall be deemed to be given on
the earliest of (a) when actually delivered, (b) on the first Business Day
after deposit with an overnight air courier service, or (c) on the third
Business Day after deposit in the United States mail, postage prepaid, in
each case to the address of the intended addressee, and any communication
so delivered in person shall be deemed to be given when receipted for by,
or actually received by Lender or Borrower, as the case may be. If given
by telecopy, a notice shall be deemed given and received when the telecopy
is transmitted to the party's telecopy number specified above confirmation
of complete receipt is received by the transmitting party during normal
business hours or on the next Business Day if not confirmed during normal
business hours. Either party may designate a change of address by written
notice to the other by giving at least ten (10) days prior written notice
of such change of address.
Section 15.2Amendments and Waivers. No amendment or waiver of
any provision of the Loan Documents shall be effective unless in writing
and signed by the party against whom enforcement is sought.
Section 15.3Limitation on Interest. It is the intention of the
parties hereto to conform strictly to applicable usury laws. Accordingly,
all agreements between Borrower and Lender with respect to the Loan are
hereby expressly limited so that in no event, whether by reason of
acceleration of maturity or otherwise, shall the amount paid or agreed to
be paid to Lender or charged by Lender for the use, forbearance or
detention of the money to be lent hereunder or otherwise, exceed the
maximum amount allowed by law. If the Loan would be usurious under
applicable law (including the laws of the State and the laws of the United
<PAGE>
States of America), then, notwithstanding anything to the contrary in the
Loan Documents: (a) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, taken, reserved,
charged or received under the Loan Documents shall under no circumstances
exceed the maximum amount of interest allowed by applicable law, and any
excess shall be credited on the Note by the holder thereof; and (b) if
maturity is accelerated by reason of an election by Lender, or in the event
of any prepayment, then any consideration which constitutes interest may
never include more than the maximum amount allowed by applicable law. In
such case, excess interest, if any, provided for in the Loan Documents or
otherwise, to the extent permitted by applicable law, shall be amortized,
prorated, allocated and spread from the date of advance until payment in
full so that the actual rate of interest is uniform through the term
hereof. If such amortization, proration, allocation and spreading is not
permitted under applicable law, then such excess interest shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited on the Note. The terms and provisions
of this Section 15.3 shall control and supersede every other provision of
the Loan Documents. The Loan Documents are contracts made under and shall
be construed in accordance with and governed by the laws of the State,
except that if at any time the laws of the United States of America permit
Lender to contract for, take, reserve, charge or receive a higher rate of
interest than is allowed by the laws of the State (whether such federal
laws directly so provide or refer to the law of any state), then such
federal laws shall to such extent govern as to the rate of interest which
Lender may contract for, take, reserve, charge or receive under the Loan
Documents.
Section 15.4Invalid Provisions. If any provision of any Loan
Document is held to be illegal, invalid or unenforceable, such provision
shall be fully severable; the Loan Documents shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part thereof; the remaining provisions thereof shall remain in
full effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance therefrom; and in lieu of such
illegal, invalid or unenforceable provision there shall be added
automatically as a part of such Loan Document a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be
possible to be legal, valid and enforceable.
Section 15.5Reimbursement of Expenses. Borrower shall pay all
reasonable expenses incurred by Lender in connection with the Loan,
including reasonable fees and expenses of Lender's attorneys,
environmental, engineering and other consultants, and fees, charges or
taxes for the recording or filing of Loan Documents. Borrower shall pay
all expenses of Lender in connection with the administration of the Loan,
including audit costs, inspection fees, settlement of condemnation and
casualty awards, and premiums for title insurance and endorsements thereto.
Borrower shall, upon request, promptly reimburse Lender for all reasonable
amounts expended, advanced or incurred by Lender to collect the Note, or to
enforce the rights of Lender under this Agreement or any other Loan
Document, or to defend or assert the rights and claims of Lender under the
Loan Documents or with respect to the Property (by litigation or other
proceedings), which amounts will include all court costs, reasonable
attorneys' fees and expenses, reasonable fees of auditors and accountants,
and reasonable investigation expenses as may be incurred by Lender in
connection with any such matters (whether or not litigation is instituted),
together with interest at the Default Rate on each such amount from the
date of disbursement until the date of reimbursement to Lender, all of
which shall constitute part of the Loan and shall be secured by the Loan
Documents.
<PAGE>
Section 15.6Approvals; Third Parties; Conditions. All approval
rights retained or exercised by Lender with respect to Leases, contracts,
plans, studies and other matters are solely to facilitate Lender's credit
underwriting, and shall not be deemed or construed as a determination that
Lender has passed on the adequacy thereof for any other purpose and may not
be relied upon by Borrower or any other Person. This Agreement is for the
sole and exclusive use of Lender and Borrower and may not be enforced, nor
relied upon, by any Person other than Lender and Borrower. All conditions
of the obligations of Lender hereunder, including the obligation to make
advances, are imposed solely and exclusively for the benefit of Lender, its
successors and assigns, and no other Person shall have standing to require
satisfaction of such conditions or be entitled to assume that Lender will
refuse to make advances in the absence of strict compliance with any or all
of such conditions, and no other Person shall, under any circumstances, be
deemed to be a beneficiary of such conditions, any and all of which may be
freely waived in whole or in part by Lender at any time in Lender's sole
discretion.
Section 15.7Lender Not in Control; No Partnership. None of the
covenants or other provisions contained in this Agreement shall, or shall
be deemed to, give Lender the right or power to exercise control over the
affairs or management of Borrower, the power of Lender being limited to the
rights to exercise the remedies referred to in the Loan Documents. The
relationship between Borrower and Lender is, and at all times shall remain,
solely that of debtor and creditor. No covenant or provision of the Loan
Documents is intended, nor shall it be deemed or construed, to create a
partnership, joint venture, agency or common interest in profits or income
between Lender and Borrower or to create an equity in the Property in
Lender. Lender neither undertakes nor assumes any responsibility or duty
to Borrower or to any other person with respect to the Property or the
Loan, except as expressly provided in the Loan Documents; and
notwithstanding any other provision of the Loan Documents: (a) Lender is
not, and shall not be construed as, a partner, joint venturer, alter ego,
manager, controlling person or other business associate or participant of
any kind of Borrower or its stockholders, members, or partners and Lender
does not intend to ever assume such status; (b) Lender shall in no event be
liable for any debts, expenses or losses incurred or sustained by Borrower
unless such debts, expenses or losses are caused solely by Lender's gross
negligence or willful misconduct; and (c) Lender shall not be deemed
responsible for or a participant in any acts, omissions or decisions of
Borrower or its stockholders, members, or partners. Lender and Borrower
disclaim any intention to create any partnership, joint venture, agency or
common interest in profits or income between Lender and Borrower, or to
create an equity in the Property in Lender, or any sharing of liabilities,
losses, costs or expenses.
Section 15.8Time of the Essence. Time is of the essence with
respect to this Agreement.
Section 15.9Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of Lender and Borrower and their
respective successors and assigns of Lender and Borrower, provided that,
except as permitted under the Loan Documents, neither Borrower nor any
other Borrower Party shall, without the prior written consent of Lender,
assign any rights, duties or obligations hereunder.
Section 15.10Renewal, Extension or Rearrangement. All
provisions of the Loan Documents shall apply with equal effect to each and
all promissory notes and amendments thereof hereinafter executed which in
whole or in part represent a renewal, extension, increase or rearrangement
of the Loan.
Section 15.11Waivers. No course of dealing on the part of
Lender, its officers, employees, consultants or agents, nor any failure or
delay by Lender with respect to exercising any right, power or privilege of
Lender under any of the Loan Documents, shall operate as a waiver thereof.
<PAGE>
Section 15.12Cumulative Rights; Joint and Several Liability.
Rights and remedies of Lender under the Loan Documents shall be cumulative,
and the exercise or partial exercise of any such right or remedy shall not
preclude the exercise of any other right or remedy. If more than one
person or entity has executed this Agreement as "Borrower," the obligations
of all such persons or entities hereunder shall be joint and several.
Section 15.13Singular and Plural. Words used in this Agreement
and the other Loan Documents in the singular, where the context so permits,
shall be deemed to include the plural and vice versa. The definitions of
words in the singular in this Agreement and the other Loan Documents shall
apply to such words when used in the plural where the context so permits
and vice versa.
Section 15.14Phrases. When used in this Agreement and the other
Loan Documents, the phrase "including" shall mean "including, but not
limited to," the phrase "satisfactory to Lender" shall mean "in form and
substance satisfactory to Lender in all respects," the phrase "with
Lender's consent" or "with Lender's approval" shall mean such consent or
approval at Lender's discretion, and the phrase "acceptable to Lender"
shall mean "acceptable to Lender at Lender's sole discretion."
Section 15.15Exhibits and Schedules. The exhibits and schedules
attached to this Agreement are incorporated herein and shall be considered
a part of this Agreement for the purposes stated herein.
Section 15.16Titles of Articles, Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions of
this Agreement and the other Loan Documents or the exhibits hereto and
thereto are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other content
of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 15.17 Promotional Material. Lender may issue press
releases, advertisements and other promotional materials in connection with
its respective promotional and marketing activities, and such materials may
describe the Loan in general terms or in detail. All references to Lender
or the REIT or the Operating Partnership contained in any press release,
advertisement or promotional material issued by Lender or Borrower shall be
approved in writing by Lender or Borrower shall be approved in writing by
the other party in advance of issuance, which approval shall not be
unreasonably withheld, delayed or conditioned. The provisions of this
Section 15.17 shall not, however, apply in any respect to references or
descriptions in disclosure, presentations or promotional material by Lender
or any other Person made in connection with a Securitization or any other
sale or marketing of the Loan for which no consent is required by Borrower
or any other Person.
Section 15.18Survival. All of the representations, warranties,
covenants, and indemnities hereunder (including environmental matters under
Article 6), and under the indemnification provisions of the other Loan
Documents shall survive the repayment in full of the Loan and the release
of the liens evidencing or securing the Loan, and shall survive the
transfer (by sale, foreclosure, conveyance in lieu of foreclosure or
otherwise) of any or all right, title and interest in and to the Property
to any party, whether or not an Affiliate of Borrower.
Section 15.19WAIVER OF JURY TRIAL. BORROWER HEREBY AGREES NOT
TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES
ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER
OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER,
AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
<PAGE>
Section 15.20Waiver of Punitive or Consequential Damages.
Neither Lender nor Borrower shall be responsible or liable to the other or
to any other Person for any punitive, exemplary or consequential damages
which may be alleged as a result of the Loan or the transaction
contemplated hereby, including any breach or other default by any party
hereto.
Section 15.21Governing Law.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK,
AND MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND
THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE
STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED
HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES
OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA,
EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND
ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND
PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT
BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH
STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION,
VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT
PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES
ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S
OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK,
COUNTY OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR
HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER
DOES HEREBY DESIGNATE AND APPOINT BROWN &WOOD LLP AS ITS AUTHORIZED AGENT
TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS
WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS
UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED
OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE
PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT
HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A
SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH
SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS
FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A
SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK,
NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 15.22Entire Agreement. This Agreement and the other
Loan Documents embody the entire agreement and understanding between Lender
and Borrower and supersede all prior agreements and understandings between
such parties relating to the subject matter hereof and thereof.
Accordingly, the Loan Documents may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties.
There are no unwritten oral agreements between the parties.
<PAGE>
Section 15.23Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall constitute an original, but all
of which shall constitute one document.
Section 15.24Brokers and Financial Advisors. Borrower hereby
represents that it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. Borrower hereby agrees to
indemnify, defend and hold Lender harmless from and against any and all
claims, liabilities, costs and expenses of any kind (including Lender's
attorneys' fees and expenses) in any way relating to or arising from a
claim by any Person that such Person acted on behalf of Borrower or Lender
in connection with the transactions contemplated herein. The provisions of
this Section 15.24 shall survive the expiration and termination of this
Agreement and the payment of the Debt.
Section 15.25Conflicts. In the event of any conflict between
the provisions of this Agreement and any of the other Loan Documents, the
provisions of this Agreement shall control.
<PAGE>
EXECUTED as of the date first written above.
LENDER: GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation
By: /s/ Peter Tzelios
------------------------------
Name: Peter Tzelios
------------------------------
Title: Authorized Signatory
------------------------------
BORROWER: LHO FINANCING PARTNERSHIP I, L.P.,
a Delaware limited partnership
By: LHO Financing, Inc.,
a Delaware corporation
By: /s/ Hans Weger
------------------------------
Name:Hans Weger
------------------------------
Title: Chief Financial Officer
------------------------------
<PAGE>
JOINDER
-------
By executing this Joinder (the "Joinder"), the undersigned
("Joinder Party") guarantees the performance by Borrower of all obligations
and liabilities for which Borrower is personally liable under Section 13.1
of this Agreement. This Joinder is a guaranty of full and complete payment
and performance and not of collectibility.
1. Waivers. To the fullest extent permitted by applicable
law, the Joinder Party waives all rights and defenses of sureties,
guarantors, accommodation parties and/or co-makers and agrees that its
obligations under this Joinder shall be primary, absolute and
unconditional, and that its obligations under this Joinder shall be
unaffected by any of such rights or defenses, including:
(a) the unenforceability of any Loan Document against
Borrower and/or any guarantor or the Joinder Party;
(b) any release or other action or inaction taken by Lender
with respect to the collateral, the Loan, Borrower, any guarantor and/or
the Joinder Party, whether or not the same may impair or destroy any
subrogation rights of the Joinder Party, or constitute a legal or equitable
discharge of any surety or indemnitor;
(c) the existence of any collateral or other security for the
Loan, and any requirement that Lender pursue any of such collateral or
other security, or pursue any remedies it may have against Borrower, any
guarantor and/or the Joinder Party;
(d) any requirement that Lender provide notice to or obtain
the Joinder Party's consent to any modification, increase, extension or
other amendment of the Loan, including the guaranteed obligations;
(e) any right of subrogation (until payment in full of the
Loan, including the guaranteed obligations, and the expiration of any
applicable preference period and statute of limitations for fraudulent
conveyance claims);
(f) any defense based on any statute of limitations;
(g) any payment by Borrower to Lender if such payment is held
to be a preference or fraudulent conveyance under bankruptcy laws or Lender
is otherwise required to refund such payment to Borrower or any other
party; and
(h) any voluntary or involuntary bankruptcy, receivership,
insolvency, reorganization or similar proceeding affecting Borrower or any
of its assets.
2. Agreements. The Joinder Party further represents,
warrants and agrees that:
(a) The obligations under this Joinder are enforceable
against Joinder Party and are not subject to any defenses, offsets or
counterclaims;
(b) The provisions of this Joinder are for the benefit of
Lender and its successors and assigns;
(c) Lender shall have the right to (i) renew, modify, extend
or accelerate the Loan, (ii) pursue some or all of its remedies against
Borrower, any guarantor or the Joinder Party, (iii) add, release or
substitute any collateral for the Loan or party obligated thereunder, and
(iv) release Borrower, any guarantor or the Joinder Party from liability,
all without notice to or consent of the Joinder Party (or other Joinder
Party) and without affecting the obligations of the Joinder Party
hereunder;
<PAGE>
(d) The Joinder Party covenants and agrees to furnish to
Lender, within ninety (90) days after the end of each calendar year, a
current (as of the end of such calendar year) balance sheet of the Joinder
Party, in scope and detail reasonably satisfactory to Lender, certified by
an officer of the Joinder Party and, if required by Lender, prepared on a
review basis and certified by an independent public accountant reasonably
satisfactory to Lender; and
(e) To the maximum extent permitted by law, the Joinder Party
hereby knowingly, voluntarily and intentionally waives the right to a trial
by jury in respect of any litigation based hereon. This waiver is a
material inducement to Lender to enter into this Agreement.
This Joinder shall be governed by the laws of the State of New
York.
Executed as of July 29, 1999.
[Signature appears on the following page]
<PAGE>
JOINDER PARTY: LASALLE HOTEL OPERATING PARTNERSHIP,
a Delaware limited partnership
By: /s/ Hans Weger
------------------------------
Name: Hans Weger
------------------------------
Title: Chief Financial Officer
------------------------------
EXHIBIT 10.5
- ------------
LHO FINANCING PARTNERSHIP I, L.P.
(Borrower)
to
BENJAMIN GRANT
(Trustee)
for the benefit of
GENERAL ELECTRIC CAPITAL CORPORATION
(Lender)
______________________________________________________________
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
______________________________________________________________
Dated: As of July 29, 1999
Property Location: 650 Pearl Street
Dallas
Dallas County, Texas
DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Reese Mason, Esq.
<PAGE>
DEED OF TRUST, ASSIGNMENT OF LEASES
AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING
This Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing (this "Deed of Trust") is executed as of
July 29, 1999, by LHO FINANCING PARTNERSHIP I, L.P., a Delaware limited
partnership ("Borrower"), whose address for notice hereunder is 1401 Eye
Street, N.W., Suite 900, Washington, D.C. 20005 to Benjamin Grant, an
individual ("Trustee"), whose address for notice hereunder is 2001 Bryan
Street, Suite 1700, Dallas, Texas 75201, for the benefit of GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("Lender"), whose
address for notice is 292 Long Ridge Road, Stamford, Connecticut 06927.
R E C I T A L S
---------------
WHEREAS, Lender is making a first deed of trust loan in the
original principal amount of $16,200,000.00 (the "Loan") to Borrower
pursuant to that certain Loan Agreement of even date herewith between
Borrower and Lender (the "Loan Agreement") to be evidenced by that certain
Promissory Note of even date herewith made by Borrower to Lender payable to
the order of Lender in the stated principal amount of $16,200,000.00 (the
"Note") and secured by this Deed of Trust;
WHEREAS, concurrently herewith, Lender has made an additional
first mortgage loan in the aggregate principal amount of $30,300,000.00
(the "Other Loan") to Borrower, pursuant to a Loan Agreement of even date
herewith between Lender and Borrower (the "Other Loan Agreement");
WHEREAS, the Other Loan is evidenced by a promissory note of
even date herewith with a maturity date of August 1, 2024 from Borrower to
Lender (the "Other Note") and is secured by, among other things, a Fee and
Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing dated of even date herewith and made by Borrower to Lender
(the "Other First Mortgage") encumbering the real and personal property
described therein (the "Other Property"); and
WHEREAS, in order to secure the full and punctual payment and
performance of all of the obligations of Borrower to Lender now or
hereafter existing, whether for principal, interest, fees, expenses or
otherwise (collectively, the "Obligations") under the Other Loan Agreement,
the Other Note, the Other First Mortgage and all other documents evidencing
or securing the Other Loan (collectively, the "Other Loan Documents") and
the Loan Documents, Borrower by these presents is hereby deeding,
mortgaging, giving, granting, bargaining, selling, alienating, enfeoffing,
conveying, confirming, warranting, pledging, assigning and hypothecating
unto Lender all of Borrower's right, title and interest in and to the
Property.
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used herein, the following terms
shall have the following meanings:
"Debt": The sum of all (a) principal, interest and all other
amounts due under or secured by the Loan Documents and the Other Loan
Documents (b) any and all advances or disbursements made by Lender of funds
other than funds deposited with Lender by Borrower to protect and preserve
the Property, or the lien hereof on the Property and/or the Other Property,
<PAGE>
including without limitation, advances or disbursements made for the
payment of taxes, levies or insurance on the Property and/or the Other
Property, advances or disbursements made under the Loan Agreement and the
Other Loan Documents to enable completion of improvements on or to the
Property and/or the Other Property and advances or disbursements made to
repair or maintain the Property and/or the Other Property, with interest on
all such advances or disbursements, and (c) all other indebtedness,
obligations and liabilities now or hereafter existing of any kind of
Borrower to Lender under documents which recite that they are intended to
be secured by this Deed of Trust.
"Loan Documents": The (a) Loan Agreement of even date
herewith, between Borrower and Lender (the "Loan Agreement"),
(b) Promissory Note of even date, executed by Borrower, payable to the
order of Lender, in the stated principal amount of $16,200,000.00, (the
"Note") (c) this Deed of Trust, (d) all other documents now or hereafter
executed by Borrower, or any other person or entity, to evidence, secure or
guaranty the payment of all or any portion of the Debt or the performance
of all or any portion of the Obligations or otherwise executed in
connection with the Note or this Deed of Trust, (e) the Other Loan
Documents, and (f) all amendments, modifications, restatements, extensions,
renewals or replacements of the foregoing.
"Obligations": All of the agreements, covenants, conditions,
warranties, representations and other obligations (other than to repay the
Debt) made or undertaken by Borrower or any other person or entity to
Lender or others as set forth in the Loan Documents.
"Permitted Encumbrances": The outstanding liens, easements,
restrictions, security interests and other exceptions to title set forth in
the policy of title insurance insuring the lien of this Deed of Trust,
together with (i) the liens and security interests in favor of Lender
created by the Loan Documents, (ii) the liens for taxes, not yet
delinquent, which are being contested in accordance with Loan Agreement and
(iii) any rights under Leases entered into in accordance with the Loan
Agreement.
"Property": (a) The condominium unit designated on Exhibit B
(the "Condominium Unit"), together with the proportionate and undivided
interest in the common elements appurtenant to the Condominium Unit (the
"Common Elements"), which are located on the real property described in
Exhibit A (the "Land"), (b) all of Borrower's rights, powers and privileges
and all credits, refunds and other sums of money to which Borrower is now
or hereafter becomes entitled to under that certain Declaration of
Covenants, Conditions and Restrictions for Plaza of the Americas, a
Condominium Regime, dated as of September 6, 1991 (as the same may be
further amended from time to time, the "Declaration"), that certain Article
of Incorporation of Plaza of the Americas Condominium Association, a Texas
Non-Profit Corporation (as the same may be further amended from time to
time, the "Article of Incorporation"), and those certain By-Laws of Plaza
of the Americas Condominium Association, a Texas Non-Profit Corporation (as
the same may be further amended from time to time, the "Bylaws"; the
Bylaws, the Declaration and the Article of Incorporation are collectively,
the "Condominium Documents"), (c) all materials, supplies, equipment,
apparatus and other items of personal property now owned or hereafter
acquired by Borrower and now or hereafter attached to, installed in or used
in connection with any of the Improvements or the Land, and all the right,
title and interest of Borrower in and to water, gas, electrical, storm and
sanitary sewer facilities and all other utilities whether or not situated
in easements (the "Fixtures"), including, without limitation, Borrower's
reversionary interest in Fixtures pursuant to the Operating Lease, if any,
(d) all right, title and interest of Borrower in and to all goods,
accounts, general intangibles, instruments, documents, chattel paper and
all other personal property of any kind or character, including such items
of personal property as defined in the UCC, now owned or hereafter acquired
<PAGE>
by Borrower and now or hereafter affixed to, placed upon, used in
connection with, arising from or otherwise related to the Land and
Improvements or which may be used in or relating to the planning,
development, financing or operation of the Property, including, without
limitation, furniture, furnishings, equipment, machinery, money, insurance
proceeds, accounts, contract rights, trademarks, goodwill, chattel paper,
documents, trade names, licenses and/or franchise agreements, rights of
Borrower under leases of Fixtures or other personal property or equipment,
inventory, all refundable, returnable or reimbursable fees, deposits or
other funds or evidences of credit or indebtedness deposited by or on
behalf of Borrower with any governmental authorities, boards, corporations,
providers of utility services, public or private, including specifically,
but without limitation, all refundable, returnable or reimbursable tap
fees, utility deposits, commitment fees and development costs (the
"Personalty"), (e) all right, title and interest of Borrower in and to
that certain Promissory Note dated as of April 29, 1998 by Operating Lessee
(as defined in the Loan Agreement) in favor of Operating Partnership (as
defined in the Loan Agreement), predecessor-in-interest to Borrower,
(f) all reserves, escrows or impounds required under the Loan Agreement and
all deposit accounts maintained by Borrower with respect to the Property
including without limitation any lockbox account and cash management
account and all securities, investments, property and financial assets held
from time to time, all accounts and monies held by Operating Lessee and/or
Manager which Borrower has an interest in and is entitled to receive and
all proceeds, products, distributions or dividends or substitutions thereon
and thereof (the "Accounts"), (g) all the right, title and interest of
Borrower in and to all plans, specifications, shop drawings and other
technical descriptions prepared for construction, repair or alteration of
the Improvements, and all amendments and modifications thereof (the
"Plans"), (h) all the right, title and interest of Borrower in and to all
leases, subleases, operating leases, licenses, concessions, occupancy
agreements, rental contracts, or other agreements (written or oral) now or
hereafter existing relating to the use or occupancy of all or any part of
the Property, together with all guarantees, letters of credit and other
credit support, modifications, extensions and renewals thereof, whether
before or after the filing by or against Borrower of any petition of relief
under 11 U.S.C. Section 101 et. seq. (as same may be amended from time to
time, the "Bankruptcy Code") and all related security and other deposits
(the "Leases") and all of Borrower's claims and rights (the "Bankruptcy
Claims") to the payment of damages arising from any rejection by a lessee
of any Lease under the Bankruptcy Code, (i) all of the Operating Lease Rent
(as defined in the Loan Agreement) and, if any, all of the rents, revenues,
issues, income, proceeds, profits, and all other payments of any kind under
the Leases actually received by Borrower for using, leasing, licensing,
possessing, operating from, residing in, selling or otherwise enjoying the
Property whether paid or accruing before or after the filing by or against
Borrower of any petition for relief under the Bankruptcy Code including,
without limitation, all hotel receipts, revenues and credit card receipts
collected from guest rooms, restaurants, bars, meeting rooms, banquet rooms
and recreational facilities, all receivables, customer obligations,
installment payment obligations and other obligations now existing or
hereafter arising or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of property
or rendering of services by Borrower or any operator or manager of the
hotel or the commercial space located in the Improvements or acquired from
others (including, without limitation, from the rental of any office space,
retail space, guest rooms or other space, halls, stores, and offices, and
deposits securing reservations of such space), license, lease, sublease and
concession fees and rentals, health club membership fees, food and beverage
wholesale and retail sales, service charges, vending machine sales and
security deposits under Leases (collectively, the "Rents"), (j) all other
agreements, such as construction contracts, architects' agreements,
operating agreements, engineers' contracts, utility contracts, maintenance
<PAGE>
agreements, franchise agreements, service contracts, permits, licenses,
certificates and entitlements in any way relating to the development,
construction, use, occupancy, operation, maintenance, enjoyment,
acquisition or ownership of the Property (the "Property Agreements"),
(k) all rights, privileges, tenements, hereditaments, rights-of-way,
easements, reciprocal easement agreements, appendages and appurtenances
appertaining to the foregoing, and all right, title and interest, if any,
of Borrower in and to any streets, ways, alleys, strips or gores of land
adjoining the Land or any part thereof, (l) all accessions, replacements
and substitutions for any of the foregoing and all proceeds thereof,
(m) all insurance policies, unearned premiums therefor and proceeds from
such policies covering any of the above property now or hereafter acquired
by Borrower, (n) all mineral, water, oil and gas rights now or hereafter
acquired and relating to all or any part of the Property, (o) all
tradenames, trademarks, service marks, logos, copyrights, goodwill, books
and records and all other general intangibles relating to or used in
connection with the operation of the Property, (p) all of Borrower's right,
title and interest in and to all inventory and articles of personal
property and accessions thereof and renewals and replacements thereof and
substitutions therefor, if any (including, but not limited to, beds,
bureaus, chiffoniers, chests, chairs, desks, lamps, mirrors, bookcases,
tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian
blinds, screens, paintings, hangings, pictures, divans, couches, luggage
carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets,
glassware, foodcarts, cookware, dry cleaning facilities, dining room
wagons, keys or other entry systems, bars, bar fixtures, liquor and other
drink dispensers, icemakers, radios, television sets, intercom and paging
equipment, electric and electronic equipment, dictating equipment, private
telephone systems, medical equipment, potted plants, heating, lighting and
plumbing fixtures, fire prevention and extinguishing apparatus, cooling and
air-conditioning systems, elevators, escalators, fittings, plants,
apparatus, stoves, ranges, refrigerators, laundry machines, tools,
machinery, engines, dynamos, motors, boilers, incinerators, switchboards,
conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and
polishing equipment, call systems, brackets, electrical signs, bulbs,
bells, ash and fuel, conveyors, cabinets, lockers, shelving, spotlighting
equipment, dishwashers, garbage disposals, washers and dryers), other
customary hotel equipment, and (q) all of Borrower's right, title and
interest in and to any awards, remunerations, reimbursements, settlements
or compensation heretofore made or hereafter to be made by any governmental
authority pertaining to the Land, Improvements, Fixtures or Personalty. As
used in this Deed of Trust, the term "Property" shall mean all or, where
the context permits or requires, any portion of the above or any interest
therein.
"UCC": The Uniform Commercial Code of Texas or, if the
creation, perfection and enforcement of any security interest herein
granted is governed by the laws of a state other than Texas, then, as to
the matter in question, the Uniform Commercial Code in effect in that
state.
Section 1.2Other Terms. Capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Loan
Agreement.
ARTICLE II
GRANT
Section 2.1Grant. To secure the full and timely payment of
the Debt and the full and timely performance of the Obligations, Borrower
hereby MORTGAGES, GRANTS, BARGAINS, SELLS and CONVEYS to Trustee all of
Borrower's right, title and interest in and to the Property, subject,
however, to the Permitted Encumbrances; TO HAVE AND TO HOLD the Property to
Trustee, its successors and assigns, IN TRUST, WITH POWER OF SALE, and
Borrower does hereby bind itself, its successors and assigns to WARRANT AND
FOREVER DEFEND the title to the Property unto Lender.
<PAGE>
ARTICLE III
WARRANTIES, REPRESENTATIONS AND COVENANTS
Borrower warrants, represents and covenants to Lender as
follows:
Section 3.1Title to Property and Lien of this Instrument.
Borrower owns the Property free and clear of any liens, claims or
interests, except the Permitted Encumbrances. This Deed of Trust creates
valid, enforceable first priority liens and security interests against the
Property. Borrower warrants that Borrower has good, marketable and
insurable title to the Property and has the full power, authority and right
to execute, deliver and perform its obligations under this Deed of Trust.
None of the Permitted Encumbrances, individually or in the aggregate,
materially interfere with the benefits of the security intended to be
provided by this Deed of Trust, materially and adversely affect the value
of the Property, materially impair the use or operations of the Property or
impair Borrower's ability to pay its obligations in a timely manner.
Section 3.2First Lien Status. Borrower shall preserve and
protect the first lien and security interest status of this Deed of Trust
and the other Loan Documents. If any lien or security interest other than
the Permitted Encumbrances is asserted against the Property, Borrower shall
promptly, and at its expense, (a) give Lender a detailed written notice of
such lien or security interest (including origin, amount and other terms),
and (b) pay the underlying claim in full or take such other action so as to
cause it to be released or, in Lender's discretion, provide a bond or other
security satisfactory to Lender for the payment of such claim or contest
such claim in accordance with the Loan Agreement.
Section 3.3Payment and Performance. Borrower shall pay the
Debt when due under the Loan Documents and shall perform the Obligations in
full when they are required to be performed.
Section 3.4Replacement of Fixtures and Personalty. Borrower
shall not, without the prior written consent of Lender, permit any of the
Fixtures or Personalty to be removed at any time from the Land,
Improvements, Condominium Unit or Common Elements, unless the removed item
is removed temporarily for maintenance and repair or, if removed
permanently, is obsolete and is replaced by an article of equal or better
suitability and value, owned by Borrower subject to the liens and security
interests of this Deed of Trust and the other Loan Documents, and free and
clear of any other lien or security interest except such as may be first
approved in writing by Lender.
Section 3.5Maintenance of Rights of Way, Easements and
Licenses. Borrower shall maintain all rights of way, easements, grants,
privileges, licenses, certificates, permits, entitlements and franchises
necessary for the use of the Property and will not, without the prior
consent of Lender, consent to any public restriction (including any zoning
ordinance) or private restriction as to the use of the Property. Borrower
shall comply in all material respects with all restrictive covenants
affecting the Property, and all zoning ordinances and other public or
private restrictions as to the use of the Property.
Section 3.6Inspection. Borrower shall permit Lender, and
Lender's agents, representatives and employees, upon reasonable prior
notice to Borrower and during normal business hours, to inspect the
Property and conduct such environmental and engineering studies as Lender
may require, provided that such inspections and studies shall not
materially interfere with the use and operation of the Property.
<PAGE>
Section 3.7Other Covenants. All of the covenants in the Loan
Agreement and the other Loan Documents are incorporated herein by reference
and, together with covenants in this Article 3, shall be covenants running
with the land. The covenants set forth in the Loan Agreement include,
among other provisions: (a) the obligation to pay (subject to Borrower's
right to contest pursuant to the terms of the Loan Agreement) when due all
taxes on the Property or assessed against Lender with respect to the Loan,
(b) the right of Lender to inspect the Property, (c) the obligation to keep
the Property insured as set forth therein, (d) the obligation to comply
with all legal requirements (including environmental laws), maintain the
Property in good condition, and promptly repair any damage or casualty, and
(e) except as otherwise permitted under the Loan Agreement, the obligation
of Borrower to obtain Lender's consent prior to entering into, modifying or
taking other actions with respect to Leases.
Section 3.8Condemnation Awards and Insurance Proceeds.
(a) Condemnation Awards. Borrower assigns all awards and
compensation for any condemnation or other taking, or any purchase in lieu
thereof, to Lender and authorizes Lender to collect and receive such awards
and compensation and to give proper receipts and acquittances therefor,
subject to the terms of the Loan Agreement.
(b) Insurance Proceeds. Borrower assigns to Lender all
proceeds of any insurance policies insuring against loss or damage to the
Property. Borrower authorizes Lender to collect and receive such proceeds
and authorizes and directs the issuer of each of such insurance policies to
make payment for all such losses directly to Lender, instead of to Borrower
and Lender jointly in accordance with Section 5.1 of the Loan Agreement.
Section 3.9Transfer or Encumbrance of Property.
(a) Without the prior written consent of Lender, neither
Borrower nor any other Person having a direct or indirect ownership or
beneficial interest in Borrower shall (i) directly or indirectly sell,
transfer, convey, mortgage, pledge, or assign the Property, any part
thereof or any interest therein (including any partnership or any other
ownership interest in Borrower); (ii) further encumber, alienate, grant a
Lien or grant any other interest in the Property or any part thereof
(including any partnership or other ownership interest in Borrower),
whether voluntarily or involuntarily; or (iii) enter into any easement or
other agreement granting rights in or restricting the use or development of
the Property.
(b) As used in this Section 3.9, "transfer" shall include,
without limitation, (i) an installment sales agreement wherein Borrower
agrees to sell the Property or any part thereof for a price to be paid in
installments; (ii) an agreement by Borrower leasing all or a substantial
part of the Property for other than actual occupancy by a space tenant
thereunder or a sale, assignment or other transfer of, or the grant of a
security interest in, Borrower's right, title and interest in and to any
Leases or any Rents, (iii) if Borrower or any general partner or managing
member of Borrower is a corporation, the voluntary or involuntary sale,
conveyance or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by
operation of law or otherwise) or the creation or issuance of new stock
such that such corporation's stock shall be vested in a party or parties
who are not now stockholders or any change in the control of such
corporation; and (iv) if Borrower or any general partner or managing member
of Borrower is a limited or general partnership, joint venture or limited
liability company, the change, removal, resignation or addition of a
general partner, managing partner, limited partner, joint venturer or
member or the transfer of the partnership interest of any general partner,
managing partner or limited partner or the transfer of the interest of any
joint venture or member.
<PAGE>
(c) Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in
order to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property without Lender's consent. This provision shall apply to every
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the Property regardless of whether voluntary or not, or whether or not
Lender has consented to any previous sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property.
(d) Lender's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property shall not be
deemed to be a waiver of Lender's right to require such consent to any
future occurrence of same. Any sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property made in contravention of
this paragraph shall be null and void and of no force and effect.
(e) Borrower agrees to bear and shall pay or reimburse Lender
on demand for all reasonable expenses (including, without limitation,
reasonable attorneys' fees and disbursements, title search costs and title
insurance endorsement premiums) incurred by Lender in connection with the
review, approval and documentation of any such sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer.
(f) Lender's consent to a one-time sale or transfer of the
Property will not be unreasonably withheld if such sale occurs in
connection with the sale of the Other Property together with the Property
to one purchaser and after consideration of all relevant factors, provided
that:
(i) no Event of Default or event which with the giving of
notice or the passage of time would constitute an Event of Default shall
have occurred and remain uncured;
(ii) the proposed transferee ("Transferee") and any
indemnitor for non-recourse carveouts shall each be a reputable entity or
person of good character, creditworthy, with sufficient financial worth as
determined by Lender in its reasonable discretion considering the
obligations assumed and undertaken, as evidenced by financial statements
and other information reasonably requested by Lender;
(iii) the Transferee and its property manager shall have
sufficient experience in the ownership and management of properties similar
to the Property and the Other Property, and Lender shall be provided with
reasonable evidence thereof (and Lender reserves the right to approve the
Transferee without approving the substitution of the property manager);
(iv) (a) the Manager (as defined in the Loan Agreement)
for the Property shall be either (1) the manager immediately prior to such
transfer, (2) a professional management company, which at the time of its
engagement as manager shall be the property manager for at least ten (10)
hotel properties containing at least two thousand (2000) rooms, exclusive
of the Property and Other Property or (3) such other manager reasonably
satisfactory to Lender and (b) any new Management Agreement (as defined in
the Loan Agreement) shall be satisfactory to Lender in its reasonable
discretion;
<PAGE>
(v) (a) the Operating Lessee shall be either (1) the
operating lessee immediately prior to such transfer, (2) an affiliate of
hotel operating company, which such operating company at the time of
engagement shall be operating and controlling, as owner, manager or
operating lessee, at least ten (10) hotel properties consisting of at least
two thousand (2000) rooms, exclusive of the Property and Other Property,
and a single purpose bankruptcy-remote entity in accordance with the then-
current standards of the Rating Agencies or (3) such other operating lessee
reasonably satisfactory to Lender and (b) any new Operating Lease (as
defined in the Loan Agreement) shall be satisfactory to Lender in its
reasonable discretion;
(vi) Lender shall have confirmation in writing from the
Rating Agencies (as hereinafter defined) to the effect that such transfer
will not result in a re-qualification, reduction or withdrawal of the then
current rating assigned in a Securitization (as defined in the Loan
Agreement). The term "Rating Agencies" as used herein shall mean each of
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. and Fitch IBCA,
Inc., or any other nationally-recognized statistical rating agency which
has been selected by Lender;
(vii) Lender shall have received evidence satisfactory to
it (which shall include a legal non-consolidation opinion reasonably
acceptable to Lender) that the single purpose nature and bankruptcy
remoteness of Transferee, its shareholders, partners, or members, as the
case may be, following such transfers are in accordance with the standards
of the Rating Agencies;
(viii) the Transferee shall have executed and delivered to
Lender an assumption agreement in form and substance reasonably acceptable
to Lender, evidencing such Transferee's agreement to abide and be bound by
the terms of the Note, this Deed of Trust and the other Loan Documents,
together with such legal opinions and title insurance endorsements as may
be reasonably requested by Lender;
(ix) the franchise or franchise system for the Property
shall be either the franchise or franchise system in place immediately
prior to such transfer or a franchise or franchise system reasonably
satisfactory to Lender; and
(x) Lender shall have received the payment of all out of
pocket costs and expenses incurred by Lender in connection with such
assumption (including reasonable attorney's fees and costs).
(g) Notwithstanding anything to the contrary contained herein
or any other Loan Documents, Lender's consent shall not be required for any
of the following sales, transfers, assignments, pledges, conveyances or
encumbrances, provided that Lender has received payment in full of all its
costs and expenses incurred in connection therewith:
(i) with respect to the REIT, (A) any transfer of all or any
portion of any shares of beneficial interests of the REIT for so long as
the shares of the REIT continues to be publicly traded on a national stock
exchange and (B) the issuance of additional shares of the REIT;
(ii) with respect to the Operating Partnership, (A) any
transfer of limited partnership interests in the Operating Partnership and
(B) the issuance of additional limited partnership units or other
securities, even if such issuance results in a reduction of the partnership
interest of the REIT in the Operating Partnership, provided that, after
giving effect to such transfer or series of transfers described in (A) or
(B), the REIT owns more than fifty-one percent (51%) of the partnership
interests of the Operating Partnership.
<PAGE>
Section 3.10Intentionally Deleted.
Section 3.11Intentionally Deleted.
Section 3.12Intentionally Deleted.
Section 3.13Intentionally Deleted.
ARTICLE IV
DEFAULT AND FORECLOSURE
Section 4.1Remedies. If an Event of Default (as defined in
the Loan Agreement) exists, Lender or Trustee may, at Lender's election,
exercise any or all of the following rights, remedies and recourses:
(a) Acceleration. Declare the Debt to be immediately due and
payable, without further notice, presentment, protest, notice of intent to
accelerate, notice of acceleration, demand or action of any nature
whatsoever (each of which hereby is expressly waived by Borrower),
whereupon the same shall become immediately due and payable.
(b) Entry on Property. Enter the Property and take exclusive
possession thereof and of all books, records and accounts relating thereto.
If Borrower remains in possession of the Property after an Event of Default
and without Lender's prior written consent, Lender may invoke any legal
remedies to dispossess Borrower.
(c) Operation of Property. Hold, lease, develop, manage,
operate or otherwise use the Property upon such terms and conditions as
Lender may deem reasonable under the circumstances (making such repairs,
alterations, additions and improvements and taking other actions, from time
to time, as Lender deems necessary or desirable), and apply all Rents and
other amounts collected by Lender or Trustee in connection therewith in
accordance with the provisions of Section 4.6.
(d) Foreclosure and Sale. Institute proceedings for the
complete foreclosure of this Deed of Trust, in which case the Property may
be sold for cash or credit in one or more parcels. At any such sale by
virtue of any judicial proceedings or any other legal right, remedy or
recourse, the title to and right of possession of any such property shall
pass to the purchaser thereof, and to the fullest extent permitted by law,
Borrower shall be completely and irrevocably divested of all of its right,
title, interest, claim and demand whatsoever, either at law or in equity,
in and to the property sold and such sale shall be a perpetual bar both at
law and in equity against Borrower, and against all other persons claiming
the property sold or any part thereof, by, through or under Borrower.
Lender may be a purchaser at such sale and if Lender is the highest bidder,
may credit the portion of the purchase price that would be distributed to
Lender against the Debt in lieu of paying cash.
(e) Receiver. Make application to a court of competent
jurisdiction for, and obtain from such court as a matter of strict right
and without notice to Borrower or regard to the adequacy of the Property
for the repayment of the Debt, the appointment of a receiver of the
Property, and Borrower irrevocably consents to such appointment. Any such
receiver shall have all the usual powers and duties of receivers in similar
cases, including the full power to rent, maintain and otherwise operate the
Property upon such terms as may be approved by the court, and shall apply
such Rents in accordance with the provisions of Section 4.6.
<PAGE>
(f) UCC. Exercise any and all rights and remedies granted to
a secured party upon default under the Uniform Commercial Code, including,
without limiting the generality of the foregoing: (i) the right to take
possession of the Personalty or any part thereof, and to take such other
measures as Lender may deem necessary for the care, protection and
preservation of the Personalty, and (ii) request Borrower at its expense to
assemble the Personalty and make it available to Lender at a convenient
place acceptable to Lender. Any notice of sale, disposition or other
intended action by Lender with respect to the Personalty sent to Borrower
in accordance with the provisions hereof at least ten (10) days prior to
such action, shall constitute commercially reasonable notice to Borrower;
(g) Other. Exercise all other rights, remedies and recourses
granted under the Loan Documents or otherwise available at law or in equity
(including an action for specific performance of any covenant contained in
the Loan Documents, or a judgment on the Note and/or the Other Note either
before, during or after any proceeding to enforce this Deed of Trust).
Section 4.2Separate Sales. The Property may be sold in one or
more parcels and in such manner and order as Lender in its sole discretion,
may elect; the right of sale arising out of any Event of Default shall not
be exhausted by any one or more sales.
Section 4.3Remedies Cumulative, Concurrent and Nonexclusive.
Lender and Trustee shall have all rights, remedies and recourses granted
in the Loan Documents and available at law or equity (including the UCC),
which rights (a) shall be cumulative and concurrent, (b) may be pursued
separately, successively or concurrently against Borrower or others
obligated under the Note and the other Loan Documents, or against the
Property, or against any one or more of them, at the sole discretion of
Lender, (c) may be exercised as often as occasion therefor shall arise, and
the exercise or failure to exercise any of them shall not be construed as a
waiver or release thereof or of any other right, remedy or recourse, and
(d) are intended to be, and shall be, nonexclusive. No action by Lender in
the enforcement of any rights, remedies or recourses under the Loan
Documents or otherwise at law or equity shall be deemed to cure any Event
of Default or any Event of Default under the Other Loan Documents.
Section 4.4Release of and Resort to Collateral. Lender may
release, regardless of consideration and without the necessity for any
notice to or consent by the holder of any subordinate lien on the Property,
any part of the Property without, as to the remainder, in any way
impairing, affecting, subordinating or releasing the lien or security
interests created in or evidenced by the Loan Documents or their status as
a first and prior lien and security interest in and to the Property. For
payment of the Debt, Lender or Trustee may resort to any other security in
such order and manner as Lender may elect.
Section 4.5Discontinuance of Proceedings. If Lender or
Trustee shall have proceeded to invoke any right, remedy or recourse
permitted under the Loan Documents and shall thereafter elect to
discontinue or abandon it for any reason, Lender shall have the unqualified
right to do so and, in such an event, Borrower and Lender shall be restored
to their former positions with respect to the Debt, the Obligations, the
Loan Documents, the Property and otherwise, and the rights, remedies,
recourses and powers of Lender shall continue as if the right, remedy or
recourse had never been invoked, but no such discontinuance or abandonment
shall waive any Event of Default which may then exist or the right of
Lender thereafter to exercise any right, remedy or recourse under the Loan
Documents for such Event of Default.
Section 4.6Application of Proceeds. The proceeds of any sale
of, and the Rents and other amounts generated by the holding, leasing,
management, operation or other use of the Property, shall be applied by
Lender or Trustee (or the receiver, if one is appointed) in the following
order unless otherwise required by applicable law:
<PAGE>
(a) to the payment of the reasonable costs and expenses of
taking possession of the Property and of holding, using, leasing,
repairing, and selling the same, including, without limitation (i)
receiver's fees and expenses, (ii) court costs, (iii) attorneys' and
accountants' fees and expenses, (iv) costs of advertisement, (v) insurance
premiums and (vi) the payment of all ground rent, real estate taxes and
assessments, except any taxes, assessments or other charges subject to
which the Property shall have been sold;
(b) to the payment of all amounts (including interest), other
than the unpaid principal balance of the Note and the Other Note and
accrued but unpaid interest, which may be due to Lender under the Loan
Documents;
(c) to the payment of the Debt in such manner and order of
preference as Lender in its sole discretion may determine; and
(d) the balance, if any, to the payment of the persons
legally entitled thereto.
Section 4.7Occupancy After Foreclosure. The purchaser at any
foreclosure sale pursuant to Section 4.1(d) shall become the legal owner of
the Property. All occupants of the Property shall, at the option of such
purchaser and subject to the rights of tenants to remain in possession,
become tenants of the purchaser at the foreclosure sale and shall deliver
possession thereof immediately to the purchaser upon demand. It shall not
be necessary for the purchaser at said sale to bring any action for
possession of the Property other than the statutory action of forcible
detainer in any justice court having jurisdiction over the Property.
Section 4.8 Additional Advances and Disbursements, Costs of
Enforcement.
(a) If any Event of Default exists, Lender shall have the
right, but not the obligation, to cure such Event of Default in the name
and on behalf of Borrower. All sums advanced and expenses incurred at any
time by Lender under this Section 4.8, or otherwise under this Deed of
Trust or any of the other Loan Documents or applicable law, shall bear
interest from the date that such sum is advanced or expense incurred, to
and including the date of reimbursement, computed at the Default Rate (as
defined in the Loan Agreement), and all such sums, together with interest
thereon, shall be secured by this Deed of Trust.
(b) Borrower shall pay all reasonable expenses (including
reasonable attorneys' fees and expenses) of or incidental to the perfection
and enforcement of this Deed of Trust and the other Loan Documents, or the
enforcement, compromise or settlement of the Debt or any claim under this
Deed of Trust and the other Loan Documents, and for the curing thereof, or
for defending or asserting the rights and claims of Lender in respect
thereof, by litigation or otherwise.
Section 4.9No Lender in Possession. Neither the enforcement
of any of the remedies under this Article 4, the assignment of the Rents
and Leases under Article 5, the security interests under Article 6, nor any
other remedies afforded to Lender or Trustee under the Loan Documents, at
law or in equity shall cause Lender to be deemed or construed to be a
mortgagee in possession of the Property, to obligate Lender to lease the
Property or attempt to do so, or to take any action, incur any expense, or
perform or discharge any obligation, duty or liability whatsoever under any
of the Leases or otherwise.
Section 4.10 Actions and Proceedings. Lender or Trustee
has the right to appear in and defend any action or proceeding brought with
respect to the Property, if reasonably necessary to protect Lender's
interest in the Property, and to bring any action or proceeding, in the
name and on behalf of Borrower, which Lender, in its reasonable discretion,
decides should be brought to protect its interest in the Property.
<PAGE>
Section 4.11 Waiver of Redemption, Notice and Marshalling
of Assets. To the fullest extent permitted by law, Borrower hereby
irrevocably and unconditionally waives and releases (a) all benefit that
might accrue to Borrower by virtue of any present or future statute of
limitations or law or judicial decision exempting the Property from
attachment, levy or sale on execution or providing for any appraisement,
valuation, stay of execution, exemption from civil process, redemption or
extension of time for payment, (b) all notices of any Event of Default or
of Lender's or Trustee's election to exercise or its actual exercise of any
right, remedy or recourse provided for under the Loan Documents, and (c)
any right to a marshalling of assets or a sale in inverse order of
alienation.
ARTICLE V
ASSIGNMENT OF RENTS AND LEASES
Section 5.1Assignment. Borrower acknowledges and confirms
that it has executed and delivered to Lender an Assignment of Leases and
Rents of even date herewith (the "Assignment of Leases and Rents"),
intending that such instrument create a present, absolute assignment to
Lender of the Leases and Rents. Without limiting the intended benefits or
the remedies provided under the Assignment of Leases and Rents, Borrower
hereby assigns to Lender and Trustee, as further security for the Debt and
the Obligations, the Leases and Rents. While any Event of Default exists,
Lender shall be entitled to exercise any or all of the remedies provided in
the Assignment of Leases and Rents and in Article 4 hereof including,
without limitation, the right to have a receiver appointed. If any
conflict or inconsistency exists between the assignment of the Rents and
the Leases in this Deed of Trust and the absolute assignment of the Leases
and Rents in the Assignment of Leases and Rents, the terms of the
Assignment of Leases and Rents shall control.
Section 5.2No Merger of Estates. So long as any part of the
Debt and the Obligations secured hereby remain unpaid and undischarged, the
fee and leasehold estates to the Property shall not merge, but shall remain
separate and distinct, notwithstanding the union of such estates either in
Borrower, Lender, any lessee or any third party by purchase or otherwise.
ARTICLE VI
SECURITY AGREEMENT
Section 6.1Security Interest. This Deed of Trust constitutes
a "Security Agreement" on personal property within the meaning of the UCC
and other applicable law and with respect to the Personalty, Fixtures,
Plans, Leases, Rents, Accounts and Property Agreements. To this end,
Borrower grants to Lender, a first and prior security interest in the
Personalty, Fixtures, Plans, Leases, Rents, Accounts and Property
Agreements and all other Property which is personal property to secure the
payment of the Debt and performance of the Obligations, and agrees that
Lender shall have all the rights and remedies of a secured party under the
UCC with respect to such property. Any sale of the Property may be held as
part of and in conjunction with a sale by Trustee of the Land. Any notice
of sale, disposition or other intended action by Lender with respect to the
Personality, Fixtures, Plans, Leases, Rents, Accounts and Property
Agreements sent to Borrower at least ten (10) days prior to any action
under the UCC shall constitute reasonable notice to Borrower.
<PAGE>
Section 6.2Financing Statements. Borrower shall execute and
deliver to Lender, in form and substance reasonably satisfactory to Lender,
such financing statements and such further assurances as Lender may, from
time to time, reasonably consider necessary to perfect and preserve
Lender's security interest hereunder and Lender may cause such statements
and assurances to be recorded and filed, at such times and places as may be
required or permitted by law to so create, perfect and preserve such
security interest. Borrower's chief executive office is in the District of
Columbia at the address set forth in the first paragraph of this Deed of
Trust.
Section 6.3Fixture Filing. This Deed of Trust shall also
constitute a "fixture filing" for the purposes of the UCC against all of
the Property which is or is to become fixtures. Information concerning the
security interest herein granted may be obtained at the addresses of Debtor
(Borrower) and Secured Party (Lender) as set forth in the first paragraph
of this Deed of Trust.
ARTICLE VII
MISCELLANEOUS
Section 7.1Limitation on Interest. It is the intention of the
parties hereto to conform strictly to applicable usury laws. Accordingly,
all agreements between Borrower and Lender with respect to the Loan are
hereby expressly limited so that in no event, whether by reason of
acceleration of maturity or otherwise, shall the amount paid or agreed to
be paid to Lender or charged by Lender for the use, forbearance or
detention of the money to be lent hereunder or otherwise, exceed the
maximum amount allowed by law. If the Loan would be usurious under
applicable law (including the laws of the state where the Property is
located and the laws of the United States of America), then,
notwithstanding anything to the contrary in the Loan Documents: (a) the
aggregate of all consideration which constitutes interest under applicable
law that is contracted for, taken, reserved, charged or received under the
Loan Documents shall under no circumstances exceed the maximum amount of
interest allowed by applicable law, and any excess shall be credited on the
Debt; and (b) if maturity is accelerated by reason of an election by
Lender, or in the event of any prepayment, then any consideration which
constitutes interest may never include more than the maximum amount allowed
by applicable law. In such case, excess interest, if any, provided for in
the Loan Documents or otherwise, to the extent permitted by applicable law,
shall be amortized, prorated, allocated and spread from the date of advance
until payment in full so that the actual rate of interest is uniform
through the term hereof. If such amortization, proration, allocation and
spreading is not permitted under applicable law, then such excess interest
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited on the Debt. The
Loan Documents are contracts made under and shall be construed in
accordance with and governed by the laws of the State of New York, except
that if at any time the laws of the United States of America permit Lender
to contract for, take, reserve, charge or receive a higher rate of interest
than is allowed by the laws of the State of New York (whether such federal
laws directly so provide or refer to the law of any state), then such
federal laws shall to such extent govern as to the rate of interest which
Lender may contract for, take, reserve, charge or receive under the Loan
Documents.
Section 7.2Notices. Any notice required or permitted to be
given under this Deed of Trust shall be (a) in writing, (b) sent in the
manner set forth in the Loan Agreement, and (c) effective in accordance
with the terms of the Loan Agreement.
<PAGE>
Section 7.3Covenants Running with the Land. All Obligations
contained in this Deed of Trust are intended by Borrower and Lender to be,
and shall be construed as, covenants running with the Property. As used
herein, "Borrower" shall refer to the party named in the first paragraph of
this Deed of Trust and to any subsequent owner of all or any portion of the
Property (without in any way implying that Lender has or will consent to
any such conveyance or transfer of the Property). All persons or entities
who may have or acquire an interest in the Property shall be deemed to have
notice of, and be bound by, the terms of the Loan Agreement and the other
Loan Documents; however, no such party shall be entitled to any rights
thereunder without the prior written consent of Lender.
Section 7.4Attorney-in-Fact. Borrower hereby irrevocably
appoints Lender and its successors and assigns, as its attorney-in-fact,
which agency is coupled with an interest, (a) to execute and/or record any
notices of completion, cessation of labor or any other notices that Lender
deems reasonably necessary to protect Lender's interest, if Borrower shall
fail to do so within ten (10) days after written request by Lender, (b)
upon the issuance of a deed pursuant to the foreclosure of this Deed of
Trust or the delivery of a deed in lieu of foreclosure, to execute all
instruments of assignment, conveyance or further assurance with respect to
the Leases, Rents, Personalty, Fixtures, Plans and Property Agreements in
favor of the grantee of any such deed and as may be reasonably necessary
for such purpose, (c) to prepare, execute and file or record financing
statements, continuation statements, applications for registration and like
papers necessary to create, perfect or preserve Lender's security interests
and rights in or to any of the collateral and (d) while any Event of
Default exists, to perform any obligation of Borrower hereunder; however:
(i) Lender shall not under any circumstances be obligated to perform any
obligation of Borrower; (ii) any sums advanced by Lender in such
performance shall be added to and included in the Debt and shall bear
interest at the Default Rate; (iii) Lender as such attorney-in-fact shall
only be accountable for such funds as are actually received by Lender; and
(iv) Lender shall not be liable to Borrower or any other person or entity
for any failure to take any action which it is empowered to take under this
Section.
Section 7.5Successors and Assigns. This Deed of Trust shall
be binding upon and inure to the benefit of Lender, Trustee and Borrower
and their respective successors and assigns. Borrower shall not, without
the prior written consent of Lender, except as expressly permitted pursuant
to Section 3.9 hereof, assign any rights, duties or obligations hereunder.
Section 7.6No Waiver. Any failure by Lender to insist upon
strict performance of any of the terms, provisions or conditions of the
Loan Documents shall not be deemed to be a waiver of same, and Lender shall
have the right at any time to insist upon strict performance of all of such
terms, provisions and conditions.
Section 7.7Subrogation. To the extent proceeds of the Note
and/or the Other Note have been used to extinguish, extend or renew any
indebtedness against the Property, then Lender shall be subrogated to all
of the rights, liens and interests existing against the Property and held
by the holder of such indebtedness and such former rights, liens and
interests, if any, are not waived, but are continued in full force and
effect in favor of Lender.
Section 7.8Loan Agreement. If any conflict or inconsistency
exists between this Deed of Trust and (a) the Loan Agreement, the Loan
Agreement shall govern, or (b) the Other Loan Agreement, the Other Loan
Agreement shall govern.
Section 7.9Release. Upon payment in full of the Debt and
performance in full of the Obligations, Lender, at Borrower's expense,
shall release the liens and security interests created by this Deed of
Trust.
<PAGE>
Section 7.10 Waiver of Stay, Moratorium and Similar
Rights. Borrower agrees, to the full extent that it may lawfully do so,
that it will not at any time insist upon or plead or in any way take
advantage of any appraisement, valuation, stay, marshaling of assets,
extension, redemption or moratorium law now or hereafter in force and
effect so as to prevent or hinder the enforcement of the provisions of this
Deed of Trust or the Debt secured hereby, or any agreement between Borrower
and Lender or any rights or remedies of Lender.
Section 7.11 Limitation on Liability. Borrower's
liability hereunder is subject to the limitation on liability provisions of
Article 13 of the Loan Agreement.
Section 7.12 Obligations of Borrower, Joint and Several.
If more than one person or entity has executed this Deed of Trust as
"Borrower," the obligations of all such persons or entities hereunder shall
be joint and several.
Section 7.13 Governing Law. THIS DEED OF TRUST WAS
NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY LENDER AND ACCEPTED BY
BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE SECURED
HEREBY WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES
AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING
TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THIS DEED OF TRUST AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE
(WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR
THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY
INTERESTS CREATED ON REAL PROPERTY (INCLUDING FIXTURES) PURSUANT HERETO AND
PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT
BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH
STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION,
VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT
PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES
ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
DEED OF TRUST, AND THIS DEED OF TRUST SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-
1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
Section 7.14 Headings. The Article, Section and
Subsection titles hereof are inserted for convenience of reference only and
shall in no way alter, modify or define, or be used in construing, the text
of such Articles, Section or Subsections.
Section 7.15 Entire Agreement. This Deed of Trust and the
other Loan Documents embody the entire agreement and understanding between
Lender and Borrower and supersede all prior agreements and understandings
between such parties relating to the subject matter hereof and thereof.
Accordingly, the Loan Documents may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties. There
are no unwritten oral agreements between the parties.
Section 7.16 Interpretation. To the extent that this Deed
of Trust references provisions in the Loan Agreement, such Loan Agreement
shall be deemed to remain in existence for the purpose of the
interpretation of this Deed of Trust whether or not the Loan is outstanding
or has been paid in full.
<PAGE>
ARTICLE VIII
PROVISIONS REGARDING THE CONDOMINIUM
Section 8.1Mortgage of Condominium Documents. (a) Borrower
hereby assigns, conveys and mortgages to Lender, as further and additional
security for the Debt and Borrower's obligations under this Deed of Trust,
all of the rights and benefits accruing to Borrower under the Condominium
Documents, including, without limitation, (i) any right of Borrower to
amend, modify or terminate any of the Condominium Documents, (ii) any right
of Borrower to terminate the Condominium Unit, including, without
limitation, as a result of condemnation or casualty and (iii) any right of
Borrower to determine whether or not the Condominium Unit or Common
Elements will be restored or repaired following a fire or other casualty.
If Lender, its nominee, designee, successor, or assignee acquires title to
the Condominium Unit by reason of foreclosure of this Deed of Trust, deed-
in-lieu of foreclosure or otherwise, Lender, its nominee, designee,
successor, assign or such purchaser shall (A) succeed to all of the rights
of and benefits accruing to Borrower under the Condominium Documents, as
amended or supplemented, (B) be entitled to exercise all of the rights and
benefits accruing to Borrower under the Condominium Documents, as so
amended, and (B) have the immediate right to remove any and all managers,
members, directors, trustees and/or officers of the Condominium Unit
appointed by Borrower, anything in the Condominium Documents to the
contrary notwithstanding, and thereupon Lender, its nominee, designee,
successor or assignee shall have the right to appoint managers, members,
directors, trustees and/or officers of the Condominium Unit, in replacement
for those managers, members, directors, trustees and/or officers so
removed. At such time as Lender shall request, Borrower shall execute and
deliver to Lender such documents as Lender and its counsel may reasonably
require in order to ensure that the provisions of this paragraph will be
validly and legally enforceable and effective against Borrower and all
parties claiming by, through, under or against Borrower. Borrower hereby
absolutely and irrevocably appoints Lender as its true and lawful attorney,
coupled with an interest, in its name and stead to make and execute on
behalf of Borrower any documents necessary to validly and legally carry out
the rights granted to Lender under the terms of this paragraph, Borrower
ratifying all that its said attorney shall do by virtue thereof. In
addition, Borrower covenants and agrees to give to Lender prompt notice of
any notice of any special assessment relating to the Condominium Unit
received by Borrower. Borrower hereby assigns to Lender, as further and
additional security for the Debt and Borrower's obligations hereunder, all
of Borrower's right to make rules and regulations for the Condominium Unit
and Borrower hereby covenants and agrees not to make or cause to be made
any rules and regulations, and not to suffer or permit any rules and
regulations to be made, without in all cases first obtaining the prior
written consent of Lender thereto, which consent shall not be unreasonably
withheld, conditioned or delayed.
(b) Notwithstanding that the assignment of Borrower's rights
under the Condominium Documents is an absolute assignment and not merely
the collateral assignment of, or the grant of a lien or security interest
in such rights, Lender grants to Borrower, subject to the terms and
conditions of the Loan Documents, a revocable license to exercise such
rights. Such license may be revoked by Lender upon the occurrence of any
Event of Default and Lender shall immediately be entitled to exercise such
rights on behalf of Borrower, whether or not Lender enters upon and takes
control of the Property.
<PAGE>
ARTICLE IX
DEED OF TRUST PROVISIONS
Section 9.1 Concerning the Trustee. Trustee shall be under no
duty to take any action hereunder except as expressly required hereunder or
by law, or to perform any act which would involve Trustee in any expense or
liability or to institute or defend any suit in respect hereof, unless
properly indemnified to Trustee's reasonable satisfaction. Trustee, by
acceptance of this Deed of Trust, covenants to perform and fulfill the
trusts herein created, being liable, however, only for willful negligence
or misconduct, and hereby waives any statutory fee and agrees to accept
reasonable compensation, in lieu thereof, for any services rendered by
Trustee in accordance with the terms hereof. Trustee may resign at any
time upon giving thirty (30) days' notice to Borrower and to Lender.
Lender may remove Trustee at any time or from time to time and select a
successor trustee. In the event of the death, removal, resignation,
refusal to act, or inability to act of Trustee, or in its sole discretion
for any reason whatsoever Lender may, without notice and without specifying
any reason therefor and without applying to any court, select and appoint a
successor trustee, by an instrument recorded wherever this Deed of Trust is
recorded and all powers, rights, duties and authority of Trustee, as
aforesaid, shall thereupon become vested in such successor. Such
substitute trustee shall not be required to give bond for the faithful
performance of the duties of Trustee hereunder unless required by Lender.
The procedure provided for in this paragraph for substitution of Trustee
shall be in addition to and not in exclusion of any other provisions for
substitution, by law or otherwise.
Section 9.2 Trustee's Fees. Borrower shall pay all reasonable
costs, fees and expenses incurred by Trustee and Trustee's agents and
counsel in connection with the performance by Trustee of Trustee's duties
hereunder and all such costs, fees and expenses shall be secured by this
Deed of Trust.
Section 9.3 Power of Sale. (a) Upon the occurrence of an
Event of Default, Trustee, or the agent or successor of Trustee, at the
request of Lender, shall sell or offer for sale the Property in such
portions, order and parcels as Lender may determine with or without having
first taken possession of same, to the highest bidder for cash at one or
more public auctions in accordance with the terms and provisions of the law
of the State in which the Property is located. Such sale shall be made at
the area within the courthouse of the county in which the Property (or any
portion thereof to be sold) is situated (whether the parts or parcels
thereof, if any, in different counties are contiguous or not, and without
the necessity of having any personal property hereby secured present at
such sale) which is designated by the applicable court of such County as
the area in which public sales are to take place, or, if no such area is
designated, at the area at the courthouse designated in the notice of sale
as the area in which the sale will take place, on such day and at such
times as permitted under applicable law of the State where the Property is
located, after advertising the time, place and terms of sale and that
portion of the Property in accordance with such law, and after having
served written or printed notice of the proposed sale by certified mail on
each Borrower obligated to pay the Note, the Other Note and other secured
indebtedness secured by this Deed of Trust according to the records of
Lender in accordance with applicable law. The affidavit of any person
having knowledge of the facts to the effect that such service was completed
shall be prima facie evidence of the fact of service.
<PAGE>
At any such public sale, Trustee may execute and deliver in the
name of Borrower to the purchaser a conveyance of the Property or any part
of the Property in fee simple. In the event of any sale under this Deed of
Trust by virtue of the exercise of the powers herein granted, or pursuant
to any order in any judicial proceeding or otherwise, the Property may be
sold in its entirety or in separate parcels and in such manner or order as
Lender in its sole discretion may elect, and if Lender so elects, Trustee
may sell the personal property covered by this Deed of Trust at one or more
separate sales in any manner permitted by the UCC, and one or more
exercises of the powers herein granted shall not extinguish or exhaust such
powers, until all the Property is sold or the Debt and other secured
indebtedness is paid in full. If the Note, the Other Note and other
secured indebtedness is now or hereafter further secured by any chattel
mortgages, pledges, contracts or guaranty, assignments of lease, or other
security instruments, Lender at its option may exhaust the remedies granted
under any of said security instruments either concurrently or
independently, and in such order as Lender may determine.
(b) Upon any foreclosure sale or sales of all or any portion
of the Property under the power herein granted, Lender may bid for and
purchase the Property and shall be entitled to apply all or any part of the
Debt as a credit to the purchase price.
(c) In the event of a foreclosure or a sale of all or any
portion of the Property under the power herein granted, the proceeds of
said sale shall be applied, in whatever order Lender in its sole discretion
may decide, to the expenses of such sale and of all proceedings in
connection therewith (including, without limitation, attorneys' fees and
expenses), to fees and expenses of Trustee (including, without limitation,
Trustee's attorneys' fees and expenses), to insurance premiums, liens,
assessments, taxes and charges (including, without limitation, utility
charges advanced by Lender), to payment of the outstanding principal
balance of the Debt, and to the accrued interest on all of the foregoing;
and the remainder, if any, shall be paid to Borrower, or to the person or
persons entitled thereto, or as otherwise required by law.
Section 9.4 Certain Rights. With the approval of Lender,
Trustee shall have the right to take any and all of the following actions:
(i) to select, employ, and advise with counsel (who may be, but need not
be, counsel for Lender) upon any matters arising hereunder, including the
preparation, execution, and interpretation of the Loan Agreement, the Note,
this Deed of Trust, the Guaranty or the other Loan Documents, and shall be
fully protected in relying as to legal matters on the advice of counsel,
(ii) to execute any of the trusts and powers hereof and to perform any duty
hereunder either directly or through his agents or attorneys, (iii) to
select and employ, in and about the execution of his duties hereunder,
suitable accountants, engineers and other experts, agents and attorneys-in-
fact, either corporate or individual, not regularly in the employ of
Trustee, and Trustee shall not be answerable for any act, default,
negligence, or misconduct of any such accountant, engineer or other expert,
agent or attorney-in-fact, if selected with reasonable area, or for any
error of judgment or act done by Trustee in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever, except for
Trustee's gross negligence or bad faith, and (iv) any and all other lawful
action as Lender may instruct Trustee to take to protect or enforce
Lender's rights hereunder. Trustee shall not be personally liable in case
of entry by Trustee, or anyone entering by virtue of the powers herein
granted to Trustee, upon the Property for debts contracted for or liability
or damages incurred in the management or operation of the Property.
Trustee shall have the right to rely on any instrument, document, or
signature authorizing or supporting an action taken or proposed to be taken
by Trustee hereunder, believed by Trustee in good faith to be genuine.
Trustee shall be entitled to reimbursement for actual expenses incurred by
Trustee in the performance of Trustee's duties hereunder and to reasonable
compensation for such of Trustee's services hereunder as shall be rendered.
<PAGE>
Section 9.5 Retention of Money. All moneys received by Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated in any
manner from any other moneys (except to the extent required by applicable
law) and Trustee shall be under no liability for interest on any moneys
received by Trustee hereunder.
Section 9.6 Perfection of Appointment. Should any deed,
conveyance, or instrument of any nature be required from Borrower by any
Trustee or substitute trustee to more fully and certainly vest in and
confirm to the Trustee or substitute trustee such estates rights, powers,
and duties, then, upon request by the Trustee or substitute trustee, any
and all such deeds, conveyances and instruments shall be made, executed,
acknowledged, and delivered and shall be caused to be recorded and/or filed
by Borrower.
Section 9.7 Succession Instruments. Any substitute trustee
appointed pursuant to any of the provisions hereof shall, without any
further act, deed, or conveyance, become vested with all the estates,
properties, rights, powers, and trusts of its or his predecessor in the
rights hereunder with like effect as if originally named as Trustee herein;
but nevertheless, upon the written request of Lender or of the substitute
trustee, the Trustee ceasing to act shall execute and deliver any
instrument transferring to such substitute trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers, and trusts of the
Trustee so ceasing to act, and shall duly assign, transfer and deliver any
of the property and moneys held by such Trustee to the substitute trustee
so appointed in the Trustee's place.
ARTICLE X
SPECIAL STATE PROVISIONS
Section 10.1Principles of Construction. In the event of any
inconsistencies between the terms and provisions of this Article X and the
terms and provisions of any other Article of this Deed of Trust, the terms
and provisions of this Article X shall govern and control.
Section 10.2Texas.
(a) Assignment of Leases and Rents Amended. The assignments
of Leases and Rents set forth in this Deed of Trust are not intended to
constitute payment to Lender or Trustee unless Borrower's license to
collect Rents is terminated, and then only to the extent that the Rents are
actually received by Lender (as opposed to constituting a portion of the
voluntary payments of principal and interest on the Note and the Other
Note) and are not used for the operation or maintenance of the Property or
for the payment of costs and expenses in connection therewith, taxes,
assessments, water charges, sewer rents, and other charges levied, assessed
or imposed against the Property, insurance premiums, costs and expenses
with respect to any litigation affecting the Property, the leases, the
concessions, and the rent, any wages and salaries of employees, commissions
of agents and attorneys fees. It is further the intent of Borrower and
Lender that the Rents hereby absolutely assigned are no longer, during the
term of this Deed of Trust, property of Borrower or property of any estate
of Borrower as defined in 11 U.S.C. Section 541 and shall not constitute
collateral, cash or otherwise, of Borrower. The term Rents as used herein
shall mean the gross rents without deduction or offsets of any kind.
<PAGE>
(b) Additional Remedy Provisions.
(i) Delivery Upon Sale. Upon the completion of any sale or
sales pursuant hereto, Trustee shall execute and deliver to the accepted
purchaser or purchasers a good and sufficient instrument, or good and
sufficient instruments, conveying, assigning and transferring all estate,
right, title and interest in and to the property and rights sold by general
warranty of title. Trustee is hereby irrevocably appointed the true and
lawful attorney of Borrower, in its name and stead, to make all necessary
conveyances, assignments, transfers and deliveries of the Property and
rights so sold and for that purpose Trustee may execute all necessary
instruments of conveyance, assignment and transfer, and may substitute one
or more persons with like power, Borrower hereby ratifying and confirming
all that its said attorney or such substitute or substitutes shall lawfully
do by virtue hereof. Any sale or sales made under or by virtue of this
section, whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale, shall operate to divest all the estate, right, title, interest,
claim and demand whatsoever, whether at law or in equity, of Borrower in
and to the properties and rights so sold, and shall be a perpetual bar both
at law and in equity against Borrower and against any and all persons
claiming or who may claim the same, or any part thereof from, through or
under Borrower.
(ii) Option to Bid. Upon any sale made under or by
virtue of this paragraph, whether made under the power of sale herein
granted or under or by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale, Lender may bid for and acquire the Property
or any part thereof and in lieu of paying cash therefor may make settlement
for the purchase price by crediting upon the Debt the net sales price after
deducting therefrom the expenses of the sale and costs of the action and
any other sums which Lender is authorized to deduct under this Deed of
Trust.
(iii) Remaining Liens. No recovery of any judgment by
Lender and no levy of an execution under any judgment upon the Property or
upon any other property of Borrower shall affect in any manner or to any
extent the lien of this Deed of Trust upon the Property or any part
thereof, or any liens, rights, powers or remedies of Lender hereunder, but
such liens, rights, powers and remedies of Lender shall continue unimpaired
as before.
(iv) No Waiver of Remedies. Lender may resort to any
remedies and the security given by the Note, the Loan Agreement, this Deed
of Trust or the other Loan Documents in whole or in part, and in such
portions and in such order as determined by Lender's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits
or remedies evidenced or provided by the Note, the Loan Agreement, this
Deed of Trust or any of the other Loan Documents. The failure of Lender to
exercise any right, remedy or option provided in the Note, the Loan
Agreement, this Deed of Trust or any of the other Loan Documents shall not
be deemed a waiver of such right, remedy or option or of any covenant or
obligation secured by the Note, the Loan Agreement, this Deed of Trust or
the other Loan Documents. No acceptance by Lender of any payment after the
occurrence of any Event of Default and no payment by Lender of any
obligation for which Borrower is liable hereunder shall be deemed to waive
or cure any Event of Default with respect to Borrower, or Borrower's
liability to pay such obligation. No sale of all or any portion of the
Property, no forbearance on the part of Lender, and no extension of time
for the payment of the whole or any portion of the Debt or any other
indulgence given by Lender to Borrower, shall operate to release or in any
manner affect the interest of Lender in
<PAGE>
the remaining Property or the liability of Borrower to pay the Debt.
No waiver by Lender shall be effective unless it is in writing and then
only to the extent specifically stated. All costs and expenses of Lender
in exercising its rights and remedies under this Deed of Trust (including
reasonable attorneys' fees and disbursements to the extent permitted by
law), shall be paid by Borrower immediately upon notice from Lender, and
such costs and expenses shall constitute a portion of the Debt and shall be
secured by this Deed of Trust.
(v) No Waiver Continued. The interests and rights of Lender
under the Note, the Loan Agreement, this Deed of Trust or in any of the
other Loan Documents shall not be impaired by any indulgence, including (A)
any renewal, extension or modification which Lender may grant with respect
to any of the Debt, (B) any surrender, compromise, release, renewal,
extension, exchange or substitution which Lender may grant with respect to
the Property or any portion thereof; or (C) any release or indulgence
granted to any maker, endorser, guarantor or surety of any of the Debt.
(vi) Foreclosure. Upon the occurrence and the
continuance of any Event of Default, Lender may request Trustee to proceed
with foreclosure under the power of sale which is hereby conferred, such
foreclosure to be accomplished in accordance with the following provisions:
(A) Public Sale. Trustee is hereby authorized and empowered,
and it shall be Trustee's special duty, upon such request of Lender, to
sell the Property, or any part thereof, at public auction to the highest
bidder for cash, with or without having taken possession of same. Any such
sale (including notice thereof) shall comply with the applicable
requirements, at the time of the sale, of Section 51.002 of the Texas
Property Code or, if and to the extent such statute is not then in force,
with the applicable requirements, at the time of the sale, of the successor
statute or statutes, if any, governing sales of Texas real property under
powers of sale conferred by deeds of trust. If there is no statute in
force at the time of the sale governing sales of Texas real property under
powers of sale conferred by deeds of trust, such sale shall comply with
applicable law, at the time of the sale, governing sales of Texas real
property under powers of sale conferred by deeds of trust. Trustee or his
successor or substitute may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Trustee, including the posting of notices, and the conduct of sale, but in
the name and on behalf of Trustee, his successor or substitute.
(B) Right to Require Proof of Financial Ability and/or Cash
Bid. At any time during the bidding, the Trustee may require a bidding
party (I) to disclose its full name, state and city of residence,
occupation, and specific business office location, and the name and address
of the principal the bidding party is representing (if applicable), and
(II) to demonstrate reasonable evidence of the bidding party's financial
ability (or, if applicable, the financial ability of the principal of such
bidding party), as a condition to the bidding party submitting bids at the
foreclosure sale. If any such bidding party (the "Questioned Bidder")
declines to comply with the Trustee's requirement in this regard, or if
such Questioned Bidder does respond but the Trustee,
<PAGE>
in Trustee's sole and absolute discretion, deems the
information or the evidence of the financial ability of the Questioned
Bidder (or, if applicable, the principal of such bidding party) to be
inadequate, then the Trustee may continue the bidding with reservation; and
in such event (1) the Trustee shall be authorized to caution the Questioned
Bidder concerning the legal obligations to be incurred in submitting bids,
and (2) if the Questioned Bidder is not the highest bidder at the sale, or
if having been the highest bidder the Questioned Bidder fails to deliver
the cash purchase price payment promptly to the Trustee, all bids by the
Questioned Bidder shall be null and void. The Trustee may, in Trustee's
sole and absolute discretion, determine that a credit bid may be in the
best interest of the Borrower and Lender, and elect to sell the Property
for credit or for a combination of cash and credit; provided, however, that
the Trustee shall have no obligation to accept any bid except an all cash
bid. In the event the Trustee requires a cash bid and cash is not
delivered within a reasonable time after conclusion of the bidding process,
as specified by the Trustee, but in no event later than 3:45 p.m. local
time on the day of sale, then said contingent sale shall be null and void,
the bidding process may be recommenced, and any subsequent bids or sale
shall be made as if no prior bids were made or accepted.
(C) Sale Subject to Unmatured Debt. In addition to the
rights and powers of sale granted under the preceding provisions of this
subsection, if default is made in the payment of any installment of the
Debt and is not cured within applicable cure periods, Lender may, at
Lender's option, at once or at any time thereafter while any matured
installment remains unpaid, without declaring the entire Debt to be due and
payable, orally or in writing direct Trustee to enforce this Deed of Trust
and to sell the Property subject to such unmatured Debt and to the rights,
powers, liens, security interests, and assignments securing or providing
recourse for payment of such unmatured Debt, in the same manner, all as
provided in the preceding provisions of this subsection. Sales made
without maturing the Debt may be made hereunder whenever there is a default
in the payment of any installment of the Debt, without exhausting the power
of sale granted hereby, and without affecting in any way the power of sale
granted under this subsection, the unmatured balance of the Debt or the
rights, powers, liens, security interests, and assignments securing or
providing recourse for payment of the Debt.
(D) Partial Foreclosure. Sale of a part of the Property
shall not exhaust the power of sale, but sales may be made from time to
time until the Debt is paid in full. It is intended by each of the
foregoing provisions of this subsection that Trustee may, after any request
or direction by Lender, sell not only the Land and the Improvements, but
also the Fixtures and other interests constituting a part of the Property
or any part thereof, along with the Land and the Improvements or any part
thereof, as a unit and as a part of a single sale, or may
<PAGE>
sell at any time or from time to time any part or parts
of the Property separately from the remainder of the Property. It shall
not be necessary to have present or to exhibit at any sale any of the
Property. Any sale of personal property made hereunder shall be deemed to
have been a public sale conducted in a commercially reasonable manner if
held contemporaneously with, or as part of, and upon the same notice as
required for the sale of real property under the power of sale granted
herein.
(E) Trustee's Deeds. After any sale under this subsection,
Trustee shall make good and sufficient deeds, assignments, and other
conveyances to the purchaser or purchasers thereunder in the name of
Borrower, conveying the Property or any part thereof so sold to the
purchaser or purchasers with general warranty of title by Borrower. It is
agreed that in any deeds, assignments or other conveyances given by
Trustee, any and all statements of fact or other recitals therein made as
to the identity of Lender, the occurrence or existence of any Event of
Default, the notice of intention to accelerate, or acceleration of, the
maturity of the Debt, the request to sell, notice of sale, time, place,
terms and manner of sale, and receipt, distribution, and application of the
money realized therefrom, the due and proper appointment of a substitute
trustee, and without being limited by the foregoing, any other act or thing
having been duly done by or on behalf of Lender or by or on behalf of
Trustee, shall be taken by all courts of law and equity as prima facie
evidence that such statements or recitals state true, correct, and complete
facts and are without further question to be so accepted, and Borrower does
hereby ratify and confirm any and all acts that Trustee may lawfully do in
the premises by virtue hereof.
(c) Inapplicability of Credit Code. In no event shall the
provisions of Article 5069, ch. 15 of the Revised Civil Statutes of Texas
(which regulates certain revolving credit loan accounts and revolving
triparty accounts) apply to the loan evidenced by the Loan Documents and/or
secured hereby.
(d) Entire Agreement. THIS DEED OF TRUST AND THE OTHER LOAN
DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER
HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OR
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
(e) Maturity Date. The maturity date of the Note secured
hereby is August 1, 2024.
(f) Notice of Indemnification. BORROWER ACKNOWLEDGES THAT
THIS DEED OF TRUST PROVIDES FOR INDEMNIFICATION OF LENDER AND TRUSTEE BY
BORROWER. IT IS SPECIFICALLY INTENDED BY BORROWER, LENDER, AND TRUSTEE
THAT ALL INDEMNITY DEBT AND LIABILITIES ASSUMED BY BORROWER HEREUNDER BE
WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF (INCLUDING
PREEXISTING CONDITIONS), STRICT LIABILITY, OR THE NEGLIGENCE OF ANY PARTY
OR PARTIES (INCLUDING LENDER AND TRUSTEE) WHETHER SUCH NEGLIGENCE BE SOLE,
JOINT OR CONCURRENT, OR PASSIVE. THE PARTIES SPECIFICALLY INTEND THAT
LENDER AND TRUSTEE ARE TO BE INDEMNIFIED AGAINST THEIR OWN NEGLIGENCE.
(g) Future Advances. This Deed of Trust shall secure any and
all future advances of the proceeds of the Loan and the Other Loan made to
Borrower by Lender pursuant to the terms of the Loan Documents. This
provision shall not constitute an obligation upon or commitment of Lender
to make additional advances or loans to Borrower.
<PAGE>
EXECUTED as of the date first above written.
LHO FINANCING PARTNERSHIP I, L.P.,
a Delaware limited partnership
By: LHO Financing, Inc.,
a Delaware corporation
By: /s/ Hans Weger
------------------------------
Name: Hans Weger
------------------------------
Title: Chief Financial Officer
------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 11,429
<SECURITIES> 0
<RECEIVABLES> 10,564
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,567
<PP&E> 501,109
<DEPRECIATION> 39,468
<TOTAL-ASSETS> 534,502
<CURRENT-LIABILITIES> 8,916
<BONDS> 41,885
<COMMON> 154
0
0
<OTHER-SE> 233,477
<TOTAL-LIABILITY-AND-EQUITY> 534,502
<SALES> 0
<TOTAL-REVENUES> 60,432
<CGS> 0
<TOTAL-COSTS> 43,622
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,558
<INCOME-PRETAX> 13,941
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,941
<EPS-BASIC> 0.91
<EPS-DILUTED> 0.91
</TABLE>
