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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
------------------------
INTERSTATE HOTELS CORPORATION
FOSTER PLAZA TEN
680 ANDERSEN DRIVE
PITTSBURGH, PENNSYLVANIA 15220
(412) 937-0600
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<S> <C> <C>
MARYLAND 0-26805 75-2767215
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification Number)
</TABLE>
The Company (1) has filed all reports to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the period that the Company was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days.
The total number of shares of the Company's Common Stock, par value $0.01
per share, outstanding at May 4, 2000 was 6,394,996.
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<PAGE> 2
INDEX
INTERSTATE HOTELS CORPORATION
<TABLE>
<CAPTION>
PAGE NO.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)............................ 2
Consolidated Balance Sheets - December 31, 1999 and March
31, 2000.................................................... 2
Consolidated Statements of Operations - Three Months Ended
March 31, 1999 and March 31, 2000........................... 3
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1999 and March 31, 2000........................... 4
Notes to Consolidated Financial Statements.................. 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 11
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 12
</TABLE>
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
INTERSTATE HOTELS CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(A) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 22,440 $ 35,682
Accounts receivable, net of allowance for doubtful
accounts of $486 in 1999 and $479 in 2000............... 16,779 16,987
Deferred income taxes..................................... 1,172 1,907
Net investment in direct financing leases................. 464 401
Prepaid expenses and other assets......................... 1,148 1,606
Related party receivables -- management contracts......... 423 --
-------- --------
Total current assets.................................. 42,426 56,583
Restricted cash............................................. 1,701 1,445
Marketable securities....................................... 2,134 2,264
Property and equipment, net................................. 16,049 15,854
Officer and employee notes receivable....................... 3,541 3,385
Notes receivable -- affiliates, net of reserve for
uncollectible notes receivable of
$333 in 2000.............................................. 10,838 10,440
Net investment in direct financing leases................... 928 802
Intangible and other assets................................. 64,842 61,005
-------- --------
Total assets.......................................... $142,459 $151,778
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable -- trade................................. 3,430 4,405
Accounts payable -- health trust.......................... 3,358 5,209
Accounts payable -- related parties....................... 3,991 4,032
Accrued payroll and related benefits...................... 8,252 5,955
Accrued rent.............................................. 5,348 5,341
Other accrued liabilities................................. 12,486 17,149
Current portion of long-term debt......................... -- 87
-------- --------
Total current liabilities............................. 36,865 42,178
Deferred income taxes....................................... 2,454 1,991
Deferred compensation....................................... 2,134 2,264
Long-term debt.............................................. -- 7,465
-------- --------
Total liabilities..................................... 41,453 53,898
Minority interest........................................... 41,000 38,702
Commitments and contingencies............................... -- --
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized; no shares issued or outstanding at March 31,
2000.................................................... -- --
Common stock, $.01 par value; 65,000,000 shares
authorized; 6,394,996 shares issued and outstanding at
March 31, 2000.......................................... 64 64
Paid-in capital........................................... 66,705 66,705
Retained deficit.......................................... (5,889) (6,794)
Unearned compensation..................................... (874) (797)
-------- --------
Total stockholders' equity............................ 60,006 59,178
-------- --------
Total liabilities and stockholders' equity............ $142,459 $151,778
======== ========
</TABLE>
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(A) The year-end balance sheet information was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles.
The accompanying notes are an integral part of the consolidated financial
statements.
2
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INTERSTATE HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1999 2000
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Lodging revenues:
Rooms..................................................... $40,270 $ 42,995
Other departmental........................................ 2,325 2,730
Net management fees......................................... 8,569 6,184
Other fees.................................................. 2,980 2,901
------- ----------
54,144 54,810
------- ----------
Lodging expenses:
Rooms..................................................... 9,735 10,466
Other departmental........................................ 1,506 1,594
Property costs............................................ 12,817 14,105
General and administrative.................................. 4,078 3,184
Payroll and related benefits................................ 4,908 5,320
Lease expense............................................... 20,897 20,156
Depreciation and amortization............................... 4,658 4,288
------- ----------
58,599 59,113
------- ----------
Operating loss.............................................. (4,455) (4,303)
Other income:
Interest, net............................................. 59 446
Other, net................................................ 382 --
------- ----------
Loss before income tax benefit.............................. (4,014) (3,857)
Income tax benefit.......................................... (1,625) (603)
------- ----------
Loss before minority interest............................... (2,389) (3,254)
Minority interest........................................... 49 (2,349)
------- ----------
Net loss.................................................... $(2,438) $ (905)
======= ==========
Earnings per common share and common share equivalent (Note
4):
Basic..................................................... -- $ (.15)
======= ==========
Diluted................................................... -- $ (.15)
======= ==========
Weighted average number of common share and common share
equivalents outstanding:
Basic..................................................... -- 6,063,079
======= ==========
Diluted................................................... -- 6,063,079
======= ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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INTERSTATE HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 2000
------------ ------------
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Cash flows from operating activities:
Net loss.................................................. $(2,438) $ (905)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization.......................... 4,658 4,288
Equity in earnings from unconsolidated subsidiaries.... (382) --
Minority interest...................................... 49 (2,349)
Deferred income taxes.................................. (2,688) (1,198)
Other.................................................. -- 410
Cash (used in) provided by assets and liabilities:
Accounts receivable, net............................... (2,114) (208)
Prepaid expenses and other assets...................... (623) (458)
Related party receivables.............................. (154) 515
Accounts payable....................................... 992 529
Accrued liabilities.................................... 6,108 4,690
------- -------
Net cash provided by operating activities............ 3,408 5,314
------- -------
Cash flows from investing activities:
Net investment in direct financing leases................. 330 189
Change in restricted cash................................. 954 256
Purchase of property and equipment, net................... (67) (112)
Purchases of marketable securities........................ (909) (400)
Proceeds from sale of marketable securities............... 838 374
Net cash received from unconsolidated subsidiaries........ 162 --
Change in officer and employee notes receivable........... (277) 156
Net investment in management contracts.................... (681) (59)
Change in notes receivable -- affiliates, net............. (989) 65
Other..................................................... 84 (8)
------- -------
Net cash (used in) provided by investing
activities.......................................... (555) 461
------- -------
Cash flows from financing activities:
Proceeds from long-term debt.............................. -- 7,560
Repayment of long-term debt............................... -- (8)
Financing costs paid...................................... -- (85)
Net distributions to minority interest.................... (36) --
Related party payables.................................... 7,232 --
Net distributions to owners............................... (9,043) --
------- -------
Net cash (used in) provided by financing
activities.......................................... (1,847) 7,467
------- -------
Net increase in cash and cash equivalents................... 1,006 13,242
Cash and cash equivalents at beginning of period............ 1,652 22,440
------- -------
Cash and cash equivalents at end of period.................. $ 2,658 $35,682
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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INTERSTATE HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Interstate Hotels Corporation (together with its subsidiaries and
predecessors, the "Company") was formed pursuant to a series of events
culminating in the spin-off of the Company's operations from Wyndham
International, Inc., formerly Patriot American Hospitality, Inc. ("Wyndham"), on
June 18, 1999. On June 2, 1998, Interstate Hotels Company (the predecessor of
the Company, and together with its subsidiaries, "Old Interstate") merged into
Wyndham (the "Merger"). Prior to the Merger, Marriott International, Inc.
("Marriott") filed a lawsuit to stop the closing of the Merger as a result of a
dispute over certain franchise agreements between Marriott and Old Interstate.
On June 18, 1999, pursuant to a settlement agreement with Marriott, Wyndham
transferred to the Company, which was then a newly formed corporation, the
third-party hotel management business of Old Interstate, equity interests in The
Charles Hotel Complex, a hotel, retail and office complex located in Cambridge,
Massachusetts, and long-term leasehold interests in 79 hotels. Wyndham then
spun-off the Company to its shareholders (the "Spin-off"). In connection with
the Spin-off, Marriott purchased 4% of the Company's common stock, Wyndham
retained 4% of the Company's common stock, and the remaining 92% of the
Company's common stock was distributed to Wyndham's shareholders.
Prior to the Spin-off, the Company was not a separate legal entity.
Therefore, the accompanying consolidated financial statements of the Company
have been carved out of Old Interstate's financial statements. The financial
statements include only those assets, liabilities, revenues and expenses
directly attributable to the third-party hotel management business, the equity
interests in The Charles Hotel Complex and the leased hotels which were retained
by the Company in connection with the Spin-off. These consolidated financial
statements have been prepared as if the Company had operated as a separate
entity for all periods presented.
The Company's principal subsidiaries include Interstate Hotels, LLC ("IH
LLC") and Interstate Pittsburgh Hotel Holdings, L.L.C. IH LLC has assumed the
third-party hotel management business previously conducted by Old Interstate and
holds the leasehold interests in the Company's leased hotels, as well as
provides ancillary services such as centralized purchasing, equipment leasing
and insurance services. The Company owns a 45% managing member interest and
Wyndham owns a 55% non-controlling ownership interest in IH LLC. Interstate
Pittsburgh Hotel Holdings, L.L.C. is a wholly owned subsidiary of the Company
which owns the Pittsburgh Airport Residence Inn by Marriott.
In accordance with IH LLC's limited liability company agreement, the
Company is required to distribute 55% of IH LLC's cash flows from operations to
Wyndham and allocate between IH LLC and the Company the costs and expenses
relating to services provided by one party for the benefit of the other in
accordance with generally accepted accounting principles, on the basis of which
party benefited from the expenditure. To the extent that the allocation of any
such costs and expenses, including general and administrative expenses, cannot
be fairly apportioned, IH LLC and the Company will allocate such costs and
expenses based upon their respective gross revenues, so that each party's profit
margins are substantially the same for similar services.
The Company includes the revenues and expenses and the working capital of
the leased hotels in the financial statements because the risk of operating
these hotels is borne by the Company, as lessee, under the terms of the leases.
Revenues and expenses from the operation of the managed hotels are not included
in the financial statements because the hotel management contracts are generally
cancellable, not transferable and do not shift the risks of operation to the
Company. Therefore, the Company records revenues from management fees only for
its managed hotels.
2. INTERIM FINANCIAL STATEMENTS:
The accompanying consolidated interim financial statements have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with
5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED, DOLLARS IN THOUSANDS)
2. INTERIM FINANCIAL STATEMENTS--CONTINUED
generally accepted accounting principles have been omitted pursuant to such
rules and regulations. These consolidated interim financial statements should be
read in conjunction with the consolidated financial statements, notes thereto
and other information included in the Company's Annual Report on Form 10-K/A for
the year ended December 31, 1999.
The accompanying consolidated interim financial statements reflect, in the
opinion of management, all adjustments necessary for a fair presentation, in all
material respects, of the financial position and results of operations for the
periods presented. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire year.
3. PRO FORMA INFORMATION:
The following pro forma information for the three-month periods ended March
31, 1999 and 2000 is presented to include the effects of the Spin-off, the sale
of equity interests in The Charles Hotel Complex and certain other adjustments
as if all of the transactions had occurred on January 1, 1999. Such other
adjustments principally include the elimination and addition of certain
management fee and other fee revenues related to Wyndham-owned hotels, the
management of which was transferred to Wyndham, Marriott or the Company as a
result of the Spin-off. The adjustments also include the elimination of a $2,000
one-time charge for additional incentive lease expense for 1999 paid in
settlement of a dispute with Equity Inns, Inc. resulting from the Merger, and
the addition of minority interest to reflect Wyndham's 55% non-controlling
interest in IH LLC prior to the Spin-off.
In management's opinion, all material pro forma adjustments necessary to
reflect the effects of these transactions have been made. The pro forma
information does not include earnings on the Company's pro forma cash and cash
equivalents or certain one-time charges to income relating to the Merger, and
does not purport to present what the actual results of operations of the Company
would have been if the previously mentioned transactions had occurred on such
date or to project the results of operations of the Company for any future
period.
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 2000
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<S> <C> <C>
Total revenues.............................................. $52,057 $54,810
Operating loss.............................................. (4,942) (4,303)
Net loss.................................................... (1,232) (905)
Pro Forma basic earnings per common share................... (.19) (.14)
Pro Forma diluted earnings per common share................. (.19) (.14)
</TABLE>
4. EARNINGS PER SHARE:
Prior to the Spin-off, the Company was not a separate legal entity.
Therefore, the accompanying consolidated financial statements of the Company
have been carved out of the financial statements of Old Interstate and Wyndham,
and principally include those assets, liabilities, revenues and expenses
directly attributable to the third-party hotel management and leasing businesses
conducted by the Company. Accordingly, the Company believes that the historical
earnings per share calculations required in accordance with Statement of
Financial Accounting Standard No. 128 are not meaningful for periods prior to
the Spin-off and, therefore, have not been provided.
6
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED, DOLLARS IN THOUSANDS)
5. LONG-TERM DEBT:
In February 2000, Interstate Pittsburgh Hotel Holdings, L.L.C. entered into
a limited-recourse mortgage note with a bank. The proceeds from the note, which
has a two-year term with a one-year extension if certain minimum financial
requirements are met, totaled $7,560. Monthly payments are due based on a
25-year amortization schedule for principal, with interest based on variable
rate options using the prime rate or the LIBOR rate. The note is collateralized
by the Pittsburgh Airport Residence Inn by Marriott, which was acquired by the
Company in November 1999, and provides for a guarantee by the Company of up to
$3,000. The outstanding principal balance on the note is due and payable at
maturity.
6. COMMITMENTS AND CONTINGENCIES:
In accordance with hotel lease agreements with Equity Inns, Inc. ("Equity
Inns"), the Company is required to maintain performance standards with respect
to the leased hotels, including requirements to maintain room revenue per
available room and expenditures to within specified percentages of the amounts
targeted in the hotels' operating budgets and a minimum net worth covenant.
Equity Inns' sole remedy for a failure to satisfy the performance standards is
to terminate the subject lease or leases, without penalty. A failure to maintain
the minimum net worth would be a default under the leases.
The Company is currently engaged in a dispute with Equity Inns regarding 41
of the 76 hotels leased from Equity Inns or its affiliates. Equity Inns has
asserted that the Company has failed to spend the required percentages of the
amounts targeted in certain categories of the hotels' operating budgets for the
measuring period from July 1, 1999 through December 31, 1999 with respect to 41
leases. The Company disagrees with and is vigorously disputing Equity Inns'
interpretation of this requirement. If, however, the Company is determined to
have failed to spend the required amount under the leases, Equity Inns' sole
remedy is to terminate the subject lease or leases. The carrying value of the
Company's leased hotel intangible assets related to the 41 hotel leases amounted
to approximately $6,200 at March 31, 2000. The termination of the subject lease
or leases could result in accelerated amortization of all or the applicable
portion of the leased hotel intangible assets on the date of termination. At
this time, Equity Inns has not notified the Company of its intent to terminate
any of the 41 subject leases.
7. SEGMENT INFORMATION:
The Company's reportable segments are: (i) operations of luxury and upscale
hotels, and (ii) operations of mid-scale, upper economy and budget hotels. The
luxury and upscale hotels segment derives revenues from management fees and
other services which directly relate to providing management services, including
revenues from insurance, purchasing and equipment leasing. The mid-scale, upper
economy and budget segment derives revenues from managing and leasing hotels and
certain specialized support services.
7
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED, DOLLARS IN THOUSANDS)
7. SEGMENT INFORMATION--CONTINUED:
The table below presents revenue and operating income (loss) information
for each reportable segment for the three-month periods ended March 31, 1999 and
2000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 2000
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<S> <C> <C>
REVENUES:
Luxury and Upscale Hotels................................... $10,709 $ 8,064
Mid-Scale, Upper Economy
and Budget Hotels......................................... 43,435 46,746
------- -------
Consolidated totals....................................... $54,144 $54,810
======= =======
OPERATING INCOME (LOSS):
Luxury and Upscale Hotels................................... $ 485 $(1,834)
Mid-Scale, Upper Economy and Budget Hotels*................. (4,940) (2,469)
------- -------
Consolidated totals....................................... $(4,455) $(4,303)
======= =======
</TABLE>
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* The 1999 amount includes a $2,000 one-time charge for additional incentive
rent paid in settlement of a dispute with Equity Inns, Inc. resulting from the
Merger.
Depreciation and amortization included in segment operating income (loss)
for the three-month periods ended March 31, 1999 and 2000 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 2000
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<S> <C> <C>
Luxury and Upscale Hotels................................... $3,345 $3,317
Mid-Scale, Upper Economy and Budget Hotels.................. 1,313 971
------ ------
Consolidated totals....................................... $4,658 $4,288
====== ======
</TABLE>
The net book value of intangible and other assets by segment consisted of
the following at December 31, 1999 and March 31, 2000:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 2000
----------------- --------------
<S> <C> <C>
Luxury and Upscale Hotels.......................... $42,736 $39,599
Mid-Scale, Upper Economy and Budget Hotels......... 22,106 21,406
------- -------
Consolidated totals.............................. $64,842 $61,005
======= =======
</TABLE>
The following table reconciles the Company's measure of segment profit to
consolidated net loss for the three-month periods ended March 31, 1999 and 2000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 2000
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Total after-tax operating loss.............................. $(2,673) $(2,581)
Unallocated amounts, net of tax:
Interest, net............................................. 35 267
Other, net................................................ 229 --
Minority interest......................................... (29) 1,409
------- -------
Consolidated net loss....................................... $(2,438) $ (905)
======= =======
</TABLE>
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Lodging revenues, which consist of rooms, food and beverage and other
departmental revenues from the leased hotels and one hotel acquired by the
Company in November 1999. Lodging revenues increased by $3.1 million, or 7.3%,
from $42.6 million in the three months ended March 31, 1999 (the "1999 Three
Months") to $45.7 million in the three months ended March 31, 2000 (the "2000
Three Months"). This increase was partially due to incremental revenues of $1.0
million related to the acquired hotel. In addition, the Company entered into
leases for two newly constructed hotels in June 1999 that earned revenues of
approximately $3.2 million during the 2000 Three Months. These additional
revenues were offset by the loss of five hotel operating leases since January 1,
1999, increased competition and general negative trends in the limited-service
hotel sector.
The average daily room rate for the leased hotels increased by 5.7%, from
$73.83 during the 1999 Three Months to $77.30 during the 2000 Three Months, and
the average occupancy rate decreased to 60% during the 2000 Three Months from
61.3% during the 1999 Three Months. This resulted in an increase in room revenue
per available room of 2.5% to $46.35 during the 2000 Three Months. The operating
results of the Company's leased hotels were consistent with the current trends
within the lodging industry. The increase in the average daily room rate
primarily resulted from inflationary rate increases, and the decrease in the
average occupancy rate resulted from an increase of new supply within the
lodging industry.
Net management fees decreased by $2.4 million, or 27.8%, from $8.6 million
in the 1999 Three Months to $6.2 million in the 2000 Three Months. This decrease
was due to the net loss of 13 management contracts since January 1, 1999, which
were primarily hotels whose management was transferred to either Wyndham or
Marriott in connection with the Spin-off. Contributing to the net loss of
management contracts was the uncertainty surrounding the timing and completion
of the Spin-off, which impaired the Company's ability to add new management
contracts. Other fees decreased slightly from $3.0 million in the 1999 Three
Months to $2.9 million in the 2000 Three Months. The impact on other fees
related to the reduction in the total number of hotels operated by the Company
in 2000 as compared to 1999 was offset by an increase in insurance revenues,
which increased by $0.1 million in the 2000 Three Months as compared to the 1999
Three Months.
Lodging expenses consist of rooms, food and beverage, property costs and
other departmental expenses from the leased hotels and one hotel acquired by the
Company in November 1999. Lodging expenses increased by $2.1 million, or 8.8%,
from $24.1 million in the 1999 Three Months to $26.2 million in the 2000 Three
Months. This increase was partially due to incremental expenses of $0.6 million
related to the acquired hotel. For the leased hotels, increased competition
resulting from an increased supply of limited-service hotels in certain markets
required higher operating costs to maintain and increase revenue levels. In
addition, the Company entered into leases for two newly constructed hotels in
June 1999 that incurred operating expenses of approximately $1.9 million during
the 2000 Three Months. These additional expenses were offset by the loss of five
hotel operating leases since January 1, 1999. The operating margin of the leased
and owned hotels decreased from 43.5% during the 1999 Three Months to 42.8%
during the 2000 Three Months due primarily to the increased costs associated
with the leased hotels. The Company expects the increased competition and
over-supply of limited-service hotels to continue to affect negatively the
future operating margin of the Company's leased hotels.
General and administrative expenses are associated with the management of
hotels and consist primarily of centralized management expenses such as
operations management, sales and marketing, finance and other hotel support
services, as well as general corporate expenses. General and administrative
expenses decreased by $0.9 million, or 21.9%, from $4.1 million in the 1999
Three Months to $3.2 million in the 2000 Three Months. During the 2000 Three
Months, the Company incurred an expense for a $0.3 million deficiency between
the amount of premiums received as compared to actual and estimated claims
incurred under the Company's self-insured health and welfare plan. The
deficiency that was recorded by the Company was $1.0 million during the 1999
Three Months. General and administrative expenses as a percentage of revenues
decreased to 5.8% during the 2000 Three Months compared to 7.5% during the 1999
Three Months. This decrease was due to the increase in total revenues and the
decrease in general and administrative expenses.
9
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Payroll and related benefits increased by $0.4 million, or 8.4%, from $4.9
million in the 1999 Three Months to $5.3 million in the 2000 Three Months. This
increase was due to the addition of the Company's Chief Executive Officer and
three marketing and development vice-presidents who were hired in connection
with the Spin-off. Payroll and related benefits as a percentage of revenues
increased slightly to 9.7% during the 2000 Three Months compared to 9.1% during
the 1999 Three Months.
Lease expense represents base rent and participating rent that is based on
a percentage of rooms and food and beverage revenues from the leased hotels,
adjusted for increases in the consumer price index. Lease expense decreased by
$0.7 million, or 3.5%, from $20.9 million in the 1999 Three Months to $20.2
million in the 2000 Three Months. The impact on lease expense related to the
increase in lodging revenues was offset by a $2.0 million one-time charge that
was incurred by the Company in the 1999 Three Months for additional incentive
rent paid in settlement of a dispute with Equity Inns, Inc. resulting from the
Merger.
Depreciation and amortization decreased by $0.4 million from $4.7 million
in the 1999 Three Months to $4.3 million in the 2000 Three Months. In the fourth
quarter of 1999, a $16.4 million non-cash impairment loss was incurred related
to the Company's leased hotel intangible assets and three leased hotels were
sold by Equity Inns, Inc., both of which events reduced future amortization.
Future terminations of hotel leases by Equity Inns, Inc. could result in
accelerated amortization of the remaining leased hotel intangible assets.
As a result of the changes noted above, an operating loss of $4.3 million
was incurred in the 2000 Three Months as compared to an operating loss of $4.5
million in the 1999 Three Months.
Other income in the 1999 Three Months consisted primarily of equity in
earnings from The Charles Hotel Complex, which was sold on June 18, 1999.
Income tax benefit for the three-month periods in 1999 and 2000 was
computed based on an effective tax rate of 40% after reduction of minority
interest.
Minority interest in the 2000 Three Months reflected Wyndham's 55%
non-controlling interest in IH LLC which it retained after the Spin-off.
Minority interest in the 1999 Three Months related to The Charles Hotel Complex.
As a result of the changes noted above, a net loss of $0.9 million was
incurred in the 2000 Three Months as compared to a net loss of $2.4 million in
the 1999 Three Months.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalent assets were $35.7 million at March
31, 2000 compared to $22.4 million at December 31, 1999, and current assets
exceeded current liabilities by $14.4 million at March 31, 2000.
The Company's principal source of liquidity during the 2000 Three Months
was cash from operations and proceeds from the issuance of long-term debt. Net
cash provided by operating activities was $5.3 million during the 2000 Three
Months compared to $3.4 million during the 1999 Three Months. The increase
resulted primarily from an increase in operating income (adjusted for non-cash
items) of $1.0 million from 1999 to 2000, and an increase of $0.8 million in
cash provided by changes in assets and liabilities.
Net cash of $7.5 million was provided by financing activities during the
2000 Three Months compared to net cash of $1.8 million used in financing
activities during the 1999 Three Months. In February 2000, the Company entered
into a $7.6 million limited-recourse mortgage note that is collateralized by the
Pittsburgh Airport Residence Inn by Marriott, which was acquired by the Company
in November 1999. Monthly payments are due based on a 25-year amortization
schedule for principal, with interest based on variable rate options using the
prime rate or the LIBOR rate. The outstanding principal balance on the note is
due and payable in 2002 with a one-year extension if certain minimum financial
requirements are met.
Net cash of $0.5 million was provided by investing activities during the
2000 Three Months compared to net cash of $0.6 million used in investing
activities during the 1999 Three Months. The Company's capital expenditure
budget for the year ending December 31, 2000 relating to current operations is
approximately $150,000 consisting primarily of expenditures for office and
telephone equipment.
10
<PAGE> 12
In accordance with the terms of IH LLC's limited liability company
agreement, the Company is required to distribute 55% of IH LLC's cash flows from
operations to Wyndham. The Company's required distribution to Wyndham for the
period from the Spin-off through March 31, 2000 totaled $3.9 million, which
amount was paid to Wyndham in the second quarter of 2000. In addition, the
agreement requires the Company to allocate between IH LLC and the Company the
costs and expenses relating to services provided by one party for the benefit of
the other in accordance with generally accepted accounting principles, on the
basis of which party benefited from the expenditure. To the extent that the
allocation of any such costs and expenses, including general and administrative
expenses, cannot be fairly apportioned, IH LLC and the Company will allocate
such costs and expenses based upon their respective gross revenues, so that each
party's profit margins are substantially the same for similar services.
In the second quarter of 2000, the Company paid additional incentive rent
in the amount of $0.5 million to Equity Inns, Inc. in connection with the sale
of one of the Company's leased hotels by Equity Inns, Inc.
The Company intends to pursue future opportunities to manage or lease
hotels on behalf of third-party owners, as well as pursue other business
opportunities, such as selective hotel investments and the formation of
strategic alliances. Such opportunities may require capital investments by the
Company. The Company believes that its cash on hand and future cash flows from
operations may be insufficient to fund fully all such capital opportunities. As
a result, the Company will be required to obtain debt or equity financing or
modify its business plan. Management is currently pursuing possible alternatives
to augment its capital resources to enable it to more effectively pursue its
growth strategy. The principal focus of this effort to date has been potential
capital partners. There can be no assurance that these efforts will be
successful or, if so, as to the timing or terms thereof. If these efforts are
not successful, or if the Company does not obtain additional financing, its
pursuit of its business strategy and growth may be impaired.
NEW ACCOUNTING PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." This SAB summarizes and clarifies the SEC's position in applying
generally accepted accounting principles to revenue recognition in financial
statements. In March 2000, the SEC issued SAB No. 101A, "Amendment: Revenue
Recognition in Financial Statements," which extends the date that the Company
may report a change in accounting principle to no later than the second quarter
of 2000. Management is currently assessing the impact of this SAB on the
Company's consolidated financial statements.
FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and information based on the
beliefs of the Company's management, as well as assumptions made by and
information currently available to the Company's management. When used herein,
words such as "anticipate," "believe," "estimate," "expect," "intend" and
similar expressions, as they relate to the Company or the Company's management,
are intended to identify these forward-looking statements. Such statements are
subject to certain risks and uncertainties that could cause the Company's
business and results of operations to differ materially from those reflected in
the Company's forward-looking statements.
Forward-looking statements are not guarantees of future performance. The
Company's forward-looking statements are based on trends that the Company's
management anticipates in the lodging industry and the effect on those trends of
such factors as industry capacity, the seasonal nature of the lodging industry
and product demand and pricing. In addition, such forward-looking statements are
subject to the Company's reversing the current negative trend in its business
and financial results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The quantitative and qualitative disclosures required by this Item 3 and by
Rule 305 of SEC Regulation S-K are not applicable to the Company at this time.
Interest rate exposure on indebtedness is discussed in "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
11
<PAGE> 13
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.1 Loan Agreement by and between Interstate Pittsburgh Hotel
Holdings, L.L.C. and PNC Bank, National Association, dated
February 14, 2000
10.2 Open-End Mortgage and Security Agreement by Interstate
Pittsburgh Hotel Holdings, L.L.C. in favor of PNC Bank, National
Association, dated February 14, 2000
10.3 Agreement of Guaranty and Suretyship by Interstate Hotels
Corporation, dated February 14, 2000
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
Report is filed.
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 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.
INTERSTATE HOTELS CORPORATION
Date: May 15, 2000 By: /s/ J. WILLIAM RICHARDSON
------------------------------------
J. William Richardson
Vice Chairman and Chief Financial
Officer
(Principal Financial Officer)
13
<PAGE> 1
Exhibit 10.1
LOAN AGREEMENT
BY AND BETWEEN
INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C.
AND
PNC BANK, NATIONAL ASSOCIATION
CLOSING DATE: FEBRUARY 14, 2000
RESIDENCE INN
NORTH FAYETTE TOWNSHIP, ALLEGHENY COUNTY, PENNSYLVANIA
<PAGE> 2
LIST OF SCHEDULES AND EXHIBITS
Schedule I Names, Addresses, Telephone and Telecopier Numbers of Parties
Exhibit A Loan Interest Rate Request Form
Exhibit B Items to be Supplied
Exhibit C Financial Reporting Requirements
Exhibit D Compliance Certificate
Exhibit E Amortization Schedule
Exhibit F Leased Office Equipment
<PAGE> 3
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made as of the __ day of February,
2000, by and between INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C., a Delaware
limited liability company (the "Borrower"), and PNC BANK, NATIONAL ASSOCIATION,
a national banking association (the "Bank"). Each initially capitalized term
used in the following recitals and not otherwise defined shall have the meaning
ascribed to it in Article 1.
WITNESSETH:
WHEREAS, Borrower is the owner in fee simple of the Land which is
located in the Township of North Fayette, County of Allegheny, Commonwealth of
Pennsylvania, comprising approximately 8.877 acres.
WHEREAS, pursuant to the terms of this Agreement, the Bank has agreed
to make a loan to Borrower in the maximum aggregate principal amount of
$7,560,000 (the "Loan").
WHEREAS, the Bank is willing to provide the Loan upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. DEFINITIONS
1.1 Definitions.
In addition to words and terms defined elsewhere in this Agreement, the
following terms shall have the following meanings:
"Affiliate" as to any Person shall mean any other Person (i) which
directly or indirectly controls, is controlled by, or is under common control
with such Person, (ii) which beneficially owns or holds 50% or more of any class
of the voting stock (or in the case of a Person which is not a corporation, more
than 50% of the equity interest) of such Person, or (iii) 50% or more of the
voting stock (or in the case of a Person which is not a corporation, 50% or more
of the equity interest) of which is beneficially owned or held, directly or
indirectly, by such Person. Control, as used in this definition, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, including the power to
elect a majority of the directors or trustees of a corporation or trust, as the
case may be.
"Agreement" shall mean this Loan Agreement as the same may be
supplemented or amended from time to time, including all schedules and exhibits.
<PAGE> 4
"Appraisal" shall mean a written appraisal prepared by an independent
appraiser engaged by Bank at Borrower's sole cost and expense prepared in
compliance with all applicable regulatory requirements, being also subject to
the Bank's customary independent appraisal requirements.
"Appraised Value" for any period of determination shall mean the
stabilized dollar value of the Project as determined by an Appraisal of the
Project.
"Assignment of Leases and Rents" shall mean that certain Assignment of
Leases and Rents of even date herewith from the Borrower to the Bank securing
the Loan, as the same may be amended, replaced or supplemented from time to time
in writing by the Borrower and the Bank.
"Assignment of Property Management Agreement" shall mean that certain
Assignment of Property Management Agreement of even date hereunder from the
Borrower to the Bank, as the same may be amended, replaced or supplemented from
time to time in writing by the Borrower and the Bank.
"Authorized Officer" shall mean those Persons designated by written
notice to the Bank from the Borrower, authorized to execute notices, reports and
other documents on behalf of the Borrower. The Borrower may amend such list of
Persons from time to time by giving written notice of such amendment to the
Bank.
"Bank" shall mean PNC BANK, NATIONAL ASSOCIATION and its successors and
assigns.
"Bank Debt" shall mean all monetary obligations, liabilities and
Indebtedness of the Borrower to the Bank, its successors, assigns or
participants, evidenced by, arising under or directly relating to the Loan
Documents, whether as principal, guarantor, surety or otherwise, secured or
unsecured, joint and/or several, absolute or contingent, due or not due, matured
and unmatured, original, renewed, extended, refinanced or replaced, now existing
or hereafter incurred or created, consensual or created by law, and including
principal (whether resulting from advances made by the Bank or from Indebtedness
purchased by the Bank), interest, yield protection payments, premiums, fees,
expenses (including reasonable collection expenses), taxes, charges, commissions
and reasonable attorneys' fees actually incurred, and including all monetary
obligations, liabilities and Indebtedness of Borrower to the Bank incurred or
arising after the commencement of any case by or against Borrower under the U.S.
Bankruptcy Code, specifically including any post-petition interest or advances.
"Base-Rate" shall mean the greater of (i) the Prime Rate, or (ii) the
Federal Funds Effective Rate plus 0.5% per annum.
"Base-Rate Options" shall have the meaning assigned to that term in
subsection 3.1(a) hereof.
"Benefit Arrangement" shall mean at any time an "employee benefit
plan," within the
<PAGE> 5
meaning of Section 3(3) of ERISA, which is neither a Plan nor a Multiemployer
Plan and which is maintained, sponsored or otherwise contributed to, by any
member of the ERISA Group.
"Borrower" shall mean Interstate Pittsburgh Hotel Holdings, L.L.C., a
Delaware limited liability company.
"Borrower Documents" shall mean the Borrower's operating agreement,
articles of organization and resolutions and all other formation documents of
the Borrower.
"Borrowing Date" shall mean the date for the making of an advance of
the Loan or the renewal or conversion thereof to the same or a different
Interest Rate Option, which shall be a Business Day.
"Borrowing Tranche" shall mean (i) portions of the Loan to which a
Euro-Rate Option applies by reason of the selection of, conversion to or renewal
of such Interest Rate Option on the same day and having the same Interest
Period, and (ii) portions of the Loan to which any Base-Rate Option applies by
reason of the selection of or conversion to such Interest Rate Option.
"Business Day" shall mean any day other than a Saturday or Sunday or a
legal holiday on which commercial banks are authorized or required to be closed
for business in Pittsburgh, Pennsylvania.
"Cash and Cash Equivalents" shall mean as of any date of determination,
cash, demand deposits, securities issued by the U.S. Department of the Treasury,
certificates of deposit (provided that no securities or certificates of deposit
shall have maturities of more than ninety (90) days from such date) and publicly
traded, marketable equity securities acceptable to the Bank.
"Closing Date" shall mean the date hereof. The closing shall take place
on the Closing Date at the offices of Marcus & Shapira LLP, One Oxford Centre,
35th Floor, Pittsburgh, Pennsylvania 15219, or at such other time and place as
the parties agree.
"Collateral" shall mean the real estate encumbered by the Mortgage and
all security pledged pursuant to this Agreement in connection with the Loan and
the Collateral Documents.
"Collateral Documents" shall mean the Mortgage, the Assignment of
Leases and Rents, the Subordination Agreement, the Assignment of Property
Management Agreement, the Pledge Agreement and the Financing Statements.
"Comfort Letter" shall mean that certain Standard Form Comfort Letter
dated February ___, 2000 from Franchisor to the Bank with respect to the
Franchise Agreement.
"Commitment Fee" shall mean the sum of $47,250.00.
<PAGE> 6
"Conditions for Extension" shall mean the provision by Borrower to the
Bank of evidence satisfactory to the Bank of Borrower's compliance with the
following:
(i) no Event of Default shall have occurred and be continuing and no
Potential Default shall have occurred, which Potential Default is not cured
prior to the commencement date of the Extension Period;
(ii) the entire Project is free of Liens and encumbrances (except for
Permitted Encumbrances);
(iii) the Debt Service Coverage Ratio for the twelve (12) month period
ending December 31, 2001 for the Project shall not be less than 1.50 to 1.00;
and
(iv) together with its notice of its election to exercise the Extension
Option, Borrower shall pay the Extension Fee to the Bank.
"Consequential Loss" shall mean an amount equal to the present value
(as determined by Bank) of the product of (a) the positive difference resulting
from subtracting the interest rate for the Euro-Rate Option which would be
applicable to a similarly sized Borrowing Tranche determined on the date of
prepayment for a period of time commencing on the date of prepayment and
terminating on the last day of the Interest Period for the Borrowing Tranche
being prepaid from the interest rate for the Euro-Rate Option actually in effect
for the Borrowing Tranche being prepaid; and (b) the amount of the prepayment;
and (c) a fraction with a numerator equal to the number of days remaining in the
Interest Period of the Borrowing Tranche being prepaid and a denominator of 360.
Any certificate of Bank delivered to Borrower setting forth the amount of
Consequential Loss as provided herein shall show the calculations required to
determine such Consequential Loss and shall be conclusive and binding, absent
manifest error, as to such amount and determination.
"Current Assets" shall have the meaning ascribed to such term by GAAP.
"Current Liabilities" shall have the meaning ascribed to such term by
GAAP (excluding maturities of property level debt).
"Current Ratio" shall mean the ratio of Current Assets to Current
Liabilities.
"Debt Multiple Ratio" shall mean the ratio of Total Debt to EBITDA, as
measured for the twelve (12) month period ending on the last day of the
applicable quarter.
"Debt Service" shall mean, for any period of determination the sum of
all principal and interest payments that would be payable over a twelve (12)
month period with respect to the Loan based upon a twenty-five (25) year
mortgage-style amortization of the Loan, assuming an interest rate per annum
(based on a year of twelve equal months) equal to the greater of (i) two and
three-quarters percent (2 3/4%) above the Treasury Rate or (ii) eight and
one-quarter percent (8 1/4%) per annum.
<PAGE> 7
"Debt Service Coverage Ratio" shall mean the ratio of Net Operating
Income to Debt Service.
"Default Rate" shall mean interest at a rate per annum equal to four
percent (4%) above the Base Rate.
"EBITDA" shall mean, for any period of determination with respect to
Guarantor, Guarantor's net income after minority interest, plus Guarantors
portion of depreciation and amortization, plus other non-cash losses, plus
Guarantor's portion of Interest Expense or interest income, as the case maybe,
plus income taxes, less non-cash gains, as each one of the foregoing is
determined in accordance with GAAP, provided however, that EBITDA shall also
include pro forma adjustments for any tangible or intangible assets acquired
with Indebtedness. Such pro forma adjustments shall utilize the previous twelve
(12) month's Net Operating Income with respect to the asset in the calculation
of the Debt Multiple Ratio.
"Environmental Complaint" shall mean any written complaint setting
forth a cause of action for personal or property damage or equitable relief,
order, notice of violation, citation, request for information issued pursuant to
any Environmental Laws by an Official Body, subpoena or other written notice of
any type relating to, arising out of, or issued pursuant to any Environmental
Law or any Environmental Conditions, as the case may be.
"Environmental Conditions" shall mean any conditions of the environment,
including the workplace, the ocean, natural resources (including flora or
fauna), soil, surface water, groundwater, any actual or potential drinking water
supply sources, substrata or the ambient air, relating to or arising out of, or
caused by the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, emptying, discharging,
injecting, escaping, leaching, disposal, dumping, threatened release or other
management or mismanagement of Regulated Substances resulting from the
renovation and construction of the Improvements or the use of, or operations on,
the Land.
"Environmental Indemnity Agreement" shall mean that certain Hazardous
Materials Certificate and Indemnity Agreement of even date herewith from
Borrower and the Guarantor to the Bank, as the same may be amended, replaced or
supplemented from time to time in writing by the parties thereto with the prior
written consent of the Bank.
"Environmental Laws" shall mean, in each case applicable to the
Project, all federal, state, local and foreign laws and regulations, including
permits, licenses authorizations, bonds, orders, judgments and consent decrees
issued, or entered into, pursuant thereto, relating to pollution or protection
of human health or the environment or employee safety in the workplace.
"Environmental Report" shall mean that certain Phase I Environmental
Site Assessment Update prepared for Interstate Hotels Corporation by Law
Engineering and Environmental Services, Inc. dated October 13, 1999, or any
other written report of the review and inspection of the Project prepared by an
environmental consultant acceptable to Bank and engaged by Borrower (or by Bank
pursuant to Section 7.1(c)) at Borrower's sole cost and expense, together
<PAGE> 8
with a reliance letter satisfactory to Bank stating that Bank may rely on such
report in making the Loan, in all cases together with all annexes, schedules,
exhibits and attachments thereto that have been provided to the Bank.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
"ERISA Group" shall mean, at any time, the Borrower and all members of
a controlled group of corporations and businesses (whether or not incorporated)
under common control and all other entities which, together with the Borrower,
are treated as a single employer under Section 414 of the Internal Revenue Code.
"Euro-Rate" shall mean with respect to any Borrowing Tranche to which a
Euro-Rate Option applies for any Interest Period, the interest rate per annum
determined by the Bank by dividing (the resulting quotient rounded upward to the
nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Bank
in accordance with its usual procedures (which determination shall be conclusive
absent manifest error) to be the "offered" eurodollar rate as quoted by
Exco-Noonan, Incorporated (or appropriate successor or, if Exco-Noonan or its
successor ceases to provide such quotes, a comparable replacement as determined
by the Bank), as evidenced on Dow Jones Markets Service (formerly known as
Telerate) display page 3750 (or other such display page on the Dow Jones Markets
Service system as may replace Dow Jones Markets Service display page 3750) two
(2) Business Days prior to the first day of such Interest Period in amounts
comparable to such Borrowing Tranche and having maturities comparable to such
Interest Period by a number equal to 1.00 minus the Euro-Rate Reserve
Percentage. The Euro-Rate may also be expressed by the following formula:
Dow Jones Markets Service display page 3750
Euro-Rate = as quoted by Exco-Noonan, or appropriate successor
-----------------------------------------------------------
1.00 - Euro-Rate Reserve Percentage
Each determination by the Bank of the Euro-Rate or of the non-existence or non-
determinability through its customary means of any Euro-Rate, in the absence of
manifest error, shall be conclusive and binding. The Euro-Rate shall be adjusted
with respect to any Euro-Rate Option outstanding on the effective date of any
change in the Euro-Rate Reserve Percentage as of such effective date. The Bank
shall give prompt notice to the Borrower of the Euro-Rate as determined or
adjusted in acceptance herewith, which determination shall be conclusive and
binding absent manifest error.
"Euro-Rate Options" shall have the meaning assigned to that term in
Section 3.1.
"Euro-Rate Reserve Percentage" shall mean the maximum effective
percentage in effect on such day as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the reserve
requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities"). Each determination by the Bank
<PAGE> 9
of a Euro-Rate Reserve Percentage, in the absence of manifest error, shall be
conclusive and binding.
"Event of Default" or "Events of Default" shall have the meaning
assigned to those terms in Section 10.1.
"Exhibits" shall mean those schedules and exhibits attached hereto and
made a part hereof, including Schedule I - Names, Addresses, Telephone and
Telecopier Numbers of Parties; Exhibit A - Loan Interest Rate Request Form;
Exhibit B - Items to be Supplied; Exhibit C - Financial Reporting Requirements;
Exhibit D - Compliance Certificate; Exhibit E - Amortization Schedule and
Exhibit F - Leased Office Equipment.
"Expiration Date" shall mean the earlier of (i) February ___, 2002, or
(ii) the date upon which the Loan is accelerated pursuant to this Agreement by
virtue of an Event of Default which is not cured within applicable notice and
cure periods.
"Extension Fee" shall mean the amount which is equal to one-quarter of
one percent (1/4%) of the outstanding principal balance of the Loan at the
commencement of the Extension Period, which shall be payable prior to the
commencement of the Extension Period pursuant to Section 2.4 hereof.
"Extension Period" shall mean a single period of twelve (12) months by
which Borrower may extend the Expiration Date subject to the terms and
conditions of Section 2.4 hereof.
"FF&E Account" shall have the meaning assigned to such term in Section
4.23 hereof.
"Federal Funds Effective Rate" for any day shall mean the rate per
annum (based on a year of 365 or 366 days and actual days elapsed, and rounded
upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New
York (or any successor) on such day as being the weighted average of the rates
on overnight federal funds transactions arranged by Federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve Bank (or
any successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, however, that if
such Federal Reserve Bank (or its successor) does not announce such rate on any
day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds
Effective Rate for the last day on which such rate was announced.
"Financing Statements" shall mean the financing statements which the
Bank may from time to time require in order to perfect its security interest in
the collateral described in the Mortgage, the other Collateral Documents and
this Agreement pursuant to the applicable Uniform Commercial Code.
"First Disbursement" shall have the meaning ascribed thereto in Section
6.1 thereof.
"Franchise Agreement" shall mean that certain Franchise Agreement dated
November 1,
<PAGE> 10
1999 between Marriott International, Inc. as Franchisor and Borrower as
Franchisee, as the same may be amended, replaced or supplemented from time to
time in writing with the consent of the Bank.
"Franchisor" shall mean Marriott International, Inc.
"GAAP" shall mean generally accepted accounting principles as are in
effect from time to time and applied on a consistent basis both as to
classification of items and amounts.
"Governmental Approvals" shall mean all consents, licenses, permits and
all other authorizations or approvals required by Official Bodies with respect
to the construction, completion, use and occupancy of the Improvements.
"Guarantor" shall mean Interstate Hotels Corporation, a Maryland
corporation.
"Guarantor Default" shall mean a default or a defined "event of
default" under any Indebtedness of Guarantor where such default or a defined
"event of default" has occurred as a result of Guarantor's failure to make a
principal or interest payment due under such Indebtedness.
"Guaranty" of any Person shall mean any obligation of such Person
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any agreement to
indemnify or hold harmless any other Person, any performance bond or other
suretyship arrangement and any other form of assurance against loss, except
endorsement of negotiable or other instruments for deposit or collection in the
ordinary course of business.
"Impositions" shall mean all (i) real estate and personal property
taxes and other taxes and assessments, water and sewer rates and charges and all
other governmental charges and any interest or costs or penalties with respect
thereto and charges for any easement or agreement maintained for the benefit of
the Land and Improvements, general and special, ordinary and extraordinary,
foreseen and unforeseen, of any kind and nature whatsoever which at any time may
be assessed, levied or imposed upon the Land or the Improvements, or the rent or
income received therefrom, or any use or occupancy thereof, and (ii) other
taxes, assessments, fees and governmental charges levied, imposed or assessed
upon or against the Borrower or any of its properties.
"Improvements" shall mean that certain 156 room Residence Inn and any
and all related improvements now or hereafter located on the Land.
"Indebtedness" shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of (i) borrowed money, (ii) amounts
raised under or liabilities in respect of any note purchase or acceptance credit
facility, (iii) reimbursement obligations under any letter of credit, currency
swap agreement, interest rate swap, cap, collar or floor agreement or
<PAGE> 11
other interest rate management device, (iv) any other transaction (including
without limitation forward sale or purchase agreements, capitalized leases and
conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements (but not including trade payables and accrued expenses incurred in
the ordinary course of business which are not represented by a promissory note
or other evidence of indebtedness and which are not more than thirty (30) days
past due), or (v) any Guaranty of Indebtedness for borrowed money.
"Interest Expense" shall mean, for any period of determination, all
interest expense incurred by the Guarantor with respect to the Indebtedness of
Guarantor, as defined in accordance with GAAP.
"Insolvency Proceedings" shall mean an action or proceeding seeking any
reorganization, arrangement, composition, readjustment, liquidation or other
similar relief under the U.S. Bankruptcy Code or any present or future statute,
law or regulation, or any proceedings for voluntary liquidation, dissolution or
other winding up, or the appointment of any trustee, receiver, liquidator or
conservator or similar official (whether in a proceeding or otherwise), or any
assignment for the benefit of creditors or any marshaling of assets.
"Interest Payment Date" shall mean each date specified for the payment
of interest in Section 3.8.
"Interest Period" shall mean the term during which a Euro-Rate option
will apply, such period to be one, two, three, six or twelve months.
"Interest Rate Option" shall mean any Euro-Rate Option or any Base-Rate
Option.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
"Land" shall mean the real property owned in fee simple by the Borrower
consisting of approximately 8.877 acres and identified in Exhibit A to the
Mortgage, together with all rights of the Borrower in and to all easements,
rights and privileges benefitting the Land.
"Leases" shall have the meaning assigned to such term in the Mortgage.
"Lien" shall mean any deed of trust, mortgage, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
"Loan" shall mean the mortgage loan which shall be made by the Bank
pursuant to this
<PAGE> 12
Agreement in the maximum principal of $7,560,000.
"Loan Documents" shall mean this Agreement, the Note, the Collateral
Documents, the Environmental Indemnity Agreement, the Payment Guaranty, the
Comfort Letter and all other documents, instruments, certificates and agreements
executed in connection with the Loan, as the same may be amended, replaced or
supplemented from time to time. "Loan Document" shall mean any of the Loan
Documents.
"Manager" shall mean Crossroads Hospitality Management Company.
"Material Adverse Change" shall mean any set of circumstances or events
which (a) has any material adverse effect whatsoever upon the validity or
enforceability of this Agreement or any other Loan Document, (b) is or could
reasonably be expected to be material and adverse to the business properties,
assets, financial condition, results of operations or prospects of the Borrower
or Guarantor taken as a whole, (c) impairs materially or could reasonably be
expected to impair materially the ability of the Borrower or Guarantor to duly
and punctually pay or perform its Indebtedness, or (d) impairs materially the
ability of the Bank, to the extent permitted, to enforce its legal remedies
pursuant to this Agreement or any other Loan Document.
"Month" with respect to an Interest Period, shall mean the interval
between the days in consecutive calendar months numerically corresponding to the
first (lst) day of such Interest Period.
"Monthly Mandatory Principal Payments" shall have the meaning ascribed
thereto in Section 3.10.
"Mortgage" shall mean that certain Open-End Mortgage and Security
Agreement of even date herewith, given by the Borrower to the Bank securing the
Loan, as the same may be amended, replaced or supplemented from time to time in
writing by the Borrower and the Bank.
"Multiemployer Plan" shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001 (a)(3) of ERISA and to
which the Borrower or any member of the ERISA Group is then making or accruing
an obligation to make contributions or, within the preceding five Plan years,
has made or had an obligation to make such contributions.
"Multiple Employer Plan" shall mean a Plan which has two or more
contributing sponsors (including the Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
"Net Operating Income" shall mean the Operating Income of Borrower,
including all gross revenues from the Project, as calculated in accordance with
GAAP and as determined for the twelve (12) month period prior to the date of
calculation less (i) actual Operating Expenses, (ii) a base management fee equal
to three percent (3%), (iii) franchise fees paid pursuant to the Franchise
Agreement, and (iv) the Required FF&E Reserve net of extraordinary gains and
losses.
<PAGE> 13
"Net Worth" shall mean the consolidated net worth of Guarantor which
shall be determined in accordance with GAAP.
"Note" shall mean that certain Mortgage Note of even date herewith,
given by Borrower to the Bank in the aggregate principal face amount of the Loan
as the same may be amended, reserved, replaced or supplemented from time to time
with the prior written consent of the Bank.
"Official Body" shall mean any national, federal, state, local or other
government or political subdivision or any agency, authority, bureau, central
bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
"Operating Expenses" shall mean the expenses actually and reasonably
incurred by Borrower with respect to the ownership, operation, leasing and
occupancy of the Project in the normal course of business, determined on the
basis of GAAP.
"Operating Income" shall mean all gross income, revenues and
consideration of whatever nature, received by or paid to or for the account or
benefit of Borrower, whether received by Borrower or any of its agents, or
employees, or any affiliate of Borrower, its agents or employees, from any and
all sources, resulting from or attributable to the ownership, operation, and
occupancy of the Project determined on the basis of GAAP.
"Payment Guaranty" shall mean that certain Agreement of Guaranty and
Suretyship (Payment), of even date herewith, given by the Guarantor to the Bank,
as the same may be amended, replaced or supplemented from time to time in
writing by the Guarantor and the Bank.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
"Pension Plan" shall mean at any time an employee pension benefit plan
(including a Multiple Employer Pension Plan but not a Multiemployer Pension
Plan) which is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Code and either (i) is maintained by any
member of the ERISA Group for employees of any member of the ERISA Group, or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
"Permitted Encumbrances" shall mean the liens, assignments and security
interests in favor of the Bank pursuant hereto; the easements, restrictions,
encumbrances and other matters described in and permitted to exist under the
terms of the Mortgage; such other matters as may be expressly consented to in
writing by the Bank; and real estate taxes on the Land and Improvements not yet
due and payable.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock
<PAGE> 14
company, trust, unincorporated organization, joint venture, government or
political subdivision or agency thereof, or any other entity.
"Plans" shall mean at any time an employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
"Pledge Agreement" shall mean that certain Pledge Agreement of even date
herewith from Borrower to the Bank with respect to the FF&E Account.
"Potential Default" shall mean an event or condition which, with the
passage of time, the giving of notice, or a determination by the Bank, or any
combination of the foregoing, would constitute an Event of Default.
"Prime Rate" shall mean the interest rate per annum announced from time
to time by the Bank at its Principal Office as its then prime rate, which rate
may not be the lowest rate then being charged commercial borrowers by the Bank.
"Principal Office" shall mean the main banking office of the Bank in
Pittsburgh, Pennsylvania.
"Prohibited Transaction" shall mean any prohibited transaction as
defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by the United
States Department of Labor.
"Project" shall mean the Land and the Improvements.
"Property Management Agreement" shall mean that certain Management
Agreement between Borrower and Manager dated November 1, 1999, as the same may
be amended, replaced or supplemented from time to time in writing with the
consent of the Bank.
"Regulated Substances" shall mean any substance, including any solid,
liquid, semisolid, gaseous, thermal, thoriated or radioactive material, refuse,
garbage, wastes, chemicals, petroleum products, by-products, co-products,
impurities, dust, scrap, heavy metals, defined as a "hazardous substance,"
"pollutant," "pollution," "contaminant," "hazardous or toxic substance,"
"extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous
waste," "industrial waste," "residual waste," "solid waste," "municipal waste,"
"mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste," or
"regulated substance" or any related materials, substances or wastes as now or
hereafter defined pursuant to any Environmental Laws, ordinances, rules,
regulations or other directives of any Official Body, the generation,
manufacture, extraction, processing, distribution, treatment, storage, disposal,
transport, recycling, reclamation, use, reuse, spilling, leaking, dumping,
injection, pumping, leaching,
<PAGE> 15
emptying, discharge, escape, release or other management or mismanagement of
which is regulated by the Environmental Laws.
"Regulation U" shall mean Regulation U, T, G or X as promulgated by the
Board of Governors of the Federal Reserve System, as amended from time to time.
"Reportable Event" means a reportable event described in Section 4043
of ERISA and regulations thereunder with respect to a Pension Plan or
Multiemployer Pension Plan.
"Required Amortization Portion" shall mean a portion of the outstanding
principal balance of the Loan as determined by the Bank in its discretion
immediately prior to the commencement of each Interest Period, which shall be
sufficient to permit all principal payments projected by the Bank to occur
during the term of an applicable Interest Period to be applied against the
portion of the outstanding principal balance that is subject to any Base-Rate
Option.
"Required FF&E Reserve" shall have the meaning assigned to such term in
Section 4.23 hereof.
"Solvent" shall mean, with respect to any Person on a particular date,
that on such date (i) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair market value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (iii) such Person not is able to realize upon its assets and pay its
debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, and (iv) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay such debts and liabilities as they mature.
"Subordination Agreement" shall mean that certain Subordination
Agreement of even date hereunder by and among the Borrower, IHC Holdings, Inc.,
a Delaware corporation, ("IHC") and the Bank, as the same may be amended,
replaced or supplemented from time to time in writing by the Borrower, IHC and
the Bank.
"Subordinated Debt" shall have the meaning assigned to such term in the
Subordination Agreement.
"Total Debt" shall mean all Indebtedness of Guarantor which is
outstanding as the last day of the applicable quarter, as determined in
accordance with GAAP.
"Treasury Rate" shall mean the "weekly average yield" on United States
Treasury Securities adjusted to a constant maturity of ten (10) years, rounded
to the nearest one- sixteenth of one percent (1/16%), as published in the
Release five (5) Business Days prior to the date of determination. It is
provided, however, that if the Release is no longer published, a substitute
therefor as may be selected by the Bank in its reasonable discretion shall be
utilized, and further provided that if the Release is not published five (5)
Business Days prior
<PAGE> 16
to the date of determination, then the Release as published on the most recent
date prior thereto shall be utilized.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect in each applicable jurisdiction.
1.2 Interpretation.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
(a) Number; Inclusion.
References to the plural include the singular, the plural, the
part and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
(b) Documents Taken as a Whole.
The words "hereof," "herein," "hereunder," "hereto" and
similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document as a whole and not to any particular
provision of this Agreement or such other Loan Document;
(c) Headings.
The section and other headings contained in this Agreement or
such other Loan Document and the Table of Contents (if any), preceding this
Agreement or such other Loan Document are for reference purposes only and shall
not control or affect the construction of this Agreement or such other Loan
Document or the interpretation thereof in any respect;
(d) Implied References to this Agreement.
Article, section, subsection, clause, schedule and exhibit references are to
this Agreement unless otherwise specified;
(e) Persons.
Reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement or such other Loan Document, as the case may be, and reference to
a Person in a particular capacity excludes such Person in any other capacity;
<PAGE> 17
(f) Modifications to Documents.
Reference to any agreement (including this Agreement and any
other Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
(g) From, To and Through.
Relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding," and "through" means
"through and including"; and
(h) Shall: Will.
References to "shall" and "will" are intended to have the same
meaning.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP.
2. AGREEMENT TO BORROW AND LEND
2.1 Agreement to Borrow and Lend.
Subject to the terms, provisions and conditions contained in this
Agreement in reliance upon the representations and warranties set forth herein,
the Bank agrees to lend to Borrower the Loan.
2.2 The Note.
The Loan is and shall be evidenced by the Note, and the Loan shall bear
interest calculated and payable as provided in Article 3 below. Borrower shall
pay the outstanding principal of the Loan and all unpaid interest accrued on the
Loan and all other sums then owing under the Loan Documents in full on the
Expiration Date. The unpaid amounts of the Loan, as set forth on the books and
records of the Bank or other holder of the Note maintained in the ordinary
course of business shall be presumptive evidence of the principal amount thereof
owing and unpaid, absent manifest error, but the failure to record any such
amount on the books and records shall not limit or affect the obligations of
Borrower hereunder or under the Note to make payments of principal and interest
on the Loan when due.
2.3 Term.
The term of the Loan shall commence on the Closing Date and shall
terminate on the Expiration Date.
<PAGE> 18
2.4 Extension Option.
If the Conditions for Extension are satisfied prior to the initial
Expiration Date and remain satisfied on the date of exercise by Borrower of the
Extension Option and on the date of the commencement of the Extension Period,
the Borrower shall have the right to extend the Expiration Date for an
additional period of twelve (12) months. Borrower shall provide the Bank with
written notice of its election to extend the initial Expiration Date for the
Extension Period no earlier than ninety (90) nor later than forty-five (45) days
prior to the initial Expiration Date.
3. LOAN INTEREST RATES, PAYMENTS AND FEES
3.1 Interest Rate Options.
The Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Loan as selected by it from the Base-Rate Options or
Euro-Rate Options set forth below, it being understood that, subject to the
provisions of this Agreement, the Borrower may select different Interest Rate
Options and different Interest Periods to apply simultaneously to the Loan
comprising different Borrowing Tranches and may convert to or renew one or more
Interest Rate Options with respect to all or any portion of the Loan comprising
any Borrowing Tranche, provided that, there shall not be at any one time
outstanding more than three (3) Borrowing Tranches (including the Base-Rate
Tranche) in the aggregate, and provided further that the Borrowing Tranche
subject to the Base-Rate Options shall at all times be equal to or greater than
the Required Amortization Portion. If at any time the designated rate applicable
to the Loan exceeds the Bank's highest lawful rate, the rate of interest on the
Loan shall be limited to the Bank's highest lawful rate. The Borrower shall have
the right to select from the following Interest Rate Options, with the interest
rate to be paid by Borrower being determined based upon the most recent
quarterly calculation of the Debt Service Coverage Ratio to be made pursuant to
Exhibit C Section (c) hereof as follows :
(a) Base-Rate Options:
(i) in the event that the Debt Service Coverage Ratio
shall be greater than 1.35 to 1.00 but less than 1.55 to 1.00, a fluctuating
rate per annum (computed on the basis of a year of 360 days and actual days
elapsed) equal to the Base-Rate plus one and three-quarters percent (1 3/4%),
such interest rate to change automatically from time to time effective as of the
effective date of each change in the Base Rate; or
(ii) in the event that the Debt Service Coverage
Ratio shall be equal to or greater than 1.55 to 1.00 but less than 1.75 to 1.00,
a fluctuating rate per annum (computed on the basis of a year of 360 days and
actual days elapsed) equal to the Base-Rate plus one and one-half percent
(1 1/2%), such interest rate to change automatically from time to time effective
as of the effective date of each change in the Base Rate; or
<PAGE> 19
(iii) in the event that the Debt Service Coverage
Ratio shall be equal to or greater than 1.75 to 1.00, a fluctuating rate per
annum (computed on the basis of a year of 360 days and actual days elapsed)
equal to the Base-Rate plus one and one-quarter percent (1 1/4%), such interest
rate to change automatically from time to time effective as of the effective
date of each change in the Base Rate (collectively, the "Base-Rate Options").
(b) Euro-Rate Options:
(i) in the event that the Debt Service Coverage Ratio
shall be greater than 1.35 to 1.00 but less than 1.55 to 1.00, a fluctuating
rate per annum (computed on the basis of a year of 360 days and actual days
elapsed) equal to the Euro-Rate plus two and one-half percent (2 1/2%); or
(ii) in the event that the Debt Service Coverage
Ratio shall be equal to or greater than 1.55 to 1.00 but less than 1.75 to 1.00,
a fluctuating rate per annum (computed on the basis of a year of 360 days and
actual days elapsed) equal to the Euro-Rate plus two and one-quarter percent
(2 1/4%); or
(iii) in the event that the Debt Service Coverage
Ratio shall be equal to or greater than 1.75 to 1.00, a fluctuating rate per
annum (computed on the basis of a year of 360 days and actual days elapsed)
equal to the Euro-Rate plus two percent (2%) (collectively, the "Euro-Rate
Options")
3.2 Loan Requests/Interest Periods.
Except as otherwise provided herein, following the First Disbursement,
the Borrower may, on any Borrowing Date, request the Bank to renew or convert
any Interest Rate Option applicable to a portion of the Loan, by the delivery to
the Bank, not later than 12:00 noon Eastern time (i) three (3) Business Days
prior to the proposed Borrowing Date with respect to the conversion to or the
renewal of a Euro-Rate Option for a portion of the Loan; and (ii) one (1)
Business Day prior to the last day of the preceding Interest Period with respect
to the renewal or conversion to a Base-Rate Option for a portion of the Loan, of
a duly completed request therefor substantially in the form of Exhibit A hereto
or a request by telephone immediately confirmed in writing by letter, facsimile
or telex in such form (each, an "Interest Rate Request"), it being understood
that the Bank may rely on the authority of any Person making such a telephonic
request without the necessity of receipt of such written confirmation. Each
Interest Rate Request shall be irrevocable and shall specify (i) the proposed
Borrowing Date; (ii) the aggregate amount of the portion of the Loan comprising
the Borrowing Tranche, which shall not be less than $1,000,000 for portions of
the Loan to which a Euro-Rate Option applies; (iii) whether a Euro-Rate Option
or a Base-Rate Option shall apply to the portion of the Loan comprising the
Borrowing Tranche; and (iv) in the case of portions of the Loan to which a
Euro-Rate Option applies, an appropriate Interest Period for the proposed
portion of the Loan comprising the Borrowing Tranche, provided that:
(a) any Interest Period which would otherwise end on a date
which is not a
<PAGE> 20
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in the next calendar month, in which case such Interest
Period shall end on the immediately preceding Business Day;
(b) any Interest Period which begins on the last day of a
calendar month for which there is no numerically corresponding day in the
subsequent calendar month during which such Interest Period is to end shall end
on the last Business Day of such subsequent month;
(c) the Borrower shall not select, convert to or renew a
Euro-Rate Option for an Interest Period that would end after the Expiration
Date;
(d) in the case of the renewal of a Euro-Rate Option at the
end of an Interest Period, the first day of the Interest Period shall be the
last day of the preceding Interest Period, without duplication in payment of
interest for such day.
3.3 Default Interest and Late Payment Charge.
To the extent permitted by law, upon the occurrence and during the
continuation of any Event of Default, the Borrower shall pay interest on the
entire principal amount then outstanding and all other sums due under the Loan,
regardless of the Interest Rate Option otherwise applicable thereto, at a rate
per annum equal to the Default Rate. The Default Rate shall accrue before and
after any judgment has been entered. In addition, Borrower shall pay upon demand
by Bank a late payment charge equal to four percent (4%) of the amount of any
payment due under the Loan, prior to maturity or acceleration, which is not
received by the Bank within ten (10) days after the date such payment is due.
The Borrower acknowledges that the increased interest rate and the late payment
charge provided for herein reflect, among other things, the fact that the Loan
has become a substantially greater risk given its default status and that the
Bank is entitled to additional compensation for such risk.
3.4 Euro-Rate Unascertainable.
(a) If, on any date on which a Euro-Rate would otherwise be
determined, the Bank shall have determined (which determination shall be
conclusive absent manifest error) that:
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
(ii) an event or condition has occurred which
materially and adversely affects the applicable U.S. eurodollar markets, or
(b) If, at any time, the Bank shall have determined (which
determination shall be conclusive absent manifest error) that:
<PAGE> 21
(i) the making, maintenance or funding of any portion
of the Loan to which a Euro-Rate Option applies has been made impracticable or
unlawful if the Bank complies in good faith with any law or any interpretation
or application thereof by any Official Body or with any request or directive of
any such Official Body (whether or not having the force of law), or
(ii) such Euro-Rate will not adequately and fairly
reflect the cost to the Bank of the establishment or maintenance of any portion
of the Loan to which a Euro-Rate Option applies, or
(iii) after making all reasonable efforts, deposits
of the relevant amount in U.S. dollars for the relevant Interest Period for any
portion of the Loan to which a Euro-Rate Option applies are not available to the
Bank in the applicable U.S. eurodollar markets,
then, in the case of any event specified in subsection (a) or (b) above, the
Bank shall promptly so notify the Borrower thereof. Upon such date as shall be
specified in any such notice (which shall not be earlier than the date such
notice is given) the obligation of the Bank to allow the Borrower to select,
continue, convert to or renew a Euro-Rate Option shall be suspended until the
Bank shall have later notified the Borrower of the Bank's determination (which
determination shall be conclusive absent manifest error) that the circumstances
giving rise to such previous determination no longer exist. If at any time the
Borrower receives notice from the Bank as provided for in this Section 3.4
whether or not any Euro-Rate Option has gone into effect, such notification
shall, subject to the Borrower's indemnification obligations under Section
3.12(b), be deemed to provide for selection of, conversion to or renewal of a
Base-Rate Option.
3.5 Selection of Interest Rate Options.
If the Borrower fails to select an Interest Period in accordance with
the provisions of Section 3.2 in the case of a portion of the Loan to which a
Euro-Rate Option applies, the Borrower shall be deemed to have converted such
portion of the Loan to a one month Euro- Rate Borrowing Tranche. If an Event of
Default shall occur and be continuing, the Bank may in its discretion limit the
Borrower to the Default Rate.
3.6 Payments.
All payments and prepayments to be made in respect of principal,
interest, or other amounts due from the Borrower to the Bank hereunder shall be
payable prior to 12:00 noon, Eastern time, on the date when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower, and without setoff, counterclaim or other
deduction of any nature, and an action therefor shall immediately accrue. Such
payments shall be made to the Bank at the Principal Office in U.S. Dollars and
in immediately available funds. The Bank's statement of account, ledger or other
relevant record shall, in the absence of manifest error, be conclusive as the
statement of the amount of principal of and interest on the Loan and other
amounts owing under this Agreement and shall be deemed an "account stated."
3.7 [INTENTIONALLY OMITTED]
<PAGE> 22
3.8 Interest Payment Dates.
Interest shall be due in arrears on the first day of each month after
the date hereof and on the Expiration Date or upon acceleration of the Note.
3.9 Optional Prepayments.
(a) The Borrower shall have the right at its option from time
to time to prepay the Loan in whole or part on the dates set forth below without
premium or penalty (except as provided below or in Section 3.12(b) hereof):
(i) on any Business Day with respect to any portion
of the Loan to which a Base-Rate Option applies;
(ii) on the last day of the applicable Interest
Period with respect to any portion of the Loan to which a Euro-Rate Option
applies; or
(iii) with the Bank's prior approval, on any Business
Day of an Interest Period with respect to any portion of the Loan to which a
Euro-Rate Option applies, provided such prepayment is accompanied by an amount
sufficient to compensate the Bank for all Consequential Loss and other costs and
losses reimbursable under Section 3.12(b).
Whenever the Borrower desires to prepay any part of the Loan,
it shall provide a prepayment notice to the Bank at least five (5) Business Days
prior to the date of prepayment setting forth the date, which shall be a
Business Day, on which the proposed prepayment is to be made, and the total
principal amount of such prepayment, which shall not be less than $500,000. The
principal amount of the portion of the Loan for which a prepayment notice is
given shall be due and payable on the date specified in such prepayment notice.
3.10 Mandatory Principal Payments.
(a) Beginning on April 1, 2000, and on the first (1st) day of
each calendar month thereafter, throughout the remaining term of the Loan,
Borrower shall make monthly payments of the outstanding principal balance of the
Loan based upon the principal portion of the level payment amount which is
payable pursuant to a twenty-five (25) year mortgage style amortization of the
maximum principal amount of the Loan assuming an interest rate per annum equal
to eight and one quarter percent (8 1/4%) as set forth on Exhibit E attached
hereto.
(b) The principal payments made by Borrower pursuant to this
Section 3.10 are hereinafter referred to as the "Monthly Mandatory Principal
Payments".
3.11 Application Among Interest Rate Options.
All payments permitted or required pursuant to Sections 3.9 or 3.10
shall be applied among
<PAGE> 23
the Interest Rate Options first to the principal amount of the Loan subject to a
Base-Rate Option, then to the principal amount of the Loan subject to a
Euro-Rate Option to be applied to such Borrowing Tranches subject to a Euro-Rate
Option as designated by Borrower, as long as no Event of Default exists
hereunder. In accordance with subsection 3.12(b), the Borrower shall indemnify
the Bank for any loss or expense including loss of margin incurred with respect
to any such prepayments, other than prepayments made under Section 3.10, applied
against any portion of the Loan subject to a Euro-Rate Option on any day other
than the last day of the applicable Interest Period, provided that, to the
extent that the outstanding principal balance which is subject to a Base-Rate
Option is less than the amount of the applicable payment, then, at the election
of Borrower, as long as no Event of Default exists hereunder, such payment and
any interest earned thereon, if applicable, shall be applied against such
Borrowing Tranches subject to the Euro-Rate Option as Borrower may choose, to
the extent of such insufficiency, subject to Borrower's obligation to indemnify
the Bank pursuant to subsection 3.12(b). Upon the occurrence of an Event of
Default, notwithstanding anything to the contrary contained above in this
Section 3.11, the Bank shall have the right to designate the application of such
payments.
3.12 Additional Compensation in Certain Circumstance
(a) Increased Costs or Reduced Return on Borrowing Tranches
Subject to a Euro-Rate Option Resulting From Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc. With respect to Borrowing Tranches subject to a
Euro-Rate Option, if any law, guideline or interpretation or any change in any
law, guideline or interpretation or application thereof by any Official Body
charged with the interpretation or administration thereof or compliance with any
request or directive (whether or not having the force of law) of any central
bank or other Official Body:
(i) subjects the Bank to any tax or charge with
respect to this Agreement, the Note, the Loan or payments by the Borrower of
principal, interest, or other amounts due from the Borrower hereunder or under
the Note (except for taxes on the overall net income of the Bank or any
corporate franchise tax imposed on the Bank),
(ii) imposes, modifies or deems applicable any
reserve, special deposit or similar requirement against credits or commitments
to extend credit extended by, or assets (funded or contingent) of, deposits with
or for the account of, or other acquisition of funds by, the Bank, or
(iii) imposes, modifies or deems applicable any
capital adequacy or similar requirement (A) against assets (funded or
contingent) of, or credits or commitments to extend credit extended by the Bank,
or (B) otherwise applicable to the obligations of the Bank under this Agreement,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expenses (including loss of margin) upon the
Bank with respect to this Agreement, the Note or the making, maintenance or
funding of any part of the Loan (or, in the case of any capital adequacy or
similar requirement, to have the effect of reducing the rate of return on the
Bank's capital, taking into consideration the Bank's customary policies with
respect to capital adequacy) by an amount which the Bank in its sole discretion
deems to be material, the Bank may from time to time notify the Borrower of the
amount determined in good faith (using any averaging and attribution methods
employed in
<PAGE> 24
good faith) by the Bank (which determination shall be conclusive absent manifest
error) to be necessary to compensate the Bank for such increase in cost,
reduction of income or additional expense. Such notice shall set forth in
reasonable detail the basis for such determination. Such amount shall be due and
payable by Borrower to the Bank within ten (10) Business Days after such notice
is given; provided, however, that if the Bank demands compensation under this
Section 3.12, Borrower may at any time upon five (5) Business Days' prior notice
to the Bank (a) give notice to the Bank that it is canceling such Borrowing
Tranches subject to a Euro-Rate Option, whereupon each such Borrowing Tranche so
canceled shall terminate and the Borrower shall be obligated to compensate the
Bank as provided in this Section 3.12(a) above and to indemnify the Bank as
provided in subsection 3.12(b) below and to pay the Bank upon demand an amount
equal to all Consequential Loss, if any, resulting therefrom, and (b) convert
such Borrowing Tranches subject to a Euro-Rate Option to the Base Rate Option.
(b) Indemnity. In addition to the compensation required by
subsection (a) of this Section 3.12, the Borrower shall indemnify the Bank
against any loss or expense (including Consequential Loss, loss of margin, any
loss incurred in liquidating or employing deposits from third parties and any
loss or expense incurred in connection with funds acquired by the Bank to fund
or maintain a portion of the Loan subject to a Euro-Rate Option) which the Bank
sustains or incurs as a consequence of any
(i) payment, prepayment, conversion or renewal of any
portion of the Loan to which a Euro-Rate Option applies on a day other than the
last day of an Interest Period (whether or not such payment or prepayment is
mandatory or automatic and whether or not such payment or prepayment is then
due), or
(ii) attempt by the Borrower to revoke (expressly, by
later inconsistent notices or otherwise) in whole or part any notice relating to
the selection of a Euro-Rate Option under Section 3.2 or prepayments under
Section 3.9.
If the Bank sustains or incurs any such loss or expense it
shall from time to time notify the Borrower of the amount determined in good
faith by the Bank (which determination shall be conclusive absent manifest error
and may include such assumptions, allocations of costs and expenses and
averaging or attribution methods as the Bank shall deem reasonable) to be
necessary to indemnify the Bank for such loss or expense. Such notice shall set
forth in reasonable detail the basis for such determination. Such amount shall
be due and payable by the Borrower to the Bank ten (10) Business Days after such
notice is given.
3.13 Commitment Fee.
The Borrower agrees to pay to the Bank, on or before the Closing Date,
as consideration for the Loan, the Commitment Fee.
4. AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, from the date hereof and
until the Bank Debt has been paid in full and all other obligations hereunder
shall have been performed and
<PAGE> 25
discharged, it shall comply at all times with the following affirmative
covenants:
4.1 Preservation of Existence, Etc.
The Borrower and Guarantor shall each maintain its corporate existence
and its license or qualification and good standing in each jurisdiction in which
its ownership or lease of property or the nature of its business makes such
licensing or qualification necessary.
4.2 Payment of Liabilities, Including Impositions.
The Borrower shall duly pay and discharge all liabilities to which it is
subject or which are asserted against it, prior to the date when any fine, late
charge or other penalty for late payment may be imposed, including all
Impositions, provided that it shall not be deemed to be a violation of this
Section 4.2 if such liabilities, including Impositions, are being contested in
good faith and by appropriate and lawful proceedings diligently conducted, and
such failure to pay and discharge such liabilities, including Impositions, (a)
would not reasonably be expected to result in a Material Adverse Change, (b)
would not reasonably be expected to materially affect the Collateral or the
validity of the Loan, and (c) for which such reserve or other appropriate
provisions, if any, as shall be required by GAAP shall have been made.
4.3 Compliance with Laws.
The Borrower shall comply with all applicable laws in all respects,
including, but not limited to, all Environmental Laws.
4.4 Keeping of Records and Books of Account.
The Borrower and Guarantors shall maintain and keep proper books of
record and account which enable each of them to issue financial statements and
reports in accordance with Section 7.2 and in which full, true and correct
entries shall be made in all material respects of all their respective dealings
and business and financial affairs.
4.5 Visitation Rights.
The Borrower shall permit any of the officers or authorized employees or
representatives of the Bank to visit and inspect the Project and to examine and
make excerpts from its books and records and discuss its affairs, finances and
accounts with its officers, all in such reasonable detail and at such reasonable
times during normal business hours and as often as the Bank may reasonably
request.
4.6 [RESERVED]
4.7 Maintenance of Insurance.
(a) The Borrower shall obtain the insurance coverages
specified in this subsection 4.7(a). The insurer issuing any such policy shall
certify to the Bank that (1) losses will be adjusted with the approval of the
Bank, (2) loss payments will be payable to the Bank,
<PAGE> 26
such payments to be applied in the manner set forth in the Mortgage either to
the restoration, repair or replacement of the Improvements or to the payment of
the Bank Debt, (3) the interests of the Bank shall be insured regardless of any
breach or violation by the Borrower of any warranties, declarations or
conditions contained in such policy, and (4) if such insurance is canceled or
materially changed or if any reinsurance is canceled for any reason whatsoever,
such insurer will promptly notify the Bank and such cancellation or change shall
not be effective as to the Bank for thirty (30) days after receipt by the Bank
of such notice. The Borrower shall deliver to the Bank Acord Form 27 Evidence of
Insurance with respect to such policies on or before the Closing Date, and
evidence of each renewal policy in a form acceptable to Bank not less than
thirty (30) days prior to the expiration of the original policy or preceding
renewal policy (as the case may be); and to deliver to the Bank, upon Bank's
request, receipts or other evidence that the premiums thereon have been paid in
accordance with the Policy. The insurer or reinsurer for all such policies shall
be rated A- IX by A.M. Best, or such other rating reasonably acceptable to the
Bank. The form, content, insurers and reinsurers of all insurance policies
required under this Agreement and the Mortgage shall be satisfactory to the Bank
in accordance with the standards established in this Section 4.7. Such insurance
coverages shall include:
(i) Fire and Extended Coverage Insurance. Fire and
Extended Coverage Insurance insuring the Improvements and all materials
(installed and uninstalled), supplies and other personal property owned by
Borrower on the Land against loss or damage by fire, vandalism, burglary, theft,
riot, and other hazards insured against by extended coverage insurance and such
other insurance (including, but not limited to, business interruption insurance
covering loss of net earnings, including rental income, and costs associated
with the period of project restoration, malicious mischief insurance and flood
insurance if in a Federal flood prone area) as may be specified by the Bank from
time to time, in amounts acceptable to the Bank and to be evidenced by an Acord
Form 27 Evidence of Insurance (or such other equivalent form as may be
acceptable to the Bank). The Borrower shall, to the extent applicable, cause
each insurance policy issued in connection herewith to name the Bank as
mortgagee and loss payee.
(ii) Public Liability Insurance. Commercial public
liability and property damage insurance in connection with the Land and
Improvements, and contractual liability and completed operations coverage, and
comprehensive automobile liability insurance covering all motor vehicles used in
connection with the Land and Improvements, all in amounts and with insurers
acceptable to the Bank. The Borrower shall cause the insurer to name the Bank as
an additional insured under such coverage.
(iii) Workers' Compensation Insurance. Workers'
compensation and employer's liability insurance covering all liability in
connection with the Land and Improvements under applicable laws with respect to
the Borrower and, with respect to all contractors employed by Borrower, Borrower
shall contractually obligate each such contractor to obtain worker's
compensation and employer's liability insurance.
(b) The Borrower shall insure its properties and assets (other
than the Land and Improvements which are required to be insured in the manner
provided in subsection (a) above) against loss or damage by fire and such other
insurable hazards as such assets are commonly insured (including business
interruption insurance) and in such amounts as similar properties and assets are
insured by prudent companies in similar circumstances carrying on
<PAGE> 27
similar businesses and against public liability for damages and against other
risks in amounts normally carried by prudent companies carrying on similar
businesses and reasonably satisfactory to the Bank.
4.8 Notice.
The Borrower shall give prompt written notice to the Bank (a) of any
action or proceeding instituted by or against it or as to which it shall have
received written notice or of which it has actual knowledge which constitutes a
Potential Default or an Event of Default under this Agreement, or (b) of a
default by the Borrower under any other material contract, instrument or
agreement to which it is a party or by which it or any of its properties or
assets may be bound or to which it or any of its properties or assets may be
subject, which default could be reasonably expected result in a Material Adverse
Change.
4.9 Performance of Obligations
The Borrower shall duly pay, perform and discharge all of its
obligations hereunder and under the other Loan Documents.
4.10 Compliance with Agreements.
The Borrower and Guarantor shall each comply in all material respects
with all obligations under any contracts, instruments and agreements to which it
is a party or to which any of its properties or assets may be subject.
4.11 Title to Land and Improvements.
The Borrower shall retain its fee simple interest in the Land and
Improvements until the Bank Debt has been indefeasibly paid in cash and
satisfied in full.
4.12 Further Assurances.
The Borrower shall, from time to time, at its expense, faithfully
preserve and protect the Bank's liens on and security interest in the Collateral
as a continuing first priority perfected lien, as applicable, subject only to
Permitted Encumbrances, and shall take such other action as the Bank in its sole
discretion may reasonably deem necessary from time to time in order to preserve,
perfect and protect the liens granted under the Collateral Documents, to
exercise and enforce the Bank's rights and remedies thereunder and with respect
to the Collateral and to carry out the terms of this Agreement and the other
Loan Documents.
4.13 Estoppel Certificate.
At any time within ten (10) Business Days after written demand by the
Bank therefor, the Borrower shall deliver to the Bank a certificate duly
executed and in form satisfactory to the Bank, stating and acknowledging, to the
best of Borrower's knowledge, (i) the then unpaid principal balance, and
interest due and unpaid under, the Loan, the fact that there are no defenses,
off-sets or counterclaims thereto (or, if such should not be the fact, then the
facts and
<PAGE> 28
circumstances relating to such defenses, off-sets or counterclaims); (ii) the
Borrower has kept, observed, complied with, fulfilled and performed in all
material respects every term, covenant and condition in this Agreement and the
other Loan Documents on its part to be kept and performed; (iii) that no
Potential Default or Event of Default exists; that no event has occurred or is
threatened which if continued would permit the holder of any recourse
indebtedness of the Borrower or to which its property is subject to accelerate
the maturity thereof or enforce any lien securing the same; and (iv) that no
material litigation or administrative proceeding has been instituted by or
against the Borrower (or, if such should not be the fact, then the facts and
circumstances relating to such event or litigation in detail) and covering such
other matters relating to the Borrower, the Loan or the Collateral as the Bank
may reasonably require.
4.14 Repairs.
The Borrower shall maintain and keep the Land and the Improvements in
good working order and condition and make all necessary and proper repairs and
replacements thereto, including, without limitation, making such repairs and
alterations as are necessary to the generator room so that such room is in
compliance with applicable building codes and regulations.
4.15 Protection Against Lien Claims.
Any Lien claimed or filed against any part of the Land or the
Improvements for labor done or materials or services furnished in connection
with any construction activities performed on the Land or Improvements shall be
insured over or discharged, by bond or otherwise, within the time frames set
forth in Section 4.2 hereof.
4.16 Plans and Benefit Arrangements.
The Borrower shall, and shall cause each other member of the ERISA
Group to, comply with ERISA, the Internal Revenue Code and other applicable laws
applicable to Plans and Benefit Arrangements except where such failure, alone or
in conjunction with any other failure, would not result in a Material Adverse
Change. Without limiting the generality of the foregoing, the Borrower shall
cause all of its Plans and all Plans maintained by any member of the ERISA Group
to be funded in accordance with the minimum funding requirements of ERISA and
shall make, and cause each member of the ERISA Group to make, in a timely
manner, all contributions due to Plans, Benefit Arrangements and Multiemployer
Plans.
4.17 Conditions Precedent.
As conditions precedent to the Bank's obligation to close the Loan and
make the First Disbursement, Borrower shall have complied with all the
requirements and shall have fulfilled all the conditions set forth in this
Agreement and shall prior to the Closing Date (unless otherwise set forth herein
or waived in writing by the Bank), furnish to Bank at Borrower's sole cost and
expense, the items set forth on Exhibit B attached hereto, all of which shall be
in form and content satisfactory to Bank and its counsel.
<PAGE> 29
4.18 Use of Proceeds.
The Borrower shall use the proceeds of the Loan for the purpose of
consolidating and refinancing the existing Indebtedness secured by the Project.
4.19 Year 2000.
The Borrower has reviewed the areas within its businesses and
operations which could be adversely affected by, and has developed a program to
address on a timely basis, the risk that certain computer applications used by
the Borrower (or any of its material suppliers, customers or vendors) may be
unable to recognize and perform properly date-sensitive functions involving
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). The Year
2000 Problem will not result in any Material Adverse Change with respect to
Borrower.
4.20 Management of the Project.
The Borrower shall operate the Project strictly in accordance with the
Franchise Agreement. The Project will be managed at all times by the Manager
pursuant to the Property Management Agreement and Borrower shall not terminate
or materially modify the Property Management Agreement without the prior written
consent of the Bank. The Borrower shall terminate the Manager at Bank's request
upon thirty (30) days' prior written notice to Borrower and the Manager, which
termination notice may be given by the Bank upon the occurrence of an Event of
Default under Section 10.1(a), (c) or (d) hereof. In the event that the Manager
is terminated pursuant hereto, Borrower shall immediately seek to appoint a
replacement property manager acceptable to Bank in Bank's sole discretion, and
Borrower's failure to obtain such an acceptable property manager within 30 days
of Bank's request to terminate the Manager shall constitute an immediate Event
of Default hereunder.
4.21 Borrower Financial Covenants.
(a) The Borrower covenants and agrees that during the first
calendar year following the Closing Date, the Debt Service Coverage Ratio for
the Project, as measured as of the end of each calendar quarter for the prior
twelve (12) month period and as set forth on the covenant compliance certificate
required to be delivered to the Bank pursuant to Exhibit C, Section (c) hereof,
shall not be less than 1.30 to 1.00.
(b) The Borrower covenants and agrees that during the second
calendar year following the Closing Date, the Debt Service Coverage Ratio for
the Project, as measured as of the end of each calendar quarter for the prior
twelve (12) month period and as set forth on the covenant compliance certificate
required to be delivered to the Bank pursuant to Exhibit C, Section (c) hereof,
shall not be less than 1.35 to 1.00.
(c) The Borrower covenants and agrees that during the
Extension Period, the Debt Service Coverage Ratio for the Project, as measured
as of the end of each calendar quarter for the prior twelve (12) month period
and as set forth on the covenant compliance certificate required to be delivered
to the Bank pursuant to Exhibit C, Section (c) hereof, shall not be less than
1.50 to 1.00.
<PAGE> 30
4.22 Guarantor Financial Covenants.
Until payment in full of all Bank Debt, satisfaction of all of
Borrower's other obligations hereunder and under the other Loan Documents, the
Borrower shall cause the Guarantor to comply at all times with the following
covenants (as reflected on the financial statements of the Guarantors prepared
and delivered to the Bank in accordance with Exhibit C Section (c) of this
Agreement):
(i) Cash and Cash Equivalents. The amount of the Guarantor's
Cash and Cash Equivalents shall not be less than $8,000,000 at any given time;
(ii) Debt Multiple Ratio. The Debt Multiple Ratio with respect
to Guarantor shall not exceed 3.00 to 1.00;
(iii) Current Ratio. The Guarantor shall maintain a Current
Ratio of at least 1.25 to 1.00; and
(iv) Net Worth. The Net Worth of Guarantor shall not be less
than $50,000,000 excluding minority interest.
4.23 Required FF&E Reserve.
Borrower shall establish an interest-bearing reserve account (the "FF&E
Account") to be maintained with the Bank, subject to the payment of all
customary charges and fees, and shall pledge all of its right, title and
interest in the FF&E Account to the Bank pursuant to the Pledge Agreement.
Beginning with the first calendar quarter following the Closing Date as soon as
available and in any event within fifteen (15) days following the end of each
calendar quarter throughout the term of the Loan, Borrower shall deposit the
greater of (i) three percent (3%) of all Facility Revenues (as hereinafter
defined) or (ii) the actual amount spent by Borrower for the costs of
acquisition of furniture, fixtures and equipment to be used in connection with
the Project into the FF&E Account (the "Required FF&E Reserve"). The Borrower
shall be permitted to withdraw amounts from the FF&E Account, so long as no
Event of Default or Potential Default shall then exist and be continuing, to
cover the cost of acquisition of furniture, fixtures and equipment to be used in
connection with the Project as long as the acquisition thereof is required to be
capitalized in accordance with Borrower's capitalization policy as approved by
the Bank prior to the Closing Date (each being a "Capital Acquisition"). At the
time the quarterly financial reports required to be delivered to the Bank
pursuant to Exhibit C, Section (c) are due, Borrower shall provide a summary and
accounting of all Capital Acquisitions made by the Borrower during the previous
calendar quarter. For the purposes hereof, the term "Facility Revenues" shall
mean all gross revenues and receipts derived from the operation of the Project,
including, without limitation, all revenues and receipts from room rents, food,
and beverage sales and other miscellaneous revenues arising from the operation
of the Project.
5. NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that, from the date hereof and
until the Bank
<PAGE> 31
Debt has been paid in full and all other obligations hereunder shall have been
performed and discharged, it shall comply at all times with the following
negative covenants:
5.1 Changes in Organizational Documents.
The Borrower shall not amend or modify, or permit the amendment or
modification of, in any material respect, the Borrower Documents, without
providing prior written notice to the Bank and obtaining the prior written
consent of the Bank.
5.2 Transfer of Land and Improvements.
The Borrower shall not voluntarily or by operation of law, directly or
indirectly, sell, convey, transfer, assign, pledge, encumber, or permit to be
sold, conveyed, transferred, assigned, pledged or encumbered any interest
whether nominal, beneficial or otherwise in or any part of the Land or the
Improvements, without the prior written consent of the Bank having been
obtained. Any transaction which is prohibited under this Section 5.2 shall be
null and void to the extent permitted by applicable law. The Bank shall not be
under any obligation to allege or show any impairment of the Collateral, and the
Bank may pursue any legal or equitable remedies for default, without such
allegation or showing, notwithstanding the foregoing.
5.3 Change in Ownership.
The Borrower shall not cause or permit sales, pledges, encumbrances,
conveyances, transfers or assignments of interests in the Borrower (whether
owned directly or through other entities) without the prior written consent of
the Bank.
5.4 Liquidations, Mergers, Consolidations, Acquisitions.
The Borrower shall not dissolve, liquidate or become a party to any
merger or consolidation, or acquire by purchase, lease or otherwise all or
substantially all of the assets or capital stock of any other Person.
5.5 Breach of Documents.
The Borrower shall not commit any act, or permit any act to occur,
which would, in any manner, give rise to a breach of any term, covenant or
condition on Borrower's part to be performed under any contract to which the
Borrower is a party or by which it is bound.
5.6 Judgments.
The Borrower shall not permit any final judgment obtained against it to
remain unpaid for a period of ten (10) days following the entry thereof without
obtaining a stay of execution or bonding or causing such judgment to be bonded.
5.7 Leasing of Premises.
The Borrower shall not, without the prior written approval of the Bank,
enter into,
<PAGE> 32
terminate, amend, modify, extend or give any consent to any tenant under any
Lease.
5.8 Material Adverse Change.
The Borrower shall not permit any Material Adverse Change in the
business, assets, operation or condition, financial or otherwise, of Borrower or
Guarantor to occur.
5.9 Conduct of Business.
The Borrower shall not conduct any business or activity, the nature of
which would differ in any material respect from that presently conducted by it.
5.10 Creation of Liens.
Except as specifically contemplated by the Loan Documents the Borrower
shall not create, incur, assume or suffer to exist or be created, or permit any
pledge of, or any deed of trust, mortgage, Lien, charge, security interest or
encumbrances of any nature with respect to the Land or the Improvements, or
assign, pledge or in any way transfer or encumber its rights to receive income
from the Land or the Improvements.
5.11 Value of Collateral.
The Borrower shall not take any action which would result in any
material impairment of the value of any Collateral.
5.12 Transfer of Personalty.
The Borrower shall not voluntarily or by operation of law, directly or
indirectly, sell, assign, transfer, encumber, pledge, mortgage, hypothecate,
convey or otherwise dispose of any interest of Borrower in or any part of any
personalty located upon the Land or the Improvements or used or intended to be
used in connection therewith, provided that Borrower may dispose of any worn out
personal property as long the same is promptly replaced with personal property
that is the functional equivalent of the replaced property within such time as
would not impair the operation of the Project.
5.13 Disposition of Rents.
The Borrower shall not consent to or commit any sale, conveyance,
pledge, mortgage, hypothecation or other disposition of any rents or other funds
arising from the Land or the Improvements.
5.14 Indebtedness.
The Borrower shall not at any time create, incur, assume or suffer to
exist any Indebtedness, except for leases entered into by Borrower for certain
office equipment (as set forth on Exhibit F attached hereto), Indebtedness under
the Loan Documents and the Subordinated Debt.
<PAGE> 33
5.15 Dividends and Related Distributions.
Borrower shall not make or pay, or agree to become or remain liable to
make or pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its membership
interests, on account of the purchase, redemption, retirement or acquisition of
its membership interests (or warrants, options or rights therefor), except as
may be permitted in accordance with Borrower's Operating Agreement, provided
however that an Event of Default shall not have occurred and be continuing.
5.16 Pension Plans and Benefit Arrangements.
The Borrower and members of the ERISA Group shall not:
(i) fail to satisfy the minimum funding requirements of ERISA
and the Internal Revenue Code with respect to any Plan;
(ii) request a minimum funding waiver from the Internal
Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan,
Benefit Arrangement or Multiemployer Plan which, alone or in conjunction with
any other circumstances or set of circumstances resulting in liability under
ERISA, would constitute a Material Adverse Change;
(iv) permit the aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Plan, to exceed, as of any actuarial valuation
date, the fair market value of the assets of such Plan;
(v) fail to make when due any contribution to any
Multiemployer Plan that the Borrower or any member of the ERISA Group may be
required to make under any agreement relating to such Multiemployer Plan, or any
law pertaining thereto;
(vi) withdraw (completely or partially) from any Multiemployer
Plan or withdraw (or be deemed under Section 4062(e) of ERISA to withdraw) from
any Multiple Employer Pension Plan, where any such withdrawal is likely to
result in a material liability of Borrower or any member of the ERISA Group;
(vii) terminate, or institute proceedings to terminate, any
Plan, where such termination is likely to result in a material liability to the
Borrower or any member of the ERISA Group;
(viii) make any amendment to any Plan with respect to which
security is required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all disclosures
and governmental
<PAGE> 34
filings required under ERISA or the Internal Revenue Code, where such failure is
likely to result in a Material Adverse Change.
6. DISBURSEMENT MATTERS
6.1 First Disbursement.
The Bank's obligation to disburse the Loan proceeds (the "First
Disbursement") shall be subject to the satisfaction of all requirements set
forth on Exhibit B hereto and to the satisfaction of the following conditions:
(a) No material portion of the Project shall have been damaged
by fire or other casualty and no condemnation or taking of the Project or any
portion thereof shall be pending or threatened;
(b) The Bank shall have received all duly executed Loan
Documents on or before the Closing Date; and the Collateral Documents and other
documents to be placed of record shall have been duly recorded and filed in all
appropriate offices;
(c) The security interest in all property described in the
Collateral Documents shall have been duly perfected and shall be a valid and
enforceable first Lien;
(d) The Commitment Fee shall have been paid on or before the
Closing Date;
(e) All Governmental Approvals shall be in full force and
effect, and no notices of violation or revocation with respect thereto shall
have been received which have not been cured to the satisfaction of the
applicable Governmental Authority;
(f) The Bank shall have received, at Borrower's expense, a
marked title insurance commitment to issue a lender's title insurance policy in
the amount of the Loan (and a title policy reflecting such marked commitment
promptly thereafter) . Such title insurance commitment and policy shall be
satisfactory to the Bank and shall insure the first priority of the Lien of the
Mortgage and contain no exceptions other than the Permitted Encumbrances;
(g) No Event of Default or Potential Default shall have
occurred and be continuing under this Agreement or any of the other Loan
Documents;
(h) The Franchise Agreement and Property Management Agreement
shall each be in full force and effect;
(i) The Bank shall have received a structural report
satisfactory to Bank from its inspecting architect concerning its review of the
Improvements, and the Governmental Approvals; and
(j) The representations and warranties of the Borrower
contained in Article 8 hereof shall be true and accurate in all material
respects on and as of the date of the First
<PAGE> 35
Disbursement of Loan proceeds with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and the Borrower shall have
performed and complied with all covenants and conditions hereof.
7. REPORTING REQUIREMENTS
7.1 Appraisals, Environmental Reports and Title Reports.
(a) Appraisal. In addition to the Appraisal required prior to
the Closing Date as set forth on Exhibit B attached hereto, until the Bank Debt
is repaid in full the Bank shall have the right at any time and from time to
time but no more frequently than once each calendar year prior to the occurrence
of an Event of Default to obtain an Appraisal with respect to the Project, which
Appraisal shall be at the expense of the Borrower. After the occurrence of an
Event of Default and so long thereafter as such Event of Default shall remain
uncured, the Bank shall have the right to obtain such Appraisals as it may
require at the expense of the Borrower without limitation.
(b) Title Reports. In addition to the title insurance
commitment required prior to the Closing Date, at the option of Bank, exercised
not more than once each calendar year until the Bank Debt has been repaid in
full, Bank may request and Borrower shall deliver within fifteen (15) days of
such request, an updated title report on the Project, prepared and issued by the
same title insurance company that delivered to Bank the lender's policy of title
insurance in connection with the delivery of the Mortgage and such updated title
report shall be provided at Borrower's expense. After the occurrence of an Event
of Default and so long thereafter as such Event of Default shall remain uncured,
Borrower will furnish such title reports, endorsements or policies as the Bank
shall require. If Borrower fails to deliver the title updates, reports,
endorsements or policies required pursuant to this Section, Bank may obtain such
item(s) and Borrower will reimburse Bank for costs incurred upon demand.
(c) Environmental Reports. Within sixty (60) days following
the request of Bank, which request must be after such time that Bank reasonably
suspects that there has been a breach of the Environmental Indemnity Agreement,
or if a previously undisclosed adverse environmental condition becomes apparent
or a change in applicable law with respect to environmental matters should occur
(but such request may be made at any time following the occurrence of an Event
of Default and so long thereafter as such Event of Default shall remain uncured,
or if Bank has reason to believe there has been a breach of the Environmental
Indemnity Agreement) until the Bank Debt has been repaid in full, the Borrower
shall cause an Environmental Report of the Project to be prepared at Borrower's
sole cost and expense, which Environmental Report will be in form and performed
by a consultant approved by Bank, and if Borrower does not respond to Bank's
request within sixty (60) days, the Bank shall cause an Environmental Report of
the Project to be performed and, upon demand, Borrower will reimburse Bank for
all costs incurred.
<PAGE> 36
7.2 Financial Reports.
Until the Bank Debt is repaid in full, the Borrower shall furnish or
cause to be furnished to the Bank, within the time periods specified on Exhibit
C attached hereto, the financial reports and information listed on Exhibit C.
8. REPRESENTATIONS AND WARRANTIES
The Borrower hereby warrants and represents to the Bank as follows:
8.1 Due Formation: Capacity.
(a) The Borrower is duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has full power and
authority to own or lease and operate properties, and to conduct its affairs as
now being conducted and as proposed to be conducted.
(b) The Guarantor is duly organized, validly existing and in
good standing under the laws of the State of Maryland, and has full power and
authority to own or lease and operate properties, and to conduct its affairs as
now being conducted and as proposed to be conducted.
8.2 Power and Authority.
The Borrower and Guarantor each has full power and authority to enter
into, execute, deliver and carry out this Agreement and the other Loan Documents
to which either of them is a party, and to perform their respective obligations
hereunder and thereunder and all such actions have been duly authorized by all
necessary proceedings on Borrower's and Guarantor's part.
8.3 Validity and Binding Effect.
This Agreement and the other Loan Documents will have been duly
executed and delivered by the Borrower and the Guarantor, to the extent they are
a party thereto, on the required date of delivery of such document. This
Agreement and the other Loan Documents constitute the legal, valid and binding
obligations of the Borrower, and the Guarantor, to the extent they are a party
thereto, enforceable against them in accordance with their respective terms.
8.4 No Conflict.
Neither the execution and delivery of this Agreement, the other Loan
Documents, nor the consummation of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or thereof,
will conflict with, constitute a default under or result in any breach of (i)
the terms and conditions of the Borrower Documents or (ii) any Governmental
Approval, any applicable law or any material agreement, instrument, order, writ,
judgment, injunction or decree to which the Borrower or Guarantor is a party or
by which either of them is bound, or result in the creation or enforcement of
any Lien, charge or encumbrance whatsoever upon any property (now or hereafter
acquired) of Borrower or Guarantor (other than Liens
<PAGE> 37
granted under the Loan Documents).
8.5 Other Agreements.
Neither the Borrower nor Guarantor is a party to any agreement or
instrument that materially and adversely affects its present or proposed
business, properties or assets, operation or conditions, financial or otherwise
or is in default of the performance, observance, or fulfillment of any of the
material obligations, covenants or conditions set forth in any material
agreement or instrument to which Borrower or Guarantor is a party.
8.6 No Potential Default or Event of Default.
No Potential Default has occurred and no condition exists or will be
caused by the First Disbursement which will constitute a Potential Default or
Event of Default.
8.7 No Litigation or Investigations.
There is no pending or threatened litigation or governmental
investigation (or any basis therefor known to the Borrower) which questions the
capacity, ability or authority of the Borrower or Guarantor to execute, deliver
and perform the provisions of the Loan Documents to which either of them is a
party, or if determined adversely to the Borrower or Guarantor would reasonably
be expected to cause a Material Adverse Change.
8.8 Financial Statements and Other Information.
The information, financial statements and other financial data
furnished by the Borrower and the Guarantor to the Bank are true and correct in
all material respects and present fairly the financial condition of the Borrower
and the Guarantor . All other information given to the Bank by and with respect
to the Borrower or the Guarantor is accurate, correct and complete in all
material respects. To the best of the Borrower's knowledge, all surveys, plot
plans and similar documents heretofore furnished by the Borrower to the Bank
with respect to the Land and Improvements are accurate and complete in all
material respects as of their respective dates.
8.9 Impositions.
All returns for Impositions required to have been filed by the Borrower
have been timely filed and payment has been made, or will be made prior to the
date upon which any penalty or fine may be imposed, for all Impositions which
have or may become due pursuant to said returns or to assessments received.
8.10 Title Aspects.
The Borrower has good and marketable fee simple title to the Land and
Improvements, subject only to Permitted Encumbrances. The Borrower has been
granted all easements appropriate for the occupancy and operation of the
Improvements, and any mortgage liens now or hereafter affecting any land
burdened by such easements are subordinate to such easements.
<PAGE> 38
8.11 Zoning and Governmental Approvals.
The development, construction, use and occupancy of the Project
conforms in all material respects to all applicable laws, all existing
Governmental Approvals and all covenants, conditions and restrictions contained
in a deed, lease or other instrument or agreement covering or affecting all or
any portion of the Land. All Governmental Approvals have been obtained and are
valid and in full force and effect.
8.12 Utilities.
All utility and municipal services necessary for the use and occupancy
of the Improvements are available to the Land and have sufficient capacity to
operate the Improvements for their intended purposes, including water supply,
storm and sanitary sewer facilities, electricity and telephone facilities.
8.13 Security Interests.
The liens and security interests granted or to be granted to the Bank
pursuant to this Agreement and the other Loan Documents constitute and will
continue to constitute valid perfected first priority security interests under
the Uniform Commercial Code or other applicable law, entitled to all the rights,
benefits and priorities provided by the Uniform Commercial Code or any other
law, upon proper filing, and the property secured thereby is subject to no other
Liens or encumbrances except for the Permitted Encumbrances.
8.14 Mortgage.
The Lien granted to the Bank pursuant to the Mortgage constitutes and
will, upon proper recording, constitute a valid perfected first priority Lien
under applicable law, and the property secured thereby is subject to no other
Liens or encumbrances except for the Permitted Encumbrances. All action as is
necessary or advisable to establish such Lien and its priority as described in
the preceding sentence, including recordation of the Mortgage in the appropriate
offices, will be taken promptly following the Closing Date, and there will be,
upon execution, delivery and recordation of the Mortgage, no necessity for any
further action in order to protect, preserve and continue such Lien and such
priority.
8.15 [INTENTIONALLY OMITTED]
8.16 Environmental Matters.
(a) Except as disclosed in the Environmental Report, the
Borrower has not received any Environmental Complaint from any Official Body or
private Person alleging that any past owner or operator of the Land is a
potentially responsible party under the Comprehensive Environmental Response,
Cleanup and Liability Act, 42 U. S.C. Section 960 1, et seq., and the Borrower
has no reason to believe that such an Environmental Complaint might be received.
Except as disclosed in the Environmental Report, to Borrower's knowledge, there
are no pending or threatened, Environmental Complaints relating to the Land
pertaining to or arising out of any Environmental Conditions.
<PAGE> 39
(b) Except as disclosed in the Environmental Report, to
Borrower's knowledge, there are no conditions, facilities or any other facts or
circumstances at, on or under the Project that constitute a breach of or
non-compliance with any of the Environmental Laws, and there are no past or
present Environmental Conditions at, on or under the Project that prevent
compliance with the Environmental Laws.
(c) Except as disclosed in the Environmental Report, to
Borrower's knowledge, there are no conditions, facilities or any other facts or
circumstances at, on or under adjacent property, and there are no past or
present Environmental Conditions at, on or under adjacent property that prevent
compliance of the Project with the Environmental Laws.
(d) Except as disclosed in the Environmental Report, to
Borrower's knowledge, neither the Land nor any structures, improvements,
equipment, fixtures, activities or facilities thereon or thereunder contain or
use Regulated Substances, except in compliance with Environmental Laws.
8.17 Insurance.
All insurance policies furnished to the Bank by the Borrower are valid
and in full force and effect. No notice has been given or claim made and, to the
best of the Borrower's knowledge, no grounds presently exist to cancel or void
any of such policies or to reduce the coverage provided thereby. Such policies
provide adequate coverage in amounts sufficient to insure the assets and risks
of the Borrower in accordance with prudent business practices.
8.18 Solvency.
The Borrower and Guarantor are Solvent as of the Closing Date and will
be Solvent after giving effect to the transactions contemplated by the Loan
Documents, including all Indebtedness incurred thereby, the security interests
granted therein and the payment of all fees related thereto.
8.19 Pension Plans and Benefit Arrangements.
(a) The Borrower and each other member of the ERISA Group are
in compliance in all material respects with any applicable provisions of ERISA
with respect to all Benefit Arrangements, Plans and Multiemployer Plans. There
has been no Prohibited Transaction with respect to any Benefit Arrangement or
any Pension Plan or, to the best knowledge of the Borrower, with respect to any
Multiemployer Plan or Multiple Employer Plan, which could result in any material
liability of the Borrower or any other member of the ERISA Group. The Borrower
and all members of the ERISA Group have made when due any and all payments
required to be made under any agreement relating to a Multiemployer Plan or a
Multiple Employer Plan or any law pertaining thereto. With respect to each Plan
and Multiemployer Plan, the Borrower and each member of the ERISA Group (i) have
fulfilled in all material respects their obligations under the minimum funding
standards of ERISA, (ii) have not incurred any liability to the PBGC, and (iii)
have not had asserted against them any penalty for failure to fulfill the
minimum funding requirements of ERISA.
<PAGE> 40
(b) To the best of the Borrower's knowledge, each
Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder
when due.
(c) Neither the Borrower nor any other member of the ERISA
Group has instituted or intends to institute proceedings to terminate any Plan.
(d) No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made to
any Plan.
(e) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a plan
termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan.
(f) Neither the Borrower nor any other member of the ERISA
Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower nor any other member of the ERISA Group has been notified
by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan
or Multiple Employer Plan has been terminated within the meaning of Title IV of
ERISA, and, to the best knowledge of the Borrower, no Multiemployer Plan or
Multiple Employer Plan is reasonably expected to be reorganized or terminated,
within the meaning of Title IV of ERISA.
(g) To the extent that any Benefit Arrangement is insured, the
Borrower and all members of the ERISA Group have paid when due all premiums
required to be paid for all periods through and including the Closing Date. To
the extent that any Benefit Arrangement is funded other than with insurance, the
Borrower and all other members of the ERISA Group have made when due all
contributions required to be paid for all periods through the Closing Date.
(h) All Plans, Benefit Arrangements and Multiemployer Plans
have been administered in accordance with their terms and applicable law.
[ARTICLE 9 - RESERVED]
10. DEFAULTS AND REMEDIES
10.1 Events of Default.
The following shall be deemed to be Events of Default under this
Agreement (whatever the reason therefor and whether voluntary, involuntary or
effected by operation of law):
(a) The Borrower shall fail to make any principal payment due
under the Loan or shall fail to pay any interest on the Loan or any other amount
owing hereunder or under the other Loan Documents after such principal, interest
or other amount shall become due and payable in accordance with the terms hereof
or thereof;
<PAGE> 41
(b) Any representation or warranty made at any time by the
Borrower or Guarantor herein or in any other Loan Document, or any certificate,
other instrument or written statement furnished by Borrower or Guarantor
pursuant to the provisions hereof or thereof, shall prove to have been false or
misleading in any material respect as of the time it was made or furnished;
(c) The Borrower shall fail to comply with any other covenant
contained in this Agreement or any of the other Loan Documents which calls for
the payment of money and shall not cure that failure within ten (10) days after
written demand by the Bank;
(d) The Borrower shall fail to comply with any covenant
contained in this Agreement or any of the other Loan Documents, other than those
defaults referred to in the other subparagraphs of this Section 10.1, and shall
not cure that failure within thirty (30) days after written notice thereof by
the Bank to Borrower or such shorter period of time for cure specified in any
Loan Document (such grace period to be applicable only in the event such default
can be remedied by corrective action of the Borrower as determined by the Bank
in its sole discretion);
(e) The Borrower shall fail to comply with the covenant set
forth in Section 4.21;
(f) The Guarantor shall fail to comply with any covenant set
forth in Section 4.22;
(g) The Borrower or Guarantor shall cease to be Solvent or
shall be unable to pay their respective debts as the same shall mature or there
shall be filed by or against the Borrower or Guarantor a petition in bankruptcy
or a petition seeking the appointment of a receiver, trustee or conservator for
Borrower or Guarantor or any portion of their respective properties or seeking
reorganization or to effect a plan or other arrangement with or for the benefit
of creditors, or the Borrower or Guarantor shall consent to the appointment of a
receiver, trustee or conservator;
(h) Any Lien or encumbrance, other than a Permitted
Encumbrance, is entered against the Land or Improvements and such Lien or
encumbrance is not discharged, vacated or bonded within ten (10) Business Days
after the filing thereof;
(i) Any final judgments for the payment of money shall be
entered against the Borrower or Guarantor by a court having jurisdiction which
is not discharged, vacated, bonded or stayed pending appeal within a period of
thirty (30) days from the date of entry of such judgment and such judgment shall
result in a Material Adverse Change with respect to the Borrower or Guarantor;
(j) There shall occur any uninsured damage to or loss, theft
or destruction of any of the Collateral in excess of $100,000, and such damage,
loss, theft or destruction is not restored within one hundred twenty (120) days
of the date thereof;
<PAGE> 42
(k) Any of the Loan Documents shall cease to be legal, valid
and binding agreements enforceable against the Borrower or Guarantor in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with their terms) or become or be judicially declared
ineffective or inoperative or shall in any way cease to give or provide the
respective liens, security interests, rights, titles, interests, remedies,
powers or privileges intended to be created thereby and Borrower has not
provided to the Bank either replacement documentation or substitute collateral
satisfactory to the Bank with thirty (30) days following written notice from the
Bank;
(l) Any party shall obtain an order or decree in any court of
competent jurisdiction to enjoin or prohibit the Bank, the Borrower or Guarantor
from carrying out the terms and conditions of any of the Loan Documents to which
any of them is a party and such order or decree is not vacated or stayed within
ten (10) days after the filing thereof;
(m) Any of the following occurs: (i) any Reportable Event,
which the Bank determines in good faith constitutes grounds for the termination
of any Plan by the PBGC or the appointment of a trustee to administer or
liquidate any Plan, shall have occurred and be continuing; (ii) proceedings
shall have been instituted or other action taken to terminate any Plan, or a
termination notice shall have been filed with respect to any Plan; (iii) a
trustee shall be appointed to administer or liquidate any Plan; (iv) the PBGC
shall give notice of its intent to institute proceedings to terminate any Plan
or Plans or to appoint a trustee to administer or liquidate any Plan; and, in
the case of the occurrence of (i), (ii), (iii) or (iv) above, the Bank
determines in good faith that the amount of Borrower's liability is likely to
cause a Material Adverse Change; (v) the Borrower or any member of the ERISA
Group shall fail to make any contributions when due to a Plan or a Multiemployer
Plan; (vi) the Borrower or any member of the ERISA Group shall make any
amendment to a Plan with respect to which security is required under Section 307
of ERISA; (vii) the Borrower or any member of the ERISA Group shall withdraw
completely or partially from a Multiemployer Plan; (viii) the Borrower or any
member of the ERISA Group shall withdraw (or shall be deemed under Section
4062(e) of ERISA to withdraw) from a Multiple Employer Plan; or (ix) any
applicable law, rule or regulation is adopted, changed or interpreted by any
governmental authority or agency or court with respect to or otherwise affecting
one or more Plans, Multiemployer Plans or Benefit Arrangements and, with respect
to any of the events specified in (v), (vi), (vii), (viii) or (ix), the Bank
determines in good faith that any such occurrence would be reasonably likely to
materially and adversely affect the total enterprise represented by the Borrower
and the other members of the ERISA Group;
(n) A Guarantor Default shall occur with respect to any
Indebtedness of Guarantor;
(o) a default shall occur under the Franchise Agreement which
is not cured within any applicable cure period (as such cure period may be
extended by the Franchisor) or the Franchise Agreement shall cease to be in full
force and effect;
(p) a default shall occur under the Property Management
Agreement which is not cured within any applicable cure period or the Property
Management Agreement shall cease to be in full force and effect;
(q) a "default" or defined "event of default" shall occur
under the Subordinated Debt; or
<PAGE> 43
(r) Borrower shall fail to fund the Required FF&E Reserve
pursuant to Section 4.23 hereof.
10.2 Remedies.
The Bank may exercise any or all of the following rights and remedies:
(a) If an Event of Default shall occur, the Bank may by
written notice to the Borrower, declare the unpaid principal amount of the Note
then outstanding and all interest accrued thereon and all other Indebtedness of
the Borrower to the Bank hereunder and thereunder to be immediately due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived.
(b) If an Event of Default shall occur, the Bank and any
branch, subsidiary or affiliate of the Bank anywhere in the world shall have the
right, in addition to all other rights and remedies available to it, without
notice to the Borrower, to set-off against and apply to the then unpaid balance
of the Loan and all other obligations of the Borrower hereunder or under any
other Loan Document any debt owing to, and any other funds held in any manner
for the account of the Borrower, or by such branch subsidiary or affiliate,
including without limitation, all funds in all deposit accounts (whether time or
demand, general or special, provisionally credited or finally credited, or
otherwise) now or hereafter maintained by the Borrower for its own account with
the Bank or such branch, subsidiary or affiliate. Such right shall exist whether
or not the Bank shall have made any demand under this Agreement or any other
Loan Document, whether or not such debt owing to or funds held for the account
of the Borrower is or are matured or unmatured and regardless of the existence
or adequacy of any Collateral, or other security to the Bank;
(c) If an Event of Default shall occur, and so long thereafter
as such Event of Default shall remain uncured, and whether or not the Bank shall
have accelerated the maturity of the Loan pursuant to any of the foregoing
provisions of this Section 10.2, the Bank may proceed to protect and enforce the
Bank's rights by suit in equity, action at law and/or other appropriate
proceeding, for the specific performance of any covenant or agreement contained
in this Agreement or the other Loan Documents and, as to any amount that shall
have become due, by declaration or otherwise, proceed to enforce the payment
thereof to enforce any other legal or equitable right of the Bank;
(d) From and after the date on which the Bank has taken any
action pursuant to this Article 10 and until all Bank Debt has been paid in
full, any and all proceeds received by the Bank from any sale or other
disposition of any Collateral, or any part thereof, or the exercise of any other
remedy by the Bank, shall be applied as follows:
(i) first, to reimburse the Bank for out-of-pocket
costs, expenses and disbursements, including without limitation, reasonable
attorneys' fees and legal expenses actually incurred by the Bank in connection
with realizing on any Collateral or collection of any obligations of the
Borrower under any of the Loan Documents, including advances made subsequent to
an Event of Default by the Bank or any of them or the Bank for the reasonable
<PAGE> 44
maintenance, preservation, protection or enforcement of, or realization upon,
any Collateral, including without limitation, advances for Impositions,
insurance, repairs and the like and reasonable expenses incurred to sell or
otherwise realize on, or prepare for sale or other realization on, any of the
Collateral;
(ii) second, to the repayment of all Bank Debt in the
order and manner determined by the Bank as to principal, interest, fees or other
amounts;
(iii) the balance, if any, as required by law.
(e) The Bank shall have all of the rights and remedies
contained in this Agreement and the other Loan Documents (including the right to
appoint a receiver and all other rights described in the Mortgage). In addition,
the Bank shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code or other applicable law, all of which rights and
remedies shall be cumulative and nonexclusive, to the extent permitted by law;
and
(f) The Bank shall have the further right to enter the Project
and take any and all actions necessary, in its judgment, to secure, winterize,
protect and preserve the Improvements and any materials or supplies located on
the Land.
10.3 Notice of Sale.
Any notice required to be given by the Bank of a sale, lease, or other
disposition of any Collateral or any other intended action by the Bank, if given
ten (10) Business Days prior to such proposed action, shall constitute
commercially reasonable and fair notice thereof to the Borrower.
11. MISCELLANEOUS
11.1 Modifications, Amendments or Waivers.
The Bank and the Borrower may from time to time enter into written
agreements amending or changing any provision of this Agreement or any other
Loan Document (except as otherwise expressly provided herein) or the rights of
the Bank or the Borrower hereunder or thereunder, or may grant written waivers
or consents to a departure from the due performance of the obligations of the
Borrower hereunder or thereunder.
11.2 No Implied Waivers: Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the Bank in exercising
any right, power, remedy or privilege under this Agreement or any other the Loan
Document shall affect any other or future exercise thereof or operate as a
waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Bank under this Agreement
and any other Loan Documents are cumulative and not exclusive of any rights or
remedies which they would otherwise have. Any waiver, permit consent or approval
of any kind or character on the part of the Bank of any breach or default under
this Agreement or any such waiver of any provision or condition of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing.
<PAGE> 45
11.3 Reimbursement and Indemnification of Bank by the Borrower;
Impositions.
The Borrower agrees unconditionally upon demand to pay or reimburse to
the Bank and to save the Bank harmless against (i) liability for the payment of
all reasonable out-of-pocket costs, expenses and disbursements, (including
reasonable fees and expenses of counsel including allocated costs of staff
counsel) for the Bank except with respect to (a) and (b) below (a) in connection
with the administration and interpretation of this Agreement, and other
instruments and documents to be delivered hereunder, (b) relating to any
amendments, waivers or consents pursuant to the provisions hereof, (c) in
connection with the enforcement of this Agreement or any other Loan Document, or
collection of amounts due hereunder or thereunder or the proof and allowability
of any claim arising under this Agreement or any other Loan Document, whether in
bankruptcy or receivership proceedings or otherwise, and (d) incurred by the
Bank in connection with any workout or restructuring, or in connection with the
protection, preservation, exercise or enforcement of this Agreement or any other
Loan Document or collection of amounts due hereunder or thereunder or the proof
and allowability of any claim arising under this Agreement or any other Loan
Document, whether in Insolvency Proceedings or otherwise, and (ii) all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
actually imposed on, incurred by or asserted against the Bank in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted by the Bank hereunder or thereunder, provided that the
Borrower shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements) if the same results from the Bank's gross negligence or willful
misconduct. The Bank will attempt to minimize the fees and expenses of legal
counsel for the Bank which are subject to reimbursement by the Borrower
hereunder by considering the usage of one law firm to represent the Bank if
appropriate under the circumstances. The Borrower agrees unconditionally to pay
all stamp, document, transfer, recording or filing taxes or fees and similar
Impositions during the Borrower's ownership of the Land and the Improvements
(except for taxes on the overall net income of the Bank and except for franchise
taxes) now or hereafter determined by the Bank to be actually due and payable in
connection with this Agreement or any other Loan Document, and the Borrower
agrees unconditionally to save the Bank harmless from and against any and all
present or future claims, liabilities or losses with respect to or resulting
from any omission to pay or delay in paying any such taxes, fees or other
similar Impositions, except as otherwise provided herein.
11.4 Holidays.
Whenever any payment or action to be made or taken hereunder shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day (except as provided in
Section 3.2 with respect to Interest Periods), and such extension of time may be
included in computing interest or fees, if any, in connection with such payment
or action, except that the Loan shall be due on the Business Day preceding the
Expiration Date if the Expiration Date is not a Business Day.
<PAGE> 46
11.5 Funding by Branch, Subsidiary or Affiliate.
(a) Notional Funding. The Bank shall have the right from time
to time, without notice to the Borrower, to deem any branch, subsidiary or
Affiliate entity (which for the purposes of this Section 11.5 shall mean any
corporation or association which is directly or indirectly controlled by or is
under direct or indirect common control with any corporation or association
which directly or indirectly controls the Bank) of the Bank to have made,
maintained or funded any portion of the Loan to which the Euro-Rate Option
applies at any time, provided that immediately following (on the assumption that
a payment was then due from the Borrower to such other office), and as a result
of such change, the Borrower would not be under any greater financial obligation
pursuant to Section 3.12 than it would have been in the absence of such change.
Notional funding offices may be selected by the Bank without regard to the
Bank's actual methods of making, maintaining or funding the Loan or any sources
of funding actually used by or available to the Bank.
(b) Actual Funding. The Bank shall have the right from time to
time to make or maintain any portion of the Loan by arranging for a branch,
subsidiary or Affiliate of the Bank to make or maintain such portion of the Loan
subject to the last sentence of this subsection 11.5(b). If the Bank causes a
branch, subsidiary or Affiliate to make or maintain any portion of the Loan
hereunder, all terms and conditions of this Agreement shall, except where the
context clearly requires otherwise, be applicable to such portion of the Loan to
the same extent as if such portion of the Loan were made or maintained by the
Bank, but in no event shall the Bank's use of such a branch, subsidiary or
Affiliate to make or maintain any part of the Loan hereunder cause the Bank or
such branch, subsidiary or Affiliate to incur any cost or expenses payable by
the Borrower hereunder or require the Borrower to pay any other compensation to
the Bank (including any expenses incurred or payable pursuant to Section 3.12)
which would otherwise not be incurred.
11.6 Notices.
All notices, requests, demands, directions and other communications
(collectively, "notices") given to or made upon any party hereto under the
provisions of this Agreement shall be in writing (including telex or facsimile
communication) unless otherwise expressly required hereunder and shall be
delivered by mail or other means or sent by telex or facsimile (in either case,
to be immediately confirmed verbally by telephone) to the respective parties at
the addresses and numbers set forth on Schedule I hereto or in accordance with
any subsequent written direction from any party to the others. All notices
shall, except as otherwise expressly herein provided, be effective (i) in the
case of telex or facsimile, when received and confirmed by telephone, (ii) in
the case of hand-delivered notice, when hand-delivered, (iii) if given by mail,
four (4) days after such communication is deposited in the mails with
first-class postage prepaid, return receipt requested, and (iv) if given by any
other means (including by air courier), when delivered; provided, however, that
notices to the Bank with respect to conversion or renewal of Interest Rate
Options and prepayment shall not be effective until received by the Bank.
11.7 Severability.
The provisions of this Agreement are intended to be severable. If any
provision of this
<PAGE> 47
Agreement shall be held invalid or unenforceable in whole or in part in any
jurisdiction such provision shall, as to such jurisdiction, be ineffective to
the extent of such invalidity or un enforceability without in any manner
affecting the validity or enforceability thereof in any other jurisdiction or
the remaining provisions hereof in any jurisdiction.
11.8 Governing Law.
This Agreement shall be deemed to be a contract under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania without regard to its conflicts of laws principles.
11.9 Prior Understanding.
This Agreement, together with the other Loan Documents, supersedes all
prior understandings and agreements, whether written or oral, between the
parties hereto and thereto relating to the transactions provided for herein and
therein, including any prior confidentiality agreements and commitments.
11.10 Duration: Survival.
All representations and warranties of the Borrower contained herein or
made in connection herewith shall survive the making of the Loan and shall not
be waived by the execution and delivery of this Agreement, any investigation by
the Bank or the making of the Loan in each case. All covenants and agreements of
the Borrower contained herein relating to the payment of additional compensation
or expenses and indemnification, including those set forth in the Note and
Sections 3.12 and 11.3 hereof, shall survive payment in full of the Bank Debt.
11.11 Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit of
the Bank and the Borrower and their respective successors and assigns, except
that the Borrower may not assign or transfer any of its rights and obligations
hereunder or any interest herein without the Bank's prior written consent. The
Bank may, at its own cost, make assignments in all or any part of the Loan to
one or more banks or other entities. In the case of a participation, the
participant's rights against Bank in respect of such participation shall be
those set forth in the agreement executed by Bank in favor of the participant
relating thereto and shall not include any voting rights. All of Bank's
obligations under this Agreement or any other Loan Documents shall remain
unchanged and all amounts payable by the Borrower hereunder or thereunder shall
be determined as if the Bank had not sold such participation.
11.12 Counterparts.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
<PAGE> 48
11.13 Exceptions.
The representations and warranties and covenants contained herein shall
be independent of each other and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable law.
11.14 Consent to Jurisdiction.
THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND AGREES THAT ALL SUCH SERVICE
OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE BORROWER AT
THE ADDRESSES PROVIDED FOR IN SECTION 11.6 HEREOF AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. THE BORROWER WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE.
11.15 No Third Parties Benefitted.
This Agreement is made and entered into for the sole protection and
benefit of the Borrower and the Bank. No trust fund is created by this Agreement
and no other Persons or entities will have any right of action under this
Agreement or any right against the Bank to obtain any proceeds of the Loan.
11.16 Authority to File Notices.
The Borrower irrevocably appoints the Bank as its attorney-in-fact,
with full power of substitution, to file for record, at the Borrower's cost and
expense and in the Borrower's name, any notices that the Bank considers
necessary or desirable to protect the Collateral.
11.17 Publicity.
Borrower agrees that Bank may at its expense publish advertisements,
print media and promotional materials or other announcements in such
publications as it may choose identifying the Borrower, the transaction and the
Bank's participation therein.
11.18 Interpretation.
Whenever the context requires, all words used in the singular will be
construed to have been used in the plural, and vice versa, and each gender will
include any other gender. The captions of the articles, sections, schedules and
exhibits of this Agreement are for convenience
<PAGE> 49
only and do not define or limit any terms or provisions. In the event of a
conflict between the terms of the other Loan Documents and the terms of this
Agreement, the terms of this Agreement shall control.
11.19 Status of Parties.
It is understood and agreed that the relationship of the parties hereto
is that of borrower and lender and that nothing contained herein or in any of
the other Loan Documents shall be construed to constitute a partnership, joint
venture or co-tenancy among Borrower and the Bank.
11.20 Brokerage Fee.
The Borrower represents to the Bank that no broker or other Person is
entitled to a brokerage fee or commission as a result of the Borrower's actions
or undertakings in connection with the financing of the Improvements and agrees
to hold the Bank harmless from all claims for brokerage commissions which may be
made as a result of such actions or undertakings, if any.
11.21 Waiver of Jury Trial.
THE BORROWER WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED TO ANY OF THE
LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
BORROWER AND BORROWER ACKNOWLEDGES THAT NEITHER THE BANK NOR ANY PERSON ACTING
ON BEHALF OF THE BANK HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER
OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE BORROWER
FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO
BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED BY ITS OWN FREE WILL, AND THAT
BORROWER HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THE
BORROWER AGREES THAT THE OBLIGATIONS EVIDENCED BY THIS AGREEMENT ARE EXEMPTED
TRANSACTIONS UNDER THE TRUTH-IN- LENDING ACT, 15 U.S.C. SECTION 1601, ET SEQ.
THE BORROWER FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING
OF THIS WAIVER PROVISION.
11.22 Warrant of Attorney to Enter Judgment by Confession.
(A) THE BORROWER ACKNOWLEDGES THAT (i) IT HAS READ AND UNDERSTANDS,
AFTER CONSULTATION WITH ITS COUNSEL, THAT THE PROVISIONS OF PARAGRAPH (B) BELOW
COULD ENABLE THE BANK TO OBTAIN A JUDGMENT AGAINST THE BORROWER AND COMMENCE
EXECUTION PROCEEDINGS THAT RESULT IN THE SEIZURE OF ASSETS OF THE BORROWER, IN
EITHER CASE, WITHOUT THE BORROWER HAVING THE BENEFIT OF PRIOR NOTICE OR A
HEARING; AND (ii) THE BORROWER NEVERTHELESS KNOWINGLY AND
<PAGE> 50
VOLUNTARILY AGREES TO SUCH POSSIBLE CONSEQUENCES AND THE PROVISIONS OF PARAGRAPH
(B) BELOW.
(B) FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT BORROWER DOES
HEREBY EMPOWER ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF
PENNSYLVANIA, TO APPEAR FOR BORROWER AND, WITH OR WITHOUT A COMPLAINT OR
DECLARATION FILED, CONFESS A JUDGMENT OR JUDGMENTS AGAINST BORROWER AND IN FAVOR
OF THE BANK OR THE BANK'S SUCCESSORS OR ASSIGNS IN ANY COURT OF RECORD WITHIN
THE COMMONWEALTH OF PENNSYLVANIA FOR THE UNPAID PRINCIPAL BALANCE OF THE NOTES,
AND ALL INTEREST THEREON, TOGETHER WITH COSTS OF SUIT AND AN ATTORNEY'S
COMMISSION OF IO% FOR COLLECTION. THE AUTHORITY AND POWER TO APPEAR FOR AND
ENTER JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES
THEREOF, AND MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS THE BANK OR ITS
SUCCESSORS OR ASSIGNS SHALL DEEM NECESSARY OR DESIRABLE. ANY SUCH JUDGMENT SHALL
BE FULLY ENFORCEABLE UP TO THE AMOUNT DUE FROM BORROWER AT THE TIME ENFORCEMENT
OF THE JUDGMENT IS SOUGHT, PLUS AN ATTORNEY'S COMMISSION OF 10% FOR COLLECTION.
BORROWER HEREBY FOREVER WAIVES AND RELEASES ANY AND ALL ERRORS IN SAID
PROCEEDINGS, WAIVES STAY OF EXECUTION, STAY, CONTINUANCE OR ADJOURNMENT OF SALE
ON EXECUTION, THE RIGHT TO PETITION TO SET ASIDE OR ORDER A RESALE, THE RIGHT TO
EXCEPT TO THE SHERIFF'S SCHEDULE OF PROPOSED DISTRIBUTION, THE RIGHT OF
INQUISITION AND EXTENSION OF TIME OF PAYMENT, AND AGREES TO CONDEMNATION OF ANY
PROPERTY LEVIED UPON BY VIRTUE OF ANY EXECUTION ISSUED ON ANY SUCH JUDGMENT, AND
BORROWER SPECIFICALLY WAIVES ALL EXEMPTIONS FROM LEVY AND SALE OF ANY PROPERTY
THAT NOW IS OR MAY HEREAFTER BE EXEMPT UNDER ANY EXISTING OR FUTURE LAWS OF THE
UNITED STATES OF AMERICA OR THE COMMONWEALTH OF PENNSYLVANIA OR OF ANY OTHER
JURISDICTION.
11.23 Time of Essence.
Time is of the essence with respect to each obligation of the Borrower
hereunder.
[REST OF PAGE INTENTIONALLY
LEFT BLANK]
<PAGE> 51
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement under seal as of the day and year first
above written.
BORROWER:
WITNESS/ATTEST: INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C.,
a Delaware limited liability company
By: Interstate Property Partnership, L.P.,
a Delaware limited partnership, sole Member
By: Interstate Property Corporation,
a Delaware corporation, General Partner
/s/ PATRICIA SHEARER
- - --------------------------- By: /s/ J. WILLIAM RICHARDSON
--------------------------------------------
Name: J. William Richardson
------------------------------------------
Title: Vice President
-----------------------------------------
BANK:
WITNESS: PNC BANK, NATIONAL ASSOCIATION,
a national banking association
/s/ TERRI WYDA
- - --------------------------- By: /s/ RANDALL S. CORNELIUS
--------------------------------------------
Name: Randall S. Cornelius
------------------------------------------
Title: Assistant Vice President
-----------------------------------------
<PAGE> 52
SCHEDULE I
Names, Addresses, Telephone
and Telecopier Numbers of Parties
Borrower:
INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C.
c/o Interstate Hotels Corporation
Foster Plaza Ten
680 Andersen Drive
Pittsburgh, PA 15220
Attention: Chief Financial Officer
(412) 937-3359 (Phone)
(412) 937-8051 (Fax)
With a copy to:
Interstate Hotels Corporation
Foster Plaza Ten
680 Andersen Drive
Pittsburgh, PA 15220
Attention: General Counsel
(412) 937-3384 (Phone)
(412) 937-3116 (Fax)
Bank:
PNC BANK NATIONAL ASSOCIATION
One PNC Plaza, 249 Fifth Avenue
P1-POPP-19-2
Pittsburgh, PA 15222-2707
Attention: Real Estate Banking
Randall S. Cornelius
(412) 768-5778 (Phone)
(412) 762-6500 (Fax)
Barbara Burzio
(412) 762-7924 (Phone)
(412) 768-5754 (Fax)
<PAGE> 53
EXHIBIT A
LOAN INTEREST RATE REQUEST
[OPTION A: NOTICE OF CONVERSION TO OR ELECTION OF EURO-RATE OPTION]
PNC BANK NATIONAL ASSOCIATION
One PNC Plaza, 249 Fifth Avenue
P1-POPP-19-2
Pittsburgh, PA 15222-2707
Attention: Real Estate Banking
Ladies and Gentlemen:
The undersigned refers to the Loan Agreement dated as of February
_______, 2000 (as amended, restated, supplemented or modified from time to time,
the "Loan Agreement") between INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C.
("Borrower") and PNC BANK, NATIONAL ASSOCIATION, a national banking association
(the "Bank"). Terms defined in the Loan Agreement shall have the same meanings
assigned to them therein when used herein.
1. The undersigned Borrower hereby gives notice, irrevocably, that it
wishes to convert all or part of the outstanding Loan subject to a Base-Rate
Option into, or elect to have a new Borrowing Tranche subject to a Euro-Rate
Option as follows:
(a) Proposed date of conversion or election to Euro-Rate Option and
expiration of Interest Period (must be three (3) Business Days after date of
this Notice for conversion or election to Euro-Rate Option):
Conversion Date Expiration Date
, 200- ,200-
(b) Aggregate amount of the Loan to be converted to the Euro-Rate
Option (must be at least $1,000,000 for each Interest Period selected) and
Euro-Rate Interest Period (must be one, two, three, six or twelve months and end
before the Expiration Date), to apply to the following conversion:
<PAGE> 54
Amount Euro-Rate Interest
Period Euro-Rate Option
$ months
------
from 200
-------- --
%
to 200
------------ --
$ months
------
from 200
-------- --
%
to 200
------------ --
$ months
------
from 200
-------- --
%
to 200
------------ --
$ months
------
from 200
-------- --
%
to 200
------------ --
2. The undersigned confirms as of the date hereof that no Event of
Default or Potential Default has occurred and is continuing.
DATED:
Very truly yours,
WITNESS/ATTEST: INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C.,
a Delaware limited liability company
By: Interstate Property Partnership, L.P.,
a Delaware limited partnership, sole Member
By: Interstate Property Corporation,
a _________ corporation, General Partner
- - --------------------------- By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
<PAGE> 55
[OPTION B: CONTINUATION OF EURO-RATE OPTION]
PNC BANK, NATIONAL ASSOCIATION
PNC Bank, National Association
One PNC Plaza, 249 Fifth Avenue
P1-POPP-19-2
Pittsburgh, PA 15222-2707
Attention: Real Estate Banking
Ladies and Gentlemen:
The undersigned refers to the Loan Agreement dated as of February __,
2000 (as amended, restated, supplemented or modified from time to time, the
"Loan Agreement") between INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C.
("Borrower") and PNC BANK, NATIONAL ASSOCIATION, a national banking association
(the "Bank"). Terms defined in the Loan Agreement shall have the same meanings
assigned to them therein when used herein.
1. The undersigned Borrower hereby gives notice, irrevocably, that it
wishes to continue all or part of the outstanding Borrowing Tranche subject to a
Euro-Rate Option with a Euro-Rate Interest Period whose last day is ___________,
200__ (the "Subject Tranche") as follows:
(a) Proposed date of continuation and expiration of Euro-Rate Interest
Period (must be (i) three (3) Business Days after date of this Notice, and (ii)
the maturity date of the Euro-Rate Interest Period for the subject Tranche):
<TABLE>
<CAPTION>
Amount Conversion Date Expiration Date Effective Date
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$
</TABLE>
<PAGE> 56
(b) Aggregate amount of Subject Tranche to be continued under Euro-Rate
Option (must be at least $1,000,000 for each Euro-Rate Interest Period selected)
and Interest Period (must be one, two, three, six or twelve months and end
before the Expiration Date):
Amount Euro-Rate Interest
Period Euro-Rate Option
$ months
------
from 200
-------- --
%
to 200
------------ --
$ months
------
from 200
-------- --
%
to 200
------------ --
$ months
------
from 200
-------- --
%
to 200
------------ --
$ months
------
from 200
-------- --
%
to 200
------------ --
<PAGE> 57
2. The undersigned confirms as of the date hereof that no Event of
Default or Potential Default has occurred and is continuing.
DATED:
Very truly yours,
WITNESS/ATTEST: INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C.,
a Delaware limited liability company
By: Interstate Property Partnership, L.P.,
a Delaware limited partnership, sole Member
By: Interstate Property Corporation,
a _________ corporation, General Partner
- - --------------------------- By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
EXHIBIT B
ITEMS TO BE SUPPLIED
1. Title and Collateral Matters:
(a) a current survey of the Land, certified by a registered surveyor
approved by Bank, such certification to be addressed to the Bank and the title
company issuing the lender's title insurance policy and (i) to show the location
and area covered by all building lines affecting the Land, the location and area
of all easements encumbering and/or benefitting the Land, the relation of the
Land to public thoroughfares for access purposes, the location of all physical
conditions on the Land, the location of the Improvements and any encroachments
of the Improvements or other physical conditions upon any easements, building
lines or property boundary lines, and (ii) to state whether the Land or any
portion thereof is located in any federally designated flood prone area, and if
so, to locate on the survey such portion of the Land so designated and to show
the dimension and location of all improvements, parking areas, drives, easements
and rights-of-way and the location of adjoining streets and distances to the
nearest intersecting street);
(b) an Appraisal of the Project which shall establish that the amount
of the Loan does not exceed sixty percent (60%) of the Project's stabilized
Appraised Value;
<PAGE> 58
(c) a legal description of the Land and all easements, compatible with
the above mentioned survey and sufficient for the purpose of the Mortgage;
(d) evidence in such form as Bank may require of (i) satisfactory
subdivision of the Land and zoning for the Project; (ii) the availability of all
utility and municipal services required for the operation of the Project; (iii)
satisfactory soils compaction conditions and sub-surface support for the
Project; and (iv) the availability of means of access to and from the Land by
means of easements benefitting the same;
(e) evidence in such form as Bank may require, including without
limitation engineering and soils reports, environmental assessment reports,
reports and clearances from governmental agencies, chain of title searches and
certifications of Borrower, that the Project is free from all asbestos, and
hazardous waste and all other materials regulated by the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, the
Resource Conservation Recovery Act, as amended, or by any other federal, state
or local law, statute, regulation, ordinance, code or order together with a
reliance letter indicating that the Bank may rely on such report in making the
Loan;
(f) evidence in such form as Bank may require (including the actual
policies and Acord Form 27 Evidence of Insurance, and evidence of payment of
premiums) that all types of hazard insurance (including business interruption
insurance, loss of rents insurance, malicious mischief insurance and flood
insurance, if in a federal flood prone area) available with respect to the
Improvements, public liability and property damage insurance with respect to the
Land and Improvements, and workers' compensation insurance are in force and will
continue in force so long as the Bank Debt is outstanding (the policies for such
insurance to be in form, in amounts and with companies satisfactory to Bank, and
all hazard and liability policies, as applicable, to have attached to them
additional insured, mortgagee and loss payee clauses, as applicable, in favor of
Bank);
(g) a title insurance binder, together with a specimen policy issued by
a title insurance company acceptable to Bank, pursuant to which said title
insurance company will on the Closing Date issue an ALTA lender's policy of
title insurance insuring the Mortgage in the principal sum secured thereby, as a
first lien upon Borrower's fee simple title to the Land and Improvements, and
all appurtenances thereto (including such easements and appurtenances as may be
required by Bank), subject only to such exceptions as may be approved in writing
by Bank, with endorsements thereto as to such matters as Bank may designate,
including, without limitation, a compliance endorsement and contiguity of the
Land with all easements and public roads, and together with such reinsurance and
direct access agreements as Bank shall in its discretion require;
(h) the certificate of occupancy for the Improvements; and
(i) the report from the Bank's inspecting architect as set forth in
Section 6.1(j) hereof.
<PAGE> 59
2. Corporate Documents
(a) an opinion or opinions of counsel acceptable to Bank and its
counsel (including local counsel), to be delivered on the Closing Date in form
and scope satisfactory to Bank, to the effect (in addition to other matters
which Bank may require to be favorably addressed) that (i) Borrower is duly
organized, validly existing and in good standing under the laws of the
jurisdictions of their formation; (ii) Borrower is duly qualified to do business
in the jurisdiction in which the Land is located, and Borrower and the Guarantor
have all requisite power and authority to operate the Land and Improvements and
to enter into, perform and consummate all aspects of the transactions
contemplated hereby; (iii) all Loan Documents and other documents to be executed
by or on behalf of Borrower or the Guarantor have been duly executed and are
valid and binding upon and enforceable against the parties thereto (other than
the Bank) in accordance with the respective terms of each, except as the same
may be limited by bankruptcy, insolvency and similar laws affecting the rights
of creditors generally; (iv) there is no action, proceeding or investigation
pending or to the knowledge of counsel threatened (or any basis therefor known
to counsel) which questions the validity of the Loan or the transactions
contemplated hereby or the ability of Borrower or the Guarantor from performing
their respective obligations under the Loan Documents; (v) the performance of
and compliance with the provisions hereof and the other documents referred to
herein will not result in or be in conflict with or constitute a default under
any agreement, instrument, document, decree, order or any federal, state or
local law, statute, rule, regulation or ordinance applicable to or affecting
Borrower or the Guarantor; (vi) no consent, approval, order or authorization of,
or registration or filing with, any governmental or public body or authority is
required in connection with the acceptance hereof, the Loan or the matters
contemplated hereby; (vii) the Loan shall not violate the usury or other laws of
the Commonwealth of Pennsylvania or of any other jurisdiction relating to the
maximum rate of interest and (viii) the Bank has a security interest in that
portion of the Mortgaged Property defined in the Mortgage and in the other
personal property described in this Agreement as security for the Loan, subject
to no Liens or encumbrances except as may have been approved by the Bank in
writing;
(b) a good standing certificate for Borrower from Delaware and evidence
of Borrower's authorization to do business in Pennsylvania;
(c) a current copy of Borrower's articles of organization certified by
the Secretary of State of Delaware;
(d) an Incumbency Certificate of Borrower certifying as to the
Operating Agreement, Bylaws of the Borrower and the corporate resolutions of
Borrower authorizing the Loan;
(e) a good standing certificate for Guarantor from Maryland and
evidence of Guarantor's authorization to do business in Pennsylvania;
(f) a current copy of Guarantor's articles of incorporation certified
by the Secretary of State of Maryland; and
(g) an Incumbency Certificate of Borrower certifying as to the Bylaws
of the Guarantor and the corporate resolutions of Guarantor authorizing the
Loan.
<PAGE> 60
(h) information satisfactory to the Bank relating to the financial
condition of the Borrower and the Guarantor;
(i) the Property Management Agreement;
(j) the Franchise Agreement; and
(j) such other documents and other materials as the Bank may require
with respect to the Borrower, the Guarantor the Project, the Leases, the tenants
of the Project and the market area in which the Project is located.
<PAGE> 61
EXHIBIT C
FINANCIAL REPORTS
(a) As soon as available and in any event within forty-five (45) days
after the close of each calendar quarter, internally prepared, unaudited
financial statements for the Borrower, including a balance sheet and related
statements of operations and statements of cash flow and net worth as of the end
of such calendar quarter and for such calendar quarter, which shall be certified
by the Chief Financial Officer of Borrower as being true and correct and
prepared in accordance with GAAP, and shall fairly present the financial
condition of the Borrower as at the end of such calendar quarter;
(b) Beginning with the first calendar quarter following the Closing
Date as soon as available and in any event within sixty (60) days after the
close of each calendar quarter, operating reports and occupancy reports with
respect to the Project as of the end of such calendar quarter, which reports
shall be prepared in a manner acceptable to the Bank;
(c) As soon as available, but in no event later than forty-five (45)
days after each calendar quarter for the Borrower and the Guarantor,
certificates of the Borrower and Guarantor, each as certified by the Chief
Financial Officer of Borrower or Guarantor, certifying, in sufficient detail
acceptable to the Bank, calculations substantiating compliance, as of the date
of the certificate, with all financial covenants in this Agreement, including,
without limitation, the financial covenants set forth in Sections 4.21 and 4.22
hereof for Borrower;
(f) As soon as available and in any event within forty five (45) days
after the close of each fiscal year, forecasts for the Project and an annual
budget with respect to the Project, which budget shall compare the prior year's
results of operation and forecasts for the Project on a line item basis and
shall be prepared in a manner acceptable to the Bank;
(g) As soon possible and in any event within ten (10) days after the
occurrence of any Material Adverse Change in the operations, financial condition
or prospects of the Borrower or Guarantor, notice of any such occurrence;
(h) As soon as possible and in any event within ten (10) days after the
occurrence of each Event of Default or each Potential Default, a statement of
the Borrower setting forth the details of such Event of Default or Potential
Default and the action which the Borrower proposes to take with respect thereto;
(i) Within forty-five (45) days following the due date thereof, copies
of the receipts evidencing payment of all real estate taxes relating to the
Project;
(j) All material filings made by the Borrower or the Guarantor with the
Securities Exchange Commission, including, without limitation, all Forms 10-K
and 10-Q and 8-K, within ten (10) Business Days after the filing thereof; and
(k) Such other information respecting the operations and properties,
financial or
<PAGE> 62
otherwise, of the Borrower, the Guarantor and the Project as the Bank may from
time to time reasonably request.
<PAGE> 63
EXHIBIT D
COMPLIANCE CERTIFICATE
Covenant Compliance Certificate
(Borrower)
Dated as of _____________, 200_
Pursuant to that certain Loan Agreement (the "Loan Agreement") dated February
___, 2000 between INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C. (the "Borrower")
and PNC Bank, National Association, (the "Bank"), the Borrower hereby certifies
to the Bank, effective on the date hereof, that:
(1) The Borrower has performed and complied with all covenants and
conditions contained in the Loan Documents;
(2) No Event of Default, after giving effect to any applicable notice,
grace and cure periods, has occurred and is continuing or exists under
the Note and the other Loan Documents; and
(3) Attached hereto are calculations substantiating compliance with the
financial covenant set forth in Section 4.21 of the Loan Agreement.
All capitalized terms used herein shall have the meanings ascribed thereto in
the Loan Agreement. The Borrower has executed and delivered this Certificate
with the understanding that the Bank will rely hereon pursuant to the terms of
the Loan Documents.
WITNESS: INTERSTATE PITTSBURGH HOTEL
HOLDINGS, L.L.C.
- - --------------------------- By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
<PAGE> 64
Covenant Compliance Certificate
(Guarantor)
Dated as of _____________, 200_
Pursuant to that certain Loan Agreement (the "Loan Agreement") dated February
___, 2000 between INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C. (the "Borrower")
and PNC Bank, National Association, (the "Bank"), the undersigned hereby
certifies to the Bank, effective on the date hereof, that:
(1) The Guarantor has performed and complied with all covenants and
conditions contained in the Loan Documents to which it is a party;
(2) Attached hereto are calculations substantiating compliance with the
financial covenants set forth in Section 4.22 of the Loan Agreement and
Section ___ of the Payment Guaranty.
All capitalized terms used herein shall have the meanings ascribed thereto in
the Loan Agreement. The undersigned Guarantor has executed and delivered this
Certificate with the understanding that the Bank will rely hereon pursuant to
the terms of the Loan Documents.
WITNESS: INTERSTATE HOTELS CORPORATION
- - --------------------------- By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
<PAGE> 1
Exhibit 10.2
OPEN-END MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE SECURES FUTURE ADVANCES
(All notices to be given to Mortgagee pursuant to
42 Pa. C.S.A. Section 8143 shall be given as set forth in
Section 9.1 of this Mortgage.)
THIS OPEN-END MORTGAGE AND SECURITY AGREEMENT ("Mortgage") IS MADE as
of the 14th day of February, 2000 by INTERSTATE PITTSBURGH HOTEL HOLDINGS,
L.L.C., a Delaware limited liability company, with an address at Foster Plaza
Ten, 680 Andersen Drive, Pittsburgh, Pennsylvania 15220 ("Mortgagor"), in favor
of PNC BANK, NATIONAL ASSOCIATION, a national banking association, with an
address at One PNC Plaza, P1-POPP-19-2, 249 Fifth Avenue, Pittsburgh, PA 15222
("Mortgagee").
This Mortgage is an "Open-End Mortgage" as set forth in 42 Pa. C.S.A.
Section 8143 and secures a maximum principal amount of indebtedness (as defined
in such statute) outstanding at any time equal to double the face amount of the
Note (as hereinafter defined), plus accrued and unpaid interest. This Mortgage
also secures advances for the payment of taxes and municipal assessments,
maintenance charges, insurance premiums, costs incurred for the protection of
the Mortgaged Property (as hereinafter define d) or the lien of this Mortgage,
expenses incurred by Mortgagee by reason of an Event of Default (as hereinafter
defined) under this Mortgage and advances for erection, construction, alteration
and repair of the Mortgaged Property or for any other purpose, together with all
other sums due hereunder or secured hereby as hereinafter described.
WITNESSETH:
WHEREAS, Mortgagor is the owner of a certain tract or parcel of land
described in Exhibit A attached hereto and made a part hereof, together with the
improvements now or hereafter erected thereon; and
WHEREAS, Mortgagee is making a loan to Mortgagor in an amount not to
exceed Seven Million Five Hundred Sixty Thousand Dollars ($7,560,000) (the
"Loan") to, the proceeds of which will be advanced to Mortgagor pursuant to the
terms and conditions of a Loan Agreement, of even date, (the "Loan Agreement"),
by and between Mortgagor and Mortgagee for the purposes set forth in the Loan
Agreement (all capitalized terms used herein and not otherwise defined shall
have the meaning assigned to such term in the Loan Agreement);
NOW, THEREFORE, for the purpose of securing the payment and performance
of the following obligations (collectively called the "Secured Obligations"):
(A) all indebtedness, together with all interest thereon, evidenced by
that certain Mortgage Note, of even date herewith, from Mortgagor to Mortgagee
in the principal face amount of Seven Million Five Hundred Sixty Thousand
Dollars ($7,560,000) (said Mortgage
<PAGE> 2
Note, as the same may be amended, supplemented or replaced from time to time,
hereinafter called the "Note"), the provisions of the Note being incorporated
herein by this reference;
(B) all indebtedness, together with all interest thereon, evidenced by
the Loan Agreement, as the same may be amended, supplemented or replaced from
time to time, the provisions of the Loan Agreement being incorporated herein by
this reference;
(C) any sums advanced by Mortgagee or which may otherwise become due
pursuant to the provisions of the Note or Loan Agreement or this Mortgage or
pursuant to any other document or instrument at any time delivered to Mortgagee
to evidence or secure any of the Secured Obligations or which otherwise related
to any of the Secured Obligations (all such documents and instruments, including
this Mortgage, and any other agreements, documents or instruments hereinabove
referenced, as the same may be amended, supplemented or replaced from time to
time, being collectively referred to herein as the "Loan Documents"); and
(D) all other obligations of Mortgagor to Mortgagee now existing or
hereafter arising, whether or not pursuant to any other loans, advances, debts,
liabilities, obligations, covenants and duties owing by the Mortgagor to the
Mortgagee or to any other direct or indirect subsidiary of PNC Bank Corp. of any
kind or nature, present or future (including, without limitation, any interest
accruing thereon after maturity, or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to the Mortgagor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether or not evidenced
by any note, guaranty or other instrument, whether arising under any agreement,
instrument or document, whether or not for the payment of money, whether arising
by reason of an extension of credit, opening of a letter of credit, loan,
equipment lease or guarantee, under any interest or currency swap, future,
option or other similar agreement, or in any other manner, whether arising out
of overdrafts on deposit or other accounts or electronic funds transfers
(whether through automated clearing houses or otherwise) or out of the
Mortgagee's non-receipt of or inability to collect funds or otherwise not being
made whole in connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, and any amendments, extensions, renewals
or increases and all costs and expenses of the Mortgagee incurred in the
documentation, negotiation, modification, enforcement, collection or otherwise
in connection with any of the foregoing, including but not limited to reasonable
attorneys' fees and expenses, provided, nevertheless, that this Mortgage shall
not extend to or secure any obligation of Mortgagor which is defined as
"consumer credit" under Regulation Z promulgated by the Board of Governors of
the Federal Reserve System and which is not exempted from application thereof.
Mortgagor, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound hereby, does hereby give,
grant, bargain, sell, convey, assign, transfer, mortgage, hypothecate, pledge,
set over and confirm unto Mortgagee and does agree that Mortgagee shall have a
security interest in the following described property, all accessions and
additions thereto, all substitutions therefor and replacements and proceeds
thereof, and all reversions and remainders of such property (collectively, the
"Mortgaged Property") now owned or held or hereafter acquired, to wit:
<PAGE> 3
(i) all of Mortgagor's estate in the premises described in
Exhibit A, together with all of the easements, rights of way,
privileges, liberties, hereditaments, gores, streets, alleys, passages,
ways, waters, watercourses, rights and appurtenances thereunto
belonging or appertaining, and all of the estate, right, title,
interest, claim and demand whatsoever of Mortgagor therein and in the
public streets and ways adjacent thereto, either in law or in equity,
in possession or expectancy (collectively, the "Realty");
(ii) the structures and buildings and all additions and
improvements thereto now or hereafter erected upon the Realty
(including all Equipment, as hereinafter defined, constituting
fixtures) (collectively, the "Improvements");
(iii) all machinery, apparatus, equipment, fittings,
appliances and fixtures of every kind and nature whatsoever and
regardless of whether the same may now or hereafter be attached or
affixed to the Realty or Improvements, including, without limitation,
all electrical, antipollution, heating, lighting, incinerating, power,
air conditioning, plumbing, lifting, cleaning, fire prevention, fire
extinguishing, refrigerating, ventilating and communication machinery,
apparatus, equipment, fittings, appliances and fixtures, and all
engines, pipes, pumps, tanks, motors, conduits, ducts, compressors,
elevators and escalators, and all articles of personal property and
goods of every kind and nature whatsoever, including all shades,
awnings and carpets now or hereafter affixed to, attached to, placed
upon, or used or usable in any way in connection with the use,
enjoyment, occupancy or operation of the Realty or Improvements
(collectively, the "Equipment");
(iv) all leases and other agreements now or hereafter in
existence relating to the use, occupancy or possession of the Realty,
Improvements or Equipment or any part thereof, and all right, title and
interest of Mortgagor thereunder, including cash and securities
deposited thereunder to secure performance by the tenants of their
obligations thereunder, and including further, the right to amend or
terminate the same or waive the provisions thereof, and the right to
receive and collect the rents thereunder and all guaranties thereof
(collectively, the "Leases");
(v) all revenues, income, rents, issues and profits of the
Realty, Improvements, Equipment and Leases, including, but not limited
to, the proceeds of all room rentals (collectively, the "Rents"),
including all proceeds of the conversion, voluntary or involuntary, of
the Realty, Improvements and Equipment or any part thereof into cash or
liquidated claims, including proceeds of insurance and condemnation
awards or payments in lieu thereof;
(vi) all Mortgagor's rights and interests in all agreements
now or hereafter in existence providing for or relating to the
construction, alteration, maintenance, repair, operation or management
of the Mortgaged Property or any part thereof, as well as the plans and
specifications therefor, and all copies thereof (together with the
right to amend or terminate the same or waive the provisions of the
foregoing) and any amendments, renewals and replacements thereof; to
the extent permitted by the relevant authorities, all licenses, permits
and approvals for the ownership, construction, maintenance, operation,
<PAGE> 4
use and occupancy of the Mortgaged Property or any part thereof and any
amendments, renewals and replacements thereof; all Mortgagor's rights
and interests in all warranties and guaranties from contractors,
subcontractors, suppliers and manufacturers to the maximum extent
permissible relating to the Mortgaged Property or any part thereof; all
insurance policies covering or affecting the Mortgaged Property or any
part thereof; all of Mortgagor's now and hereafter arising or acquired
Accounts, General Intangibles, Goods, Inventory, Chattel Paper,
Documents and Instruments (as such terms are defined in Article 9 of
the Pennsylvania Uniform Commercial Code) arising out of, used in
connection with, or otherwise relating to the Mortgaged Property
(collectively, the "Other Property").
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee, its
successors and assigns, to its own use forever in accordance with the provisions
hereof.
1. REPRESENTATIONS AND WARRANTIES
Mortgagor represents and warrants to Mortgagee as follows:
1.1 Warranty of Title.
(a) Mortgagor has good and marketable title to an estate in fee simple
absolute in the Realty and Improvements and has all right, title and interest in
all other property constituting a part of the Mortgaged Property, in each case
free and clear of all liens and encumbrances, except as may otherwise be set
forth on an Exhibit B which may be attached hereto;
(b) this Mortgage is a valid and enforceable first lien on the
Mortgaged Property (except as aforesaid) and Mortgagee shall, subject to
Mortgagor's right of possession prior to an Event of Default, quietly enjoy and
possess the Mortgaged Property; and
(c) Mortgagor shall preserve such title as Mortgagor warrants herein
and the validity and priority of the lien hereof and shall forever warrant and
defend the same to Mortgagee against the claims of all persons and parties
whomsoever.
1.2 Accuracy of Information.
The information, financial statements and other financial data
furnished to Mortgagee by Mortgagor or any other obligor or guarantor of all or
any portion of the Secured Obligations, including any information furnished with
respect to the Mortgaged Property, are accurate, correct and complete in all
material respects.
1.3 No Litigation.
There is no litigation or governmental investigation of any type
pending, or to the best of Mortgagor's knowledge threatened, which questions the
capacity or authority of Mortgagor or any other obligor or guarantor of all or
any portion of the Secured Obligations to fulfill its obligations under this
Mortgage or the other Loan Documents, or if determined adversely, could
<PAGE> 5
materially affect the business or financial condition of Mortgagor or
Mortgagor's use, ownership, control or occupancy of any portion of the Mortgaged
Property.
1.4 No Conflicts.
The execution and delivery of this Mortgage and the other Loan
Documents does not conflict with any statute, rule, judgment or order of any
court or governmental authority by which Mortgagor or any other obligor or
guarantor of all or any portion of the Secured Obligations is bound and does not
conflict with or constitute a default under any contract, agreement or other
document by which Mortgagor or any such obligor or guarantor or the Mortgaged
Property is bound.
1.5 No Casualty or Taking.
None of the Mortgaged Property has been damaged by fire or other
casualty which is not now fully restored and no notice of taking by eminent
domain or condemnation of any of the Mortgaged Property has been received and
Mortgagor has no knowledge that any taking is contemplated.
1.6 Licenses and Permits.
All licenses, permits, consents and approvals necessary to occupy the
Mortgaged Property and to conduct and operate Mortgagor's business, whether at
the Mortgaged Property or elsewhere, have been obtained and are in full force
and effect, including, but not limited to, all licenses, permits, consents and
approvals required under federal, state or local law relating to occupancy,
zoning, access to public streets, sewage, stormwater drainage, building, health,
employee safety, public safety, environmental and energy matters.
1.7 Due Organization, Etc.
Each party (other than individuals) to each of the Loan Documents is
duly organized and validly existing under the laws of the jurisdiction of its
formation and is duly authorized and qualified to do business in each
jurisdiction wherein its activities require such authorization or qualification.
Each of the Loan Documents has been duly executed and delivered by the parties
thereto pursuant to all requisite power and authority. Each of the Loan
Documents constitutes the legal, valid and binding obligation of each of the
parties thereto, enforceable in accordance with its terms. Notwithstanding the
foregoing, Mortgagor does not make any representation or warranty as to
Mortgagee under this Section.
2. AFFIRMATIVE COVENANTS
Until all of the Secured Obligations shall have been fully paid,
satisfied and discharged, Mortgagor shall:
2.1 Payment and Performance of Secured Obligations.
Pay or perform all Secured Obligations when due as provided in the Loan
Documents.
<PAGE> 6
2.2 Legal Requirements.
Promptly comply with and conform to all present and future laws,
statutes, codes, ordinances, orders, decrees, regulations and requirements, even
if unforeseen or extraordinary, of every governmental authority or agency and
all covenants, restrictions and conditions which may be applicable to Mortgagor
or to any of the Mortgaged Property or to the use, manner of use, occupancy,
possession, operation, maintenance, alteration, repair or reconstruction of any
of the Mortgaged Property (collectively, the "Legal Requirements"), even if such
compliance necessitates structural changes or improvements or results in
interference with the use or enjoyment of any of the Mortgaged Property,
provided that no structural changes shall be made without the prior written
consent of Mortgagee.
2.3 Impositions.
(a) Before interest or penalties are due thereon and otherwise when
due, pay all taxes of every kind and nature (including real and personal
property taxes on the Mortgaged Property, income, franchise, withholding,
profits and gross receipts taxes) assessed against Mortgagor or any portion of
the Mortgaged Property, all charges for any easement or agreement maintained for
the benefit of any of the Mortgaged Property, all general and special
assessments (including, without limitation, any condominium or planned unit
development assessments, if any), levies, permits, inspection and license fees,
all mortgages and other liens or encumbrances upon any portion of the Mortgaged
Property, all water and sewer rents and charges, and all other charges and
liens, whether of a like or different nature, even if unforeseen or
extraordinary, now or hereafter imposed upon or assessed against Mortgagor or
any of the Mortgaged Property or arising in respect of the ownership, occupancy,
use or possession thereof. In addition, Mortgagor shall pay promptly on demand
all taxes, assessments and charges which may now or hereafter be imposed upon
Mortgagee by reason of its holding any of the Loan Documents, including
intangibles, business privilege and excise taxes, but excluding any taxes upon
the income derived by Mortgagee upon the interest or other sums collected by
Mortgagee pursuant to the Loan Documents. The obligations referred to in this
Section are hereinafter collectively referred to as the "Impositions". Within
thirty (30) days after the payment of any Imposition, Mortgagor shall deliver to
Mortgagee evidence acceptable to Mortgagee of such payment. Mortgagor shall also
deliver to Mortgagee within ten (10) days of receipt thereof copies of all
settlements and notices pertaining to the Impositions which may be issued by any
governmental authority.
(b) Subject to the right of Mortgagor to contest the payment of an
Imposition as hereinafter provided, Mortgagee may pay or perform any Imposition
and add the amount so paid or the cost incurred to the Secured Obligations, and
all such amounts shall on demand be due and payable, together with interest
thereon, from the date of such demand at the highest rate applicable to any
portion of the Secured Obligations, but in no event exceeding the highest rate
permitted by law (the "Default Rate").
(c) Mortgagor may in good faith contest by proper legal proceedings the
validity of any Legal Requirement or the validity or amount of any Imposition,
provided, (i) an Event of Default does not exist; (ii) Mortgagor provides
Mortgagee with security satisfactory to Mortgagee assuring compliance with or
payment of the Legal Requirement or Imposition and any additional charge,
interest, penalty, expense or other payment which may arise from or be incurred
as a result of any delay in such compliance or payment during the course of such
contest, all as estimated from time to time by Mortgagee; and (iii) such contest
operates to
<PAGE> 7
suspend enforcement of compliance with or collection of the Legal Requirement or
Imposition and is maintained and prosecuted with diligence.
2.4 Maintenance and Impairment of Security.
Keep the Mortgaged Property in good condition and order and in a
rentable and tenantable state of repair and will make or cause to be made, as
and when necessary, all repairs, renewals, and replacements, structural and
nonstructural, exterior and interior, foreseen and unforeseen, ordinary and
extraordinary, provided, however, that no structural repairs, renewals or
replacements shall be made without Mortgagee's prior written consent. Mortgagor
shall not remove, demolish or alter the Mortgaged Property nor commit or suffer
waste with respect thereto nor permit the Mortgaged Property to become deserted
or abandoned. Mortgagor shall permit Mortgagee and its agents at any time and
from time to time to enter upon and visit the Mortgaged Property for the purpose
of inspecting and appraising the same. Mortgagor covenants and agrees not to
take or permit any action with respect to the Mortgaged Property which will in
any manner impair the security of this Mortgage.
2.5 Use of Mortgaged Property.
Use, and permit others to use, the Mortgaged Property only for uses
permitted under applicable Legal Requirements.
2.6 Books and Records.
Maintain and Mortgagee shall have access to complete and adequate books
of account and other records relating to the financing, development,
construction, leasing, management, operation and use of the Mortgaged Property
as Mortgagee may require, and Mortgagor will discuss the finances and business
of Mortgagor with Mortgagee as Mortgagee may request. Such books and records
shall be kept in all material respects in accordance with generally accepted
accounting principles consistently applied. Mortgagor shall permit Mortgagee to
photocopy such books and records on the Mortgaged Property or, if photocopying
facilities are not available on the Mortgaged Property, at a copying facility
selected by Mortgagee in its discretion. Mortgagee may freely share any of such
information with any other affiliated entity or any participating lender with
Mortgagee with respect to any part of the Secured Obligations at any time.
2.7 [intentionally omitted]
2.8 Leases.
(a) Mortgagor shall promptly (i) perform all of the provisions of the
Leases on the part of the landlord thereunder to be performed; (ii) appear in
and defend any action or proceeding in any manner connected with the Leases or
the obligations of Mortgagor thereunder; (iii) within ten (10) days after
request by Mortgagee, deliver to Mortgagee a certificate from each tenant under
the Leases identifying such Lease with particularity and stating that no default
by Mortgagor or such tenant has occurred under the applicable Lease, that no
rent thereunder has been prepaid, except for the current month, and addressing
such other matters as Mortgagee may request; (iv) within ten (10) days after
<PAGE> 8
request by Mortgagee, deliver a written statement containing the names of all
tenants, the terms of all Leases and the spaces occupied and rentals payable
thereunder and a statement of all Leases which are then in default, including
the nature of the default; (v) deliver to Mortgagee promptly copies of any
notices of default which Mortgagor may at any time forward to or receive from a
tenant of any Lease; and, within ten (10) days after execution, deliver to
Mortgagee a fully executed counterpart of each Lease or a copy thereof.
(b) Each Lease hereafter executed with respect to the Realty or
Improvements or any part thereof shall provide that (i) the tenant thereunder,
at the request of any transferee in foreclosure of this Mortgage or in lieu
thereof, shall attorn to such other transferee and shall recognize such
transferee as landlord under the Lease, (ii) neither Mortgagee nor any such
transferee or its successors or assigns shall be bound by (A) any prepayment of
an installment or rent or other obligation under any Lease, or (B) any amendment
or modification to any Lease made without the written consent of Mortgagee or
such transferee, or (C) any obligations under the Lease to have been performed
prior to the date that Mortgagee or such transferee shall have acquired title to
the Mortgaged Property, (iii) such Lease shall not be amended, extended or
consensually terminated without the prior written consent of Mortgagee, and (iv)
such Lease shall incorporate the terms of Section 8.9 of this Mortgage. By the
recordation of this Mortgage, the foregoing provisions shall be binding upon
each Lease hereafter executed with respect to the Realty or Improvements, even
if not contained expressly in such Leases. Each tenant, upon request by
Mortgagee or such successor in interest, shall execute and deliver an instrument
or instruments confirming the foregoing provisions.
3. NEGATIVE COVENANTS
Until all of the Secured Obligations shall have been fully paid,
satisfied and discharged:
3.1 Leases.
(a) Mortgagor shall not (i) execute an assignment or pledge of the
Rents and/or the Leases other than in favor of Mortgagee; or (ii) accept any
prepayment of an installment of any Rents more than one month prior to the due
date of such installment.
(b) Mortgagor shall not, without the prior written consent of
Mortgagee, (i) amend, modify, extend or consent to the surrender of any Lease or
give any consent or waiver to any tenant pursuant to any Lease; or (ii) make any
Lease, except for Leases approved in writing by Mortgagee, it being the express
understanding of Mortgagee and Mortgagor that, unless waived in writing by
Mortgagee, Mortgagee shall have the right to approve all terms and conditions of
each Lease.
3.2 No Other Financing or Liens.
Without the prior written consent of Mortgagee, other than leases for
certain equipment as set forth on Exhibit C attached hereto, Mortgagor shall not
enter into any lease for any personal property as lessee which is to be used in
connection with the operation of Mortgagor's business at the Mortgaged Property
or create or cause or permit to exist any lien on, or security interest in,
whether voluntary or involuntary, any part of the Mortgaged Property, other than
in favor of Mortgagee.
<PAGE> 9
3.3 Sale of Mortgaged Property, Etc.
Mortgagor shall not sell, assign, give, mortgage, pledge, hypothecate,
encumber, lease or otherwise transfer the Mortgaged Property or any part thereof
or interest therein, voluntarily or involuntarily, without Mortgagee's prior
written consent.
3.4 Maintenance of Existence
(a) If Mortgagor is other than an individual, Mortgagor will not
dissolve or liquidate nor merge or consolidate with any other entity nor permit
any other entity to merge into it nor amend, supplement or modify its articles
of incorporation, bylaws, partnership agreement or other document relating to
its formation, structure or governance, as the case may be, without the prior
written consent of Mortgagee. Mortgagor shall do all things necessary to
preserve and keep in full force and effect its existence, franchises, rights and
privileges under the laws of the state of its formation and its right to own
property and transact business in each jurisdiction where any part of the
Mortgaged Property is located.
(b) Unless Mortgagee gives its prior written consent, no interests in
Mortgagor will be sold, assigned, transferred, pledged, mortgaged, hypothecated
or otherwise encumbered, and all such interests shall be maintained in the
percentages existing as of the date of this Mortgage.
4. INSURANCE, CONDEMNATION AND RESTORATION
4.1 Insurance.
(a) Mortgagor shall maintain the insurance required under Section 4.7
of the Loan Agreement.
(b) If Mortgagor shall not at any time comply with the terms of this
Section, irrespective of the passage of any grace period, Mortgagee may cure
such non-compliance and may purchase such insurance as it may elect. Mortgagor
shall reimburse Mortgagee on demand for any costs incurred by Mortgagee in
connection with any such actions, together with interest at the Default Rate.
Any such actions by Mortgagee shall not constitute a waiver of any
non-compliance of the terms of this Mortgage by Mortgagor.
4.2 Rights of Mortgagee to Proceeds.
In the event of any loss with respect to the project where Mortgagor is
entitled to receive insurance proceeds, Mortgagee shall have the exclusive right
to adjust, collect and compromise all such insurance claims in excess of
$250,000 (hereinafter referred to as a "Major Loss"), and Mortgagor shall not
adjust, collect or compromise any claims for Major Losses under said policies
without the prior written consent of Mortgagee. For Major Losses, each insurer
is hereby authorized and directed to make payment under said policies, including
return of unearned premiums, directly to Mortgagee instead of to Mortgagor and
Mortgagee jointly, and Mortgagor appoints Mortgagee as Mortgagor's
attorney-in-fact to endorse any draft therefor. All insurance proceeds for Major
Losses shall be payable to Mortgagee and such proceeds may, at
<PAGE> 10
Mortgagee's sole option, be applied to all or any part of the Secured
Obligations and in any order (notwithstanding that such Secured Obligations may
not then otherwise be due and payable) or to the repair and restoration of any
of the Mortgaged Property under such terms and conditions as are set forth in
Section 4.4 or otherwise as Mortgagee may impose. Mortgagee shall not be deemed
to have elected such option until such option is elected specifically in
writing. Until so elected, Mortgagee shall not in any circumstances be deemed to
have waived its right to make such election.
4.3 Condemnation.
Mortgagor, immediately upon obtaining knowledge of the institution of
any proceedings for the condemnation or taking by eminent domain of any of the
Mortgaged Property, shall notify Mortgagee of the pendency of such proceedings.
Mortgagee may participate in any such proceedings and Mortgagor shall deliver to
Mortgagee all instruments requested by it to permit such participation. Any
award or compensation for property taken or for damage to property not taken,
whether as a result of such proceedings or in lieu thereof, is hereby assigned
to and shall be received and collected directly by Mortgagee, and any award or
compensation shall be applied, at Mortgagee's option, to any part of the Secured
Obligations and in any order (notwithstanding that any of such Secured
Obligations may not then be due and payable) or to the repair and restoration of
any of the Mortgaged Property under such terms and conditions as are set forth
in Section 4.4 or otherwise as Mortgagee may impose. Mortgagee shall not be
deemed to have elected such option until such option is elected specifically in
writing. Until so elected, Mortgagee shall not in any circumstances be deemed to
have waived its right to make such election.
4.4 Restoration.
(a) All amounts received by Mortgagee pursuant to this Article and
which Mortgagee, at its sole option, permits to be applied to the restoration of
the Mortgaged Property may either be held in a restoration fund ("Restoration
Fund") by Mortgagee or, if it refuses to serve, a bank or trust company
appointed by Mortgagee which has a combined capital and surplus of not less than
$100,000,000 as restoration fund trustee (the "Restoration Fund Trustee") with
any additions thereto that may be required by Mortgagee as hereinafter provided.
The interest or income, if any, received on all deposits or investments of any
monies in the Restoration Fund shall be added to the Restoration Fund. If
Mortgagee consents to the deposit of such funds in an interest-bearing account
or otherwise consents to the investment of such funds, neither Mortgagee nor the
Restoration Fund Trustee shall be liable or accountable for any loss resulting
from any such deposit or investment or for any withdrawal, redemption or sale of
deposits or investments. Mortgagee and the Restoration Fund Trustee may impose
reasonable charges for services performed in managing the Restoration Fund and
may deduct such charges therefrom. Restoration shall be performed only in
accordance with the following conditions:
(i) prior to commencement of restoration and from time to time
during restoration, Mortgagee may require Mortgagor to deposit
additional monies into the Restoration Fund in amounts which, in
Mortgagee's judgment, are sufficient to defray all costs to be incurred
to complete the restoration and all costs associated therewith,
including labor, materials, architectural and design fees and expenses
and contractor's fees and expenses, and Mortgagee shall have approved a
budget and cost breakdown for the restoration, together with a
disbursement schedule, in detail satisfactory to Mortgagee;
<PAGE> 11
(ii) prior to commencement of restoration, the contracts,
contractors, plans and specifications for the restoration shall have
been approved by Mortgagee and all governmental authorities having
jurisdiction, and Mortgagee shall be provided with satisfactory title
insurance and acceptable surety bonds insuring satisfactory completion
of the restoration and the payment of all subcontractors and
materialmen;
(iii) all restoration work shall be done under fixed price
contracts, fully bonded;
(iv) at the time of any disbursement, an Event of Default or
any event or conditions which with the passage of time or the giving of
notice, or both, would constitute an Event of Default shall not have
occurred, no mechanics' or materialmen's liens shall have been filed
and remain undischarged and an endorsement satisfactory to Mortgagee to
its title insurance policy shall have been delivered to Mortgagee;
(v) disbursements from the Restoration Fund shall be made from
time to time, but not more frequently than once each calendar month,
for completed work under the aforesaid contracts (subject to retainage)
and for other costs associated therewith and approved by Mortgagee upon
receipt of evidence satisfactory to Mortgagee of the stage of
completion and of performance of the work in a good and workmanlike
manner in accordance with the contracts, plans and specifications as
approved by Mortgagee;
(vi) Mortgagor will pay the cost of Mortgagee's inspecting
architect or engineer and the cost of any attorney's fees and
disbursements incurred by Mortgagee in connection with such
restoration;
(vii) Mortgagee shall have the option to retain up to ten
percent (10%) of the cost of all work until the restoration is fully
completed, as determined by Mortgagee, and all occupancy permits
therefor have been issued;
(viii) Mortgagee may impose such other reasonable conditions,
including a restoration schedule, as are customarily imposed by
construction lenders to assure complete and lien-free restoration;
(ix) any sum remaining in the Restoration Fund upon completion
of restoration shall, at Mortgagee's option, be applied to any part of
the Secured Obligations and in any order (notwithstanding that any of
such Secured Obligations may not then be due and payable) or be paid to
Mortgagor.
(b) If within 120 days after the occurrence of any loss or damage to
the Mortgaged Property Mortgagor shall not have submitted to Mortgagee and
received Mortgagee's approval of plans and specifications for the repair,
restoration or rebuilding of such loss or damage or shall not have obtained
approval of such plans and specifications from all governmental authorities
whose approval is required or if, after such plans and specifications are
approved by Mortgagee and by all such governmental authorities, Mortgagor shall
fail to commence promptly such repair, restoration or rebuilding or if
thereafter Mortgagor fails to carry
<PAGE> 12
out diligently such repair, restoration or rebuilding or is delinquent in the
payment to mechanics, materialmen or others of the costs incurred in connection
with such work or if any other condition of this paragraph is not satisfied
within 120 days after the occurrence of any such loss or damage, then Mortgagee,
in addition to all other rights herein set forth, and after giving Mortgagor
thirty (30) days written notice of the nonfulfillment of one or more of the
foregoing conditions, may, failing Mortgagor's fulfillment of said conditions
within said thirty (30)-day period, at Mortgagee's option, (A) declare all
Secured Obligations immediately due and payable, and/or (B) perform or cause to
be performed such repair, restoration or rebuilding and may take such other
steps as Mortgagee may elect to carry out such repair, restoration or rebuilding
and may enter upon the Mortgaged Property for any of the foregoing purposes, and
Mortgagor hereby waives, for itself and all others holding under it, any claim
against Mortgagee and any receiver and their respective agents (other than a
claim based upon the alleged gross negligence or intentional misconduct of
Mortgagee or any such receiver or agent) arising out of anything done by them or
any of them pursuant to this paragraph and Mortgagee may, in its discretion,
apply any insurance or condemnation proceeds held by it to reimburse itself
and/or such receiver for all amounts expended or incurred by it in connection
with the performance of such work, including attorneys' fees, and any excess
costs shall be paid by Mortgagor to Mortgagee, and Mortgagor's obligation to pay
such excess costs shall be secured by the lien of this Mortgage and shall bear
interest at the Default Rate until paid.
(c) Mortgagor waives any and all right to claim or recover against
Mortgagee, its officers, employees, agents and representatives for loss of or
damage to Mortgagor, the Mortgaged Property, Mortgagor's property or the
property of others under Mortgagor's control from any cause insured against or
required to be insured against by the provisions of this Mortgage.
5. DEFAULT
5.1 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
(a) a failure to pay any Secured Obligations when due in accordance
with the terms thereof;
(b) Mortgagor shall fail to perform or observe any of the obligations
in Article 3 or 4 of this Mortgage;
(c) a failure by Mortgagor to duly perform and observe any other
provision in this Mortgage, and such failure shall continue for a period of
thirty (30) days after notice from Mortgagee;
(d) a failure by Mortgagor to duly perform and observe any other
provision in any of the other Loan Documents, and such failure continues beyond
the grace period, if any, set forth therein or the occurrence of any defined
"default" or "event of default" under any of the Loan Documents (it being
understood that any such default or event of default shall be additional Events
of Default hereunder and shall not be construed to be in substitution of any
other Events of Default);
<PAGE> 13
(e) any representation or warranty made by Mortgagor herein or in any
of the Loan Documents, or in any other instrument or document which pertains to
or is delivered in connection with any of the Secured Obligations, shall prove
to be incorrect, now or hereafter, in any material respect;
(f) Mortgagor, or any obligor or guarantor of any of the Secured
Obligations, shall become insolvent or unable to pay its or his or her debts as
the same mature, or a petition shall be filed by Mortgagor or any such party in
bankruptcy or seeking the appointment of a receiver, trustee or conservator for
Mortgagor or any such party or for any portion of its or his or her property, or
for reorganization or to effect a plan or other arrangement with or for the
benefit of creditors of Mortgagor or any such party, or Mortgagor or any such
party shall consent to the appointment of a receiver, trustee or conservator for
Mortgagor or any such party or for any portion of its or his or her property;
(g) a petition shall be filed against Mortgagor or any obligor or
guarantor of any of the Secured Obligations in bankruptcy or seeking the
appointment of a receiver, trustee or conservator for Mortgagor or any such
party or for any portion of its or his or her property, or for reorganization or
to effect a plan or other arrangement with or for the benefit of creditors of
Mortgagor or any such party, and such petition shall not be dismissed within
sixty (60) days thereafter;
(h) any attachment proceeding shall be commenced against Mortgagee or
any obligor or guarantor of any of the Secured Obligations for the collection of
any indebtedness or liability;
(i) foreclosure proceedings shall be instituted against the Mortgaged
Property upon any other lien or claim whether alleged to be superior or junior
to the lien of this Mortgage;
(j) the Improvements shall be substantially damaged or destroyed by an
uninsured or inadequately insured casualty;
(k) Mortgagor shall fail to deliver any certification or other document
or instrument requested by Mortgagee pursuant to the Loan Documents within ten
(10) days after receipt of request;
(l) Mortgagor shall fail to comply with any duty or obligation imposed
pursuant to Article 7 hereof, or any warranty or representation contained
therein shall be incorrect or misleading; or
(m) Mortgagor shall at any time deliver or cause to be delivered to
Mortgagee a notice pursuant to 42 Pa. C.S.A. Section 8143 electing to limit the
indebtedness secured by this Mortgage.
5.2 Demand Obligation.
<PAGE> 14
Nothing in this Mortgage or any of the other Loan Documents shall be
construed to limit the applicability of any term of the Loan Documents providing
for the payment of any Secured Obligations on demand.
6. REMEDIES
6.1 Rights and Remedies of Mortgagee.
If an Event of Default occurs, Mortgagee may, at its option and
notwithstanding any contrary provisions in the Loan Documents, without demand,
notice or delay, do one or more of the following:
(a) Mortgagee may declare the entire unpaid principal balance of the
Secured Obligations, together with all interest thereon, to be due and payable
immediately (and in the case of an Event of Default under subsection 5.1(f), (g)
or (h), all such indebtedness shall automatically and immediately become due and
payable without notice or any other act).
(b) Mortgagee may (i) institute and maintain an action of mortgage
foreclosure against the Mortgaged Property and the interests of Mortgagor
therein, (ii) institute and maintain an action on any instruments evidencing the
Secured Obligations or any portion thereof, and (iii) take such other action at
law or in equity for the enforcement of any of the Loan Documents as the law may
allow, and in each such action Mortgagee shall be entitled to all costs of suit
and attorneys' fees.
(c) Mortgagee may, in its sole and absolute discretion, and without
releasing Mortgagor or any other obligor or guarantor from any obligation under
any of the Loan Documents and without waiving any Event of Default: (i) collect
any or all of the Rents, including any Rents past due and unpaid, (ii) perform
any obligation or exercise any right or remedy of Mortgagor under any Lease, or
(iii) enforce any obligation of any tenant of any of the Mortgaged Property.
Mortgagee may exercise any right under this subsection (c) whether or not
Mortgagee shall have entered into possession of any of the Mortgaged Property,
and nothing herein contained shall be construed as constituting Mortgagee a
"mortgagee in possession", unless Mortgagee shall have entered into and shall
continue to be in actual possession of the Mortgaged Property. Mortgagor hereby
authorizes and directs each and every present and future tenant of any of the
Mortgaged Property to pay all Rents directly to Mortgagee and to perform all
other obligations of that tenant for the direct benefit of Mortgagee, as if
Mortgagee were the landlord under the Lease with that tenant, immediately upon
receipt of a demand by Mortgagee to make such payment or perform such
obligations. Mortgagor hereby waives any right, claim or demand it may now or
hereafter have against any such tenant by reason of such payment of Rents or
performance of obligations to Mortgagee, and any such payment or performance to
Mortgagee shall discharge the obligations of the tenant to make such payment or
performance to Mortgagor. Mortgagor shall indemnify Mortgagee and hold Mortgagee
harmless from and against any and all claims, liability, damage, cost and
expense (including attorneys' fees) which may be asserted against or incurred by
Mortgagee by reason of any obligations of Mortgagor to perform any provision of
any Lease. Mortgagee may apply the Rents received by Mortgagee to the payment of
any one or more of the following, in such order and amounts as Mortgagee, in its
sole discretion, may elect, whether or not the same be then due: the Secured
Obligations, liens on any of the Mortgaged Property, Impositions, claims,
insurance premiums, other carrying charges, invoices of persons who at any time
have supplied goods or services to or for the benefit of any
<PAGE> 15
of the Mortgaged Property, and all other costs and expenses of maintenance,
repair, restoration, management, operation, ownership, use, leasing, occupancy,
protection, security, insurance, alteration or improvement of any of the
Mortgaged Property, costs of enforcing Mortgagee's rights under the Loan
Documents, including any foreclosure sale hereunder, and including all
attorneys' fees and costs. Mortgagee may, in its sole discretion, determine the
method by which, and extent to which, the Rents will be collected and
obligations of tenants enforced; and Mortgagee may waive or fail to perform or
enforce any provision of any Lease. Mortgagee shall not be accountable for any
Rents or other sums it does not actually receive. Mortgagor hereby appoints
Mortgagee as its attorney-in-fact effective upon an Event of Default to perform
all acts which Mortgagor is required or permitted to perform under any and all
Leases.
(d) Mortgagee may, without releasing Mortgagor or any obligor or
guarantor of any of the Secured Obligations from any obligation under any of the
Loan Documents and without waiving any Event of Default, enter upon and take
possession of the Mortgaged Property or any portion thereof, with or without
legal action and by force if necessary, or have a receiver appointed without
proof of depreciation or inadequacy of the value of the Mortgaged Property, the
insolvency of Mortgagor, or any other proof. Mortgagee or said receiver may
manage and operate the Mortgaged Property, make, cancel, enforce or modify the
Leases or any of them, obtain and evict tenants, establish or change the amount
of any Rents, and perform any acts and advance any sums which Mortgagee deems
proper to protect the security of this Mortgage, all such sums to be payable on
demand, together with interest thereon at the Default Rate, from the date of
such demand, and such sums and interest to be secured by this Mortgage.
(e) Mortgagee may take possession of the Equipment and Other Property,
or any portion thereof, and may use and deal with the same to the same extent as
Mortgagor is entitled to do so and may sell the same pursuant to law and
exercise such other rights and remedies with respect to the same as may be
provided by law, and file such continuation statements which it deems desirable.
6.2 Sale in Parcels or Units.
In case any sale under this Mortgage occurs by virtue of judicial
proceedings, the Mortgaged Property may be sold in one parcel or unit and as an
entity, or in such parcels or units, and in such manner or order, as Mortgagee
in its sole discretion may elect.
6.3 Confession of Judgment in Ejectment.
At any time after the occurrence of an Event of Default, without
further notice, regardless of whether Mortgagee has asserted any other right or
exercised any other remedy under this Mortgage or any of the other Loan
Documents, it shall be lawful for any attorney licensed in the Commonwealth of
Pennsylvania as attorney for Mortgagor to confess judgment in ejectment against
Mortgagor and all persons claiming under Mortgagor for the recovery by Mortgagee
of possession of all or any part of the Mortgaged Property, for which this
Mortgage shall be sufficient warrant. If for any reason after such action shall
have commenced the same shall be determined and the possession of the Mortgaged
Property remain in or be restored to Mortgagor, Mortgagee shall have the right
upon any subsequent default or defaults to bring one or more
<PAGE> 16
amicable action or actions as hereinbefore set forth to recover possession of
all or any part of the Mortgaged Property.
6.4 Remedies Cumulative.
All remedies contained in this Mortgage are cumulative and Mortgagee
also has all other remedies provided by law or in equity or in any of the other
Loan Documents. No delay or failure by Mortgagee to exercise any right or remedy
under this Mortgage will be construed to be a waiver of that right or remedy or
a waiver of any Event of Default. Mortgagee may exercise any one or more of its
rights and remedies without regard to the adequacy of its security. One or more
of the other Loan Documents may contain provisions pursuant to which all or a
part of the Secured Obligations shall become immediately and automatically due
and payable upon the occurrence of certain events described therein. Nothing in
this Mortgage shall be construed as limiting the effectiveness of such
provisions, and in the event of any inconsistency with the terms of this
Mortgage, those provisions more advantageous to Mortgagee shall govern.
6.5 No Merger.
(a) If Mortgagee or any other person or entity owning or holding this
Mortgage shall acquire or shall become vested with the fee title to the
Mortgaged Property or any other estate or interest in the Mortgaged Property,
such estates shall not merge as a result of such acquisition and shall remain
separate and distinct from all other estates and interests in the Mortgaged
Property for all purposes after such acquisition. The lien and security interest
created hereby shall not be destroyed or terminated by the application of the
doctrine of merger and, in such event, Mortgagee nor such other person or entity
shall continue to have and enjoy all of the rights and privileges of Mortgagee
hereunder as to each separate estate unless and until Mortgagee nor such other
person or entity shall affirmatively elect in writing to merge such estates.
(b) Upon the foreclosure of the lien created hereby on the Mortgaged
Property, as herein provided, any Leases then existing shall not be destroyed or
terminated by application of the doctrine of merger or by operation of law or as
a result of such foreclosure unless Mortgagee or any purchaser at a foreclosure
sale shall so elect by written notice to the lessee in question.
(c) THE OBLIGATIONS OF THE MORTGAGOR AND THE RIGHTS AND REMEDIES OF THE
MORTGAGEE HEREUNDER OR UNDER ANY OF THE LOAN DOCUMENTS OR THE SECURED
OBLIGATIONS SHALL CONTINUE AFTER AND SURVIVE THE ENTRY OF JUDGMENT HEREUNDER OR
THEREUNDER; IT BEING THE INTENTION OF THE PARTIES HERETO THAT SUCH RIGHTS,
REMEDIES AND OBLIGATIONS SHALL NOT MERGE INTO OR BE EXTINGUISHED BY ANY SUCH
JUDGMENT BUT SHALL CONTINUE UNTIL THE SECURED OBLIGATIONS HAVE BEEN IRREVOCABLY
PAID IN FULL.
7. ENVIRONMENTAL MATTERS
7.1 Environmental Warranty.
<PAGE> 17
Mortgagor hereby agrees that the Environmental Indemnity Agreement is
hereby incorporated herein by reference.
8. ADDITIONAL RIGHTS AND OBLIGATIONS
8.1 Installments for Insurance, Taxes and Other Charges.
Without limiting the effect of any other provision of this Mortgage,
Mortgagor shall, if requested by Mortgagee, pay to Mortgagee monthly with
Mortgagor's payment on the Note an amount equal to one-twelfth (1/12) of the
annual premiums for the insurance policies referred to hereinabove and the
annual Impositions and any other item which at any time may be or become a lien
upon the Mortgaged Property (the "Escrow Charges"); and on demand from time to
time Mortgagor shall pay to Mortgagee any additional sums necessary to pay when
due all Escrow Charges. The amounts so paid shall be security for the Secured
Obligations and shall be used in payment of the Escrow Charges so long as no
Event of Default shall have occurred. No amount so paid to Mortgagee shall be
deemed to be trust funds but may be commingled with general funds of Mortgagee,
nor shall any sums paid bear interest. Upon the occurrence of an Event of
Default, Mortgagee shall have the right, at its election, to apply any amount so
held against the Secured Obligations due and payable in such order as Mortgagee
may deem fit, and Mortgagor hereby grants to Mortgagee a lien upon and security
interest in such amounts for such purpose. At Mortgagee's option, Mortgagee from
time to time may waive, and after any such waiver may reinstate, the provisions
of this Section 8.1. In the event the interest of Mortgagor in the Mortgaged
Property is sold or otherwise transferred, voluntarily or involuntarily, then
all of the interest of Mortgagor in and to the sums held by Mortgagee shall vest
in the successor to the interest of Mortgagor in the Mortgaged Property,
subject, nevertheless, to the rights of Mortgagee hereunder.
8.2 Mortgagee's Right to Protect Security.
Mortgagee is hereby authorized to do any one or more of the following,
irrespective of whether an Event of Default has occurred: (a) appear in and
defend any action or proceeding purporting to affect the security hereof or the
rights or powers of Mortgagee hereunder; (b) take such action as Mortgagee may
determine to pay, perform or comply with any Impositions or Legal Requirements,
to cure any Events of Default and to protect its security in the Mortgaged
Property, including the recordation or filing of financing statements and other
documents to further assure the enforceability or priority of Mortgagee's liens
and security interests, advance sums on behalf of Mortgagor to pay, perform or
comply with any Imposition, Legal Requirement, prohibited lien, claims, costs
and expenses in connection with the Mortgaged Property, including payment for
utilities, fuel or any other necessary maintenance expenses, fees, insurance and
repairs; and for the purpose of exercising any such powers and all other rights
and powers granted by this Mortgage to Mortgagee, Mortgagee is hereby appointed
attorney-in-fact for Mortgagor. All sums paid by or otherwise owing to Mortgagee
under this Section shall be paid by Mortgagor to Mortgagee on demand, and until
paid such sums shall be added to the principal secured hereby, shall be included
as part of the Secured Obligations and shall bear interest at the Default Rate
from the date of demand.
8.3 Mortgagee's Costs and Expenses.
<PAGE> 18
In the event of an Event of Default or the exercise by Mortgagee of any
of its rights hereunder, or if Mortgagee shall become a party, either as
plaintiff or defendant or otherwise, to any suit or legal proceeding affecting
any of the Mortgaged Property or the Secured Obligations, or if review and
approval of any document, or any other matter related to any of the Secured
Obligations, is required by, or requested of, Mortgagee, Mortgagor shall pay to
Mortgagee on demand its costs, expenses and attorneys' fees incurred in
connection therewith. If such amounts are not paid, they shall be added to the
principal secured hereby, shall be included as part of the Secured Obligations
and shall bear interest at the Default Rate from the date of demand.
8.4 Security Agreement Under Uniform Commercial Code.
This Mortgage is a Security Agreement as defined in the Uniform
Commercial Code. Notwithstanding the filing of a financing statement covering
any of the Mortgaged Property in the records normally pertaining to personal
property, at Mortgagee's option all of the Mortgaged Property, for all purposes
and in all proceedings, legal or equitable, shall be regarded (to the extent
permitted by law) as part of the Realty, whether or not any such item is
physically attached to the Realty or Improvements. The mention in any such
financing statement of any of the Mortgaged Property shall not be construed as
in any way altering any of the rights of Mortgagee or adversely affecting the
priority of the lien granted hereby or by any other Loan Document, but such
mention in the financing statement is hereby declared to be for the protection
of Mortgagee in the event any court shall at any time hold that notice of
Mortgagee's priority of interest, to be effective against any third party, must
be filed in the Uniform Commercial Code records. This Mortgage constitutes a
fixture filing under the Uniform Commercial Code.
8.5 Assignment of Loan Documents; Estoppel Certificates.
Mortgagor agrees that nothing herein shall be deemed to prohibit the
assignment or negotiation, with or without recourse, of any of the Loan
Documents or any interest of Mortgagee therein, or the assignment of this
Mortgage. Mortgagor further agrees that, if requested by Mortgagee, Mortgagor
shall certify to the assignee of this Mortgage, to Mortgagee, and to such other
persons as Mortgagee may request from time to time that this Mortgage is in full
force and effect, the amount or amounts of the Secured Obligations, the terms of
the Loan Documents, whether any offsets, claims, counterclaims or defenses exist
with respect to the payment of the Secured Obligations or the performance of the
Loan Documents and such other matters as Mortgagee or any assignee may require.
8.6 Waivers by Mortgagor.
Mortgagor, to the extent permitted by law, hereby waives all errors and
imperfections in any proceedings instituted by Mortgagee under any of the Loan
Documents and all benefit of any present or future statute of limitation or
repose, or moratorium law, or any other present or future law, regulation or
judicial decision which (a) exempts any of the Mortgaged Property or any other
property, real or personal, or any part of the proceeds arising from any sale
thereof from attachment, levy or sale under execution, (b) provides for any stay
of execution, marshaling of assets, exemption from civil process, redemption,
extension of time for payment or valuation or appraisement of any of the
Mortgaged Property, or (c) conflicts with any provision of any of the Loan
Documents.
8.7 Payment of Fees.
<PAGE> 19
The Mortgagor will pay all filing, registration and recording fees, and
all expenses incident to the preparation, execution, acknowledgment, filing and
recording of this Mortgage, any financing statements, releases, continuation
statements, and any instruments of further assurance and all federal, state,
county and municipal stamp taxes and other taxes, duties, imposts, assessments
and charges arising out of or in connection with the execution and delivery of
this Mortgage and the other Loan Documents.
8.8 Further Assurances.
Mortgagor agrees to execute such further assurances, documents and
instruments as may be desirable by Mortgagee for the purposes of further
evidencing, carrying out and/or confirming this Mortgage and for all other
purposes intended by this Mortgage.
8.9 Subordination to Leases.
At the option of Mortgagee, this Mortgage shall become subject and
subordinate, in whole or in part (but not with respect to the priority of
entitlement to insurance proceeds or any award in condemnation or with respect
to any option to purchase), to any and all Leases, upon the execution by
Mortgagee and recording thereof, at any time hereafter, in the office of the
Recorder of Deeds in and for the county wherein the Realty is situate, of a
unilateral declaration to that effect.
8.10 Subrogation.
If the proceeds of any loan or other credit extended by Mortgagee, the
repayment of which is hereby secured, is used directly or indirectly to pay off,
discharge or satisfy, in whole or in part, any prior lien or encumbrance upon
the Mortgaged Property or any part thereof, then Mortgagee shall be subrogated
to any additional security held by the holder of such lien or encumbrance.
8.11 Restatement of Representations and Warranties.
Each representation or warranty made by Mortgagor in this Mortgage or
in any other Loan Document or certificate related thereto shall be deemed to be
restated as of the date of each advance made or credit extended by Mortgagee
constituting a Secured Obligation.
8.12 Acceleration.
In order to accelerate the maturity of the indebtedness hereby secured
because of the failure of Mortgagor to pay any tax assessment, liability,
obligation or encumbrance upon the Mortgaged Property as herein provided, it
shall not be necessary that Mortgagee shall first pay the same.
9. MISCELLANEOUS MATTERS
9.1 Notices.
<PAGE> 20
(a) Except as otherwise provided in this Mortgage, all notices
hereunder shall be in writing and shall be deemed to have been duly given for
all purposes when delivered in person, or when deposited in the United States
mail, by registered or certified mail, return receipt requested, directed to the
party to receive the same at the addresses set forth at the beginning of this
Mortgage or at such other address as may be substituted by notice given as
herein provided. The giving of any notice required hereunder may be waived.
Copies of all notices by Mortgagor pursuant to this Section must be sent to:
Marcus & Shapira, LLP
35th Floor, One Oxford Centre
301 Grant Street
Pittsburgh, Pennsylvania 15219
Attention: Carrie Kochenbach, Esq.
(b) All notices given to Mortgagee by any person or entity (other than
Mortgagor) pursuant to 42 Pa. C.S.A. Section 8143(c) or (d) shall be in writing
and shall be sent exclusively by registered or certified mail, return receipt
requested, to Mortgagee at the address set forth above.
9.2 Governing Law.
This Mortgage shall be interpreted in accordance with the law of the
jurisdiction in which the Realty is located, without regard to principles of
conflicts of law.
9.3 Status of Parties.
It is understood and agreed that the relationship of the parties is
that of Mortgagor and Mortgagee and that nothing herein shall be construed to
constitute a partnership, joint venture or co-tenancy between Mortgagor and
Mortgagee.
9.4 Severability.
In the event any one or more of the provisions contained in this
Mortgage shall for any reason be held to be inapplicable, invalid, illegal, or
unenforceable in any respect, such inapplicability, invalidity, illegality or
unenforceability shall not affect any other provision of this Mortgage, but this
Mortgage shall be construed as if such inapplicable, invalid, illegal or
unenforceable provision had never been contained herein.
9.5 Successors and Assigns.
All of the grants, covenants, terms, provisions and conditions herein
shall run with the land and shall apply to, bind and inure to the benefit of the
successors and assigns of Mortgagor and Mortgagee.
9.6 Time of Essence.
<PAGE> 21
Time is of the essence as to all of Mortgagor's obligations hereunder
and under the other Loan Documents and under any and all other documents
relating in any manner to any of the Secured Obligations.
9.7 Section Headings.
The section headings in this Mortgage are used only for convenience in
finding the subject matters and are not part of this Mortgage or to be used in
determining the intent of the parties or otherwise interpreting this Mortgage.
9.8 Performance by Mortgagee.
Any act which Mortgagee is permitted to perform under the Loan
Documents may be performed at any time and from time to time by Mortgagee or any
person or entity designated by Mortgagee.
9.9 Attorney-in-Fact.
Each appointment of Mortgagee as attorney-in-fact for Mortgagor in this
Mortgage is irrevocable and coupled with an interest.
9.10 Refusal of Consent.
Except as otherwise specified herein, Mortgagee has the right to refuse
to grant its consent whenever such consent is required under this Mortgage.
9.11 Joint and Several Obligations.
If there is more than one party identified in this Mortgage as
"Mortgagor", then each such party so identified shall be liable, jointly and
severally, for all obligations of Mortgagor hereunder, and all references to
"Mortgagor" herein shall refer to each such party individually and to all, or
any two or more, of such parties collectively.
9.12 No Oral Modification.
This Mortgage may be modified, amended, discharged or waived only by an
agreement in writing, signed by all of the parties hereto.
9.13 Defeasance.
If Mortgagor pays to Mortgagee in full the Secured Obligations, then
this Mortgage shall become void.
9.14 WAIVER OF JURY TRIAL.
MORTGAGOR WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS MORTGAGE OR ANY
OF THE OTHER LOAN DOCUMENTS OR ANY OF THE
<PAGE> 22
TRANSACTIONS RELATED TO ANY OF THE LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY MADE BY MORTGAGOR AND MORTGAGOR ACKNOWLEDGES THAT
NEITHER MORTGAGEE NOR ANY PERSON ACTING ON BEHALF OF MORTGAGEE HAS OR HAVE MADE
ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY
TO MODIFY OR NULLIFY ITS EFFECT. MORTGAGOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN
REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF
THIS MORTGAGE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL. MORTGAGOR AGREES THAT THE OBLIGATION EVIDENCED BY THIS
MORTGAGE IS AN EXEMPTED TRANSACTION UNDER THE TRUTH-IN-LENDING ACT, 15 U.S.C.
SECTION 1061, ET SEQ. MORTGAGOR FURTHER ACKNOWLEDGES THAT IT HAS READ AND
UNDERSTANDS THE MEANING OF THIS WAIVER PROVISION AND AS EVIDENCE OF THIS FACT
SIGNS ITS INITIALS.
/s/ JWR
--------------
(INITIALS OF MORTGAGOR)
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE> 23
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly
executed the day and year first above written.
WITNESS/ATTEST: INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C.
By: Interstate Property Partnership, L.P., a
Delaware limited partnership, its sole Member
By: Interstate Property Corporation, a
Delaware corporation, General Partner
/s/ PATRICIA SHEARER By: /s/ J. WILLIAM RICHARDSON
- - ---------------------- -----------------------------------------
Title: Vice-President
--------------------------------------
<PAGE> 24
CERTIFICATE OF RESIDENCE
The undersigned certifies that the residence of Mortgagee is One PNC Plaza,
P1-POPP-19-2, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222.
By: /s/ CARRIE KOCHENBACH
---------------------------------------
Title: Attorney for Mortgagee
------------------------------------
<PAGE> 1
Exhibit 10.3
AGREEMENT OF GUARANTY AND SURETYSHIP
(PAYMENT)
In order to induce PNC BANK, NATIONAL ASSOCIATION, a national banking
association, with its principal office at One PNC Plaza, 249 Fifth Avenue,
P1-POPP-19-2, Pittsburgh, Pennsylvania 15222-2707, Attention: Real Estate
Banking (hereinafter called "Lender"), to make a mortgage loan in the principal
amount of (the "Loan") to INTERSTATE PITTSBURGH HOTEL HOLDINGS, L.L.C., a
Delaware limited liability company ("Borrower") pursuant to a certain Loan
Agreement of even date herewith between Borrower and Lender (the "Loan
Agreement"), undersigned, intending to be legally bound, and for good and
valuable consideration, receipt of which is hereby acknowledged, covenants and
agrees as follows:
1. In this Agreement of Guaranty and Suretyship (this "Agreement"), the
following terms shall have the meanings specified in this Section 1 unless the
context otherwise requires and all other capitalized terms used and not
otherwise expressly defined herein shall have the meaning ascribed to such terms
in the Loan Agreement:
"Loan Debt Service" shall mean the sum of all interest payments as
shall become due under the provisions of the Note (as hereinafter defined) and
Loan Agreement.
2. Subject to the provisions of Section 3 hereof, if applicable,
undersigned unconditionally guarantees and become surety for the full and timely
payment, whether by declaration, acceleration or otherwise, by Borrower of the
principal of and interest on all the following (hereinafter collectively
referred to as the "Obligations"):
(i) all principal, interest and other sums due or to become
due under that certain Mortgage Note, of even date herewith, given by
Borrower to Lender in the principal amount of Seven Million Five
Hundred Sixty Thousand Dollars ($7,560,000), as the same may be
amended, supplemented, renewed or replaced from time to time (the
"Note"), and
(ii) all sums now or hereafter to be paid by either or both
Borrower under all other agreements, instruments and documents given to
Lender to evidence, secure or otherwise support the indebtedness
evidenced by the Note (all such agreements, instruments and documents,
including the Note, as the same may be amended, supplemented, renewed
or replaced from time to time being hereinafter referred to as the
"Loan Documents").
3. Notwithstanding any other provision contained in this Agreement to
the contrary, the Obligations of the undersigned hereunder shall be limited to
(a) the amount of $3,000,000 plus (b) all unpaid Loan Debt Service calculated at
the rate or rates set forth in Section 3.1 of the Loan Agreement. At any given
time, the Obligations of the undersigned hereunder determined pursuant to this
Paragraph 3 are referred to as the "Liability Limitation".
The Liability Limitation shall be reduced by payments made directly by
the undersigned to the Lender after acceleration of the indebtedness evidenced
by the Note and shall not include any amounts received by the Lender from any
other party or source or realized as a result of the
<PAGE> 2
exercise of the rights in collateral furnished by any other party or source,
including, without limitation, the Borrower. In order for a payment to be
construed as having been made directly by the undersigned, the undersigned shall
cause such payment to be delivered in person or by mail, to any Vice-President
of the Lender's Real Estate Banking Department or by wire with written
confirmation to any Vice-President of the Lender's Real Estate Banking
Department and such payment shall contain a written statement by undersigned
that such payment is being made in satisfaction of its Obligations, subject to
the Liability Limitation under this Agreement.
4. Undersigned agrees to pay the Obligations, subject to the Liability
Limitation immediately when due, irrespective of whether or not any one or more
of the following events have occurred: (i) Lender has made any demand on
Borrower; (ii) Lender has taken any action of any nature against Borrower; (iii)
Lender has pursued any rights which Lender has against any other person who may
be liable for any of the Obligations; (iv) Lender holds or has resorted to any
security for any of the Obligations; or (v) Lender has invoked any other
remedies or rights Lender has available with respect to any of the Obligations.
The liability of undersigned as surety and guarantor is unconditional.
Undersigned therefore agrees to pay the Obligations even if any of the Loan
Documents, or any part thereof, are for any reason invalid or unenforceable.
Undersigned further agrees to make full payment to Lender even if circumstances
exist which otherwise constitute a legal or equitable discharge of undersigned
as surety or guarantor.
5. Undersigned waives and agrees not to enforce any of the rights of
undersigned against Borrower unless and until Borrower are no longer liable in
any respect to Lender, including, but not limited to: (i) any right of
undersigned to be subrogated in whole or in part to any right or claim with
respect to any of the Obligations or any portion thereof to Lender which might
otherwise arise from partial payment or performance by undersigned to Lender on
account of the Obligations or any portion thereof; and (ii) any right of
undersigned to require the marshaling of assets of Borrower which might
otherwise arise from partial payment or performance by undersigned to Lender on
account of the Obligations or any portion thereof.
6. Undersigned waives any and all notice with respect to: (i)
acceptance by Lender of this Agreement or any of the Loan Documents; and (ii)
the provisions of any of the Loan Documents or any other instrument or agreement
relating to the Obligations; and (iii) any default in connection with the
Obligations.
7. Undersigned waives any presentment, demand, notice of dishonor or
nonpayment, protest, notice of protest and notice of non-payment in connection
with the Obligations.
8. Undersigned agrees that Lender may do any of the following without
notice to undersigned and without adversely affecting the validity or
enforceability of this Agreement or any other agreement, document or instrument
given by undersigned to Lender in connection with this Agreement or the
Obligations, including, without limitation, any mortgage or other security
instrument given by undersigned to secure its Obligations under this Agreement:
(i) release, surrender, exchange, compromise or settle the Obligations, or any
part thereof; (ii) change, renew or waive the terms of the Obligations, or any
part thereof; (iii) change, renew or waive the terms of any of the Loan
Documents or any other note, instrument or agreement relating to the
Obligations, such rights in Lender to include without limitation the right to
change the rate of interest charged to Borrower (in which event the Obligations
shall be deemed also to include all interest at such changed rate); (iv) grant
any extension or indulgence with respect to the payment
<PAGE> 3
or performance of the Obligations or any part thereof; (v) enter into any
agreement of forbearance with respect to the Obligations, or any part thereof;
(vi) release, surrender, exchange or compromise any security held by Lender for
any of the Obligations; (vii) release any person who is a guarantor or surety or
who has agreed to purchase the Obligations or any part thereof; and (viii)
release, surrender, exchange or compromise any security or lien held by Lender
for the liabilities of any person who is guarantor or surety for the Obligations
or any part thereof. Undersigned agrees that Lender may do any of the above as
Lender deems necessary or advisable, in Lender's sole discretion, without giving
any notice to undersigned, and that undersigned will remain liable for full
payment and performance of the Obligations, subject to the Liability Limitation.
If at any time all or any part of any payment theretofore applied by Lender to
any of the liabilities is or must be rescinded or returned by Lender for any
reason whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of either Borrower), such liability shall, for the purposes of
this Agreement, to the extent that such payment is or must be rescinded or
returned, be deemed to have continued in existence, notwithstanding such
application by Lender, and this Agreement shall continue to be effective or be
reinstated, as the case may be, as to such liabilities, all as though such
application by Lender had not been made.
9. Undersigned, as security for the obligations of the undersigned
hereunder, pledges to Lender, and grants to Lender a security interest in and a
right of set-off against, all moneys, deposits and other property of any kind
owned by undersigned or in which undersigned has an interest and which are or
shall be in the possession or control of Lender at any time for any reason
whatsoever.
10. Undersigned agrees that no failure on the part of Lender to
exercise any of its rights under this Agreement shall be a waiver of such rights
or a waiver of any default by undersigned. Undersigned further agrees that no
waiver or modification of any rights of Lender under this Agreement shall be
effective unless in writing and signed by an authorized officer of Lender.
Undersigned further agrees that each written waiver shall extend only to the
specific instance actually recited in such written waiver and shall not impair
the rights of Lender in any other respect.
11. Undersigned agrees to pay all costs and expenses, including
attorneys' fees, incurred by Lender in enforcing this Agreement against
undersigned. Undersigned further agrees to pay all costs and expenses, including
attorneys' fees, incurred by Lender in collecting or enforcing or attempting to
collect or enforce the Obligations.
12. Undersigned acknowledges that Lender may, in its sole discretion,
elect to enforce this Agreement for the total Obligations, subject to the
Liability Limitation or any part thereof, against undersigned without any duty
or responsibility to pursue any other person or entity and that such an election
by Lender shall not be a defense to any action Lender may elect to take against
undersigned.
13. Undersigned agrees that this Agreement shall be binding upon
undersigned, and undersigned's respective heirs, executors, administrators,
successors or assigns, and that the death or disability of any person shall in
no way impair or affect this Agreement or the power of attorney to confess
judgment as hereinafter provided, either with respect to the estate of the
<PAGE> 4
person so dying, which shall continue to be bound, or otherwise. Undersigned
further agrees that this Agreement shall inure to the benefit of Lender, its
successors and assigns.
14. Undersigned agree that this Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
Undersigned agrees that the Courts of Common Pleas of Allegheny County,
Pennsylvania and the United States District Court for the Western District of
Pennsylvania shall have exclusive jurisdiction and venue with respect to all
actions by or against undersigned under or pursuant to this Agreement and hereby
consents to the jurisdiction of such courts and to service of process, effective
upon receipt by personal service, overnight express delivery or registered or
certified mail to undersigned at the address given below undersigned's signature
hereto. Undersigned shall promptly notify Lender in writing of any change in
undersigned's address.
15. Undersigned recognizes that this agreement when executed
constitutes a sealed instrument and as a result the instrument will be
enforceable as such without regard to any statute of limitations which might
otherwise be applicable and without any consideration.
16. Until payment in full of all Bank Debt, satisfaction of all of
Borrower's other obligations under the Loan Documents, the undersigned shall
comply at all times with the following covenants (as reflected on the financial
statements of the undersigned prepared and delivered to the Lender in accordance
with Exhibit C Section (c) of the Loan Agreement):
(i) Cash and Cash Equivalents. The amount of the undersigned's
Cash and Cash Equivalents shall not be less than $8,000,000 at any given time;
(ii) Debt Multiple Ratio. The Debt Multiple Ratio with respect
to undersigned shall not exceed 3.00 to 1.00;
(iii) Current Ratio. The undersigned shall maintain a Current
Ratio of at least 1.25 to 1.00; and
(iv) Net Worth. The Net Worth of undersigned shall not be less
than $50,000,000 excluding minority interest.
17. This Agreement may be executed in several counterparts, each of
which shall be an original and all of which together shall constitute but one
and the same instrument.
18. CONFESSION OF JUDGMENT. UNDERSIGNED ACKNOWLEDGES THAT (A) IT HAS
READ AND UNDERSTAND, AFTER CONSULTATION WITH ITS COUNSEL, THAT THE PROVISIONS OF
THE FOLLOWING PARAGRAPH COULD ENABLE LENDER TO OBTAIN A JUDGMENT AGAINST
UNDERSIGNED AND COMMENCE EXECUTION PROCEEDINGS THAT COULD RESULT IN THE SEIZURE
OF ASSETS OF UNDERSIGNED, IN EITHER CASE, WITHOUT UNDERSIGNED HAVING THE BENEFIT
OF PRIOR NOTICE OF A HEARING; AND (B) UNDERSIGNED NEVERTHELESS KNOWINGLY AND
VOLUNTARILY AGREES TO SUCH POSSIBLE CONSEQUENCES AND THE PROVISIONS OF THE
FOLLOWING PARAGRAPH.
<PAGE> 5
UNDERSIGNED HEREBY EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD WITHIN
THE COMMONWEALTH OF PENNSYLVANIA TO APPEAR FOR UNDERSIGNED AND, WITH OR WITHOUT
A COMPLAINT OR DECLARATION FILED, CONFESS A JUDGMENT OR JUDGMENTS AGAINST
UNDERSIGNED IN ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF PENNSYLVANIA, AT
ANY TIME AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT UNDER THE LOAN DOCUMENTS,
IN FAVOR OF LENDER OR ITS SUCCESSORS OR ASSIGNS FOR THE UNPAID PRINCIPAL BALANCE
OF THE NOTE, AND ALL INTEREST THEREON, TOGETHER WITH COSTS OF SUIT AND AN
ATTORNEY'S COMMISSION OF 10% FOR COLLECTION. THE AUTHORITY AND POWER TO APPEAR
FOR AND ENTER JUDGMENT AGAINST UNDERSIGNED SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, AND MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS LENDER
OR ITS SUCCESSORS OR ASSIGNS SHALL DEEM NECESSARY OR DESIRABLE. THE VALIDITY OF
ANY JUDGMENT ENTERED UNDER THE AUTHORITY OF THIS WARRANT SHALL NOT BE ADVERSELY
AFFECTED BY THE OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN PARAGRAPH 8 OF THIS
AGREEMENT AND ANY SUCH JUDGMENT SHALL BE FULLY ENFORCEABLE UP TO THE AMOUNT OF
THE OBLIGATIONS AT THE TIME ENFORCEMENT OF THE JUDGMENT IS SOUGHT, PLUS AN
ATTORNEY'S COMMISSION OF 10% FOR COLLECTION, EVEN THOUGH ANY OF THE EVENTS
DESCRIBED IN PARAGRAPH 8 HAVE OCCURRED. UNDERSIGNED HEREBY FOREVER WAIVES AND
RELEASES ANY AND ALL ERRORS IN SAID PROCEEDINGS, WAIVES STAY OF EXECUTION, STAY,
CONTINUANCE OR ADJOURNMENT OF SALE ON EXECUTION, THE RIGHT TO PETITION TO SET
ASIDE OR ORDER A RESALE, THE RIGHT TO EXCEPT TO THE SHERIFF'S SCHEDULE OF
PROPOSED DISTRIBUTION, THE RIGHT OF INQUISITION AND EXTENSION OF TIME OF
PAYMENT, AND AGREES TO CONDEMNATION OF ANY PROPERTY LEVIED UPON BY VIRTUE OF ANY
EXECUTION ISSUED ON ANY SUCH JUDGMENT, AND UNDERSIGNED SPECIFICALLY WAIVES ALL
EXEMPTIONS FROM LEVY AND SALE OF ANY PROPERTY THAT NOW IS OR MAY HEREAFTER BE
EXEMPT UNDER ANY EXISTING OR FUTURE LAWS OF THE UNITED STATES OF AMERICA OR THE
COMMONWEALTH OF PENNSYLVANIA OR OF ANY OTHER JURISDICTION.
19. In the event that any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, and this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
20. UNDERSIGNED WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS RELATED TO ANY OF THE
LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
UNDERSIGNED AND UNDERSIGNED ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON
ACTING ON BEHALF OF LENDER HAS OR HAVE MADE ANY REPRESENTATIONS OF FACT TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY
<PAGE> 6
OR NULLIFY ITS EFFECT. UNDERSIGNED FURTHER ACKNOWLEDGES THAT UNDERSIGNED HAVE
BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING
OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF ITS OWN FREE WILL, AND THAT UNDERSIGNED HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL. UNDERSIGNED AGREES THAT THE OBLIGATIONS
EVIDENCED BY THIS AGREEMENT ARE EXEMPTED TRANSACTIONS UNDER THE TRUTH-IN-LENDING
ACT, 15 U.S.C. SECTION 1601, ET SEQ.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE> 7
IN WITNESS WHEREOF, undersigned, intending to be legally bound, has
executed this Agreement as of the 14th day of February, 2000.
WITNESS:
INTERSTATE HOTELS CORPORATION,
a Maryland corporation
By: /s/ J. WILLIAM RICHARDSON
---------------------------------
Title: Vice Chairman and CFO
- - ------------------------------ ------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND THE CONSOLIDATED STATEMENT
OF OPERATION FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 35,682
<SECURITIES> 0
<RECEIVABLES> 17,466
<ALLOWANCES> (479)
<INVENTORY> 0
<CURRENT-ASSETS> 56,583
<PP&E> 21,473
<DEPRECIATION> (5,619)
<TOTAL-ASSETS> 151,778
<CURRENT-LIABILITIES> 42,178
<BONDS> 7,552
0
0
<COMMON> 64
<OTHER-SE> 59,114
<TOTAL-LIABILITY-AND-EQUITY> 151,778
<SALES> 0
<TOTAL-REVENUES> 54,810
<CGS> 0
<TOTAL-COSTS> 59,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (446)
<INCOME-PRETAX> (3,857)
<INCOME-TAX> (603)
<INCOME-CONTINUING> (3,254)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (905)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
