SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Original Report: September 20, 1999
APPLE SUITES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 333-77055 54-1938865
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
<PAGE>
APPLE SUITES, INC.
FORM 8-K
Index
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements and Exhibits
a. Financial Statements - None
b. Exhibits
4.1 Note dated October 5, 1999 in the principal amount of
$ 7,350,000 made payable by Apple Suites, Inc. to the
order of Promus Hotels, Inc.
4.2 Fee and Leasehold Deed to Secure Debt, Assignment of
Leases and Rents and Security Agreement dated October
5, 1999 from Apple Suites, Inc. and Apple Suites
Management, Inc. for the benefit of Promus Hotels,
Inc. encumbering the Atlanta-Galleria/Cumberland
hotel.
4.3 Fee and Leasehold Deed of Trust, Assignment of Leases
and Rents and Security Agreement dated October 5,
1999 from Apple Suites REIT Limited Partnership and
Apple Suites Services Limited Partnership for the
benefit of Promus Hotels, Inc. imposing a second lien
on the Dallas-Addison and Dallas-Irving/Las Colinas
hotels.
4.4 Fee and Leasehold Deed of Trust, Assignment of Leases
and Rents and Security Agreement dated October 5,
1999 from Apple Suites REIT Limited Partnership and
Apple Suites Services Limited Partnership for the
benefit of Promus Hotels, Inc. imposing a second lien
on the North Dallas-Plano hotel.
4.5 Negative Pledge Agreement dated October 5, 1999
between Apple Suites, Inc. and Promus Hotels, Inc.
pertaining to the Richmond-West End hotel.
10.1 Indemnity dated October 5, 1999 from Apple Suites,
Inc. to Promus Hotels, Inc. pertaining to the
Atlanta-Galleria/Cumberland hotel.
10.2 Homewood Suites License Agreement dated October 5,
1999 between Promus Hotels, Inc. and Apple Suites
Management, Inc. pertaining to the
Atlanta-Galleria/Cumberland hotel.
10.3 Management Agreement dated October 5, 1999 between
Apple Suites Management, Inc. and Promus Hotels, Inc.
pertaining to the Atlanta-Galleria/Cumberland hotel.
10.4 Comfort Letter dated October 5, 1999 among Promus
Hotels, Inc., Apple Suites, Inc. and Apple Suites
Management, Inc. pertaining to the
Atlanta-Galleria/Cumberland hotel.
2
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10.5 Promissory Note dated October 5, 1999 in the amount
of $55,800 made payable by Apple Suites Management,
Inc. and Apple Suites Services Limited Partnership to
the order of Apple Suites, Inc.
10.6 Promissory Note dated October 5, 1999 in the amount
of $12,400 made payable by Apple Suites Management,
Inc. and Apple Suites Services Limited Partnership to
the order of Apple Suites, Inc.
3
<PAGE>
Item 2. Acquisition or Disposition of Assets
In a Report on Form 8-K dated September 20, 1999 and filed on October
5, 1999, Apple Suites, Inc. reported its acquisition of a Homewood Suites(R)
property in Atlanta, Georgia, as well as certain other Homewood Suites(R)
property acquisitions. This Report on Form 8-K/A includes certain exhibits
pertaining to the acquisition of the property in Atlanta, Georgia.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Apple Suites, Inc.
Date: October 21, 1999 By: /s/ Glade M. Knight
---------------------------
Glade M. Knight,
Chief Executive Officer of
Apple Suites, Inc.
5
EXHIBIT 4.1
NOTE
Date of Note: October 5, 1999
Principal Amount: $7,350,000
Maturity Date: October 1, 2000
Interest Rate: 8.5% per annum to be computed on an actual/365-day basis (i.e.,
interest for each day during which any of the Principal Amount is
outstanding shall be computed at the Interest Rate divided by 365).
FOR VALUE RECEIVED, the undersigned ("Maker") does hereby
covenant and promise to pay to the order of PROMUS HOTELS, INC., a Delaware
corporation or its successors or assigns (collectively, "Payee"), at 755
Crossover Lane, Memphis, Tennessee 38117-4900, or at such other place as Payee
may designate to Maker in writing from time to time, the Principal Amount, on
the Maturity Date, together with interest at the Interest Rate on the unpaid
portion of the Principal Amount on the first day of the first month following
the Date of Note and on the first day of each month thereafter until this Note
is paid in full, and with a late payment premium of 4% of any principal or
interest payment made more than ten (10) days after the due date thereof which
shall be due with any such late payment. All payments of principal, interest and
other sums hereunder shall be made in lawful money of the United States and in
immediately available funds.
Pursuant to Section 2(b) of the Purchase Agreement (as
hereinafter defined), in addition to the payment of interest as provided herein,
commencing on the first day of the first month following the repayment in full
of all sums evidenced by the Note made by Maker to Payee dated September 20,
1999 in the Principal Amount of $26,625,000 and on the first day of each month
thereafter, Maker hereby covenants and promises to pay a monthly principal
amortization payment equal to the Amortization Amount, as hereinafter defined.
Each such principal amortization payment shall be applied in reduction of the
Principal Amount. In connection with calculating the Amortization Amount, on or
before the twenty-second (22nd) day of each month (or if such 22nd day is not a
business day, the first business day thereafter) between the date hereof and the
repayment in full of amounts evidenced by this Note and secured by the Mortgage
(as hereinafter defined), Maker shall notify Payee (the "Equity Proceeds
Notice") of (1) the total proceeds received in connection with the "best
efforts" public offering of shares in Maker (the "Equity Proceeds") and (2) the
net sum available to Maker from the Equity Proceeds after deduction of offering
expenses, including, without limitation, accountants' fees, legal fees, printing
expenses, registration fees, NASD filing fees, stock exchange/quotation service
listing fees and transfer agent and escrow charges,
<PAGE>
selling commissions, marketing expense allowance, Property (as herein defined)
acquisition fees and expenses and closing costs and a working capital reserve
and a reserve for renovations, repairs and replacements of capital improvements
for each Property (the "Net Equity Proceeds"), all as contemplated in Maker's
Form S-11 Registration Statement, filed on August 3, 1999. For the purposes of
this Note (i) the "Amortization Amount" shall mean an amount equal to the excess
of the Net Equity Proceeds set forth in the most recent Equity Proceeds Notice
over the sum of (x) $37,950,000 plus (y) the aggregate of all previous principal
amortization payments applied in reduction of the Principal Amount and (ii)
"Property" shall mean the property sold to Maker pursuant to that certain
Agreement of Sale dated October 5, 1999 between Hampton Inns, Inc. as seller,
and Maker, as buyer (the "Purchase Agreement"). Notwithstanding the foregoing,
nothing provided herein shall prevent Payee from paying the Amortization Amount
more often than monthly.
This Note is secured by, among other things, mortgages and/or
deeds of trust and/or deeds to secure debt (individually and collectively, the
"Mortgage"), which Mortgage specifies various defaults upon the happening of
which all sums owing on this Note may, at Payee's option, be declared
immediately due and payable.
Maker agrees that it shall be bound by any agreement extending
the time or modifying the above terms of payment, made by Payee and the owner or
owners of the property affected by the Mortgage, whether with or without notice
to Maker, and Maker shall continue liable to pay the amount due hereunder, but
with interest at a rate no greater than the Interest Rate, according to the
terms of any such agreement of extension or modification. This Note may be
prepaid, in whole or in part, without premium or penalty.
This Note may not be changed orally, but only by an agreement
in writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
Should the indebtedness represented by this Note or any part
thereof be collected at law or in equity, or in bankruptcy, receivership or any
other court proceedings (whether at the trial or appellate level), or should
this Note be placed in the hands of attorneys for collection upon default, Maker
agrees to pay, in addition to the principal, premium and interest due and
payable hereon, all costs of collection or attempting to collect this Note,
including reasonable attorneys' fees and expenses.
All parties to this Note, whether Maker, principal, surety,
guarantor or endorser, hereby waive presentment for payment, demand, protest,
notice of protest and notice of dishonor.
Anything herein to the contrary notwithstanding, the
obligations of Maker under this Note and the Mortgage shall be subject to the
limitation that payments of interest shall not be required to the extent that
receipt of any such payment by Payee would be contrary to provisions of law
applicable to Payee limiting the maximum rate of interest that may be charged or
collected by Payee.
<PAGE>
In case of any loss, theft, destruction or mutilation of this
Note, Maker shall, upon its receipt of an affidavit of an officer of Payee as to
such loss, theft, destruction or mutilation and an appropriate indemnification,
execute and deliver a replacement Note to Payee in the same principal amount and
otherwise of like tenor as this Note.
MAKER BY EXECUTION HEREOF, AND PAYEE BY ACCEPTANCE HEREOF,
HEREBY EXPRESSLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION
OR PROCEEDING BROUGHT BY PAYEE ON THIS NOTE, ANY AND EVERY RIGHT IT MAY HAVE TO
A TRIAL BY JURY.
This Note and the rights and obligations of the parties
hereunder shall in all respects be governed by, and construed and enforced in
accordance with, the laws of the State of Tennessee (without giving effect to
Tennessee's principles of conflicts of law). Maker hereby irrevocably submits to
the non-exclusive jurisdiction of any Tennessee State or Federal court sitting
in The City of Memphis over any suit, action or proceeding arising out of or
relating to this Note, and Maker hereby agrees and consents that, in addition to
any methods of service of process provided for under applicable law, all service
of process in any such suit, action or proceeding in any Tennessee State or
Federal court sitting in The City of Memphis may be made by certified or
registered mail, return receipt requested, directed to Maker at the address
indicated below, with a copy to counsel at Jenkens & Gilchrist, Fountain Place,
1445 Ross Avenue, Suite 3200, Dallas, Texas 75202, and service so made shall be
complete five (5) days after the same shall have been so mailed.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Maker has executed and delivered this Note
on the day and year first above written.
APPLE SUITES, INC.,
a Virginia corporation
By /s/ Glade M. Knight
-----------------------
Name: Glade M. Knight
Title: President
Address of Maker:
306 East Main Street
Richmond, Virginia 23219
ATTN: Glade M. Knight
This is to certify that this Note was executed in my presence
on the date hereof by the party whose signature appears above in the capacity
indicated.
/s/ Jacquelyn B. Owens
---------------------------
Notary Public
My commission expires:
6/30/03
---------------------------
Exhibit 4.2
STATE OF GEORGIA )
)
COUNTY OF COBB )
================================================================================
Date: October 5, 1999
FEE AND LEASEHOLD DEED TO SECURE DEBT, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
("this Deed")
BY AND AMONG
APPLE SUITES, INC.,
a Virginia corporation, as a grantor
("Fee Owner")
AND
APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation, as a grantor
("Lessee")
Address of Fee Owner and Lessee: 306 East Main Street
Richmond, Virginia 23219
Attn: Mr. Glade M. Knight
AND
PROMUS HOTELS, INC.,
a Delaware corporation, as grantee
("Mortgagee")
Address of Mortgagee: 755 Crossover Lane
Memphis, Tennessee 38117
THIS INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS.
THE NAMES OF THE DEBTOR AND SECURED PARTY FROM WHICH INFORMATION CONCERNING THE
SECURITY INTEREST MAY BE OBTAINED, THE MAILING ADDRESS OF THE DEBTOR AND A
STATEMENT INDICATING THE TYPES, OR DESCRIBING THE ITEMS, OF CHATTELS, ARE AS
DESCRIBED IN SECTION 3.05 HEREOF IN COMPLIANCE WITH THE REQUIREMENTS OF THE
OFFICIAL CODE OF GEORGIA ANNOTATED, SECTION 11-9-402.
THIS INSTRUMENT CREATES A "PURCHASE MONEY SECURITY INTEREST" AS CONTEMPLATED BY
SECTION 11-9-107 OF THE OFFICIAL CODE OF GEORGIA ANNOTATED, PART OF THE PROCEEDS
OF WHICH ARE TO ENABLE A DEBTOR TO ACQUIRE RIGHTS IN AND TO COLLATERAL.
================================================================================
This instrument prepared by, and after recording please return to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Graham R. Hone, Esq.
<PAGE>
TABLE OF CONTENTS
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RECITAL.............................................................................................1
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION.......................................................1
GRANTING CLAUSE.....................................................................................4
ARTICLE I COVENANTS OF MORTGAGOR....................................................6
Section 1.01. (a) Warranty of Title; Power and Authority..............................6
(b) Hazardous Materials.................................................6
(c) Flood Hazard Area...................................................7
Section 1.02. (a) Further Assurances..................................................7
(b) Information Reporting and Back-up Withholding.......................7
Section 1.03. (a) Filing and Recording of Documents...................................7
(b) Filing and Recording Fees and Other Charges.........................8
Section 1.04. Payment and Performance of Loan Documents.................................8
Section 1.05. Maintenance of Existence; Compliance with Laws............................8
Section 1.06. After-Acquired Property...................................................8
Section 1.07. (a) Payment of Taxes and Other Charges..................................9
(b) Payment of Mechanics and Materialmen................................9
(c) Good Faith Contests.................................................9
Section 1.08. Taxes on Mortgagee.......................................................10
Section 1.09. Insurance................................................................10
Section 1.10. Protective Advances by Mortgagee.........................................13
Section 1.11. (a) Visitation and Inspection..........................................14
(b) Financial and Other Information....................................14
(c) Estoppel Certificates..............................................14
Section 1.12. Maintenance of Premises and Improvements.................................14
Section 1.13. Condemnation.............................................................14
Section 1.14. Leases...................................................................15
Section 1.15. Premises Documents.......................................................16
Section 1.16. Trust Fund; Lien Laws....................................................16
Section 1.17. Assignment of Rents......................................................16
Section 1.18. Assignment of Leases.....................................................17
Section 1.19. New Leases...............................................................17
ARTICLE II EVENTS OF DEFAULT AND REMEDIES...........................................17
Section 2.01. Events of Default and Certain Remedies...................................17
Section 2.02. Other Matters Concerning Sales...........................................22
Section 2.03. Payment of Amounts Due...................................................24
Section 2.04. Actions; Receivers.......................................................25
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Section 2.05. Mortgagee's Right to Possession..........................................25
Section 2.06. Remedies Cumulative......................................................26
Section 2.07. Moratorium Laws; Right of Redemption.....................................26
Section 2.08. Intentionally Omitted....................................................26
Section 2.09. Mortgagee's Rights Concerning Application of Amounts Collected...........26
ARTICLE III SECURITY AGREEMENT.......................................................26
Section 3.01. Scope and Intent.........................................................26
Section 3.02. Security Agreement.......................................................27
Section 3.03. Warranties and Covenants.................................................27
Section 3.04. Nature of Interest.......................................................27
Section 3.05. Financing Statement......................................................28
ARTICLE IV MISCELLANEOUS............................................................28
Section 4.01. Intentionally Omitted....................................................28
Section 4.02. Intentionally Omitted....................................................28
Section 4.03. Application of Certain Payments..........................................28
Section 4.04. Severability.............................................................28
Section 4.05. Modifications and Waivers in Writing.....................................29
Section 4.06. Notices..................................................................29
Section 4.07. Successors and Assigns...................................................29
Section 4.08. Limitation on Interest...................................................29
Section 4.09. Counterparts.............................................................29
Section 4.10. Substitute Mortgages.....................................................29
Section 4.11. Cancellation.............................................................29
Section 4.12. Subrogation..............................................................30
Section 4.13. Georgia Code Title 44....................................................30
Section 4.14. Mortgagee's Sale of Interests in Loan....................................30
Section 4.15. No Merger of Interests...................................................30
Section 4.16. CERTAIN WAIVERS..........................................................30
Section 4.17. GOVERNING LAW............................................................30
</TABLE>
(ii)
<PAGE>
THE AMOUNT OF THIS MORTGAGE IS $33,975,000.
RECITAL
Mortgagee, Hampton Inns, Inc. and Promus Hotels Florida, Inc., as sellers,
and Fee Owner, as buyer, have heretofore entered into an Agreement of Sale dated
as of August 6, 1999 (as amended, the "First Agreement of Sale") for the
purchase of certain premises more particularly described therein (the "Initial
Premises") and Mortgagee, as seller, and Fee Owner, as buyer, have entered into
an Agreement of Sale dated as of October 5, 1999 (as amended, the "Second
Agreement of Sale"; together with the First Agreement of Sale, collectively, the
"Agreement of Sale") for the purchase of the premises described in SCHEDULE A
attached hereto and made a part hereof. Fee Owner has acquired and is the owner
of the premises described in SCHEDULE A and Lessee is the owner of a leasehold
interest therein. Lessee acknowledges that it will derive substantial benefit
from the making of the loans contemplated in the Agreement of Sale and further
acknowledges that the obligation of Mortgagee to make such loans is conditioned
upon, among other things, the execution and delivery by Lessee of this Mortgage.
In connection with the purchase of the Initial Premises by Fee Owner (or its
indirect wholly-owned subsidiary) from Mortgagee (or its affiliates) pursuant to
the First Agreement of Sale, Fee Owner has borrowed the sum of $26,625,000 and
has executed and delivered to Mortgagee its note, dated September 20, 1999,
obligating it to pay the sum of $26,625,000, with interest thereon as therein
provided and with final payment being due on October 1, 2000, which note is by
this reference made a part hereof (the "First Note"). In connection with the
purchase of the Premises by Fee Owner pursuant to the Second Agreement of Sale,
Fee Owner will borrow $7,350,000 from Mortgagee and has executed and delivered
to Mortgagee its note, dated the date hereof, obligating it to pay the sum of
$7,350,000, with interest thereon as therein provided and with final payment
being due on October 1, 2000, which note is by this reference made a part hereof
(the "Second Note"; together with the First Note and as either thereof may
hereafter be amended, modified, extended, severed, assigned, renewed, replaced
or restated, hereinafter, the "Note"). In order to secure the payment of the
Note, Fee Owner and Lessee, as grantors, have duly authorized the execution and
delivery of this Mortgage. For purposes of this Mortgage, "Mortgagor" shall mean
Fee Owner and Lessee but only to the extent of their respective interests in the
Mortgaged Property (as herein defined) and their respective obligations under
the Note and Ground Lease.
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION
Mortgagor and Mortgagee agree that, unless the context otherwise specifies
or requires, the following terms shall have the meanings herein specified.
"Chattels" means all fixtures, furnishings, fittings, appliances,
apparatus, equipment, building materials and components, machinery and articles
of personal property, of whatever kind or nature, including any replacements,
proceeds or products thereof and additions thereto, other than those owned by
lessees, now or at any time
<PAGE>
hereafter intended to be or actually affixed to, attached to, placed upon, or
used in any way in connection with the complete and comfortable use, enjoyment,
development, occupancy or operation of the Premises, and whether located on or
off the Premises, including, but not by way of limitation, all gas and electric
fixtures, radiators, heaters, engines and machinery, boilers, ranges, ovens,
elevators and motors, bathtubs, sinks, water closets, basins, pipes, faucets and
other air-conditioning, plumbing and heating fixtures, mirrors, mantles,
refrigerating plant, refrigerators, iceboxes, dishwashers, carpeting, furniture,
laundry equipment, cooking apparatus and appurtenances, and all building
material and equipment now or hereafter delivered to the Premises and intended
to be installed therein, fire extinguishers and any other safety equipment
required by governmental regulations, books and records; such other goods,
equipment, chattels and personal property as are usually furnished by landlords
in letting premises of the character hereby conveyed; all the right, title and
interest of Mortgagor in any of the foregoing property which is subject to or
covered by any prior security agreement, conditional sales contract, chattel
mortgage or similar lien or claim, together with the benefit of any deposits or
payments now or hereafter made by Mortgagee on behalf of Mortgagor; all trade
names, trademarks, service marks, logos and good will related thereto which in
any way now or hereafter belong, relate or appertain to the Premises or any part
thereof; all renewals or replacements thereof or articles in substitution
thereof and all of the estate, right, title and interest of Mortgagor in and to
all property of any nature whatsoever, now or hereafter situated on the Premises
or intended to be used in connection with the operation thereof; and all
inventory, accounts, chattel paper, documents, equipment, fixtures, farm
products, consumer goods, general intangibles and personal property of every
kind and nature whatsoever constituting proceeds acquired with cash proceeds of
any of the property described hereinabove. All of the estate, right, title and
interest of Mortgagor in and to all the foregoing property are hereby declared
and shall be deemed to be fixtures and accessions to the freehold and a part of
the Premises as between Mortgagor and Mortgagee and all persons claiming by,
through or under them or either of them, and which shall be deemed to be a
portion of the security for the indebtedness herein described and to be secured
by this Mortgage. The location of the Chattels is Cobb County, Georgia, which is
also the location of the Premises.
"Default Rate" means the rate (or, if more than one, the highest of the
rates) of interest per annum provided in the Note plus 5%, but in no event to
exceed the maximum rate allowed by law.
"Events of Default" means the events and circumstances described as such in
Section 2.01.
"Ground Lease" means the Master Hotel Lease Agreement dated as of September
20, 1999 between Fee Owner and Lessee covering, among other properties, the
Premises described in SCHEDULE A, as the same may be amended, supplemented or
modified from time to time.
"Hazardous Materials" means any pollutant, effluents, emissions,
contaminants, toxic or hazardous wastes, materials or substances, as any of
those terms are defined from time to time in or for the purposes of any relevant
environmental law, rule, regulation,
2
<PAGE>
code, permit, order, notice, demand letter or other binding determination
(hereinafter, "Environmental Laws") including, without limitation, asbestos
fibers and friable asbestos, polychlorinated biphenyls and any petroleum or
hydrocarbon-based products or derivatives, in each case in amounts in violation
of applicable Environmental Laws.
"Improvements" means all structures or buildings, and replacements thereof,
now or hereafter located upon the Premises, including all plant equipment,
apparatus, machinery and fixtures of every kind and nature whatsoever forming
part of said structures or buildings.
"lease" or "leases" means any lease or leases of all or any portion of the
Premises, whether affecting the fee or leasehold portion thereof.
"The lien hereof", "first lien", and "lien of this Mortgage", and similar
phrases, mean the security title to the Mortgaged Property hereby conveyed.
"Loan" means the loan made by Mortgagee to Fee Owner evidenced by the Note
and secured hereby.
"Mortgage" or "this Mortgage" means this Fee and Leasehold Deed To Secure
Debt, Assignment of Leases and Rents And Security Agreement, which shall
constitute a security agreement as defined by the Uniform Commercial Code as
enacted in the State of Georgia and which shall operate and is to be construed
as a deed passing legal title to the Mortgaged Property and is made under those
provisions of the existing laws of the State of Georgia relating to deeds to
secure debt, and not as a mortgage.
"Mortgage Amount" means and shall equal the sum of Thirty-Three Million
Nine Hundred Seventy-Five and 00/100 Dollars ($33,975,000.00).
"Premises" means the premises described in SCHEDULE A, including the
leasehold interest therein created by the Ground Lease, and including all of the
easements, rights, privileges and appurtenances (including air or development
rights) thereunto belonging or in anywise appertaining, and all of the estate,
right, title, interest, claim or demand whatsoever of Mortgagor therein and in
the streets and ways adjacent thereto, either in law or in equity, in possession
or expectancy, now or hereafter acquired, and as used herein shall, unless the
context otherwise requires, be deemed to include the Improvements.
"Premises Documents" means all reciprocal easement or operating agreements,
declarations of covenants, conditions or restrictions, declarations of
condominium, developer's or utility agreements with any village, town, county or
other governmental authority, and any similar such agreements or declarations
now or hereafter affecting the Premises or any part thereof.
All terms of this Mortgage which are not defined above shall have the
meaning set forth elsewhere in this Mortgage.
3
<PAGE>
Except as expressly indicated otherwise, when used in this Mortgage (i)
"or" is not exclusive, (ii) "hereunder", "herein", "hereof" and the like refer
to this Mortgage as a whole, (iii) "Article", "Section" and "Schedule" refer to
Articles, Sections and Schedules of this Mortgage, (iv) terms defined in the
singular have a correlative meaning when used in the plural and vice versa, (v)
a reference to a law or statute includes any amendment or modification to, or
replacement of, such law or statute and (vi) a reference to an agreement,
instrument or document means such agreement, instrument or document as the same
may be amended, modified or supplemented from time to time in accordance with
its terms and as permitted hereby and by the other documents executed or
delivered to Mortgagee in connection with the Loan. The cover page and all
Schedules hereto are incorporated herein and made a part hereof. Any table of
contents and the headings and captions herein are for convenience only and shall
not affect the interpretation or construction hereof.
GRANTING CLAUSE
NOW, THEREFORE, Mortgagor, in consideration of the premises and in order to
secure the payment of both the principal of, and the interest and any other sums
payable under, the Note or this Mortgage (together with any and all other
purchase money indebtedness now or hereafter owing by Mortgagor to Mortgagee,
however incurred, but not including sums owed by Mortgagor to Mortgagee in
respect of franchise fees, management fees or any other sums payable under the
License Agreement or the Management Agreement (as hereinafter defined)) and the
performance and observance of all the provisions hereof and of the Note,
including the payment of any sums advanced by Mortgagee to pay taxes,
assessments, insurance premiums, or the costs of repairing, maintaining or
preserving the Premises to the extent the aggregate of such sums and any other
sums expended pursuant hereto exceed the sum of the Mortgage Amount, hereby
gives, grants, bargains, sells, warrants, aliens, remises, releases, conveys,
assigns, transfers, sets over and confirms unto Mortgagee, all its estate,
right, title and interest in, to and under any and all of the following
described property (hereinafter, the "Mortgaged Property") whether now owned or
held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels;
(iv) the Premises Documents;
(v) all rents, royalties, issues, profits, revenue, income,
recoveries, reimbursements and other benefits of the Mortgaged Property
(hereinafter, the "Rents") and all leases of the Mortgaged Property or
portions thereof now or hereafter entered into and all right, title and
interest of Mortgagor thereunder, including, without limitation, cash or
securities deposited thereunder to secure performance by the lessees of
their obligations thereunder, whether such cash or securities are to be
held until the expiration of the terms of such leases or applied
4
<PAGE>
to one or more of the installments of rent coming due immediately prior to
the expiration of such terms, and including any guaranties of such leases
and any lease cancellation, surrender or termination fees in respect
thereof, all subject, however, to the provisions of Section 4.01;
(vi) all (a) development work product prepared in connection with the
Premises, including, but not limited to, engineering, drainage, traffic,
soil and other studies and tests; water, sewer, gas, electrical and
telephone approvals, taps and connections; surveys, drawings, plans and
specifications; and subdivision, zoning and platting materials; (b)
building and other permits, rights, licenses and approvals relating to the
Premises; and (c) contracts and agreements (including, without limitation,
contracts with architects and engineers, construction contracts and
contracts for the maintenance or management of the Premises), contract
rights, logos, trademarks, trade names, copyrights and other general
intangibles used or useful in connection with the ownership, operation or
occupancy of the Premises or any part thereof;
(vii) all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without
limitation, proceeds of insurance and condemnation awards, and all rights
of Mortgagor to refunds of real estate taxes and assessments;
(viii) all revenue and income received by or on behalf of Mortgagor
resulting from the operation of the Premises as a hotel, including all sums
(1) paid by customers for the use of hotel rooms located within the
Premises, (2) derived from food and beverage operations located within the
Premises, (3) generated by other hotel operations, including any parking,
convention, sports and recreational facilities and (4) business
interruption insurance proceeds;
(ix) all accounts and accounts receivable, including all present and
future right to payment from any consumer credit or charge card
organization or entity (such as those organizations which sponsor or
administer the American Express, Carte Blanche, Discover Card, Diners Club,
Visa and Master Card) arising out of the leasing and operation of, or the
business conducted at or in relation to, all or any part of the Premises;
and
(x) any deposit, operating or other account including the entire
balance therein (now or hereafter existing) of Mortgagor containing
proceeds of the operation of the Premises with any banking or financial
institution and all money, instruments, securities, documents, chattel
paper, credits, demands, and any other property, rights, or interests of
Mortgagor relating to the operation of the Premises which at any time shall
come into the possession, custody or control of any banking or financial
institution.
TO HAVE AND TO HOLD the Mortgaged Property with all and singular the parts,
rights, members and appurtenances thereto now or hereafter belonging, relating
or
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appertaining, to the use, benefit and behalf of Mortgagee, its successors and
assigns forever.
ARTICLE I
COVENANTS OF MORTGAGOR
Mortgagor represents, except as known by Mortgagee or its affiliates to the
contrary, or disclosed to Mortgagee in connection with the sale of the Mortgaged
Property to Mortgagor, and Mortgagor covenants and agrees as follows:
Section 1.01. (a) Warranty of Title; Power and Authority. Mortgagor
warrants that, with respect to the fee interest in the Premises, it has a good
and marketable title to an indefeasible fee estate subject to no lien, charge or
encumbrance, that the Ground Lease is subject to no lien, charge or encumbrance
of any kind and is prior to all liens, charges and encumbrances whatsoever on
the fee interest of the landlord thereunder, except in either case such as are
listed as exceptions to title in the title policy insuring the lien hereof; and,
Mortgagor further warrants that, with respect to the leasehold interest in the
Premises, that it is the owner of a valid and subsisting interest as tenant
under the Ground Lease, that the Ground Lease is in full force and effect, there
are no defaults thereunder and no event has occurred or is occurring which after
notice or passage of time or both will result in such a default; that it owns
the Chattels, all leases and the Rents in respect of the Mortgaged Property and
all other personal property encumbered hereby free and clear of liens and
claims; and Mortgagor warrants that this Mortgage is and will remain a valid and
enforceable lien on the Mortgaged Property subject only to the exceptions
referred to above. Mortgagor has full power and lawful authority to subject the
Mortgaged Property to the lien hereof in the manner and form herein done or
intended hereafter to be done. Mortgagor will preserve such title, will preserve
such leasehold estate created by the Ground Lease and will forever warrant and
defend the same to Mortgagee and Mortgagee and will forever warrant and defend
the validity and priority of the lien hereof against the claims of all persons
and parties whomsoever. Mortgagor will perform or cause to be performed all of
the covenants and conditions required to be performed by it under the Ground
Lease, will do all things necessary to preserve unimpaired its rights
thereunder, and will not (i) enter into any agreement modifying or amending the
Ground Lease that would reduce the term of the Ground Lease, increase the amount
of rent payable thereunder (except as contemplated by the provisions of the
Ground Lease) or have a material adverse effect on the lien created by this
Mortgage or the rights of Mortgagee hereunder or (ii) for so long as the Ground
Lease is in effect, release the landlord thereunder from any obligations imposed
upon it thereby. If Mortgagor receives a notice of default under the Ground
Lease, it shall immediately cause a copy of such notice to be sent by registered
United States mail to Mortgagee.
(b) Hazardous Materials. To the best of Mortgagor's knowledge, Mortgagor
represents and warrants that (i) the Premises and the improvements thereon and
the surrounding areas are not currently and have never been subject to Hazardous
Materials or their effects, in each case in amounts in violation of applicable
Environmental Laws,
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(ii) neither it nor any portion of the Premises or improvements thereon is in
violation of, or subject to any existing, pending or threatened investigation or
proceeding by any governmental authorities under, any Environmental Law, (iii)
there are no claims, litigation, administrative or other proceedings, whether
actual or threatened, or judgments or orders, concerning Hazardous Materials
relating in any way to the Premises or the improvements thereon and (iv)
Mortgagor is not required by any Environmental Law to obtain any permits or
licenses to construct or use any improvements, fixtures or equipment with
respect to the Premises, or if any such permit or license is required it has
been obtained and is capable of being mortgaged and assigned hereby. Mortgagor
will comply with all applicable Environmental Laws and will, at its sole cost
and expense, promptly remove, or cause the removal of, any and all Hazardous
Materials or the effects thereof at any time identified as being on, in, under
or affecting the Premises.
(c) Flood Hazard Area. Mortgagor represents that neither the Premises nor
any part thereof is located in an area identified by the Secretary of the United
States Department of Housing and Urban Development or by any applicable federal
agency as having special flood hazards or, if it is, Mortgagor has obtained the
insurance required by Section 1.09.
Section 1.02. (a) Further Assurances. Mortgagor will, at its sole cost and
expense, do, execute, acknowledge and deliver all and every such further acts,
deeds, conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as Mortgagee shall from time to time reasonably require, for the
better assuring, conveying, assigning, transferring and confirming unto
Mortgagee the property and rights hereby conveyed or assigned or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound to
convey or assign to Mortgagee, or for carrying out the intention or facilitating
the performance of the terms hereof, or for filing, registering or recording
this Mortgage and, on demand, will execute and deliver, and hereby authorizes
Mortgagee to execute and file in Mortgagor's name, to the extent they may
lawfully do so, one or more financing statements, chattel mortgages or
comparable security instruments, to evidence or perfect more effectively
Mortgagee's security interest in and the lien hereof upon the Chattels and other
personal property encumbered hereby.
(b) Information Reporting and Back-up Withholding. Mortgagor will, at its
sole cost and expense, do, execute, acknowledge and deliver all and every such
acts, information reports, returns and withholding of monies as shall be
necessary or appropriate to comply fully, or to cause full compliance, with all
applicable information reporting and back-up withholding requirements of the
Internal Revenue Code of 1986 (including all regulations now or hereafter
promulgated thereunder) in respect of the Premises and all transactions related
to the Premises, and will at all times provide Mortgagee with satisfactory
evidence of such compliance and notify Mortgagee of the information reported in
connection with such compliance.
Section 1.03. (a) Filing and Recording of Documents. Mortgagor forthwith
upon the execution and delivery hereof, and thereafter from time to time, will
cause this Mortgage and any security instrument creating a lien or evidencing
the lien hereof upon the Chattels and each instrument of further assurance to be
filed, registered or recorded in
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such manner and in such places as may be required by any present or future law
in order to publish notice of and fully to protect the lien hereof upon, and the
interest of Mortgagee in, the Mortgaged Property.
(b) Filing and Recording Fees and Other Charges. Mortgagor will pay all
filing, registration or recording fees, and all expenses incident to the
execution and acknowledgment hereof, any mortgage supplemental hereto, any
security instrument with respect to the Chattels, and any instrument of further
assurance, and any reasonable expenses (including attorneys' fees and
disbursements) incurred by Mortgagee in connection with the Loan, and will pay
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 the Note, this Mortgage, any mortgage supplemental
hereto, any security instrument with respect to the Chattels or any instrument
of further assurance.
Section 1.04. Payment and Performance of Loan Documents. Mortgagor will
punctually pay the principal and interest and all other sums to become due in
respect hereof and of the Note at the time and place and in the manner specified
therein, according to the true intent and meaning thereof, all in currency of
the United States of America which at the time of such payment shall be legal
tender for the payment of public and private debts. Mortgagor will duly and
timely comply with and perform all of the terms, provisions, covenants and
agreements contained in said documents and in all other documents or instruments
executed or delivered by Mortgagor to Mortgagee in connection with the Loan, and
will permit no failures of performance thereunder.
Section 1.05. Maintenance of Existence; Compliance with Laws. Mortgagor, if
other than a natural person, will, so long as it is owner of all or part of the
Mortgaged Property, do all things necessary to preserve and keep in full force
and effect its existence, franchises, rights and privileges as a business or
stock corporation, partnership, limited liability company, trust or other entity
under the laws of the state of its formation. Mortgagor will duly and timely
comply with all laws, regulations, rules, statutes, orders and decrees of any
governmental authority or court applicable to it or to the Mortgaged Property or
any part thereof.
Section 1.06. After-Acquired Property. All right, title and interest of
Mortgagor in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Mortgaged Property, hereafter acquired by, or released to, Mortgagor or
constructed, assembled or placed by Mortgagor on the Premises, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, conveyance,
assignment or other act by Mortgagor, shall become subject to the lien hereof as
fully and completely, and with the same effect, as though now owned by Mortgagor
and specifically described in the Granting Clause hereof, but at any and all
times Mortgagor will execute and deliver to Mortgagee any and all such further
assurances, mortgages, conveyances or assignments thereof as Mortgagee may
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reasonably require for the purpose of expressly and specifically subjecting the
same to the lien hereof.
Section 1.07. (a) Payment of Taxes and Other Charges. Mortgagor, from time
to time before the same shall become delinquent, will pay and discharge all
taxes of every kind and nature (including real and personal property taxes and
income, franchise, withholding, profits and gross receipts taxes), all general
and special assessments, levies, permits, inspection and license fees, all water
and sewer rents and charges, and all other public charges whether of a like or
different nature, imposed upon or assessed against it or the Mortgaged Property
or any part thereof or upon the revenues, rents, issues, income and profits of
the Mortgaged Property or arising in respect of the occupancy, use or possession
thereof. Mortgagor will, upon Mortgagee's request, deliver to Mortgagee receipts
evidencing the payment of all such taxes, assessments, levies, fees, rents and
other public charges imposed upon or assessed against it or the Mortgaged
Property or any portion thereof.
Mortgagee may, at its option following the occurrence of an Event of
Default, to be exercised by thirty (30) days' notice to Mortgagor, require the
deposit by Mortgagor, at the time of each payment of an installment of interest
or principal under the Note (but no less often than monthly), of an additional
amount sufficient to discharge the obligations under this clause (a) when they
become due. The determination of the amount so payable and of the fractional
part thereof to be deposited with Mortgagee, so that the aggregate of such
deposits shall be sufficient for this purpose, shall be made by Mortgagee in its
sole discretion. Such amounts shall be held by Mortgagee without interest and
applied to the payment of the obligations in respect of which such amounts were
deposited or, at Mortgagee's option, to the payment of said obligations in such
order or priority as Mortgagee shall determine, on or before the respective
dates on which the same or any of them would become delinquent. If one (1) month
prior to the due date of any of the aforementioned obligations the amounts then
on deposit therefor shall be insufficient for the payment of such obligation in
full, Mortgagor within ten (10) days after demand shall deposit the amount of
the deficiency with Mortgagee. Nothing herein contained shall be deemed to
affect any right or remedy of Mortgagee under any provisions hereof or of any
statute or rule of law to pay any such amount and to add the amount so paid,
together with interest at the Default Rate, to the indebtedness hereby secured.
(b) Payment of Mechanics and Materialmen. Mortgagor will pay, from time to
time when the same shall become due, all lawful claims and demands of mechanics,
materialmen, laborers, and others which, if unpaid, might result in, or permit
the creation of, a lien on the Mortgaged Property or any part thereof, and in
general will do or cause to be done everything necessary so that the lien hereof
shall be fully preserved, at the cost of Mortgagor and without expense to
Mortgagee, other than those liens which Mortgagee or its affiliates have
indemnified Mortgagor pursuant to the provisions set forth in the Agreement of
Sale.
(c) Good Faith Contests. Nothing in this Section 1.07 shall require the
payment or discharge of any obligation imposed upon Mortgagor by this Section so
long as
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Mortgagor shall in good faith and at its own expense contest the same or the
validity thereof by appropriate legal proceedings which shall operate to prevent
the collection thereof or other realization thereon and the sale or forfeiture
of the Mortgaged Property or any part thereof to satisfy the same; provided,
however, that (i) during such contest Mortgagor shall set aside reserves
sufficient to discharge Mortgagor's obligation hereunder and of any additional
charge, penalty or expense arising from or incurred as a result of such contest
and (ii) if at any time payment of any obligation imposed upon Mortgagor by
clause (a) above shall become necessary to prevent the delivery of a tax deed or
other instrument conveying the Mortgaged Property or any portion thereof because
of non-payment, then Mortgagor shall pay the same in sufficient time to prevent
the delivery of such tax deed or other instrument.
Section 1.08. Taxes on Mortgagee. Mortgagor will pay any taxes, except
income taxes, imposed on Mortgagee by reason of their ownership of the Note or
this Mortgage, provided that Mortgagee can require payment of the Note in full
within ninety (90) days if it shall be illegal for Mortgagor to pay any tax or
if the payment of such tax by Mortgagor would result in the violation of
applicable usury laws.
Section 1.09. Insurance. (a) Mortgagor will at all times (directly or
indirectly) provide, maintain and keep in force:
(i) policies of insurance insuring the Premises, Improvements and
Chattels against loss or damage by fire and lightning; against loss or
damage by other risks embraced by coverage of the type now known as All
Risk Replacement Cost Insurance with agreed amount endorsement, including
but not limited to riot and civil commotion, vandalism, malicious mischief
and theft; and against such other risks or hazards as Mortgagee from time
to time reasonably may designate in an amount sufficient to prevent
Mortgagee or Mortgagor from becoming a co-insurer under the terms of the
applicable policies, but in any event in an amount not less than 100% of
the then full replacement cost of the Improvements (exclusive of the cost
of excavations, foundations and footings below the lowest basement floor)
without deduction for physical depreciation;
(ii) policies of insurance insuring the Premises against the loss of
"rental value" of the buildings which constitute a part of the Improvements
on a "rented or vacant basis" arising out of the perils insured against
pursuant to clause (i) above in an amount equal to not less than one (1)
year's gross "rental value" of the Improvements. "Rental value" as used
herein is defined as the sum of (A) the total anticipated gross rental
income from tenant occupancy of such buildings as furnished and equipped,
(B) the amount of all charges which are the legal obligation of tenants and
which would otherwise be the obligation of Mortgagor and (C) the fair
rental value of any portion of such buildings which is occupied by
Mortgagor. Mortgagor hereby assigns the proceeds of such insurance to
Mortgagee, to be applied by Mortgagee in payment of the interest and
principal on the Note, insurance premiums, taxes, assessments and private
impositions until such time as the Improvements shall have been restored
and placed in full operation, at which time, provided Mortgagor is not then
in default hereunder, the
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balance of such insurance proceeds, if any, held by Mortgagee shall be paid
over to Mortgagor;
(iii) if all or part of the Premises are located in an area identified
by the Secretary of the United States Department of Housing and Urban
Development or by any applicable federal agency as a flood hazard area,
flood insurance in an amount at least equal to the maximum limit of
coverage available under the National Flood Insurance Act of 1968,
provided, however, that Mortgagee reserves the right to require flood
insurance in excess of said limit if such insurance is commercially
available up to the amount provided in clause (i) above;
(iv) during any period of restoration under this Section 1.09 or
Section 1.13, a policy or policies of builder's "all risk" insurance,
written on a Standard Builder's Risk Completed Value Form (100%
non-reporting), in an amount not less than the full insurable value of the
Premises against such risks (including, without limitation, fire and
extended coverage, collapse and earthquake coverage to agreed limits) as
Mortgagee may reasonably request, in form and substance acceptable to
Mortgagee;
(v) a policy or policies of workers' compensation insurance as
required by workers' compensation insurance laws (including employer's
liability insurance, if requested by Mortgagee) covering all employees of
Mortgagor;
(vi) comprehensive liability insurance on an "occurrence" basis
against claims for "personal injury" liability, including, without
limitation, bodily injury, death or property damage liability, with a limit
of not less than $15,000,000 in the event of "personal injury" to any
number of persons or of damage to property arising out of one "occurrence".
Such policies shall name Mortgagee as additional insured by an endorsement,
and shall contain cross-liability and severability of interest clauses, all
satisfactory to Mortgagee; and
(vii) such other insurance (including, but not limited to, earthquake
insurance), and in such amounts, as may from time to time be reasonably
required by Mortgagee against the same or other insurable hazards.
Notwithstanding anything herein to the contrary, for so long as that
certain Management Agreement of even date herewith between Lessee and Mortgagee
remains in full force and effect (as the same may be amended, the "Management
Agreement"), the types and amounts of insurance required by the Management
Agreement to the extent inconsistent with those set forth above shall govern and
control Mortgagor's obligations in respect thereof.
(b) All policies of insurance required under this Section 1.09 shall be
issued by companies having Best's ratings and being otherwise reasonably
acceptable to Mortgagee, shall be subject to the reasonable approval of
Mortgagee as to amount, content, form and expiration date and, except for the
liability policies described in clauses
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(a)(v) and (vi) above, shall contain a Non-Contributory Standard Mortgagee
Clause and Lender's Loss Payable Endorsement, or their equivalents, in favor of
Mortgagee, and shall provide that the proceeds thereof shall be payable to
Mortgagee. Mortgagee shall be furnished with the original of each policy
required hereunder, which policies shall provide that they shall not lapse, nor
be modified or cancelled, without thirty (30) days' written notice to Mortgagee.
At least thirty (30) days prior to expiration of any policy required hereunder,
Mortgagor shall furnish Mortgagee appropriate proof of issuance of a policy
continuing in force the insurance covered by the policy so expiring. Mortgagor
shall furnish to Mortgagee, promptly upon request, receipts or other
satisfactory evidence of the payment of the premiums on such insurance policies.
In the event that Mortgagor does not deposit with Mortgagee a new certificate or
policy of insurance with evidence of payment of premiums thereon at least thirty
(30) days prior to the expiration of any expiring policy, then Mortgagee may,
but shall not be obligated to, procure such insurance and pay the premiums
therefor, and Mortgagor agrees to repay to Mortgagee the premiums thereon
promptly on demand, together with interest thereon at the Default Rate.
(c) Mortgagor hereby assigns to Mortgagee all proceeds of any insurance
required to be maintained by this Section 1.09 which Mortgagor may be entitled
to receive for loss or damage to the Premises, Improvements or Chattels. All
such insurance proceeds shall be payable to Mortgagee, and Mortgagor hereby
authorizes and directs any affected insurance company to make payment thereof
directly to Mortgagee subject, however, to clause (f) below. Mortgagor shall
give prompt notice to Mortgagee of any casualty, whether or not of a kind
required to be insured against under the policies to be provided by Mortgagor
hereunder, such notice to generally describe the nature and cause of such
casualty and the extent of the damage or destruction. Mortgagor may settle,
adjust or compromise any claims for loss, damage or destruction, regardless of
whether or not there are insurance proceeds available or whether any such
insurance proceeds are sufficient in amount to fully compensate for such loss or
damage, subject to Mortgagee's prior consent. Notwithstanding the foregoing,
Mortgagee shall have the right to join Mortgagor in settling, adjusting or
compromising any loss of $100,000 or more. Mortgagor hereby authorizes the
application or release by Mortgagee of any insurance proceeds under any policy
of insurance, subject to the other provisions hereof. The application or release
by Mortgagee of any insurance proceeds shall not cure or waive any default or
notice of default hereunder or invalidate any act done pursuant to such notice.
(d) In the event of the foreclosure hereof or other transfer of the title
to the Mortgaged Property in extinguishment, in whole or in part, of the
indebtedness secured hereby, all right, title and interest of Mortgagor in and
to any insurance policy, or premiums or payments in satisfaction of claims or
any other rights thereunder then in force, shall pass to the purchaser or
grantee notwithstanding the amount of any bid at such foreclosure sale. Nothing
contained herein shall prevent the accrual of interest as provided in the Note
on any portion of the principal balance due under the Note until such time as
insurance proceeds are actually received and applied to reduce the principal
balance outstanding.
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(e) Mortgagor shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 1.09 unless Mortgagee is included thereon as a named insured with loss
payable to Mortgagee under standard mortgage endorsements of the character and
to the extent above described. Mortgagor shall promptly notify Mortgagee
whenever any such separate insurance is taken out and shall promptly deliver to
Mortgagee the policy or policies of such insurance.
(f) Any and all monies received as payment which Mortgagor may be entitled
to receive for loss or damage to the Premises, Improvements or Chattels under
any insurance maintained pursuant to this Section 1.09 (other than proceeds
under the policies required by clause (a)(ii) above) shall be paid over to
Mortgagee and, at Mortgagee's option, either applied to the prepayment of the
Note and all interest and other sums accrued and unpaid in respect thereof or
disbursed from time to time to Mortgagor in reimbursement of its costs and
expenses incurred in the restoration of the Improvements in accordance with
Mortgagee's standard construction lending practices, terms and conditions, in
either case, less Mortgagee's reasonable expenses for collecting and, if
applicable, disbursing the insurance proceeds, or otherwise incurred in
connection therewith. Notwithstanding the provisions of the immediately
preceding sentence, provided no default exists hereunder, Mortgagee agrees to
apply any such proceeds received by it to the reimbursement of Mortgagor's costs
of restoring the Improvements. Advances of insurance proceeds shall be made to
Mortgagor from time to time in accordance with Mortgagee's standard construction
lending practices, terms and conditions; amounts not required for such purposes
shall be applied, at Mortgagee's option, to the prepayment of the Note and to
interest accrued and unpaid thereon in such order and proportions as Mortgagee
may elect. In no event shall Mortgagee be required to advance such proceeds to
Mortgagor unless Mortgagee shall have (i) received satisfactory evidence that
the funding/expiration dates of the commitment, if any, for the permanent
financing of the Improvements have been extended for such period of time as is
reasonably necessary to complete said restoration and (ii) reasonably determined
that the restoration of the Improvements can be completed by the Maturity Date
of the Note at a cost which does not exceed the amount of available insurance
proceeds or, in the event that such proceeds are reasonably determined by
Mortgagee to be inadequate, Mortgagee shall have received from Mortgagor a cash
deposit equal to the excess of said estimated cost of restoration over the
amount of said available proceeds. If the conditions for the advance of
insurance proceeds for restoration set forth in clauses (i) and (ii) above are
not satisfied within sixty (60) days of Mortgagee's receipt thereof or if the
actual restoration shall not have been commenced within such period, Mortgagee
shall have the option at any time thereafter to apply such insurance proceeds to
the payment of the Note and to interest accrued and unpaid thereon in such order
and proportions as Mortgagee may elect.
Section 1.10. Protective Advances by Mortgagee. If Mortgagor shall fail to
perform any of the covenants contained herein, Mortgagee may make advances to
perform the same on its behalf and all sums so advanced shall be a lien upon the
Mortgaged Property and shall be secured hereby. Mortgagor will repay on demand
all sums so advanced on its behalf together with interest thereon at the Default
Rate. The
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provisions of this Section shall not prevent any default in the observance of
any covenant contained herein from constituting an Event of Default.
Section 1.11. (a) Visitation and Inspection. Mortgagor will keep adequate
records and books of account in accordance with generally accepted accounting
principles and will permit Mortgagee, by their agents, accountants and
attorneys, to visit and inspect the Mortgaged Property and examine its records
and books of account and make copies thereof or extracts therefrom, and to
discuss its affairs, finances and accounts with the officers or general
partners, as the case may be, of Mortgagor, at such reasonable times as may be
requested by Mortgagee.
(b) Financial and Other Information. Mortgagor will deliver to Mortgagee
with reasonable promptness such financial information with respect to Mortgagor
or the Premises as Mortgagee may reasonably request from time to time. All
financial statements of Mortgagor shall be prepared in accordance with generally
accepted accounting principles and shall be accompanied by the certificate of a
principal financial or accounting officer or general partner, as the case may
be, of Mortgagor, dated within five (5) days of the delivery of such statements
to Mortgagee, stating that he or she knows of no Event of Default, nor of any
event which after notice or lapse of time or both would constitute an Event of
Default, which has occurred and is continuing, or, if any such event or Event of
Default has occurred and is continuing, specifying the nature and period of
existence thereof and what action Mortgagor has taken or proposes to take with
respect thereto, and, except as otherwise specified, stating that Mortgagor has
fulfilled all of its obligations hereunder and otherwise in respect of the Loan
which are required to be fulfilled on or prior to the date of such certificate.
(c) Estoppel Certificates. Mortgagor, within three (3) days upon request in
person or within five (5) days upon request by mail, will furnish a statement,
duly acknowledged, of the amount due whether for principal or interest on this
Mortgage and whether any offsets, counterclaims or defenses exist against the
indebtedness secured hereby.
Section 1.12. Maintenance of Premises and Improvements. Mortgagor will not
commit any waste on the Premises or make any change in the use of the Premises
which will in any way increase any ordinary fire or other hazard arising out of
construction or operation. Mortgagor will, or shall cause its Lessee to, at all
times, maintain the Improvements and Chattels in good operating order and
condition and will promptly make, from time to time, all repairs, renewals,
replacements, additions and improvements in connection therewith which are
needful or desirable to such end. The Improvements shall not be demolished or
substantially altered, nor shall any Chattels be removed without Mortgagee's
prior consent except where appropriate replacements free of superior title,
liens and claims are immediately made of value at least equal to the value of
the removed Chattels.
Section 1.13. Condemnation. Mortgagor, immediately upon obtaining knowledge
of the institution or pending institution of any proceedings for the
condemnation of the Premises or any portion thereof, will notify Mortgagee
thereof.
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Mortgagee may participate in any such proceedings and may be represented therein
by counsel of Mortgagee's selection. Mortgagor from time to time will deliver to
Mortgagee all instruments requested by it to permit or facilitate such
participation. In the event of such condemnation proceedings, the award or
compensation payable is hereby assigned to and shall be paid to Mortgagee.
Mortgagee shall be under no obligation to question the amount of any such award
or compensation and may accept the same in the amount in which the same shall be
paid. The proceeds of any award or compensation so received shall, at
Mortgagee's option, either be applied to the prepayment of the Note and all
interest and other sums accrued and unpaid in respect thereof at the rate of
interest provided therein regardless of the rate of interest payable on the
award by the condemning authority, or be disbursed to Mortgagor from time to
time for restoration of the Improvements in accordance with Mortgagee's standard
construction lending practices, terms and conditions, in either case, less
Mortgagee's reasonable expenses for collecting and, if applicable, disbursing
the award, or otherwise incurred in connection therewith. Notwithstanding the
provisions of the immediately preceding sentence, provided no monetary or
bankruptcy related default or any Event of Default exists hereunder, Mortgagee
agrees to apply any such condemnation award proceeds received by it to the
reimbursement of Mortgagor's costs of restoring the Improvements. Advances of
condemnation award proceeds shall be made to Mortgagor from time to time in
accordance with Mortgagee's standard construction lending practices, terms and
conditions; amounts not required for such purposes shall be applied, at
Mortgagee's option, to the prepayment of the Note and to interest accrued and
unpaid thereon (at the rate of interest provided therein regardless of the rate
of interest payable on the award by the condemning authority) in such order and
proportions as Mortgagee may elect.
Section 1.14. Leases. (a) Mortgagor will not (i) execute an assignment of
the rents or any part thereof from the Premises without Mortgagee's prior
consent, (ii) except where the lessee is in default thereunder, terminate or
consent to the cancellation or surrender of any lease of the Premises or of any
part thereof, now existing or hereafter to be made, having an unexpired term of
one (1) year or more, provided, however, that any lease may be cancelled if
promptly after the cancellation or surrender thereof a new lease is entered into
with a new lessee having a credit standing at least equivalent to that of the
lessee whose lease was cancelled, on substantially the same terms as the
terminated or cancelled lease, (iii) modify any such lease so as to shorten the
unexpired term thereof or so as to decrease, waive or compromise in any manner
the amount of the rents payable thereunder or materially expand the obligations
of the lessor thereunder, (iv) accept prepayments of more than one month of any
installments of rents to become due under such leases, except prepayments in the
nature of security for the performance of the lessees thereunder, (v) modify,
release or terminate any guaranties of any such lease or (vi) in any other
manner impair the value of the Mortgaged Property or the security hereof.
(b) Mortgagor will not execute any lease of all or a substantial portion of
the Premises except for actual occupancy by the lessee thereunder or its
property manager, and will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or portions thereof now or hereafter existing, on
the part of the lessor thereunder to be kept and
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performed and will at all times do all things reasonably necessary to compel
performance by the lessee under each lease of all obligations, covenants and
agreements by such lessee to be performed thereunder. If any of such leases
provide for the giving by the lessee of certificates with respect to the status
of such leases, Mortgagor shall exercise its right to request such certificates
within five (5) days of any demand therefor by Mortgagee and shall deliver
copies thereof to Mortgagee promptly upon receipt.
(c) In the event of the enforcement by Mortgagee of the remedies provided
for hereby or by law, the lessee under each of the leases of the Premise will,
upon request of any person succeeding to the interest of Mortgagor as a result
of such enforcement, automatically become the lessee of said successor in
interest, without change in the terms or other provisions of such lease,
provided, however, that said successor in interest shall not be bound by (i) any
payment of rent or additional rent for more than one (1) month in advance,
except prepayments in the nature of security for the performance by said lessee
of its obligations under said lease or (ii) any amendment or modification of the
lease made without the consent of Mortgagee or such successor in interest. Each
lease shall also provide that, upon request by said successor in interest, such
lessee shall execute and deliver an instrument or instruments confirming such
attornment.
Section 1.15. Premises Documents. Mortgagor shall (a) do all things
reasonably necessary to cause the due compliance and faithful performance by the
other parties to the Premises Documents with and of all obligations and
agreements by such other parties to be complied with and performed thereunder,
except for any continuing failure of the Premises to comply with the Premises
Documents of the date of the acquisition hereof from Mortgagee or its affiliate,
and (b) deliver promptly to Mortgagee copies of any notices which it gives or
receives under any of the Premises Documents.
Section 1.16. Trust Fund; Lien Laws. Mortgagor will receive the advances
secured hereby and will hold the right to receive such advances as a trust fund
to be applied first for the purpose of paying the costs of improvements on the
Premises and will apply the same first to the payment of such costs before using
any part of the total of the same for any other purpose. Mortgagor will
indemnify and hold Mortgagee harmless against any loss or liability, cost or
expense, including, without limitation, any judgments, attorney's fees, costs of
appeal bonds and printing costs, arising out of or relating to any proceeding
instituted by any claimant alleging a violation by Mortgagor of any applicable
lien law.
Section 1.17. Assignment of Rents. As further security for the debt hereby
secured Mortgagor sells, assigns, sets over and transfers to Mortgagee,
presently, absolutely and irrevocably, all of the Rents now or hereafter
accruing, reserving only the right and license to collect the Rents as long as
an Event of Default has not occurred. The aforesaid assignment shall be
effective immediately upon the execution of this Mortgage and is not conditioned
upon the occurrence of any Event of Default hereunder or any other contingency
or event. Upon the occurrence of an Event of Default said right and license of
Mortgagor shall be automatically terminated and of no further force or effect
and Mortgagee may enter upon the Mortgaged Property and collect the Rents.
Mortgagee is hereby constituted and appointed as the exclusive agent and
attorney-in-fact
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of Mortgagor to collect the Rents by any appropriate proceeding and Mortgagee is
authorized to pay a rental or real estate agent 10% commission for collecting
the Rents. The net amount of the Rents so collected shall be applied towards the
debt hereby secured. Nothing in this Mortgage shall be construed to obligate
Mortgagee to discharge or perform the duties of a landlord to a tenant or to
impose any liability as a result of the exercise of the option to collect rents
hereunder by virtue of the occurrence of an Event of Default, and it is agreed
that the collection or participation therein by Mortgagee shall be as agent only
for Mortgagor.
Section 1.18. Assignment of Leases. Mortgagor hereby covenants and agrees
that it will assign to Mortgagee, as security for the debt secured hereby, the
lessor's interest in any and all leases covering the Mortgaged Property, or any
part thereof, and Mortgagor's interest in all agreements, contracts, licenses
and permits affecting the Mortgaged Property, such assignments to be made by
instruments in form satisfactory to Mortgagee. No such assignment shall be
construed as a consent by Mortgagee to any lease, agreement, contract, license
or permit so assigned, or to impose upon Mortgagee any obligation with respect
thereto.
Section 1.19. New Leases. Notwithstanding any other provisions of this
Article I, Mortgagor may not, except as otherwise provided in the Comfort Letter
of even date herewith from Mortgagee to Fee Owner, enter into any lease or
rental contract of the Premises, or any part thereof, except on the following
conditions: (a) each such lease or contract shall contain a provision that the
rights of such lessee or tenant thereunder are expressly subordinate to all of
the rights and title of Mortgagee under this Mortgage; (b) any such lease or
contract shall contain an express provision whereby the lessee or tenant
thereunder expressly recognizes and agrees that, notwithstanding such
subordination, Mortgagee, its successors or assigns, or other holder of this
Mortgage and the Note, may sell the Mortgaged Property, or any part thereof, in
the manner provided in Part IV of Section 2.01 hereof, and thereby, at the
option of Mortgagee, its successors or assigns or other holder of this Mortgage
and the Note, sell the same subject to the lease or tenant contract of such
lessee or tenant; and (c) at or prior to the time of execution of any such lease
or contract by any such lessee or tenant, Mortgagor shall, as a condition to
such execution, procure from such lessee or tenant an agreement in favor of
Mortgagee, or other holder of this Mortgage and the Note, in form and substance
satisfactory to Mortgagee or such holder, whereunder such lessee or tenant
agrees to be bound by the provisions of Part IV of Section 2.01 hereof regarding
the manner in which Mortgagee or such holder may exercise its power of sale
under said Part IV.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.01. Events of Default and Certain Remedies. If one or more of the
following Events of Default shall happen, that is to say:
(a) if (i) default shall be made in the payment of any principal,
interest, fees or other sums under the Note, in any such case, when and as
the
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same shall become due and payable, whether at maturity or by acceleration
or as part of any payment or prepayment or otherwise, in each case, as
herein or in the Note provided, and such default shall have continued for a
period of ten (10) days or (ii) default shall be made in the payment of any
tax or other charge required by Section 1.07 to be paid and said default
shall have continued for a period of twenty (20) days; or
(b) if default shall be made in the due observance or performance of
any covenant, condition or agreement in the Note, this Mortgage or in any
other document executed or delivered to Mortgagee in connection with the
Loan, and such default shall have continued for a period of thirty (30)
days after notice thereof shall have been given to Mortgagor by Mortgagee,
or, in the case of such other documents, such shorter grace period, if any,
as may be provided for therein; or
(c) if any representation or warranty made by Mortgagor in Section
1.01 shall be incorrect, or if any other representation or warranty made to
Mortgagee in this Mortgage, or in any other document, certificate or
statement executed or delivered to Mortgagee in connection with the Loan
shall be incorrect in any material respect when made or remade; or
(d) if by order of a court of competent jurisdiction, a trustee,
receiver or liquidator of the Mortgaged Property or any part thereof, or of
Mortgagor shall be appointed and such order shall not be discharged or
dismissed within sixty (60) days after such appointment; or
(e) if Mortgagor shall file a petition in bankruptcy or for an
arrangement or for reorganization pursuant to the Federal Bankruptcy Act or
any similar federal or state law, or if, by decree of a court of competent
jurisdiction, Mortgagor shall be adjudicated a bankrupt, or be declared
insolvent, or shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts generally as they
become due, or shall consent to the appointment of a receiver or receivers
of all or any part of its property; or
(f) if any of the creditors of Mortgagor shall file a petition in
bankruptcy against Mortgagor or for reorganization of Mortgagor pursuant to
the Federal Bankruptcy Act or any similar federal or state law, and if such
petition shall not be discharged or dismissed within sixty (60) days after
the date on which such petition was filed; or
(g) if final judgment for the payment of money shall be rendered
against Mortgagor and Mortgagor shall not discharge the same or cause it to
be discharged within sixty (60) days from the entry thereof, or shall not
appeal therefrom or from the order, decree or process upon which or
pursuant to which said judgment was granted, based or entered, and secure a
stay of execution pending such appeal; or
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(h) Intentionally Omitted;
(i) if there shall occur a default which is not cured within the
applicable grace period, if any, under any mortgage, deed of trust or other
security instrument covering all or part of the Mortgaged Property
regardless of whether any such mortgage, deed of trust or other security
instrument is prior or subordinate hereto or under any mortgage, deed of
trust or other security instrument now or hereafter securing the Note; it
being further agreed by Mortgagor that an Event of Default hereunder shall
constitute an Event of Default under any such mortgage, deed of trust or
other security instrument held by or for the benefit of Mortgagee; or
(j) if there shall occur a default which is not cured within the
applicable grace period, if any, under any of the Premises Documents,
except for any continuing failure of the Premises to comply with the
Premises Documents of the date of the acquisition hereof from Mortgagee or
its affiliate; or if any of the Premises Documents is amended, modified,
supplemented or terminated without Mortgagee's prior consent; or
(k) if Mortgagor shall transfer, or agree to transfer (or suffer or
permit the transfer or agreement to transfer), in any manner, either
voluntarily or involuntarily, by operation of law or otherwise, all or any
portion of the Mortgaged Property, or any interest or rights therein
(including air or development rights) without, in any such case,
Mortgagee's prior consent. As used in this clause, "transfer" shall
include, without limitation, any sale, assignment, lease (other than to
Lessee) or conveyance except leases for occupancy subordinate hereto and to
all advances made and to be made hereunder or, in the event Mortgagor (or a
general partner or co-venturer thereof) is a partnership, joint venture,
limited liability company, trust or closely-held corporation, the sale,
conveyance, transfer or other disposition of more than 10%, in the
aggregate, of any class of the issued and outstanding capital stock of such
closely-held corporation or of the beneficial interest of such partnership,
venture, limited liability company or trust, or a change of any general
partner, joint venturer, member or beneficiary, as the case may be. In the
event Mortgagor is a limited partnership, and so long as a limited partner
has contributed to (or remains personally liable for) the present and
future partnership capital contributions required of such limited partner
by the partnership agreement, such partner may sell, convey, devise,
transfer or dispose of all or a part of his limited partnership interest to
his spouse, children, grandchildren or a family trust in which his spouse,
children or grandchildren are sole beneficiaries; or
(l) if Mortgagor shall encumber, or agree to encumber, in any manner,
either voluntarily or involuntarily, by operation of law or otherwise, all
or any portion of the Mortgaged Property, or any interest or rights therein
(including air or development rights) without, in any such case,
Mortgagee's prior consent. As used in this clause, "encumber" shall
include, without limitation, the placing or permitting the placing of any
mortgage, deed of trust, assignment of rents or other
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security device. (Mortgagee may grant or deny its consent under this clause
and the immediately preceding clause in its sole discretion and, if consent
should be given, any such transfer or encumbrance shall be subject hereto
and to any other documents which evidence or secure the Loan, and, if a
transfer, any such transferee shall assume all of Mortgagor's obligations
hereunder and thereunder and agree to be bound by all provisions and
perform all obligations contained herein and therein; consent to one such
transfer or encumbrance shall not be deemed to be a waiver of the right to
require consent to future or successive transfers or encumbrances);
then and in every such case:
I. During the continuance of any such Event of Default, Mortgagee, by
notice to Mortgagor, may declare the entire principal of the Note then
outstanding (if not then due and payable), and all accrued and unpaid
interest and other sums in respect thereof, to be due and payable
immediately, and upon any such declaration the principal of the Note and
said accrued and unpaid interest and other sums shall become and be
immediately due and payable, anything herein or in the Note (other than
Section 4.08 hereof, the provisions thereof limiting interest payable
thereunder to the maximum amount permitted by applicable law) to the
contrary notwithstanding.
II. During the continuance of any such Event of Default, Mortgagee
personally, or by its agents or attorneys, may enter into and upon all or
any part of the Premises, and each and every part thereof, and are each
hereby given a right and license and appointed Mortgagor's attorney-in-fact
and exclusive agent to do so, and may exclude Mortgagor, its agents and
servants wholly therefrom; and having and holding the same, may use,
operate, manage and control the Premises and conduct the business thereof,
either personally or by its superintendents, managers, agents, servants,
attorneys or receivers; and upon every such entry, Mortgagee, at the
expense of the Mortgaged Property, from time to time, either by purchase,
repairs or construction, may maintain and restore the Mortgaged Property,
whereof it shall become possessed as aforesaid; may complete the
construction of the Improvements and in the course of such completion may
make such changes in the contemplated Improvements as Mortgagee may deem
desirable and may insure the same; and likewise, from time to time, at the
expense of the Mortgaged Property, Mortgagee may make all necessary or
proper repairs, renewals and replacements and such useful alterations,
additions, betterments and improvements thereto and thereon as Mortgagee
may seem advisable; and in every such case Mortgagee shall have the right
to manage and operate the Mortgaged Property and to carry on the business
thereof and exercise all rights and powers of Mortgagor with respect
thereto either in the name of Mortgagor or otherwise as Mortgagee shall
deem best; and Mortgagee shall be entitled to collect and receive the Rents
and every part thereof, all of which shall for all purposes constitute
property of Mortgagor; and in furtherance of such right Mortgagee may
collect the rents payable under all leases of the Premises directly from
the lessees thereunder upon notice to each such lessee that an Event of
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Default exists hereunder accompanied by a demand on such lessee for the
payment to Mortgagee of all rents due and to become due under its lease,
and Mortgagor FOR THE BENEFIT OF MORTGAGEE AND EACH SUCH LESSEE hereby
covenants and agrees that the lessee shall be under no duty to question the
accuracy of Mortgagee's statement of default and shall unequivocally be
authorized to pay said rents to Mortgagee without regard to the truth of
Mortgagee's statement of default and notwithstanding notices from Mortgagor
disputing the existence of an Event of Default such that the payment of
rent by the lessee to Mortgagee pursuant to such a demand shall constitute
performance in full of the lessee's obligation under the lease for the
payment of rents by the lessee to Mortgagor; and after deducting the
expenses of conducting the business thereof and of all maintenance,
repairs, renewals, replacements, alterations, additions, betterments and
improvements and amounts necessary to pay for taxes, assessments, insurance
and prior or other proper charges upon the Mortgaged Property or any part
thereof, as well as just and reasonable compensation for the services of
Mortgagee and for all attorneys, counsel, agents, clerks, servants and
other employees by it engaged and employed, Mortgagee shall apply the
moneys arising as aforesaid, first, to the payment of the principal of the
Note and the interest thereon, when and as the same shall become payable
and in such order and proportions as Mortgagee shall elect and second, to
the payment of any other sums required to be paid by Mortgagor hereunder.
III. Mortgagee with or without entry, personally or by its agents or
attorneys, insofar as applicable, may:
(1) sell the Mortgaged Property to the extent permitted and
pursuant to the procedures provided by law and all estate, right,
title and interest, claim and demand therein, and right of redemption
thereof, at one or more sales as an entity or in parcels or parts, and
at such time and place, and upon such terms and conditions after such
notice thereof as may be required or permitted by applicable law; or
(2) institute proceedings for the complete or partial foreclosure
hereof; or
(3) take such steps to protect and enforce its rights whether by
action, suit or proceeding in equity or at law for the specific
performance of any covenant, condition or agreement in the Note or
herein, or in aid of the execution of any power herein granted, or for
any foreclosure hereunder, or for the enforcement of any other
appropriate legal or equitable remedy or otherwise as Mortgagee shall
elect.
IV. Mortgagor hereby grants to Mortgagee, and to the lawful holder of
the Note, the following irrevocable power of attorney, to be exercised at
its option, in lieu of or additional to any remedy at law or in equity
which might be pursued or any other remedy herein provided, viz:
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During the continuance of any such Event of Default, Mortgagee,
or the holder of said Note, may at its option, without notice to
Mortgagor, sell the Mortgaged Property, or part thereof, at auction,
at the usual place for conducting sales at the courthouse in the
County where the Premises or any part thereof lies, to the highest
bidder for cash, after advertising the time, terms and place of such
sale once a week for 4 weeks immediately preceding such sale (but
without regard to the number of days) in a newspaper published in the
County where the Premises lies, or in the paper in which the Sheriff's
advertisements for such County are then being published, all other
notice being hereby waived by Mortgagor. Mortgagee shall execute and
deliver to the purchaser or purchasers of said property a deed
conveying the Mortgaged Property, or part thereof, in fee simple,
which deed shall contain recitals as to the Event of Default upon
which the power of sale herein granted is exercised, and Mortgagor
hereby constitutes and appoints Mortgagee the agent and
attorney-in-fact of Mortgagor to execute such deed and make such
recitals, and hereby covenants and agrees that the recitals so made by
Mortgagee shall be binding and conclusive upon Mortgagor. Mortgagor
agrees that the conveyance to be made by Mortgagee shall be binding
and conclusive upon Mortgagor and shall be effective to bar all equity
of redemption of Mortgagor and others in and to the Mortgaged Property
and Mortgagee shall collect the proceeds of such sale and apply the
same as provided in clause (d) of Section 2.02 hereof. All of the
provisions of this Article II, to the extent not contradictory to the
power of sale granted in this Part IV, shall be applicable hereto. The
power and the agency hereby granted are coupled with an interest, are
irrevocable, and are granted as cumulative to the remedies for
collection and foreclosure as provided by law and in this Mortgage.
It is expressly understood and agreed that in exercising its
power of sale pursuant to the provisions of this Part IV, Mortgagee
may, at its option, sell the Mortgaged Property, or part thereof, at
such sale subject to such leases, tenant and rental contracts of
lessees and tenants in possession of the Premises as shall be
specifically designated in the advertisements of sale required under
the provisions of this Part IV.
In the case of a sale pursuant to the foregoing power of sale,
Mortgagor, or any person in possession under Mortgagor, as to whose
interest such sale was not made subject, shall, at the option of Mortgagee,
then become and be tenants holding over and shall forthwith deliver
possession to the purchaser at such sale, or be summarily dispossessed in
accordance with the provisions of law applicable to tenants holding over.
Section 2.02. Other Matters Concerning Sales. (a) Mortgagee may adjourn
from time to time any sale by it to be made hereunder or by virtue hereof by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and, except as otherwise provided by any applicable provision of
law, Mortgagee,
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without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.
(b) Upon the completion of any sale or sales made by Mortgagee under or by
virtue of this Article II, Mortgagee, or an officer of any court empowered to do
so, shall execute and deliver to the accepted purchaser or purchasers a good and
sufficient instrument or instruments conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold.
Mortgagee is hereby appointed the true and lawful attorney irrevocable of
Mortgagor, in its name and stead, to make all necessary conveyances,
assignments, transfers and deliveries of the Mortgaged Property and rights so
sold and for that purpose Mortgagee may execute all necessary instruments of
conveyance, assignment and transfer, and may substitute one or more persons with
like power, Mortgagor hereby ratifying and confirming all that its said attorney
or such substitute or substitutes shall lawfully do by virtue hereof.
Nevertheless, Mortgagor, if requested by Mortgagee, shall ratify and confirm any
such sale or sales by executing and delivering to Mortgagee or to such purchaser
or purchasers all such instruments as may be advisable, in the judgment of
Mortgagee, for the purpose, and as may be designated in such request. Any such
sale or sales made under or by virtue of this Article II, whether made under the
power of sale herein granted or under or by virtue of judicial proceedings or of
a judgment or decree of foreclosure and sale, shall operate to divest all the
estate, right, title, interest, claim and demand whatsoever, whether at law or
in equity, of Mortgagor in and to the properties and rights so sold, and shall
be a perpetual bar both at law and in equity against Mortgagor and against any
and all persons claiming or who may claim the same, or any part thereof from,
through or under Mortgagor.
(c) In the event of any sale or sales made under or by virtue of this
Article II (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale), the entire principal of, and interest and other sums on, the Note, if not
previously due and payable, and all other sums required to be paid by Mortgagor
pursuant hereto, immediately thereupon shall, anything in any of said documents
(other than Section 4.08 hereof) to the contrary notwithstanding, become due and
payable.
(d) The purchase money, proceeds or avails of any sale or sales made under
or by virtue of this Article II, together with any other sums which then may be
held by Mortgagee hereunder, whether under the provisions of this Article II or
otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of such sale,
including reasonable compensation to Mortgagee, its agents and counsel, and
of any judicial proceedings wherein the same may be made, and of all
expenses, liabilities and advances made or incurred by Mortgagee hereunder,
together with interest at the Default Rate on all advances made by
Mortgagee, and of all taxes, assessments or other charges, except any
taxes, assessments or other charges subject to which the Mortgaged Property
shall have been sold.
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Second: To the payment of the whole amount then due, owing or unpaid
upon the Note for principal and interest, with interest on the unpaid
principal at the Default Rate from and after the happening of any Event of
Default described in clause (a) of Section 2.01 from the due date of any
such payment of principal until the same is paid, in such order and amounts
as Mortgagee may elect.
Third: To the payment of any other sums required to be paid by
Mortgagor pursuant to any provision hereof or of the Note, including all
expenses, liabilities and advances made or incurred by Mortgagee hereunder
or in connection with the enforcement hereof, together with interest at the
Default Rate on all such advances.
Fourth: To the payment of the surplus, if any, to whomsoever may be
lawfully entitled to receive the same.
(e) Upon any sale or sales made under or by virtue of this Article II,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the indebtedness secured hereby the net sales price after
deducting therefrom the expenses of the sale and the costs of the action and any
other sums which Mortgagee is authorized to deduct hereunder.
Section 2.03. Payment of Amounts Due. (a) In case an Event of Default
described in clause (a) of Section 2.01 shall have happened and be continuing,
then, upon demand of Mortgagee, Mortgagor will pay to Mortgagee the whole amount
which then shall have become due and payable on the Note, for principal or
interest or both, as the case may be, and after the happening of said Event of
Default will also pay to Mortgagee interest at the Default Rate on the then
unpaid principal of the Note, and the sums required to be paid by Mortgagor
pursuant to any provision hereof, and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to Mortgagee, its agents and counsel and any expenses
incurred by Mortgagee hereunder. In the event Mortgagor shall fail forthwith to
pay all such amounts upon such demand, Mortgagee shall be entitled and empowered
to institute such action or proceedings at law or in equity as may be advised by
its counsel for the collection of the sums so due and unpaid, and may prosecute
any such action or proceedings to judgment or final decree, and may enforce any
such judgment or final decree against Mortgagor and collect, out of the property
of Mortgagor wherever situated, as well as out of the Mortgaged Property, in any
manner provided by law, moneys adjudged or decreed to be payable.
(b) Mortgagee shall be entitled to recover judgment as aforesaid either
before, after or during the pendency of any proceedings for the enforcement of
the provisions hereof; and the right of Mortgagee to recover such judgment shall
not be affected by any entry or sale hereunder, or by the exercise of any other
right, power or remedy for the enforcement of the provisions hereof, or the
foreclosure of the lien hereof; and in the event of a sale of the Mortgaged
Property, and of the application of the proceeds of sale,
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as herein provided, to the payment of the debt hereby secured, Mortgagee shall
be entitled to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, the Note, and to enforce payment of all other charges, payments
and costs due hereunder or otherwise in respect of the Loan, and shall be
entitled to recover judgment for any portion of the debt remaining unpaid, with
interest at the Default Rate. In case of proceedings against Mortgagor in
insolvency or bankruptcy or any proceedings for its reorganization or involving
the liquidation of its assets, then Mortgagee shall be entitled to prove the
whole amount of principal, interest and other sums due upon the Note to the full
amount thereof, and all other payments, charges and costs due hereunder or
otherwise in respect of the Loan, without deducting therefrom any proceeds
obtained from the sale of the whole or any part of the Mortgaged Property,
provided, however, that in no case shall Mortgagee receive, from the aggregate
amount of the proceeds of the sale of the Mortgaged Property and the
distribution from the estate of Mortgagor, a greater amount than such principal
and interest and such other payments, charges and costs.
(c) No recovery of any judgment by Mortgagee and no levy of an execution
under any judgment upon the Mortgaged Property or upon any other property of
Mortgagor shall affect in any manner or to any extent, the lien hereof upon the
Mortgaged Property or any part thereof, or any liens, rights, powers or remedies
of Mortgagee hereunder, but such liens, rights, powers and remedies of Mortgagee
shall continue unimpaired as before.
(d) Any moneys thus collected by Mortgagee under this Section 2.03 shall be
applied by Mortgagee in accordance with the provisions of clause (d) of Section
2.02.
Section 2.04. Actions; Receivers. After the happening of any Event of
Default and immediately upon the commencement of any action, suit or other legal
proceedings by Mortgagee to obtain judgment for the principal of, or interest
on, the Note and other sums required to be paid by Mortgagor pursuant to any
provision hereof, or of any other nature in aid of the enforcement of the Note
or hereof, Mortgagor will (a) waive the issuance and service of process and
enter its voluntary appearance in such action, suit or proceeding and (b) if
required by Mortgagee, consent to the appointment of a receiver or receivers of
all or part of the Mortgaged Property and of any or all of the Rents in respect
thereof. After the happening of any Event of Default and during its continuance,
or upon the commencement of any proceedings to foreclose this Mortgage or to
enforce the specific performance hereof or in aid thereof or upon the
commencement of any other judicial proceeding to enforce any right of Mortgagee,
Mortgagee shall be entitled, as a matter of right, if it shall so elect, without
the giving of notice to any other party and without regard to the adequacy or
inadequacy of any security for the indebtedness secured hereby, forthwith either
before or after declaring the unpaid principal of the Note to be due and
payable, to the appointment of such a receiver or receivers.
Section 2.05. Mortgagee's Right to Possession. Notwithstanding the
appointment of any receiver, liquidator or trustee of Mortgagor, or of any of
its property, or of the Mortgaged Property or any part thereof, Mortgagee shall
be entitled to retain possession and control of all property now or hereafter
held hereunder.
25
<PAGE>
Section 2.06. Remedies Cumulative. No remedy herein conferred upon or
reserved to Mortgagee is intended to be exclusive of any other remedy or
remedies, and each and every such remedy shall be cumulative, and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law, in equity or by statute. No delay or omission of Mortgagee to exercise any
right or power accruing upon any Event of Default shall impair any such right or
power, or shall be construed to be a waiver of any such Event of Default or any
acquiescence therein; and every power and remedy given hereby to Mortgagee may
be exercised from time to time as often as may be deemed by them expedient.
Nothing herein or in the Note shall affect the obligation of Mortgagor to pay
the principal of, and interest and other sums on, the Note in the manner and at
the time and place therein respectively expressed.
Section 2.07. Moratorium Laws; Right of Redemption. Mortgagor will not at
any time insist upon, or plead, or in any manner whatever claim or take any
benefit or advantage of any stay or extension or moratorium law, any exemption
from execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance hereof, nor claim, take or insist upon any benefit or
advantage of any law now or hereafter in force providing for the valuation or
appraisal of the Mortgaged Property, or any part thereof, prior to any sale or
sales thereof which may be made pursuant to any provision herein, or pursuant to
the decree, judgment or order of any court of competent jurisdiction; nor, after
any such sale or sales, claim or exercise any right under any statute heretofore
or hereafter enacted to redeem the property so sold or any part thereof and
Mortgagor hereby expressly waives all benefit or advantage of any such law or
laws, and covenants not to hinder, delay or impede the execution of any power
herein granted or delegated to Mortgagee, but to suffer and permit the execution
of every power as though no such law or laws had been made or enacted.
Mortgagor, for itself and all who may claim under it, waives, to the extent that
it lawfully may, all right to have the Mortgaged Property marshaled upon any
foreclosure hereof.
Section 2.08. Intentionally Omitted.
Section 2.09. Mortgagee's Rights Concerning Application of Amounts
Collected. Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default, Mortgagee may apply, to the extent permitted
by law, any amount collected hereunder to principal, interest or any other sum
due under the Note or otherwise in respect of the Loan in such order and
amounts, and to such obligations, as Mortgagee shall elect in its sole and
absolute discretion.
ARTICLE III
SECURITY AGREEMENT
Section 3.01. Scope and Intent. In the event that Mortgagor and Mortgagee
shall respectively become the "Debtor" and the "Secured Party" in any one or
more Uniform Commercial Code financing statements affecting property either
referred to or described herein, or in any way connected with the use and
enjoyment of the Premises,
26
<PAGE>
Mortgagor warrants, covenants and agrees, and Mortgagee, by acceptance hereof,
agrees, as provided in this Article III.
Section 3.02. Security Agreement. This Mortgage shall be deemed a security
agreement as defined in the Uniform Commercial Code as enacted in the State of
Georgia, the rights of Mortgagee and Mortgagor in and to the Chattels shall be
as provided in this Mortgage and the remedies for any violation of the
covenants, terms and conditions of the agreements herein contained shall be (i)
as prescribed herein, or (ii) by general law, or (iii) as to such part of the
security which is also reflected in any such financing statement, by the
specific statutory consequences now or hereafter enacted and specified in said
Uniform Commercial Code, all at Mortgagee's sole election.
Section 3.03. Warranties and Covenants. Mortgagor warrants that (i)
Mortgagor's (that is, "Debtor's") name, identity or corporate structure, and
residence or principal place of business is as set forth in Section 3.05 hereof;
(ii) Mortgagor (that is, "Debtor") has been using or operating under said name,
identity or corporate structure without change for the time period set forth in
said Section and (iii) the location of the Chattels is as set forth in said
Section. Mortgagor covenants and agrees that Mortgagor will furnish Mortgagee
with notice of any change in (i) or (iii) of this Section within thirty (30)
days of the effective date of any such change and Mortgagor will promptly
execute any financing statements or other instruments deemed reasonably
necessary by Mortgagee to prevent any filed financing statement from becoming
seriously misleading or losing its perfected status. In addition to Mortgagee's
other remedies hereunder, Mortgagor shall be liable to Mortgagee for any loss,
damage or impairment of Mortgagee's security interest in the Chattels suffered
by Mortgagee resulting or arising from any breach of warranty or covenant
contained in this Section.
Section 3.04. Nature of Interest. The filing of any such financing
statement in the records normally having to do with personal property shall
never be construed as in anywise derogating from or impairing this declaration
and hereby stated intention of Mortgagor and Mortgagee that everything used in
connection with the production of income from the Premises (including, without
limitation, all Chattels) and/or adapted for use therein and/or which is
described or reflected in this Mortgage, is, and at all times and for all
purposes and in all proceedings both legal and equitable shall be, regarded as
part of the real estate irrespective of whether (i) any item of collateral is
physically attached to the improvements, (ii) serial numbers are used for the
better identification of certain items of collateral capable of being thus
identified in a recital contained herein or in any list filed with Mortgagee, or
(iii) any item of collateral is referred to or reflected in any such financing
statement so filed at any time. Similarly, the mention in any such financing
statement of (i) the rights in or to the proceeds of any fire and/or hazard
insurance policy, or (ii) any award in eminent domain proceedings for a taking
or for loss of value, or (iii) Mortgagor's (that is, "Debtor's") interest as
lessor in any present or future lease or rights to income growing out of the use
and/or occupancy of the Premises, whether pursuant to lease or otherwise, shall
never be construed as in anywise altering any of the rights of Mortgagee as
determined by this Mortgage or impugning the priority of Mortgagee's security
title and lien granted hereby or by any other recorded document, but such
mention in any such financing statement is declared to be for the protection of
27
<PAGE>
Mortgagee in the event any court or judicial authority shall at any time hold
with respect to any matter mentioned in clauses (i), (ii) or (iii) of this
sentence that notice of Mortgagee's priority of interest to be effective against
a particular class of persons, including but not limited to, the Federal
government and any subdivision or entity of the Federal government, must be
filed in the Uniform Commercial Code records.
Section 3.05. Financing Statement. The names of the "Debtor" and the
"Secured Party", the identity or corporate structure and residence or principal
place of business of "Debtor", and the time period for which "Debtor" has been
using or operating under said name and identity or corporate structure without
change, are with respect to Fee Owner as set forth in Part 1 of SCHEDULE B-1
attached hereto and by reference made a part hereof and are with respect to
Lessee as set forth in Part 1 of said SCHEDULE B-2 attached hereto and made a
part hereof. The mailing address of the "Secured Party" from which information
concerning the security interest may be obtained, and the mailing address of
"Debtor", are with respect to Fee Owner as set forth in Part 2 of said SCHEDULE
B-1 and are with respect to Lessee as set forth in Part 2 of said SCHEDULE B-2.
A statement indicating the types, or describing the items of Chattels is set
forth in the "Certain Definitions" provided hereinabove. The information
contained in this Section 3.05 is provided in order that this Mortgage shall
comply with the requirements of the Uniform Commercial Code, as enacted in the
State of Georgia, for instruments to be filed as financing statements.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Intentionally Omitted.
Section 4.02. Intentionally Omitted.
Section 4.03. Application of Certain Payments. In the event that all or any
part of the Mortgaged Property is encumbered by one or more mortgages held by or
for the benefit of Mortgagee, Mortgagor hereby irrevocably authorizes and
directs Mortgagee to apply any payment received by Mortgagee in respect of any
note secured hereby or by any other such mortgage to the payment of such of said
notes as Mortgagee shall elect in its sole and absolute discretion, and
Mortgagee shall have the right to apply any such payment in reduction of
principal and/or interest and in such order and amounts as Mortgagee shall elect
in its sole and absolute discretion without regard to the priority of the
mortgage securing the note so repaid or to contrary directions from Mortgagor or
any other party.
Section 4.04. Severability. In the event any one or more of the provisions
contained herein or in the Note 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 hereof, but this Mortgage
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein or therein.
28
<PAGE>
Section 4.05. Modifications and Waivers in Writing. No provision hereof may
be changed, waived, discharged or terminated orally or by any other means except
an instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought. Any agreement hereafter made
by Mortgagor and Mortgagee relating hereto shall be superior to the rights of
the holder of any intervening or subordinate lien or encumbrance.
Section 4.06. Notices. All notices, demands, consents, approvals and
statements required or permitted hereunder shall be in writing and shall be
deemed to have been sufficiently given or served for all purposes when presented
personally, three (3) days after mailing by registered or certified mail,
postage prepaid, or one (1) day after delivery to a nationally recognized
overnight courier service providing evidence of the date of delivery, if to
Mortgagor at its address stated above, with a copy to Thomas E. Davis, Esq.,
Jenkens & Gilchrist, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799, and
if to Mortgagee to its address stated above, or at such other address of which a
party shall have notified the party giving such notice in accordance with the
provisions of this Section.
Section 4.07. 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, the
successors in trust of Mortgagee and the endorsees, transferees, successors and
assigns of Mortgagee.
Section 4.08. Limitation on Interest. Anything herein or in the Note to the
contrary notwithstanding, the obligations of Mortgagor hereunder and under the
Note shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt of any such payment by Mortgagee would be
contrary to provisions of law applicable to Mortgagee limiting the maximum rate
of interest that may be charged or collected by Mortgagee.
Section 4.09. Counterparts. This Mortgage may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one and
the same mortgage.
Section 4.10. Substitute Mortgages. Mortgagor and Mortgagee shall, upon
their mutual agreement to do so, execute such documents as may be necessary in
order to effectuate the modification hereof, including the execution of
substitute mortgages, so as to create two (2) or more liens on or security
titles in respect of the Mortgaged Property in such amounts as may be mutually
agreed upon but in no event to exceed, in the aggregate, the unpaid principal
portion of the Note Amount; in such event, Mortgagor covenants and agrees to pay
the reasonable fees and expenses of Mortgagee and its counsel in connection with
any such modification.
Section 4.11. Cancellation. Should the indebtedness hereby secured be paid
according to the tenor and effect thereof when the same shall become due and
payable, and should Mortgagor perform all covenants contained herein, then this
Mortgage shall
29
<PAGE>
be cancelled and surrendered, it being the intention of the parties hereto that
this instrument shall operate as a deed, and not as a mortgage.
Section 4.12. Subrogation. Mortgagee shall be subrogated to all right,
title, lien, or equity of all persons to whom it may have paid moneys, either
directly or indirectly, in settlement or discharge of liens, charges, or in
acquisition of title of or for its benefit hereunder, or for the benefit and
account of Mortgagor at the time of making the loan secured hereby, or
subsequently under any of the provisions hereof.
Section 4.13. Georgia Code Title 44. This Mortgage is executed to conform
to Title 44, Chapter 14 of the Official Code of Georgia Annotated, as amended.
Section 4.14. Mortgagee's Sale of Interests in Loan. Mortgagor recognizes
that Mortgagee may sell and transfer interests in the Loan to one or more
participants or assignees and that all documentation, financial statements,
appraisals and other data, or copies thereof, relevant to Mortgagor, any
Guarantor or the Loan, may be exhibited to and retained by any such participant
or assignee or prospective participant or assignee.
Section 4.15. No Merger of Interests. Unless expressly provided otherwise,
in the event that ownership hereof and title to the fee and/or leasehold estates
in the Premises encumbered hereby shall become vested in the same person or
entity, this Mortgage shall not merge in said title but shall continue to be and
remain a valid and subsisting lien and/or trust deed on said estates in the
Premises for the amount secured hereby.
Section 4.16. CERTAIN WAIVERS. MORTGAGOR EXPRESSLY AND UNCONDITIONALLY
WAIVES BY EXECUTION HEREOF, AND MORTGAGEE WAIVES BY ACCEPTANCE HEREOF, IN
CONNECTION WITH ANY FORECLOSURE OR SIMILAR ACTION OR PROCEDURE BROUGHT BY
MORTGAGEE ASSERTING AN EVENT OF DEFAULT UNDER CLAUSE (A) OF SECTION 2.01 OF THIS
MORTGAGE, ANY AND EVERY RIGHT IT MAY HAVE TO A TRIAL BY JURY.
Section 4.17. GOVERNING LAW. THE PERFORMANCE REQUIRED BY THIS MORTGAGE
SHALL, INSOFAR AS IS POSSIBLE, BE RENDERED TO THE MORTGAGEE AT ITS OFFICE IN
TENNESSEE. MORTGAGOR AND MORTGAGEE INTEND THAT THE VALIDITY AND CONSTRUCTION OF
THE OBLIGATIONS SECURED BY THIS MORTGAGE BE GOVERNED BY THE LAWS OF THE STATE OF
TENNESSEE INCLUDING ALL OBLIGATIONS AND LIABILITIES HEREUNDER WITH RESPECT TO
THE PAYMENT OF INTEREST OR ANY OTHER COMPENSATION FOR THE USE, FORBEARANCE OR
DETENTION OF MONEY. THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TENNESSEE, WITHOUT REFERENCE TO THE CONFLICTS OF
LAW PRINCIPLES OF THAT STATE, EXCEPT ONLY TO THE EXTENT THAT GEORGIA LAW
EXPRESSLY PROVIDES THAT IT GOVERNS AND THAT A CONTRARY AGREEMENT BY THE PARTIES
IS INEFFECTIVE AND EXCEPT
30
<PAGE>
THAT THE LAW OF THE STATE OF GEORGIA SHALL APPLY TO ANY AND ALL ACTS WITH
RESPECT TO THE CREATION AND PRIORITY OF THE LIEN OF THE MORTGAGE AND ASSIGNMENT
OF LEASES AND RENTS ON THE MORTGAGED PROPERTY HEREBY EVIDENCED AND SALE BY
MORTGAGEE ON THE MORTGAGED PROPERTY. MORTGAGOR AND MORTGAGEE COVENANT AND AGREE
TO TAKE ANY AND ALL ACTION WHICH MAY BE NECESSARY UNDER GEORGIA LAW WITH RESPECT
TO SALE CONTEMPLATED HEREUNDER UNDER THE LAWS OF THE STATE OF GEORGIA. SHOULD
ANY OBLIGATION OR REMEDY UNDER THIS MORTGAGE BE INVALID OR UNENFORCEABLE UNDER
THE LAWS PROVIDED HEREIN TO GOVERN, THE LAWS OF ANOTHER STATE WHOSE LAWS CAN
VALIDATE AND APPLY TO THIS MORTGAGE SHALL APPLY.
31
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed and delivered by
Mortgagor.
APPLE SUITES, INC.,
Attest: a Virginia corporation
/s/ S. J. Olander, Jr. By /s/ Glade M. Knight [SEAL]
- -------------------------------- ---------------------------------
Name: Name: Glade M. Knight
Title: President
Witnesses:
Signed, sealed and delivered this 5th day of October, 1999 in the presence of:
/s/ Gus G. Remppies
- --------------------------------
Unofficial Witness
/s/ Jacquelyn B. Owens
- --------------------------------
Notary Public
[Notarial Seal]
[Notarial Stamp]
APPLE SUITES MANAGEMENT, INC.,
Attest: a Virginia corporation
/s/ S. J. Olander, Jr. By /s/ Glade M. Knight [SEAL]
- -------------------------------- ---------------------------------
Name: Name: Glade M. Knight
Title: President
Witnesses:
Signed, sealed and delivered this 5th day of October, 1999 in the presence of:
/s/ Gus G. Remppies
- --------------------------------
Unofficial Witness
/s/ Jacquelyn B. Owens
- --------------------------------
Notary Public
[Notarial Seal]
[Notarial Stamp]
<PAGE>
SCHEDULE A
<PAGE>
LEGAL DESCRIPTION OF PREMISES
(ATLANTA - GALLERIA/CUMBERLAND)
ALL THAT TRACT OR PARCEL OF LAND situated, lying and being in Land Lot 978 in
the 2nd Section and 17th District of Cobb County, Georgia, and being more
particularly described as follows:
BEGINNING at a railroad iron found, said point being the land lot corner common
to Land Lots 948, 949, 978 and 979, said Section, District and County; thence
proceed North 88 (degrees) 59' 50" East 572.69 feet to a 1" bar found on the
southwesterly right-of-way line of U.S. Highway No. 41 (a 130-foot
right-of-way); thence proceed along the aforedescribed right-of-way line South
55 (degrees) 57' 41" East 100.00 feet to an iron pin set; thence leaving the
aforedescribed right-of-way line South 34 (degrees) 04' 16" West 100.00 feet to
an iron pin set; thence proceed North 55 (degrees) 57' 41" West 41.00 feet to an
iron pin set; thence proceed South 34 (degrees) 04' 16" West 170.19 feet to a
point; thence proceed along the arc of a curve in a counter-clockwise direction,
whose radius is 245.00 feet and is subtended by a chord bearing of South 22
(degrees) 41' 38" West and a chord distance of 96.66 feet, an arc distance of
97.30 feet to an iron pin set; thence proceed North 88 (degrees) 32' 42" West
116.03 feet to an iron pin set; thence proceed along the arc of a curve in a
counter-clockwise direction, whose radius is 1054.08 feet and is subtended by a
chord bearing of North 69 (degrees) 58' 11" West and a chord distance of 344.10
feet, an arc distance of 345.64 feet to an iron pin set on the land lot line
common to Land Lots 949 and 978; thence proceed along said land lot line North
01 (degrees) 42' 53" East 215.28 feet to a railroad iron found, said point being
THE POINT OF BEGINNING.
The aforedescribed tract or parcel of land is known as Tract No. 1 and Tract No.
2 and contains 3.698 acres as shown on the ALTA/ACSM Land Title Survey for
Homewood Equity Development Corporation by Precision Planning, Inc.,
Lawrenceville, Georgia, dated April 19, 1989, revised May 1, 1989, bearing the
seal and certification of Randall W. Dixon, G.R.L.S. No. 1678. Said survey being
incorporated herein by this reference.
TOGETHER WITH, as an appurtenance to the title to the hereinabove described
property, a perpetual non-exclusive sanitary sewer easement, subject to the
conditions hereinafter set forth, in, to, over, across and through the following
described property:
ALL THAT TRACT OR PARCEL OF LAND situated, lying and being in Land Lot 978, 17th
District, 2nd Section, Cobb County, Georgia, and being more particularly
described as follows:
TO FIND THE TRUE POINT OF BEGINNING, commence at a railroad iron found at the
land lot corner common to Land Lots 948, 949, 978 and 979, said District,
Section and County; and running thence South 01 (degrees) 42' 53" West 215.28
feet to a 1/2" rebar found; thence along the arc of a 1,054.076-foot radius
curve to the left and arc distance of 345.64 feet (said arc being subtended by a
chord lying to the northeast having a bearing of South 69 (degrees) 58' 11" East
and being 344.10 feet in length) to a 1/2" rebar found; thence South 88
(degrees) 32' 42" East 101.86 feet to the TRUE POINT OF BEGINNING. FROM THE TRUE
POINT OF BEGINNING AS THUS ESTABLISHED, run thence South 04 (degrees) 22' 23"
West 398.97 feet to a point; thence South 23 (degrees) 30' 49" East 18.93 feet
to a point; thence continuing South 23 (degrees) 30' 49" East 110 feet more or
less to a point located on the southerly right-of-way line of Cumberland Circle
(a 100-foot right-of-way); thence continuing South 23 (degrees) 30' 49" East
22.84 feet to a point; thence South 38 (degrees) 18' 44" East 170.97 feet to a
point; thence South 25 (degrees) 20' 10" East 256.28 feet to a point; thence
North 58 (degrees) 19' 25" East 20.12 feet to a point; thence North 25 (degrees)
20' 10" West 256.33 feet to a point; thence North 38 (degrees) 18' 44" West
170.65 feet to a point; thence North 23 (degrees) 30' 49" West 13.94 feet to a
point; thence North 23 (degrees) 30' 49" West 115.67 feet to a point; thence
North 23 (degrees) 30' 49" West 16.92 feet to a point; thence North 04 (degrees)
22' 23" East 407.52 feet to a point; thence North 85 (degrees) 37' 37" West 3.95
feet to a point; thence along the arc of a 245.00-foot radius curve to the left
an arc distance of 12.93 feet (said arc being subtended by a chord lying to the
East having a bearing of South 12 (degrees) 49' 49" West and being 12.93 feet in
length) to a point; thence North 88 (degrees) 32' 42" West 14.17 feet to THE
TRUE POINT OF BEGINNING.
(Page 1 of 2)
<PAGE>
Said property being more particularly shown on that certain plat of survey
entitled Proposed 20' Sanitary Sewer Easements for Homewood Equity Development
Corporation by precision Planning, Inc., dated May 3, 1989, and bearing the seal
and certification of Randall W. Dixon, G.R.L.S. No. 1678, said survey being
incorporated herein by this reference.
LESS AND EXCEPT the following two parcels of property:
Parcel I:
All that tract or parcel of land lying and being in Land Lot 978 of the 17th
District, 2nd section of Cobb County, Georgia and being more particularly
described as follows:
Beginning at a point on the southwest right of way line of State Route 3 (U.S.
41) Cobb Parkway. Said point being located 68 feet southwest of the centerline
of said highway and further located at 406.63 feet northwest of the intersection
of said right-of-way line and the centerline of Cumberland Circle and is the
TRUE POINT OF BEGINNING; thence S 34 (degrees) 04' 16" W a distance of 7.00 feet
to a point; thence N 55 (degrees) 55' 40" W a distance of 109.97 feet to a
point; thence N 88 (degrees) 59' 40" E a distance of 12.18 feet to a point;
thence S 55 (degrees) 55' 44" E a distance of 100.00 feet back to the TRUE POINT
OF BEGINNING.
Said parcel contains 0.01687 acres.
Parcel II:
ALL THAT TRACT or parcel of land lying and being in Land Lot 978 of the 17th
District, 2nd Section, Cobb County, Georgia, and being more particularly
described as follows:
TO FIND THE TRUE POINT OF BEGINNING, Commence at an iron pin set at the
intersection of the southwestern right-of-way line of U.S. Highway No. 41 (Cobb
Parkway and State Route No. 3) (having a variable right-of-way width) and the
northwestern right-of-way line of Cumberland Circle (having a variable
right-of-way width); run thence along said southwestern right-of-way line of
U.S. Highway No. 41, in a generally northwesterly direction, the following
courses and distances: North 55 (degrees) 51' 19" West a distance of 216.33 feet
to an iron pin set; and North 55 (degrees) 55' 44" West a distance of 119.88
feet to an iron pin set; thence leaving said southwestern right-of-way line, run
thence along the southeastern and southwestern boundary line of property now or
formerly owned by Homewood Suites Equity Development Corporation, in a generally
southwesterly and northwesterly direction, the following courses and distances:
South 34 (degrees) 04' 16" West a distance of 92.95 feet to an iron pin set;
North 55 (degrees) 57' 41" West a distance of 41.00 feet to an iron pin set;
South 34 (degrees) 04' 16" West a distance of 170.19 feet to an iron pin set,
said iron pin being the TRUE POINT OF BEGINNING. From the True Point of
Beginning as thus Established, thence continuing along said southeastern
boundary line of property, in a generally southwesterly direction, along the arc
of a 245.00 foot radius curve an arc distance of 59.14 feet to an iron pin set
(said arc being subtended by a chord lying to the southeast thereof, bearing
South 27 (degrees) 09' 20" East and having a length of 59.00 feet); and along
the arc of a 245.00 foot radius curve an arc distance of 38.16 feet to an iron
pin set (said arc being subtended by a chord lying to the southeast thereof,
bearing South 15 (degrees) 46' 41" West and having a length of 38.12 feet);
thence leaving said southeastern boundary line of property, run thence North 34
(degrees) 04' 16" East a distance of 106.96 feet to an iron pin set on the
southeastern boundary line of property now or formerly owned by Homewood Suites
Equity Development Corporation, said iron pin being the TRUE POINT OF BEGINNING.
The above-described property contains 0.0163 acres and is shown as and described
according to that certain Survey prepared by Loo-Turley & Associates, P.C.,
Richard Loo, Georgia Registered Land Surveyor No. 2129, dated, June 3, 1991,
last revised June 19, 1991, which certain Survey is incorporated herein by this
reference and made a part of this description.
(Page 2 of 2)
<PAGE>
SCHEDULE B-1
Part 1
Name of Debtor: Apple Suites, Inc.
Name of Secured Party: Promus Hotels, Inc.
Identity or corporate
structure of Debtor: Virginia corporation
Residence or principal
place of business of Debtor: 306 East Main Street
Richmond, Virginia 23219
Attn: Mr. Glade M. Knight
Time period Debtor is using, or operating under, its current name or corporate
structure without change: Less than one (1) year
Part 2
Mailing address of Secured Party:
Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117-4900
Mailing address of Debtor:
306 East Main Street
Richmond, Virginia 23219
Attn: Mr. Glade M. Knight
<PAGE>
SCHEDULE B-2
Part 1
Name of Debtor: Apple Suites Management, Inc.
Name of Secured Party: Promus Hotels, Inc.
Identity or corporate
structure of Debtor: Virginia corporation
Residence or principal
place of business of Debtor: 306 East Main Street
Richmond, Virginia 23219
Attn: Mr. Glade M. Knight
Time period Debtor is using, or operating under, its current name or corporate
structure without change: Less than one (1) year
Part 2
Mailing address of Secured Party:
Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117-4900
Mailing address of Debtor:
306 East Main Street
Richmond, Virginia 23219
Attn: Mr. Glade M. Knight
EXHIBIT 4.3
================================================================================
Date: October 5, 1999
FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
("this Deed")
FROM
APPLE SUITES REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
("Fee Owner")
AND
APPLE SUITES SERVICES LIMITED PARTNERSHIP,
a Virginia limited partnership
("Lessee")
Address of Fee Owner and Lessee: ATTN: Glade M. Knight
306 East Main Street
Richmond, Virginia 23219
TO
DAVID LONG
("Trustee")
Address of Trustee: c/o Hoge, Evans, Holmes, Carter & Ledbetter, PLLC
4311 Oak Lawn Avenue, Suite 600
Dallas, Texas 75219
FOR THE BENEFIT OF
PROMUS HOTELS, INC.,
a Delaware corporation
("Beneficiary")
Address of Beneficiary: 755 Crossover Lane
Memphis, Tennessee 38117
Note Amount: $ 7,350,000
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This instrument prepared by, and after recording please return to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Graham R. Hone, Esq.
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TABLE OF CONTENTS
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RECITAL.............................................................................................1
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION.......................................................1
GRANTING CLAUSE.....................................................................................3
ARTICLE I COVENANTS OF GRANTOR......................................................4
Section 1.01. (a) Warranty of Title; Power and Authority..............................4
(b) Hazardous Materials.................................................5
(c) Flood Hazard Area...................................................5
Section 1.02. (a) Further Assurances..................................................6
(b) Information Reporting and Back-up Withholding.......................6
Section 1.03. (a) Filing and Recording of Documents...................................6
(b) Filing and Recording Fees and Other Charges.........................6
Section 1.04. Payment and Performance of Loan Documents.................................7
Section 1.05. Maintenance of Existence; Compliance with Laws............................7
Section 1.06. After-Acquired Property...................................................7
Section 1.07. (a) Payment of Taxes and Other Charges..................................7
(b) Payment of Mechanics and Materialmen................................8
(c) Good Faith Contests.................................................8
Section 1.08. Taxes on Trustee or Beneficiary...........................................8
Section 1.09. Insurance.................................................................9
Section 1.10. Protective Advances by Beneficiary.......................................12
Section 1.11. (a) Visitation and Inspection..........................................12
(b) Financial and Other Information....................................12
(c) Estoppel Certificates..............................................13
Section 1.12. Maintenance of Premises and Improvements.................................13
Section 1.13. Condemnation.............................................................13
Section 1.14. Leases...................................................................14
Section 1.15. Premises Documents.......................................................15
Section 1.16. Trust Fund; Lien Laws....................................................15
Section 1.17. Expenses of Trustee......................................................15
ARTICLE II EVENTS OF DEFAULT AND REMEDIES...........................................15
Section 2.01. Events of Default and Certain Remedies...................................15
Section 2.02. Other Matters Concerning Sales...........................................21
Section 2.03. Payment of Amounts Due...................................................23
Section 2.04. Actions; Receivers.......................................................24
Section 2.05. Beneficiary's Right to Possession........................................24
Section 2.06. Remedies Cumulative......................................................24
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(i)
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Section 2.07. Moratorium Laws; Right of Redemption......................................25
Section 2.08. Intentionally Omitted.....................................................25
Section 2.09. Beneficiary's Rights Concerning Application of Amounts Collected..........25
ARTICLE III CONCERNING TRUSTEE........................................................25
Section 3.01. Trustee's Performance.....................................................25
Section 3.02. Resignation by Trustee....................................................25
Section 3.03. Removal of Trustee; Successors............................................25
ARTICLE IV MISCELLANEOUS.............................................................26
Section 4.01. Assignment of Rents.......................................................26
Section 4.02. Security Agreement........................................................26
Section 4.03. Application of Certain Payments...........................................27
Section 4.04. Severability..............................................................27
Section 4.05. Modifications and Waivers in Writing......................................27
Section 4.06. Notices...................................................................27
Section 4.07. Successors and Assigns....................................................27
Section 4.08. Limitation on Interest....................................................28
Section 4.09. Counterparts..............................................................28
Section 4.10. Substitute Deeds..........................................................28
Section 4.11. Beneficiary's Sale of Interests in Loan...................................28
Section 4.12. No Merger of Interests....................................................28
Section 4.13. CERTAIN WAIVERS...........................................................28
Section 4.14. GOVERNING LAW.............................................................29
Section 4.15. Duplication of Covenants..................................................30
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(ii)
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RECITAL
Beneficiary, as seller, and Apple Suites, Inc. ("Borrower"), as buyer,
have entered into an Agreement of Sale dated as of October 5, 1999 (the
"Agreement of Sale") for the purchase of certain premises more particularly
described therein (the "New Premises"). Borrower indirectly owns one hundred
percent (100%) of the beneficial interests in Fee Owner. Fee Owner has acquired
and is the owner of the premises described in SCHEDULE A and Lessee is the owner
of a leasehold interest therein. Lessee acknowledges that it will derive
substantial benefit from the making of the loan contemplated herein and further
acknowledges that the obligation of Beneficiary to make such loan is conditioned
upon, among other things, the execution and delivery by Lessee of this Deed. In
connection with the purchase of the New Premises, Borrower will borrow the Note
Amount from Beneficiary and has executed and delivered to Beneficiary its note,
dated the date hereof, obligating it to pay the Note Amount (said note, as the
same may hereafter be amended, modified, extended, severed, assigned, renewed,
replaced or restated, hereinafter, the "Note") and, as the indirect owner of one
hundred percent (100%) of the beneficial interests in Fee Owner, in order to
secure the payment of the Note has duly authorized the execution and delivery of
this Deed. For purposes of this Deed, "Grantor" shall mean Fee Owner, Lessee and
Borrower but only to the extent of their respective interests in the Mortgaged
Property (as herein defined) and their respective obligations under the Note and
Ground Lease.
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION
Grantor, Trustee and Beneficiary agree that, unless the context
otherwise specifies or requires, the following terms shall have the meanings
herein specified.
"Chattels" means all fixtures, furnishings, fittings, appliances,
apparatus, equipment, building materials and components, machinery and articles
of personal property, of whatever kind or nature, including any replacements,
proceeds or products thereof and additions thereto, other than those owned by
lessees, now or at any time hereafter intended to be or actually affixed to,
attached to, placed upon, or used in any way in connection with the complete and
comfortable use, enjoyment, development, occupancy or operation of the Premises,
and whether located on or off the Premises.
"Default Rate" means the rate (or, if more than one, the highest of the
rates) of interest per annum provided in the Note plus 5%, but in no event to
exceed the maximum rate allowed by law.
"Events of Default" means the events and circumstances described as
such in Section 2.01.
"Ground Lease" means the lease identified in SCHEDULE A covering the
Premises described in SCHEDULE A which is subject to the Ground Lease.
"Hazardous Materials" means any pollutant, effluents, emissions,
contaminants, toxic or hazardous wastes, materials or substances, as any of
those terms are defined from
<PAGE>
time to time in or for the purposes of any relevant environmental law, rule,
regulation, code, permit, order, notice, demand letter or other binding
determination (hereinafter, "Environmental Laws") including, without limitation,
asbestos fibers and friable asbestos, polychlorinated biphenyls and any
petroleum or hydrocarbon-based products or derivatives, in each case in amounts
in violation of applicable Environmental Laws.
"Improvements" means all structures or buildings, and replacements
thereof, now or hereafter located upon the Premises, including all plant
equipment, apparatus, machinery and fixtures of every kind and nature whatsoever
forming part of said structures or buildings.
"lease" or "leases" means any lease or leases of all or any portion of
the Premises, whether affecting the fee or leasehold portion thereof.
"Loan" means the loan made by Beneficiary to Borrower evidenced by the
Note and secured hereby.
"Premises" means the premises described in SCHEDULE A, including the
leasehold interest therein created by the Ground Lease, and including all of the
easements, rights, privileges and appurtenances (including air or development
rights) thereunto belonging or in anywise appertaining, and all of the estate,
right, title, interest, claim or demand whatsoever of Grantor therein and in the
streets and ways adjacent thereto, either in law or in equity, in possession or
expectancy, now or hereafter acquired, and as used herein shall, unless the
context otherwise requires, be deemed to include the Improvements.
"Premises Documents" means all reciprocal easement or operating
agreements, declarations of covenants, conditions or restrictions, declarations
of condominium, developer's or utility agreements with any village, town, county
or other governmental authority, and any similar such agreements or declarations
now or hereafter affecting the Premises or any part thereof.
All terms of this Deed which are not defined above shall have the
meaning set forth elsewhere in this Deed.
Except as expressly indicated otherwise, when used in this Deed (i)
"or" is not exclusive, (ii) "hereunder", "herein", "hereof" and the like refer
to this Deed as a whole, (iii) "Article", "Section" and "Schedule" refer to
Articles, Sections and Schedules of this Deed, (iv) terms defined in the
singular have a correlative meaning when used in the plural and vice versa, (v)
a reference to a law or statute includes any amendment or modification to, or
replacement of, such law or statute and (vi) a reference to an agreement,
instrument or document means such agreement, instrument or document as the same
may be amended, modified or supplemented from time to time in accordance with
its terms and as permitted hereby and by the other documents executed or
delivered to Beneficiary in connection with the Loan. The cover page and all
Schedules hereto are incorporated herein and made a part hereof. Any table of
contents and the headings and captions herein are for convenience only and shall
not affect the interpretation or construction hereof.
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GRANTING CLAUSE
NOW, THEREFORE, Grantor, in consideration of the premises and in order
to secure the payment of both the principal of, and the interest and any other
sums payable under, the Note or this Deed and the performance and observance of
all the provisions hereof and of the Note, hereby gives, grants, bargains,
sells, warrants, aliens, remises, releases, conveys, assigns, transfers,
mortgages, hypothecates, deposits, pledges, sets over and confirms unto Trustee,
all its estate, right, title and interest in, to and under any and all of the
following described property (hereinafter, the "Mortgaged Property") whether now
owned or held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels;
(iv) the Premises Documents;
(v) all rents, royalties, issues, profits, revenue, income,
recoveries, reimbursements and other benefits of the Mortgaged Property
(hereinafter, the "Rents") and all leases of the Mortgaged Property or
portions thereof now or hereafter entered into and all right, title and
interest of Grantor thereunder, including, without limitation, cash or
securities deposited thereunder to secure performance by the lessees of
their obligations thereunder, whether such cash or securities are to be
held until the expiration of the terms of such leases or applied to one
or more of the installments of rent coming due immediately prior to the
expiration of such terms, and including any guaranties of such leases
and any lease cancellation, surrender or termination fees in respect
thereof, all subject, however, to the provisions of Section 4.01;
(vi) all (a) development work product prepared in connection
with the Premises, including, but not limited to, engineering,
drainage, traffic, soil and other studies and tests; water, sewer, gas,
electrical and telephone approvals, taps and connections; surveys,
drawings, plans and specifications; and subdivision, zoning and
platting materials; (b) building and other permits, rights, licenses
and approvals relating to the Premises; and (c) contracts and
agreements (including, without limitation, contracts with architects
and engineers, construction contracts and contracts for the maintenance
or management of the Premises), contract rights, logos, trademarks,
trade names, copyrights and other general intangibles used or useful in
connection with the ownership, operation or occupancy of the Premises
or any part thereof;
3
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(vii) all proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or liquidated claims, including,
without limitation, proceeds of insurance and condemnation awards, and
all rights of Grantor to refunds of real estate taxes and assessments;
(viii) all revenue and income received by or on behalf of
Grantor resulting from the operation of the Premises as a hotel,
including all sums (1) paid by customers for the use of hotel rooms
located within the Premises, (2) derived from food and beverage
operations located within the Premises, (3) generated by other hotel
operations, including any parking, convention, sports and recreational
facilities and (4) business interruption insurance proceeds;
(ix) all accounts and accounts receivable, including all
present and future right to payment from any consumer credit or charge
card organization or entity (such as those organizations which sponsor
or administer the American Express, Carte Blanche, Discover Card,
Diners Club, Visa and Master Card) arising out of the leasing and
operation of, or the business conducted at or in relation to, all or
any part of the Premises; and
(x) any deposit, operating or other account including the
entire balance therein (now or hereafter existing) of Grantor
containing proceeds of the operation of the Premises with any banking
or financial institution and all money, instruments, securities,
documents, chattel paper, credits, demands, and any other property,
rights, or interests of Grantor relating to the operation of the
Premises which at any time shall come into the possession, custody or
control of any banking or financial institution.
TO HAVE AND TO HOLD unto Trustee, its successors and assigns forever.
IN TRUST, to secure the payment to Beneficiary of the principal of and
interest on the Note at the maturity thereof and all other sums due hereunder or
under the Note and the performance of all covenants and agreements herein and in
the Note, whereupon this Deed shall cease and be void and the Mortgaged Property
shall be released at the cost of Grantor.
ARTICLE I
COVENANTS OF GRANTOR
Grantor represents, except as known by Beneficiary or its affiliates to
the contrary, or disclosed to Beneficiary in connection with the sale of the
Mortgaged Property to Grantor, and Grantor covenants and agrees as follows:
Section 1.01. (a) Warranty of Title; Power and Authority. Grantor
warrants that, with respect to the fee interest in the Premises, it has a good
and marketable title to an indefeasible fee estate subject to no lien, charge or
encumbrance, that the Ground Lease is subject to no lien, charge or encumbrance
of any kind and is prior to all liens,
4
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charges and encumbrances whatsoever on the fee interest of the landlord
thereunder, except in either case such as are listed as exceptions to title in
the title policy insuring the lien hereof; and, Grantor further warrants that,
with respect to the leasehold interest in the Premises, that it is the owner of
a valid and subsisting interest as tenant under the Ground Lease, that the
Ground Lease is in full force and effect, there are no defaults thereunder and
no event has occurred or is occurring which after notice or passage of time or
both will result in such a default; that it owns the Chattels, all leases and
the Rents in respect of the Mortgaged Property and all other personal property
encumbered hereby free and clear of liens and claims; and Grantor warrants that
this Deed is and will remain a valid and enforceable lien on the Mortgaged
Property subject only to the exceptions referred to above. Grantor has full
power and lawful authority to subject the Mortgaged Property to the lien hereof
in the manner and form herein done or intended hereafter to be done. Grantor
will preserve such title, will preserve such leasehold estate created by the
Ground Lease and will forever warrant and defend the same to Trustee and
Beneficiary and will forever warrant and defend the validity and priority of the
lien hereof against the claims of all persons and parties whomsoever. Grantor
will perform or cause to be performed all of the covenants and conditions
required to be performed by it under the Ground Lease, will do all things
necessary to preserve unimpaired its rights thereunder, and will not (i) enter
into any agreement modifying or amending the Ground Lease that would reduce the
term of the Ground Lease, increase the amount of rent payable thereunder (except
as contemplated by the provisions of the Ground Lease) or have a material
adverse effect on the lien created by this Deed or the rights of Beneficiary
hereunder or (ii) for so long as the Ground Lease is in effect, release the
landlord thereunder from any obligations imposed upon it thereby. If Grantor
receives a notice of default under the Ground Lease, it shall immediately cause
a copy of such notice to be sent by registered United States mail to
Beneficiary.
(b) Hazardous Materials. To the best of Grantor's knowledge, Grantor
represents and warrants that (i) the Premises and the improvements thereon and
the surrounding areas are not currently and have never been subject to Hazardous
Materials or their effects, in each case in amounts in violation of applicable
Environmental Laws, (ii) neither it nor any portion of the Premises or
improvements thereon is in violation of, or subject to any existing, pending or
threatened investigation or proceeding by any governmental authorities under,
any Environmental Law, (iii) there are no claims, litigation, administrative or
other proceedings, whether actual or threatened, or judgments or orders,
concerning Hazardous Materials relating in any way to the Premises or the
improvements thereon and (iv) Grantor is not required by any Environmental Law
to obtain any permits or licenses to construct or use any improvements, fixtures
or equipment with respect to the Premises, or if any such permit or license is
required it has been obtained and is capable of being mortgaged and assigned
hereby. Grantor will comply with all applicable Environmental Laws and will, at
its sole cost and expense, promptly remove, or cause the removal of, any and all
Hazardous Materials or the effects thereof at any time identified as being on,
in, under or affecting the Premises.
(c) Flood Hazard Area. Grantor represents that neither the Premises nor
any part thereof is located in an area identified by the Secretary of the United
States Department of Housing and Urban Development or by any applicable federal
agency as having special flood hazards or, if it is, Grantor has obtained the
insurance required by Section 1.09.
<PAGE>
Section 1.02. (a) Further Assurances. Grantor will, at its sole cost
and expense, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances, mortgages, assignments, notices of assignment,
transfers and assurances as Trustee or Beneficiary shall from time to time
reasonably require, for the better assuring, conveying, assigning, transferring
and confirming unto Trustee the property and rights hereby conveyed or assigned
or intended now or hereafter so to be, or which Grantor may be or may hereafter
become bound to convey or assign to Trustee, or for carrying out the intention
or facilitating the performance of the terms hereof, or for filing, registering
or recording this Deed and, on demand, will execute and deliver, and hereby
authorizes Trustee or Beneficiary to execute and file in Grantor's name, to the
extent they may lawfully do so, one or more financing statements, chattel
mortgages or comparable security instruments, to evidence or perfect more
effectively Beneficiary's security interest in and the lien hereof upon the
Chattels and other personal property encumbered hereby.
(b) Information Reporting and Back-up Withholding. Grantor will, at its
sole cost and expense, do, execute, acknowledge and deliver all and every such
acts, information reports, returns and withholding of monies as shall be
necessary or appropriate to comply fully, or to cause full compliance, with all
applicable information reporting and back-up withholding requirements of the
Internal Revenue Code of 1986 (including all regulations now or hereafter
promulgated thereunder) in respect of the Premises and all transactions related
to the Premises, and will at all times provide Beneficiary with satisfactory
evidence of such compliance and notify Beneficiary of the information reported
in connection with such compliance.
Section 1.03. (a) Filing and Recording of Documents. Grantor forthwith
upon the execution and delivery hereof, and thereafter from time to time, will
cause this Deed and any security instrument creating a lien or evidencing the
lien hereof upon the Chattels and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect the lien hereof upon, and the title of Trustee to, the Mortgaged
Property.
(b) Filing and Recording Fees and Other Charges. Grantor will pay all
filing, registration or recording fees, and all expenses incident to the
execution and acknowledgment hereof, any deed of trust supplemental hereto, any
security instrument with respect to the Chattels, and any instrument of further
assurance, and any reasonable expenses (including attorneys' fees and
disbursements) incurred by Beneficiary in connection with the Loan, and will pay
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 the Note, this Deed, any deed of trust supplemental
hereto, any security instrument with respect to the Chattels or any instrument
of further assurance.
6
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Section 1.04. Payment and Performance of Loan Documents. Grantor will
punctually pay the principal and interest and all other sums to become due in
respect hereof and of the Note at the time and place and in the manner specified
therein, according to the true intent and meaning thereof, all in currency of
the United States of America which at the time of such payment shall be legal
tender for the payment of public and private debts. Grantor will duly and timely
comply with and perform all of the terms, provisions, covenants and agreements
contained in said documents and in all other documents or instruments executed
or delivered by Grantor to Beneficiary in connection with the Loan, and will
permit no failures of performance thereunder.
Section 1.05. Maintenance of Existence; Compliance with Laws. Grantor,
if other than a natural person, will, so long as it is owner of all or part of
the Mortgaged Property, do all things necessary to preserve and keep in full
force and effect its existence, franchises, rights and privileges as a business
or stock corporation, partnership, limited liability company, trust or other
entity under the laws of the state of its formation. Grantor will duly and
timely comply with all laws, regulations, rules, statutes, orders and decrees of
any governmental authority or court applicable to it or to the Mortgaged
Property or any part thereof.
Section 1.06. After-Acquired Property. All right, title and interest of
Grantor in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Mortgaged Property, hereafter acquired by, or released to, Grantor or
constructed, assembled or placed by Grantor on the Premises, and all conversions
of the security constituted thereby, immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be, and in
each such case, without any further deed of trust, conveyance, assignment or
other act by Grantor, shall become subject to the lien hereof as fully and
completely, and with the same effect, as though now owned by Grantor and
specifically described in the Granting Clause hereof, but at any and all times
Grantor will execute and deliver to Trustee or Beneficiary any and all such
further assurances, deeds of trust, conveyances or assignments thereof as
Trustee or Beneficiary may reasonably require for the purpose of expressly and
specifically subjecting the same to the lien hereof.
Section 1.07. (a) Payment of Taxes and Other Charges. Grantor, from
time to time before the same shall become delinquent, will pay and discharge all
taxes of every kind and nature (including real and personal property taxes and
income, franchise, withholding, profits and gross receipts taxes), all general
and special assessments, levies, permits, inspection and license fees, all water
and sewer rents and charges, and all other public charges whether of a like or
different nature, imposed upon or assessed against it or the Mortgaged Property
or any part thereof or upon the revenues, rents, issues, income and profits of
the Mortgaged Property or arising in respect of the occupancy, use or possession
thereof. Grantor will, upon Beneficiary's request, deliver to Beneficiary
receipts evidencing the payment of all such taxes, assessments, levies, fees,
rents and other public charges imposed upon or assessed against it or the
Mortgaged Property or any portion thereof.
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Beneficiary may, at its option following the occurrence of an Event of
Default, to be exercised by thirty (30) days' notice to Grantor, require the
deposit by Grantor, at the time of each payment of an installment of interest or
principal under the Note (but no less often than monthly), of an additional
amount sufficient to discharge the obligations under this clause (a) when they
become due. The determination of the amount so payable and of the fractional
part thereof to be deposited with Beneficiary, so that the aggregate of such
deposits shall be sufficient for this purpose, shall be made by Beneficiary in
its sole discretion. Such amounts shall be held by Beneficiary without interest
and applied to the payment of the obligations in respect of which such amounts
were deposited or, at Beneficiary's option, to the payment of said obligations
in such order or priority as Beneficiary shall determine, on or before the
respective dates on which the same or any of them would become delinquent. If
one (1) month prior to the due date of any of the aforementioned obligations the
amounts then on deposit therefor shall be insufficient for the payment of such
obligation in full, Grantor within ten (10) days after demand shall deposit the
amount of the deficiency with Beneficiary. Nothing herein contained shall be
deemed to affect any right or remedy of Beneficiary under any provisions hereof
or of any statute or rule of law to pay any such amount and to add the amount so
paid, together with interest at the Default Rate, to the indebtedness hereby
secured.
(b) Payment of Mechanics and Materialmen. Grantor will pay, from time
to time when the same shall become due, all lawful claims and demands of
mechanics, materialmen, laborers, and others which, if unpaid, might result in,
or permit the creation of, a lien on the Mortgaged Property or any part thereof,
and in general will do or cause to be done everything necessary so that the lien
hereof shall be fully preserved, at the cost of Grantor and without expense to
Trustee or Beneficiary, other than those liens which Beneficiary or its
affiliates have indemnified Grantor pursuant to the provisions set forth in the
Agreement of Sale, dated August 6, 1999, by and between Hampton Inns, Inc.,
Promus Hotels Florida, Inc., Promus Hotels, Inc. and Apple Suites, Inc.
(c) Good Faith Contests. Nothing in this Section 1.07 shall require the
payment or discharge of any obligation imposed upon Grantor by this Section so
long as Grantor shall in good faith and at its own expense contest the same or
the validity thereof by appropriate legal proceedings which shall operate to
prevent the collection thereof or other realization thereon and the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy the same;
provided, however, that (i) during such contest Grantor shall set aside reserves
sufficient to discharge Grantor's obligation hereunder and of any additional
charge, penalty or expense arising from or incurred as a result of such contest
and (ii) if at any time payment of any obligation imposed upon Grantor by clause
(a) above shall become necessary to prevent the delivery of a tax deed or other
instrument conveying the Mortgaged Property or any portion thereof because of
non-payment, then Grantor shall pay the same in sufficient time to prevent the
delivery of such tax deed or other instrument.
Section 1.08. Taxes on Trustee or Beneficiary. Grantor will pay any
taxes, except income taxes, imposed on Trustee or Beneficiary by reason of their
ownership of the Note or this Deed, provided that Beneficiary can require
payment of the Note in full within ninety (90) days if it shall be illegal for
Grantor to pay any tax or if the payment of such tax by Grantor would result in
the violation of applicable usury laws.
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Section 1.09. Insurance. (a) Grantor will at all times (directly or
indirectly) provide, maintain and keep in force:
(i) policies of insurance insuring the Premises, Improvements
and Chattels against loss or damage by fire and lightning; against loss
or damage by other risks embraced by coverage of the type now known as
All Risk Replacement Cost Insurance with agreed amount endorsement,
including but not limited to riot and civil commotion, vandalism,
malicious mischief and theft; and against such other risks or hazards
as Beneficiary from time to time reasonably may designate in an amount
sufficient to prevent Beneficiary or Grantor from becoming a co-insurer
under the terms of the applicable policies, but in any event in an
amount not less than 100% of the then full replacement cost of the
Improvements (exclusive of the cost of excavations, foundations and
footings below the lowest basement floor) without deduction for
physical depreciation;
(ii) policies of insurance insuring the Premises against the
loss of "rental value" of the buildings which constitute a part of the
Improvements on a "rented or vacant basis" arising out of the perils
insured against pursuant to clause (i) above in an amount equal to not
less than one (1) year's gross "rental value" of the Improvements.
"Rental value" as used herein is defined as the sum of (A) the total
anticipated gross rental income from tenant occupancy of such buildings
as furnished and equipped, (B) the amount of all charges which are the
legal obligation of tenants and which would otherwise be the obligation
of Grantor and (C) the fair rental value of any portion of such
buildings which is occupied by Grantor. Grantor hereby assigns the
proceeds of such insurance to Beneficiary, to be applied by Beneficiary
in payment of the interest and principal on the Note, insurance
premiums, taxes, assessments and private impositions until such time as
the Improvements shall have been restored and placed in full operation,
at which time, provided Grantor is not then in default hereunder, the
balance of such insurance proceeds, if any, held by Beneficiary shall
be paid over to Grantor;
(iii) if all or part of the Premises are located in an area
identified by the Secretary of the United States Department of Housing
and Urban Development or by any applicable federal agency as a flood
hazard area, flood insurance in an amount at least equal to the maximum
limit of coverage available under the National Flood Insurance Act of
1968, provided, however, that Beneficiary reserves the right to require
flood insurance in excess of said limit if such insurance is
commercially available up to the amount provided in clause (i) above;
(iv) during any period of restoration under this Section 1.09
or Section 1.13, a policy or policies of builder's "all risk"
insurance, written on a Standard Builder's Risk Completed Value Form
(100% non-reporting), in an amount not less than the full insurable
value of the Premises against such risks (including,
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without limitation, fire and extended coverage, collapse and
earthquake coverage to agreed limits) as Beneficiary may reasonably
request, in form and substance acceptable to Beneficiary;
(v) a policy or policies of workers' compensation insurance as
required by workers' compensation insurance laws (including employer's
liability insurance, if requested by Beneficiary) covering all
employees of Grantor;
(vi) comprehensive liability insurance on an "occurrence" basis
against claims for "personal injury" liability, including, without
limitation, bodily injury, death or property damage liability, with a
limit of not less than $15,000,000 in the event of "personal injury" to
any number of persons or of damage to property arising out of one
"occurrence". Such policies shall name Beneficiary as additional
insured by an endorsement, and shall contain cross-liability and
severability of interest clauses, all satisfactory to Beneficiary; and
(vii) such other insurance (including, but not limited to,
earthquake insurance), and in such amounts, as may from time to time be
reasonably required by Beneficiary against the same or other insurable
hazards.
Notwithstanding anything herein to the contrary, for so long as that
certain Management Agreement of even date herewith between Lessee and
Beneficiary remains in full force and effect (as the same may be amended, the
"Management Agreement"), the types and amounts of insurance required by the
Management Agreement to the extent inconsistent with those set forth above shall
govern and control Grantor's obligations in respect thereof.
(b) All policies of insurance required under this Section 1.09 shall be
issued by companies having Best's ratings and being otherwise reasonably
acceptable to Beneficiary, shall be subject to the reasonable approval of
Beneficiary as to amount, content, form and expiration date and, except for the
liability policies described in clauses (a)(v) and (vi) above, shall contain a
Non-Contributory Standard Mortgagee Clause and Lender's Loss Payable
Endorsement, or their equivalents, in favor of Beneficiary, and shall provide
that the proceeds thereof shall be payable to Beneficiary. Beneficiary shall be
furnished with the original of each policy required hereunder, which policies
shall provide that they shall not lapse, nor be modified or cancelled, without
thirty (30) days' written notice to Beneficiary. At least thirty (30) days prior
to expiration of any policy required hereunder, Grantor shall furnish
Beneficiary appropriate proof of issuance of a policy continuing in force the
insurance covered by the policy so expiring. Grantor shall furnish to
Beneficiary, promptly upon request, receipts or other satisfactory evidence of
the payment of the premiums on such insurance policies. In the event that
Grantor does not deposit with Beneficiary a new certificate or policy of
insurance with evidence of payment of premiums thereon at least thirty (30) days
prior to the expiration of any expiring policy, then Beneficiary may, but shall
not be obligated to, procure such insurance and pay the premiums therefor, and
Grantor agrees to repay to Beneficiary the premiums thereon promptly on demand,
together with interest thereon at the Default Rate.
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(c) Grantor hereby assigns to Beneficiary all proceeds of any insurance
required to be maintained by this Section 1.09 which Grantor may be entitled to
receive for loss or damage to the Premises, Improvements or Chattels. All such
insurance proceeds shall be payable to Beneficiary, and Grantor hereby
authorizes and directs any affected insurance company to make payment thereof
directly to Beneficiary subject, however, to clause (f) below. Grantor shall
give prompt notice to Beneficiary of any casualty, whether or not of a kind
required to be insured against under the policies to be provided by Grantor
hereunder, such notice to generally describe the nature and cause of such
casualty and the extent of the damage or destruction. Grantor may settle, adjust
or compromise any claims for loss, damage or destruction, regardless of whether
or not there are insurance proceeds available or whether any such insurance
proceeds are sufficient in amount to fully compensate for such loss or damage,
subject to Beneficiary's prior consent. Notwithstanding the foregoing,
Beneficiary shall have the right to join Grantor in settling, adjusting or
compromising any loss of $100,000 or more. Grantor hereby authorizes the
application or release by Beneficiary of any insurance proceeds under any policy
of insurance, subject to the other provisions hereof. The application or release
by Beneficiary of any insurance proceeds shall not cure or waive any default or
notice of default hereunder or invalidate any act done pursuant to such notice.
(d) In the event of the foreclosure hereof or other transfer of the
title to the Mortgaged Property in extinguishment, in whole or in part, of the
indebtedness secured hereby, all right, title and interest of Grantor in and to
any insurance policy, or premiums or payments in satisfaction of claims or any
other rights thereunder then in force, shall pass to the purchaser or grantee
notwithstanding the amount of any bid at such foreclosure sale. Nothing
contained herein shall prevent the accrual of interest as provided in the Note
on any portion of the principal balance due under the Note until such time as
insurance proceeds are actually received and applied to reduce the principal
balance outstanding.
(e) Grantor shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 1.09 unless Beneficiary is included thereon as a named insured with loss
payable to Beneficiary under standard mortgage endorsements of the character and
to the extent above described. Grantor shall promptly notify Beneficiary
whenever any such separate insurance is taken out and shall promptly deliver to
Beneficiary the policy or policies of such insurance.
(f) Any and all monies received as payment which Grantor may be
entitled to receive for loss or damage to the Premises, Improvements or Chattels
under any insurance maintained pursuant to this Section 1.09 (other than
proceeds under the policies required by clause (a)(ii) above) shall be paid over
to Beneficiary and, at Beneficiary's option, either applied to the prepayment of
the Note and all interest and other sums accrued and unpaid in respect thereof
or disbursed from time to time to Grantor in reimbursement of its costs and
expenses incurred in the restoration of the Improvements in accordance with
Beneficiary's standard construction lending practices, terms and conditions, in
either case, less Beneficiary's reasonable expenses for collecting and, if
applicable, disbursing the insurance proceeds, or otherwise incurred in
connection
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therewith. Notwithstanding the provisions of the immediately preceding sentence,
provided no default exists hereunder, Beneficiary agrees to apply any such
proceeds received by it to the reimbursement of Grantor's costs of restoring the
Improvements. Advances of insurance proceeds shall be made to Grantor from time
to time in accordance with Beneficiary's standard construction lending
practices, terms and conditions; amounts not required for such purposes shall be
applied, at Beneficiary's option, to the prepayment of the Note and to interest
accrued and unpaid thereon in such order and proportions as Beneficiary may
elect. In no event shall Beneficiary be required to advance such proceeds to
Grantor unless Beneficiary shall have (i) received satisfactory evidence that
the funding/expiration dates of the commitment, if any, for the permanent
financing of the Improvements have been extended for such period of time as is
reasonably necessary to complete said restoration and (ii) reasonably determined
that the restoration of the Improvements can be completed by the Maturity Date
of the Note at a cost which does not exceed the amount of available insurance
proceeds or, in the event that such proceeds are reasonably determined by
Beneficiary to be inadequate, Beneficiary shall have received from Grantor a
cash deposit equal to the excess of said estimated cost of restoration over the
amount of said available proceeds. If the conditions for the advance of
insurance proceeds for restoration set forth in clauses (i) and (ii) above are
not satisfied within sixty (60) days of Beneficiary's receipt thereof or if the
actual restoration shall not have been commenced within such period, Beneficiary
shall have the option at any time thereafter to apply such insurance proceeds to
the payment of the Note and to interest accrued and unpaid thereon in such order
and proportions as Beneficiary may elect.
Section 1.10. Protective Advances by Beneficiary. If Grantor shall fail
to perform any of the covenants contained herein, Trustee or Beneficiary may
make advances to perform the same on its behalf and all sums so advanced shall
be a lien upon the Mortgaged Property and shall be secured hereby. Grantor will
repay on demand all sums so advanced on its behalf together with interest
thereon at the Default Rate. The provisions of this Section shall not prevent
any default in the observance of any covenant contained herein from constituting
an Event of Default.
Section 1.11. (a) Visitation and Inspection. Grantor will keep adequate
records and books of account in accordance with generally accepted accounting
principles and will permit each of Trustee and Beneficiary, by their agents,
accountants and attorneys, to visit and inspect the Mortgaged Property and
examine its records and books of account and make copies thereof or extracts
therefrom, and to discuss its affairs, finances and accounts with the officers
or general partners, as the case may be, of Grantor, at such reasonable times as
may be requested by Trustee or Beneficiary.
(b) Financial and Other Information. Grantor will deliver to
Beneficiary with reasonable promptness such financial information with respect
to Grantor or the Premises as Beneficiary may reasonably request from time to
time. All financial statements of Grantor shall be prepared in accordance with
generally accepted accounting principles and shall be accompanied by the
certificate of a principal financial or accounting officer or general partner,
as the case may be, of Grantor, dated within five (5) days of the delivery of
such statements to Beneficiary, stating that he or she knows of no Event of
Default, nor of any event which after notice or lapse of time or both would
constitute an
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Event of Default, which has occurred and is continuing, or, if any such event or
Event of Default has occurred and is continuing, specifying the nature and
period of existence thereof and what action Grantor has taken or proposes to
take with respect thereto, and, except as otherwise specified, stating that
Grantor has fulfilled all of its obligations hereunder and otherwise in respect
of the Loan which are required to be fulfilled on or prior to the date of such
certificate.
(c) Estoppel Certificates. Grantor, within three (3) days upon request
in person or within five (5) days upon request by mail, will furnish a
statement, duly acknowledged, of the amount due whether for principal or
interest on this Deed and whether any offsets, counterclaims or defenses exist
against the indebtedness secured hereby.
Section 1.12. Maintenance of Premises and Improvements. Grantor will
not commit any waste on the Premises or make any change in the use of the
Premises which will in any way increase any ordinary fire or other hazard
arising out of construction or operation. Grantor will, or shall cause its
Lessee to, at all times, maintain the Improvements and Chattels in good
operating order and condition and will promptly make, from time to time, all
repairs, renewals, replacements, additions and improvements in connection
therewith which are needful or desirable to such end. The Improvements shall not
be demolished or substantially altered, nor shall any Chattels be removed
without Beneficiary's prior consent except where appropriate replacements free
of superior title, liens and claims are immediately made of value at least equal
to the value of the removed Chattels.
Section 1.13. Condemnation. Grantor, immediately upon obtaining
knowledge of the institution or pending institution of any proceedings for the
condemnation of the Premises or any portion thereof, will notify Trustee and
Beneficiary thereof. Trustee and Beneficiary may participate in any such
proceedings and may be represented therein by counsel of Beneficiary's
selection. Grantor from time to time will deliver to Beneficiary all instruments
requested by it to permit or facilitate such participation. In the event of such
condemnation proceedings, the award or compensation payable is hereby assigned
to and shall be paid to Beneficiary. Beneficiary shall be under no obligation to
question the amount of any such award or compensation and may accept the same in
the amount in which the same shall be paid. The proceeds of any award or
compensation so received shall, at Beneficiary's option, either be applied to
the prepayment of the Note and all interest and other sums accrued and unpaid in
respect thereof at the rate of interest provided therein regardless of the rate
of interest payable on the award by the condemning authority, or be disbursed to
Grantor from time to time for restoration of the Improvements in accordance with
Beneficiary's standard construction lending practices, terms and conditions, in
either case, less Beneficiary's reasonable expenses for collecting and, if
applicable, disbursing the award, or otherwise incurred in connection therewith.
Notwithstanding the provisions of the immediately preceding sentence, provided
no monetary or bankruptcy related default or any Event of Default exists
hereunder, Beneficiary agrees to apply any such condemnation award proceeds
received by it to the reimbursement of Grantor's costs of restoring the
Improvements. Advances of condemnation award proceeds shall be made to Grantor
from time to time in accordance
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with Beneficiary's standard construction lending practices, terms and
conditions; amounts not required for such purposes shall be applied, at
Beneficiary's option, to the prepayment of the Note and to interest accrued and
unpaid thereon (at the rate of interest provided therein regardless of the rate
of interest payable on the award by the condemning authority) in such order and
proportions as Beneficiary may elect.
Section 1.14. Leases. (a) Grantor will not (i) execute an assignment of
the rents or any part thereof from the Premises without Beneficiary's prior
consent, (ii) except where the lessee is in default thereunder, terminate or
consent to the cancellation or surrender of any lease of the Premises or of any
part thereof, now existing or hereafter to be made, having an unexpired term of
one (1) year or more, provided, however, that any lease may be cancelled if
promptly after the cancellation or surrender thereof a new lease is entered into
with a new lessee having a credit standing at least equivalent to that of the
lessee whose lease was cancelled, on substantially the same terms as the
terminated or cancelled lease, (iii) modify any such lease so as to shorten the
unexpired term thereof or so as to decrease, waive or compromise in any manner
the amount of the rents payable thereunder or materially expand the obligations
of the lessor thereunder, (iv) accept prepayments of more than one month of any
installments of rents to become due under such leases, except prepayments in the
nature of security for the performance of the lessees thereunder, (v) modify,
release or terminate any guaranties of any such lease or (vi) in any other
manner impair the value of the Mortgaged Property or the security hereof.
(b) Grantor will not execute any lease of all or a substantial portion
of the Premises except for actual occupancy by the lessee thereunder or its
property manager, and will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or portions thereof now or hereafter existing, on
the part of the lessor thereunder to be kept and performed and will at all times
do all things reasonably necessary to compel performance by the lessee under
each lease of all obligations, covenants and agreements by such lessee to be
performed thereunder. If any of such leases provide for the giving by the lessee
of certificates with respect to the status of such leases, Grantor shall
exercise its right to request such certificates within five (5) days of any
demand therefor by Beneficiary and shall deliver copies thereof to Beneficiary
promptly upon receipt.
(c) In the event of the enforcement by Trustee or Beneficiary of the
remedies provided for hereby or by law, the lessee under each of the leases of
the Premise will, upon request of any person succeeding to the interest of
Grantor as a result of such enforcement, automatically become the lessee of said
successor in interest, without change in the terms or other provisions of such
lease, provided, however, that said successor in interest shall not be bound by
(i) any payment of rent or additional rent for more than one (1) month in
advance, except prepayments in the nature of security for the performance by
said lessee of its obligations under said lease or (ii) any amendment or
modification of the lease made without the consent of Beneficiary or such
successor in interest. Each lease shall also provide that, upon request by said
successor in interest, such lessee shall execute and deliver an instrument or
instruments confirming such attornment.
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Section 1.15. Premises Documents. Grantor shall (a) do all things
reasonably necessary to cause the due compliance and faithful performance by the
other parties to the Premises Documents with and of all obligations and
agreements by such other parties to be complied with and performed thereunder,
except for any continuing failure of the Premises to comply with the Premises
Documents of the date of the acquisition hereof from Beneficiary or its
affiliate, and (b) deliver promptly to Beneficiary copies of any notices which
it gives or receives under any of the Premises Documents.
Section 1.16. Trust Fund; Lien Laws. Grantor will receive the advances
secured hereby and will hold the right to receive such advances as a trust fund
to be applied first for the purpose of paying the costs of improvements on the
Premises and will apply the same first to the payment of such costs before using
any part of the total of the same for any other purpose. Grantor will indemnify
and hold Trustee and Beneficiary harmless against any loss or liability, cost or
expense, including, without limitation, any judgments, attorney's fees, costs of
appeal bonds and printing costs, arising out of or relating to any proceeding
instituted by any claimant alleging a violation by Grantor of any applicable
lien law.
Section 1.17. Expenses of Trustee. Grantor shall pay all costs, fees
and expenses of Trustee, its agents and counsel in connection with the
performance of its duties hereunder.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.01. Events of Default and Certain Remedies. If one or more of
the following Events of Default shall happen, that is to say:
(a) if (i) default shall be made in the payment of any
principal, interest, fees or other sums under the Note, in any such
case, when and as the same shall become due and payable, whether at
maturity or by acceleration or as part of any payment or prepayment or
otherwise, in each case, as herein or in the Note provided, and such
default shall have continued for a period of ten (10) days or (ii)
default shall be made in the payment of any tax or other charge
required by Section 1.07 to be paid and said default shall have
continued for a period of twenty (20) days; or
(b) if default shall be made in the due observance or
performance of any covenant, condition or agreement in the Note, this
Deed or in any other document executed or delivered to Beneficiary in
connection with the Loan, and such default shall have continued for a
period of thirty (30) days after notice thereof shall have been given
to Grantor by Beneficiary, or, in the case of such other documents,
such shorter grace period, if any, as may be provided for therein; or
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(c) if any representation or warranty made by Grantor in
Section 1.01 shall be incorrect, or if any other representation or
warranty made to Beneficiary in this Deed, or in any other document,
certificate or statement executed or delivered to Beneficiary in
connection with the Loan shall be incorrect in any material respect
when made or remade; or
(d) if by order of a court of competent jurisdiction, a
trustee, receiver or liquidator of the Mortgaged Property or any part
thereof, or of Grantor shall be appointed and such order shall not be
discharged or dismissed within sixty (60) days after such appointment;
or
(e) if Grantor shall file a petition in bankruptcy or for an
arrangement or for reorganization pursuant to the Federal Bankruptcy
Act or any similar federal or state law, or if, by decree of a court of
competent jurisdiction, Grantor shall be adjudicated a bankrupt, or be
declared insolvent, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall consent to the appointment of a
receiver or receivers of all or any part of its property; or
(f) if any of the creditors of Grantor shall file a petition in
bankruptcy against Grantor or for reorganization of Grantor pursuant to
the Federal Bankruptcy Act or any similar federal or state law, and if
such petition shall not be discharged or dismissed within sixty (60)
days after the date on which such petition was filed; or
(g) if final judgment for the payment of money shall be
rendered against Grantor and Grantor shall not discharge the same or
cause it to be discharged within sixty (60) days from the entry
thereof, or shall not appeal therefrom or from the order, decree or
process upon which or pursuant to which said judgment was granted,
based or entered, and secure a stay of execution pending such appeal;
or
(h) (Intentionally Omitted)
(i) if there shall occur a default which is not cured within
the applicable grace period, if any, under any mortgage, deed of trust
or other security instrument covering all or part of the Mortgaged
Property regardless of whether any such mortgage, deed of trust or
other security instrument is prior or subordinate hereto; it being
further agreed by Grantor that an Event of Default hereunder shall
constitute an Event of Default under any such mortgage, deed of trust
or other security instrument held by or for the benefit of Beneficiary;
or
(j) if there shall occur a default which is not cured within
the applicable grace period, if any, under any of the Premises
Documents, except for any continuing failure of the Premises to comply
with the Premises Documents of the date of the acquisition hereof from
Beneficiary or its affiliate; or if any of the Premises Documents is
amended, modified, supplemented or terminated without Beneficiary's
prior consent; or
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(k) if Grantor shall transfer, or agree to transfer (or suffer
or permit the transfer or agreement to transfer), in any manner, either
voluntarily or involuntarily, by operation of law or otherwise, all or
any portion of the Mortgaged Property, or any interest or rights
therein (including air or development rights) without, in any such
case, Beneficiary's prior consent. As used in this clause, "transfer"
shall include, without limitation, any sale, assignment, lease (other
than to Lessee) or conveyance except leases for occupancy subordinate
hereto and to all advances made and to be made hereunder or, in the
event Grantor (or a general partner or co-venturer thereof) is a
partnership, joint venture, limited liability company, trust or
closely-held corporation, the sale, conveyance, transfer or other
disposition of more than 10%, in the aggregate, of any class of the
issued and outstanding capital stock of such closely-held corporation
or of the beneficial interest of such partnership, venture, limited
liability company or trust, or a change of any general partner, joint
venturer, member or beneficiary, as the case may be. In the event
Grantor is a limited partnership, and so long as a limited partner has
contributed to (or remains personally liable for) the present and
future partnership capital contributions required of such limited
partner by the partnership agreement, such partner may sell, convey,
devise, transfer or dispose of all or a part of his limited partnership
interest to his spouse, children, grandchildren or a family trust in
which his spouse, children or grandchildren are sole beneficiaries; or
(l) if Grantor shall encumber, or agree to encumber, in any
manner, either voluntarily or involuntarily, by operation of law or
otherwise, all or any portion of the Mortgaged Property, or any
interest or rights therein (including air or development rights)
without, in any such case, Beneficiary's prior consent. As used in this
clause, "encumber" shall include, without limitation, the placing or
permitting the placing of any mortgage, deed of trust, assignment of
rents or other security device. (Beneficiary may grant or deny its
consent under this clause and the immediately preceding clause in its
sole discretion and, if consent should be given, any such transfer or
encumbrance shall be subject hereto and to any other documents which
evidence or secure the Loan, and, if a transfer, any such transferee
shall assume all of Grantor's obligations hereunder and thereunder and
agree to be bound by all provisions and perform all obligations
contained herein and therein; consent to one such transfer or
encumbrance shall not be deemed to be a waiver of the right to require
consent to future or successive transfers or encumbrances);
then and in every such case:
I. During the continuance of any such Event of Default,
Beneficiary, by notice to Grantor, may declare the entire principal of
the Note then outstanding (if not then due and payable), and all
accrued and unpaid interest and other sums in respect thereof, to be
due and payable immediately, and upon any such
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declaration the principal of the Note and said accrued and unpaid
interest and other sums shall become and be immediately due and
payable, anything herein or in the Note (other than Section 4.08
hereof, the provisions thereof limiting interest payable thereunder to
the maximum amount permitted by applicable law) to the contrary
notwithstanding.
II. During the continuance of any such Event of Default,
Trustee or Beneficiary personally, or by their agents or attorneys, may
enter into and upon all or any part of the Premises, and each and every
part thereof, and are each hereby given a right and license and
appointed Grantor's attorney-in-fact and exclusive agent to do so, and
may exclude Grantor, its agents and servants wholly therefrom; and
having and holding the same, may use, operate, manage and control the
Premises and conduct the business thereof, either personally or by
their superintendents, managers, agents, servants, attorneys or
receivers; and upon every such entry, Trustee or Beneficiary, at the
expense of the Mortgaged Property, from time to time, either by
purchase, repairs or construction, may maintain and restore the
Mortgaged Property, whereof they shall become possessed as aforesaid;
and likewise, from time to time, at the expense of the Mortgaged
Property, Trustee or Beneficiary may make all necessary or proper
repairs, renewals and replacements and such useful alterations,
additions, betterments and improvements thereto and thereon as
Beneficiary may seem advisable; and in every such case Trustee or
Beneficiary shall have the right to manage and operate the Mortgaged
Property and to carry on the business thereof and exercise all rights
and powers of Grantor with respect thereto either in the name of
Grantor or otherwise as Beneficiary shall deem best; and Trustee or
Beneficiary shall be entitled to collect and receive the Rents and
every part thereof, all of which shall for all purposes constitute
property of Grantor; and in furtherance of such right Beneficiary may
collect the rents payable under all leases of the Premises directly
from the lessees thereunder upon notice to each such lessee that an
Event of Default exists hereunder accompanied by a demand on such
lessee for the payment to Beneficiary of all rents due and to become
due under its lease, and Grantor FOR THE BENEFIT OF BENEFICIARY AND
EACH SUCH LESSEE hereby covenants and agrees that the lessee shall be
under no duty to question the accuracy of Beneficiary's statement of
default and shall unequivocally be authorized to pay said rents to
Beneficiary without regard to the truth of Beneficiary's statement of
default and notwithstanding notices from Grantor disputing the
existence of an Event of Default such that the payment of rent by the
lessee to Beneficiary pursuant to such a demand shall constitute
performance in full of the lessee's obligation under the lease for the
payment of rents by the lessee to Grantor; and after deducting the
expenses of conducting the business thereof and of all maintenance,
repairs, renewals, replacements, alterations, additions, betterments
and improvements and amounts necessary to pay for taxes, assessments,
insurance and prior or other proper charges upon the Mortgaged Property
or any part thereof, as well as just and reasonable compensation for
the services of Trustee and Beneficiary and for all attorneys, counsel,
agents, clerks, servants and other employees by them engaged and
employed, Trustee or Beneficiary, as the case may be, shall apply the
moneys
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arising as aforesaid, first, to the payment of the principal of the
Note and the interest thereon, when and as the same shall become
payable and in such order and proportions as Beneficiary shall elect
and second, to the payment of any other sums required to be paid by
Grantor hereunder.
III. Trustee or Beneficiary, as the case may be, with or
without entry, personally or by their agents or attorneys, insofar as
applicable, may:
(1) sell the Mortgaged Property and all estate,
right, title and interest, claim and demand therein, at public
auction at such time and place, and upon such terms and
conditions as Beneficiary may deem expedient or as may be
required or permitted by applicable law, having first given
such notice prior to the sale of such time, place and terms by
publication in one (1) or more newspapers published or having
a general circulation in the county or counties of the state
in which the Mortgaged Property is located as may be required
or permitted by law and by such other methods, if any, as
Trustee or Beneficiary may deem desirable or as may be
required or permitted by applicable law. In the event of any
sale of all or part of the Mortgaged Property under the terms
hereof, Grantor shall pay (in addition to taxable costs) a
reasonable fee to Trustee which shall be in lieu of all other
fees and commission permitted by statute or custom to be paid,
reasonable attorneys' fees and all expenses incurred in
obtaining or continuing abstracts of title for the purpose of
any such sale; or
(2) institute proceedings for the complete or partial
foreclosure hereof; or
(3) take such steps to protect and enforce their
rights whether by action, suit or proceeding in equity or at
law for the specific performance of any covenant, condition or
agreement in the Note or herein, or in aid of the execution of
any power herein granted, or for any foreclosure hereunder, or
for the enforcement of any other appropriate legal or
equitable remedy or otherwise as Trustee or Beneficiary shall
elect.
IV. If Grantor shall default hereunder, Grantor hereby
authorizes and empowers Trustee, at the request of Beneficiary (which
request shall be presumed made), at any time during the continuance of
any default, to sell all or any portion of the Mortgaged Property, at
public auction, to the highest bidder, for cash, in the area at the
County Courthouse of the county in Texas in which the Mortgaged
Property or any part thereof is situated which has been designated by
the commissioner's court of such county as the area where such sales
are to take place (as such designation is recorded in the real property
records of such county) or, if no such area has been designated by the
commissioner's court of such county, in the area at such County
Courthouse which has been designated in the notice of sale, between the
hours of 10:00 o'clock A.M. and 4:00 o'clock P.M. on the first Tuesday
of any month, after giving notice of the time, place and terms of said
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sale, and of the property to be sold as follows or in any other manner
now or hereafter required or permitted by applicable law:
Notice of such proposed sale shall be given by posting written
notice thereof at least twenty-one (21) days preceding the
date of the sale at the Courthouse door of the county in which
the sale is to be made, and by filing a copy of the notice in
the office of the county clerk of the county in which the sale
is to be made at least twenty-one (21) days preceding the date
of the sale, and if the property to be sold is situated in
more than one county, one notice shall be posted at the
Courthouse door of each county in which the property to be
sold is situated and one copy of the notice shall be filed in
the office of the county clerk in each county in which the
property to be sold is situated (such notice shall designate
the county where such property will be sold). In addition,
Beneficiary shall, at least twenty-one (21) days preceding the
date of sale, serve written notice of the proposed sale by
certified mail on each debtor obligated to pay the
Indebtedness secured hereby according to the records of
Beneficiary. Service of such notice shall be completed upon
deposit of the notice, enclosed in a postpaid wrapper,
properly addressed to such debtor at the most recent address
as shown by the records of Beneficiary, in a post office or
official depository under the care and custody of the United
States Postal Service. The affidavit of any person having
knowledge of the facts to the effect that such service was
completed shall be prima facie evidence of the fact of
service.
Any sale of the Mortgaged Property covered by this Deed may be conducted in the
manner provided in this Deed without the necessity for Trustee to have physical
or constructive possession of the Mortgaged Property (Grantor hereby covenanting
and agreeing to deliver to Trustee any portion of the Mortgaged Property not
actually or constructively possessed by Trustee immediately upon demand by
Trustee) and the title to and right of possession of that property will pass to
the purchaser as completely as if it had been actually present and delivered to
purchaser at the sale.
Any notice that is required or permitted to be given to Grantor may be
addressed to Grantor at Grantor's address as stated above. Any notice that is to
be given by certified mail to any other debtor may, if the address for such
other debtor is not shown by the records of Beneficiary, be addressed to such
other debtor at the address of Grantor as is shown by the records of
Beneficiary. Notwithstanding the foregoing provisions of this paragraph, notice
of such sale given in accordance with the requirements of the applicable law of
the State of Texas in effect at the time of such sale shall constitute
sufficient notice of such sale. Grantor hereby authorizes and empowers Trustee
to sell all or any portion of the Mortgaged Property, together or in lots or
parcels, as Trustee may deem expedient, and to execute and deliver to the
purchaser or purchasers of such property, good and sufficient deeds of
conveyance of fee simple title with covenants of general warranty made on behalf
of Grantor. In no event shall Trustee be required to exhibit, present or display
at any such sale, any of the personalty described herein to be sold at such
sale. Payment of the purchase price to Trustee shall satisfy the obligation of
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the purchaser at such sale therefor, and such purchaser shall not be bound to
look after the application thereof. The sale or sales by Trustee of less than
the whole of the Mortgaged Property shall not exhaust the power of sale herein
granted, and Trustee is specifically empowered to make successive sale or sales
under such power until the whole of the Mortgaged Property shall be sold; and if
the proceeds of such sale or sales of less than the whole of such Mortgaged
Property shall be less than the aggregate of the Indebtedness secured hereby and
the expense of executing this trust, this Deed and the lien, security interest
and assignment hereof shall remain in full force and effect as to the unsold
portion of the Mortgaged Property just as though no sale or sales had been made;
provided, however, that Grantor shall never have any right to require the sale
or sales of less than the whole of the Mortgaged Property, but Beneficiary shall
have the right, at its sole election, to request Trustee to sell less than the
whole of the Mortgaged Property. If default is made hereunder, the holder of the
Indebtedness or any part thereof on which the payment is delinquent shall have
the option to proceed with foreclosure in satisfaction of such item either
through judicial proceedings or by directing Trustee to proceed as if under a
full foreclosure, conducting the sale as herein provided without declaring the
entire Indebtedness secured hereby due, and if sale is made because of default
of an installment, or a part of an installment, such sale may be made subject to
the unmatured part of the Note and other Indebtedness secured by this Deed; and
it is agreed that such sale, if so made, shall not in any manner affect the
unmatured part of the Indebtedness secured by this Deed, but as to such
unmatured part, this Deed shall remain in full force and effect as though no
sale had been made under the provisions of this paragraph. Several sales may be
made hereunder without exhausting the right of sale for any unmatured part of
the Indebtedness secured hereby. The provisions of this paragraph IV shall
control all other conflicting provisions of this deed with respect to the sale
of the Mortgaged Property pursuant to this Deed.
Section 2.02. Other Matters Concerning Sales. (a) Trustee or
Beneficiary may adjourn from time to time any sale by it to be made hereunder or
by virtue hereof by announcement at the time and place appointed for such sale
or for such adjourned sale or sales; and, except as otherwise provided by any
applicable provision of law, Trustee or Beneficiary, as the case may be, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
(b) Upon the completion of any sale or sales made by Trustee or
Beneficiary, as the case may be, under or by virtue of this Article II, Trustee,
or an officer of any court empowered to do so, shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient instrument or instruments
conveying, assigning and transferring all estate, right, title and interest in
and to the property and rights sold. Trustee is hereby appointed the true and
lawful attorney irrevocable of Grantor, in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the Mortgaged
Property and rights so sold and for that purpose Trustee may execute all
necessary instruments of conveyance, assignment and transfer, and may substitute
one or more persons with like power, Grantor hereby ratifying and confirming all
that its said attorney or such substitute or substitutes shall lawfully do by
virtue hereof. Nevertheless, Grantor, if requested by Trustee or Beneficiary,
shall ratify and confirm any such sale or sales by executing and delivering to
Trustee or to such purchaser or purchasers all such
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instruments as may be advisable, in the judgment of Trustee or Beneficiary, for
the purpose, and as may be designated in such request. Any such sale or sales
made under or by virtue of this Article II, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale, shall operate to divest all the estate, right,
title, interest, claim and demand whatsoever, whether at law or in equity, of
Grantor in and to the properties and rights so sold, and shall be a perpetual
bar both at law and in equity against Grantor and against any and all persons
claiming or who may claim the same, or any part thereof from, through or under
Grantor.
(c) In the event of any sale or sales made under or by virtue of this
Article II (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale), the entire principal of, and interest and other sums on, the Note, if not
previously due and payable, and all other sums required to be paid by Grantor
pursuant hereto, immediately thereupon shall, anything in any of said documents
(other than Section 4.08 hereof) to the contrary notwithstanding, become due and
payable.
(d) The purchase money, proceeds or avails of any sale or sales made
under or by virtue of this Article II, together with any other sums which then
may be held by Trustee or Beneficiary hereunder, whether under the provisions of
this Article II or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of such sale,
including reasonable compensation to Trustee and Beneficiary, their
agents and counsel, and of any judicial proceedings wherein the same
may be made, and of all expenses, liabilities and advances made or
incurred by Trustee hereunder, together with interest at the Default
Rate on all advances made by Trustee, and of all taxes, assessments or
other charges, except any taxes, assessments or other charges subject
to which the Mortgaged Property shall have been sold.
Second: To the payment of the whole amount then due, owing or
unpaid upon the Note for principal and interest, with interest on the
unpaid principal at the Default Rate from and after the happening of
any Event of Default described in clause (a) of Section 2.01 from the
due date of any such payment of principal until the same is paid, in
such order and amounts as Beneficiary may elect.
Third: To the payment of any other sums required to be paid by
Grantor pursuant to any provision hereof or of the Note, including all
expenses, liabilities and advances made or incurred by Beneficiary
hereunder or in connection with the enforcement hereof, together with
interest at the Default Rate on all such advances.
Fourth: To the payment of the surplus, if any, to whomsoever may be
lawfully entitled to receive the same.
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(e) Upon any sale or sales made under or by virtue of this Article II,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Beneficiary may bid for and acquire the Mortgaged Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase price
by crediting upon the indebtedness secured hereby the net sales price after
deducting therefrom the expenses of the sale and the costs of the action and any
other sums which Trustee or Beneficiary are authorized to deduct hereunder.
Section 2.03. Payment of Amounts Due. (a) In case an Event of Default
described in clause (a) of Section 2.01 shall have happened and be continuing,
then, upon demand of Beneficiary, Grantor will pay to Beneficiary the whole
amount which then shall have become due and payable on the Note, for principal
or interest or both, as the case may be, and after the happening of said Event
of Default will also pay to Beneficiary interest at the Default Rate on the then
unpaid principal of the Note, and the sums required to be paid by Grantor
pursuant to any provision hereof, and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to Trustee and Beneficiary, their agents and counsel and
any expenses incurred by Trustee or Beneficiary hereunder. In the event Grantor
shall fail forthwith to pay all such amounts upon such demand, Beneficiary shall
be entitled and empowered to institute such action or proceedings at law or in
equity as may be advised by its counsel for the collection of the sums so due
and unpaid, and may prosecute any such action or proceedings to judgment or
final decree, and may enforce any such judgment or final decree against Grantor
and collect, out of the property of Grantor wherever situated, as well as out of
the Mortgaged Property, in any manner provided by law, moneys adjudged or
decreed to be payable.
(b) Beneficiary shall be entitled to recover judgment as aforesaid
either before, after or during the pendency of any proceedings for the
enforcement of the provisions hereof; and the right of Beneficiary to recover
such judgment shall not be affected by any entry or sale hereunder, or by the
exercise of any other right, power or remedy for the enforcement of the
provisions hereof, or the foreclosure of the lien hereof; and in the event of a
sale of the Mortgaged Property, and of the application of the proceeds of sale,
as herein provided, to the payment of the debt hereby secured, Beneficiary shall
be entitled to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, the Note, and to enforce payment of all other charges, payments
and costs due hereunder or otherwise in respect of the Loan, and shall be
entitled to recover judgment for any portion of the debt remaining unpaid, with
interest at the Default Rate. In case of proceedings against Grantor in
insolvency or bankruptcy or any proceedings for its reorganization or involving
the liquidation of its assets, then Beneficiary shall be entitled to prove the
whole amount of principal, interest and other sums due upon the Note to the full
amount thereof, and all other payments, charges and costs due hereunder or
otherwise in respect of the Loan, without deducting therefrom any proceeds
obtained from the sale of the whole or any part of the Mortgaged Property,
provided, however, that in no case shall Beneficiary receive, from the aggregate
amount of the proceeds of the sale of the Mortgaged Property and the
distribution from the estate of Grantor, a greater amount than such principal
and interest and such other payments, charges and costs.
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(c) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Grantor shall affect in any manner or to any extent, the lien hereof
upon the Mortgaged Property or any part thereof, or any liens, rights, powers or
remedies of Trustee or Beneficiary hereunder, but such liens, rights, powers and
remedies of Trustee or Beneficiary shall continue unimpaired as before.
(d) Any moneys thus collected by Beneficiary under this Section 2.03
shall be applied by Beneficiary in accordance with the provisions of clause (d)
of Section 2.02.
Section 2.04. Actions; Receivers. After the happening of any Event of
Default and immediately upon the commencement of any action, suit or other legal
proceedings by Trustee or Beneficiary to obtain judgment for the principal of,
or interest on, the Note and other sums required to be paid by Grantor pursuant
to any provision hereof, or of any other nature in aid of the enforcement of the
Note or hereof, Grantor will (a) waive the issuance and service of process and
enter its voluntary appearance in such action, suit or proceeding and (b) if
required by Beneficiary, consent to the appointment of a receiver or receivers
of all or part of the Mortgaged Property and of any or all of the Rents in
respect thereof. After the happening of any Event of Default and during its
continuance, or upon the commencement of any proceedings to foreclose this Deed
or to enforce the specific performance hereof or in aid thereof or upon the
commencement of any other judicial proceeding to enforce any right of Trustee or
Beneficiary, Trustee or Beneficiary shall be entitled, as a matter of right, if
they shall so elect, without the giving of notice to any other party and without
regard to the adequacy or inadequacy of any security for the indebtedness
secured hereby, forthwith either before or after declaring the unpaid principal
of the Note to be due and payable, to the appointment of such a receiver or
receivers.
Section 2.05. Beneficiary's Right to Possession. Notwithstanding the
appointment of any receiver, liquidator or trustee of Grantor, or of any of its
property, or of the Mortgaged Property or any part thereof, Trustee and
Beneficiary shall be entitled to retain possession and control of all property
now or hereafter held hereunder.
Section 2.06. Remedies Cumulative. No remedy herein conferred upon or
reserved to Trustee or Beneficiary is intended to be exclusive of any other
remedy or remedies, and each and every such remedy shall be cumulative, and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity or by statute. No delay or omission of Trustee or
Beneficiary to exercise any right or power accruing upon any Event of Default
shall impair any such right or power, or shall be construed to be a waiver of
any such Event of Default or any acquiescence therein; and every power and
remedy given hereby to Trustee or Beneficiary may be exercised from time to time
as often as may be deemed by them expedient. Nothing herein or in the Note shall
affect the obligation of Grantor to pay the principal of, and interest and other
sums on, the Note in the manner and at the time and place therein respectively
expressed.
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Section 2.07. Moratorium Laws; Right of Redemption. Grantor will not at
any time insist upon, or plead, or in any manner whatever claim or take any
benefit or advantage of any stay or extension or moratorium law, any exemption
from execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance hereof, nor claim, take or insist upon any benefit or
advantage of any law now or hereafter in force providing for the valuation or
appraisal of the Mortgaged Property, or any part thereof, prior to any sale or
sales thereof which may be made pursuant to any provision herein, or pursuant to
the decree, judgment or order of any court of competent jurisdiction; nor, after
any such sale or sales, claim or exercise any right under any statute heretofore
or hereafter enacted to redeem the property so sold or any part thereof and
Grantor hereby expressly waives all benefit or advantage of any such law or
laws, and covenants not to hinder, delay or impede the execution of any power
herein granted or delegated to Trustee or Beneficiary, but to suffer and permit
the execution of every power as though no such law or laws had been made or
enacted. Grantor, for itself and all who may claim under it, waives, to the
extent that it lawfully may, all right to have the Mortgaged Property marshaled
upon any foreclosure hereof.
Section 2.08. Intentionally Omitted.
Section 2.09. Beneficiary's Rights Concerning Application of Amounts
Collected. Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default, Beneficiary may apply, to the extent
permitted by law, any amount collected hereunder to principal, interest or any
other sum due under the Note or otherwise in respect of the Loan in such order
and amounts, and to such obligations, as Beneficiary shall elect in its sole and
absolute discretion.
ARTICLE III
CONCERNING TRUSTEE
Section 3.01. Trustee's Performance. Trustee, by its acceptance hereof,
covenants faithfully to perform and fulfill the trusts herein created, being
liable, however, only for willful negligence or misconduct, and hereby waives
any statutory fee and agrees to accept reasonable compensation, in lieu thereof,
for any services rendered by it in accordance with the terms hereof.
Section 3.02. Resignation by Trustee. Trustee may resign at any time
upon giving thirty (30) days' notice to Grantor and Beneficiary.
Section 3.03. Removal of Trustee; Successors. Beneficiary may remove
Trustee at any time or from time to time and select a successor trustee. In the
event of the death, removal, resignation or refusal or inability to act of
Trustee, or in its sole discretion for any reason whatsoever, Beneficiary may,
without notice and without specifying any reason therefor and without applying
to any court, select and appoint a successor Trustee, and all powers, rights,
duties and authority of Trustee, as aforesaid, shall thereupon become vested in
such successor. In such connection, Beneficiary may, on its and
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Grantor's behalf, execute, acknowledge and record an instrument or agreement of
such substitution, and Grantor hereby irrevocably appoints Beneficiary as its
attorney-in-fact, with full power of substitution, to do so. Such substitute
trustee shall not be required to give bond for the faithful performance of its
duties unless required by Beneficiary.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Assignment of Rents. This Deed is intended to constitute
a present, absolute and irrevocable assignment of all of the Rents now or
hereafter accruing, and Grantor, without limiting the generality of the Granting
Clause hereof, specifically hereby presently, absolutely and irrevocably assigns
all of the Rents now or hereafter accruing to Beneficiary. The aforesaid
assignment shall be effective immediately upon the execution hereof and is not
conditioned upon the occurrence of any Event of Default hereunder or any other
contingency or event, provided, however, that Beneficiary hereby grants to
Grantor the right and license to collect and receive the Rents as they become
due, and not in advance, so long as no Event of Default exists hereunder.
Immediately upon the occurrence of any such Event of Default, the foregoing
right and license shall be automatically terminated and of no further force or
effect. Nothing contained in this Section or elsewhere herein shall be construed
to make Beneficiary a mortgagee in possession unless and until Beneficiary
actually takes possession of the Mortgaged Property, nor to obligate Beneficiary
to take any action or incur any expense or discharge any duty or liability under
or in respect of any leases or other agreements relating to the Mortgaged
Property or any part thereof.
Section 4.02. Security Agreement.
This Deed constitutes a security agreement under the applicable Uniform
Commercial Code with respect to the Chattels and such other of the Mortgaged
Property which is personal property. In addition to the rights and remedies
granted to Beneficiary by other applicable law or hereby, Beneficiary shall have
all of the rights and remedies with respect to the Chattels and such other
personal property as are granted to a secured party under the applicable Uniform
Commercial Code. Upon Beneficiary's request after an Event of Default, Grantor
shall promptly and at its expense assemble the Chattels and such other personal
property and make the same available to Beneficiary at a convenient place
acceptable to Beneficiary. Grantor, after an Event of Default, shall pay to
Beneficiary on demand, with interest at the Default Rate, any and all expenses,
including attorneys' fees, incurred by Beneficiary in protecting its interest in
the Chattels and such other personal property and in enforcing its rights with
respect thereto. Any notice of sale, disposition or other intended action by
Beneficiary with respect to the Chattels and such other personal property sent
to Grantor in accordance with the provisions hereof at least five (5) days prior
to such action shall constitute reasonable notice to Grantor. The proceeds of
any such sale or disposition, or any part thereof, may be applied by Beneficiary
to the payment of the indebtedness secured hereby in such order and proportions
as Beneficiary in its discretion shall deem appropriate. To the extent Grantor
may lawfully do so and without limiting any rights and/or privileges herein
granted to
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Beneficiary, Grantor agrees that Beneficiary and/or Trustee and any successor
Trustee may dispose of any or all of the Chattels at the same time and place and
after giving the same notices provided in this Deed in connection with a
non-judicial foreclosure sale under the terms and conditions set forth in
Article II, Section 2.01, III or IV, of this Deed. In this connection, Grantor
agrees that the sale may be conducted by Trustee or successor Trustee; that the
sale of the real estate and improvements described in this Deed and the Chattels
or any part thereof, may be sold separately or together; and that in the event
the Premises and the Chattels or any part thereof are sold together, Beneficiary
will not be obligated to allocate the consideration received as between the
Premises and the Chattels.
Section 4.03. Application of Certain Payments. In the event that all or
any part of the Mortgaged Property is encumbered by one or more deeds of trust
held by or for the benefit of Beneficiary, Grantor hereby irrevocably authorizes
and directs Beneficiary to apply any payment received by Beneficiary in respect
of any note secured hereby or by any other such deed of trust to the payment of
such of said notes as Beneficiary shall elect in its sole and absolute
discretion, and Beneficiary shall have the right to apply any such payment in
reduction of principal and/or interest and in such order and amounts as
Beneficiary shall elect in its sole and absolute discretion without regard to
the priority of the deed of trust securing the note so repaid or to contrary
directions from Grantor or any other party.
Section 4.04. Severability. In the event any one or more of the
provisions contained herein or in the Note 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 hereof, but this Deed
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein or therein.
Section 4.05. Modifications and Waivers in Writing. No provision hereof
may be changed, waived, discharged or terminated orally or by any other means
except an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought. Any agreement hereafter
made by Grantor and Beneficiary relating hereto shall be superior to the rights
of the holder of any intervening or subordinate lien or encumbrance.
Section 4.06. Notices. All notices, demands, consents, approvals and
statements required or permitted hereunder shall be in writing and shall be
deemed to have been sufficiently given or served for all purposes when presented
personally, three (3) days after mailing by registered or certified mail,
postage prepaid, or one (1) day after delivery to a nationally recognized
overnight courier service providing evidence of the date of delivery, if to
Grantor at its address stated above, with a copy to Thomas E. Davis, Esq.,
Jenkens & Gilchrist, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799, and
if to Beneficiary at its address stated above, or at such other address of which
a party shall have notified the party giving such notice in accordance with the
provisions of this Section.
Section 4.07. 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 Grantor, the
successors in trust of Trustee and the endorsees, transferees, successors and
assigns of Beneficiary.
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Section 4.08. Limitation on Interest. Anything herein or in the Note to
the contrary notwithstanding, the obligations of Grantor hereunder and under the
Note shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt of any such payment by Beneficiary would be
contrary to provisions of law applicable to Beneficiary limiting the maximum
rate of interest that may be charged or collected by Beneficiary.
Section 4.09. Counterparts. This Deed may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one and
the same deed.
Section 4.10. Substitute Deeds. Grantor and Beneficiary shall, upon
their mutual agreement to do so, execute such documents as may be necessary in
order to effectuate the modification hereof, including the execution of
substitute deeds of trust, so as to create two (2) or more liens on or security
titles in respect of the Mortgaged Property in such amounts as may be mutually
agreed upon but in no event to exceed, in the aggregate, the unpaid principal
portion of the Note Amount; in such event, Grantor covenants and agrees to pay
the reasonable fees and expenses of Beneficiary and its counsel in connection
with any such modification.
Section 4.11. Beneficiary's Sale of Interests in Loan. Grantor
recognizes that Beneficiary may sell and transfer interests in the Loan to one
or more participants or assignees and that all documentation, financial
statements, appraisals and other data, or copies thereof, relevant to Grantor,
any Guarantor or the Loan, may be exhibited to and retained by any such
participant or assignee or prospective participant or assignee.
Section 4.12. No Merger of Interests. Unless expressly provided
otherwise, in the event that ownership hereof and title to the fee and/or
leasehold estates in the Premises encumbered hereby shall become vested in the
same person or entity, this Deed shall not merge in said title but shall
continue to be and remain a valid and subsisting lien and/or trust deed on said
estates in the Premises for the amount secured hereby.
Section 4.13. CERTAIN WAIVERS. BY EXECUTION OF THIS DEED AND BY
INITIALING THIS SECTION 4.13, GRANTOR EXPRESSLY AND UNCONDITIONALLY: (A)
ACKNOWLEDGES THE RIGHT OF BENEFICIARY TO ACCELERATE THE INDEBTEDNESS EVIDENCED
BY THE NOTE AND ANY OTHER INDEBTEDNESS IN ACCORDANCE WITH THE LOAN DOCUMENTS AND
THE POWER OF ATTORNEY GIVEN HEREIN TO BENEFICIARY TO SELL THE MORTGAGED PROPERTY
BY NONJUDICIAL FORECLOSURE UPON DEFAULT BY GRANTOR WITHOUT ANY JUDICIAL HEARING
AND WITHOUT ANY NOTICE OTHER THAN SUCH NOTICE (IF ANY) AS IS SPECIFICALLY
REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS DEED OR BY LAW; (B) WAIVES ANY
AND ALL RIGHTS THAT GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE UNITED STATES
OF AMERICA
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(INCLUDING, WITHOUT LIMITATION, THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF),
THE VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON
OF ANY OTHER APPLICABLE LAW, TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE
EXERCISE BY BENEFICIARY OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO BENEFICIARY,
EXCEPT SUCH NOTICE (IF ANY) IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE LOAN
DOCUMENTS OR UNDER THE RIGHTS OR BENEFITS OF ANY STATUTE OF LIMITATION OR ANY
MORATORIUM, REINSTATEMENT, MARSHALING, FORBEARANCE, APPRAISEMENT, VALUATION,
STAY, EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION BY LAW; (C) WAIVES BY
EXECUTION HEREOF, AND BENEFICIARY WAIVES BY ACCEPTANCE HEREOF, IN CONNECTION
WITH ANY FORECLOSURE OR SIMILAR ACTION OR PROCEDURE BROUGHT BY BENEFICIARY
ASSERTING AN EVENT OF DEFAULT UNDER CLAUSE (A) OF SECTION 2.01 OF THIS DEED, ANY
AND EVERY RIGHT IT MAY HAVE TO A TRIAL BY JURY; (D) ACKNOWLEDGES THAT GRANTOR
HAS READ THIS DEED AND ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO GRANTOR, AND
GRANTOR HAS CONSULTED WITH COUNSEL OF GRANTOR'S CHOICE PRIOR TO EXECUTING THIS
DEED AND INITIALING THIS SECTION 4.13; AND (E) ACKNOWLEDGES THAT ALL WAIVERS OF
THE AFORESAID RIGHTS OF GRANTOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY AND
WILLINGLY BY GRANTOR AS A PART OF A BARGAINED-FOR LOAN TRANSACTION AND THAT THIS
DEED IS VALID AND ENFORCEABLE BY BENEFICIARY AGAINST GRANTOR IN ACCORDANCE WITH
ALL THE TERMS, PROVISIONS AND CONDITIONS HEREOF.
Section 4.14. GOVERNING LAW. THE PERFORMANCE REQUIRED BY THIS DEED
SHALL, INSOFAR AS IS POSSIBLE, BE RENDERED TO THE BENEFICIARY AT ITS OFFICE IN
TENNESSEE. GRANTOR AND BENEFICIARY INTEND THAT THE VALIDITY AND CONSTRUCTION OF
THE OBLIGATIONS SECURED BY THIS DEED BE GOVERNED BY THE LAWS OF THE STATE OF
TENNESSEE INCLUDING ALL OBLIGATIONS AND LIABILITIES HEREUNDER WITH RESPECT TO
THE PAYMENT OF INTEREST OR ANY OTHER COMPENSATION FOR THE USE, FORBEARANCE OR
DETENTION OF MONEY. THIS DEED SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TENNESSEE, WITHOUT REFERENCE TO THE CONFLICTS OF LAW
PRINCIPLES OF THAT STATE, EXCEPT ONLY TO THE EXTENT THAT TEXAS LAW EXPRESSLY
PROVIDES THAT IT GOVERNS AND THAT A CONTRARY AGREEMENT BY THE PARTIES IS
INEFFECTIVE AND EXCEPT THAT THE LAW OF THE STATE OF TEXAS SHALL APPLY TO ANY AND
ALL ACTS WITH RESPECT TO THE CREATION AND PRIORITY OF THE LIEN OF THE DEED AND
ASSIGNMENT OF LEASES AND RENTS ON THE MORTGAGED PROPERTY HEREBY EVIDENCED AND
FORECLOSURE BY TRUSTEE ON THE MORTGAGED PROPERTY. GRANTOR, BENEFICIARY AND
TRUSTEE COVENANT AND AGREE TO TAKE ANY AND ALL ACTION WHICH MAY BE NECESSARY
UNDER TEXAS LAW WITH RESPECT TO FORECLOSURE
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UNDER THE LAWS OF THE STATE OF TEXAS. SHOULD ANY OBLIGATION OR REMEDY UNDER THIS
DEED BE INVALID OR UNENFORCEABLE UNDER THE LAWS PROVIDED HEREIN TO GOVERN, THE
LAWS OF ANOTHER STATE WHOSE LAWS CAN VALIDATE AND APPLY TO THIS DEED SHALL
APPLY.
Section 4.15. Duplication of Covenants. Beneficiary, by its acceptance
hereof, acknowledges that (i) the covenants in the Fee and Leasehold Deed of
Trust, Assignment of Leases and Rents and Security Agreement from Grantor to
Trustee for the benefit of Beneficiary, dated September 20, 1999 (the "First
Deed"), which has been recorded with the County Clerk's Office in Collin County,
Texas, and the covenants in this Deed are substantially similar and (ii) that
performance under either the First Deed or this Deed constitutes performance
under the other. Grantor acknowledges, however, that failure to perform any such
covenant under either the First Deed or this Deed constitutes a default under
each.
30
<PAGE>
IN WITNESS WHEREOF, this Deed has been duly executed and delivered by
Grantor.
APPLE SUITES REIT LIMITED
PARTNERSHIP, a Virginia limited
partnership
By: Apple Suites General, Inc., its
general partner
By /s/ Glade M. Knight
----------------------------------
Name: Glade M. Knight
Title: President
APPLE SUITES SERVICES LIMITED
PARTNERSHIP, a Virginia limited
partnership
By: Apple Suites Services General, Inc.,
its general partner
By /s/ Glade M. Knight
---------------------------------
Name: Glade M. Knight
Title: President
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 30th day of
September, 1999, by Glade M. Knight, President of Apple Suites General, Inc., a
Virginia corporation, as general partner of Apple Suites REIT Limited
Partnership, on behalf of said Apple Suites General, Inc., as general partner of
Apple Suites REIT Limited Partnership.
/s/ Jacquelyn B. Owens
--------------------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
Commission Expires: 6/30/03
------------------------
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 30th day of
September, 1999, by Glade M. Knight, President of Apple Suites Services General,
Inc., a Virginia corporation, as general partner of Apple Suites Services
Limited Partnership, on behalf of said Apple Suites Services General, Inc., as
general partner of Apple Suites Services Limited Partnership.
/s/ Jacquelyn B. Owens
--------------------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
Commission Expires: 6/30/03
------------------------
<PAGE>
SCHEDULE A
(Dallas-Addison)
Being Lot 1, Addison Oaks Addition, an Addition to the Town of Addison, Dallas
County, Texas, according to the plat thereof recorded in Volume 89166, Page
1974, Map Records, Dallas County, Texas
<PAGE>
SCHEDULE A
(Dallas-Irving/Las Colinas)
BEING a 3.378 acre tract of land situated in the City of Irving, Dallas County,
Texas, in the S.A. & M.C.R.R Survey, Abstract No. 1452, and the A. W. Carter
Survey, Abstract No. 377, said 3.378 acre tract of land being more particularly
described as follows:
BEGINNING at a 1/2 inch iron rod found for the intersection of the southeasterly
right-of-way line of Wingren Blvd. (a 100 foot right-of-way) as described by
plat recorded in Volume 80018, Page 0019, of the Map Records of Dallas County,
Texas, and the northeasterly line of John W. Carpenter Freeway, State Highway
114 (a variable width right-of-way);
THENCE along the southeasterly right-of-way line of said Wingren Boulevard,
North 50(degrees) 21' 52" East, a distance of 183.29 feet to a 1/2 inch iron rod
found for the southwesterly corner of a 0.483 acre tract of land as described by
deed recorded in Volume 85228, Page 3242 of the Deed Records of Dallas County,
Texas;
THENCE along the southwesterly line of said 0.483 acre tract, the following:
South 42(degrees) 30' 00" East, a distance of 132.00 feet to a 1/2
inch iron rod found for corner;
North 47(degrees) 30' 00" East, a distance of 14.71 feet to a 1/2 inch
iron rod set for corner;
South 42(degrees) 30' 00" East, a distance of 122.80 feet to a nail
set for corner;
North 47(degrees) 30' 00" East, a distance of 10.25 feet to a 1/2 inch
iron rod found for corner;
South 42(degrees) 30' 00" East, a distance of 8.26 feet to a 1/2 inch
iron rod found for the point of tangent to spiral of a spiral curve to
the right having a spiral angle of 03(degrees) 17' 20".
Southeasterly with said spiral curve to the right for a distance of
118.98 feet to a 1/2 inch iron rod found for the point of spiral to
curve of a circular curve to the right having a radius of 639.00 feet,
a chord distance of 17.23 feet and a chord bearing of South
36(degrees) 26' 18" East;
Southeasterly with said curve to the right through a central angle of
01(degrees) 32' 40" for an arc distance of 17.23 feet to a 1/2 inch
iron rod found for the point of curve to spiral of a spiral curve to
the right having a spiral angle of 03(degrees) 17' 20";
Southeasterly with said spiral curve to the right for a distance of
118.98 feet to a 1/2 inch iron rod found for the point of spiral to
tangent;
<PAGE>
South 30(degrees) 22' 40" East, a distance of 29.36 feet to an "X" in
concrete found for corner 10 feet from the back (dry) side of a canal
wall, and on a northerly line of that certain tract of land described
by deed recorded in Volume 82117, Page 1045 of the Deed Records of
Dallas County, Texas, said 1/2 inch iron rod being on a non-tangent
curve to the right having a radius of 39.50 feet, a chord distance of
11.87 feet and a chord of South 51(degrees) 04' 23" West;
THENCE 10 feet from and parallel with the back (dry) side of a canal wall and
along said northerly line, the following:
Southwesterly with said curve to the right through a central angle of
17(degrees) 16' 46" for an arc distance of 11.91 feet to a 1/2 inch
iron rod set for the point of tangency;
South 59(degrees) 42' 46" West, a distance of 227.63 feet to a 1/2
inch iron rod found for corner, said 1/2 inch iron rod being on a
non-tangent curve to the left having a radius of 31.00 feet, a chord
distance of 19.92 feet and a chord bearing of South 77(degrees) 55'
31" West;
THENCE continuing along said northerly line, the following:
Southeasterly with said non-tangent curve to the left through a
central angle of 37(degrees) 28' 35" for an arc distance of 20.28 feet
to a 1/2 inch iron rod found for corner
North 89(degrees) 23'14" West, a distance of 26.36 feet to an "X" in
concrete found for corner
South 32(degrees) 5' 51" West, a distance of 30.77 feet to an "X" in
concrete found for corner in the northeasterly right-of-way line of
the aforementioned State Highway 114;
THENCE along the northeasterly right-of-way line of said Highway 114, the
following:
North 37(degrees) 39' 27" West, a distance of 68.87 feet to a 1/2 inch
iron rod found for corner
North 32(degrees) 05' 21" West, a distance of 101.61 feet to a 1/2
inch iron rod found on a non-tangent curve to the left having a radius
of 1938.36 feet a chord distance of 264.04 feet and a chord bearing of
North 34(degrees) 05' 29" West;
Northwesterly with said curve to the left through a central angle of
07(degrees) 48' 39" for an arc distance of 264.24 feet to a 1/2 inch
iron rod found for corner;
North 06(degrees) 16' 41" East, a distance of 83.41 feet to the POINT
OF BEGINNING:
CONTAINING a computed area of 147,140 square feet or 3.378 acres of land more or
less.
Exhibit 4.4
================================================================================
Date: October 5, 1999
FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
("this Deed")
FROM
APPLE SUITES REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
("Fee Owner")
AND
APPLE SUITES SERVICES LIMITED PARTNERSHIP,
a Virginia limited partnership
("Lessee")
Address of Fee Owner and Lessee: ATTN: Glade M. Knight
306 East Main Street
Richmond, Virginia 23219
TO
DAVID LONG
("Trustee")
Address of Trustee: c/o Hoge, Evans, Holmes, Carter & Ledbetter, PLLC
4311 Oak Lawn Avenue, Suite 600
Dallas, Texas 75219
FOR THE BENEFIT OF
PROMUS HOTELS, INC.,
a Delaware corporation
("Beneficiary")
Address of Beneficiary: 755 Crossover Lane
Memphis, Tennessee 38117
Note Amount: $ 7,350,000
================================================================================
This instrument prepared by, and after recording please return to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Graham R. Hone, Esq.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITAL.............................................................................................1
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION.......................................................1
GRANTING CLAUSE.....................................................................................3
ARTICLE I COVENANTS OF GRANTOR......................................................4
Section 1.01. (a) Warranty of Title; Power and Authority..............................4
(b) Hazardous Materials.................................................5
(c) Flood Hazard Area...................................................5
Section 1.02. (a) Further Assurances..................................................6
(b) Information Reporting and Back-up Withholding.......................6
Section 1.03. (a) Filing and Recording of Documents...................................6
(b) Filing and Recording Fees and Other Charges.........................6
Section 1.04. Payment and Performance of Loan Documents.................................7
Section 1.05. Maintenance of Existence; Compliance with Laws............................7
Section 1.06. After-Acquired Property...................................................7
Section 1.07. (a) Payment of Taxes and Other Charges..................................7
(b) Payment of Mechanics and Materialmen................................8
(c) Good Faith Contests.................................................8
Section 1.08. Taxes on Trustee or Beneficiary...........................................8
Section 1.09. Insurance.................................................................9
Section 1.10. Protective Advances by Beneficiary.......................................12
Section 1.11. (a) Visitation and Inspection..........................................12
(b) Financial and Other Information....................................12
(c) Estoppel Certificates..............................................13
Section 1.12. Maintenance of Premises and Improvements.................................13
Section 1.13. Condemnation.............................................................13
Section 1.14. Leases...................................................................14
Section 1.15. Premises Documents.......................................................15
Section 1.16. Trust Fund; Lien Laws....................................................15
Section 1.17. Expenses of Trustee......................................................15
ARTICLE II EVENTS OF DEFAULT AND REMEDIES...........................................15
Section 2.01. Events of Default and Certain Remedies...................................15
Section 2.02. Other Matters Concerning Sales...........................................21
Section 2.03. Payment of Amounts Due...................................................23
Section 2.04. Actions; Receivers.......................................................24
Section 2.05. Beneficiary's Right to Possession........................................24
Section 2.06. Remedies Cumulative......................................................24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 2.07. Moratorium Laws; Right of Redemption.....................................25
Section 2.08. Intentionally Omitted....................................................25
Section 2.09. Beneficiary's Rights Concerning Application of Amounts Collected.........25
ARTICLE III CONCERNING TRUSTEE.......................................................25
Section 3.01. Trustee's Performance....................................................25
Section 3.02. Resignation by Trustee...................................................25
Section 3.03. Removal of Trustee; Successors...........................................25
ARTICLE IV MISCELLANEOUS............................................................26
Section 4.01. Assignment of Rents......................................................26
Section 4.02. Security Agreement.......................................................26
Section 4.03. Application of Certain Payments..........................................27
Section 4.04. Severability.............................................................27
Section 4.05. Modifications and Waivers in Writing.....................................27
Section 4.06. Notices..................................................................27
Section 4.07. Successors and Assigns...................................................27
Section 4.08. Limitation on Interest...................................................28
Section 4.09. Counterparts.............................................................28
Section 4.10. Substitute Deeds.........................................................28
Section 4.11. Beneficiary's Sale of Interests in Loan..................................28
Section 4.12. No Merger of Interests...................................................28
Section 4.13. CERTAIN WAIVERS..........................................................28
Section 4.14. GOVERNING LAW............................................................29
Section 4.15. Duplication of Covenants.................................................30
</TABLE>
(ii)
<PAGE>
RECITAL
Beneficiary, as seller, and Apple Suites, Inc. ("Borrower"), as buyer, have
entered into an Agreement of Sale dated as of October 5, 1999 (the "Agreement of
Sale") for the purchase of certain premises more particularly described therein
(the "New Premises"). Borrower indirectly owns one hundred percent (100%) of the
beneficial interests in Fee Owner. Fee Owner has acquired and is the owner of
the premises described in SCHEDULE A and Lessee is the owner of a leasehold
interest therein. Lessee acknowledges that it will derive substantial benefit
from the making of the loan contemplated herein and further acknowledges that
the obligation of Beneficiary to make such loan is conditioned upon, among other
things, the execution and delivery by Lessee of this Deed. In connection with
the purchase of the New Premises, Borrower will borrow the Note Amount from
Beneficiary and has executed and delivered to Beneficiary its note, dated the
date hereof, obligating it to pay the Note Amount (said note, as the same may
hereafter be amended, modified, extended, severed, assigned, renewed, replaced
or restated, hereinafter, the "Note") and, as the indirect owner of one hundred
percent (100%) of the beneficial interests in Fee Owner, in order to secure the
payment of the Note has duly authorized the execution and delivery of this Deed.
For purposes of this Deed, "Grantor" shall mean Fee Owner, Lessee and Borrower
but only to the extent of their respective interests in the Mortgaged Property
(as herein defined) and their respective obligations under the Note and Ground
Lease.
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION
Grantor, Trustee and Beneficiary agree that, unless the context otherwise
specifies or requires, the following terms shall have the meanings herein
specified.
"Chattels" means all fixtures, furnishings, fittings, appliances,
apparatus, equipment, building materials and components, machinery and articles
of personal property, of whatever kind or nature, including any replacements,
proceeds or products thereof and additions thereto, other than those owned by
lessees, now or at any time hereafter intended to be or actually affixed to,
attached to, placed upon, or used in any way in connection with the complete and
comfortable use, enjoyment, development, occupancy or operation of the Premises,
and whether located on or off the Premises.
"Default Rate" means the rate (or, if more than one, the highest of the
rates) of interest per annum provided in the Note plus 5%, but in no event to
exceed the maximum rate allowed by law.
"Events of Default" means the events and circumstances described as such in
Section 2.01.
"Ground Lease" means the lease identified in SCHEDULE A covering the
Premises described in SCHEDULE A which is subject to the Ground Lease.
"Hazardous Materials" means any pollutant, effluents, emissions,
contaminants, toxic or hazardous wastes, materials or substances, as any of
those terms are defined from
<PAGE>
time to time in or for the purposes of any relevant environmental law, rule,
regulation, code, permit, order, notice, demand letter or other binding
determination (hereinafter, "Environmental Laws") including, without limitation,
asbestos fibers and friable asbestos, polychlorinated biphenyls and any
petroleum or hydrocarbon-based products or derivatives, in each case in amounts
in violation of applicable Environmental Laws.
"Improvements" means all structures or buildings, and replacements thereof,
now or hereafter located upon the Premises, including all plant equipment,
apparatus, machinery and fixtures of every kind and nature whatsoever forming
part of said structures or buildings.
"lease" or "leases" means any lease or leases of all or any portion of the
Premises, whether affecting the fee or leasehold portion thereof.
"Loan" means the loan made by Beneficiary to Borrower evidenced by the Note
and secured hereby.
"Premises" means the premises described in SCHEDULE A, including the
leasehold interest therein created by the Ground Lease, and including all of the
easements, rights, privileges and appurtenances (including air or development
rights) thereunto belonging or in anywise appertaining, and all of the estate,
right, title, interest, claim or demand whatsoever of Grantor therein and in the
streets and ways adjacent thereto, either in law or in equity, in possession or
expectancy, now or hereafter acquired, and as used herein shall, unless the
context otherwise requires, be deemed to include the Improvements.
"Premises Documents" means all reciprocal easement or operating agreements,
declarations of covenants, conditions or restrictions, declarations of
condominium, developer's or utility agreements with any village, town, county or
other governmental authority, and any similar such agreements or declarations
now or hereafter affecting the Premises or any part thereof.
All terms of this Deed which are not defined above shall have the meaning
set forth elsewhere in this Deed.
Except as expressly indicated otherwise, when used in this Deed (i) "or" is
not exclusive, (ii) "hereunder", "herein", "hereof" and the like refer to this
Deed as a whole, (iii) "Article", "Section" and "Schedule" refer to Articles,
Sections and Schedules of this Deed, (iv) terms defined in the singular have a
correlative meaning when used in the plural and vice versa, (v) a reference to a
law or statute includes any amendment or modification to, or replacement of,
such law or statute and (vi) a reference to an agreement, instrument or document
means such agreement, instrument or document as the same may be amended,
modified or supplemented from time to time in accordance with its terms and as
permitted hereby and by the other documents executed or delivered to Beneficiary
in connection with the Loan. The cover page and all Schedules hereto are
incorporated herein and made a part hereof. Any table of contents and the
headings and
2
<PAGE>
captions herein are for convenience only and shall not affect the interpretation
or construction hereof.
GRANTING CLAUSE
NOW, THEREFORE, Grantor, in consideration of the premises and in order to
secure the payment of both the principal of, and the interest and any other sums
payable under, the Note or this Deed and the performance and observance of all
the provisions hereof and of the Note, hereby gives, grants, bargains, sells,
warrants, aliens, remises, releases, conveys, assigns, transfers, mortgages,
hypothecates, deposits, pledges, sets over and confirms unto Trustee, all its
estate, right, title and interest in, to and under any and all of the following
described property (hereinafter, the "Mortgaged Property") whether now owned or
held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels;
(iv) the Premises Documents;
(v) all rents, royalties, issues, profits, revenue, income,
recoveries, reimbursements and other benefits of the Mortgaged Property
(hereinafter, the "Rents") and all leases of the Mortgaged Property or
portions thereof now or hereafter entered into and all right, title and
interest of Grantor thereunder, including, without limitation, cash or
securities deposited thereunder to secure performance by the lessees of
their obligations thereunder, whether such cash or securities are to be
held until the expiration of the terms of such leases or applied to one or
more of the installments of rent coming due immediately prior to the
expiration of such terms, and including any guaranties of such leases and
any lease cancellation, surrender or termination fees in respect thereof,
all subject, however, to the provisions of Section 4.01;
(vi) all (a) development work product prepared in connection with the
Premises, including, but not limited to, engineering, drainage, traffic,
soil and other studies and tests; water, sewer, gas, electrical and
telephone approvals, taps and connections; surveys, drawings, plans and
specifications; and subdivision, zoning and platting materials; (b)
building and other permits, rights, licenses and approvals relating to the
Premises; and (c) contracts and agreements (including, without limitation,
contracts with architects and engineers, construction contracts and
contracts for the maintenance or management of the Premises), contract
rights, logos, trademarks, trade names, copyrights and other general
intangibles used or useful in connection with the ownership, operation or
occupancy of the Premises or any part thereof;
3
<PAGE>
(vii) all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without
limitation, proceeds of insurance and condemnation awards, and all rights
of Grantor to refunds of real estate taxes and assessments;
(viii) all revenue and income received by or on behalf of Grantor
resulting from the operation of the Premises as a hotel, including all sums
(1) paid by customers for the use of hotel rooms located within the
Premises, (2) derived from food and beverage operations located within the
Premises, (3) generated by other hotel operations, including any parking,
convention, sports and recreational facilities and (4) business
interruption insurance proceeds;
(ix) all accounts and accounts receivable, including all present and
future right to payment from any consumer credit or charge card
organization or entity (such as those organizations which sponsor or
administer the American Express, Carte Blanche, Discover Card, Diners Club,
Visa and Master Card) arising out of the leasing and operation of, or the
business conducted at or in relation to, all or any part of the Premises;
and
(x) any deposit, operating or other account including the entire
balance therein (now or hereafter existing) of Grantor containing proceeds
of the operation of the Premises with any banking or financial institution
and all money, instruments, securities, documents, chattel paper, credits,
demands, and any other property, rights, or interests of Grantor relating
to the operation of the Premises which at any time shall come into the
possession, custody or control of any banking or financial institution.
TO HAVE AND TO HOLD unto Trustee, its successors and assigns forever.
IN TRUST, to secure the payment to Beneficiary of the principal of and
interest on the Note at the maturity thereof and all other sums due hereunder or
under the Note and the performance of all covenants and agreements herein and in
the Note, whereupon this Deed shall cease and be void and the Mortgaged Property
shall be released at the cost of Grantor.
ARTICLE I
COVENANTS OF GRANTOR
Grantor represents, except as known by Beneficiary or its affiliates to the
contrary, or disclosed to Beneficiary in connection with the sale of the
Mortgaged Property to Grantor, and Grantor covenants and agrees as follows:
Section 1.01. (a) Warranty of Title; Power and Authority. Grantor warrants
that, with respect to the fee interest in the Premises, it has a good and
marketable title to an indefeasible fee estate subject to no lien, charge or
encumbrance, that the Ground Lease is subject to no lien, charge or encumbrance
of any kind and is prior to all liens,
4
<PAGE>
charges and encumbrances whatsoever on the fee interest of the landlord
thereunder, except in either case such as are listed as exceptions to title in
the title policy insuring the lien hereof; and, Grantor further warrants that,
with respect to the leasehold interest in the Premises, that it is the owner of
a valid and subsisting interest as tenant under the Ground Lease, that the
Ground Lease is in full force and effect, there are no defaults thereunder and
no event has occurred or is occurring which after notice or passage of time or
both will result in such a default; that it owns the Chattels, all leases and
the Rents in respect of the Mortgaged Property and all other personal property
encumbered hereby free and clear of liens and claims; and Grantor warrants that
this Deed is and will remain a valid and enforceable lien on the Mortgaged
Property subject only to the exceptions referred to above. Grantor has full
power and lawful authority to subject the Mortgaged Property to the lien hereof
in the manner and form herein done or intended hereafter to be done. Grantor
will preserve such title, will preserve such leasehold estate created by the
Ground Lease and will forever warrant and defend the same to Trustee and
Beneficiary and will forever warrant and defend the validity and priority of the
lien hereof against the claims of all persons and parties whomsoever. Grantor
will perform or cause to be performed all of the covenants and conditions
required to be performed by it under the Ground Lease, will do all things
necessary to preserve unimpaired its rights thereunder, and will not (i) enter
into any agreement modifying or amending the Ground Lease that would reduce the
term of the Ground Lease, increase the amount of rent payable thereunder (except
as contemplated by the provisions of the Ground Lease) or have a material
adverse effect on the lien created by this Deed or the rights of Beneficiary
hereunder or (ii) for so long as the Ground Lease is in effect, release the
landlord thereunder from any obligations imposed upon it thereby. If Grantor
receives a notice of default under the Ground Lease, it shall immediately cause
a copy of such notice to be sent by registered United States mail to
Beneficiary.
(b) Hazardous Materials. To the best of Grantor's knowledge, Grantor
represents and warrants that (i) the Premises and the improvements thereon and
the surrounding areas are not currently and have never been subject to Hazardous
Materials or their effects, in each case in amounts in violation of applicable
Environmental Laws, (ii) neither it nor any portion of the Premises or
improvements thereon is in violation of, or subject to any existing, pending or
threatened investigation or proceeding by any governmental authorities under,
any Environmental Law, (iii) there are no claims, litigation, administrative or
other proceedings, whether actual or threatened, or judgments or orders,
concerning Hazardous Materials relating in any way to the Premises or the
improvements thereon and (iv) Grantor is not required by any Environmental Law
to obtain any permits or licenses to construct or use any improvements, fixtures
or equipment with respect to the Premises, or if any such permit or license is
required it has been obtained and is capable of being mortgaged and assigned
hereby. Grantor will comply with all applicable Environmental Laws and will, at
its sole cost and expense, promptly remove, or cause the removal of, any and all
Hazardous Materials or the effects thereof at any time identified as being on,
in, under or affecting the Premises.
(c) Flood Hazard Area. Grantor represents that neither the Premises nor any
part thereof is located in an area identified by the Secretary of the United
States Department of Housing and Urban Development or by any applicable federal
agency as
5
<PAGE>
having special flood hazards or, if it is, Grantor has obtained the insurance
required by Section 1.09.
Section 1.02. (a) Further Assurances. Grantor will, at its sole cost and
expense, do, execute, acknowledge and deliver all and every such further acts,
deeds, conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as Trustee or Beneficiary shall from time to time reasonably require,
for the better assuring, conveying, assigning, transferring and confirming unto
Trustee the property and rights hereby conveyed or assigned or intended now or
hereafter so to be, or which Grantor may be or may hereafter become bound to
convey or assign to Trustee, or for carrying out the intention or facilitating
the performance of the terms hereof, or for filing, registering or recording
this Deed and, on demand, will execute and deliver, and hereby authorizes
Trustee or Beneficiary to execute and file in Grantor's name, to the extent they
may lawfully do so, one or more financing statements, chattel mortgages or
comparable security instruments, to evidence or perfect more effectively
Beneficiary's security interest in and the lien hereof upon the Chattels and
other personal property encumbered hereby.
(b) Information Reporting and Back-up Withholding. Grantor will, at its
sole cost and expense, do, execute, acknowledge and deliver all and every such
acts, information reports, returns and withholding of monies as shall be
necessary or appropriate to comply fully, or to cause full compliance, with all
applicable information reporting and back-up withholding requirements of the
Internal Revenue Code of 1986 (including all regulations now or hereafter
promulgated thereunder) in respect of the Premises and all transactions related
to the Premises, and will at all times provide Beneficiary with satisfactory
evidence of such compliance and notify Beneficiary of the information reported
in connection with such compliance.
Section 1.03. (a) Filing and Recording of Documents. Grantor forthwith upon
the execution and delivery hereof, and thereafter from time to time, will cause
this Deed and any security instrument creating a lien or evidencing the lien
hereof upon the Chattels and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect the
lien hereof upon, and the title of Trustee to, the Mortgaged Property.
(b) Filing and Recording Fees and Other Charges. Grantor will pay all
filing, registration or recording fees, and all expenses incident to the
execution and acknowledgment hereof, any deed of trust supplemental hereto, any
security instrument with respect to the Chattels, and any instrument of further
assurance, and any reasonable expenses (including attorneys' fees and
disbursements) incurred by Beneficiary in connection with the Loan, and will pay
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 the Note, this Deed, any deed of trust supplemental
hereto, any security instrument with respect to the Chattels or any instrument
of further assurance.
6
<PAGE>
Section 1.04. Payment and Performance of Loan Documents. Grantor will
punctually pay the principal and interest and all other sums to become due in
respect hereof and of the Note at the time and place and in the manner specified
therein, according to the true intent and meaning thereof, all in currency of
the United States of America which at the time of such payment shall be legal
tender for the payment of public and private debts. Grantor will duly and timely
comply with and perform all of the terms, provisions, covenants and agreements
contained in said documents and in all other documents or instruments executed
or delivered by Grantor to Beneficiary in connection with the Loan, and will
permit no failures of performance thereunder.
Section 1.05. Maintenance of Existence; Compliance with Laws. Grantor, if
other than a natural person, will, so long as it is owner of all or part of the
Mortgaged Property, do all things necessary to preserve and keep in full force
and effect its existence, franchises, rights and privileges as a business or
stock corporation, partnership, limited liability company, trust or other entity
under the laws of the state of its formation. Grantor will duly and timely
comply with all laws, regulations, rules, statutes, orders and decrees of any
governmental authority or court applicable to it or to the Mortgaged Property or
any part thereof.
Section 1.06. After-Acquired Property. All right, title and interest of
Grantor in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Mortgaged Property, hereafter acquired by, or released to, Grantor or
constructed, assembled or placed by Grantor on the Premises, and all conversions
of the security constituted thereby, immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be, and in
each such case, without any further deed of trust, conveyance, assignment or
other act by Grantor, shall become subject to the lien hereof as fully and
completely, and with the same effect, as though now owned by Grantor and
specifically described in the Granting Clause hereof, but at any and all times
Grantor will execute and deliver to Trustee or Beneficiary any and all such
further assurances, deeds of trust, conveyances or assignments thereof as
Trustee or Beneficiary may reasonably require for the purpose of expressly and
specifically subjecting the same to the lien hereof.
Section 1.07. (a) Payment of Taxes and Other Charges. Grantor, from time to
time before the same shall become delinquent, will pay and discharge all taxes
of every kind and nature (including real and personal property taxes and income,
franchise, withholding, profits and gross receipts taxes), all general and
special assessments, levies, permits, inspection and license fees, all water and
sewer rents and charges, and all other public charges whether of a like or
different nature, imposed upon or assessed against it or the Mortgaged Property
or any part thereof or upon the revenues, rents, issues, income and profits of
the Mortgaged Property or arising in respect of the occupancy, use or possession
thereof. Grantor will, upon Beneficiary's request, deliver to Beneficiary
receipts evidencing the payment of all such taxes, assessments, levies, fees,
rents and other public charges imposed upon or assessed against it or the
Mortgaged Property or any portion thereof.
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Beneficiary may, at its option following the occurrence of an Event of
Default, to be exercised by thirty (30) days' notice to Grantor, require the
deposit by Grantor, at the time of each payment of an installment of interest or
principal under the Note (but no less often than monthly), of an additional
amount sufficient to discharge the obligations under this clause (a) when they
become due. The determination of the amount so payable and of the fractional
part thereof to be deposited with Beneficiary, so that the aggregate of such
deposits shall be sufficient for this purpose, shall be made by Beneficiary in
its sole discretion. Such amounts shall be held by Beneficiary without interest
and applied to the payment of the obligations in respect of which such amounts
were deposited or, at Beneficiary's option, to the payment of said obligations
in such order or priority as Beneficiary shall determine, on or before the
respective dates on which the same or any of them would become delinquent. If
one (1) month prior to the due date of any of the aforementioned obligations the
amounts then on deposit therefor shall be insufficient for the payment of such
obligation in full, Grantor within ten (10) days after demand shall deposit the
amount of the deficiency with Beneficiary. Nothing herein contained shall be
deemed to affect any right or remedy of Beneficiary under any provisions hereof
or of any statute or rule of law to pay any such amount and to add the amount so
paid, together with interest at the Default Rate, to the indebtedness hereby
secured.
(b) Payment of Mechanics and Materialmen. Grantor will pay, from time to
time when the same shall become due, all lawful claims and demands of mechanics,
materialmen, laborers, and others which, if unpaid, might result in, or permit
the creation of, a lien on the Mortgaged Property or any part thereof, and in
general will do or cause to be done everything necessary so that the lien hereof
shall be fully preserved, at the cost of Grantor and without expense to Trustee
or Beneficiary, other than those liens which Beneficiary or its affiliates have
indemnified Grantor pursuant to the provisions set forth in the Agreement of
Sale, dated August 6, 1999, by and between Hampton Inns, Inc., Promus Hotels
Florida, Inc., Promus Hotels, Inc. and Apple Suites, Inc.
(c) Good Faith Contests. Nothing in this Section 1.07 shall require the
payment or discharge of any obligation imposed upon Grantor by this Section so
long as Grantor shall in good faith and at its own expense contest the same or
the validity thereof by appropriate legal proceedings which shall operate to
prevent the collection thereof or other realization thereon and the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy the same;
provided, however, that (i) during such contest Grantor shall set aside reserves
sufficient to discharge Grantor's obligation hereunder and of any additional
charge, penalty or expense arising from or incurred as a result of such contest
and (ii) if at any time payment of any obligation imposed upon Grantor by clause
(a) above shall become necessary to prevent the delivery of a tax deed or other
instrument conveying the Mortgaged Property or any portion thereof because of
non-payment, then Grantor shall pay the same in sufficient time to prevent the
delivery of such tax deed or other instrument.
Section 1.08. Taxes on Trustee or Beneficiary. Grantor will pay any taxes,
except income taxes, imposed on Trustee or Beneficiary by reason of their
ownership of the Note or this Deed, provided that Beneficiary can require
payment of the Note in full
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within ninety (90) days if it shall be illegal for Grantor to pay any tax or if
the payment of such tax by Grantor would result in the violation of applicable
usury laws .
Section 1.09. Insurance. (a) Grantor will at all times (directly or
indirectly) provide, maintain and keep in force:
(i) policies of insurance insuring the Premises, Improvements and
Chattels against loss or damage by fire and lightning; against loss or
damage by other risks embraced by coverage of the type now known as All
Risk Replacement Cost Insurance with agreed amount endorsement, including
but not limited to riot and civil commotion, vandalism, malicious mischief
and theft; and against such other risks or hazards as Beneficiary from time
to time reasonably may designate in an amount sufficient to prevent
Beneficiary or Grantor from becoming a co-insurer under the terms of the
applicable policies, but in any event in an amount not less than 100% of
the then full replacement cost of the Improvements (exclusive of the cost
of excavations, foundations and footings below the lowest basement floor)
without deduction for physical depreciation;
(ii) policies of insurance insuring the Premises against the loss of
"rental value" of the buildings which constitute a part of the Improvements
on a "rented or vacant basis" arising out of the perils insured against
pursuant to clause (i) above in an amount equal to not less than one (1)
year's gross "rental value" of the Improvements. "Rental value" as used
herein is defined as the sum of (A) the total anticipated gross rental
income from tenant occupancy of such buildings as furnished and equipped,
(B) the amount of all charges which are the legal obligation of tenants and
which would otherwise be the obligation of Grantor and (C) the fair rental
value of any portion of such buildings which is occupied by Grantor.
Grantor hereby assigns the proceeds of such insurance to Beneficiary, to be
applied by Beneficiary in payment of the interest and principal on the
Note, insurance premiums, taxes, assessments and private impositions until
such time as the Improvements shall have been restored and placed in full
operation, at which time, provided Grantor is not then in default
hereunder, the balance of such insurance proceeds, if any, held by
Beneficiary shall be paid over to Grantor;
(iii) if all or part of the Premises are located in an area identified
by the Secretary of the United States Department of Housing and Urban
Development or by any applicable federal agency as a flood hazard area,
flood insurance in an amount at least equal to the maximum limit of
coverage available under the National Flood Insurance Act of 1968,
provided, however, that Beneficiary reserves the right to require flood
insurance in excess of said limit if such insurance is commercially
available up to the amount provided in clause (i) above;
(iv) during any period of restoration under this Section 1.09 or
Section 1.13, a policy or policies of builder's "all risk" insurance,
written on a Standard Builder's Risk Completed Value Form (100%
non-reporting), in an amount not less than the full insurable value of the
Premises against such risks (including,
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without limitation, fire and extended coverage, collapse and earthquake
coverage to agreed limits) as Beneficiary may reasonably request, in form
and substance acceptable to Beneficiary;
(v) a policy or policies of workers' compensation insurance as
required by workers' compensation insurance laws (including employer's
liability insurance, if requested by Beneficiary) covering all employees of
Grantor;
(vi) comprehensive liability insurance on an "occurrence" basis
against claims for "personal injury" liability, including, without
limitation, bodily injury, death or property damage liability, with a limit
of not less than $15,000,000 in the event of "personal injury" to any
number of persons or of damage to property arising out of one "occurrence".
Such policies shall name Beneficiary as additional insured by an
endorsement, and shall contain cross-liability and severability of interest
clauses, all satisfactory to Beneficiary; and
(vii) such other insurance (including, but not limited to, earthquake
insurance), and in such amounts, as may from time to time be reasonably
required by Beneficiary against the same or other insurable hazards.
Notwithstanding anything herein to the contrary, for so long as that
certain Management Agreement of even date herewith between Lessee and
Beneficiary remains in full force and effect (as the same may be amended, the
"Management Agreement"), the types and amounts of insurance required by the
Management Agreement to the extent inconsistent with those set forth above shall
govern and control Grantor's obligations in respect thereof.
(b) All policies of insurance required under this Section 1.09 shall be
issued by companies having Best's ratings and being otherwise reasonably
acceptable to Beneficiary, shall be subject to the reasonable approval of
Beneficiary as to amount, content, form and expiration date and, except for the
liability policies described in clauses (a)(v) and (vi) above, shall contain a
Non-Contributory Standard Mortgagee Clause and Lender's Loss Payable
Endorsement, or their equivalents, in favor of Beneficiary, and shall provide
that the proceeds thereof shall be payable to Beneficiary. Beneficiary shall be
furnished with the original of each policy required hereunder, which policies
shall provide that they shall not lapse, nor be modified or cancelled, without
thirty (30) days' written notice to Beneficiary. At least thirty (30) days prior
to expiration of any policy required hereunder, Grantor shall furnish
Beneficiary appropriate proof of issuance of a policy continuing in force the
insurance covered by the policy so expiring. Grantor shall furnish to
Beneficiary, promptly upon request, receipts or other satisfactory evidence of
the payment of the premiums on such insurance policies. In the event that
Grantor does not deposit with Beneficiary a new certificate or policy of
insurance with evidence of payment of premiums thereon at least thirty (30) days
prior to the expiration of any expiring policy, then Beneficiary may, but shall
not be obligated to, procure such insurance and pay the premiums therefor, and
Grantor agrees to repay to Beneficiary the premiums thereon promptly on demand,
together with interest thereon at the Default Rate.
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(c) Grantor hereby assigns to Beneficiary all proceeds of any insurance
required to be maintained by this Section 1.09 which Grantor may be entitled to
receive for loss or damage to the Premises, Improvements or Chattels. All such
insurance proceeds shall be payable to Beneficiary, and Grantor hereby
authorizes and directs any affected insurance company to make payment thereof
directly to Beneficiary subject, however, to clause (f) below. Grantor shall
give prompt notice to Beneficiary of any casualty, whether or not of a kind
required to be insured against under the policies to be provided by Grantor
hereunder, such notice to generally describe the nature and cause of such
casualty and the extent of the damage or destruction. Grantor may settle, adjust
or compromise any claims for loss, damage or destruction, regardless of whether
or not there are insurance proceeds available or whether any such insurance
proceeds are sufficient in amount to fully compensate for such loss or damage,
subject to Beneficiary's prior consent. Notwithstanding the foregoing,
Beneficiary shall have the right to join Grantor in settling, adjusting or
compromising any loss of $100,000 or more. Grantor hereby authorizes the
application or release by Beneficiary of any insurance proceeds under any policy
of insurance, subject to the other provisions hereof. The application or release
by Beneficiary of any insurance proceeds shall not cure or waive any default or
notice of default hereunder or invalidate any act done pursuant to such notice.
(d) In the event of the foreclosure hereof or other transfer of the title
to the Mortgaged Property in extinguishment, in whole or in part, of the
indebtedness secured hereby, all right, title and interest of Grantor in and to
any insurance policy, or premiums or payments in satisfaction of claims or any
other rights thereunder then in force, shall pass to the purchaser or grantee
notwithstanding the amount of any bid at such foreclosure sale. Nothing
contained herein shall prevent the accrual of interest as provided in the Note
on any portion of the principal balance due under the Note until such time as
insurance proceeds are actually received and applied to reduce the principal
balance outstanding.
(e) Grantor shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 1.09 unless Beneficiary is included thereon as a named insured with loss
payable to Beneficiary under standard mortgage endorsements of the character and
to the extent above described. Grantor shall promptly notify Beneficiary
whenever any such separate insurance is taken out and shall promptly deliver to
Beneficiary the policy or policies of such insurance.
(f) Any and all monies received as payment which Grantor may be entitled to
receive for loss or damage to the Premises, Improvements or Chattels under any
insurance maintained pursuant to this Section 1.09 (other than proceeds under
the policies required by clause (a)(ii) above) shall be paid over to Beneficiary
and, at Beneficiary's option, either applied to the prepayment of the Note and
all interest and other sums accrued and unpaid in respect thereof or disbursed
from time to time to Grantor in reimbursement of its costs and expenses incurred
in the restoration of the Improvements in accordance with Beneficiary's standard
construction lending practices, terms and conditions, in either case, less
Beneficiary's reasonable expenses for collecting and, if applicable, disbursing
the insurance proceeds, or otherwise incurred in connection
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therewith. Notwithstanding the provisions of the immediately preceding sentence,
provided no default exists hereunder, Beneficiary agrees to apply any such
proceeds received by it to the reimbursement of Grantor's costs of restoring the
Improvements. Advances of insurance proceeds shall be made to Grantor from time
to time in accordance with Beneficiary's standard construction lending
practices, terms and conditions; amounts not required for such purposes shall be
applied, at Beneficiary's option, to the prepayment of the Note and to interest
accrued and unpaid thereon in such order and proportions as Beneficiary may
elect. In no event shall Beneficiary be required to advance such proceeds to
Grantor unless Beneficiary shall have (i) received satisfactory evidence that
the funding/expiration dates of the commitment, if any, for the permanent
financing of the Improvements have been extended for such period of time as is
reasonably necessary to complete said restoration and (ii) reasonably determined
that the restoration of the Improvements can be completed by the Maturity Date
of the Note at a cost which does not exceed the amount of available insurance
proceeds or, in the event that such proceeds are reasonably determined by
Beneficiary to be inadequate, Beneficiary shall have received from Grantor a
cash deposit equal to the excess of said estimated cost of restoration over the
amount of said available proceeds. If the conditions for the advance of
insurance proceeds for restoration set forth in clauses (i) and (ii) above are
not satisfied within sixty (60) days of Beneficiary's receipt thereof or if the
actual restoration shall not have been commenced within such period, Beneficiary
shall have the option at any time thereafter to apply such insurance proceeds to
the payment of the Note and to interest accrued and unpaid thereon in such order
and proportions as Beneficiary may elect.
Section 1.10. Protective Advances by Beneficiary. If Grantor shall fail to
perform any of the covenants contained herein, Trustee or Beneficiary may make
advances to perform the same on its behalf and all sums so advanced shall be a
lien upon the Mortgaged Property and shall be secured hereby. Grantor will repay
on demand all sums so advanced on its behalf together with interest thereon at
the Default Rate. The provisions of this Section shall not prevent any default
in the observance of any covenant contained herein from constituting an Event of
Default.
Section 1.11. (a) Visitation and Inspection. Grantor will keep adequate
records and books of account in accordance with generally accepted accounting
principles and will permit each of Trustee and Beneficiary, by their agents,
accountants and attorneys, to visit and inspect the Mortgaged Property and
examine its records and books of account and make copies thereof or extracts
therefrom, and to discuss its affairs, finances and accounts with the officers
or general partners, as the case may be, of Grantor, at such reasonable times as
may be requested by Trustee or Beneficiary.
(b) Financial and Other Information. Grantor will deliver to Beneficiary
with reasonable promptness such financial information with respect to Grantor or
the Premises as Beneficiary may reasonably request from time to time. All
financial statements of Grantor shall be prepared in accordance with generally
accepted accounting principles and shall be accompanied by the certificate of a
principal financial or accounting officer or general partner, as the case may
be, of Grantor, dated within five (5) days of the delivery of such statements to
Beneficiary, stating that he or she knows of no Event of Default, nor of any
event which after notice or lapse of time or both would constitute an
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Event of Default, which has occurred and is continuing, or, if any such event or
Event of Default has occurred and is continuing, specifying the nature and
period of existence thereof and what action Grantor has taken or proposes to
take with respect thereto, and, except as otherwise specified, stating that
Grantor has fulfilled all of its obligations hereunder and otherwise in respect
of the Loan which are required to be fulfilled on or prior to the date of such
certificate.
(c) Estoppel Certificates. Grantor, within three (3) days upon request in
person or within five (5) days upon request by mail, will furnish a statement,
duly acknowledged, of the amount due whether for principal or interest on this
Deed and whether any offsets, counterclaims or defenses exist against the
indebtedness secured hereby.
Section 1.12. Maintenance of Premises and Improvements. Grantor will not
commit any waste on the Premises or make any change in the use of the Premises
which will in any way increase any ordinary fire or other hazard arising out of
construction or operation. Grantor will, or shall cause its Lessee to, at all
times, maintain the Improvements and Chattels in good operating order and
condition and will promptly make, from time to time, all repairs, renewals,
replacements, additions and improvements in connection therewith which are
needful or desirable to such end. The Improvements shall not be demolished or
substantially altered, nor shall any Chattels be removed without Beneficiary's
prior consent except where appropriate replacements free of superior title,
liens and claims are immediately made of value at least equal to the value of
the removed Chattels.
Section 1.13. Condemnation. Grantor, immediately upon obtaining knowledge
of the institution or pending institution of any proceedings for the
condemnation of the Premises or any portion thereof, will notify Trustee and
Beneficiary thereof. Trustee and Beneficiary may participate in any such
proceedings and may be represented therein by counsel of Beneficiary's
selection. Grantor from time to time will deliver to Beneficiary all instruments
requested by it to permit or facilitate such participation. In the event of such
condemnation proceedings, the award or compensation payable is hereby assigned
to and shall be paid to Beneficiary. Beneficiary shall be under no obligation to
question the amount of any such award or compensation and may accept the same in
the amount in which the same shall be paid. The proceeds of any award or
compensation so received shall, at Beneficiary's option, either be applied to
the prepayment of the Note and all interest and other sums accrued and unpaid in
respect thereof at the rate of interest provided therein regardless of the rate
of interest payable on the award by the condemning authority, or be disbursed to
Grantor from time to time for restoration of the Improvements in accordance with
Beneficiary's standard construction lending practices, terms and conditions, in
either case, less Beneficiary's reasonable expenses for collecting and, if
applicable, disbursing the award, or otherwise incurred in connection therewith.
Notwithstanding the provisions of the immediately preceding sentence, provided
no monetary or bankruptcy related default or any Event of Default exists
hereunder, Beneficiary agrees to apply any such condemnation award proceeds
received by it to the reimbursement of Grantor's costs of restoring the
Improvements. Advances of condemnation award proceeds shall be made to Grantor
from time to time in accordance
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with Beneficiary's standard construction lending practices, terms and
conditions; amounts not required for such purposes shall be applied, at
Beneficiary's option, to the prepayment of the Note and to interest accrued and
unpaid thereon (at the rate of interest provided therein regardless of the rate
of interest payable on the award by the condemning authority) in such order and
proportions as Beneficiary may elect.
Section 1.14. Leases. (a) Grantor will not (i) execute an assignment of the
rents or any part thereof from the Premises without Beneficiary's prior consent,
(ii) except where the lessee is in default thereunder, terminate or consent to
the cancellation or surrender of any lease of the Premises or of any part
thereof, now existing or hereafter to be made, having an unexpired term of one
(1) year or more, provided, however, that any lease may be cancelled if promptly
after the cancellation or surrender thereof a new lease is entered into with a
new lessee having a credit standing at least equivalent to that of the lessee
whose lease was cancelled, on substantially the same terms as the terminated or
cancelled lease, (iii) modify any such lease so as to shorten the unexpired term
thereof or so as to decrease, waive or compromise in any manner the amount of
the rents payable thereunder or materially expand the obligations of the lessor
thereunder, (iv) accept prepayments of more than one month of any installments
of rents to become due under such leases, except prepayments in the nature of
security for the performance of the lessees thereunder, (v) modify, release or
terminate any guaranties of any such lease or (vi) in any other manner impair
the value of the Mortgaged Property or the security hereof.
(b) Grantor will not execute any lease of all or a substantial portion of
the Premises except for actual occupancy by the lessee thereunder or its
property manager, and will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or portions thereof now or hereafter existing, on
the part of the lessor thereunder to be kept and performed and will at all times
do all things reasonably necessary to compel performance by the lessee under
each lease of all obligations, covenants and agreements by such lessee to be
performed thereunder. If any of such leases provide for the giving by the lessee
of certificates with respect to the status of such leases, Grantor shall
exercise its right to request such certificates within five (5) days of any
demand therefor by Beneficiary and shall deliver copies thereof to Beneficiary
promptly upon receipt.
(c) In the event of the enforcement by Trustee or Beneficiary of the
remedies provided for hereby or by law, the lessee under each of the leases of
the Premise will, upon request of any person succeeding to the interest of
Grantor as a result of such enforcement, automatically become the lessee of said
successor in interest, without change in the terms or other provisions of such
lease, provided, however, that said successor in interest shall not be bound by
(i) any payment of rent or additional rent for more than one (1) month in
advance, except prepayments in the nature of security for the performance by
said lessee of its obligations under said lease or (ii) any amendment or
modification of the lease made without the consent of Beneficiary or such
successor in interest. Each lease shall also provide that, upon request by said
successor in interest, such lessee shall execute and deliver an instrument or
instruments confirming such attornment.
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Section 1.15. Premises Documents. Grantor shall (a) do all things
reasonably necessary to cause the due compliance and faithful performance by the
other parties to the Premises Documents with and of all obligations and
agreements by such other parties to be complied with and performed thereunder,
except for any continuing failure of the Premises to comply with the Premises
Documents of the date of the acquisition hereof from Beneficiary or its
affiliate, and (b) deliver promptly to Beneficiary copies of any notices which
it gives or receives under any of the Premises Documents.
Section 1.16. Trust Fund; Lien Laws. Grantor will receive the advances
secured hereby and will hold the right to receive such advances as a trust fund
to be applied first for the purpose of paying the costs of improvements on the
Premises and will apply the same first to the payment of such costs before using
any part of the total of the same for any other purpose. Grantor will indemnify
and hold Trustee and Beneficiary harmless against any loss or liability, cost or
expense, including, without limitation, any judgments, attorney's fees, costs of
appeal bonds and printing costs, arising out of or relating to any proceeding
instituted by any claimant alleging a violation by Grantor of any applicable
lien law.
Section 1.17. Expenses of Trustee. Grantor shall pay all costs, fees and
expenses of Trustee, its agents and counsel in connection with the performance
of its duties hereunder.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.01. Events of Default and Certain Remedies. If one or more of the
following Events of Default shall happen, that is to say:
(a) if (i) default shall be made in the payment of any principal,
interest, fees or other sums under the Note, in any such case, when and as
the same shall become due and payable, whether at maturity or by
acceleration or as part of any payment or prepayment or otherwise, in each
case, as herein or in the Note provided, and such default shall have
continued for a period of ten (10) days or (ii) default shall be made in
the payment of any tax or other charge required by Section 1.07 to be paid
and said default shall have continued for a period of twenty (20) days; or
(b) if default shall be made in the due observance or performance of
any covenant, condition or agreement in the Note, this Deed or in any other
document executed or delivered to Beneficiary in connection with the Loan,
and such default shall have continued for a period of thirty (30) days
after notice thereof shall have been given to Grantor by Beneficiary, or,
in the case of such other documents, such shorter grace period, if any, as
may be provided for therein; or
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(c) if any representation or warranty made by Grantor in Section 1.01
shall be incorrect, or if any other representation or warranty made to
Beneficiary in this Deed, or in any other document, certificate or
statement executed or delivered to Beneficiary in connection with the Loan
shall be incorrect in any material respect when made or remade; or
(d) if by order of a court of competent jurisdiction, a trustee,
receiver or liquidator of the Mortgaged Property or any part thereof, or of
Grantor shall be appointed and such order shall not be discharged or
dismissed within sixty (60) days after such appointment; or
(e) if Grantor shall file a petition in bankruptcy or for an
arrangement or for reorganization pursuant to the Federal Bankruptcy Act or
any similar federal or state law, or if, by decree of a court of competent
jurisdiction, Grantor shall be adjudicated a bankrupt, or be declared
insolvent, or shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts generally as they
become due, or shall consent to the appointment of a receiver or receivers
of all or any part of its property; or
(f) if any of the creditors of Grantor shall file a petition in
bankruptcy against Grantor or for reorganization of Grantor pursuant to the
Federal Bankruptcy Act or any similar federal or state law, and if such
petition shall not be discharged or dismissed within sixty (60) days after
the date on which such petition was filed; or
(g) if final judgment for the payment of money shall be rendered
against Grantor and Grantor shall not discharge the same or cause it to be
discharged within sixty (60) days from the entry thereof, or shall not
appeal therefrom or from the order, decree or process upon which or
pursuant to which said judgment was granted, based or entered, and secure a
stay of execution pending such appeal; or
(h) (Intentionally Omitted)
(i) if there shall occur a default which is not cured within the
applicable grace period, if any, under any mortgage, deed of trust or other
security instrument covering all or part of the Mortgaged Property
regardless of whether any such mortgage, deed of trust or other security
instrument is prior or subordinate hereto; it being further agreed by
Grantor that an Event of Default hereunder shall constitute an Event of
Default under any such mortgage, deed of trust or other security instrument
held by or for the benefit of Beneficiary; or
(j) if there shall occur a default which is not cured within the
applicable grace period, if any, under any of the Premises Documents,
except for any continuing failure of the Premises to comply with the
Premises Documents of the date of the acquisition hereof from Beneficiary
or its affiliate; or if any of the
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Premises Documents is amended, modified, supplemented or terminated without
Beneficiary's prior consent; or
(k) if Grantor shall transfer, or agree to transfer (or suffer or
permit the transfer or agreement to transfer), in any manner, either
voluntarily or involuntarily, by operation of law or otherwise, all or any
portion of the Mortgaged Property, or any interest or rights therein
(including air or development rights) without, in any such case,
Beneficiary's prior consent. As used in this clause, "transfer" shall
include, without limitation, any sale, assignment, lease (other than to
Lessee) or conveyance except leases for occupancy subordinate hereto and to
all advances made and to be made hereunder or, in the event Grantor (or a
general partner or co-venturer thereof) is a partnership, joint venture,
limited liability company, trust or closely-held corporation, the sale,
conveyance, transfer or other disposition of more than 10%, in the
aggregate, of any class of the issued and outstanding capital stock of such
closely-held corporation or of the beneficial interest of such partnership,
venture, limited liability company or trust, or a change of any general
partner, joint venturer, member or beneficiary, as the case may be. In the
event Grantor is a limited partnership, and so long as a limited partner
has contributed to (or remains personally liable for) the present and
future partnership capital contributions required of such limited partner
by the partnership agreement, such partner may sell, convey, devise,
transfer or dispose of all or a part of his limited partnership interest to
his spouse, children, grandchildren or a family trust in which his spouse,
children or grandchildren are sole beneficiaries; or
(l) if Grantor shall encumber, or agree to encumber, in any manner,
either voluntarily or involuntarily, by operation of law or otherwise, all
or any portion of the Mortgaged Property, or any interest or rights therein
(including air or development rights) without, in any such case,
Beneficiary's prior consent. As used in this clause, "encumber" shall
include, without limitation, the placing or permitting the placing of any
mortgage, deed of trust, assignment of rents or other security device.
(Beneficiary may grant or deny its consent under this clause and the
immediately preceding clause in its sole discretion and, if consent should
be given, any such transfer or encumbrance shall be subject hereto and to
any other documents which evidence or secure the Loan, and, if a transfer,
any such transferee shall assume all of Grantor's obligations hereunder and
thereunder and agree to be bound by all provisions and perform all
obligations contained herein and therein; consent to one such transfer or
encumbrance shall not be deemed to be a waiver of the right to require
consent to future or successive transfers or encumbrances);
then and in every such case:
I. During the continuance of any such Event of Default, Beneficiary,
by notice to Grantor, may declare the entire principal of the Note then
outstanding (if not then due and payable), and all accrued and unpaid
interest and other sums in respect thereof, to be due and payable
immediately, and upon any such
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declaration the principal of the Note and said accrued and unpaid interest
and other sums shall become and be immediately due and payable, anything
herein or in the Note (other than Section 4.08 hereof, the provisions
thereof limiting interest payable thereunder to the maximum amount
permitted by applicable law) to the contrary notwithstanding.
II. During the continuance of any such Event of Default, Trustee or
Beneficiary personally, or by their agents or attorneys, may enter into and
upon all or any part of the Premises, and each and every part thereof, and
are each hereby given a right and license and appointed Grantor's
attorney-in-fact and exclusive agent to do so, and may exclude Grantor, its
agents and servants wholly therefrom; and having and holding the same, may
use, operate, manage and control the Premises and conduct the business
thereof, either personally or by their superintendents, managers, agents,
servants, attorneys or receivers; and upon every such entry, Trustee or
Beneficiary, at the expense of the Mortgaged Property, from time to time,
either by purchase, repairs or construction, may maintain and restore the
Mortgaged Property, whereof they shall become possessed as aforesaid; and
likewise, from time to time, at the expense of the Mortgaged Property,
Trustee or Beneficiary may make all necessary or proper repairs, renewals
and replacements and such useful alterations, additions, betterments and
improvements thereto and thereon as Beneficiary may seem advisable; and in
every such case Trustee or Beneficiary shall have the right to manage and
operate the Mortgaged Property and to carry on the business thereof and
exercise all rights and powers of Grantor with respect thereto either in
the name of Grantor or otherwise as Beneficiary shall deem best; and
Trustee or Beneficiary shall be entitled to collect and receive the Rents
and every part thereof, all of which shall for all purposes constitute
property of Grantor; and in furtherance of such right Beneficiary may
collect the rents payable under all leases of the Premises directly from
the lessees thereunder upon notice to each such lessee that an Event of
Default exists hereunder accompanied by a demand on such lessee for the
payment to Beneficiary of all rents due and to become due under its lease,
and Grantor FOR THE BENEFIT OF BENEFICIARY AND EACH SUCH LESSEE hereby
covenants and agrees that the lessee shall be under no duty to question the
accuracy of Beneficiary's statement of default and shall unequivocally be
authorized to pay said rents to Beneficiary without regard to the truth of
Beneficiary's statement of default and notwithstanding notices from Grantor
disputing the existence of an Event of Default such that the payment of
rent by the lessee to Beneficiary pursuant to such a demand shall
constitute performance in full of the lessee's obligation under the lease
for the payment of rents by the lessee to Grantor; and after deducting the
expenses of conducting the business thereof and of all maintenance,
repairs, renewals, replacements, alterations, additions, betterments and
improvements and amounts necessary to pay for taxes, assessments, insurance
and prior or other proper charges upon the Mortgaged Property or any part
thereof, as well as just and reasonable compensation for the services of
Trustee and Beneficiary and for all attorneys, counsel, agents, clerks,
servants and other employees by them engaged and employed, Trustee or
Beneficiary, as the case may be, shall apply the moneys
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arising as aforesaid, first, to the payment of the principal of the Note
and the interest thereon, when and as the same shall become payable and in
such order and proportions as Beneficiary shall elect and second, to the
payment of any other sums required to be paid by Grantor hereunder.
III. Trustee or Beneficiary, as the case may be, with or without
entry, personally or by their agents or attorneys, insofar as applicable,
may:
(1) sell the Mortgaged Property and all estate, right, title and
interest, claim and demand therein, at public auction at such time and
place, and upon such terms and conditions as Beneficiary may deem
expedient or as may be required or permitted by applicable law, having
first given such notice prior to the sale of such time, place and
terms by publication in one (1) or more newspapers published or having
a general circulation in the county or counties of the state in which
the Mortgaged Property is located as may be required or permitted by
law and by such other methods, if any, as Trustee or Beneficiary may
deem desirable or as may be required or permitted by applicable law.
In the event of any sale of all or part of the Mortgaged Property
under the terms hereof, Grantor shall pay (in addition to taxable
costs) a reasonable fee to Trustee which shall be in lieu of all other
fees and commission permitted by statute or custom to be paid,
reasonable attorneys' fees and all expenses incurred in obtaining or
continuing abstracts of title for the purpose of any such sale; or
(2) institute proceedings for the complete or partial foreclosure
hereof; or
(3) take such steps to protect and enforce their rights whether
by action, suit or proceeding in equity or at law for the specific
performance of any covenant, condition or agreement in the Note or
herein, or in aid of the execution of any power herein granted, or for
any foreclosure hereunder, or for the enforcement of any other
appropriate legal or equitable remedy or otherwise as Trustee or
Beneficiary shall elect.
IV. If Grantor shall default hereunder, Grantor hereby authorizes and
empowers Trustee, at the request of Beneficiary (which request shall be
presumed made), at any time during the continuance of any default, to sell
all or any portion of the Mortgaged Property, at public auction, to the
highest bidder, for cash, in the area at the County Courthouse of the
county in Texas in which the Mortgaged Property or any part thereof is
situated which has been designated by the commissioner's court of such
county as the area where such sales are to take place (as such designation
is recorded in the real property records of such county) or, if no such
area has been designated by the commissioner's court of such county, in the
area at such County Courthouse which has been designated in the notice of
sale, between the hours of 10:00 o'clock A.M. and 4:00 o'clock P.M. on the
first Tuesday of any month, after giving notice of the time, place and
terms of said
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sale, and of the property to be sold as follows or in any other manner now
or hereafter required or permitted by applicable law:
Notice of such proposed sale shall be given by posting written notice
thereof at least twenty-one (21) days preceding the date of the sale
at the Courthouse door of the county in which the sale is to be made,
and by filing a copy of the notice in the office of the county clerk
of the county in which the sale is to be made at least twenty-one (21)
days preceding the date of the sale, and if the property to be sold is
situated in more than one county, one notice shall be posted at the
Courthouse door of each county in which the property to be sold is
situated and one copy of the notice shall be filed in the office of
the county clerk in each county in which the property to be sold is
situated (such notice shall designate the county where such property
will be sold). In addition, Beneficiary shall, at least twenty-one
(21) days preceding the date of sale, serve written notice of the
proposed sale by certified mail on each debtor obligated to pay the
Indebtedness secured hereby according to the records of Beneficiary.
Service of such notice shall be completed upon deposit of the notice,
enclosed in a postpaid wrapper, properly addressed to such debtor at
the most recent address as shown by the records of Beneficiary, in a
post office or official depository under the care and custody of the
United States Postal Service. The affidavit of any person having
knowledge of the facts to the effect that such service was completed
shall be prima facie evidence of the fact of service.
Any sale of the Mortgaged Property covered by this Deed may be conducted in the
manner provided in this Deed without the necessity for Trustee to have physical
or constructive possession of the Mortgaged Property (Grantor hereby covenanting
and agreeing to deliver to Trustee any portion of the Mortgaged Property not
actually or constructively possessed by Trustee immediately upon demand by
Trustee) and the title to and right of possession of that property will pass to
the purchaser as completely as if it had been actually present and delivered to
purchaser at the sale.
Any notice that is required or permitted to be given to Grantor may be
addressed to Grantor at Grantor's address as stated above. Any notice that is to
be given by certified mail to any other debtor may, if the address for such
other debtor is not shown by the records of Beneficiary, be addressed to such
other debtor at the address of Grantor as is shown by the records of
Beneficiary. Notwithstanding the foregoing provisions of this paragraph, notice
of such sale given in accordance with the requirements of the applicable law of
the State of Texas in effect at the time of such sale shall constitute
sufficient notice of such sale. Grantor hereby authorizes and empowers Trustee
to sell all or any portion of the Mortgaged Property, together or in lots or
parcels, as Trustee may deem expedient, and to execute and deliver to the
purchaser or purchasers of such property, good and sufficient deeds of
conveyance of fee simple title with covenants of general warranty made on behalf
of Grantor. In no event shall Trustee be required to exhibit, present or display
at any such sale, any of the personalty described herein to be sold at such
sale. Payment of the purchase price to Trustee shall satisfy the obligation of
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the purchaser at such sale therefor, and such purchaser shall not be bound to
look after the application thereof. The sale or sales by Trustee of less than
the whole of the Mortgaged Property shall not exhaust the power of sale herein
granted, and Trustee is specifically empowered to make successive sale or sales
under such power until the whole of the Mortgaged Property shall be sold; and if
the proceeds of such sale or sales of less than the whole of such Mortgaged
Property shall be less than the aggregate of the Indebtedness secured hereby and
the expense of executing this trust, this Deed and the lien, security interest
and assignment hereof shall remain in full force and effect as to the unsold
portion of the Mortgaged Property just as though no sale or sales had been made;
provided, however, that Grantor shall never have any right to require the sale
or sales of less than the whole of the Mortgaged Property, but Beneficiary shall
have the right, at its sole election, to request Trustee to sell less than the
whole of the Mortgaged Property. If default is made hereunder, the holder of the
Indebtedness or any part thereof on which the payment is delinquent shall have
the option to proceed with foreclosure in satisfaction of such item either
through judicial proceedings or by directing Trustee to proceed as if under a
full foreclosure, conducting the sale as herein provided without declaring the
entire Indebtedness secured hereby due, and if sale is made because of default
of an installment, or a part of an installment, such sale may be made subject to
the unmatured part of the Note and other Indebtedness secured by this Deed; and
it is agreed that such sale, if so made, shall not in any manner affect the
unmatured part of the Indebtedness secured by this Deed, but as to such
unmatured part, this Deed shall remain in full force and effect as though no
sale had been made under the provisions of this paragraph. Several sales may be
made hereunder without exhausting the right of sale for any unmatured part of
the Indebtedness secured hereby. The provisions of this paragraph IV shall
control all other conflicting provisions of this deed with respect to the sale
of the Mortgaged Property pursuant to this Deed.
Section 2.02. Other Matters Concerning Sales. (a) Trustee or Beneficiary
may adjourn from time to time any sale by it to be made hereunder or by virtue
hereof by announcement at the time and place appointed for such sale or for such
adjourned sale or sales; and, except as otherwise provided by any applicable
provision of law, Trustee or Beneficiary, as the case may be, without further
notice or publication, may make such sale at the time and place to which the
same shall be so adjourned.
(b) Upon the completion of any sale or sales made by Trustee or
Beneficiary, as the case may be, under or by virtue of this Article II, Trustee,
or an officer of any court empowered to do so, shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient instrument or instruments
conveying, assigning and transferring all estate, right, title and interest in
and to the property and rights sold. Trustee is hereby appointed the true and
lawful attorney irrevocable of Grantor, in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the Mortgaged
Property and rights so sold and for that purpose Trustee may execute all
necessary instruments of conveyance, assignment and transfer, and may substitute
one or more persons with like power, Grantor hereby ratifying and confirming all
that its said attorney or such substitute or substitutes shall lawfully do by
virtue hereof. Nevertheless, Grantor, if requested by Trustee or Beneficiary,
shall ratify and confirm any such sale or sales by executing and delivering to
Trustee or to such purchaser or purchasers all such
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instruments as may be advisable, in the judgment of Trustee or Beneficiary, for
the purpose, and as may be designated in such request. Any such sale or sales
made under or by virtue of this Article II, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale, shall operate to divest all the estate, right,
title, interest, claim and demand whatsoever, whether at law or in equity, of
Grantor in and to the properties and rights so sold, and shall be a perpetual
bar both at law and in equity against Grantor and against any and all persons
claiming or who may claim the same, or any part thereof from, through or under
Grantor.
(c) In the event of any sale or sales made under or by virtue of this
Article II (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale), the entire principal of, and interest and other sums on, the Note, if not
previously due and payable, and all other sums required to be paid by Grantor
pursuant hereto, immediately thereupon shall, anything in any of said documents
(other than Section 4.08 hereof) to the contrary notwithstanding, become due and
payable.
(d) The purchase money, proceeds or avails of any sale or sales made under
or by virtue of this Article II, together with any other sums which then may be
held by Trustee or Beneficiary hereunder, whether under the provisions of this
Article II or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of such sale,
including reasonable compensation to Trustee and Beneficiary, their agents
and counsel, and of any judicial proceedings wherein the same may be made,
and of all expenses, liabilities and advances made or incurred by Trustee
hereunder, together with interest at the Default Rate on all advances made
by Trustee, and of all taxes, assessments or other charges, except any
taxes, assessments or other charges subject to which the Mortgaged Property
shall have been sold.
Second: To the payment of the whole amount then due, owing or unpaid
upon the Note for principal and interest, with interest on the unpaid
principal at the Default Rate from and after the happening of any Event of
Default described in clause (a) of Section 2.01 from the due date of any
such payment of principal until the same is paid, in such order and amounts
as Beneficiary may elect.
Third: To the payment of any other sums required to be paid by Grantor
pursuant to any provision hereof or of the Note, including all expenses,
liabilities and advances made or incurred by Beneficiary hereunder or in
connection with the enforcement hereof, together with interest at the
Default Rate on all such advances.
Fourth: To the payment of the surplus, if any, to whomsoever may be
lawfully entitled to receive the same.
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(e) Upon any sale or sales made under or by virtue of this Article II,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Beneficiary may bid for and acquire the Mortgaged Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase price
by crediting upon the indebtedness secured hereby the net sales price after
deducting therefrom the expenses of the sale and the costs of the action and any
other sums which Trustee or Beneficiary are authorized to deduct hereunder.
Section 2.03. Payment of Amounts Due. (a) In case an Event of Default
described in clause (a) of Section 2.01 shall have happened and be continuing,
then, upon demand of Beneficiary, Grantor will pay to Beneficiary the whole
amount which then shall have become due and payable on the Note, for principal
or interest or both, as the case may be, and after the happening of said Event
of Default will also pay to Beneficiary interest at the Default Rate on the then
unpaid principal of the Note, and the sums required to be paid by Grantor
pursuant to any provision hereof, and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to Trustee and Beneficiary, their agents and counsel and
any expenses incurred by Trustee or Beneficiary hereunder. In the event Grantor
shall fail forthwith to pay all such amounts upon such demand, Beneficiary shall
be entitled and empowered to institute such action or proceedings at law or in
equity as may be advised by its counsel for the collection of the sums so due
and unpaid, and may prosecute any such action or proceedings to judgment or
final decree, and may enforce any such judgment or final decree against Grantor
and collect, out of the property of Grantor wherever situated, as well as out of
the Mortgaged Property, in any manner provided by law, moneys adjudged or
decreed to be payable.
(b) Beneficiary shall be entitled to recover judgment as aforesaid either
before, after or during the pendency of any proceedings for the enforcement of
the provisions hereof; and the right of Beneficiary to recover such judgment
shall not be affected by any entry or sale hereunder, or by the exercise of any
other right, power or remedy for the enforcement of the provisions hereof, or
the foreclosure of the lien hereof; and in the event of a sale of the Mortgaged
Property, and of the application of the proceeds of sale, as herein provided, to
the payment of the debt hereby secured, Beneficiary shall be entitled to enforce
payment of, and to receive all amounts then remaining due and unpaid upon, the
Note, and to enforce payment of all other charges, payments and costs due
hereunder or otherwise in respect of the Loan, and shall be entitled to recover
judgment for any portion of the debt remaining unpaid, with interest at the
Default Rate. In case of proceedings against Grantor in insolvency or bankruptcy
or any proceedings for its reorganization or involving the liquidation of its
assets, then Beneficiary shall be entitled to prove the whole amount of
principal, interest and other sums due upon the Note to the full amount thereof,
and all other payments, charges and costs due hereunder or otherwise in respect
of the Loan, without deducting therefrom any proceeds obtained from the sale of
the whole or any part of the Mortgaged Property, provided, however, that in no
case shall Beneficiary receive, from the aggregate amount of the proceeds of the
sale of the Mortgaged Property and the distribution from the estate
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of Grantor, a greater amount than such principal and interest and such other
payments, charges and costs.
(c) No recovery of any judgment by Beneficiary and no levy of an execution
under any judgment upon the Mortgaged Property or upon any other property of
Grantor shall affect in any manner or to any extent, the lien hereof upon the
Mortgaged Property or any part thereof, or any liens, rights, powers or remedies
of Trustee or Beneficiary hereunder, but such liens, rights, powers and remedies
of Trustee or Beneficiary shall continue unimpaired as before.
(d) Any moneys thus collected by Beneficiary under this Section 2.03 shall
be applied by Beneficiary in accordance with the provisions of clause (d) of
Section 2.02.
Section 2.04. Actions; Receivers. After the happening of any Event of
Default and immediately upon the commencement of any action, suit or other legal
proceedings by Trustee or Beneficiary to obtain judgment for the principal of,
or interest on, the Note and other sums required to be paid by Grantor pursuant
to any provision hereof, or of any other nature in aid of the enforcement of the
Note or hereof, Grantor will (a) waive the issuance and service of process and
enter its voluntary appearance in such action, suit or proceeding and (b) if
required by Beneficiary, consent to the appointment of a receiver or receivers
of all or part of the Mortgaged Property and of any or all of the Rents in
respect thereof. After the happening of any Event of Default and during its
continuance, or upon the commencement of any proceedings to foreclose this Deed
or to enforce the specific performance hereof or in aid thereof or upon the
commencement of any other judicial proceeding to enforce any right of Trustee or
Beneficiary, Trustee or Beneficiary shall be entitled, as a matter of right, if
they shall so elect, without the giving of notice to any other party and without
regard to the adequacy or inadequacy of any security for the indebtedness
secured hereby, forthwith either before or after declaring the unpaid principal
of the Note to be due and payable, to the appointment of such a receiver or
receivers.
Section 2.05. Beneficiary's Right to Possession. Notwithstanding the
appointment of any receiver, liquidator or trustee of Grantor, or of any of its
property, or of the Mortgaged Property or any part thereof, Trustee and
Beneficiary shall be entitled to retain possession and control of all property
now or hereafter held hereunder.
Section 2.06. Remedies Cumulative. No remedy herein conferred upon or
reserved to Trustee or Beneficiary is intended to be exclusive of any other
remedy or remedies, and each and every such remedy shall be cumulative, and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity or by statute. No delay or omission of Trustee or
Beneficiary to exercise any right or power accruing upon any Event of Default
shall impair any such right or power, or shall be construed to be a waiver of
any such Event of Default or any acquiescence therein; and every power and
remedy given hereby to Trustee or Beneficiary may be exercised from time to time
as often as may be deemed by them expedient. Nothing herein or in the Note shall
affect the obligation of Grantor to pay the principal of, and interest and other
sums on, the Note in the manner and at the time and place therein respectively
expressed.
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Section 2.07. Moratorium Laws; Right of Redemption. Grantor will not at any
time insist upon, or plead, or in any manner whatever claim or take any benefit
or advantage of any stay or extension or moratorium law, any exemption from
execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance hereof, nor claim, take or insist upon any benefit or
advantage of any law now or hereafter in force providing for the valuation or
appraisal of the Mortgaged Property, or any part thereof, prior to any sale or
sales thereof which may be made pursuant to any provision herein, or pursuant to
the decree, judgment or order of any court of competent jurisdiction; nor, after
any such sale or sales, claim or exercise any right under any statute heretofore
or hereafter enacted to redeem the property so sold or any part thereof and
Grantor hereby expressly waives all benefit or advantage of any such law or
laws, and covenants not to hinder, delay or impede the execution of any power
herein granted or delegated to Trustee or Beneficiary, but to suffer and permit
the execution of every power as though no such law or laws had been made or
enacted. Grantor, for itself and all who may claim under it, waives, to the
extent that it lawfully may, all right to have the Mortgaged Property marshaled
upon any foreclosure hereof.
Section 2.08. Intentionally Omitted.
Section 2.09. Beneficiary's Rights Concerning Application of Amounts
Collected. Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default, Beneficiary may apply, to the extent
permitted by law, any amount collected hereunder to principal, interest or any
other sum due under the Note or otherwise in respect of the Loan in such order
and amounts, and to such obligations, as Beneficiary shall elect in its sole and
absolute discretion.
ARTICLE III
CONCERNING TRUSTEE
Section 3.01. Trustee's Performance. Trustee, by its acceptance hereof,
covenants faithfully to perform and fulfill the trusts herein created, being
liable, however, only for willful negligence or misconduct, and hereby waives
any statutory fee and agrees to accept reasonable compensation, in lieu thereof,
for any services rendered by it in accordance with the terms hereof.
Section 3.02. Resignation by Trustee. Trustee may resign at any time upon
giving thirty (30) days' notice to Grantor and Beneficiary.
Section 3.03. Removal of Trustee; Successors. Beneficiary may remove
Trustee at any time or from time to time and select a successor trustee. In the
event of the death, removal, resignation or refusal or inability to act of
Trustee, or in its sole discretion for any reason whatsoever, Beneficiary may,
without notice and without specifying any reason therefor and without applying
to any court, select and appoint a successor Trustee, and all powers, rights,
duties and authority of Trustee, as aforesaid, shall thereupon become vested in
such successor. In such connection, Beneficiary may, on its and
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Grantor's behalf, execute, acknowledge and record an instrument or agreement of
such substitution, and Grantor hereby irrevocably appoints Beneficiary as its
attorney-in-fact, with full power of substitution, to do so. Such substitute
trustee shall not be required to give bond for the faithful performance of its
duties unless required by Beneficiary.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Assignment of Rents. This Deed is intended to constitute a
present, absolute and irrevocable assignment of all of the Rents now or
hereafter accruing, and Grantor, without limiting the generality of the Granting
Clause hereof, specifically hereby presently, absolutely and irrevocably assigns
all of the Rents now or hereafter accruing to Beneficiary. The aforesaid
assignment shall be effective immediately upon the execution hereof and is not
conditioned upon the occurrence of any Event of Default hereunder or any other
contingency or event, provided, however, that Beneficiary hereby grants to
Grantor the right and license to collect and receive the Rents as they become
due, and not in advance, so long as no Event of Default exists hereunder.
Immediately upon the occurrence of any such Event of Default, the foregoing
right and license shall be automatically terminated and of no further force or
effect. Nothing contained in this Section or elsewhere herein shall be construed
to make Beneficiary a mortgagee in possession unless and until Beneficiary
actually takes possession of the Mortgaged Property, nor to obligate Beneficiary
to take any action or incur any expense or discharge any duty or liability under
or in respect of any leases or other agreements relating to the Mortgaged
Property or any part thereof.
Section 4.02. Security Agreement.
This Deed constitutes a security agreement under the applicable Uniform
Commercial Code with respect to the Chattels and such other of the Mortgaged
Property which is personal property. In addition to the rights and remedies
granted to Beneficiary by other applicable law or hereby, Beneficiary shall have
all of the rights and remedies with respect to the Chattels and such other
personal property as are granted to a secured party under the applicable Uniform
Commercial Code. Upon Beneficiary's request after an Event of Default, Grantor
shall promptly and at its expense assemble the Chattels and such other personal
property and make the same available to Beneficiary at a convenient place
acceptable to Beneficiary. Grantor, after an Event of Default, shall pay to
Beneficiary on demand, with interest at the Default Rate, any and all expenses,
including attorneys' fees, incurred by Beneficiary in protecting its interest in
the Chattels and such other personal property and in enforcing its rights with
respect thereto. Any notice of sale, disposition or other intended action by
Beneficiary with respect to the Chattels and such other personal property sent
to Grantor in accordance with the provisions hereof at least five (5) days prior
to such action shall constitute reasonable notice to Grantor. The proceeds of
any such sale or disposition, or any part thereof, may be applied by Beneficiary
to the payment of the indebtedness secured hereby in such order and proportions
as Beneficiary in its discretion shall deem appropriate. To the extent Grantor
may lawfully do so and without limiting any rights and/or privileges herein
granted to
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Beneficiary, Grantor agrees that Beneficiary and/or Trustee and any successor
Trustee may dispose of any or all of the Chattels at the same time and place and
after giving the same notices provided in this Deed in connection with a
non-judicial foreclosure sale under the terms and conditions set forth in
Article II, Section 2.01, III or IV, of this Deed. In this connection, Grantor
agrees that the sale may be conducted by Trustee or successor Trustee; that the
sale of the real estate and improvements described in this Deed and the Chattels
or any part thereof, may be sold separately or together; and that in the event
the Premises and the Chattels or any part thereof are sold together, Beneficiary
will not be obligated to allocate the consideration received as between the
Premises and the Chattels.
Section 4.03. Application of Certain Payments. In the event that all or any
part of the Mortgaged Property is encumbered by one or more deeds of trust held
by or for the benefit of Beneficiary, Grantor hereby irrevocably authorizes and
directs Beneficiary to apply any payment received by Beneficiary in respect of
any note secured hereby or by any other such deed of trust to the payment of
such of said notes as Beneficiary shall elect in its sole and absolute
discretion, and Beneficiary shall have the right to apply any such payment in
reduction of principal and/or interest and in such order and amounts as
Beneficiary shall elect in its sole and absolute discretion without regard to
the priority of the deed of trust securing the note so repaid or to contrary
directions from Grantor or any other party.
Section 4.04. Severability. In the event any one or more of the provisions
contained herein or in the Note 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 hereof, but this Deed
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein or therein.
Section 4.05. Modifications and Waivers in Writing. No provision hereof may
be changed, waived, discharged or terminated orally or by any other means except
an instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought. Any agreement hereafter made
by Grantor and Beneficiary relating hereto shall be superior to the rights of
the holder of any intervening or subordinate lien or encumbrance.
Section 4.06. Notices. All notices, demands, consents, approvals and
statements required or permitted hereunder shall be in writing and shall be
deemed to have been sufficiently given or served for all purposes when presented
personally, three (3) days after mailing by registered or certified mail,
postage prepaid, or one (1) day after delivery to a nationally recognized
overnight courier service providing evidence of the date of delivery, if to
Grantor at its address stated above, with a copy to Thomas E. Davis, Esq.,
Jenkens & Gilchrist, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799, and
if to Beneficiary at its address stated above, or at such other address of which
a party shall have notified the party giving such notice in accordance with the
provisions of this Section.
Section 4.07. 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
27
<PAGE>
to the benefit of, the successors and assigns of Grantor, the successors in
trust of Trustee and the endorsees, transferees, successors and assigns of
Beneficiary.
Section 4.08. Limitation on Interest. Anything herein or in the Note to the
contrary notwithstanding, the obligations of Grantor hereunder and under the
Note shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt of any such payment by Beneficiary would be
contrary to provisions of law applicable to Beneficiary limiting the maximum
rate of interest that may be charged or collected by Beneficiary.
Section 4.09. Counterparts. This Deed may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one and
the same deed.
Section 4.10. Substitute Deeds. Grantor and Beneficiary shall, upon their
mutual agreement to do so, execute such documents as may be necessary in order
to effectuate the modification hereof, including the execution of substitute
deeds of trust, so as to create two (2) or more liens on or security titles in
respect of the Mortgaged Property in such amounts as may be mutually agreed upon
but in no event to exceed, in the aggregate, the unpaid principal portion of the
Note Amount; in such event, Grantor covenants and agrees to pay the reasonable
fees and expenses of Beneficiary and its counsel in connection with any such
modification.
Section 4.11. Beneficiary's Sale of Interests in Loan. Grantor recognizes
that Beneficiary may sell and transfer interests in the Loan to one or more
participants or assignees and that all documentation, financial statements,
appraisals and other data, or copies thereof, relevant to Grantor, any Guarantor
or the Loan, may be exhibited to and retained by any such participant or
assignee or prospective participant or assignee.
Section 4.12. No Merger of Interests. Unless expressly provided otherwise,
in the event that ownership hereof and title to the fee and/or leasehold estates
in the Premises encumbered hereby shall become vested in the same person or
entity, this Deed shall not merge in said title but shall continue to be and
remain a valid and subsisting lien and/or trust deed on said estates in the
Premises for the amount secured hereby.
Section 4.13. CERTAIN WAIVERS. BY EXECUTION OF THIS DEED AND BY INITIALING
THIS SECTION 4.13, GRANTOR EXPRESSLY AND UNCONDITIONALLY: (A) ACKNOWLEDGES THE
RIGHT OF BENEFICIARY TO ACCELERATE THE INDEBTEDNESS EVIDENCED BY THE NOTE AND
ANY OTHER INDEBTEDNESS IN ACCORDANCE WITH THE LOAN DOCUMENTS AND THE POWER OF
ATTORNEY GIVEN HEREIN TO BENEFICIARY TO SELL THE MORTGAGED PROPERTY BY
NONJUDICIAL FORECLOSURE UPON DEFAULT BY GRANTOR WITHOUT ANY JUDICIAL HEARING AND
WITHOUT ANY NOTICE OTHER THAN SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED
TO BE GIVEN UNDER THE PROVISIONS OF THIS DEED OR BY LAW; (B) WAIVES ANY AND ALL
RIGHTS THAT GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE UNITED STATES OF
AMERICA
28
<PAGE>
(INCLUDING, WITHOUT LIMITATION, THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF),
THE VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON
OF ANY OTHER APPLICABLE LAW, TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE
EXERCISE BY BENEFICIARY OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO BENEFICIARY,
EXCEPT SUCH NOTICE (IF ANY) IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE LOAN
DOCUMENTS OR UNDER THE RIGHTS OR BENEFITS OF ANY STATUTE OF LIMITATION OR ANY
MORATORIUM, REINSTATEMENT, MARSHALING, FORBEARANCE, APPRAISEMENT, VALUATION,
STAY, EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION BY LAW; (C) WAIVES BY
EXECUTION HEREOF, AND BENEFICIARY WAIVES BY ACCEPTANCE HEREOF, IN CONNECTION
WITH ANY FORECLOSURE OR SIMILAR ACTION OR PROCEDURE BROUGHT BY BENEFICIARY
ASSERTING AN EVENT OF DEFAULT UNDER CLAUSE (A) OF SECTION 2.01 OF THIS DEED, ANY
AND EVERY RIGHT IT MAY HAVE TO A TRIAL BY JURY; (D) ACKNOWLEDGES THAT GRANTOR
HAS READ THIS DEED AND ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO GRANTOR, AND
GRANTOR HAS CONSULTED WITH COUNSEL OF GRANTOR'S CHOICE PRIOR TO EXECUTING THIS
DEED AND INITIALING THIS SECTION 4.13; AND (E) ACKNOWLEDGES THAT ALL WAIVERS OF
THE AFORESAID RIGHTS OF GRANTOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY AND
WILLINGLY BY GRANTOR AS A PART OF A BARGAINED-FOR LOAN TRANSACTION AND THAT THIS
DEED IS VALID AND ENFORCEABLE BY BENEFICIARY AGAINST GRANTOR IN ACCORDANCE WITH
ALL THE TERMS, PROVISIONS AND CONDITIONS HEREOF.
Section 4.14. GOVERNING LAW. THE PERFORMANCE REQUIRED BY THIS DEED SHALL,
INSOFAR AS IS POSSIBLE, BE RENDERED TO THE BENEFICIARY AT ITS OFFICE IN
TENNESSEE. GRANTOR AND BENEFICIARY INTEND THAT THE VALIDITY AND CONSTRUCTION OF
THE OBLIGATIONS SECURED BY THIS DEED BE GOVERNED BY THE LAWS OF THE STATE OF
TENNESSEE INCLUDING ALL OBLIGATIONS AND LIABILITIES HEREUNDER WITH RESPECT TO
THE PAYMENT OF INTEREST OR ANY OTHER COMPENSATION FOR THE USE, FORBEARANCE OR
DETENTION OF MONEY. THIS DEED SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TENNESSEE, WITHOUT REFERENCE TO THE CONFLICTS OF LAW
PRINCIPLES OF THAT STATE, EXCEPT ONLY TO THE EXTENT THAT TEXAS LAW EXPRESSLY
PROVIDES THAT IT GOVERNS AND THAT A CONTRARY AGREEMENT BY THE PARTIES IS
INEFFECTIVE AND EXCEPT THAT THE LAW OF THE STATE OF TEXAS SHALL APPLY TO ANY AND
ALL ACTS WITH RESPECT TO THE CREATION AND PRIORITY OF THE LIEN OF THE DEED AND
ASSIGNMENT OF LEASES AND RENTS ON THE MORTGAGED PROPERTY HEREBY EVIDENCED AND
FORECLOSURE BY TRUSTEE ON THE MORTGAGED PROPERTY. GRANTOR, BENEFICIARY AND
TRUSTEE COVENANT AND AGREE TO TAKE ANY AND ALL ACTION WHICH MAY BE NECESSARY
UNDER TEXAS LAW WITH RESPECT TO FORECLOSURE
29
<PAGE>
UNDER THE LAWS OF THE STATE OF TEXAS. SHOULD ANY OBLIGATION OR REMEDY UNDER THIS
DEED BE INVALID OR UNENFORCEABLE UNDER THE LAWS PROVIDED HEREIN TO GOVERN, THE
LAWS OF ANOTHER STATE WHOSE LAWS CAN VALIDATE AND APPLY TO THIS DEED SHALL
APPLY.
Section 4.15. Duplication of Covenants. Beneficiary, by its acceptance
hereof, acknowledges that (i) the covenants in the Fee and Leasehold Deed of
Trust, Assignment of Leases and Rents and Security Agreement from Grantor to
Trustee for the benefit of Beneficiary, dated September 20, 1999 (the "First
Deed"), which has been recorded with the County Clerk's Office in Dallas County,
Texas, and the covenants in this Deed are substantially similar and (ii) that
performance under either the First Deed or this Deed constitutes performance
under the other. Grantor acknowledges, however, that failure to perform any such
covenant under either the First Deed or this Deed constitutes a default under
each.
30
<PAGE>
IN WITNESS WHEREOF, this Deed has been duly executed and delivered by
Grantor.
APPLE SUITES REIT LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple Suites General, Inc.,
its general partner
By /s/ Glade M. Knight
---------------------------
Name: Glade M. Knight
Title: President
APPLE SUITES SERVICES LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Apple Suites Services General, Inc.,
its general partner
By /s/ Glade M. Knight
---------------------------
Name: Glade M. Knight
Title: President
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 30th day of September,
1999, by Glade M. Knight, President of Apple Suites General, Inc., a Virginia
corporation, as general partner of Apple Suites REIT Limited Partnership, on
behalf of said Apple Suites General, Inc., as general partner of Apple Suites
REIT Limited Partnership.
/s/ Jacquelyn B. Owens
--------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
Commission Expires: 6/30/03
------------
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 30th day of September,
1999, by Glade M. Knight, President of Apple Suites Services General, Inc., a
Virginia corporation, as general partner of Apple Suites Services Limited
Partnership, on behalf of said Apple Suites Services General, Inc., as general
partner of Apple Suites Services Limited Partnership.
/s/ Jacquelyn B. Owens
--------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
Commission Expires: 6/30/03
------------
<PAGE>
SCHEDULE A
(North Dallas-Plano)
BEING a tract of land out of the DENTON DARBY SURVEY. Abstract No. 250, in the
City of Plano, Collin County, Texas and being all of LOT 1, BLOCK A of HOMEWOOD
SUITES at PRESION PARK SOUTH, an addition to the City of Plano, Collin County,
Texas according to the final plat thereof recorded in Cabinet J. Slide 743 of
the Map Records of Collin County, Texas and being more particularly described as
follows:
BEGINNING at a 5/8" iron rod found in the north right-of-way line of Old Shepard
Place (85 degrees ROW), from which a 5/8" iron rod found for the west corner of
the corner slip at the intersection of said north right-of-way line of Old
Shepard Place with the west right-of-way line of Preston Park Court (80 degrees
ROW) bears South 89 degrees 43' 25" East, a distance of 255.81 feet;
THENCE with the said north right-of-way line, North 89 degrees 43' 25" West, a
distance of 293.00 feet to an aluminum disk found in concrete for the southeast
corner of THE COURTYARD AT PRESTON PARK an addition to the City of Plano, Texas
according to the plat thereof recorded in Cabinet F, Slide 153 of the Map
Records of Collin County, Texas;
THENCE leaving the north right-of-way line of Old Shepard Place with the east
line of said THE COURTYARD AT PRESTON PARK, the following courses and distances
to wit:
North 00 degrees 16' 28" East, a distance of 259.96 feet to a 1/2" iron rod
found for corner;
South 89 degrees 43' 32" East, a distance of 30.00 feet to a cross mark
found in concrete for the beginning of a non-tangent curve to the left,
having a central angle of 73 degrees 45' 48", a radius of 68.02 feet and a
chord bearing and distance of North 15 degrees 50' 51" West, 81.65 feet;
Northwesterly with the said curve, an arc distance of 87.57 feet to a cross
mark found in concrete for the beginning of a reverse curve to the right,
having a central angle of 73 degrees 45' 14", a radius of 68.02 feet and a
chord bearing and distance of North 15 degrees 51' 08" West, 81.64 feet;
Northerly with said curve, an arc distance of 87.56 feet to a cross mark
found in concrete for corner;
North 21 degrees 01' 30" East, a distance of 39.99 feet to a cross mark set
in concrete in the southerly right-of-way line of Preston Park Boulevard (a
variable width ROW):
THENCE with the said southerly right-of-way line of Preston Park Boulevard, the
following courses and distances to wit:
South 68 degrees 58' 19" East, a distance of 275.15 feet to a 1/2" iron rod
found for the beginning of a tangent curve to the left, having a central
angle of 04 degrees 56' 56", a radius of 450.00 feet and a chord bearing
and distance of South 71 degrees 26' 47" East, 38.86 feet;
Easterly with the said curve, an arc distance of 38.67 feet to an aluminum
disc found in concrete for corner;
THENCE leaving the southerly right-of-way line of Preston Park Boulevard, South
00 degrees 16' 35" West, a distance of 344.54 feet to the POINT OF BEGINNING and
containing 2.6601 acre of land.
Bearing system based on the plat recorded in Cabinet C. Slide 731 of the Map
Records of Collin County, Texas.
EXHIBIT 4.5
APPLE SUITES, INC.
c/o Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
October 5, 1999
Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117-4900
Re: Agreement of Sale dated October 5, 1999 (the
"Purchase Agreement"; capitalized terms not
otherwise defined herein shall have the
meanings ascribed to such terms in the
Purchase Agreement) between Hampton Inns,
Inc., as Seller, and Apple Suites, Inc., as
Buyer
Gentlemen:
Reference is made to (i) the Purchase Agreement and (ii) the
purchase money note of even date herewith made by the undersigned in the amount
of $7,350,000 (the "Note") and the mortgages and/or deeds of trust and/or deeds
to secure debt securing the Note (individually and collectively, the
"Mortgage").
We hereby agree that until such time as all amounts evidenced
and secured by the Note and the Mortgage have been paid in full we shall not:
(i) transfer, or agree to transfer (or suffer or permit the
transfer or agreement to transfer), in any manner, either voluntarily
or involuntarily, by operation of law or otherwise, all or any portion
of the property located in Henrico County, Virginia heretofore
transferred to us by a deed from you dated September 20, 1999 (the
"Virginia Property"), without, in any such case, your prior written
consent, which shall not be unreasonably withheld in the case of a
transfer to any affiliate or subsidiary wholly owned by Apple Suites,
Inc.; or
(ii) encumber, or agree to encumber, in any manner, either
voluntarily or involuntarily, by operation of law or otherwise, all or
any portion of any Virginia Property, or any interest or rights therein
without, in any such case, your prior written consent. As used in this
clause, "encumber" shall include, without limitation, the placing or
permitting the placing of any mortgage, deed of trust, assignment of
rents or other security device. (It is understood that you may grant or
deny your consent under this clause and the immediately preceding
clause in your sole discretion).
<PAGE>
Notwithstanding the foregoing, it is understood that neither
the lease to Apple Suites Management, Inc. from us, dated September 20, 1999 nor
the Deed of Trust, Assignment of Leases and Rents and Security Agreement made by
us and Apple Suites Management, Inc. for your benefit dated September 20, 1999,
shall constitute a violation of the foregoing restrictions.
Very truly yours,
APPLE SUITES, INC.,
a Virginia corporation
By /s/ C. Douglas Schepker
---------------------------------
Name: C. Douglas Schepker
Title: Chief Operating Officer
2
EXHIBIT 10.1
INDEMNITY
October 5, 1999
Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117-4900
Attention: General Counsel
Loan: $33,975,000
Borrower: Apple Suites, Inc.
Premises: 3200 Cobb Parkway, Atlanta, Georgia
Dear Sirs:
Except to the extent of any existing liability of you and/or
your affiliates for Corrective Work with respect to Hazardous Materials
currently in, on or under the Property, for good and valuable consideration in
hand received, the undersigned, and if there are two or more signers, each of
us, hereby jointly and severally covenants and agrees for your benefit, in
addition to, and not in limitation of, any other rights and remedies available
to you at law or in equity, as follows:
1. Definitions: The following terms shall be defined as set forth
below.
(a) Corrective Work: The removal, relocation, elimination,
remediation or encapsulation of Hazardous Materials from
all or any portion of the Property and (to the extent
provided in Subparagraph 2(b) hereof) surrounding areas
and, to the extent thereby required, the reconstruction
and rehabilitation of the Property pursuant to, and in
compliance with, Governmental Requirements;
(b) Governmental Requirements: Any present and future (i)
federal, state or local laws, rules or regulations and
(ii) judicial or administrative interpretation thereof,
including any judicial or administrative orders or
judgments;
(c) Hazardous Materials: (i) Asbestos and polychlorinated
biphenyls and (ii) hazardous or toxic materials, wastes
and substances which are defined, determined or
identified as such (including petroleum products if they
are defined, determined or identified as such) in, or
subject to, any Governmental Requirements, in each case
in amounts in violation of applicable Governmental
Requirements;
<PAGE>
(d) Indemnified Losses: Incurred damages, losses,
liabilities, costs and expenses of Corrective Work,
including, without limitation, obligations, penalties,
fines, impositions, fees, levies, lien removal or bonding
costs, claims, litigation, demands, defenses, judgments,
suits, proceedings, costs, disbursements or expenses
(including, without limitation, attorneys' and experts'
reasonable fees and disbursements) of any kind and nature
whatsoever, including interest thereon;
(e) Loan Documents: The documents comprising the total
documentation pertaining to the Loan indicated above made
to, or for the benefit of, the above-named Borrower,
including, without limitation, and as applicable, any
loan agreement, building loan or construction loan
agreement, note, mortgage, deed of trust, security
agreement, assignment of leases and rents, any guaranty
or guaranties (whether of payment and/or performance),
pledge agreement, commitments, letters of credit,
assignment of partnership interests, and all other
instruments and documents evidencing, securing, or
collateral to, the Loan;
(f) Property: The land more particularly described in Exhibit
A hereto attached and as indicated above, together with
the buildings, improvements, structures and betterments
now or hereafter existing thereon or thereunder.
2. (a) Except as hereinafter limited in Paragraph 9 and
Subparagraphs 2(b) and 2(c), the undersigned covenant and
agree, at their sole cost and expense, to indemnify,
protect and save you harmless against and from any and
all Indemnified Losses which may at any time be imposed
upon, incurred by or asserted or awarded against you
arising from, out of, attributable to or by reason of,
the:
(i) nonperformance or delayed performance and completion
of Corrective Work; or
(ii) enforcement of this Indemnity or the assertion by
the undersigned of any defense to its obligations
hereunder (except the successful defense of actual
performance not subject to further appeal);
whether the Indemnified Losses arise before, during or after,
enforcement of the remedies and rights available to you under
the Loan Documents, including the acquisition of title to all
or any portion of the Property by you or your successors or
affiliates (as such terms are defined in Paragraph 8(a)
hereof).
2
<PAGE>
(b) The Indemnified Losses shall not extend to the costs of
Corrective Work pertaining to surrounding areas if the
applicable Hazardous Materials did not originate from any
portion of the Property, unless the removal of the Hazardous
Materials from the surrounding areas by Borrower is
necessitated by Governmental Requirements.
(c) If you, or any of your successors or affiliates, take
(i) title to the Property at a foreclosure sale, at a
sale pursuant to a power of sale under a mortgage or deed
of trust, or by deed in lieu of foreclosure, or by
exercise of other remedial rights; or
(ii) possession, custody and control of the Property as a
mortgagee-in-possession or through court designated
receiver and Borrower, and its successors or affiliates,
never reacquire such possession, custody and control,
then the Indemnified Losses shall not include or apply to
Hazardous Materials which are initially placed on, in or under
all or any portion of the Property at any time thereafter.
3. (a) So long as Borrower is in possession, custody and control
of the Property you agree that prior to the undertaking
of Corrective Work by you, the Borrower or the undersigned
may at their sole cost and expense contest the Governmental
Requirements and/or perform any Corrective Work, provided that
at all times all of the following conditions are continuously
satisfied in full:
(i) no uncured event of default (other than as related to
the Hazardous Materials involved in such contest or
Corrective Work) exists under any of the Loan Documents;
(ii) you (and your agents, officers, directors, servants,
employees, contractors and shareholders) shall not be
subject to any criminal or other penalties, fines, costs
or expenses, by reason of such contest or Corrective Work
or any delays in connection therewith;
(iii) unless the undersigned has instituted a contest as
permitted hereunder with respect to any Corrective Work,
the undersigned shall commence the Corrective Work
promptly after obtaining actual knowledge of the
Hazardous Materials on, in, under or affecting the
Property or any surrounding areas, but at least fifteen
(15) days prior to commencement of such Corrective Work,
submit to you in conformity with your reasonable
requirements (which
3
<PAGE>
requirements may not create conditions which violate
Governmental Requirements), reasonably detailed plans for
such Corrective Work complying with Governmental
Requirements. If, within said fifteen (15)-day period,
you, in your reasonable judgment, reject such plans, the
undersigned shall promptly submit revised plans
conforming to your reasonable requirements to you for
your approval. If within fifteen (15) days from your
receipt of the original plans, or revised plans, you fail
to approve or reject such original plans, or revised
plans, as the case may be, the same shall be deemed
accepted by you. All Corrective Work shall be performed
in compliance with such approved original or revised
plans;
(iv) a contest, if instituted, shall be instituted
promptly after the undersigned, or Borrower, obtains
actual knowledge of an action, suit, proceeding, or
governmental order or directive which asserts any
obligation or liability affecting all or any portion of
the Property, or Borrower or any of the undersigned and
diligently prosecuted until a final judgment is obtained;
(v) Corrective Work shall be instituted promptly
following an unsuccessful nonappealable completion of the
contest and shall be diligently prosecuted until the
Hazardous Materials involved in the contest are removed,
relocated, encapsulated and/or disposed of as required by
the Governmental Requirements;
(vi) the undersigned shall notify you within ten (10)
days after commencement of such contest or Corrective
Work and shall render to you a written monthly report
detailing the progress thereof including such information
as you shall reasonably request; and
(vii) if you are named in any action or proceeding as a
necessary party or as a party defendant relating to
matters covered by this Indemnity, you agree to utilize
counsel designated by the undersigned, subject to your
right of approval, not to be unreasonably withheld or
delayed. If you are not named in any such action or
proceeding, you, at your expense, shall have the right
(but not the obligation) to join in any action or
proceeding in which the undersigned or Borrower contests
any Governmental Requirements.
So long as all of such conditions are continuously satisfied,
you agree that you will not enter into any settlement
agreement binding upon the undersigned, or Borrower, without
their prior consent, which consent will not be unreasonably
withheld or delayed.
4
<PAGE>
(b) Promptly after the receipt by you of written notice of any
demand or claim or the commencement of any action, suit or
proceeding in respect of any of the Indemnified Losses, you
shall notify the undersigned thereof in writing, but the
failure by you promptly to give such notice shall not relieve
the undersigned of any of their obligations under this
Indemnity, except to the extent of prejudice to any defense to
such Indemnified Losses resulting from such delay.
4. The liability of the undersigned under this Indemnity shall in
no way be limited or impaired by (a) any amendment or
modification of the Loan Documents; (b) any extensions of time
for performance required by any of the Loan Documents; (c) any
sale, assignment or foreclosure pursuant to the Loan Documents
or any sale or transfer of all or any part of the Property;
(d) any exculpatory provision in any of the Loan Documents
limiting your recourse to the Property or to any other
security, or limiting your rights to a deficiency judgment
against Borrower, or the undersigned; (e) the accuracy or
inaccuracy of any representations or warranties made to you
under the Loan Documents; (f) the release of Borrower or any
other person from performance or observance of any of the
agreements, covenants, terms or conditions contained in any of
the Loan Documents by operation of law, your voluntary act, or
otherwise; (g) the release or substitution, in whole or in
part, of any security for the note or other evidence of debt
issued pursuant to the Loan Documents; (h) your failure to
record or file any of the Loan Documents (or your improper
recording or filing of any thereof) or to otherwise perfect,
protect, secure or insure any security interest or lien given
as security for the note or other evidence of indebtedness
under the Loan Documents, (i) any other action or circumstance
whatsoever which constitutes, or might be construed to
constitute, a legal or equitable discharge or defense of
Borrower or others for their obligations under any of the Loan
Documents or of the undersigned for their obligations under
this Indemnity or (j) the invalidity, irregularity or
unenforceability, in whole or in part, of any of the Loan
Documents; and in any of such cases, whether with or without
notice to Borrower or the undersigned and with or without
consideration.
5. The undersigned (a) waive any right or claim of right to cause
a marshalling of the undersigned's assets or to cause you to
proceed against any of the security for the Loan Documents
before proceeding under this Indemnity or to cause you to
proceed against the undersigned in any particular order; (b)
agree that any payments required to be made hereunder shall
become due on demand; (c) waive and relinquish all rights and
remedies accorded by applicable law to indemnitors or
guarantors, except any rights of subrogation which the
undersigned may have, provided that (i) the indemnity provided
for hereunder shall neither be contingent upon the existence
of any such rights of subrogation nor subject to any claims or
defenses whatsoever which may be asserted in connection with
the enforcement or attempted enforcement of such subrogation
rights including, without limitation, any claim that such
5
<PAGE>
subrogation rights were abrogated by any of your acts, and
(ii) the undersigned postpone and subordinate (A) the exercise
of any and all of their rights of subrogation to your rights
against the undersigned under this Indemnity and (B) any
rights of subrogation to any collateral securing the Loan
until the Loan shall have been paid in full.
6. No delay on your part in exercising any right, power or
privilege under any of the Loan Documents shall operate as a
waiver of any such privilege, right or power.
7. Any one or more of the undersigned, or any other party liable
upon or in respect of this Indemnity or the Loan, may be
released from liability (in whole or in part) under this
Indemnity or the Loan Documents without affecting the
liability hereunder of any of the undersigned not so released.
8. (a) This Indemnity shall be binding upon the undersigned and
their respective heirs, personal representatives, successors
and assigns and shall inure to the benefit of and, where
applicable, shall be binding upon, you and your successors and
affiliates, which acquire all or any part of the Property by
any sale, assignment or foreclosure under the Loan Documents,
by deed or other assignment in lieu of foreclosure, or
otherwise, including if you, or such successor, affiliate or
participant, is the successful bidder at a foreclosure or
other remedial sale. For purposes of this Indemnity your (i)
"successors" shall mean successors by merger, consolidation or
acquisition of all or a substantial part of your assets and
business and (ii) "affiliates" shall mean your parent, if any,
or its successors as above defined and any direct or indirect
subsidiary or affiliate of your parent or its successors as
above defined.
(b) Except as provided in Subparagraph 8(a) above, the
obligations of the undersigned under this Indemnity shall not
inure to the benefit of (i) any other purchaser of the
Property at a foreclosure sale or a sale pursuant to a power
of sale or other remedial rights under the Loan Documents or
(ii) any subsequent holder of the Loan Documents unless such
holder is your successor, affiliate or participant as
hereinabove defined.
9. (a) Except as provided in Subparagraph 9(b) hereof, this
Indemnity shall terminate and be of no further force and
effect upon payment in full by Borrower or guarantor of all
principal, interest and other sums and costs evidenced or
secured by the Loan Documents, provided that at the time of
such full payment neither you, nor your successors or
affiliates, have, at any time, or in any manner, through
exercise of their remedial rights under the Loan Documents,
participated in the management or control of, taken possession
of, or title to, the Property or any portion thereof, whether
by foreclosure, deed in lieu of foreclosure, sale under power
of sale pursuant to the Loan Documents, or otherwise.
6
<PAGE>
(b) Notwithstanding Subparagraph 9(a) above, the undersigned
agree that this Indemnity shall continue after full payment of
the Loan with respect to:
(i) litigation or administrative claims involving
Indemnified Losses pertaining to Hazardous Materials
covered by this Indemnity pending at the date of payment
in full of the Loan, and
(ii) reasonable costs and expenses (including experts'
and attorneys' fees and disbursements) incurred or
expended by you in (A) enforcing Subparagraph 2(a)(ii)
of this Indemnity or (B) any litigation, arbitration,
administrative claims or matters relating to any
Indemnified Losses subsequently arising within four (4)
years after the date of such full payment (hereinafter
called ("Subsequent Claims") involving Hazardous
Materials on, in or under the Property, or if covered by
this Indemnity, any surrounding areas, but the
undersigned's obligation under this Indemnity as to
Subsequent Claims is hereby limited and shall not extend
to payment of any monetary awards or damages against you
but only to the costs and expenses above mentioned. You
agree to utilize counsel designated by the undersigned
(whether or not the undersigned are also parties
defendant in such matters) subject to your right of
approval, not to be unreasonably withheld or delayed.
10. This Indemnity shall continue to be effective, or be
reinstated automatically, as the case may be, if at any time
payment, in whole or in part, of any of the obligations
indemnified against hereby is rescinded or otherwise must be
restored or returned by you (whether as a preference,
fraudulent conveyance or otherwise) upon or in connection with
the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Borrower, any of the undersigned or any
other person, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar
officer for, Borrower, any of the undersigned or any other
person or for a substantial part of Borrower's, any of the
undersigned's or any of such other person's property, as the
case may be, or otherwise, all as though such payment had not
been made. Each of the undersigned further agrees that in the
event any such payment is rescinded or must be restored or
returned, all costs and expenses (including, without
limitation, legal fees and expenses) incurred by you or on
your behalf in defending or enforcing such continuance or
reinstatement, as the case may be, shall constitute costs of
enforcement which are covered by each of the undersigned's
indemnification obligations under this Indemnity.
11. Each of the undersigned represents and covenants to you that:
(i) if a corporation, partnership, venture, trust or
limited liability company, it is duly organized,
validly existing and in good
7
<PAGE>
standing under the laws of the state of its formation
and has full power and authority to execute, deliver
and perform this Indemnity; each of the undersigned
will preserve and maintain such legal existence and
good standing;
(ii) there are no actions, suits or proceedings pending
or threatened against or affecting Borrower or any of
the undersigned, at law, in equity or before or by any
governmental authorities except actions, suits or
proceedings which are fully covered by insurance or
would, if adversely determined, not be likely to have a
material adverse effect on Borrower's or any of the
undersigned's business or financial condition; neither
Borrower nor any of the undersigned is in material
default with respect to any order, writ, injunction,
decree or demand of any court or governmental
authorities;
(iii) the consummation of the transactions contemplated
hereby and the performance of this Indemnity have not
resulted and will not result in any breach of, or
constitute a default under, any mortgage, deed of
trust, lease, bank loan or credit agreement, corporate
charter, by-laws, partnership agreement or other
instrument to which any of the undersigned is a party
or by which any of the undersigned may be bound or
affected; and
(iv) each of the undersigned is in compliance with, and
the transactions contemplated by this Indemnity do not
and will not violate any provision of, or require any
filing, registration, consent or approval under, any
federal, state or local law, rule, regulation,
ordinance, order, writ, judgment, injunction, decree,
determination or award (hereinafter, "Laws") presently
in effect having applicability to it; each of the
undersigned will comply promptly with all Laws now or
hereafter in effect having applicability to it.
12. You shall, at all times, at your discretion and expense, be
free to independently establish to your satisfaction the
existence or non-existence of any fact or facts, the existence
or non-existence of which is a condition of this Indemnity or
any of its provisions.
13. This Indemnity may be executed in one or more counterparts,
each of which shall be deemed an original. Said counterparts
shall constitute but one and the same instrument and shall be
binding upon each of the undersigned as fully and completely
as if all had signed but one instrument. The joint and several
liability of the undersigned shall be unaffected by the
failure of any of the undersigned to execute any or all of the
counterparts.
8
<PAGE>
14. All notices hereunder shall be in writing and shall be deemed
to have been sufficiently given or served for all purposes
when sent by registered or certified mail, if to the
undersigned at their respective addresses stated on the
signature page hereof and if to you, at your address indicated
above, or at such other address of which a party shall have
notified the party giving such notice in writing in accordance
with the foregoing requirements.
15. No provision of this Indemnity may be changed, waived,
discharged or terminated orally, by telephone or by any other
means except by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or
termination is sought.
16. THE UNDERSIGNED BY EXECUTION HEREOF, AND YOU, BY ACCEPTANCE
HEREOF, HEREBY EXPRESSLY AND UNCONDITIONALLY WAIVE, IN
CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING BROUGHT BY YOU
ON THIS INDEMNITY, ANY AND EVERY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY.
17. THIS INDEMNITY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TENNESSEE APPLICABLE TO THE INTERPRETATION, CONSTRUCTION AND
ENFORCEMENT OF INDEMNITIES (WITHOUT GIVING EFFECT TO
TENNESSEE'S PRINCIPLES OF CONFLICTS OF LAW). THE EXISTENCE OF
HAZARDOUS MATERIALS SHALL BE DETERMINED IN ACCORDANCE WITH
FEDERAL LAW AND STATE AND LOCAL LAWS OF THE STATE IN WHICH THE
PROPERTY IS LOCATED.
18. THE UNDERSIGNED IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF ANY TENNESSEE STATE OR FEDERAL COURT SITTING
IN THE CITY OF MEMPHIS, STATE OF TENNESSEE, OVER ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDEMNITY AND THE UNDERSIGNED AGREE AND CONSENT THAT, IN
ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR
UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY ABOVE STATED COURT SITTING IN THE
CITY OF MEMPHIS MAY BE MADE BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, DIRECTED TO THE UNDERSIGNED AT THEIR
RESPECTIVE ADDRESSES INDICATED ON THE SIGNATURE PAGE HEREOF,
AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE
SAME SHALL HAVE BEEN SO MAILED.
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<PAGE>
Very truly yours,
Indemnitor: Address Of Indemnitor:
- ----------- ----------------------
APPLE SUITES, INC., a ATTN: Glade M. Knight
Virginia corporation 306 East Main Street
Richmond, Virginia 23219
By /s/ Glade M. Knight With a copy to:
--------------------- Thomas E. Davis, Esq.
Name: Glade M. Knight Jenkens & Gilchrist
Title: President 1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
This is to certify that this Indemnity was executed in my
presence on the date hereof by the parties whose signatures appear above in the
capacities indicated.
/s/ Jacquelyn B. Owens
---------------------------
Notary Public
My commission expires:
6/30/03
---------------------------
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<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF PREMISES
(ATLANTA - GALLERIA/CUMBERLAND)
ALL THAT TRACT OR PARCEL OF LAND situated, lying and being in Land Lot 978 in
the 2nd Section and 17th District of Cobb County, Georgia, and being more
particularly described as follows:
BEGINNING at a railroad iron found, said point being the land lot corner common
to Land Lots 948, 949, 978 and 979, said Section, District and County; thence
proceed North 88(degrees) 59' 50" East 572.69 feet to a 1" bar found on the
southwesterly right-of-way line of U.S. Highway No. 41 (a 130-foot
right-of-way); thence proceed along the aforedescribed right-of-way line South
55(degrees) 57' 41" East 100.00 feet to an iron pin set; thence leaving the
aforedescribed right-of-way line South 34(degrees) 04' 16" West 100.00 feet to
an iron pin set; thence proceed North 55(degrees) 57' 41" West 41.00 feet to an
iron pin set; thence proceed South 34(degrees) 04' 16" West 170.19 feet to a
point; thence proceed along the arc of a curve in a counter-clockwise direction,
whose radius is 245.00 feet and is subtended by a chord bearing of South
22(degrees) 41' 38" West and a chord distance of 96.66 feet, an arc distance of
97.30 feet to an iron pin set; thence proceed North 88(degrees) 32' 42" West
116.03 feet to an iron pin set; thence proceed along the arc of a curve in a
counter-clockwise direction, whose radius is 1054.08 feet and is subtended by a
chord bearing of North 69(degrees) 58' 11" West and a chord distance of 344.10
feet, an arc distance of 345.64 feet to an iron pin set on the land lot line
common to Land Lots 949 and 978; thence proceed along said land lot line North
01(degrees) 42' 53" East 215.28 feet to a railroad iron found, said point being
THE POINT OF BEGINNING.
The aforedescribed tract or parcel of land is known as Tract No. 1 and Tract No.
2 and contains 3.698 acres as shown on the ALTA/ACSM Land Title Survey for
Homewood Equity Development Corporation by Precision Planning, Inc.,
Lawrenceville, Georgia, dated April 19, 1989, revised May 1, 1989, bearing the
seal and certification of Randall W. Dixon, G.R.L.S. No. 1678. Said survey being
incorporated herein by this reference.
TOGETHER WITH, as an appurtenance to the title to the hereinabove described
property, a perpetual non-exclusive sanitary sewer easement, subject to the
conditions hereinafter set forth, in, to, over, across and through the following
described property:
ALL THAT TRACT OR PARCEL OF LAND situated, lying and being in Land Lot 978, 17th
District, 2nd Section, Cobb County, Georgia, and being more particularly
described as follows:
TO FIND THE TRUE POINT OF BEGINNING, commence at a railroad iron found at the
land lot corner common to Land Lots 948, 949, 978 and 979, said District,
Section and County; and running thence South 01(degrees) 42' 53" West 215.28
feet to a 1/2" rebar found; thence along the arc of a 1,054.076-foot radius
curve to the left and arc distance of 345.64 feet (said arc being subtended by a
chord lying to the northeast having a bearing of South 69(degrees) 58' 11" East
and being 344.10 feet in length) to a 1/2" rebar found; thence South 88(degrees)
32' 42" East 101.86 feet to the TRUE POINT OF BEGINNING. FROM THE TRUE POINT OF
BEGINNING AS THUS ESTABLISHED, run thence South 04(degrees) 22' 23" West 398.97
feet to a point; thence South 23(degrees) 30' 49" East 18.93 feet to a point;
thence continuing South 23(degrees) 30' 49" East 110 feet more or less to a
point located on the southerly right-of-way line of Cumberland Circle (a
100-foot right-of-way); thence continuing South 23(degrees) 30' 49" East 22.84
feet to a point; thence South 38(degrees) 18' 44" East 170.97 feet to a point;
thence South 25(degrees) 20' 10" East 256.28 feet to a point; thence North
58(degrees) 19' 25" East 20.12 feet to a point; thence North 25(degrees) 20' 10"
West 256.33 feet to a point; thence North 38(degrees) 18' 44" West 170.65 feet
to a point; thence North 23(degrees) 30' 49" West 13.94 feet to a point; thence
North 23(degrees) 30' 49" West 115.67 feet to a point; thence North 23(degrees)
30' 49" West 16.92 feet to a point; thence North 04(degrees) 22' 23" East 407.52
feet to a point; thence North 85(degrees) 37' 37" West 3.95 feet to a point;
thence along the arc of a 245.00-foot radius curve to the left an arc distance
of 12.93 feet (said arc being subtended by a chord lying to the East having a
bearing of South 12(degrees)49' 49" West and being 12.93 feet in length) to a
point; thence North 88(degrees) 32' 42" West 14.17 feet to THE TRUE POINT OF
BEGINNING.
<PAGE>
Said property being more particularly shown on that certain plat of survey
entitled Proposed 20' Sanitary Sewer Easements for Homewood Equity Development
Corporation by precision Planning, Inc., dated May 3, 1989, and bearing the seal
and certification of Randall W. Dixon, G.R.L.S. No. 1678, said survey being
incorporated herein by this reference.
LESS AND EXCEPT the following two parcels of property:
Parcel I:
All that tract or parcel of land lying and being in Land Lot 978 of the 17th
District, 2nd section of Cobb County, Georgia and being more particularly
described as follows:
Beginning at a point on the southwest right of way line of State Route 3 (U.S.
41) Cobb Parkway. Said point being located 68 feet southwest of the centerline
of said highway and further located at 406.63 feet northwest of the intersection
of said right-of-way line and the centerline of Cumberland Circle and is the
TRUE POINT OF BEGINNING; thence S 34(degrees) 04' 16" W a distance of 7.00 feet
to a point; thence N 55(degrees) 55' 40" W a distance of 109.97 feet to a point;
thence N 88(degrees) 59' 40" E a distance of 12.18 feet to a point; thence S
55(degrees) 55' 44" E a distance of 100.00 feet back to the TRUE POINT OF
BEGINNING.
Said parcel contains 0.01687 acres.
Parcel II:
ALL THAT TRACT or parcel of land lying and being in Land Lot 978 of the 17th
District, 2nd Section, Cobb County, Georgia, and being more particularly
described as follows:
TO FIND THE TRUE POINT OF BEGINNING, Commence at an iron pin set at the
intersection of the southwestern right-of-way line of U.S. Highway No. 41 (Cobb
Parkway and State Route No. 3) (having a variable right-of-way width) and the
northwestern right-of-way line of Cumberland Circle (having a variable
right-of-way width); run thence along said southwestern right-of-way line of
U.S. Highway No. 41, in a generally northwesterly direction, the following
courses and distances: North 55(degrees) 51' 19" West a distance of 216.33 feet
to an iron pin set; and North 55(degrees) 55' 44" West a distance of 119.88 feet
to an iron pin set; thence leaving said southwestern right-of-way line, run
thence along the southeastern and southwestern boundary line of property now or
formerly owned by Homewood Suites Equity Development Corporation, in a generally
southwesterly and northwesterly direction, the following courses and distances:
South 34(degrees) 04' 16" West a distance of 92.95 feet to an iron pin set;
North 55(degrees) 57' 41" West a distance of 41.00 feet to an iron pin set;
South 34(degrees) 04' 16" West a distance of 170.19 feet to an iron pin set,
said iron pin being the TRUE POINT OF BEGINNING. From the True Point of
Beginning as thus Established, thence continuing along said southeastern
boundary line of property, in a generally southwesterly direction, along the arc
of a 245.00 foot radius curve an arc distance of 59.14 feet to an iron pin set
(said arc being subtended by a chord lying to the southeast thereof, bearing
South 27(degrees) 09' 20" East and having a length of 59.00 feet); and along the
arc of a 245.00 foot radius curve an arc distance of 38.16 feet to an iron pin
set (said arc being subtended by a chord lying to the southeast thereof, bearing
South 15(degrees) 46' 41" West and having a length of 38.12 feet); thence
leaving said southeastern boundary line of property, run thence North
34(degrees) 04' 16" East a distance of 106.96 feet to an iron pin set on the
southeastern boundary line of property now or formerly owned by Homewood Suites
Equity Development Corporation, said iron pin being the TRUE POINT OF BEGINNING.
The above-described property contains 0.0163 acres and is shown as and described
according to that certain Survey prepared by Loo-Turley & Associates, P.C.,
Richard Loo, Georgia Registered Land Surveyor No. 2129, dated, June 3, 1991,
last revised June 19, 1991, which certain Survey is incorporated herein by this
reference and made a part of this description.
Exhibit 10.2
[HOMEWOOD SUITES LOGO]
ATLANTA-GALLERIA/CUMBERLAND, GA
PROMUS HOTELS, INC
755 CROSSOVER LANE
MEMPHIS, TENNESSEE 38117
HOMEWOOD SUITES
LICENSE AGREEMENT
DATED OCTOBER 5, 1999 BETWEEN PROMUS HOTELS, INC., A DELAWARE CORPORATION
("LICENSOR"), AND APPLE SUITES MANAGEMENT, INC., A VIRGINIA CORPORATION
("LICENSEE"), WHOSE ADDRESS IS 306 EAST MAIN STREET, RICHMOND, VIRGINIA 23219.
THE PARTIES AGREE AS FOLLOWS:
1. The License.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high quality hotel service to the public under the name
"Homewood Suites" (the "System"). High standards established by Licensor
are the essence of the System. Future investments may be required of
Licensee under this License Agreement ("Agreement"). Licensee has
independently investigated the risks of the business to be operated
hereunder, including current and potential market conditions, competitive
factors and risks, has read Licensor's "Franchise Offering Circular," and
has made an independent evaluation of all such facts. Aware of the relevant
facts, Licensee desires to enter into this Agreement in order to obtain a
license to use the System in the operation of a Homewood Suites hotel
located at 3200 COBB PARKWAY, SW, ATLANTA, GEORGIA 30339 (the "Hotel")
subject to the terms of this Agreement.
A. THE HOTEL. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry, exit,
parking and other areas from time to time located on the site approved
for the Hotel and acknowledged by Licensor in anticipation of the
execution of this Agreement, or located on any land from time to time
approved by Licensor for additions, signs or other facilities. No
change in the number of approved guest suites ("Guest Suites")
reflected on Attachment B (the "Rider") and no other significant
change in the Hotel may be made without Licensor's prior approval.
Redecoration and minor structural changes that comply with Licensor's
standards and specifications will not be considered significant.
Licensee represents that it is entitled to possession of the Hotel
during the entire License Term without restrictions that would
interfere with anything contemplated in this Agreement.
B. THE SYSTEM. The System is composed of elements, as designated from
time to time by Licensor, designed to identify "Homewood Suites
hotels" to the consuming public and/or to contribute to such
identification and its association with quality standards. The System
at present includes the service mark "Homewood Suites" and such other
service marks and such copyrights, trademarks and similar property
rights as may be designated from time to time by Licensor to be part
of the System; access to a reservation service; distribution of
advertising, publicity and other marketing programs and materials; the
furnishing of training programs and materials, standards,
specifications and policies for construction, furnishing, operation,
appearance and service of the Hotel, and other requirements as stated
or referred to in this Agreement and from time to time in the Manual
(as defined herein) or in other communications to Licensee; and
programs for inspecting the Hotel and consulting with
2
<PAGE>
Licensee. Licensor may add elements to the System or modify, alter or
delete elements of the System (including the trade name and/or brand
name of the Hotel) at its sole discretion from time to time. Licensee
is only authorized to use "Homewood Suites" service marks and
trademarks at or in connection with the Hotel.
C. THE MANUAL. Licensee acknowledges the receipt of a current Homewood
Suites Standards Manual ("Manual"). The Manual contains, among other
matters, minimum standards and requirements for constructing,
equipping, furnishing, supplying, operating, maintaining and marketing
the Hotel. Licensor shall have the right to change the Manual from
time to time and Licensee agrees to abide by the Manual as changed.
The Manual shall at all times remain the sole property of Licensor.
Licensee shall use all reasonable efforts to maintain the
confidentiality of the Manual. Licensee shall not make or distribute
copies of the Manual or any portion thereof.
D. APPLICATION OF MANUAL. All hotels operated within the System will be
subject to the Manual, as it may from time to time be modified or
revised by Licensor. Licensor may, in its sole discretion, grant
limited exceptions from compliance with the Manual which may be made
based on local conditions or special circumstances. Each material
change in the Manual will be explained in writing to Licensee at least
30 days before it goes into effect. Licensee is responsible for the
costs of implementing all changes required because of modification to
the Manual.
Licensor may require that particular models or brands of furniture,
fixtures, equipment, food, and other items (collectively, the
"Supplies") be used in the operation of the Hotel or be purchased from
Licensor or from a source designated by Licensor. Otherwise, Licensee
may purchase all Supplies from any source as long as the standards and
specifications in the Manual are met, which standards and
specifications may be changed by Licensor from time to time. Licensee
will be responsible for the costs, if any, associated with the
purchase of Supplies or changing brands, models or sources of supply.
2. GRANT OF LICENSE.
Licensor hereby grants to Licensee a nonexclusive license (the "License")
to use the System only at the Hotel, only in connection with the operation
of a Homewood Suites hotel, only in accordance with this Agreement and only
during the "License Term" beginning with the date hereof and terminating as
provided in Paragraph 13. The License applies to the location of the Hotel
specified herein and no other. This Agreement does not limit Licensor's
right, or the rights of any parent, subsidiary, division or affiliate of
Licensor ("Entities"), to use or license to others the System or any part
thereof or to engage in or license any business activity at any other
location. Licensee acknowledges that Licensor and its Entities are and may
in the future be engaged in other business activities including activities
involving transient lodging and related activities which may be or may be
deemed to be competitive with the System; that facilities, programs,
services and/or personnel used in connection with the System may also be
used in connection with such other business activities of Licensor and its
Entities; and that Licensee is acquiring no rights hereunder other than the
non-exclusive right to use the System in connection with a Homewood Suites
hotel as specifically defined herein in accordance with the terms of this
Agreement.
3. LICENSOR'S RESPONSIBILITIES.
A. TRAINING. During the License Term, Licensor will specify required and
optional training programs and provide these programs at various
locations. Licensee may be charged for (i) required training services
and materials and (ii) for optional training services and materials if
provided to Licensee. Travel, lodging and other expenses of Licensee
and its employees will be borne by Licensee.
B. RESERVATION SERVICES. During the License Term, so long as Licensee is
in full compliance with the obligations set forth in this Agreement,
Licensor will afford Licensee access to reservation services for the
Hotel.
C. CONSULTATION. Licensor will, from time to time at Licensor's sole
discretion, make available to Licensee consultation and advice in
connection with operations, facilities and marketing. Licensor
2
<PAGE>
shall have the right to establish fees in advance for its advice and
consultation on a project-by-project basis.
D. ARRANGEMENTS FOR MARKETING, ETC. Licensor will use the
Marketing/Reservation Contribution for costs associated with
advertising, promotion, publicity, market research and other marketing
programs and related activities, including reservation programs and
services. Licensor may enter into arrangements for development,
marketing, operations, administrative, technical and support
functions, facilities, programs, services and/or personnel with any
other entity and may use any facilities, programs, services and/or
personnel used in connection with the System in connection with any
business activities of its Entities. Licensor is not obligated to
expend funds for marketing or reservation services in excess of the
amounts received from Licensees using the System. Licensor and its
designees shall have no obligation in administering any marketing and
reservation activities to make expenditures for Licensee which are
equivalent or proportionate to Licensee's payments, or to ensure that
any particular hotel benefits directly or proportionately from such
expenditures.
E. INSPECTIONS/COMPLIANCE ASSISTANCE. Licensor has the right to inspect
the Hotel at any time, with or without notice to Licensee, to
determine if the Hotel is in compliance with the standards and rules
of operation set forth in the Manual. If the Hotel fails to comply
with such standards and rules of operation, Licensor may, at its
option and at Licensee's cost, require an action plan to correct the
deficiencies. Licensee must then take all steps necessary to correct
any deficiencies within the times established by Licensor. Licensor's
approval of an action plan does not waive any rights it may have under
this Agreement nor does it relieve Licensee of any obligations under
this Agreement.
4. PROPRIETARY RIGHTS.
A. OWNERSHIP OF THE SYSTEM. Licensee acknowledges and will not contest,
either directly or indirectly, Licensor's (or its affiliates', as the
case may be) unrestricted and exclusive ownership of the System and
any element(s) or component(s) thereof, and acknowledges that Licensor
has the sole right to grant licenses to use all or any element(s) or
component(s) of the System. Licensee specifically agrees and
acknowledges that Licensor (or its affiliates) is the owner of all
right, title and interest in and to the service mark "Homewood
Suites", its distinguishing characteristics, trade names, service
marks, trademarks, logos, copyrights, slogans, etc., and all other
marks associated with the System ("Marks") together with the goodwill
symbolized thereby and that Licensee will not contest directly or
indirectly the validity or ownership of the Marks either during the
term of this Agreement or at any time thereafter. All improvements and
additions whenever made to or associated with the System by the
parties to this Agreement or anyone else, and all service marks,
trademarks, copyrights, and service mark and trademark registrations
at any time used, applied for or granted in connection with the
System, and all goodwill arising from Licensee's use of the Marks
shall inure to the benefit of and become the property of Licensor (or
its applicable affiliate). Upon expiration or termination of this
Agreement, no monetary amount shall be assigned as attributable to any
goodwill associated with Licensee's use of the System or any
element(s) or component(s) of the System including the name or Marks.
B. USE OF NAME. Licensee will not use the word "Homewood" or "Homewood
Suites" or any similar word(s) in its corporate, partnership, business
or trade name, or in any Internet related name (including a domain
name) except as provided in this Agreement or the Manual, nor
authorize or permit such word(s) to be used by anyone else.
5. TRADEMARK AND SERVICE MARK.
A. TRADEMARK DISPUTES. Licensor will have the sole right and
responsibility to handle disputes with third parties concerning use of
all or any part of the System, and Licensee will, at its reasonable
expense, extend its full cooperation to Licensor in all such matters.
All recoveries made as a result of disputes with third parties
regarding use of the System or any part thereof shall be for the
account of Licensor. Licensor need not initiate suit against alleged
imitators or infringers and may settle any dispute by grant of a
license or otherwise. Licensee will not initiate any suit or
proceeding against alleged imitators or infringers or any other suit
or proceeding to enforce or protect the System.
3
<PAGE>
B. PROTECTION OF NAMES AND MARKS. Both parties will make every effort
consistent with the foregoing to protect and maintain the Marks and
name "Homewood Suites" and its distinguishing characteristics as
standing for the System and only the System. Licensee agrees to
execute any documents deemed necessary by Licensor or its counsel to
obtain protection for Licensor's Marks or to maintain their continued
validity and enforceability. Licensee agrees to use such names and
Marks only in connection with the operation of a Homewood Suites hotel
and in the manner authorized by Licensor. Licensee acknowledges that
any unauthorized use of the names or Marks shall constitute
infringement of Licensor's rights. Licensee must notify Licensor
immediately, in writing, of any infringement or challenge to
Licensee's use of the Marks or of any unauthorized use or possible
misuse of Licensor's Marks or Licensor's proprietary information.
6. LICENSEE'S RESPONSIBILITIES.
A. OPERATIONAL AND OTHER REQUIREMENTS. During the License Term, Licensee
will:
(1) promptly pay to Licensor all amounts due Licensor and its
Entities as royalties or fees or for goods or services purchased by
Licensee;
(2) maintain the Hotel in a clean, safe and orderly manner and in
first class condition;
(3) provide efficient, courteous and high-quality service to the
public;
(4) operate the Hotel 24 hours a day every day, except as
otherwise permitted by Licensor based on special circumstances;
(5) strictly comply in all respects with the Manual and with all
other policies, procedures and requirements of Licensor which may be
from time to time communicated to Licensee;
(6) strictly comply with Licensor's reasonable requirements to
protect the System and the Hotel from unreliable sources of supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that either must or
may be used, promoted or offered at the Hotel;
(b) use, display, style and type of signage;
(c) directory and reservation service listings of the
Hotel;
(d) training of persons to be involved in the operation of
the Hotel;
(e) participation in all marketing, reservation service,
advertising, training and operating programs designated
by Licensor as System-wide (or area-wide) programs
based on Licensor's assessment of the long-term best
interests of hotels using the System, considering the
interest of the System overall;
(f) maintenance, appearance and condition of the Hotel;
(g) quality and types of services offered to customers at
the Hotel, and
(h) its 100% Satisfaction Guarantee rule of operation, and
any similar rules of operation designed to maintain or
improve relationships with past, present and potential
guests and other hotel customers, as such rule or rules
are in effect or as they may be established or revised
hereafter;
(8) use such automated guest service and/or hotel management
and/or telephone system(s) which Licensor deems to be in the best
interests of the System based on Licensor's assessment of
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the long-term best interests of hotels using the System, considering
the interests of the System overall, including any additions,
enhancements, supplements or variants thereof which may be developed
during the term hereof;
(9) participate in and use those reservation services which
Licensor deems to be in the best interests of the System based on
Licensor's assessment of the long-term best interests of hotels using
the System, considering the interests of the System overall, including
any additions, enhancements, supplements or variants thereof which may
be developed during the term hereof;
(10) adopt improvements or changes to the System as may be from
time to time designated by Licensor;
(11) strictly comply with all governmental requirements,
including the filing and maintenance of any required trade name or
fictitious name registrations, paying all taxes, and maintaining all
governmental licenses and permits necessary to operate the Hotel in
accordance with the System;
(12) permit inspection of the Hotel by Licensor's representatives
at any time and give them free lodging for such time as may be
reasonably necessary to complete their inspections;
(13) upon request by Licensor, provide to Licensor statistics on
Hotel operations in the form specified by Licensor and using
definitions specified by Licensor;
(14) promote the Hotel on a local or regional basis subject to
Licensor's requirements as to form, content and prior approvals;
(15) ensure that no part of the Hotel or System is used to
further or promote another lodging facility or any business that
competes with any business Licensor or an affiliate engages in at any
time during the Agreement (including, but not limited to, the
timeshare resort or vacation ownership business), except for those
approved by Licensor, its parent, subsidiaries or affiliates;
(16) use every reasonable means to encourage use of Homewood
Suites facilities everywhere by the public; provided, however, this
will not prohibit Licensor from requiring Licensee's participation in
programs designed to refer prospective customers to other hotels (in
the System or otherwise);
(17) in all respects use Licensee's best efforts to reflect
credit upon and create favorable public response to the name "Homewood
Suites";
(18) comply with Licensor's requirements concerning
confidentiality of information;
(19) not at any time during the term of this Agreement, through
itself or any member of an affiliated group (as defined by the
Internal Revenue Code) own, in whole or in part, or be the licensor
of, a hotel brand, tradename, system or chain without the written
consent of Licensor in its sole discretion. Hereafter, any entity
that, through itself or any affiliate, owns in whole or in part, or is
the licensor of a hotel brand, tradename, system or chain shall be
referred to as a "Competitor"; and
(20) maintain possession and control of the Hotel and Hotel site.
B. UPGRADING OF THE HOTEL. Licensor may at any time during the License
Term require substantial modernization, rehabilitation and other
upgrading of the Hotel to meet the then current standards specified in
the Manual as long as those standards apply to a majority of the
hotels operated by Licensor and its licensees in the same brand or
category as the Hotel. Nothing in this paragraph shall be construed to
relieve Licensee from the obligation to maintain acceptable product
quality ratings at the Hotel and maintain the Hotel in accordance with
the Manual at all times during the Agreement. Limited exceptions from
those standards may be made by Licensor based on local conditions or
special circumstances. If the upgrading requirements contained in this
Paragraph 6b cause Licensee undue hardship, Licensee may terminate
this Agreement by paying a fee computed according to Paragraph 13f.
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C. STAFF AND MANAGEMENT. Licensee is at all times responsible for the
management of the Hotel's business. Licensee may fulfill this
responsibility by retaining a third party management company
("Manager"); provided, however, Licensee shall not enter into any
lease, management agreement or other similar arrangement for the
operation of the Hotel or any part thereof with any entity without the
prior written consent of Licensor in Licensor's sole discretion (there
being no obligation on the part of Licensor to approve a third party
management company). Licensee understands that Licensor will not
normally approve a Competitor to manage the Hotel, or any entity that
(through itself or an affiliate) is the exclusive manager for a
Competitor. If a Manager becomes a Competitor at any time during the
term of the Agreement, Licensee shall have 90 days to retain a
substitute manager suitable to Licensor. As a prerequisite for
Licensor's approval of a Manager, the proposed management agreement
must provide (1) that the Manager has authority for the day-to-day
management of the Hotel; (2) that the Manager has the authority to
perform the obligations of the Licensee under this Agreement; and (3)
that in the case of any conflict between this Agreement and the
management agreement, this Agreement prevails.
7. FEES.
A. Commencing on the opening date of the Hotel as a Homewood Suites hotel
and continuing for the full term of this Agreement, for each month (or
part of a month), Licensee will pay to Licensor by the 15th of the
following month:
(1) a royalty fee equal to 4 percent of the gross revenues
attributable to or payable for rental of Guest Suites at the Hotel with
deductions for sales and room taxes only ("Gross Suites Revenue"); and
(2) a "Marketing/Reservation Contribution" equal to 4 percent of Gross
Suites Revenue. The Marketing/Reservation Contribution is subject to change
by Licensor from time to time, which Marketing/Reservation Contributions do
not include the cost, installation or maintenance of reservation services
equipment or training; and
(3) all amounts due Licensor for any other miscellaneous fees or
invoices or for goods or services purchased by or provided to Licensee or
paid by Licensor on Licensee's behalf; and
(4) an amount equal to any sales, gross receipts or similar tax
imposed on Licensor for the receipt of the payments required in (1), (2)
and (3) of this Paragraph above, unless the tax is an optional alternative
to an income tax otherwise payable by Licensor.
B. Licensee will operate the Hotel so as to maximize Gross Suites Revenue
consistent with sound marketing and industry practice and will not
engage in any conduct which is likely to reduce Gross Suites Revenue
in order to further other business activities.
C. Royalties may be charged on revenues (or upon any other basis, if so
determined by Licensor) from any activity conducted at the Hotel if
added by mutual agreement and if: (i) not now offered at hotels within
the System generally and is likely to benefit significantly from or be
identified significantly with the Homewood Suites name or other
aspects of the System or (ii) designed or developed by or for
Licensor.
D. Licensor may charge for optional products or services accepted by
Licensee from Licensor either in accordance with current practice or
as developed in the future.
E. A Guest Suite addition fee for guest suite additions to a hotel set
forth in Licensor's then current "Franchise Offering Circular" shall
be paid by Licensee to Licensor on Licensee's submission of an
application to add any Guest Suites to the Hotel. As a condition to
Licensor granting its approval of such application, Licensor may
require Licensee to upgrade the Hotel, subject to Paragraph 6b.
F. Local and regional marketing programs and related activities may be
conducted by Licensee, but only at Licensee's expense and subject to
Licensor's requirements. Reasonable charges may be made by
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Licensor for optional advertising materials ordered or used by
Licensee for such programs and activities.
G. Licensee shall participate in Licensor's travel agent commission
program(s) as it may be modified from time to time and shall reimburse
Licensor on or before the 15th of each month for call costs associated
with such programs including, but not limited to, travel agent
commissions and third party reservation service charges (such as
airline reservation systems).
H. Each payment paid by Licensor under this Paragraph 7 shall be
accompanied by the monthly statement referred to in Paragraph 8.
Licensor may apply any amounts received under this Paragraph 7 to any
amounts due under this Agreement. If any amounts are not paid when
due, such non-payment shall constitute a breach of this Agreement and,
in addition, such unpaid amounts will accrue a service charge
beginning on the first day of the month following the due date of 1
1/2 percent per month but not to exceed the maximum amount permitted
by applicable law.
8. RECORDS AND AUDITS.
A. DAILY AND MONTHLY REPORTS. At the request of Licensor, Licensee shall
prepare and deliver daily reports to Licensor, which reports will
contain information reasonably requested by Licensor on a daily basis,
such as daily rate and room occupancy, and which may be used by
Licensor for its reasonable purposes. At least monthly, Licensee shall
prepare a statement which will include all information concerning
Gross Suites Revenue, other revenues generated at the Hotel, suite
occupancy rates, reservation data and other information required by
Licensor (the "Data"). The Data will be permanently recorded and
retained as may be reasonably required by Licensor. By the 15th of
each month, Licensee will submit to Licensor a statement setting forth
the Data for the previous month and reflecting the computation of the
amounts then due under Paragraph 7. The statement will be in such form
and detail as Licensor may reasonably request from time to time, and
may be used by Licensor for its reasonable purposes.
B. MAINTENANCE OF RECORDS. Licensee shall, in a manner and form
satisfactory to Licensor and utilizing accounting and reporting
standards as reasonably required by Licensor, prepare on a current
basis (and preserve for no less than four years), complete and
accurate records concerning Gross Suites Revenue and all financial,
operating, marketing and other aspects of the Hotel, and maintain an
accounting system which fully and accurately reflects all financial
aspects of the Hotel and its business. Such records shall include
books of account, tax returns, governmental reports, register tapes,
daily reports, and complete quarterly and annual financial statements
(profit and loss statements, balance sheets and cash flow statements).
C. AUDIT. Licensor may require Licensee to have the Gross Suites Revenue
or other monies due hereunder computed and certified as accurate by a
certified public accountant. During the License Term and for two years
thereafter, Licensor and its authorized agents shall have the right to
verify information required under this Agreement by requesting,
receiving, inspecting and auditing, at all reasonable times, any and
all records referred to above wherever they may be located (or
elsewhere if reasonably requested by Licensor). If any such inspection
or audit discloses a deficiency in any payments due hereunder,
Licensee shall immediately pay to Licensor (i) the deficiency, (ii) a
service charge thereon as provided in Paragraph 7h, and (iii) all
inspection and audit costs (including travel, lodging, meals, salaries
and other expenses of the inspecting or auditing personnel).
Licensor's acceptance of Licensee's payment of any deficiency as
provided for herein shall not waive Licensor's right to terminate this
Agreement as provided for herein in Paragraph 13. If the audit
discloses an overpayment, Licensor shall refund the overpayment to
Licensee within 30 days.
D. ANNUAL FINANCIAL STATEMENTS. Licensee will submit to Licensor complete
year-end financial statements for the Hotel, Licensee and/or any
guarantors as soon as available but not later than 90 days after the
end of Licensee's fiscal year. Licensee will certify them to be true
and correct and to have been prepared in accordance with generally
accepted accounting principles consistently applied, and any false
certification will be a breach of this Agreement.
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E. All of the information provided to Licensor pursuant to this paragraph
or any other part of this Agreement, or pursuant to any agreement
ancillary to this Agreement (including agreements relating to the
System 21 business system or other property management system provided
by Licensor) (the "Information"), shall be the property of Licensor.
HOWEVER, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
INFORMATION, SUCH AS FINANCIAL STATEMENTS, PREPARED FOR THE HOTEL,
LICENSEE AND/OR GUARANTORS, WHICH ANY SUCH PARTIES ARE REQUIRED BY LAW
OR BY THEIR NORMAL BUSINESS PRACTICES TO USE FOR OTHER PURPOSES (SUCH
AS IN FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION OR OTHER
GOVERNMENTAL AUTHORITIES OR FOR TRANSMISSION TO SHAREHOLDERS) MAY BE
USED BY THEM FOR SUCH PURPOSES, AND SUCH PARTIES SHALL RETAIN
OWNERSHIP IN SUCH INFORMATION TO THE EXTENT NECESSARY TO PERMIT SUCH
USE. NEVERTHELESS, LICENSOR SHALL OWN THE COPIES OF ANY SUCH
INFORMATION PROVIDED BY ANY SUCH PARTIES IN ACCORDANCE WITH THE TERMS
OF THIS AGREEMENT. Licensor will use reasonable efforts to sort,
categorize, classify and otherwise analyze the information to help
licensees market their hotels. The Information will remain the
proprietary information of Licensor which Licensor will share with
licensees only as determined by Licensor in its sole discretion.
Licensor and its affiliates may use the Information for any reason
whatsoever, including an earnings claim in Licensor's offering
circular.
9. INDEMNITY.
SUBJECT TO THE PROVISIONS OF ANY MANAGEMENT AGREEMENT BETWEEN LICENSOR (AS
MANAGER THEREUNDER) AND LICENSEE (AS OWNER THEREUNDER), Licensee will
indemnify, during and after the term of this Agreement, Licensor and its
affiliates, and their respective officers, directors, employees, agents,
predecessors, successors and assigns ("Indemnified Parties") against, hold
them harmless from, and promptly reimburse them for, all payments of money
(fines, damages, legal fees, expenses, etc.) by reason of any claim,
demand, tax, penalty, or judicial or administrative investigation or
proceeding (even where negligence of Licensor and/or its Entities and/or
their Indemnified Parties is actual or alleged) arising from any claimed
occurrence at the Hotel or arising from, as a result of, or in connection
with the development or operation of the Hotel (including, but not limited
to, the design, construction, financing, furnishing, equipment, acquisition
of supplies or operation of the Hotel in any way), or any other of
Licensee's acts, omissions or obligations or those of anyone associated or
affiliated with Licensee or the Hotel in any way arising out of or related
to this Agreement. At the election of Licensor, Licensee will also defend
Licensor and/or its Entities and/or their Indemnified Parties against the
same. In any event, Licensor will have the right, through counsel of its
choice, to control any matter to the extent it could directly or indirectly
affect Licensor and/or its Entities and/or their Indemnified Parties
financially. Licensee will also reimburse Licensor for all expenses,
including attorneys' fees and court costs, reasonably incurred by Licensor
to protect itself and/or its Entities and/or their Indemnified Parties
from, or to remedy Licensee's defaults or to collect any amounts due under
this Agreement.
10. INSURANCE.
A. Licensee will comply with Licensor's specifications for insurance as
to amount and type of coverage as may be reasonably specified by
Licensor from time to time in writing and will in any event maintain
as a minimum the following insurance underwritten by an insurer
approved by Licensor:
(1) employer's liability and workers' compensation insurance as
prescribed by applicable law; and
(2) liquor liability insurance, if applicable, naming Licensor and its
then current Entities and their predecessors, successors and assigns as
additional insureds with single-limit coverage for personal and bodily
injury and property damage of at least $10,000,000 for each occurrence; and
(3) commercial general liability insurance (with products, completed
operations and independent contractors coverage) and comprehensive
automobile liability insurance, all on an occurrence and per location basis
naming Licensor, its Entities and their predecessors, successors and
assigns as additional insureds and underwritten by an insurer approved by
Licensor, with single-limit coverage for personal and bodily injury and
property damage of at least $10,000,000 for each occurrence; and
(4) in connection with all construction at the Hotel during the
License Term, Licensee will cause the general contractor to maintain with
an insurer approved by Licensor commercial general liability
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insurance (with products, completed operations, and independent contractors
coverage including workers' compensation and automobile liability insurance
for such independent contractors) in at least the amount of $10,000,000 for
each occurrence for personal and bodily injury and property damage with
Licensor, its Entities and their predecessors, successors and assigns as
additional insureds.
B. EVIDENCE OF INSURANCE/CHANGES. This coverage shall be evidenced by
original certificates of insurance submitted to Licensor
simultaneously herewith, annually hereafter and each time a change is
made in any insurance or insurance carrier, Licensee will furnish to
Licensor certificates of insurance including the term and coverage of
the insurance in force, the persons insured, and a statement that the
coverage may not be cancelled, altered or permitted to lapse or expire
without 30 days advance written notice to Licensor. Licensor will send
Licensee notice of any policy or coverage which Licensor, in its sole
discretion, finds unacceptable and upon receipt of such notice,
Licensee will promptly undertake to change such policy or coverage.
C. If Licensee fails or neglects to obtain or maintain the insurance or
policy limits required by this Agreement, Licensor shall have the
option, without notice, to obtain and maintain such insurance for
Licensee, and Licensee shall pay immediately upon demand therefore,
the premiums and the cost incurred by Licensor in taking such action.
11. TRANSFER.
A. TRANSFER OF THIS AGREEMENT BY LICENSOR. Licensor shall have the right
to transfer or assign this Agreement or any of Licensor's rights,
obligations, or assets under this Agreement to any person or legal
entity provided that the transferee assumes all of Licensor's
obligations to Licensee under this Agreement.
B. TRANSFERS BY LICENSEE.
(1) General Statement of Explanation and Intent. This Agreement is not
transferable by Licensee, and a change in ownership of the Hotel or the
licensed business (i.e., either this Agreement, the Licensee or any
indirect ownership interest in the Licensee) is not allowed under this
Agreement. Certain intra-family transfers of interest and (in the case of
corporate licensees) corporate restructurings are permitted as long as the
requirements described below are met. However, Licensor has entered into
this Agreement with a particular Licensee or its owners. If the Licensee
wants to transfer the Hotel or its interest in the licensed business, such
a transfer will constitute a "change of ownership". If the transferee wants
to continue to operate the Hotel as a Homewood Suites hotel, the transferee
will have to apply for a new license which, if approved, will last at most
for the balance of the term of this Agreement. If the change of ownership
is not approved, or if the transferee does not want to continue to operate
the Hotel as a Homewood Suites hotel, Licensor may refuse to consent to the
termination of this Agreement. If Licensor does consent to termination,
this Agreement will terminate and Licensee will owe liquidated damages. In
addition, if the transfer is to a Competitor, Licensor has the right to buy
the Hotel. The foregoing explanation is more fully described and qualified
by the following specific provisions.
(2) Licensee understands and acknowledges that the rights and duties
set forth in this Agreement are personal to Licensee, and that Licensor has
entered into this Agreement in reliance on the business skill, financial
capacity, and personal character of Licensee (if Licensee is an
individual), and that of the partners, members, or stockholders of Licensee
(if Licensee is a partnership, company, corporation, or other legal
entity). Accordingly, no direct or indirect interest in the Hotel or in
this Agreement, and no direct or indirect Equity Interest (as defined
herein) in Licensee may be sold, leased, assigned, or transferred, (such
instances hereafter referred to collectively as a "Transfer"), without the
consent of the Licensor. Nothing herein shall require Licensor's approval
for any pledge, mortgage, or hypothecation of all or any part of the assets
of the licensed business (other than this Agreement or any Equity Interest
in Licensee) to banks or other lending institutions.
(3) Any purported Transfer, by operation of law or otherwise, not in
accordance with the provisions of this Agreement shall be null and void and
shall constitute a breach of this Agreement, for which Licensor may
terminate this Agreement upon notice without opportunity to cure pursuant
to Paragraph 13d, and as a result of which Licensee will owe liquidated
damages.
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(4) References in this Agreement to "Equity Interests" shall mean any
direct or indirect beneficial interest in Licensee (an "indirect" interest
is an interest in an entity other than the Licensee that either itself, or
through others, has an interest in the Licensee). In addition,
"publicly-traded equity interest" shall mean any Equity Interest which is
traded on any securities exchange or is quoted in any publication or
electronic reporting service maintained by the National Association of
Securities Dealers, Inc. or any of its successors. In computing changes of
Equity Interests, limited partners will not be distinguished from general
partners. Licensor's judgment will be final if there is any question as to
the definition of Equity Interest or as to the computation of relative
Equity Interests, the principal considerations being: direct and indirect
(i) power to exercise control over the affairs of Licensee; (ii) right to
share in Licensee's profits; and (iii) exposure to risk in the Licensee's
business.
(5) Licensee represents that the Equity Interests are directly and (if
applicable) indirectly owned as shown on the Rider.
C. PROCEDURES FOR TRANSFERS. Licensee must provide written notice to
Licensor in advance of any proposed Transfer stating the identity of
the prospective transferee, purchaser, or lessee and the terms and
conditions of the conveyance. As a condition to consenting to the
transfer, Licensor may require any one or more of the following to be
met:
(1) Licensee will upon request provide a copy of any proposed
agreement of transfer and all other information with respect thereto which
Licensor may reasonably require;
(2) Licensee will upon request provide documents showing ownership
structure of the Licensee, site control by the Licensee, possession or
management control by the Licensee, financial statements of any
participants, and any other documents reasonably requested by Licensor;
(3) Licensee will upon request pay a processing fee to Licensor of up
to $5,000 to cover Licensor's costs to review and consent to the Transfer;
provided however, in the case of a transfer of Equity Interests which
require registration under any federal or state securities law, Licensee
will pay a processing fee that will not exceed $25,000;
(4) Licensee and all participants in any proposed public offering
(including the sale of partnership or membership interests) (i) agree to
fully indemnify Licensor in connection with the registration, (ii) furnish
Licensor with all information requested, and (iii) avoid using Licensor's
service marks or trademarks or otherwise implying Licensor's participation
in or endorsing of any public offering;
(5) Licensee will at all times adequately provide for the management
of the Hotel during any Transfer; or
(6) Licensor may require the transferee to promptly execute a new
license agreement on Licensor's then current license agreement for the
unexpired term of this Agreement, and Licensor may require the guarantee of
the new license agreement by the same guarantors of this Agreement (or
substitute guarantors approved by Licensor in its sole discretion).
D. PERMITTED TRANSFERS. Licensor will not unreasonably withhold consent
to any of the following Transfers provided Licensee complies with all
the requirements specified by Licensor pursuant to Subparagraph c
above (it being understood that if Licensee is in default of any of
its obligations under the Agreement, it will not be unreasonable for
Licensor to refuse to consent to any of these Transfers):
(1) Equity Interests which are not publicly-traded may be transferred,
if after the transaction, Glade M. Knight owns, directly or indirectly, not
less than 50% of all Equity Interests and controls the management and
policies of Licensee and, in the case of any such permitted transfer, the
requirements of clauses (3) and (6) of subparagraph c. above need not be
complied with by Licensee.
(2) Publicly-traded equity interests may be transferred (without
Licensor's consent and without notification) if such transfer is exempt
from registration under federal securities law and if immediately
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before and after the transfer, the transferor and transferee respectively
each own less than 25 percent of the Equity Interests in Licensee.
(3) Licensee, if a natural person, may transfer its interest in the
License or Equity Interest in the Licensee to one or more of Licensee's
spouse, parents, siblings, nephews, descendants or spouses' descendants or
to a corporation entirely owned by Licensee ("Permitted Transferees").
(4) If Licensee is a natural person, upon the Licensee's death, the
License or Licensee's Equity Interest in the Licensee will pass in
accordance with Licensee's will, or, if Licensee dies intestate, in
accordance with laws of intestacy governing the distribution of the
Licensee's estate, as the case may be, provided the transferee is one or
more of the decedent's Permitted Transferees (excluding corporations
formerly owned by the Licensee) and within one year after the death the
Permitted Transferees meet all Licensor's normal requirements of an
approved applicant.
(5) Licensee may sell or lease the Hotel, the Hotel site, or any
portion thereof if, in the reasonable judgment of Licensor, after such
transfer, Licensee will retain possession and control of the Hotel site and
management control of the Hotel operations (which may be via third party
management contract pursuant to Paragraph 6c). If, in the reasonable
judgment of Licensor, the transfer of the Hotel will result in the loss of
possession or control of the Hotel or Hotel site or management of the
Hotel, the transfer will constitute a change of ownership as described in
Subparagraph e.
E. CHANGE OF OWNERSHIP.
(1) Any Transfer that does not qualify as a permitted transfer under
Subparagraph d above shall constitute a change of ownership. If in the case
of a change of ownership, the transferee desires to continue to operate the
Hotel as a Homewood Suites hotel, the transferee must submit an application
for a new license agreement. The new license, if approved, will be at most
for the unexpired term of this Agreement. The transferee shall be
responsible for all normal fees and costs (including application fees and
costs of improvements to the Hotel).
(2) Licensor shall process such change of ownership application in
good faith and in accordance with Licensor's then current procedures,
criteria and requirements regarding upgrading of the Hotel, credit,
operational abilities and capabilities, prior business dealings, market
feasibility, guarantees, and other factors deemed relevant by Licensor. If
such change of ownership application is approved, Licensor and the new
owner shall, upon surrender of this Agreement, enter into a new license
agreement. The new license agreement shall be on Licensor's then current
form and contain Licensor's then current terms (except for duration), and
if applicable, the new license agreement will contain specified upgrading
and other requirements. If the application is approved, Licensee submits a
voluntary termination of this Agreement and signs a release (in a form
satisfactory to Licensor) of all claims against Licensor, and the proposed
new owner executes a new license within 30 days of the sale of the Hotel,
no liquidated damages described in Paragraph 13 will be owed by Licensee
for the termination of this Agreement.
(3) If a change of ownership application for the proposed transferee
is not approved by Licensor or the transferee does not want to continue to
operate the Hotel as a Homewood Suites hotel, Licensor may refuse consent
to the transfer and reserve all remedies; if Licensee does consent and the
Transfer occurs, then this Agreement shall terminate pursuant to Paragraph
13d hereof and Licensor shall be entitled to all of its remedies including
liquidated damages.
F. TRANSFER TO COMPETITOR. Notwithstanding any of the foregoing, if the
Licensee receives a bona fide offer from a Competitor to purchase or
lease the Hotel or to purchase Licensee or any entity that controls
Licensee, or to purchase an interest in either, and Licensee or any
person or entity that owns or controls Licensee wishes to accept such
offer, Licensee shall give written notice thereof to Licensor, stating
the name and full identity of the prospective purchaser or tenant, as
the case may be, including the names and addresses of the owners of
the capital stock, partnership interests or other proprietary
interests of such prospective purchaser or tenant, the price or rental
and all terms and conditions of such proposed transaction, together
with all other information with respect thereto which is requested by
Licensor and reasonably available to Licensee. Within 60 days after
receipt by Licensor of such
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written notice from Licensee, Licensor shall elect by written notice to
Licensee one of the following four alternatives:
(1) If the proposed transaction is a sale or lease of the Hotel,
Licensor (or its designee) shall have the right to purchase or lease the
Hotel premises and related property at the same price or rental and upon
the same terms and conditions as those set forth in such bona fide offer
from a Competitor. In such event Licensee and Licensor (or its designee)
shall promptly enter into an agreement for sale or lease at the price or
rental and on terms consistent with such bona fide offer.
(2) If the proposed transaction is a purchase of all or a portion of
the stock or assets (which includes the Hotel) of Licensee or the person
that owns or controls Licensee, Licensor (or its designee) shall have the
right to purchase the Hotel premises and related property. If the parties
are unable to agree as to a purchase price and terms within thirty days of
Licensor's election, the fair market value of the Hotel premises and
related property shall be determined by arbitration as follows: Either
party may by written notice to the other appoint an arbitrator. Thereupon,
within 15 days after the giving of such notice, the other shall by written
notice to the former appoint another arbitrator, and in default of such
second appointment the arbitrator first appointed shall be the sole
arbitrator. When any two arbitrators have been appointed as aforesaid, they
shall, if possible, agree upon a third arbitrator and shall appoint him by
notice in writing, signed by both of them in triplicate, one of which
triplicate notices shall be given to each party hereto; but if 15 days
shall lapse without the appointment of the third arbitrator as aforesaid,
then such third arbitrator shall be appointed by the American Arbitration
Association from its qualified panel of arbitrators, and shall be a person
having at least ten (10) years' recent professional experience as to the
subject matter in question. Upon appointment of the third arbitrator
(whichever way appointed as aforesaid), the three arbitrators shall meet
and render their decision. The decision of a majority of the arbitrators so
chosen shall be conclusive. Licensor (or its designee) shall have the
right, at any time within 30 days of being notified in writing of the
decision of the arbitrators as aforesaid, to purchase the Hotel premises
and related property at the valuation fixed by the arbitrators. The parties
shall share equally the expense of such arbitration.
(3) To terminate this Agreement, in which event Licensee shall be
obligated to pay to Licensor liquidated damages pursuant to a Special
Termination as set forth in Paragraph 13f.
(4) To refuse to consent to the Transfer, reserving all remedies under
the applicable law.
G. FINANCING. The construction and/or operation of the Hotel may not be
financed by a public offering of any right, title or interest in the
Hotel, the property upon which it is built or the receipts from its
operation without the prior review and approval of the applicable
documentation by Licensor. Licensee shall submit a non-refundable
$25,000 fee with said documentation.
12. CONDEMNATION AND CASUALTY.
A. CONDEMNATION. Licensee shall, at the earliest possible time, give
Licensor notice of any proposed taking by eminent domain. If Licensor
agrees that the Hotel or a substantial part thereof is to be taken,
Licensor may, in its sole discretion and within a reasonable time of
the taking (within four months) transfer this Agreement to a nearby
location selected by Licensee. If Licensor approves the new location
and authorizes the transfer and if within one year of the closing of
the Hotel Licensee opens a new hotel at the new location in accordance
with Licensor's specifications, then the new hotel will be deemed to
be the Hotel licensed under this Agreement. If a condemnation takes
place and a new hotel does not, for whatever reason, become the Hotel
under this Agreement in strict accordance with this paragraph (or if
it is reasonably evident to Licensor that such will be the case), this
Agreement will terminate immediately upon notice thereof by Licensor
to Licensee, without the payment of liquidated damages as calculated
in Paragraph 13f.
B. CASUALTY. If the Hotel is damaged by fire or other casualty, Licensee
will expeditiously repair the damage. If the damage or repair requires
closing the Hotel, Licensee will immediately notify Licensor, will
repair or rebuild the Hotel according to Licensor's standards, will
commence reconstruction within four months after closing, and will
reopen the Hotel for continuous business operations as soon as
practicable (but in any event within one year after the closing of the
Hotel), giving Licensor ample advance notice of the date of reopening.
If the Hotel is not reopened according to this Paragraph, this
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Agreement will terminate immediately, upon notice thereof by Licensor
to Licensee, with the payment of liquidated damages as calculated in
Paragraph 13f, provided however, if Licensee's insurer fails to pay
the applicable insurance policy proceeds to Licensee, or if Licensee's
lender, pursuant to a valid agreement with Licensee, refuses to allow
the insurance proceeds to be used for repair or rebuilding, the
Agreement may be terminated by Licensee without payment of the
liquidated damages in Paragraph 13f. In such case Licensee shall
notify Licensor and provide any reasonable proof requested by
Licensor.
C. NO EXTENSIONS OF TERM. Nothing in this Paragraph 12 will extend the
License Term but Licensee shall not be required to make any payments
pursuant to Paragraph 7 for periods during which the Hotel is closed
by reason of condemnation or casualty.
13. TERMINATION.
A. EXPIRATION OF TERM. Unless terminated earlier, this Agreement will
expire without notice October 4, 2019.
B. PERMITTED TERMINATION PRIOR TO EXPIRATION OF TERM. Licensee may
terminate this Agreement on the tenth or fifteenth anniversary date of
the opening of the Hotel by giving at least 12 but not more than 15
months advance notice to Licensor accompanied by the payment as
provided in Paragraph 13f herein.
C. TERMINATION OR SUSPENSION BY LICENSOR ON ADVANCE NOTICE. This
Agreement may be terminated if Licensee fails to satisfy any
obligations under this Agreement or any attachment hereto. Except in
the case of an immediate termination as provided in subparagraph 13d
below, this Agreement shall terminate if Licensee fails to cure an
Event of Default after the Licensor furnishes adequate notice of
termination based on the Event of Default.
(1) An "Event of Default" shall occur if the Licensee fails to satisfy
or comply with any of the requirements, conditions, or terms set forth in
(i) this Agreement or any attachment including, but not limited to, any
provisions regarding: any transfer of the Hotel, or any direct or indirect
interest in the Agreement or Licensee, any representation or warranty, any
fee obligation, any operational requirements (including the standards in
the Manual); trademarks usage; maintenance of records, insurance and
indemnity; or (ii) any other agreement between Licensor (or an affiliate)
and Licensee relating to the Hotel, including, but not limited to, any
property management system agreement, such as the System 21 business system
agreement, or any agreement to manage the Hotel.
(2) Notice of termination shall be adequate, if mailed thirty (30)
days (or such longer period required by applicable law) in advance of the
termination date.
(3) Licensor's notice of termination shall not relieve Licensee of its
obligations under this Agreement or any attachment.
(4) As a result of Licensee's efforts to comply with the terms and
conditions contained on Attachment A and elsewhere in this Agreement,
Licensee will incur substantial expense and expend substantial time and
effort. Licensee acknowledges and agrees that Licensor shall have no
liability or obligation to Licensee for any losses, obligations,
liabilities or expenses incurred by Licensee if (i) Licensee commits an
Event of Default as described in Paragraph 13c(1); (ii) the Hotel is not
authorized by Licensor to Open as defined in Attachment A or (iii) this
Agreement is terminated because Licensee has not complied with the terms
and conditions of this Agreement.
(5) Notwithstanding the foregoing, following an Event of Default,
Licensor may at any time, in its sole discretion, suspend its obligations
under this Agreement (including reservation services).
D. IMMEDIATE TERMINATION BY LICENSOR. Notwithstanding the foregoing
paragraph, this Agreement may be immediately terminated (or terminated
at the earliest time permitted by applicable law) if one or more of
the following material breaches to this Agreement or any Attachment
occur:
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(1) Any Event of Default where a prior Event of Default had also
occurred during the preceding 12 months, but the License was not terminated
because Licensee cured the prior Event of Default;
(2) Licensee or any guarantor of Licensee's obligations hereunder
shall:
(a) generally not pay its debts as they become due or shall
admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors; or
(b) commence any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief
of debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any
substantial part of its property; or
(c) take any corporate or other action to authorize any of the
actions set forth above in Paragraphs (a) or (b).
(3) Any case, proceeding or other action against Licensee or any such
guarantor shall be commenced seeking to have an order for relief entered
against it as debtor, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its property, and
such case, proceeding or other action (i) results in the entry of an order
for relief against it which is not fully stayed within seven business days
after the entry thereof or (ii) remains undismissed for a period of 45
days; or
(4) an attachment remains on all or a substantial part of the Hotel or
of Licensee's or any such guarantors assets for 30 days; or
(5) Licensee or any such guarantor fails within 60 days of the entry
of a final judgment against Licensee in any amount exceeding $50,000 to
discharge, vacate or reverse the judgment, or to stay execution of it, or
if appealed, to discharge the judgment within 30 days after a final adverse
decision in the appeal; or
(6) Licensee loses possession or the right to possession of all or a
significant part of the Hotel or Hotel site; or
(7) Licensee fails to continue to identify the Hotel to the public as
a Homewood Suites hotel; or
(8) Licensee contests in any court or proceeding Licensor's ownership
of the System or any part of the System, or the validity of any service
marks or trademarks associated with Licensor's business; or
(9) Any action is taken toward dissolving or liquidating Licensee or
any such guarantor, if it is a corporation or partnership, except for death
of a partner; or
(10) Licensee or any of its principals is, or is discovered to have
been convicted of a felony (or any other offense if it is likely to
adversely reflect upon or affect the Hotel, the System, the Licensor and/or
its Entities in any way; or
(11) Licensee maintains false books and records of accounts or submits
false reports or information to Licensor.
(12) Licensee becomes a Competitor (as defined in Paragraph 6a(19).
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<PAGE>
E. DE-IDENTIFICATION OF HOTEL UPON TERMINATION. Upon termination or
expiration of the term, Licensee will take whatever action is
necessary to assure that no use is made of any part of the System
(including but not limited to the Marks) at or in connection with the
Hotel or otherwise. Licensee shall return to Licensor the Manual and
all other proprietary materials, remove all distinctive System
features of the Hotel, including the primary freestanding sign down to
the structural steel, and take all other actions ("De-identification
Actions") required to preclude any possibility of confusion on the
part of the public that the Hotel is still using all or any part of
the System or is otherwise holding itself out to the public as a
Homewood Suites hotel. If within 30 days after termination of this
Agreement Licensee fails to comply with this paragraph, Licensor or
its agents at Licensee's expense, may enter the premises of the Hotel
to perform the De-identification Actions. The preceding sentence shall
not in any way limit Licensor's other rights or remedies under this
Agreement.
F. LIQUIDATED DAMAGES. The parties recognize the difficulty of
ascertaining damages to Licensor resulting from premature termination
of this Agreement, and have provided for liquidated damages, which
represent the parties' best estimate as to the damages arising from
the circumstances in which they are provided and which are only
damages for the premature termination of this Agreement, and not as a
penalty or as damages for breaching this Agreement or in lieu of any
other payment. If this Agreement is terminated other than by the
expiration of the term described in Paragraph 13a, Licensee will pay
Licensor, within 10 days of termination, liquidated damages in an
amount determined as follows:
(1) an amount equal to the amount payable under Paragraph 7 (regarding
Fees) for the three years prior to termination; or
(2) if the Hotel opened but has been Open for less than three years,
an amount equal to the greater of: (i) 36 times the monthly average payable
under Paragraph 7, or (ii) 36 times the amount payable under Paragraph 7
for the last full month prior to termination; or
(3) if the Hotel opened, but has not been in operation for one full
month, an amount equal to $3,000 per Guest Suite in the Hotel; or
(4) if the Agreement is terminated before the commencement of
construction or of the Work (as described in the applicable attachment), an
amount equal to the initial application fee that would be due for a license
application according to Licensor's then current franchise offering
circular (in addition to any initial application fee already paid); or
(5) if the Agreement is terminated after commencement of construction
or of the Work but before opening of the Hotel, an amount equal to two
times the initial application fee; or
(6) if the Agreement is terminated pursuant to Paragraph 13b
(permitted termination after 10th or 15th year) only, an amount equal to
the amount payable under Paragraph 7 for the two years prior to notice of
termination.
Furthermore, Licensee recognizes the additional harm by way of
confusion with respect to national accounts, greater difficulty in
re-entering the market, and damage to goodwill of the Marks that
Licensor will suffer in the case of (i) a Licensee who terminates two
or more license agreements with Licensor at approximately the same
time (between either itself or its affiliates and Licensor) or (ii) a
license that terminates as a result of the Hotel or Licensee being
acquired by a Competitor, and the Licensor is unable or elects not to
buy the Hotel pursuant to Paragraph 11f (each of these will be
referred to as a "Special Termination"). Licensee agrees that in the
case of a Special Termination, the amount of liquidated damages as
calculated above will be doubled.
14. RENEWAL.
This Agreement is non-renewable.
15. RELATIONSHIP OF PARTIES.
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A. NO AGENCY RELATIONSHIP. Licensee is an independent contractor. Neither
party is the legal representative or agent of, or has the power to
obligate (or has the right to direct or supervise the daily affairs
of) the other for any purpose whatsoever. Licensor and Licensee
expressly acknowledge that the relationship intended by them is a
business relationship based entirely on, and defined by, the express
provisions of this Agreement and that no partnership, joint venture,
agency, fiduciary or employment relationship is intended or created by
reason of this Agreement.
B. LICENSEE'S NOTICES TO PUBLIC CONCERNING INDEPENDENT STATUS. Licensee
will take all necessary steps including those reasonably requested by
Licensor to minimize the chance of a claim being made against Licensor
for anything that occurs at the Hotel, or for acts, omissions or
obligations of Licensee or anyone associated or affiliated with
Licensee or the Hotel. Such steps may, for example, include giving
notice in Guest Suites, public rooms and advertisements, on business
forms and stationery, etc., making clear to the public that Licensor
is not the owner or operator of the Hotel and is not accountable for
what happens at the Hotel. Unless required by law, Licensee will not
use the words "Homewood", "Homewood Suites" or any other names or mark
associated with the System to incur any obligation or indebtedness on
behalf of Licensor. Licensee shall not enter into or execute any
contracts in the name "Homewood Suites hotel", and all contracts for
the Hotel's operations and services at the Hotel shall be in the name
of Licensee or Licensee's management company. Likewise, the words
"Homewood", "Homewood Suites", or any similar words will not be used
to name or identify developments adjacent to or associated with the
Hotel, nor will Licensee use such names in its general business in any
manner separated from the business of the Hotel.
16. MISCELLANEOUS.
A. SEVERABILITY AND INTERPRETATION. The remedies provided in this
Agreement are not exclusive. If any provision of this Agreement is
held to be unenforceable, void or voidable as being contrary to the
law or public policy of the jurisdiction entitled to exercise
authority hereunder, all remaining provisions shall nevertheless
continue in full force and effect unless deletion of such provision(s)
impairs the consideration for this Agreement in a manner which
frustrates the purpose of the parties or makes performance
commercially impracticable. The provisions of this Agreement shall be
interpreted based on the reasonable intention of the parties in the
context of this transaction without interpreting any provision in
favor of or against any party whether or not such party was the
drafting party or by such party's position relative to the other
party. Any covenant, term or provision of this Agreement which, in
order to effect the intent of the parties, must survive the
termination of this Agreement, shall survive any such termination.
B. CONTROLLING LAW. This Agreement shall become valid when signed by the
parties hereto. It shall be deemed made and entered into in the State
of Tennessee and shall be governed and construed under and in
accordance with the laws of the State of Tennessee. In entering into
this Agreement, Licensee acknowledges that it has sought, voluntarily
accepted and become associated with Licensor who is headquartered in
Memphis, Tennessee, and that this Agreement contemplates and will
result in business relationships with Licensor's headquarter's
personnel. The choice of law designation permits, but does not require
that all suits concerning this Agreement be filed in the State of
Tennessee.
C. EXCLUSIVE BENEFIT. This Agreement is exclusively for the benefit of
the parties hereto, and it may not give rise to liability to a third
party, except as otherwise specifically set forth herein. No agreement
between Licensor and anyone else is for the benefit of Licensee.
D. ENTIRE AGREEMENT. Licensor and the Licensee each acknowledge and
warrant to each other that they wish to have all terms of this
business relationship defined in this written agreement. Neither
Licensor nor Licensee wishes to enter into a business relationship
with the other in which any terms or obligations are the subject of
alleged oral statements or in which oral statements serve as the basis
for creating rights or obligations different than or supplementary to
the rights and obligations set forth in this Agreement. Accordingly,
Licensor and Licensee agree that this Agreement and any Attachments
hereto and the documents referred to herein, shall be construed
together and shall supersede and cancel any prior and/or
contemporaneous discussions or writings (whether described as
representations, inducements, promises, agreements or any other term)
between Licensor or anyone
16
<PAGE>
acting on its behalf and Licensee or anyone acting on his, her or its
behalf, which might be taken to constitute agreements,
representations, inducements, promises or understandings (or any
equivalent to such terms) with respect to this Agreement or the
relationship between the parties and Licensor and Licensee each agree
that they have placed, and will place, no reliance on any such
discussions or writings. This Agreement (including any Attachments and
the documents referred to herein), is the entire agreement between the
parties and contains all of the terms, conditions, rights and
obligations of the parties with respect to the Hotel or any other
aspect of the relationship between the parties. No future license or
offer of a license for additional locations or any other business
activity have been promised to Licensee and no such license or offer
shall come into existence, except by means of a separate writing,
executed by Licensor's officer or such other entity granting the
license and specifically identified as a License Agreement. No change,
modification, amendment or waiver of any of the provisions of this
Agreement will be effective and binding upon Licensor unless it is in
writing, specifically identified as an amendment to this Agreement and
signed by Licensor's officer.
E. LICENSOR'S WITHHOLDING CONSENT. Licensor may withhold its consent,
wherever required under this Agreement, if any default or breach by
Licensee exists under this Agreement. Approvals and consents by
Licensor will not be effective unless evidenced by a writing duly
executed on behalf of Licensor.
F. NOTICES. Any notice must be in writing and will be effective on either
(1) the day it is sent via facsimile with a confirmation of receipt;
or (2) the third day after it is mailed by first class mail; or (3)
the day it is delivered by express delivery service; or (4) the third
day after it is sent by certified mail to the appropriate party at its
address first stated above or to such person and at such address as
may be designated by notice hereunder.
G. GENERAL RELEASE. Licensee and its respective heirs, administrators,
executors, agents, representatives and their respective successors and
assigns, hereby release, remise, acquit and forever discharge Licensor
and its Entities and their officers, directors, employees, agents,
representatives and their respective successors and assigns from any
and all actions, claims, causes of action, suits, rights, debts,
liabilities, accounts, agreements, covenants, contracts, promises,
warrants, judgments, executions, demands, damages, costs and expenses,
whether known or unknown at this time, of any kind or nature, absolute
or contingent, if any, at law or in equity, on account of any matter,
cause or thing whatsoever which has happened, developed or occurred at
any time from the beginning of time to and including the date of
Licensee's execution and delivery to Licensor of this Agreement and
that they will not institute any suit or action at law or otherwise
against Licensor directly or indirectly relating to any claim released
hereby by Licensee. This release and covenant not to sue shall survive
the termination of this Agreement. Licensee shall take whatever steps
are necessary or appropriate to carry out the terms of this release
upon Licensor's request.
H. DESCRIPTIVE HEADINGS. The descriptive headings in this Agreement are
for convenience only and shall not control or affect the meaning or
construction of any provision in this Agreement.
I. WARRANTIES. Licensee warrants, represents and agrees that all
statements made by Licensee in the Application submitted to Licensor
in anticipation of this Agreement and all other documents and
information submitted by Licensee are true, correct and complete as of
the date hereof and will continue to be updated so that they are true,
correct and complete. This warranty and representation shall survive
the termination of this Agreement.
J. TIME. Time is of the essence in this Agreement.
K. INCLUDING. Including shall mean including, without limitation.
L. COUNTERPARTS. This Agreement may be executed in counterparts, and each
copy so executed and delivered shall be deemed an original.
M. AMENDMENTS. If an amendment to this Agreement is required prior to its
execution, said amendment shall be made a part of this Agreement as an
Attachment. If an amendment to this Agreement is
17
<PAGE>
necessary after its execution, said amendment shall be made a part of
this Agreement in the form of a separate document.
N. PERFORMANCE REQUIREMENTS/RESPONSIBILITIES. Attachment A is hereby
incorporated by reference and made a part of this Agreement to set
forth certain of Licensee's performance conditions and requirements.
O. BUSINESS JUDGMENT. The parties hereto recognize, and any mediator or
judge is affirmatively advised, that certain provisions of this
Agreement describe the right of Licensor to take (or refrain from
taking) certain actions in the exercise of its assessment of the
long-term best interests of hotels using the System, considering the
interests of the System overall. Where such decisions have been taken
by Licensor and are supported by the business judgment of Licensor,
neither a mediator nor a judge nor any other person reviewing such
decisions shall substitute his, her or its judgment for the judgment
so exercised by Licensor.
17. EXPIRATION OF OFFER.
This Agreement constitutes an offer which must be accepted by the Licensee
named on the signature page hereof by dating, executing and returning to
Licensor two copies hereof (and all attachments hereto, including, if
required, the Guaranty) on or before the date specified on the Rider.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
LICENSEE: LICENSOR:
APPLE SUITES MANAGEMENT, INC. PROMUS HOTELS, INC.
By: /s/ Glade M. Knight By: /s/ Thomas P. Powell
------------------------------- --------------------------------
Name: Glade M. Knight Name: Thomas P. Powell
------------------------------- --------------------------------
Title: President Title: Sr. Vice President-Development
------------------------------ -------------------------------
Witness: /s/ C. Douglas Schepker Witness:/s/ Debbie Jackson
----------------------------- ------------------------------
Date: 10/14/99 Date: October 15, 1999
------------------------------- --------------------------------
19
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GUARANTY
Location: 3200 Cobb Parkway, SW, Atlanta-Galleria/Cumberland, Georgia
---------------------------------------------------------------------
As an inducement to Promus Hotels, Inc. ("Licensor") to execute the above
License Agreement, the undersigned, jointly and severally, hereby
unconditionally warrant to Licensor and its successors and assigns that all of
Licensee's representations in the License Agreement and the application
submitted by Licensee to obtain the License Agreement are true and guarantee
that all of Licensee's obligations under the above License Agreement, including
any amendments thereto whenever made (the "Agreement"), will be punctually paid
and performed.
Upon default by Licensee or notice from Licensor, the undersigned will
immediately make each payment required of Licensee under the Agreement. Without
affecting the obligations of the undersigned under this Guaranty, Licensor may
without notice to the undersigned extend, modify or release any indebtedness or
obligation of Licensee, or settle, adjust or compromise any claims against
Licensee. The undersigned waive notice of amendment of the Agreement and notice
of demand for payment or performance by Licensee.
Upon the death of an individual guarantor, the estate of such guarantor will be
bound by this Guaranty but only for defaults and obligations hereunder existing
at the time of death, and the obligations of the other guarantors will continue
in full force and effect.
The Guaranty constitutes a guaranty of payment and not of collection, and each
of the guarantors specifically waives any obligation of Licensor to proceed
against Licensee on any money or property held by Licensee or by any other
person or entity as collateral security, by way of set off or otherwise. The
undersigned further agree that this Guaranty shall continue to be effective or
be reinstated as the case may be, if at any time payment or any of the
guaranteed obligations is rescinded or must otherwise be restored or returned by
Licensor upon the insolvency, bankruptcy or reorganization of Licensee or any of
the undersigned, all as though such payment has not been made.
This Guaranty shall be governed and construed under and in accordance with the
laws of the State of Tennessee.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of the
date of the above Agreement.
Witnesses: Guarantors:
Apple Suites, Inc.
/s/ C. Douglas Schepker By: /s/ Glade M. Knight (Seal)
- --------------------------------- ------------------------------
Glade M. Knight, President
20
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ATTACHMENT A - PERFORMANCE CONDITIONS
CHANGE OF OWNERSHIP
I. CONSULTATION. Licensee or its representative(s) shall meet with Licensor at
a location selected by Licensor, within 30 days following the date of
Licensee's receipt of a request from Licensor for consultation and
coordination with the project manager assigned to Licensee by Licensor.
II. WORK AND PURCHASE REQUIREMENT. Attachment C, the Product Improvement Plan
(the "PIP"), is incorporated by reference, attached to and made a part of
this Agreement. Licensee shall perform the renovation and/or construction
work and purchase the items described on the PIP (the "Work") on or before
the completion date specified on the Rider. Whether or not indicated on the
PIP, the Work shall include Licensee's purchasing and/or leasing and
installing all fixtures, equipment, furnishings, furniture, signs, computer
terminals and related equipment, supplies and other items which would be
required of a new Homewood Suites licensee under the Manual and such other
equipment, furnishings and supplies as may be required by Licensor in order
to operate the Hotel. Licensee shall be solely responsible for obtaining
all necessary licenses, permits and zoning variances required for the
Hotel.
III. APPROVAL OF ARCHITECT/ENGINEER AND CONTRACTOR. Licensor shall have the
right to approve the architect/engineer, general contractor and major
subcontractors for the Work. The Work shall not commence until such
approval has been granted, which approvals may be conditioned on bonding of
the contractors. Prior to commencement of the Work, if requested by
Licensor, Licensee shall submit to Licensor, resumes and financial
statements of the architect/engineer, general contractor and any major
sub-contractors for the Work and such additional information concerning
their experience and financial responsibility as Licensor may request.
IV. APPROVAL OF PLANS. On or before the Plans submission date specified on the
Rider, Licensee shall submit to Licensor, Licensee's plans and
specifications and drawings for the Work, including the proposed
furnishings, fixtures, equipment and signs (collectively, "Plans") for
approval. Licensor may supply Licensee with representative prototype Guest
Room and public area plans and schematic building plans as a guide for
preparation of plans and specifications for the Hotel. Once Licensor has
approved the Plans, no change shall be made to the Plans without the
advance consent of Licensor. In approving the Plans, Licensor does not in
any manner warrant the depth of its analysis or assume any responsibility
for the efficacy of the Plans or the resulting construction. Licensee shall
cause the Hotel renovation and/or construction to be in accordance with
this Agreement, the approved Plans, the Manual and the PIP.
V. COMMENCEMENT; COMPLETION. Licensee shall commence the Work on or before the
date specified on the Rider and shall continue the Work uninterrupted
(except for interruption by reason of events constituting force majeure)
until it is completed. Notwithstanding the occurrence of any events
constituting force majeure, or any other cause, the Work shall be completed
and the Hotel shall be furnished, equipped, and shall otherwise be in
compliance with this Agreement not later than the date specified on the
Rider. Licensor shall have the sole right to determine whether the Work has
been completed in accordance with this Agreement, the approved Plans, the
Manual and the PIP.
VI. INSPECTION. During the course of the Work, Licensee shall, and Licensee
shall cause the architect, engineer, contractors, and subcontractors to
cooperate fully with Licensor for the purpose of permitting Licensor to
inspect the Hotel in order to determine whether the Work is being done in
accordance with this Agreement and shall provide Licensor with samples of
construction materials, etc. as Licensor may request.
VII. REPORTS. Licensee shall submit to Licensor each month after the date hereof
(or more frequently if Licensor shall so request) a report showing progress
made toward fulfilling the terms of this Agreement.
Section A-1
<PAGE>
VIII. ACQUISITION OF EQUIPMENT, FURNISHINGS, AND SUPPLIES/STAFFING. Licensee
shall order, purchase and/or lease and install all fixtures, equipment,
furnishings, furniture, signs, computer terminals and related equipment,
supplies and other items required by Licensor, this Agreement, the
approved Plans, the Manual and the PIP.
In accordance with the Manual and such other instructions as are furnished
to Licensee by Licensor, Licensee shall cause to be hired a staff to
operate the Hotel, and all such personnel shall be trained as required by
the Manual. All costs and expenses incurred directly or indirectly in
hiring and training such staff shall be paid by Licensee, except as
expressly provided otherwise in the Manual.
IX. COST OF CONSTRUCTION AND EQUIPPING. Licensee shall bear the entire cost of
the Work, including the cost of the plans, professional fees, licenses and
permits, equipment, furniture, furnishings and supplies.
X. LIMITATION OF LIABILITY. Notwithstanding the right of Licensor to approve
the Plans, the architect, engineer and certain contractors, and to inspect
the Work and the Hotel, Licensor shall have no liability or obligation
with respect to the Work, or the design and construction of the Hotel,
as the rights of Licensor are being exercised solely for the purpose of
assuring compliance with the terms and conditions of this Agreement.
Licensor does not undertake to approve the Hotel as complying with
governmental requirements or as being safe for guests or other third
parties. Licensee should not rely upon Licensor's approval for any purpose
whatsoever except compliance with Licensor's then prevailing standards
and requirements of the Manual.
XI. CONDITIONAL AUTHORIZATION. Licensor may conditionally authorize Licensee
to continue to operate the Hotel as a Homewood Suites hotel even though
Licensee has not fully complied with the terms of this Agreement. Under
certain circumstances, Licensor may suspend services to the Hotel
(including reservation services) while the Work is being performed by
Licensee.
XII. PERFORMANCE OF AGREEMENT. Licensee agrees to satisfy all of the terms and
conditions of this Agreement, and to equip, supply and staff the Hotel in
accordance with this Agreement and to cooperate with Licensor in
connection therewith. As a result of Licensee's efforts to comply with the
terms and conditions of this Agreement, Licensee will incur substantial
expense and expend substantial time and effort. Licensee acknowledges and
agrees that Licensor shall have no liability or obligation to Licensee for
any losses, obligations, liabilities or expenses incurred by Licensee if
this Agreement is terminated because Licensee has not complied with the
terms and conditions of this Agreement.
Section A-2
<PAGE>
ATTACHMENT B
RIDER TO LICENSE AGREEMENT
<TABLE>
<S> <C> <C>
1. Name and Address of Licensee: Apple Suites Management, Inc.
Attn: Glade M. Knight
306 East Main Street
Richmond, Virginia 23219
2. Location of Hotel: 3200 Cobb Parkway, SW
Atlanta, Georgia 30339
3. Number of Approved Guest Rooms: 124
4. Effective Date of License: October 5, 1999
It shall be a condition precedent to the validity of
this Agreement, and this Agreement shall be of no force
and effect and Licensee shall have no rights hereunder
unless and until on or before October 5, 1999, Licensee
shall have submitted to Licensor, written verification,
in a form satisfactory to Licensor, that Apple Suites
REIT Limited Partnership has closed on the purchase of
and obtained possession and control of the Hotel
("Closing"). Within five days of Closing, Licensee shall
submit to Licensor (i) a copy of the deed, as recorded,
transferring the Hotel to Apple Suites, Inc., (ii) a
copy of the lease agreement between Licensee and Apple
Suites, Inc., and (iii) the franchise application fee in
the amount of $55,800
5. Term of License to Expire: October 4, 2019
6. Plans Submission Dates: as required under the Product Improvement Plan
(Attachment C)
7. Construction or Work Commencement Date: October 5, 1999
8. Construction or Work Completion Date: within 90 days of Closing but not later than January 5, 2000
9. Offer Expiration Date [Paragraph 17]: October 15, 1999
10. Ownership of Licensee: Apple Suites Management, Inc. 100%
Stockholder:
Glade M. Knight 100%
</TABLE>
Section B-1
Exhibit 10.3
MANAGEMENT AGREEMENT
This Management Agreement (as the same may be amended, modified or
supplemented from time to time, this "Agreement") is made and entered into as of
the 5th day of October, 1999 ("Effective Date") between Apple Suites Management,
Inc., a Virginia corporation, whose address is 306 East Main Street, Richmond,
Virginia 23219 ("Owner") and Promus Hotels, Inc., a Delaware corporation, whose
address is 755 Crossover Lane, Memphis, Tennessee 38117 ("Manager").
ARTICLE 1
THE HOTEL
Section 1.01. The Hotel. The subject matter of this Agreement is the
management of the "Hotel", as defined in the Homewood Suites License Agreement
attached hereto as Exhibit "A" (hereinafter collectively referred to as the
"License Agreement"), by Manager. The Hotel is owned in fee by Apple Suites,
Inc., a Virginia corporation ("Fee Owner") and leased to Owner pursuant to a
lease between Fee Owner and Owner with a commencement date of even date herewith
covering the Hotel (hereinafter the "Percentage Lease"). The License Agreement
shall exclusively govern Owner's right to use the Homewood Suites "System" (as
defined in the License Agreement) in the operation of the Hotel. Fee Owner shall
have no right to use the Homewood Suites "System" except as expressly set forth
in the License Agreement. Owner hereby expressly acknowledges that neither it
nor Fee Owner shall derive any rights in or to the use of the "Homewood Suites"
name or the Homewood Suites "System" from this Agreement.
ARTICLE 2
TERM
Section 2.01. Term. The term shall commence on the Effective Date and
continue for the term of years from the Effective Date set forth on Exhibit "B"
("Term").
ARTICLE 3
MANAGER'S OBLIGATIONS
Section 3.01. Manager's Obligations. Manager shall, on behalf of Owner
and at Owner's expense, direct the operation of the Hotel pursuant to the terms
of this Agreement and the License Agreement. Manager shall be exclusively
responsible for directing the day-to-day activities of the Hotel and
establishing all policies and procedures relating to the management and
operation of the Hotel. Except as specifically
<PAGE>
otherwise provided, all cost(s) and expense(s) incurred by Manager in
association with the performance of the obligations hereinafter set forth shall
be, regardless of the designation of a portion thereof as Fee Ownership Costs
(as herein defined), operating costs and shall accordingly be paid from the Bank
Account(s) as hereinafter defined in Section 3.01(iv) below. Manager, during the
Term, shall have the following obligations:
(i) Costs of Fee Owner and Owner. Pursuant to the terms of the
Percentage Lease, Manager understands that Fee Owner has agreed
to pay, among other things (i) land, building and personal
property taxes and assessments applicable to the Hotel, (ii)
premiums and charges for the casualty insurance coverages
specified on Exhibit "D", (iii) expenditures for capital
replacements, (iv) expenditures for maintenance and repair of
underground utilities and structural elements of the Hotel and
(v) the payments of principal, interest and other sums payable
under the Acquisition Loan (as herein defined) (collectively,
"Fee Ownership Costs"). To the extent this Agreement obligates or
authorizes Manager to pay any such Fee Ownership Costs, Manager
shall pay such Fee Ownership Costs on behalf of Fee Owner to the
extent of funds in the Bank Account(s) (as herein defined) in the
order of priority set forth in Exhibit B or the Reserve Fund (as
herein defined) and Fee Owner and Owner shall make such
adjustments and payments to each other as may be necessary from
time to time to take into account any such payments by Manager.
Manager shall have no duty, obligation or liability to Fee Owner
or Owner (i) to make any determination as to whether any expense
required to be paid by Manager hereunder is a Fee Ownership Cost
or a cost of Owner, (ii) to make any determination as to whether
funds in the Bank Account(s) or the Reserve Fund belong to Fee
Owner or Owner or (iii) to require that Fee Ownership Costs be
paid from funds which can be identified as belonging to Fee
Owner, or that other costs and expenses required to be paid by
Owner be paid from funds which can be identified as belonging to
Owner; it being the intent of the parties to this Agreement that
(i) Owner and Fee Owner shall look only to each other and not to
Manager with respect to moneys that may be owed one to the other
as a consequence of Manager's performance under this Agreement
and (ii) Manager need only look to Owner to pay operating costs,
including, without limitation, those designated herein as Fee
Ownership Costs;
(ii) Personnel. Manager shall be the sole judge of the fitness and
qualification of all personnel working at the Hotel ("Hotel
Personnel") and shall have the sole and absolute right to hire,
supervise, order, instruct, discharge and determine the
compensation, benefits and terms of employment of all Hotel
Personnel. All Hotel Personnel shall be employees of Manager.
Manager shall also have the right to use employees of Manager,
Manager's parent and subsidiary and affiliated companies, not
located at the Hotel to provide services to the Hotel ("Off-Site
Personnel") and the right to have the general manager of the
hotel serve as the regional manager for other hotels managed by
Manager. All expenses, costs (including, but not
2
<PAGE>
limited to, salaries, benefits and severance pay), liabilities
and claims which are related to Hotel Personnel and Off-Site
Personnel shall be operating costs; provided, however, with
respect to any moving expenses for any Hotel Personnel who has
not been an employee at the Hotel for at least twelve (12)
months, only that portion of such moving expenses equal to
Owner's Share (as hereinafter defined) shall constitute operating
costs and the balance shall be paid by Manager and/or such
employee. Manager shall also have the right to have Off-Site
Personnel performing regional or area duties relating to the
Hotel and other hotels managed by Manager lodged at the Hotel
from time to time free of charge. "Owner's Share" shall mean a
fraction having twelve (12) as its denominator and the number of
months or part thereof such person has been one of the Hotel
Personnel as its numerator. All expenses for Off-Site Personnel
shall be included as a separate category or item of the Operating
Budgets or shall otherwise be approved by Owner.
Manager agrees that it will consult with Owner regarding the
hiring, transferring, or terminating of the general manager and
director of sales for the Hotel. Owner shall be afforded an
opportunity to review the resumes of, and to interview, the
candidates for these positions, all within a time frame
established by Manager, which shall be reasonable under the
circumstances in question. Manager and Owner shall consult with
each other concerning such decisions and Manager agrees to give
serious consideration to the views of Owner prior to Manager's
making a final decision with respect to any such individual;
(iii) Hotel Policies. Manager shall determine the terms of guest
admittance to the Hotel, establish room rates, and use of rooms
for commercial purposes;
(iv) Bank Accounts. Manager shall open and operate the Hotel's bank
accounts. All sums received from the operation of the Hotel and
all items paid by Manager arising by virtue of Manager's
operation of the Hotel shall pass through bank account(s)
established by Manager in Owner's name at such banks as Manager
and Owner shall mutually agree ("Bank Account(s)"); only
Manager's designees shall be exclusively authorized to operate
and draw from the Bank Account(s). Each fiscal month Manager, on
behalf of Owner, shall disburse funds from the Bank Account(s) in
the order of priority and to the extent available in accordance
with the priority schedule set forth on Exhibit "B";
(v) Operating Budgets. Manager has submitted to Owner, for Owner's
approval, a proposed operating budget for the ensuing full or
partial fiscal year, as the case may be ("Operating Budget").
Hereafter, Manager shall, not less than forty-five (45) days
prior to the commencement of each full fiscal year, submit to
Owner, for Owner's approval, a proposed Operating Budget for the
ensuing full or partial fiscal year, as the case may be. Each
3
<PAGE>
Operating Budget shall be accompanied by, and shall include, a
business plan which shall describe business objectives and
strategies for the period covered by the Operating Budget. The
business plan shall include, without limitation, an analysis of
the market area in which the Hotel competes, a comparison of the
Hotel and its business with competitive hotels, an analysis of
categories of potential guests, and a description of sales and
marketing activities designed to achieve and implement identified
objectives and strategies. Fee Owner shall have no right to
approve any Operating Budget.
Owner's approval of the Operating Budget shall not be
unreasonably withheld and shall be deemed given unless a specific
written objection thereto is delivered by Owner to Manager within
fifteen (15) days after submission. Owner shall review the
Operating Budget on a line-by-line basis. To be effective, any
notice which disapproves a proposed Operating Budget must contain
specific objections in reasonable detail to individual line
items.
If the initial Operating Budget contains disputed budget item(s),
said item(s) shall be deemed adopted until Owner and Manager have
resolved the item(s) objected to by Owner or the Accountant(s)
(hereinafter defined in Section 10.02) have resolved the item(s)
objected to by Owner. Thereafter, if Owner disapproves or raises
objections to a proposed Operating Budget in the manner and
within the time period provided therefor, and Owner and Manager
are unable to resolve the disputed or objectionable matters
submitted by Owner prior to the commencement of the applicable
fiscal year, the undisputed portions of the proposed Operating
Budget shall be deemed to be adopted and approved and the
corresponding line item contained in the Operating Budget for the
preceding fiscal year shall be adjusted as set forth herein and
shall be substituted in lieu of the disputed items in the
proposed Operating Budget. Those line items which are in dispute
shall be determined by increasing the preceding fiscal year's
corresponding line items by an amount determined by Manager which
does not exceed the Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics of the United States
Department of Labor, U.S. City Average, all items (1984-1986=100)
for the fiscal year prior to the fiscal year with respect to
which the adjustment to the line item is being calculated or any
successor or replacement index thereto. The resulting Operating
Budget obtained in accordance with the preceding sentence shall
be deemed to be the Operating Budget in effect until such time as
Manager and Owner have resolved the items objected to by Owner.
Manager shall revise the Operating Budget from time to time, as
necessary, to reflect any unpredicted significant changes,
variables or events or to include significant, additional,
unanticipated items of income or expense. Any such revision shall
be submitted to Owner for approval,
5
<PAGE>
which approval shall not be unreasonably withheld, delayed or
conditioned. Manager shall be permitted to reallocate part or all
of the amount budgeted with respect to any line item to another
line item and to make such other modifications to the Operating
Budget as Manager deems necessary, provided, however, that
Manager may not reallocate from one Department to another without
Owner's consent, which shall not be unreasonably withheld or
delayed. The term "Department" shall mean and refer to those
general divisional categories shown in the Operating Budget
(e.g., Guest Services Department or Administration Department),
but shall not mean or refer to subcategories (e.g., linen
replacement or uniforms) appearing in a divisional category. In
addition, in the event actual Adjusted Gross Revenues (as defined
in Exhibit "C" hereto) for any calendar period are greater than
those provided for in the Operating Budget, the amounts approved
in the Operating Budget for suite maintenance, guest services,
food and beverage, telephone, utilities, marketing and hotel
repair and maintenance for any calendar month shall be
automatically deemed to be increased to an amount that bears the
same relationship (ratio) to the amounts budgeted for such items
as actual Adjusted Gross Revenue for such month bears to the
projected Adjusted Gross Revenue for such month. Owner
acknowledges that the Operating Budget is intended only to be a
reasonable estimate of the Hotel's income and expenses for the
ensuing fiscal year. Manager shall not be deemed to have made any
guarantee, warranty or representation whatsoever in connection
with the Operating Budget;
(vi) Operating Statement. Manager shall prepare and furnish Owner, on
or before the twentieth (20th) day of the fiscal month
immediately following the close of a fiscal month, with a
detailed operating statement setting forth the results of the
Hotel's operations. Within ninety (90) days after the end of each
fiscal year, Manager shall furnish Owner with a detailed
operating statement setting forth the results of the Hotel's
operations for the fiscal year;
(vii) Capital Budgets. Manager shall, not less than forty-five (45)
days prior to the commencement of each fiscal year, submit to
Owner, for Owner's approval, a recommended "Capital Budget" for
the ensuing full or partial fiscal year, as the case may be, for
furnishings, equipment, and ordinary Hotel capital replacement
items as shall be required to operate the Hotel in accordance
with the standards referred to in the License Agreement. Manager,
to the extent it is able to do so without compromising compliance
with the minimum standards required under the terms of the
License Agreement, shall take into consideration, among other
factors, the amount of funds available to pay for the proposed
capital expenditures. Manager shall also identify for Owner those
projects that are required to meet the minimum standards of the
License Agreement and give priority to such items. Owner and
Manager shall meet to discuss the proposed Capital Budget and
Owner shall be required to make specific written
5
<PAGE>
objections to a proposed Capital Budget in the manner and within
the same time periods specified in Section 3.01(v) with respect
to an Operating Budget. Owner agrees not to unreasonably withhold
or delay its consent. If Owner does not approve the Capital
Budget, Manager (i) with respect to Capital Improvements (as
herein defined) required to meet the minimum standards of the
License Agreement, will be entitled to spend such amounts as are
necessary to meet such minimum standards and (ii) with respect to
any other Capital Improvements, will only spend such amounts as
are approved by Owner, acting reasonably, provided, however, that
in any event Manager shall be entitled to spend up to five
percent (5%) of Adjusted Gross Revenue for capital expenditures
after the date hereof until the disputed Capital Budget item(s)
have been resolved in accordance with Section 10.02.1(e).
Manager, at Owner's expense, shall be responsible for supervising
the design, installation and construction of alterations or
additions to, or rebuilding or renovation of, the Hotel,
including any additions to Hotel furnishings and equipment
(collectively, "Capital Improvements"). Owner shall have the
right to approve and inspect the installation and construction of
Capital Improvements and any mortgagee having a first lien on
Owner's leasehold estate in the Hotel ("Owner's Leasehold
Mortgagee") or a first lien on Fee Owner's fee estate in the
Hotel (the "Fee Owner's Mortgagee") shall also have any right of
approval or inspection of the installation and construction of
the Capital Improvements to the extent set forth in the mortgage,
deed of trust or other loan documents (collectively, the
"Mortgage Documents") (but only if and to the extent the Manager
has been provided with copies of the Mortgage Documents). Fee
Owner shall not have the right to approve any Capital Budget.
After a Capital Budget has been adopted, it shall be subject to
review and modification in the event unpredicted or unanticipated
capital expenditures are required during any calendar year.
Manager and Owner each agree not to unreasonably withhold or
delay its consent to a proposed modification of a Capital Budget.
Any amendment that is mutually agreed upon shall be set forth in
writing and signed by both parties. It is acknowledged by Owner
that capital expenditures required as a result of an emergency
situation shall not reduce amounts available pursuant to the
Capital Budget or otherwise hereunder, other than to the extent a
Capital Budget item is subsumed within the capital expenditures
required as a result of the occurrence of the emergency;
(viii) General Maintenance Non-Capital Replacements. Manager shall
supervise the maintenance, repair and replacement of non-capital
replacements;
(ix) Operating Equipment. Manager shall select and purchase all
operating equipment for the Hotel such as linens, utensils,
uniforms and other similar items, provided, however, that if
Owner determines that it can
6
<PAGE>
purchase operating equipment of a quality at least equal to that
which Manager generally uses at a price lower than the price
obtained by Manager, Manager shall purchase such operating
equipment from the vendor designated by Owner;
(x) Operating Supplies. Manager shall select and purchase all
operating supplies for the Hotel such as food, beverages, fuel,
soap, cleansing items, stationery and other consumable items,
provided, however, that if Owner determines that it can purchase
operating supplies of a quality at least equal to that which
Manager generally uses at a price lower than the price obtained
by Manager, Manager shall purchase such operating supplies from
the vendor designated by Owner;
(xi) Accounting Standards. Manager shall maintain the books and
records reflecting the operations of the Hotel in accordance with
the accounting practices of Manager in conformity with generally
accepted accounting practices consistently applied and shall
adopt and follow the fiscal accounting periods utilized by
Manager in its normal course of business. The Hotel level
generated accounting records reflecting detailed day-to-day
transactions of the Hotel's operations, shall be kept by Manager
at the Hotel or at Manager's regional offices or corporate
headquarters, or at such other location as Manager shall
reasonably determine. Manager shall receive a monthly fee for
accounting services provided to the Hotel ("Accounting Fee"). The
current Accounting Fee is set forth on Exhibit "B". The
Accounting Fee shall be adjusted by Manager from time to time and
set forth in the annual Operating Budget;
(xii) Marketing and Advertising. Manager shall advertise and promote
the Hotel in coordination with the sales and marketing programs
of Manager and other Homewood Suites hotels. Manager may
participate in sales and promotional campaigns and activities
involving complimentary rooms. Manager, in marketing and
advertising the Hotel, shall have the right to use marketing and
advertising services of employees of Manager and its parent and
affiliated companies not located at the Hotel. Manager may charge
the Hotel for personnel and other costs and expenses incurred in
providing such services; provided that (i) Manager's allocation
of such costs and expenses among hotels, including the Hotel,
shall be pro rated among all hotels owned or managed by Manager
and (ii) the annual allocation of such costs and expenses to the
Hotel shall not exceed $10,000.00. Such costs and expenses shall
be reflected in the budgets and operating statements required to
be prepared and submitted by Manager under this Agreement;
(xiii) Permits and Licenses. Manager shall obtain and maintain the
various permits and licenses required or permitted to be held in
its name that are necessary to enable Manager to operate the
Hotel in accordance with the terms of this Agreement and the
License Agreement, provided, however,
7
<PAGE>
that Manager shall only hold liquor licenses and alcoholic
beverage licenses if required by the laws of the jurisdiction in
which the Hotel is located. In addition, Manager shall upon
request cooperate with and assist Owner in obtaining the various
permits and licenses that are required to be held in the name of
either or both of Owner and Fee Owner that are necessary to
enable Manager to operate the Hotel. Manager, at Owner's cost and
expense, shall use all reasonable efforts, to the extent within
its control, to comply with the terms and conditions of all
licenses and permits issued with respect to the Hotel and the
business conducted at the Hotel, including, without limitation,
the terms and conditions of the License Agreement;
(xiv) Owner Meetings. The Hotel's general manager shall meet with
Owner's Representative as hereinafter defined in Section
4.01(viii) quarterly to review and discuss the previous and
future month's operating statement, cash flow, budget, capital
expenditures, important personnel matters and the general
concerns of Owner and Manager. In addition, a representative of
Manager's corporate staff shall meet with Owner's Representative
quarterly to review and discuss the previous and future quarter's
operating statement, cash flow, budget, capital expenditures,
important personnel matters and the general concerns of Owner and
Manager. Except to the extent otherwise mutually agreed upon by
Owner and Manager, the quarterly meetings described in this
clause (xiv) shall be held at the Hotel;
(xv) Insurance. Manager shall procure and maintain throughout the Term
the insurance coverages set forth on Exhibit "D";
(xvi) Compliance with Law. Manager, at Owner's cost and expense, shall
use all reasonable efforts to comply with all laws, ordinances,
regulations and requirements of any federal, state or municipal
government that are applicable to the use and operation of the
Hotel, as well as with all orders and requirements of the local
fire department, of which Manager has knowledge; provided,
however, that Owner shall have the right to contest by proper
legal proceedings, the validity of any such law, ordinance, rule,
regulation, order, decision or requirement and may postpone
compliance therewith to the extent and in the manner provided by
law until final determination of any such proceedings. Manager
promptly shall notify Owner in writing of all notices of legal
requirements applicable to the Hotel that are received by
Manager;
(xvii) Satisfaction of Obligations. Manager agrees to pay, when due,
all amounts due under any equipment leases and all other
contracts and agreements relating to the operation or maintenance
of the Hotel, and, if requested by Owner, any Mortgage Documents
relating to the loan from Owner's Leasehold Mortgagee ("Owner's
Mortgage Documents"), but solely from and to the extent that
funds are available in the Bank Account(s), and to comply, at
Owner's cost and expense, with all other
8
<PAGE>
covenants and obligations contained in the equipment leases and
all utility contracts, concession agreements, and service and
maintenance contracts, and, if requested by Owner, Owner's
Mortgage Documents to the extent that compliance therewith is
within the reasonable control of Manager by reason of its
management and operation of the Hotel pursuant to this Agreement;
provided, however, Manager shall have no obligation to comply
with any provisions in the Mortgage Documents that conflict with
its rights and obligations under this Agreement. Manager shall
have no obligation to perform or comply with any obligations of
(i) Fee Owner or Owner under the Percentage Lease or (ii) Fee
Owner under any Mortgage Documents relating to the loan from Fee
Owner's Mortgagee (other than any right to approve or inspect
Capital Improvements contemplated by Section 3.01(vii) above);
(xviii) Requests for Information. Manager shall respond, with
reasonable promptness, to any information requests by Owner's
Leasehold Mortgagee in accordance with Owner's Mortgage
Documents, to the extent such information is required to be
furnished by Manager to Owner pursuant to this Agreement. Any
additional information or reports requested by Owner's Leasehold
Mortgagee shall be provided by Manager only if Owner so directs
Manager in writing and, to the extent such information or reports
are not being prepared for Owner in the ordinary course of
business pursuant to this Agreement, Owner agrees to pay the
reasonable expenses of preparing such information and reports;
(xix) Tax and Insurance Accruals. If requested by Owner, Manager shall
accrue and set aside on a monthly basis funds from Adjusted Gross
Revenues if available in the priority set forth on Exhibit B for
the payment of real estate taxes and insurance premiums, and such
accruals shall be deposited in a separate account and not
commingled with other operating accounts for Hotel operations
generally, provided, however, that to the extent such accruals
exceed the amount necessary to pay the actual amount of real
estate taxes and insurance premiums, such excess shall be
available for operating costs, ownership costs, Owner's Basic
Return, the Subordinated Management Fee and the others items set
forth on, and in the priority set forth on, Exhibit B. If such
accruals do not exceed the actual amounts due in respect of real
estate taxes and insurance premiums but Owner and Manager agree
in writing, the tax and insurance accruals on deposit may be used
from time to time to pay operating costs if Adjusted Gross
Revenues are not otherwise sufficient to pay such operating
costs.
9
<PAGE>
ARTICLE 4
OWNER'S OBLIGATIONS
Section 4.01. Owner's Obligations. During the Term, Owner shall have
the obligations set forth below:
(i) License Agreement. Owner shall comply with all the terms and
conditions of the License Agreement (specifically including, but
not limited to, Licensee's obligation to pay the fees, charges and
contributions set forth in paragraphs 3.c. and 7 of the License
Agreement) and keep the License Agreement in full force and effect
from the Effective Date through the remainder of the Term. Nothing
in this Agreement shall be interpreted in a manner which would
relieve Owner of any of its obligations under the License
Agreement;
(ii) Licenses and Permits. Owner shall obtain and maintain, with
Manager's assistance and cooperation, all governmental
permissions, licenses and permits required to be held in Owner's
and/or Fee Owner's name that are necessary to enable Manager to
operate the Hotel in accordance with the terms of this Agreement
and the License Agreement;
(iii) Insurance. Owner shall procure and maintain throughout the Term
the insurance coverages set forth on Exhibit "E";
(iv) Intentionally Omitted;
(v) Operating Funds. Owner shall provide all funds necessary to enable
Manager to manage and operate the Hotel in accordance with the
terms of this Agreement and the License Agreement, regardless of
the designation of a portion of the operating costs as Fee
Ownership Costs. Owner agrees to deliver to Manager for deposit
into the Bank Account(s) on the Effective Date the amount
specified on Exhibit "B" which amount shall be the "Minimum
Balance" to be maintained by Owner during the first year of the
Hotel's operation. The Minimum Balance thereafter shall be no less
than the Hotel's operating costs for the preceding fiscal month.
The Minimum Balance shall serve as working capital for the Hotel's
operations. Owner agrees, upon Manager's written request, to
immediately furnish Manager with sufficient funds to make up any
deficiency in the Minimum Balance;
(vi) Capital Funds. Owner shall expend such amounts for renovation
programs, furnishings, equipment and ordinary Hotel capital
replacement items as are required from time to time to (a)
maintain the Hotel in good order and repair, (b) comply with the
standards referred to in the License Agreement, and (c) comply
with governmental regulations and orders. Owner shall cooperate
fully with Manager in establishing appropriate procedures and
timetables for Owner to undertake capital replacement projects.
10
<PAGE>
It is recognized that expenditures for capital replacements are
incapable of precise calculation in advance. Therefore, five
percent (5%) of Gross Revenues each year shall be paid over in
cash in each calendar month after the Effective Date into a
Reserve Fund (as hereinafter defined) to pay for capital
replacements. In lieu of funding monthly into the Reserve Fund as
contemplated above, Owner shall have the right, but not the
obligation, to deposit into the Reserve Fund, on or about the
commencement of each year, the full amount set forth in the
Capital Budget. Manager shall establish a reserve for capital
replacements on the books of account for the Hotel and the cash
amounts required for such reserve shall be placed into an
interest-bearing account (the "Reserve Fund") established in the
Hotel's name at the bank at which the Bank Account(s) are
established, with Manager's designees being the only authorized
signatories on said account. All amounts on deposit in the Reserve
Fund shall be Owner's. Any expenditures for capital replacements
during any calendar year which have been included in an approved
Capital Budget may be made without Owner's or Fee Owner's
additional approval and, to the extent available, shall be made by
Manager from the Reserve Fund (including accrued interest and
unused accumulations from prior calendar years). Any amounts
remaining in the Reserve Fund at the close of each calendar year
shall be carried forward and retained in the Reserve Fund until
fully used as herein provided. To the extent the Reserve Fund is
insufficient at a particular time or to the extent the Reserve
Fund plus anticipated contributions for the ensuing calendar year
is less than the budgeted expenditures set forth in the approved
Capital Budget for the ensuing calendar year then in either such
event, Manager shall give Owner written notice thereof at least
sixty (60) days before the anticipated date such funds will be
needed. Owner shall supply the necessary funds by deposit to the
Reserve Fund at least fifteen (15) days before the anticipated
date such funds will be needed. All proceeds from the sale of
capital items no longer needed for the operation of the Hotel
shall be deposited to the Reserve Fund. Sale of such items shall
be at the discretion of Manager, and conducted in a commercially
reasonable manner. Manager shall not dispose of any capital item
or group of capital items having a value in excess of ten thousand
dollars ($10,000) without Owner's prior written consent unless the
replacement of such capital item or group of capital items has
been contemplated in the applicable Capital Budget. Manager also
shall obtain the consent of Owner's Leasehold Mortgagee when
required for any disposition of capital items otherwise prohibited
under the terms of Owner's Mortgage Documents, provided, however,
that to the extent a capital item is being replaced because the
same is defective or obsolete or with an item of equal or greater
value no such consent need be obtained from Owner's Leasehold
Mortgagee. Upon termination of this Agreement for whatever reason
or upon sale of the Hotel, Manager's right to expend any unused
portion of the Reserve Fund shall terminate and the balance of the
fund shall be paid over to Owner, less any sums then due Manager.
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To the extent any expenditure under this Section 4.01(vi) shall
exceed twenty thousand dollars ($20,000), Manager shall first
solicit bids from at least three different reputable and qualified
third parties, and the lowest of the bidders shall be selected
unless acceptance of a higher bid has been approved by Owner in
writing or unless Manager provides a reasonably detailed
explanation for its selection of a bid higher than the lowest of
the bidders;
(vii) Payments to Manager. Owner shall promptly pay to Manager all
amounts due Manager under this Agreement;
(viii) Owner's Representative. Owner shall appoint a representative to
represent Owner in all matters relating to this Agreement and/or
the Hotel ("Owner's Representative"). Owner's initial Owner's
Representative shall be the individual named on Exhibit "B".
Manager shall have the right to deal solely with the Owner's
Representative on all such matters. Manager may rely upon
statements and representations of Owner's Representative as being
from and binding upon Owner. Owner may change its Owner's
Representative from time to time by providing written notice to
Manager in the manner provided for herein. Owner shall cause the
Owner's Representative to attend all quarterly meetings referred
to in Section 3.01(xiv);
(ix) Owner's Audits. Owner shall have the right to have its independent
accounting firm examine the books and records of the Hotel at any
reasonable time upon forty-eight (48) hours notice to Manager;
(x) Right of Inspection and Review. Owner, Owner's Leasehold
Mortgagee, Fee Owner and Fee Owner's Mortgagee and their
respective accountants, attorneys, agents and other
representatives and invitees, shall have the right to enter upon
any part of the Hotel at all reasonable times during normal
business hours and during the term of this Agreement upon
reasonable prior notice to Manager for the purpose of examining or
inspecting the Hotel, showing the Hotel to prospective purchasers
or mortgagees, or auditing, examining or making extracts of books
and records of the Hotel, or for any other purpose which Owner, in
its reasonable discretion, shall deem necessary or advisable, but
the same shall be done with as little disruption to the business
of the Hotel as under the circumstances is reasonable; and
(xi) Quiet and Peaceable Operation. Owner shall ensure that Manager is
able to peaceably and quietly operate the Hotel in accordance with
the terms of this Agreement, free from molestation, eviction and
disturbance by Owner
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or by any other person or persons claiming by, through or under
Owner. Owner shall undertake and prosecute all reasonable and
appropriate actions, judicial or otherwise, required to assure
such quiet and peaceable operations by Manager.
ARTICLE 5
MANAGEMENT FEE
Section 5.01. Management Fee. On the first day of each fiscal month
after the Effective Date, Manager is authorized by Owner to pay itself from the
Bank Account(s) the Management Fees calculated in the manner set forth on
Exhibit "C".
ARTICLE 6
CLAIMS AND LIABILITY
Section 6.01. Claims and Liability. Owner and Manager mutually agree
for the benefit of each other to look only to the appropriate insurance
coverages in effect pursuant to this Agreement in the event any demand, claim,
action, damage, loss, liability or expense occurs as a result of injury to
person or damage to property regardless whether any such demand, claim, action,
damage, loss, liability or expense is caused or contributed to, by or results
from the negligence of Owner or Manager or their subsidiaries, affiliates,
employees, directors, officers, agents or independent contractors and regardless
whether the injury to person or damage to property occurs in and about the Hotel
or elsewhere as a result of the performance of this Agreement. Nevertheless, in
the event the insurance proceeds are insufficient or there is no insurance
coverage to satisfy the demand, claim, action, loss, liability or expense and
the same did not arise out of the gross negligence or willful misconduct of
Manager, Owner agrees, at its expense, to indemnify and hold Manager and its
subsidiaries, affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability.
Section 6.02. Survival. The provisions of this Article 6 shall survive
any cancellation, termination or expiration of this Agreement and shall remain
in full force and effect until such time as the applicable statute of limitation
shall cut off all demands, claims, actions, damages, losses, liabilities or
expenses which are the subject of the provisions of this Article 6.
ARTICLE 7
CLOSURE, EMERGENCIES AND DELAYS
Section 7.01. Events of Force Majeure. If at any time during the Term
of this Agreement it becomes necessary, in Manager's opinion, to cease operation
of the Hotel in order to protect the Hotel and/or the health, safety and welfare
of the guests
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and/or employees of the Hotel for reasons beyond the reasonable control of
Manager, such as, but not limited to, acts of war, insurrection, civil strife
and commotion, labor unrest, governmental regulations and orders, shortage or
lack of adequate supplies or lack of skilled or unskilled employees, contagious
illness, catastrophic events or acts of God, which shall not include Manager's
computer systems and software not being able to accurately process date data and
information, including, but not limited to, calculating, comparing and
sequencing from, into and between the twentieth century, the year 2000 and the
twenty-first century ("Force Majeure"), then in such event or similar events
Manager may close and cease operation of all or any part of the Hotel, reopening
and commencing operation when Manager deems that such may be done without
jeopardy to the Hotel, its guests and employees.
Manager and Owner agree, except as otherwise provided herein, that the
time within which a party is required to perform an obligation and Manager's
right to manage the Hotel under this Agreement shall be extended for a period of
time equivalent to the period of delay caused by an event of Force Majeure.
Section 7.02. Emergencies. If a condition of an emergency nature should
exist which requires that immediate repairs be made for the preservation and
protection of the Hotel, its guests or employees, or to assure the continued
operation of the Hotel, Manager is authorized to take all actions and to make
all expenditures necessary to repair and correct such condition, regardless
whether provisions have been made in the applicable budget for such emergency
expenditures. Expenditures made by Manager in connection with an emergency shall
be paid, in Manager's sole discretion, out of the Bank Account(s). Owner shall
immediately replenish such funds paid from the Bank Account(s). Manager shall
endeavor to communicate with Owner prior to making any expenditures to correct
an emergency condition, but in any event shall promptly notify Owner after the
emergency expenditures have been made.
ARTICLE 8
CONDEMNATION AND CASUALTY
Section 8.01. Condemnation. If the Hotel is taken in any eminent
domain, expropriation, condemnation, compulsory acquisition or similar
proceeding by a competent authority, this Agreement shall automatically
terminate as of the date of taking or condemnation. Any compensation for the
taking or condemnation of the physical facility comprising the Hotel shall be
paid to Owner. Manager, however, with the full cooperation of Owner, shall have
the right to file a claim with the appropriate authorities for the loss of
Management Fee income for the remainder of the Term and any extension thereof
because of the condemnation or taking. If only a portion of the Hotel is so
taken and the taking does not make it unreasonable or imprudent, in Manager's
and Owner's opinion, to operate the remainder as a hotel of the type immediately
preceding such taking, this Agreement shall not terminate. Any compensation
shall be used, however, in whole or in part, to render the Hotel a complete and
satisfactory architectural unit as a hotel of the same type and class as it was
immediately preceding such taking or condemnation.
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Section 8.02. Casualty. In the event of a fire or other casualty, Owner
shall comply with the terms of the License Agreement and this Agreement shall
remain in full force and effect so long as the License Agreement remains in full
force and effect.
ARTICLE 9
TERMINATION RIGHTS
Section 9.01. Bankruptcy and Dissolution. If either party is
voluntarily or involuntarily dissolved or declared bankrupt, insolvent, or
commits an act of bankruptcy, or if a company enters into liquidation whether
compulsory or voluntary otherwise than for the purpose of amalgamation or
reconstruction, or compounds with its creditors, or has a receiver appointed
over all or any part of its assets, or passes title in lieu of foreclosure, the
other party may terminate this Agreement immediately upon serving notice to the
other party, without liability on the part of the terminating party.
Section 9.02. Manager's Termination Right Upon the Termination of
License Agreement. If the License Agreement is terminated for any reason,
Manager may terminate this Agreement immediately upon serving notice to Owner,
without liability on the part of Manager. Upon such termination, unless
specifically provided otherwise herein, Manager shall be entitled to receive the
Sale Termination Fee calculated in the manner set forth on Exhibit "B".
Notwithstanding anything contained herein, Manager shall not be entitled to
receive the Sale Termination Fee if the License Agreement is terminated because
of Manager's failure to perform its obligations hereunder and Manager's failure
was not caused by the failure of Owner to perform its obligations hereunder.
Section 9.03. (a) Owner's Default. The following shall, at the election
of Manager, constitute events of default by Owner under this Agreement (each
such event being referred to herein as an "Owner's Default"):
(i) The failure of Owner to pay any amount to Manager provided for
herein for a period of ten (10) days after written notice by
Manager of such failure to pay.
(ii) Failure of Owner to keep or perform any duty, obligation, covenant
or agreement of Owner under this Agreement (other than the
obligation to pay that is the subject of paragraph (i) above) and
such failure continues for a period of thirty (30) days after
receipt of written notice thereof from Manager; provided, however,
if such failure cannot reasonably be remedied or corrected within
such thirty (30) day period, then such thirty (30) day period
shall be extended for such additional period as may be reasonably
required to cure such default but only if Owner promptly commences
to cure such default and continues thereafter with all due
diligence to complete such a cure to the satisfaction of Manager.
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(iii) The occurrence of a default under or other termination of the
Percentage Lease.
(iv) Failure of Fee Owner to keep or perform any duty, obligation,
covenant or agreement of Fee Owner under the "Comfort Letter" of
even date herewith from Manager to Fee Owner agreed to and
accepted by Fee Owner (the "Comfort Letter") relating to the Hotel
and such failure continues for a period of thirty (30) days after
receipt of written notice thereof from Manager; provided, however,
if such failure cannot reasonably be remedied or corrected within
such thirty (30) day period, then such thirty (30) day period
shall be extended for such additional period as may be reasonably
required to cure such default, but only if Fee Owner promptly
commences to cure such default and continues thereafter with all
due diligence to complete such a cure to the satisfaction of
Manager.
(v) The occurrence of an "Event of Default" (as defined in the
Acquisition Mortgage Documents (as herein defined)) under the
Acquisition Mortgage Documents.
On the occurrence of any Owner's Default, Manager shall have the right
to terminate this Agreement by written notice to Owner, in addition to its
rights to seek damages or other remedies available to it at law or in equity.
(b) Manager Default. The following shall, at the election of Owner,
constitute an event of default by Manager under this Agreement (such event being
referred to herein as the "Manager Default"): Failure of Manager to keep or
perform any duty, obligation, covenant or agreement of Manager under this
Agreement and such failure shall continue for a period of thirty (30) days after
receipt of written notice thereof from Owner; provided, however, if such failure
cannot reasonably be remedied or corrected within such thirty (30) day period,
then such thirty (30) day period shall be extended for such additional period as
may be reasonably required to cure such default provided that Manager promptly
commences to cure such default and continues thereafter with all due diligence
to complete such cure to the satisfaction of Owner. Upon the occurrence of the
Manager Default, Owner shall have the right to terminate this Agreement by
written notice to Manager, in addition to its right to seek damages or other
remedies available to it at law or in equity.
Section 9.04. Owner's -- Termination Rights. (a) Provided Owner is not
in default under this Agreement at the time of delivery of the Termination
Notice (as defined herein) or on the Termination Date (as defined herein), Owner
shall have the right, after the tenth anniversary of the Effective Date, to
terminate this Agreement by giving written notice (a "Termination Notice") to
Manager setting forth an effective termination date which shall be the last day
of a month (the "Termination Date") and which shall be not less than six (6)
months nor more than twelve (12) months after the date of such Termination
Notice and shall in no event be prior to the tenth anniversary of the Effective
Date. If Owner terminates this Agreement pursuant to this Section 9.04(a), in
addition to payment of all other fees and reimbursable sums due to Manager on
the
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Termination Date, Manager shall have the right to receive the Cancellation
Termination Fee calculated in the manner set forth on Exhibit "B". Such
termination shall be effective so long as on or before the Termination Date (x)
Owner pays to Manager the Cancellation Termination Fee and all amounts
determined by Owner and Manager, each acting reasonably and in good faith, to be
due and owing to Manager pursuant to the terms and provisions of this Agreement
and (y) all sums then outstanding under the Acquisition Loan shall have been
paid in full.
(b) (i) Provided Owner is not in default under this Agreement, Owner
shall have the right to terminate this Agreement if, beginning in the first full
calendar year of Hotel operations, Manager fails to achieve, in any two
consecutive calendar years, a Gross Operating Profit (as herein defined) which
is at least eighty-five percent (85%) of the amount set forth in the respective
annual Operating Budget for Gross Operating Profit ("Budgeted GOP"); provided,
however, that, if within sixty (60) days of receipt of a notice from Owner that
Owner intends to terminate this Agreement pursuant to this Section 9.04(b)(i),
Manager pays in cash to Owner the difference between the achieved Gross
Operating Profit and eighty-five percent (85%) of the Budgeted GOP for the
second of the two consecutive calendar years in which shortfalls occurred, then
Owner shall not be entitled to terminate this Agreement. If Owner is entitled to
and elects to terminate this Agreement, Owner shall give written notice to
Manager within ninety (90) days following delivery to Owner of the annual
financial statements for the calendar year. If such notice is not provided by
Owner to Manager within such ninety (90) day period, Owner shall be deemed to
have waived its right hereunder to terminate this Agreement with respect to the
calendar year as to which the failure occurred. In the event Owner has the right
to terminate with respect to a calendar year but waives such right, Owner's
right to terminate shall carry forward and shall be applicable to the next
succeeding calendar year if Manager fails to achieve eighty-five percent (85%)
of Budgeted GOP for the next succeeding year, subject to Manager's right to cure
for such calendar year. For purposes of this section, the term "Gross Operating
Profit" shall mean the amount, if any, by which Adjusted Gross Revenues for any
calendar year exceed operating costs for such calendar year.
(ii) The provisions of clause (b)(i) above shall not apply in any
calendar year in which the operation of the Hotel, or the use of the Hotel's
facilities, are significantly disrupted by casualty loss, strike, eminent
domain, or other events of Force Majeure that are beyond the reasonable control
of Manager, or major repairs to or refurbishment of the Hotel. In the event
Owner exercises the right of termination contemplated in clause (b)(i) above,
(a) Owner shall have no obligation to pay any termination fee or other damages
to Manager as a consequence of such termination, except that Owner shall be
liable to Manager and shall pay immediately upon such termination all fees
earned and other amounts and expenses payable or reimbursable to Manager
pursuant to this Agreement and (b) the exercise of the right of termination
shall only be valid if on or prior to the termination date all sums outstanding
under the Acquisition Loan shall have been paid in full.
Section 9.05. Manager's Right to Terminate Upon Sale. If there is to be
a "Change in Ownership" as defined in the License Agreement and the new owner of
the
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Hotel has not received a Homewood Suites License Agreement for the operation of
the Hotel (for purposes of this Section 9.05, said agreement shall be referred
to as the "License Agreement"), Manager shall have the right upon giving notice
to Owner to terminate this Agreement on the date the Change of Ownership occurs.
If there is a Change of Ownership and the new owner of the Hotel receives a
License Agreement, but does not enter into an assumption agreement, pursuant to
which the new owner assumes all of Owner's obligations hereunder, with Manager
prior to the date the Change of Ownership occurs, Manager shall have the right,
upon giving notice to Owner, to terminate this Agreement on the date the Change
of Ownership occurs. If Manager terminates this Agreement pursuant to this
Section 9.05 (in addition to payment of all other fees and reimbursable sums due
to Manager to the date of termination), Manager shall have the right to receive
the Sale Termination Fee calculated in the manner set forth on Exhibit "B". If a
Change of Ownership occurs, and the new owner obtains a License Agreement and
the new owner and Manager enter into an assumption agreement pursuant to which
this Agreement remains in full force and effect, Manager shall not receive a
Termination Fee and references in this Agreement to License Agreement shall be
to the License Agreement with such new owner.
Section 9.06. Delays. Notwithstanding any other provision of this
Agreement, if any event of the type described in Article 7 or 8 occurs after the
Effective Date and Manager is unable to operate the Hotel for a period of ninety
(90) days, Manager shall have the option to terminate this Agreement upon thirty
(30) days' prior written notice to Owner, without liability on the part of
Manager, its parent or their subsidiaries or affiliates. Under any such
circumstances, the Acquisition Loan shall be repaid in full.
Section 9.07. Employment Solicitation Restriction Upon Termination.
Owner and its affiliates and subsidiaries and their successors hereby agree not
to solicit the employment of the Hotel general manager, assistant general
manager or director of sales at any time during the term of this Agreement
without Manager's prior written approval. Furthermore, Owner and its affiliates
and subsidiaries and successors agree not to employ the Hotel's general manager,
assistant general manager or director of sales for a period of twelve (12)
months after the termination or expiration of this Agreement, without Manager's
prior written approval.
Section 9.08. Transition Upon Termination. Upon any termination of this
Agreement, all fees and payments due to Manager as of the effective date of
termination, including all accrued and unpaid fees and reimbursable charges and
expenses, shall be paid to Manager within ten (10) days after delivery to Owner
of an itemized statement of such fees and payments. Manager shall be entitled to
exercise the right of setoff provided in Section 11.16 hereof with respect to
such fees, charges and expenses. Manager shall deliver to Owner, or such other
person or persons as Owner may designate, copies of all books and records of the
Hotel and all funds in the possession of Manager belonging to Owner or received
by Manager pursuant to the terms of this Agreement, and shall assign, transfer
or convey to such person or persons all service contracts and personal property
relating to or used in the operation and maintenance of the Hotel, except any
personal property which is owned by Manager. Manager also shall, for a period of
thirty (30) days
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after such expiration or termination, make itself available to consult with and
advise Owner or such other person or persons regarding the operation and
maintenance of the Hotel at a consultation fee to be agreed upon between Manager
and Owner.
ARTICLE 10
APPLICABLE LAW AND ARBITRATION
Section 10.01. Applicable Law. The interpretation, validity and
performance of this Agreement shall be governed by the procedural and
substantive laws of the state of Tennessee and any and all disputes, except
those specifically referred to below, shall be brought and maintained within
that state. If any judicial authority holds or declares that the law of another
jurisdiction is applicable, this Agreement shall remain enforceable under the
laws of that jurisdiction.
Section 10.02. Arbitration of Financial Matters.
Subsection 10.02.1. Matters to be Submitted to Arbitration. In
the case of a dispute with respect to any of the following matters,
either party may submit such matter to arbitration which shall be
conducted by the Accountants (as hereinafter defined in Subsection
10.02.2): (a) computation of the Management Fees; (b) reimbursements
due to Manager under the provisions of Section 11.15; (c) any
adjustment in the Minimum Balance under the provisions of Section
4.01(v); (d) any adjustment in dollar amounts of insurance coverages
required to be maintained; and (e) any dispute concerning the approval
of an Operating Budget.
All disputes concerning the above matters shall be submitted to
the Accountants. The decision of the Accountants with respect to any
matters submitted to them under this Subsection 10.02.1 shall be
binding on both parties hereto.
Subsection 10.02.2. The Accountants. The "Accountants" shall be
one of three (3) firms of certified public accountants of recognized
national standing in the hotel industry. Until otherwise agreed to by
the parties, the three (3) firms shall be Arthur Andersen & Co.,
PriceWaterhouseCoopers, and Ernst & Young, notwithstanding any existing
relationships which may exist between Owner and such accounting firms
or Manager and such accounting firms. The party desiring to submit any
matter to arbitration under Subsection 10.02.1 shall do so by written
notice to the other party, which notice shall set forth the items to be
arbitrated and such party's choice of one of the three (3) accounting
firms. The party receiving such notice shall within fifteen (15) days
after receipt of such notice either approve such choice, or designate
one of the remaining two (2) firms by written notice back to the first
party, and the first party shall within fifteen (15) days after receipt
of such notice either approve such choice or disapprove the same. If
both parties shall have approved one of the three (3) firms under the
preceding sentence, then such firm shall be the "Accountants" for the
purposes of arbitrating
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the dispute; if the parties are unable to agree on an accounting firm,
then the third firm, which was not designated by either party, shall be
the "Accountants" for such purpose. The Accountants shall be required
to render a decision in accordance with the procedures described in
Subsection 10.02.3 within fifteen (15) days after being notified of
their selection. The fees and expenses of the Accountants will be paid
by the non-prevailing party.
Subsection 10.02.3. Procedures. In all arbitration proceedings
submitted to the Accountants, the Accountants shall be required to
agree upon and approve the substantive position advocated by Owner or
Manager with respect to each disputed item. Any decision rendered by
the Accountants that does not reflect the position advocated by Owner
or Manager shall be beyond the scope of authority granted to the
Accountants and, consequently, may be overturned by either party. All
proceedings by the Accountants shall be conducted in accordance with
the Uniform Arbitration Act, except to the extent the provisions of
such act are modified by this Agreement or the mutual agreement of the
parties. Unless otherwise agreed, all arbitration proceedings shall be
conducted at the Hotel.
Section 10.03. Performance During Disputes. It is mutually agreed that
during any kind of controversy, claim, disagreement or dispute, including a
dispute as to the validity of this Agreement, Manager shall remain in possession
of the Hotel as Manager; and Owner and Manager shall continue their performance
of the provisions of this Agreement and its exhibits. Manager shall be entitled
to injunctive relief from a civil court or other competent authority to maintain
possession in the event of a threatened eviction during any dispute,
controversy, claim or disagreement arising out of this Agreement.
ARTICLE 11
GENERAL PROVISIONS
Section 11.01. Authorization. Owner and Manager represent and warrant
to each other that their respective corporations have full power and authority
to execute this Agreement and to be bound by and perform the terms hereof. On
request, each party shall furnish the other evidence of such authority.
Section 11.02. Relationship. Manager and Owner shall not be construed
as joint venturers or partners of each other by reason of this Agreement and
neither shall have the power to bind or obligate the other except as set forth
in this Agreement.
Section 11.03. Manager's Contractual Authority in the Performance of
this Agreement. Manager is authorized to make, enter into and perform in the
name of and for the account of Owner any contracts deemed necessary by Manager
to perform its obligations under this Agreement. In exercising its authority
hereunder, Manager shall be entitled to execute and enter into contracts without
the specific approval of Owner and Fee Owner so long as each such contract (i)
requires expenditures or otherwise establishes liability of twenty-five thousand
dollars ($25,000) or less and (ii) has a term
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(excluding options in favor of Manager and Owner to renew) of one (1) year or
less or can be cancelled without penalty upon sixty (60) days' notice or less,
provided, however, that any contract entered into pursuant to the last paragraph
of Section 4.01(vi) shall be governed by the provisions of said Section
4.01(vi). Any contract that does not satisfy the conditions set forth in the
preceding sentence shall require the prior approval in each instance of Owner,
regardless whether such expenditure is authorized in an applicable budget,
unless the form of the contract proposed to be entered into has been approved in
advance by Owner. Owner agrees to promptly respond to any request for approval
and further agrees that its consent shall not be unreasonably withheld or
delayed. Manager shall be authorized to enter into contracts with affiliates of
Manager, but only so long as Owner shall have approved in advance the cost of
the service or product to be provided.
Section 11.04. Further Actions. Owner and Manager agree to execute all
contracts, agreements and documents and to take all actions necessary to comply
with the provisions of this Agreement and the intent hereof.
Section 11.05. Successors and Assigns. Owner's consent shall not be
required for Manager to assign any of its rights, interests or obligations as
Manager hereunder to any parent, subsidiary or affiliate of Manager or Promus
Hotel Corporation, provided that any such assignee agrees to be bound by the
terms and conditions of this Agreement and provided, further, that such assignee
has received an assignment of all or substantially all of the management
agreements entered into by Manager with respect to other Homewood Suites hotels.
The acquisition of Manager or its parent company by a third party shall not
constitute an assignment of this Agreement by Manager and this Agreement shall
remain in full force and effect between Owner and Manager. Except as herein
provided, Manager shall not assign any of its obligations hereunder without the
prior written consent of Owner, which shall not be unreasonably withheld or
delayed. Owner shall be deemed to have consented to such an assignment of this
Agreement if Owner has not notified Manager in writing to the contrary within
fifteen (15) days after Owner has received Manager's request for Owner's consent
to an assignment. Manager shall have the right to pledge or assign its right to
receive the Management Fees hereunder without the prior written consent of
Owner.
Owner shall have the right to assign this Agreement to the person or
entity which has obtained (i) leasehold title to the Hotel in accordance with
the Comfort Letter and (ii) a Homewood Suites License Agreement for the Hotel.
Except as hereinabove provided, Owner shall not have the right to assign this
Agreement.
Section 11.06. Notices. All notices or other communications provided
for in this Agreement shall be in writing and shall be either hand delivered,
delivered by certified mail, postage prepaid, return receipt requested,
delivered by an overnight delivery service, or delivered by facsimile machine
(with an executed original sent the same day by an overnight delivery service),
addressed as set forth on Exhibit "B". Notices shall be deemed delivered on the
date that is four (4) calendar days after the notice is deposited in the U.S.
mail (not counting the mailing date) if sent by certified mail, or, if hand
delivered, on the date the hand delivery is made, or if delivered by facsimile
machine, on the date the transmission is made. If given by an overnight
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delivery service, the notice shall be deemed delivered on the next business day
following the date that the notice is deposited with the overnight delivery
service. The addresses given above may be changed by any party by notice given
in the manner provided herein.
Section 11.07. Documents. Owner shall furnish Manager copies of all
leases, title documents, property tax receipts and bills, insurance statements,
all financing documents (including notes and mortgages) relating to the Hotel
and such other documents pertaining to the Hotel as Manager shall request.
Section 11.08. Defense. Manager shall defend and/or settle any claim or
legal action brought against Manager or Owner, individually, jointly or
severally in connection with the operation of the Hotel. Manager shall retain
and supervise legal counsel, accountants and such other professionals,
consultants and specialists as Manager deems appropriate to defend and/or settle
any such claim or cause of action. Owner shall have the right to participate
actively in the defense of any such claim or cause of action in which Owner is a
named defendant. Owner's approval shall be required with respect to any proposed
settlement of any claim or cause of action in which Owner is a named party or
that is not covered by insurance (excluding any deductible amount specified in
the applicable policy of insurance). Manager shall confer with Owner concerning
any settlement proposal that Manager is considering accepting, regardless of
whether Owner is a named party, but Owner's approval shall not be required if
Owner is not a named party and the settlement is covered by insurance. All
liabilities, costs, and expenses, including attorneys' fees and disbursements,
incurred in defending and/or settling any such claim or legal action which are
not covered by insurance shall be paid by Owner.
Section 11.09. Waivers. No failure or delay by Manager or Owner to
insist upon the strict performance of any covenant, agreement, term or condition
of this Agreement, or to exercise any right or remedy consequent upon the breach
thereof, shall constitute a waiver of any such breach or any subsequent breach
of such covenant, agreement, term or condition. No covenant, agreement, term, or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
Section 11.10. Changes. Any change to or modification of this
Agreement, including, without limitation, any change in the application of this
Agreement to the Hotel, must be evidenced by a written document signed by both
parties hereto.
Section 11.11. Captions. The captions for each Article and Section are
intended for convenience only.
Section 11.12. Severability. If any of the terms and provisions hereof
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any of the other terms or provisions hereof. If, however, any
material part of a party's rights under this Agreement shall be declared invalid
or unenforceable (specifically including Manager's right to receive its
Management Fees), the party whose rights have been declared invalid or
unenforceable shall have the option to terminate this Agreement upon thirty (30)
days' written notice to the other party, without liability on the part of the
terminating party.
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Section 11.13. Interest. Any amount payable to Manager or Owner by the
other which has not been paid when due shall accrue interest at the lesser of:
(a) the highest legal limit in the state in which the Hotel is located, (b) the
highest legal limit in the state of Tennessee, or (c) two percentage points (2%)
over the published base rate of interest charged by Citibank, N.A., New York,
New York, to borrowers on ninety (90) day unsecured commercial loans, as the
same may be changed from time to time.
Section 11.14. Reimbursement. The performance by Manager of its
responsibilities under this Agreement are conditioned upon Owner providing
sufficient funds to Manager on a timely basis to enable Manager to perform its
obligations hereunder. Nevertheless, Manager shall be entitled, at its option,
after first providing not less than ten (10) days' prior written notice to Owner
specifying the obligations to be satisfied and the amount of money to be
advanced, to advance funds or contribute property, on behalf of the Owner, to
satisfy obligations of Owner in connection with the Hotel and this Agreement.
Manager shall keep appropriate records to document all reimbursable expenses
paid by Manager, which records shall be made available for inspection by Owner
or its agents upon request. Owner agrees to reimburse Manager with interest upon
demand for money paid or property contributed by Manager to satisfy obligations
of Owner in connection with the Hotel and this Agreement. Interest shall be
calculated at the rate set forth in Section 11.13 from the date Owner was
obligated to remit the funds or contribute the property for the satisfaction of
such obligation to the date reimbursement is made.
Section 11.15. Travel and Out-of-Pocket Expenses. Manager shall be
reimbursed for all reasonable travel and out-of-pocket expenses of Manager's
employees reasonably incurred in the performance of this Agreement, provided,
however, that travel and out-of-pocket expenses of officers of Manager, its
parent and affiliates shall not be reimbursable by Owner. Manager shall have
sole discretion, which shall not be unreasonably exercised, to determine the
necessity for such travel or other expenses.
Section 11.16. Set off. Without prejudice to Manager's right to
terminate this Agreement pursuant to the provisions of this Agreement, Manager
may at any time and without notice to Owner set off or transfer any sum or sums
held by Manager or other affiliate of Promus Hotels, Inc. to the order or on
behalf of Owner or Fee Owner or standing to the credit of Owner or Fee Owner in
the Bank Account(s) in or towards satisfaction of any of Owner's liabilities to
Manager in respect of all sums due to Manager under the terms of this Agreement.
Section 11.17. Third Party Beneficiary. This Agreement is exclusively
for the benefit of the parties hereto and it may not be enforced by any party
other than the parties to this Agreement and shall not give rise to liability to
any third party other than the authorized successors and assigns of the parties
hereto.
23
<PAGE>
Section 11.18. Brokerage. Manager and Owner represent and warrant to
each other that neither has sought the services of a broker, finder or agent in
this transaction, and neither has employed, nor authorized, any other person to
act in such capacity. Manager and Owner each hereby agrees to indemnify and hold
the other harmless from and against any and all claims, loss, liability, damage
or expenses (including reasonable attorneys' fees) suffered or incurred by the
other party as a result of a claim brought by a person or entity engaged or
claiming to be engaged as a finder, broker or agent by the indemnifying party.
Section 11.19. Survival of Covenants. Any covenant, term or provision
of this Agreement which, in order to be effective, must survive the termination
of this Agreement, shall survive any such termination.
Section 11.20. Estoppel Certificate. Manager and Owner agree to furnish
to the other party, from time to time upon request, an estoppel certificate in
such reasonable form as the requesting party may request stating whether there
have been any defaults under this Agreement known to the party furnishing the
estoppel certificate and such other information relating to the Hotel as may be
reasonably requested.
Section 11.21. Other Agreements. Except to the extent as may now or
hereafter be specifically provided, nothing contained in this Agreement shall be
deemed to modify any other agreement between Owner and Manager with respect to
the Hotel or any other property. This Agreement, together with the Comfort
Letter, contains the entire agreement between Owner and Manager regarding the
management of the Hotel.
Section 11.22. Periods of Time. Whenever any determination is to be
made or action is to be taken on a date specified in this Agreement, if such
date shall fall on a Saturday, Sunday or legal holiday under the laws of the
states of Tennessee and Virginia and/or the state in which the Hotel is located,
then in such event said date shall be extended to the next day which is not a
Saturday, Sunday or legal holiday.
Section 11.23. Preparation of Agreement. This Agreement shall not be
construed more strongly against either party regardless of who is responsible
for its preparation.
Section 11.24. Exhibits. All exhibits attached hereto are incorporated
herein by reference and made a part hereof as if fully rewritten or reproduced
herein.
Section 11.25. Attorneys' Fees and Other Costs. The parties to this
Agreement shall bear their own attorneys' fees in relation to negotiating and
drafting this Agreement. Should Owner or Manager engage in litigation to enforce
their respective rights pursuant to this Agreement, the prevailing party shall
have the right to indemnity by the non-prevailing party for an amount equal to
the prevailing party's reasonable attorneys' fees, court costs and expenses
arising therefrom.
Section 11.26. Agreement Not an Interest in Real Property. This
Agreement is not, and shall not be deemed at any time to be or to create, an
interest in real estate or a lien or other encumbrance of any kind whatsoever
against the Hotel or the land on which it is erected.
24
<PAGE>
Section 11.27. Acquisition Loan; Agency Coupled With an Interest; No
Termination While the Acquisition Loan Remains Outstanding. In accordance with
the Purchase Agreement (as herein defined) and that certain Agreement of Sale
dated August 6, 1999 by and among Hampton Inns, Inc., Promus Hotels Florida,
Inc. and Promus Hotels, Inc., as sellers, and Fee Owner, as buyer (as the same
has been amended, the "Existing Purchase Agreement"), Promus Hotels, Inc. (in
its capacity as lender, the "Acquisition Lender") has loaned to Fee Owner the
sum of $33,975,000 (the "Acquisition Loan") as purchase money financing for the
acquisition of the properties (the "Properties") conveyed pursuant to the
Purchase Agreement and the Existing Purchase Agreement. The Acquisition Loan is
evidenced by (i) a note of Fee Owner dated September 20, 1999 in the amount of
$26,625,000 and (ii) a note of Fee Owner of even date herewith in the amount of
$7,350,000 and is secured by, among other things, mortgage(s), deed(s) of trust
or deed(s) to secure debt dated September 20, 1999 or of even date herewith from
Fee Owner or its wholly-owned subsidiary which encumbers some or all of the
Properties, which may include the Hotel (the documents evidencing and securing
the Acquisition Loan herein referred to as the "Acquisition Mortgage
Documents"). Owner and Manager specifically acknowledge and agree that (i)
Acquisition Lender has been induced, in part, to make the Acquisition Loan to
Fee Owner based upon Owner's agreement to enter into this Agreement with
Manager, (ii) Acquisition Lender required Owner to enter into this Agreement
with Manager as a condition to making the Acquisition Loan so that (inter alia)
Manager could facilitate the repayment of the Acquisition Loan in accordance
with its terms by managing and operating the Hotel in accordance with the terms
of this Agreement, and (iii) it is the parties' intention that Owner's retention
of Manager to operate the Hotel pursuant to the terms of this Agreement is
intended to, and shall, create an "agency coupled with an interest" in favor of
Manager, which agency shall be irrevocable unless and until the Acquisition Loan
is repaid in full. Manager shall be entitled to the legal and equitable
protections that the status of an agent coupled with an interest confers on
Manager for so long as the Acquisition Loan remains outstanding. Accordingly,
(x) no purported termination of this Agreement by Owner for any reason
whatsoever (including, without limitation, any purported termination pursuant to
Article 8 or Article 9) shall be effective unless and until the Acquisition Loan
shall have been repaid in full, and (y) Manager shall have the right and option
to extend the Term of this Agreement indefinitely for so long as the Acquisition
Loan remains outstanding. The provisions of this Section shall take effect
notwithstanding anything to the contrary set forth in this Agreement.
Section 11.28. Counterparts. This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original.
25
<PAGE>
The parties have respectively caused this Agreement to be executed as
of the respective dates shown below.
OWNER:
/s/ Gus G. Remppies APPLE SUITES MANAGEMENT,
- -------------------- INC., a Virginia corporation
Witness:
By /s/ Glade M. Knight
-------------------------
Name: Glade M. Knight
Title: President
Date:
MANAGER:
/s/ [illegible] PROMUS HOTELS, INC.
- --------------------
Witness:
By /s/ Dan L. Hale
---------------------------
Name: Dan L. Hale
Title: Executive Vice President & CFO
Date:
<PAGE>
EXHIBIT "A"
LICENSE AGREEMENT
[Included elsewhere in this Filing.]
A-1
<PAGE>
EXHIBIT "B"
DEAL SPECIFIC TERMS
TERM: Fifteen (15) years from the Effective
Date
INITIAL MINIMUM BALANCE
FOR THE BANK ACCOUNT(S) : $75,000
INITIAL OWNER'S REPRESENTATIVE: Doug Schepker
DISBURSEMENT PRIORITY SCHEDULE:
Each fiscal month Manager, on behalf of Owner, shall disburse funds
from the Bank Account(s) in the following order of priority and to the extent
available:
(a) all fees, assessments and charges due and payable under the License
Agreement when issued;
(b) the Management Fee, but excluding, to the extent then applicable,
the Subordinated Management Fee;
(c) all reimbursable expenses due Manager;
(d) all other Hotel operating costs (herein and in the Agreement
referred to as "operating costs"), as such costs and expenses are
defined under the accounting practices of Manager in conformity
with generally accepted accounting practices consistently applied,
specifically including, but not limited to, (i) the cost of
operating equipment and operating supplies, wages, salaries and
employee fringe benefits, advertising and promotional expenses, the
cost of personnel training programs, utility and energy costs,
operating licenses and permits, grounds and landscaping maintenance
costs and equipment rentals approved by Manager as an operating
cost; (ii) all expenditures made for maintenance and repairs to
keep the Hotel in good condition and repair, specifically excluding
expenditures for Capital Replacements; and (iii) premiums and
charges on the insurance coverages specified in Exhibit "D"
incurred after the Effective Date. There shall be excluded from the
operating costs of the Hotel the following, which shall be
ownership costs of the Hotel: (i) depreciation of the Hotel,
furnishings, fixtures and equipment; (ii) rental pursuant to a
ground lease, if any, or the Percentage Lease or any other lease
payments; (iii) debt service (interest and principal) on any
mortgage(s) encumbering Owner's leasehold interest in, and/or Fee
Owner's fee interest in, the Hotel; (iv) property taxes and
assessments; (v) expenditures for Capital Replacements; (vi) audit,
legal and other professional or special fees; (vii) premiums for
insurance
B-1
<PAGE>
coverages specified in Exhibit "E"; (viii) administrative and
general expenses and disbursements of Owner, including compensation
of employees of Owner; (ix) Federal, State and local Franchise and
Income Taxes; (x) amortization of bond discounts and mortgage
expenses; (xi) deposits into the Reserve Fund or amounts held
pursuant to Section 3.01(xix); and (xiii) such other costs or
expenses which are normally treated as ownership costs under the
accounting practices of Manager in conformity with generally
accepted accounting practices consistently applied;
(e) the following ownership costs, disbursed in the following order of
priority and to the extent available:
(i) an amount (annualized) to satisfy land, building and
personal property taxes and assessments;
(ii) an amount (annualized) to satisfy the premiums for the
insurance required to be obtained by Owner in accordance
with Exhibit "E";
(iii) the amount to be deposited in the Reserve Fund pursuant to
Section 4.01(d); and
(iv) any ground lease payments, but specifically excluding,
except as specifically itemized above, any sums payable by
Owner to Fee Owner pursuant to the Percentage Lease;
(f) Owner's Basic Return;
(g) the Subordinated Management Fee;
(h) payments of principal, interest and other sums payable under the
Acquisition Loan;
(i) any payments not specifically contemplated above which are required
to be paid by Owner to Fee Owner pursuant to the Percentage Lease;
and
(j) except as provided above, debt service upon any mortgage(s)
encumbering the Hotel and any capital lease payments.
After the disbursements set forth above, any excess funds remaining in
the Bank Account(s) over the Minimum Balance shall be distributed to Owner. If
after making the disbursements set forth above, there shall be a deficiency in
the Minimum Balance, Owner shall immediately provide such funds as may be
required to maintain the Minimum Balance in the Bank Account(s).
B-2
<PAGE>
NOTICES:
Owner: Apple Suites Management, Inc.
306 East Main Street
Richmond, Virginia 23219
Fax: 804/782-9302
Attention: Mr. Glade M. Knight
with a copy to:
Jenkens & Gilchrist
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Fax: 214/855-4300
Attention: Thomas E. Davis, Esq.
Manager: Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117
Fax: 901/374-5050
Attention: Corporate Secretary
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Fax: 212/259-6333
Attention: Graham R. Hone, Esq.
SALE TERMINATION FEE:
The "Sale Termination Fee" shall be: (i) if the termination of this
Agreement occurs on or before the second anniversary of the Effective Date, the
sum of $771,000; (ii) if the termination of this Agreement occurs after the
second anniversary of the Effective Date but on or before the tenth (10th)
anniversary of the Effective Date, an amount equal to the product of (x) three
(3) times (y) the quotient of the aggregate of the Management Fees earned during
the preceding twenty-four (24) month period divided by two (2); (iii) if the
termination of this Agreement occurs after the tenth (10th) anniversary of the
Effective Date but on or before the fourteenth (14th) anniversary of the
Effective Date, an amount equal to the product of (x) one and one-half (1.5)
times (y) the aggregate of the Management Fees earned during the preceding
twenty-four month period divided by two (2); and (iv) if the termination of this
Agreement occurs after the fourteenth (14th) anniversary of the Effective Date,
an amount equal to the product of (x) the aggregate of the Management Fees
earned during the preceding twenty-four (24) month period divided by 24 times
(y) the number of full calendar months remaining in the Term.
B-3
<PAGE>
CANCELLATION TERMINATION FEE:
The "Cancellation Termination Fee" shall be: (i) if the termination of
this Agreement occurs after the tenth (10th) anniversary of the Effective Date
but on or before the fourteenth (14th) anniversary of the Effective Date, an
amount equal to the product of (x) two (2) times (y) the aggregate of the
Management Fees earned during the preceding twenty-four month period divided by
two (2); and (ii) if the termination of this Agreement occurs after the
fourteenth (14th) anniversary of the Effective Date, an amount equal to the
product of (x) the aggregate of the Management Fees earned during the preceding
twenty-four (24) month period divided by 24 times (y) the number of full
calendar months remaining in the Term. [FOR EXAMPLE, . . . .]
ACCOUNTING FEE: $1,000/month
[NOTE A - THIS AMOUNT TO BE CALCULATED ON A HOTEL BY HOTEL BASIS AND WILL BE THE
AGGREGATE OF THE FIRST FIVE YEARS OF THE MANAGEMENT FEES AS SHOWN ON THE 10-YEAR
PRO FORMA FOR THE HOTEL IN QUESTION]
B-4
<PAGE>
EXHIBIT "C"
MANAGEMENT FEES
The "Management Fee" shall mean and refer to a fee equal to four
percent (4%) of Adjusted Gross Revenues (as hereinafter defined) with respect to
each fiscal month during the term of this Agreement, provided, however, that for
the first two years of the term of this Agreement a portion of the Management
Fee equal to one percent (1%) of Adjusted Gross Revenues (such portion, the
"Subordinated Management Fee") shall be subordinated to Owner's Basic Return (as
hereinafter defined). Manager and Owner agree that, in light of Manager's
agreement to subordinate the Subordinated Management Fee, the Subordinated
Management Fee, while payable monthly to the extent proceeds are available,
shall be adjusted annually and paid, to the extent Adjusted Gross Revenues after
payment of Owner's Basic Return are available therefor, within thirty (30) days
of Manager's delivery of the operating statements required pursuant to Section
3.01(vi) of the Agreement. Any Subordinated Management Fee not so paid pursuant
to the provisions of the immediately preceding sentence shall not thereafter be
payable by Owner.
The term "Gross Revenues" shall be defined as all revenues and income
of any nature derived directly or indirectly from the Hotel or from the use or
operation thereof, whether on or off the Site, including total room sales, food
and beverage sales, if any, laundry, telephone, telegraph and telex revenues,
other income, rental or other payments from lessees, sublessees, licensees and
concessionaires (but not the gross receipts of such lessees, sublessees,
licensees or concessionaires) and the proceeds of business interruption, use,
occupancy or similar insurance.
The term "Adjusted Gross Revenues" shall be defined as Gross Revenues
less the following revenues actually received by the Hotel and included in Gross
Revenues: (i) any gratuities or service charges added to a customer's bill; (ii)
any credits or refunds made to customers, guests or patrons; (iii) any sums and
credits received by Owner for lost or damaged merchandise; (iv) any sales taxes,
excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist
taxes or charges; (v) any proceeds from the sale or other disposition of the
Hotel, furnishings and equipment or other capital assets; (vi) any fire and
extended coverage insurance proceeds; (vii) any condemnation awards; (viii) any
proceeds of financing or refinancing of the Hotel; and (ix) any interest on the
Bank Account(s).
The term "Owner's Investment" shall mean the sum of (x) the purchase
price for the Hotel ("Purchase Price") as set forth in the Agreement of Sale
dated October 5, 1999 by and between Fee Owner, as buyer, and Hampton Inns,
Inc., as seller (the "Purchase Agreement") plus (y) all reasonable costs and
expenses incurred by Fee Owner in connection with performing its due diligence
in connection with the Purchase Agreement and consummating the purchase
contemplated by the Purchase Agreement, including, without limitation, title and
survey fees and charges, real estate transfer taxes and reasonable attorneys'
fees and charges, which shall be deemed to include any such
C-1
<PAGE>
reasonable costs and expenses incurred or advanced by Cornerstone Realty Income
Trust, Inc. or Glade M. Knight for the benefit of Apple Suites, Inc. or Owner
and reimbursed to it or him by any of Apple Suites, Inc. or Owner and which are
specifically allocable to the Hotel or if not specifically allocable allocated
on a pro rata basis based on the purchase prices set forth in the Existing
Purchase Agreement and the Purchase Agreement and the purchase price of any
other properties acquired by Fee Owner or its directly or indirectly
wholly-owned affiliate(s) from Manager or its directly or indirectly
wholly-owned affiliate(s) on or prior to December 31, 1999, but specifically
excluding fees and charges paid to Apple Suites Advisors, Inc., Apple Suites
Realty Group, Inc. or any other affiliate of Glade M. Knight or any fees and
charges paid in connection with offering of common stock in Fee Owner plus (z)
amounts advanced by any of Apple Suites, Inc. or Owner in respect of the PIP (as
defined in the License Agreement) and in respect of Hotel capital replacement
items which are in excess of amounts required to be deposited in the Reserve
Fund from Gross Revenues.
The term "Owner's Basic Return" shall mean for the first and second
years, eleven percent (11%) of Owner's Investment.
Attached hereto and made a part hereof, as Exhibit C-1, is an example
of the calculation of, and payment of, the Management Fee (less the Subordinated
Management Fee), the Owner's Basic Return and the Subordinated Management Fee.
C-2
<PAGE>
EXHIBIT "C-1"
MANAGEMENT FEE
C-1-1
<PAGE>
EXHIBIT "D"
INSURANCE
In accordance with Section 3.01(xv), Manager shall, on behalf of Owner
and at Owner's expense, procure the insurance coverages hereinafter set forth
and ensure that they are in full force and effect as of the Effective Date and
that they remain in full force and effect throughout the Term of this Agreement.
All cost(s) and expense(s) incurred by Manager in procuring the following
insurance coverages shall be operating costs and shall be paid from the Bank
Account(s):
Coverages: Amounts of Insurance
Comprehensive General Liability $10,000,000 per location
Including -
Premises - Operations
Products/Completed Operations
Contractual
Personal Injury
Liquor Liability/Dram Shop (if applicable)
Elevators and Escalators
Automotive Liability $10,000,000
Owned Vehicles
Non-Owned Vehicles
Uninsured Motorist where Required by Statute
Automobile Physical Damage (Optional)
Comprehensive (To Value if insured)
Collision
Workers' Compensation Statutory
Employer's Liability $1,000,000
Fidelity (Employee Dishonesty) As required
Money and Securities As required
All insurance coverages provided for under this Exhibit "D" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is located; and (ii) that are of good
reputation and of sound and adequate financial responsibility, having a Bests
Rating of B+ VI, or better, or a comparable rating if Bests ceases to publish
its ratings or materially changes its rating standards or procedures.
D-1
<PAGE>
Manager shall deliver to Owner duly executed certificates of insurance
with respect to all of the policies of insurance procured, including existing,
additional and renewal policies.
Each policy of insurance maintained in accordance with this Exhibit
"D," to the extent obtainable, shall specify that such policies shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.
Except as otherwise provided in the Agreement, Manager and Owner each
waives, releases and discharges the other from all claims or demands which each
may have or acquire against the other, or against each other's subsidiaries,
affiliates, directors, officers, agents, employees, independent contractors or
partners, with respect to any claims for any losses, damages, liabilities or
expenses (including attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property or business arising out of
the ownership, management, operation and maintenance of the Hotel, regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or independent contractors. Each policy of insurance maintained in
accordance with this Exhibit "D" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.
All policies of insurance provided for under this Exhibit "D" shall be
carried in the name of the Manager. Owner's interest and that of any other
applicable party will be included in the coverage by an additional insured
endorsement.
All such policies of insurance shall be written on an "occurrence"
basis, with no per location aggregate limitation.
Either Manager or Owner, by notice to the other, shall have the right
to require that the minimum amount of insurance to be maintained with respect to
the Hotel under this Exhibit "D" be increased to make such insurance comparable
with prudent industry standards and to reflect increases in liability exposures,
taking into account the size and location of the Hotel.
Owner hereby authorizes Manager to utilize the services of and/or place
the insurance set forth in this Exhibit "D" with (i) any subsidiary or
affiliated company of Promus Hotels, Inc. in the insurance business as Manager
deems appropriate; or (ii) a third party insurance carrier meeting the
specifications set forth above.
D-2
<PAGE>
EXHIBIT "E"
INSURANCE
In accordance with Section 4.01(iii), Owner agrees, at its expense, to
procure and maintain the following insurance coverages, as reasonably adjusted
from time to time, throughout the Term of this Agreement:
Coverages: Amounts of Insurance
Builders Risk Completed value of the Hotel
All risk for term of the initial and any subsequent Hotel
construction and renovation.
Real and Personal Property 100% replacement value of building
and contents
Blanket Coverage
Replacement Cost - all risk
Boiler Machinery - written on a comprehensive form
Business Interruption Calculated yearly based on
estimated Hotel revenues
Blanket Coverage for the perils insured against under Real and
Personal Property in this Exhibit "E". This coverage shall
specifically cover Manager's loss of Management Fees. The business
interruption insurance shall be for a twelve (12) month indemnity
period.
Owner's Protective Liability $10,000,000
All risks from construction and renovation occurring prior to the
Opening Date and all risks from Hotel construction and renovation
projects costing more than $250,000 occurring after the Opening
Date.
All insurance coverages provided for under this Exhibit "E" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is located; and (ii) that are of good
reputation and of sound and adequate financial responsibility, having a Bests
Rating of B+ VI, or better, or a comparable rating if Bests ceases to publish
its ratings or materially changes its rating standards or procedures.
Owner shall deliver to Manager duplicate copies of either insurance
policies or certificates of insurance (at Manager's option) with respect to all
of the policies of insurance procured, including existing, additional and
renewal policies, and in the case of insurance nearing expiration, shall deliver
duplicate copies of the insurance policies or certificates of insurance with
respect to the renewal policies to Manager not less than thirty (30) days prior
to the respective dates of expiration.
<PAGE>
Each policy of insurance maintained in accordance with this Exhibit
"E," to the extent obtainable, shall specify that such policies shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.
Except as otherwise provided in this Agreement, Manager and Owner each
waives, releases and discharges the other from all claims or demands which each
may have or acquire against the other, or against each other's subsidiaries,
affiliates, directors, officers, agents, employees, independent contractors or
partners, with respect to any claims for any losses, damages, liabilities or
expenses (including attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property or business arising out of
the ownership, management, operation and maintenance of the Hotel, regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or independent contractors. Each policy of insurance maintained in
accordance with this Exhibit "E" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.
All policies of insurance provided for under this Exhibit "E" shall be
carried in the name of the Owner and Manager, and losses thereunder shall be
payable to the parties as their respective interests may appear. All liability
policies shall name the Owner and Manager, and in each case any of their
affiliated or subsidiary companies which they may specify, and their respective
directors, officers, agents, employees and partners as additional named
insureds.
All such policies of insurance shall be written on an "occurrence"
basis.
Either Manager or Owner, by notice to the other, shall have the right
to require the minimum amount of insurance to be maintained with respect to the
Hotel under this Exhibit "E" be increased to make such insurance comparable with
prudent industry standards and to reflect increases in liability exposures,
taking into account the size and location of the Hotel.
EXHIBIT 10.4
COMFORT LETTER
October 5, 1999
Apple Suites, Inc.
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Gus G. Remppies
Re: Homewood Suites(R) hotel located at 3200 Cobb
Parkway, Atlanta, Georgia (the "Hotel")
Gentlemen:
Promus Hotels, Inc. ("Promus") is about to execute with
respect to the Hotel (i) a License Agreement and the Rider, Attachment and
Exhibits referenced therein (the "License Agreement"), dated the date hereof,
pertaining to the licensing of Apple Suites Management, Inc., a Virginia
corporation ("Lessee"), to operate the Hotel as a Homewood Suites(R) hotel, and
(ii) a management agreement of even date herewith (the "Management Agreement")
with respect to the operation of the Hotel by Promus, as Manager. In addition,
Promus has loaned to Apple Suites, Inc. ("Fee Owner") the sum of $33,975,000
(the "Acquisition Loan") as purchase money financing for the acquisition of
certain properties (the "Properties") conveyed pursuant to the Purchase
Agreement (as defined in the Management Agreement) and that certain Agreement of
Sale dated August 6, 1999 by and among Hampton Inns, Inc., Promus Hotels
Florida, Inc. and Promus, as sellers, and Fee Owner, as buyer, as the same has
been amended, which is evidenced by (i) a note of Fee Owner dated September 20,
1999 in the amount of $26,625,000 and (ii) a note of Fee Owner of even date
herewith in the amount of $7,350,000 and is secured by, among other things,
mortgage(s), deed(s) of trust or deed(s) to secure debt dated September 20, 1999
or of even date herewith from Fee Owner or its wholly-owned subsidiary which
encumbers some or all of the Properties, which may include the Hotel (the
documents evidencing and securing the Acquisition Loan herein referred to as the
"Acquisition Mortgage Documents"). Lessee is the owner of a leasehold estate in
the Hotel pursuant to a Lease Agreement dated the date hereof (the "Percentage
Lease") with Fee Owner. Although the License Agreement is non-assignable, and is
not subject to any collateral assignment, Lessee and Fee Owner have requested
that Promus enter into this letter agreement with Fee Owner with respect to,
among other things, Fee Owner's rights with regard to the License Agreement, and
<PAGE>
Promus has requested that Fee Owner enter into this letter agreement with Promus
with respect to, among other things, the Management Agreement and its continuing
rights to operate the Hotel for the term of the Management Agreement, subject to
the terms thereof and hereof, and to confirm certain understandings with respect
to the Acquisition Loan. No third party beneficiaries (other than Fee Owner) are
intended or implied. Fee Owner has requested that Promus inform you of the
procedures Promus agrees to follow in the event Lessee commits a breach under
the provisions of the License Agreement.
So long as Fee Owner is the owner of the Hotel, and the
License Agreement is in effect, Promus will notify Fee Owner by certified mail
at the above address (or such other address as you may specify in a written
notice to Promus pursuant hereto) of any default as a result of any breach of
the License Agreement or Management Agreement by Lessee, provided, however, that
to the extent the default is a default under, or termination of, the Percentage
Lease or a default under the Acquisition Loan, Promus shall have no obligation
to notify Fee Owner as contemplated above. This notice will be in the form of a
copy of the notice of such default that is sent to Lessee. In the notice, Promus
will give Fee Owner (i) ten (10) days to cure or cause to be cured monetary
defaults identified in Promus's default notice and (ii) thirty (30) days to cure
or cause to be cured the non-monetary breach(es) identified in Promus's default
notice, provided, however, that to the extent the default identified in Promus's
default notice is not capable of being cured by Fee Owner (i.e., the bankruptcy
of Lessee or a transfer in violation of the License Agreement), Fee Owner will
not be afforded an opportunity to cure such incurable defaults. If a breach
identified in the notice is of a curable non-monetary nature which is not
reasonably capable of being cured within such thirty (30) day period, Promus
shall extend the cure period for such length of time as Promus in its sole
discretion reasonably determines is necessary for such breach to be cured (not
to exceed in any event an additional period of ninety (90) days).
In the event a default occurs under the Percentage Lease
(other than a default under the Acquisition Loan) and, as a consequence thereof,
Fee Owner elects to terminate the Percentage Lease, or remove Lessee from
possession of the Hotel without terminating the Percentage Lease or if Lessee
does not elect to extend the Percentage Lease term through the full term of the
License Agreement (any such event being referred to herein as a "Triggering
Event") while the License Agreement and/or the Management Agreement are in
effect, Fee Owner shall give Promus written notice of such termination
("Triggering Event Notice"). Fee Owner shall have a ninety (90) day period from
the date such Triggering Event Notice is given to elect to enter into a lease
agreement with a substitute lessee of the Hotel satisfying the conditions set
forth in Paragraph 1 below (a "Successor Lessee") and to obtain a new license
agreement for such Hotel in the name of such Successor Lessee, for a term equal
to the balance of the original term of the License Agreement and otherwise on
the terms and conditions set forth in the License Agreement, except that it
shall be issued to Successor Lessee without the payment of any application fee
or transfer fee. Promus's obligations to issue a new license agreement pursuant
to this paragraph are subject to and conditioned upon the satisfaction of the
following:
1. Successor Lessee shall (i) be a "Permitted Transferee" (as
hereinafter defined) and (ii) either (y) be (1) at least fifty percent (50%)
owned by Fee
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Owner or persons that are its "Affiliates" (as hereinafter defined) and (2)
controlled by Fee Owner or its Affiliates or (z) have complied with the
requirements of Section 11 of the applicable License Agreement.
For purposes of this letter agreement the following terms
shall have the respective meanings assigned thereto:
(a) The term "Permitted Transferee" means a person or entity
that (i) has adequate financial resources to perform all of Lessee's
obligations under and in accordance with the terms of the License
Agreement, the Percentage Lease, and/or the Management Agreement, (ii)
is not the franchisor or an operator of a chain of hotels (i.e., a
group of hotels marketed under the same brand name) which competes with
the Homewood Suites(R)system of hotels, and (iii) enjoys a favorable
reputation for integrity in his or its community; provided, however,
that an entity the stock of which is not traded on a national stock
exchange shall not qualify as a "Permitted Transferee" unless (A) all
officers, directors, managing members and general partners of such
entity and all persons having, directly or indirectly, a ten percent
(10%) or more equity or profit-sharing interest in such entity would
qualify as Permitted Transferees under clauses (ii) and (iii) of this
sentence, and (B) all officers, directors, managing members and general
partners of any entity having, directly or indirectly, a ten percent
(10%) or more equity or profit-sharing interest in such entity, the
stock of which is not traded on a national stock exchange, would
qualify as Permitted Transferees under clauses (ii) and (iii) of this
sentence. For purposes of the foregoing, it is agreed that any person
or entity who or which, because of reputation or past conduct, has been
denied or would be likely to be denied a gaming license by any
governmental authority shall not qualify as a "Permitted Transferee".
(b) The term "Affiliate" means, with respect to any person or
entity, any other person or entity which, directly or indirectly,
controls, is controlled by, or is under common control with, such first
person or entity. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and
"under common control with"), shall mean the possession, directly or
indirectly, of the power (i) to vote more than fifty percent (50%) of
the securities having ordinary voting power for the election of
directors of the controlled person, or (ii) to direct or cause the
direction of the management and policies of the controlled person,
whether through the ownership of voting shares or by contract or
otherwise, and shall be deemed to include the directors and executive
officers of Fee Owner.
2. Successor Lessee shall also enter into a management
agreement with Promus covering the Hotel for a term equal to the balance of the
original term of the Management Agreement covering the Hotel and otherwise on
the terms and conditions set forth in such Management Agreement.
If Fee Owner fails to provide a written notice to Promus of
Successor Lessee's intention to obtain a new license within such ninety (90) day
period, the License Agreement shall, at Promus's option, terminate upon the date
of expiration of such ninety
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(90) day period, in which event Fee Owner shall pay to Promus an amount, as
liquidated damages, equal to the aggregate amount owed under the License
Agreement (including liquidated damages attributable to such termination as
provided in Paragraph 13 of the License Agreement) and the Management Agreement.
If Fee Owner enters into a new lease with a Successor Lessee
who intends to obtain a new license, all existing breaches under the License
Agreement and the Management Agreement (collectively, the "Hotel Agreements") of
which Promus notifies Fee Owner must be cured on or before the final day of the
ninety (90) day period, provided, however, if such breach(es) are of the type
set forth in paragraph 13.d.(3) and (4) of the License Agreement or Section 9.01
of the Management Agreement and are not capable of being cured by Fee Owner or a
Successor Lessee within such ninety (90) day period, such breach(es) need not be
cured if Fee Owner or a Successor Lessee cures all other breaches of the Hotel
Agreements. With regard to any breaches of a non-monetary nature which are not
reasonably capable of being cured within said ninety (90) day period, Promus
shall extend the cure period for such period of time as Promus in its sole
discretion reasonably determines is necessary for such breaches to be cured.
In the event Fee Owner exercises its rights under the terms of
this letter agreement to enable a Successor Lessee to obtain a new license
agreement, Lessee shall not be released from its obligations under the
applicable Hotel Agreements accruing prior to the date such Successor Lessee
obtains a new license and enters into a new management agreement with Promus.
In addition, in the event the provisions of Internal Revenue
Code, as amended, applicable to real estate investment trusts ("REIT") are
amended to permit REITs, such as Fee Owner, to operate hotels or otherwise
render the structure embodied by the Percentage Lease to be obsolete as
economically unnecessary, Fee Owner may give Promus written notice thereof (the
"Tax Event Notice") and of Fee Owner's election to terminate the Percentage
Lease and of its desire to obtain a new license agreement for the Hotel in Fee
Owner's name for a term equal to the balance of the original term of the License
Agreement and otherwise on the terms and conditions set forth in the License
Agreement, except that it shall be issued to Fee Owner without the payment of
any application fee or transfer fee. The Tax Event Notice shall, in addition,
contain Lessee's consent to the termination of the Management Agreement and the
License Agreement and acknowledgment of the provisions of the immediately
succeeding paragraph. Promus's obligations to issue a new license agreement
pursuant to this paragraph are subject to and conditioned upon the satisfaction
of the following:
1. Fee Owner shall be a "Permitted Transferee", except that
clause (i) thereof shall be amended to read "(i) has adequate financial
resources to perform all of owner's obligations under and in accordance with the
terms of the License Agreement and/or the Management Agreement".
2. Fee Owner shall also enter into a management agreement with
Promus covering the Hotel for a term equal to the balance of the original term
of the Management Agreement covering the Hotel and otherwise on the terms and
conditions set forth in the Management Agreement.
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In the event Fee Owner exercises its right under the terms of
the immediately preceding paragraph of this letter agreement to enable it to
obtain a new license agreement, Lessee shall not be released from its
obligations under the applicable Hotel Agreements accruing prior to the date Fee
Owner obtains a new license and enters into a new management agreement with
Promus.
In connection with Lessee's execution and delivery of the
License Agreement, Apple Suites, Inc. has executed and delivered for the benefit
of Promus that certain Guaranty of even date herewith with respect to the
License Agreement (the "Guaranty"). Promus acknowledges that, in the event of
actual conflict, the terms and provisions of this letter agreement shall control
over the terms and provisions of the Guaranty. Without limiting the generality
of the foregoing, and in order to provide Apple Suites, Inc. with the full
benefits intended by the provisions of the immediately preceding sentence,
Promus shall notify Apple Suites, Inc. by certified mail not less than ten (10)
days prior to Promus's execution and delivery of any amendment or modification
of the License Agreement or of its acceptance of any voluntary surrender or
termination by Lessee of the License Agreement, other than amendments or
modifications or surrender or termination which has been requested by Fee Owner
or Apple Suites, Inc. or to which Fee Owner is a party. Nothing in the foregoing
sentence shall be deemed or construed to limit or restrict Promus's rights to
terminate or exercise any other remedy under the License Agreement in the event
of a default by Lessee thereunder, subject to the other terms and provisions of
this letter agreement.
With reference to Licensee's representation in the last
sentence of Section 1(a) of the License Agreement, Promus acknowledges that the
Percentage Lease is for a base term of less than twenty (20) years and that only
upon exercising all extension options available to Licensee, including certain
options requiring negotiation of fair market rental, will the term of the
Percentage Lease extend to the full twenty (20) years of the term of the License
Agreement. Fee Owner and Lessee acknowledge that the failure for any reason to
exercise the extension options will result in the application of the liquidated
damages provisions of Paragraph 13.f of the License Agreement if, upon the
termination of the Percentage Lease, Fee Owner or a Successor Lessee does not
obtain a new license agreement for the Hotel for a term equal to the balance of
the original term of the License Agreement, as contemplated herein.
Promus hereby confirms for the benefit of Fee Owner and Lessee
that the License Agreement shall be read with the following clarifications:
(i) with respect to the provisions of Paragraph 1.d. of the
License Agreement relating to the requirement to use particular
Supplies or that particular Supplies be purchased from Promus or a
source designated by Promus, such requirements shall only be imposed on
the licensee under the License Agreement to the extent Promus is
imposing such requirements on substantially all of its licensees of the
System, but that with respect to other Supplies if Lessee determines
that it can purchase Supplies of a quality at least equal to that which
Promus is requiring at a price lower than the price then being charged
by Promus or its designated supplier, Lessee may purchase such Supplies
from its vendor;
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(ii) with respect to the provisions of Paragraph 6.a.(19) of
the License Agreement, such provisions are not intended to preclude
Lessee or any member of an affiliated group from owning licensed hotels
of other, even competing, brands, but from owning a hotel brand,
tradename, system or chain;
(iii) with respect to the provisions of Paragraph 11 of the
License Agreement relating to change in ownership or a transfer of the
hotel, the provisions are intended to apply only to Lessee's beneficial
or equity interests or its interest in the hotel; and
(iv) with respect to the language of the second sentence of
Paragraph 13.f. of the License Agreement reading "If this Agreement is
terminated other than by the expiration of the term described in
Paragraph 13.a.,", this language is not intended to modify other
provisions of the License Agreement relating to whether or not
liquidated damages are payable under other circumstances and
accordingly shall be read as if preceded by the phrase "Subject to the
other provisions of this Agreement". In addition, liquidated damages
shall not be payable if the License Agreement is terminated as a result
of Promus's default under the License Agreement.
Promus acknowledges that, in the event of actual conflict
between this letter agreement and the License Agreement, the terms and
provisions of this letter agreement shall control over the terms and provisions
of the License Agreement. Without limiting the generality of the foregoing, (i)
no transfer of any interest in Fee Owner, or of fee ownership of the Hotel to an
affiliate of Fee Owner, shall constitute a prohibited change of ownership under
the License Agreement, subject, however, to the penultimate paragraph of this
letter agreement, (ii) no transfer of the leasehold interest of Lessee in the
Hotel to a Successor Lessee shall constitute a prohibited change of ownership
under the License Agreement, and (iii) in no event shall the initial Licensee be
liable for liquidated damages as the result of termination of the Percentage
Lease or default under the License Agreement if a Successor Lessee is supplied
by Fee Owner or Fee Owner enters into a new License Agreement following a Tax
Event Notice, and all prior curable defaults under the License Agreement are
cured by Fee Owner, as contemplated herein.
Fee Owner and Lessee agree with Promus as follows with respect
to the relationship of Promus and Lessee under the Management Agreement:
(a) Pursuant to the terms of the Percentage Lease, Fee Owner
has agreed to pay, among other things, (i) land, building and personal
property taxes and assessments applicable to the Hotel, (ii) premiums
and charges for property casualty insurance coverages specified in
Exhibit "D" to the Management Agreement, (iii) expenditures for capital
replacements, (iv) expenditures for maintenance and repair of
underground utilities and structural elements of the Hotel and (v) the
payments of principal, interest and other sums payable under the
Acquisition Loan (collectively, "Fee Owner Costs"). To the extent the
Management Agreement obligates or authorizes Promus to pay any Fee
Owner Costs, Promus shall pay such Fee Owner Costs on behalf of Lessee
to the extent
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of funds in the Hotel's bank account(s) (collectively, the "Hotel
Accounts"), including, without limitation, the Bank Account(s) and the
Reserve Fund (as such terms are defined in the Management Agreement)
subject to any limitations contained in the Management Agreement and
Fee Owner and Lessee shall make such adjustments and payments to each
other as may be necessary from time to time to take into account any
such payments. Promus shall have no duty, obligation or liability to
Fee Owner (x) to make any determination as to whether any expense
required to be paid by Promus under the Management Agreement is a Fee
Owner Cost or a cost of Lessee, or (y) to make any determination as to
whether funds in the Hotel Accounts belong to Fee Owner or Lessee, or
(z) to require that Fee Owner Costs be paid from funds which can be
identified as belonging to Fee Owner, or other costs and expenses
required to be paid by Lessee be paid from funds which can be
identified as belonging to Lessee; it being the intent of this
provision that (i) Fee Owner and Lessee shall look only to each other
and not to Promus with respect to moneys that may be owed one to the
other as consequence of Promus's performance of the Management
Agreement and (ii) Promus need only look to Lessee to pay operating
costs, including, without limitation, those designated herein as Fee
Owner Costs.
(b) Promus shall be permitted (and is hereby authorized) to
set off against any amounts owed to Promus by Lessee under the
Management Agreement and the License Agreement any funds held by Promus
pursuant to the Management Agreement, including amounts in the Hotel
Accounts, whether or not amounts are due to Fee Owner by Lessee under
the Percentage Lease.
(c) Fee Owner has approved the form of the Management
Agreement and License Agreement and agrees that Fee Owner's consent or
approval is not required with respect to the performance of any of its
rights, duties or obligations under the Management Agreement or the
License Agreement.
(d) Fee Owner hereby approves the deposit of funds into the
Reserve Account and the expenditure of funds from the Reserve Account
by Promus in accordance with the terms of the Management Agreement.
(e) To the extent required by applicable laws, Fee Owner shall
obtain and maintain (or cooperate in obtaining and maintaining) any
licenses, permits or approvals of any governmental authority necessary
to operate and manage the Hotel in accordance with the Management
Agreement.
(f) Fee Owner acknowledges and agrees that, unless it enters
into a license agreement pursuant to a Tax Event Notice, it has no
right to use the Homewood Suites(R) "System" except as expressly set
forth in the License Agreement nor any right to use the name "Homewood
Suites" or the Homewood Suites(R) "System" as a result of Lessee
entering into the Hotel Agreements.
(g) Fee Owner acknowledges and agrees that any amounts owed to
Promus under the License Agreement and the Management Agreement are
superior to any amounts owed by Lessee to Fee Owner under the
Percentage
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Lease, other than amounts owed in respect of the Subordinated
Management Fee, as defined in the Management Agreement, to the extent
Lessee applies amounts received in respect of Owner's Basic Return, as
defined in the Management Agreement, in respect of amounts owed by
Lessee to Fee Owner under the Percentage Lease.
(h) Fee Owner agrees not to amend or modify the Percentage
Lease in any manner that would (i) reduce the term of the Percentage
Lease, (ii) increase the amount of rent payable by Lessee thereunder
(except as contemplated by the provisions of the Percentage Lease), or
(iii) have a material adverse effect on any of the rights, duties and
privileges of Promus under the Management Agreement. Nothing in this
paragraph (h) shall be deemed or construed to limit or restrict Fee
Owner's rights to terminate or exercise any other remedy under the
Percentage Lease in the event of a default by Lessee thereunder.
(i) Fee Owner acknowledges and agrees that Promus has no duty
or obligation to comply with any of the terms of the Percentage Lease
and that Fee Owner will look solely to Lessee with respect to such
matters.
(j) Fee Owner acknowledges and agrees that (i) no sale,
transfer or conveyance of Fee Owner's fee estate in the Hotel shall
terminate the Management Agreement, (ii) except as provided below,
neither the termination of the Percentage Lease nor the assignment of
Lessee's interest therein shall terminate the Management Agreement, and
(iii) no merger of the leasehold and fee simple estates of the Hotel
shall terminate the Management Agreement; it being the intent of Fee
Owner and Promus that the Management Agreement shall continue in effect
for the term of the Management Agreement so long as the Hotel is
operating as a Homewood Suites(R) hotel pursuant to a license agreement
and Manager is not in default of its obligations under the Management
Agreement (subject, however, to any express rights of termination
contained in the Management Agreement).
(k) Fee Owner acknowledges and agrees that Manager shall have
a right to file a separate claim in any condemnation case in accordance
with Article VIII of the Management Agreement.
(l) Fee Owner agrees that so long as the License Agreement is
in effect the casualty insurance proceeds will be applied in the manner
provided in the License Agreement.
(m) In the event that Fee Owner terminates the Percentage
Lease and as a consequence thereof Promus terminates the License
Agreement and does not enter into a new license agreement with any
successor operator of the Hotel, Promus and Fee Owner, subject to the
payment of all amounts owed under the Management Agreement and all
amounts owed under the Acquisition Loan, shall have the right to
terminate the Management Agreement covering the Hotel. Otherwise, the
successor operator shall assume in writing the remaining term of such
Management Agreement.
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Fee Owner and Lessee further agree with Promus with respect to
the Acquisition Loan that the Percentage Lease shall be subject and subordinate
to the lien of the Acquisition Mortgage Documents and to all of the terms,
conditions and provisions thereof, to all advances made or to be made
thereunder, and to any renewals, extensions, modifications or replacements
thereof, including any increases therein or supplements thereto. The foregoing
provisions shall be self-operative. However, Fee Owner and Lessee agree to
execute and deliver to Promus such other instrument as Promus shall request in
order to effectuate said provisions.
It is acknowledged and agreed that (i) Promus shall be
entitled to rely upon any written notice or request by Fee Owner made pursuant
to the provisions hereof without requirement of investigating the accuracy or
authenticity of such written notice or any facts or allegations contained
therein, and (ii) Fee Owner shall be entitled to rely upon any written notice or
request by Promus made pursuant to the provisions hereof without requirement of
investigating the accuracy or authenticity of such written notice or any facts
or allegations contained therein.
You agree to notify Promus by certified mail at 755 Crossover
Lane, Memphis, Tennessee 38117-4900, Attention: General Counsel (or such other
address as Promus may specify in a written notice to you) of any action
regarding the Hotel to: (a) terminate the Percentage Lease; (b) petition for
appointment of a Receiver or Trustee for Lessee to take any action under Federal
Bankruptcy law or similar state laws; or (c) take possession of the Hotel,
through a Successor Lessee or otherwise, without termination of the Percentage
Lease.
The rights, powers and interests of Promus hereunder may be
transferred and assigned by Promus, without the prior written consent of Fee
Owner, Lessee and, if applicable, any Successor Lessee, to any person to whom
the License Agreement and Management Agreement may be assigned. The rights and
obligations of Fee Owner, Lessee and, if applicable, Successor Lessee hereunder
are not transferable without the written consent of Promus.
Subject to the foregoing limitations, this letter agreement
shall extend to, and shall bind, the respective successors and assigns of
Promus, Fee Owner, Lessee and, if applicable, any Successor Lessee, provided,
however, that in the case of Fee Owner, this letter agreement shall not extend
to any transferee of Fee Owner's fee interest in the Hotel nor to Fee Owner if
Apple Suites, Inc. is not a publicly held REIT.
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Please indicate your agreement with the terms of this letter
agreement by signing and returning four executed copies to Promus. This letter
may be executed by original signature or by signature received by telecopy in
any number of counterparts, each of which shall be original and all of which
together shall constitute and be construed as one and the same instrument.
Very truly yours,
PROMUS HOTELS, INC.
By /s/ Dan L. Hale
-------------------------------------
Name: Dan L. Hale
Title: Executive Vice President & CFO
cc: Franchise Administration
Accepted and Agreed:
APPLE SUITES, INC.
By /s/ Glade M. Knight
-------------------------------
Name: Glade M. Knight
Title: President
Acknowledged and Agreed:
APPLE SUITES MANAGEMENT, INC.
By /s/ Glade M. Knight
-------------------------------
Name: Glade M. Knight
Title: President
EXHIBIT 10.5
(HOTEL FRANCHISE FEES)
PROMISSORY NOTE
$55,800.00 RICHMOND, VIRGINIA
OCTOBER 5, 1999
FOR VALUE RECEIVED, Apple Suites Management, Inc., a Virginia corporation (the
"Maker"), hereby makes an UNCONDITIONAL PROMISE TO PAY TO THE ORDER OF Apple
Suites, Inc., a Virginia corporation (the "Holder"), in lawful money of the
United States of America, the principal sum of Fifty-Five Thousand Eight Hundred
and 00/100 Dollars ($55,800.00), together with interest thereon, in accordance
with the following terms:
1. INTEREST.
Interest shall accrue on the unpaid principal balance at the annual
rate of nine percent (9%) (the "Note Rate"). The computation of interest at the
Note Rate shall be based on a 360-day year and a uniform period of 30 days per
month. If there is an Event of Default (as defined below), the annual rate of
interest shall increase to twelve percent (12%), and shall be compounded monthly
(the "Default Rate"). The computation of interest at the Default Rate shall be
based on the actual number of days elapsed.
2. PAYMENTS.
(a) The debt represented by this Note shall be paid in one hundred
twenty-one (121) consecutive monthly installments. The amount of the first
installment shall be $376.65, consisting entirely of interest. The amount of
each subsequent installment shall be $706.85, consisting of principal and
interest on an amortized basis.
(b) Each installment shall be due and payable on the first day of each
month, beginning with November 1, 1999. The due date for each installment shall
be deemed a "Payment Date." The entire balance of principal and interest shall
be due and payable in full on November 1, 2009.
(c) The Maker is entitled to prepay the principal balance under this
Note, in whole or in part, on one or more occasion(s), without premium or
penalty.
(d) The Holder shall have the right to allocate all payments under this
Note in accordance with the following priority: (1) first, to accrued but unpaid
interest; and (2) second, to unpaid principal.
3. PAYMENT ADDRESS AND METHOD.
The Holder shall have the right, which may be exercised on one or more
occasion(s) in the sole discretion of the Holder, to require the Maker to use
any address for the delivery of payment and any reasonable method of payment,
including but not limited to cashier's check or wire transfer. For present
purposes, the Holder hereby requires the Maker to use a single check for
<PAGE>
each installment payment, and to use the mailing address shown below for the
delivery of all payments:
Apple Suites, Inc.
Attn: Stanley J. Olander, Jr., Secretary
306 East Main Street
Richmond, VA 23219
4. SECURITY AND COLLATERAL.
The Holder and the Maker acknowledge and agree that no security
interest has been granted in any property or collateral in connection with this
Note.
5. PURPOSE.
The Maker has leased certain extended-stay hotel properties, including
the Atlanta-Galleria/Cumberland hotel at 3200 Cobb Parkway in Atlanta, Georgia
(the "Hotel"). The Maker has received funds from the Holder for the satisfaction
of various franchise fees the Hotel. This Note serves as evidence of the
indebtedness of the Maker to the Holder, and provides for the repayment of such
indebtedness to the Holder.
6. EVENTS OF DEFAULT.
(a) Each of the following events shall constitute an "Event of Default"
under this Note:
(1) the failure by the Maker to pay to the Holder, within a
grace period of five (5) calendar days after any Payment Date, the full amount
due on such Payment Date;
(2) the acceleration of any payment obligation of the Maker
under any other promissory note, debt instrument or other financial instrument
or agreement that now exists or may exist in the future;
(3) the commencement of any proceeding to appoint any
receiver, trustee, custodian, liquidator, or similar official for the Maker, or
the final appointment of any of the foregoing;
(4) the attachment, levy, seizure or garnishment, whether in
whole or in part, of any wages, funds, financial accounts or other property of
the Maker;
(5) the entry of any judgment against the Maker that exceeds,
when combined with other unpaid judgments of the Maker, ten percent (10%) of the
then unpaid principal balance under this Note;
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(6) the general inability of the Maker to pay its debts as
they become due;
(7) the filing or commencement, by the creditors of the
Maker, of any Insolvency Action (as defined below) that is not dismissed within
thirty (30) calendar days after the original date of filing or commencement;
(8) the Maker's approval or voluntary filing of any
Insolvency Action, or its approval or consummation of any plan to make a general
assignment for the benefit of creditors;
(9) the approval of any plan, or the execution of any
contract, that causes or is intended to cause any of the following with respect
to the Maker: (A) its dissolution; (B) the liquidation of its assets; (C) the
termination of its corporate existence, whether by merger or otherwise; or (D)
the sale or transfer of all, or substantially all, of its assets;
(10) any event that causes or will cause the Maker to cease
its business or operations for a period of more than thirty (30) consecutive
calendar days; or
(11) any event that terminates or will terminate the business,
operations or legal existence of the Maker.
(b) For purposes of this Note, the term "Insolvency Action" shall mean
any case or proceeding, or petition relating thereto, that arises under any
state or Federal laws relating to bankruptcy or insolvency, whether now existing
or subsequently enacted, and that seeks reorganization, liquidation or other
relief with respect to the debts, assets or businesses of the Maker.
7. REMEDIES.
(a) If an Event of Default occurs, all unpaid principal and accrued
interest under this Note shall become immediately due and payable in full,
without any action whatsoever by the Holder.
(b) The Maker shall pay all costs, including but not limited to
reasonable legal fees and expenses, whether arising in connection with an
Insolvency Action or otherwise, that may be incurred by the Holder to enforce
this Note or to collect the amounts due under this Note ("Enforcement Costs").
The Holder, in its sole discretion, shall have the right to treat Enforcement
Costs as additional interest under this Note.
8. TRANSFER AND ASSIGNMENT.
(a) The Holder shall have the right to transfer this Note and to assign
any rights or remedies under this Note. Such right may be exercised in whole or
in part, on one or more occasion(s), in the sole discretion of the Holder. The
obligations of the Maker under this Note shall not be altered or affected in any
way by any such transfer or assignment by the Holder.
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<PAGE>
(b) The Maker shall be absolutely prohibited from assigning any of
their obligations under this Note without the prior written consent of the
Holder. The Holder shall be entitled to withhold such consent in its sole
discretion for any reason or no reason. Any attempted assignment in violation of
such prohibition shall be ineffective and void.
(c) The Holder and the Maker acknowledge and agree that this Note (1)
is evidence of commercial debt financing; and (2) is not an investment contract,
is not designed to raise capital, is not part of any plan of distribution and is
not related to any offering of securities.
9. WAIVERS.
(a) The Holder shall not be deemed to have waived any of its rights or
remedies under this Note unless the Holder delivers a written notice to each of
the Maker that states the nature and scope of such waiver. Without limiting the
foregoing, no waiver of the Holder's rights or remedies shall be deemed to exist
solely because the Holder, on one or more occasion(s), may have: (1) waived
certain rights or remedies; (2) elected certain rights or remedies in lieu of
others; (3) delayed in exercising any rights or remedies; (4) extended any
Payment Dates under this Note; or (5) refrained from requiring the Maker to act
in strict compliance with this Note.
(b) The Maker, to the maximum extent permitted by law, hereby grants a
complete, irrevocable and unconditional waiver of each of the following: (1) the
right to require presentment, demand, dishonor, protest or any notices of any
kind or nature from the Holder in connection with this Note; (2) the right to
assert any statute of limitations as a defense to the enforcement of this Note;
(3) any claim that seeks to restrain, enjoin, prohibit, delay or interfere with
any transfer of this Note by the Holder, or any assignment of the Holder's
rights or remedies under this Note; (4) any claim that a transfer or assignment
by the Holder with respect to this Note has altered or affected the obligations
of the Maker in any way; and (5) any claim that the Holder has waived its rights
or remedies under this Note in a manner other than the manner described in
subsection (a) immediately above.
10. GENERAL.
(a) Time is of the essence with respect to this Note and each Payment
Date. Except as expressly set forth in this Note, or in a written waiver that
may be granted by the Holder, there are no grace periods and no extensions of
time for payment with respect to this Note, and no grace periods or extensions
shall be implied.
(b) This Note shall be interpreted and enforced in accordance with the
laws of the Commonwealth of Virginia, without regard to any choice of law
provisions or principles thereof to the contrary.
(c) All provisions in this Note are severable and each valid and
enforceable provision shall remain in full force and effect, regardless of any
official or formal determination that declares certain provisions of this Note
to be invalid or unenforceable.
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<PAGE>
(d) Captions and headings are used in this Note for convenience only
and shall not affect the interpretation of this Note. Terms such as "hereof,"
"hereby," "hereto," "herein" and "hereunder" shall be deemed to refer to this
Note as a whole, rather than to any particular provision of this Note.
(e) All terms and conditions of this Note shall be binding upon, and
enforceable against, the Holder and the Maker, and all of their respective
assignees and successors in title or interest.
APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation
By: /s/ Glade M. Knight
-----------------------------------------
Glade M. Knight, President
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EXHIBIT 10.6
(HOTEL SUPPLIES)
PROMISSORY NOTE
$12,400.00 RICHMOND, VIRGINIA
OCTOBER 5, 1999
FOR VALUE RECEIVED, Apple Suites Management, Inc., a Virginia corporation (the
"Maker"), hereby makes an UNCONDITIONAL PROMISE TO PAY TO THE ORDER OF Apple
Suites, Inc., a Virginia corporation (the "Holder"), in lawful money of the
United States of America, the principal sum of Twelve Thousand Four Hundred and
00/100 Dollars ($12,400.00) together with interest thereon, in accordance with
the following terms:
1. INTEREST.
Interest shall accrue on the unpaid principal balance at the annual
rate of nine percent (9%) (the "Note Rate"). The computation of interest at the
Note Rate shall be based on a 360-day year and a uniform period of 30 days per
month. If there is an Event of Default (as defined below), the annual rate of
interest shall increase to twelve percent (12%), and shall be compounded monthly
(the "Default Rate"). The computation of interest at the Default Rate shall be
based on the actual number of days elapsed.
2. PAYMENTS.
(a) The debt represented by this Note shall be paid in sixty-one (61)
consecutive monthly installments. The amount of the first installment shall be
$83.70, consisting entirely of interest. The amount of each subsequent
installment shall be $257.40, consisting of principal and interest on an
amortized basis.
(b) Each installment shall be due and payable on the first day of each
month, beginning with November 1, 1999. The due date for each installment shall
be deemed a "Payment Date." The entire balance of principal and interest shall
be due and payable in full on November 1, 2004.
(c) The Maker is entitled to prepay the principal balance under this
Note, in whole or in part, on one or more occasion(s), without premium or
penalty.
(d) The Holder shall have the right to allocate all payments under this
Note in accordance with the following priority: (1) first, to accrued but unpaid
interest; and (2) second, to unpaid principal.
3. PAYMENT ADDRESS AND METHOD.
The Holder shall have the right, which may be exercised on one or more
occasion(s) in the sole discretion of the Holder, to require the Maker to use
any address for the delivery of payment and any reasonable method of payment,
including but not limited to cashier's check or wire transfer. For present
purposes, the Holder hereby requires the Maker to use a single check for
<PAGE>
each installment payment, and to use the mailing address shown below for the
delivery of all payments:
Apple Suites, Inc.
Attn: Stanley J. Olander, Jr., Secretary
306 East Main Street
Richmond, VA 23219
4. SECURITY AND COLLATERAL.
The Holder and the Maker acknowledge and agree that no security
interest has been granted in any property or collateral in connection with this
Note.
5. PURPOSE.
The Maker has leased certain extended-stay hotel properties, including
the Atlanta-Galleria/Cumberland hotel at 3200 Cobb Parkway in Atlanta, Georgia
(the "Hotel"). The Maker has received funds from the Holder for the purchase of
various supplies for such hotel properties, including without limitation,
sheets, towels and similar supplies to be used in connection with the operation
of such hotel properties. This Note serves as evidence of the indebtedness of
the Maker to the Holder, and provides for the repayment of such indebtedness to
the Holder.
6. EVENTS OF DEFAULT.
(a) Each of the following events shall constitute an "Event of Default"
under this Note:
(1) the failure by the Maker to pay to the Holder, within a
grace period of five (5) calendar days after any Payment Date, the full amount
due on such Payment Date;
(2) the acceleration of any payment obligation of the Maker
under any other promissory note, debt instrument or other financial instrument
or agreement that now exists or may exist in the future;
(3) the commencement of any proceeding to appoint any
receiver, trustee, custodian, liquidator, or similar official for the Maker, or
the final appointment of any of the foregoing;
(4) the attachment, levy, seizure or garnishment, whether in
whole or in part, of any wages, funds, financial accounts or other property of
the Maker;
(5) the entry of any judgment against the Maker that exceeds,
when combined with other unpaid judgments of the Maker, ten percent (10%) of the
then unpaid principal balance under this Note;
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<PAGE>
(6) the general inability of the Maker to pay its debts as
they become due;
(7) the filing or commencement, by the creditors of the
Maker, of any Insolvency Action (as defined below) that is not dismissed within
thirty (30) calendar days after the original date of filing or commencement;
(8) the Maker's approval or voluntary filing of any
Insolvency Action, or its approval or consummation of any plan to make a general
assignment for the benefit of creditors;
(9) the approval of any plan, or the execution of any
contract, that causes or is intended to cause any of the following with respect
to the Maker: (A) its dissolution; (B) the liquidation of its assets; (C) the
termination of its corporate existence, whether by merger or otherwise; or (D)
the sale or transfer of all, or substantially all, of its assets;
(10) any event that causes or will cause the Maker to cease
its business or operations for a period of more than thirty (30) consecutive
calendar days; or
(11) any event that terminates or will terminate the business,
operations or legal existence of the Maker.
(b) For purposes of this Note, the term "Insolvency Action" shall mean
any case or proceeding, or petition relating thereto, that arises under any
state or Federal laws relating to bankruptcy or insolvency, whether now existing
or subsequently enacted, and that seeks reorganization, liquidation or other
relief with respect to the debts, assets or businesses of the Maker.
7. REMEDIES.
(a) If an Event of Default occurs, all unpaid principal and accrued
interest under this Note shall become immediately due and payable in full,
without any action whatsoever by the Holder.
(b) The Maker shall pay all costs, including but not limited to
reasonable legal fees and expenses, whether arising in connection with an
Insolvency Action or otherwise, that may be incurred by the Holder to enforce
this Note or to collect the amounts due under this Note ("Enforcement Costs").
The Holder, in its sole discretion, shall have the right to treat Enforcement
Costs as additional interest under this Note.
8. TRANSFER AND ASSIGNMENT.
(a) The Holder shall have the right to transfer this Note and to assign
any rights or remedies under this Note. Such right may be exercised in whole or
in part, on one or more occasion(s), in the sole discretion of the Holder. The
obligations of the Maker under this Note shall not be altered or affected in any
way by any such transfer or assignment by the Holder.
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<PAGE>
(b) The Maker shall be absolutely prohibited from assigning any of
their obligations under this Note without the prior written consent of the
Holder. The Holder shall be entitled to withhold such consent in its sole
discretion for any reason or no reason. Any attempted assignment in violation of
such prohibition shall be ineffective and void.
(c) The Holder and the Maker acknowledge and agree that this Note (1)
is evidence of commercial debt financing; and (2) is not an investment contract,
is not designed to raise capital, is not part of any plan of distribution and is
not related to any offering of securities.
9. WAIVERS.
(a) The Holder shall not be deemed to have waived any of its rights or
remedies under this Note unless the Holder delivers a written notice to each of
the Maker that states the nature and scope of such waiver. Without limiting the
foregoing, no waiver of the Holder's rights or remedies shall be deemed to exist
solely because the Holder, on one or more occasion(s), may have: (1) waived
certain rights or remedies; (2) elected certain rights or remedies in lieu of
others; (3) delayed in exercising any rights or remedies; (4) extended any
Payment Dates under this Note; or (5) refrained from requiring the Maker to act
in strict compliance with this Note.
(b) The Maker, to the maximum extent permitted by law, hereby grants a
complete, irrevocable and unconditional waiver of each of the following: (1) the
right to require presentment, demand, dishonor, protest or any notices of any
kind or nature from the Holder in connection with this Note; (2) the right to
assert any statute of limitations as a defense to the enforcement of this Note;
(3) any claim that seeks to restrain, enjoin, prohibit, delay or interfere with
any transfer of this Note by the Holder, or any assignment of the Holder's
rights or remedies under this Note; (4) any claim that a transfer or assignment
by the Holder with respect to this Note has altered or affected the obligations
of the Maker in any way; and (5) any claim that the Holder has waived its rights
or remedies under this Note in a manner other than the manner described in
subsection (a) immediately above.
10. GENERAL.
(a) Time is of the essence with respect to this Note and each Payment
Date. Except as expressly set forth in this Note, or in a written waiver that
may be granted by the Holder, there are no grace periods and no extensions of
time for payment with respect to this Note, and no grace periods or extensions
shall be implied.
(b) This Note shall be interpreted and enforced in accordance with the
laws of the Commonwealth of Virginia, without regard to any choice of law
provisions or principles thereof to the contrary.
(c) All provisions in this Note are severable and each valid and
enforceable provision shall remain in full force and effect, regardless of any
official or formal determination that declares certain provisions of this Note
to be invalid or unenforceable.
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<PAGE>
(d) Captions and headings are used in this Note for convenience only
and shall not affect the interpretation of this Note. Terms such as "hereof,"
"hereby," "hereto," "herein" and "hereunder" shall be deemed to refer to this
Note as a whole, rather than to any particular provision of this Note.
(e) All terms and conditions of this Note shall be binding upon, and
enforceable against, the Holder and the Maker, and all of their respective
assignees and successors in title or interest.
APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation
By: /s/ Glade M. Knight
--------------------------------------------------
Glade M. Knight, President
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