UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 33-78866
______________________
MOTELS OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0166914
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Lee Street, Suite 1000, Des Plaines, Illinois 60016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 803-1200
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[X] Yes [ ] No
Number of shares of Common Stock, $.01 par value outstanding as of March
13, 1997: 800,000
INDEX TO FORM 10-K
Page
------
Part I
Item 1. Business ......................................................... 3
Item 2. Properties ....................................................... 7
Item 3. Legal Proceedings ................................................ 13
Item 4. Submission of Matters to a Vote of Security Holders .............. 13
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters ....................................................... 13
Item 6. Selected Financial Data .......................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ..................................... 16
Item 8. Financial Statements and Supplementary Data ...................... 26
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ...................................... 26
Part III
Item 10. Directors and Executive Officers of the Registrant ............... 27
Item 11. Executive Compensation ........................................... 29
Item 12. Security Ownership of Certain Beneficial Owners and Management ... 31
Item 13. Certain Relationships and Related Transactions ................... 31
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . 32
Signatures
PART I
ITEM 1. BUSINESS
General
Motels of America, Inc. ("MOA" or the "Company") is a leading owner and
operator of national brand affiliated limited service lodging facilities in
the United States. As of December 31, 1996, the Company, directly and through
subsidiaries, operated 135 lodging facilities located in 35 states with a
total of 11,317 rooms. In January 1997, MOA sold a lodging facility and in
February 1997, MOA completed construction and opened an additional lodging
facility. As a result of these transactions, as of March 13, 1997, the
Company operates 135 lodging facilities located in 35 states with a total of
11,233 rooms. The Company's largest concentrations of lodging facilities are
located in the States of Georgia and Illinois with 13 lodging facilities each.
The Company operates 131 of its lodging facilities pursuant to franchise or
license agreements with the following national brands: Best Western, Comfort
Inn, Day's Inn, Holiday Inn Express, Howard Johnson, Microtel, Ramada, Ltd.,
Shoney's Inn, Super 8, Travelodge and Villager Lodge. By affiliating its
lodging facilities with national brands, MOA benefits by receiving national
brand name recognition, national advertising exposure, central reservation
services, exposure in published travel directories, group tour generated
business and other professional services which could not be duplicated by the
Company on a cost-effective basis for its lodging facilities.
The Company was incorporated in 1986 under the laws of the State of
Delaware to continue the business commenced by its predecessors in 1982. The
Company's principal executive offices are located at 701 Lee Street, Suite
1000, Des Plaines, Illinois 60016, telephone (847) 803-1200.
Repositioning
In October 1990, a controlling interest in the Company was acquired by a
corporation affiliated with Paul F. Wallace, the Chairman and Chief Executive
Officer and a director of the Company and previously a director and
controlling stockholder of EconoLodge. At the time of Mr. Wallace's 1990
investment, the Company was experiencing financial pressures resulting from
the 1989 acquisition of a regional motel chain and from economic
conditions that were adversely affecting the entire lodging industry. The
Company filed a bankruptcy petition on December 12, 1990 and subsequently
developed a plan of reorganization which permitted the Company to emerge from
bankruptcy on September 10, 1992.
Recent History
Since January 1, 1993, the Company has made a number of significant
acquisitions, including the purchase in February 1993 of the Pacific Shore
Hotel located in Santa Monica, California for a purchase price of
approximately $2.9 million in cash and the assumption of $9.5 million of
mortgage debt, the purchase in April 1994 of nine lodging facilities from
Midwest Lodging, Inc. for a cash purchase price of $28.5 million, the purchase
in April 1994 of fifteen lodging facilities through acquisition of all of the
outstanding common stock of Tri-State Inns, Inc. for a purchase price of $30.5
million in cash and the assumption of approximately $15.0 million in mortgage
debt, and the purchase during the period from May through December 1994 of
seventeen additional lodging facilities from unaffiliated parties for
approximately $34.1 million in cash and the assumption of $4.5 million in
mortgage debt. In January 1996, the Company acquired nineteen lodging
facilities from Forte USA, Inc., a subsidiary of Forte Hotels, Inc., for
approximately $35.5 million in cash which was financed by borrowings under the
NACC credit line and from HFS Incorporated. During 1996, the Company, in a
series of transactions, sold eleven motel properties for $15.8 million in net
cash proceeds and $6.3 million in mortgage and other notes receivable.
In April 1994, the Company issued in a public offering $80 million
principal amount of 12% Senior Subordinated Notes due April 15, 2004, Series B
(the "Notes"), the proceeds of which were used principally to finance
acquisitions and to repay existing indebtedness. In October 1994, the Company
entered into a two-year $100 million secured line of credit facility (the
"NACC credit line") with Nomura Asset Capital Corporation ("NACC").
Borrowings under the NACC credit line were secured by lodging facilities and
used principally to finance acquisitions of lodging facilities and related
expenses (including refurbishment costs).
In September 1995, the Company and NACC entered into a financing
transaction (the "Secured Financing") involving the formation of Motels of
America, L.L.C., a limited liability company wholly owned by MOA
("MOA LLC"), the transfer of 93 lodging facilities owned by MOA and its
subsidiaries to MOA LLC, and the borrowing by MOA LLC from NACC, on a secured
basis, of $158.8 million. Proceeds of the Secured Financing were used to
repay existing indebtedness of approximately $142.2 million (including
outstanding indebtedness under the NACC credit line) and for general corporate
purposes. During 1996, ownership of MOA LLC was transferred from MOA to one of
its wholly owned subsidiaries.
In November 1996, the Company completed two separate financing
transactions with CS First Boston Corporation ("CSFB") pursuant to which the
Company borrowed approximately $37.2 million. Approximately $29.8 million of
the proceeds were utilized to repay the entire outstanding borrowings under the
NACC credit line; $1.6 million of the proceeds were utilized toward a partial
paydown of the Company's borrowings from HFS Incorporated; and the remaining
net proceeds were retained for general corporate purposes. The CSFB borrowings
are evidenced by notes which mature on November 1, 1998 and are secured by first
mortgages on nineteen of the Company's motel properties and a pledge of the
stock of one of the Company's subsidiaries.
Industry and Competition
The United States lodging industry is generally comprised of two sectors:
full-service facilities and limited-service facilities. Full-service lodging
facilities generally have more extensive common areas (including restaurants,
lounges and extensive meeting room facilities), offer more services such as
bell service and room service, and tend to be larger in terms of number of
rooms than limited-service facilities. MOA's properties are principally
limited-service type lodging facilities. The United States lodging industry
is also categorized into five general price segments (based on relative
pricing in local markets): luxury, upscale, mid-price, economy, and budget.
MOA's properties predominately fall into the economy segment with a small
percentage represented in both the mid-price and budget segments. Industry
estimates indicate that there are over 23,000 lodging facilities within the
mid-price, economy and budget segments. The United States lodging industry is
also generally considered to be relatively fragmented in terms of ownership.
This combination of a large number of competitive lodging facilities and
limited concentration of ownership makes the segment in which MOA's lodging
facilities compete very competitive.
Generally, each of the Company's lodging facilities competes within its
local market with several national and regional brand affiliated lodging
facilities along with many independent competitive lodging facilities. Some
of the more recognizable brands with which the Company's lodging facilities
compete either directly or indirectly include: Budgetel Inns, Comfort Inns,
Day's Inns, Fairfield Inns, Hampton Inns, Holiday Inn Express, LaQuinta Inns,
Motel 6, Ramada, Ltd., Red Roof Inns, Super 8 Motels and Travelodge.
Distinguishing characteristics among competitive lodging facilities include:
convenience of location, degree of curb appeal, reasonableness of room rates,
and in particular with repeat customers the quality and cleanliness of room
accommodations and the level of service.
The Company competes with other lodging facilities for a wide spectrum of
business and leisure travelers who desire consistency in the quality of their
accommodations and demand reasonable prices. They tend to be value conscious
consumers consisting of: construction workers, sales people, technicians,
senior citizens, government and military employees, and vacation travelers.
Due to the nature and location of the Company's lodging facilities, the
Company does not experience any significant degree of advance bookings typical
with many resort facilities nor does any one customer represent a significant
portion of the Company's revenues.
Demand for the Company's lodging facilities is affected by normally
recurring seasonal patterns. Demand for the Company's lodging facilities is
generally highest during the months of June, July and August and lowest during
the months of December, January and February. As is the case for the lodging
industry in general, demand for the Company's lodging facilities may be
affected by weather, national and regional economic conditions, government
regulations, changes in travel patterns, construction of new lodging
facilities, changes in the degree of competition from existing lodging
facilities and other factors.
Ownership Structure
At December 31, 1996 and March 13, 1997, the Company had 100% ownership
interest, either directly or through subsidiaries, in 133 of the 135 lodging
facilities it operated. The Company was a general partner with ownership
interests of 30% and 50% in two individual limited partnerships each of which
owned one lodging facility as its principal asset. These partially owned
lodging facilities have been consolidated for financial reporting purposes due
to the management and control which the Company possesses.
Franchise and License Agreements
The Company operates 131 of its lodging facilities pursuant to franchise
or license agreements. Eighty-eight of these agreements are with Super 8
Motels, Inc. The franchise fees (including royalties, and contributions to
advertising and media funds) range from 6% to 7% of room revenues. Under the
Super 8 franchise agreements, the franchisor is obligated to: provide certain
standardized training programs; publish a travel directory with information
pertaining to all Super 8 motels; maintain an advertising and reservation fund
to be administered by the franchisor for advertising and promotion; inspect
the motels to assure satisfaction of Super 8 specifications and maintain
availability of corporate officers and employees for consultation concerning
motel operations. The obligations of the franchisee include, among other
things, maintaining the motel in a manner that satisfies Super 8 quality
assurance standards and compliance with Super 8 rules of operations.
The Super 8 franchise agreements have an initial 20-year term which, for
the Company, results in ending dates ranging from 1998 through 2014. The
agreements continue thereafter on a year-by-year basis unless terminated by
either party upon nine months notice. The agreements provide a negotiated
area of geographic protection within which the franchisor is prohibited from
franchising another Super 8 motel.
The Company has forty-three franchise or license agreements with other
franchisors or licensees. These agreements, which have various terms with
ending dates ranging from 1997 to 2017, generally provide similar benefits and
obligations as the Super 8 franchise agreements. Franchise fees (including
royalty and advertising fund contributions) generally range from 5% of room
revenues for the franchise agreements pertaining to the fifteen Shoney's Inns
franchised by ShoLodge, Inc. to approximately 9% of room revenues based on
various billing structures of the other franchisors. The ShoLodge, Inc.
franchise agreements provide for an area of geographic protection while the
other franchise agreements generally rely on an impact policy to determine if
another lodging facility with the same brand affiliation could be located
within a particular market.
The Company has four standard license agreements with Best Western
International. These agreements provide for an annual renewal.
Operations
The Company believes the ownership and management of its properties gives
it certain competitive advantages over third party managed properties with
which it competes by being able to control all aspects of a lodging facility's
operations and expenditures to maintain such facilities. The Company also
believes it has certain competitive advantages over chain owned and operated
properties because as long as the Company meets a franchisor's minimum
requirements it can tailor the services and product offering of individual
facilities without concerning itself with national consistency.
Management of the Company's lodging facilities is coordinated from the
Company's corporate offices in Des Plaines, Illinois. Accounting, human
resources, purchasing, renovation and construction, sales and marketing, and
training is centralized and controlled from the corporate office. The Company
utilizes its Regional Managers to facilitate oversight and direction of the
day-to-day operations of its lodging facilities. Regional Managers are
located in the field and interface on a daily basis generally with ten to
forty property managers within their region.
The Company has developed and conducts its own training programs which
satisfies most franchisor training requirements. The Company believes its
unique training programs provide a competitive advantage in the management of
motels over individual owner/operators which must rely on franchisor and
industry supplied training material.
Typically, the General Manager is the only salaried position at a
property; although, for the larger properties (generally in excess of 100
rooms), an assistant manager and/or salesperson may be present on a salaried
basis. Other employees generally are employed on an hourly basis with
staffing continually adjusted based on occupancy levels. General Managers
generally do not reside on site because the Company believes its managers are
more effective if they spend time away from the property and become involved
in the communities where the properties are located. At December 31, 1996,
the Company employed approximately 2,900 employees including approximately 75
full and part-time employees at the corporate office. The employees are not
represented by any labor unions and management believes its ongoing labor
relations with its employees is good.
The Company utilizes advertising and marketing programs sponsored by the
various franchisors on both a national and regional basis. In addition, the
Company engages in a wide variety of sales and marketing activities at the
local market level including extensive individual sales calls, marketing
blitzes and involvement in local community activities such as Rotary Clubs,
Chambers of Commerce and motel associations. Various properties also promote
special packages in conjunction with local attractions or events. Billboard
advertising represents the single largest sales and marketing expenditure
other than contributions to franchisor sponsored advertising and media funds.
Regulatory Matters
The Company is subject to environmental regulations under various
federal, state and local laws. Certain of these laws may require a current or
previous owner or operator of real estate to clean up designated hazardous or
toxic substances or petroleum product releases affecting the property. In
addition, the owner or operator may be held liable to a governmental entity or
to third parties for damages or costs incurred by such parties in connection
with the contamination.
Certain of the Company's lodging facilities are located on, adjacent to
or in the vicinity of, properties, including gasoline stations, that contain
or have contained storage tanks or that have engaged or may in the future
engage in activities that may release petroleum products or other hazardous
substances into the soil or groundwater.
While there can be no assurance that in the future the foregoing
environmental conditions may not have a material effect on the Company,
management is not aware of any such materially adverse impacts to the Company
due to the existence of contaminants under or near its properties. Except as
described above, management is not aware of any environmental condition with
respect to its lodging facilities that could have a material adverse impact on
the Company's financial condition or results of operations.
The Company's lodging facilities are subject to various other laws,
ordinances and regulations. The Company believes that each facility has the
necessary permits and approvals required to enable the Company to operate its
lodging facilities.
The Company's lodging facilities must comply with Title III of the
Americans With Disabilities Act (the "ADA"). Under the provisions of the ADA,
the Company, as owner of the lodging facilities, is obligated to reasonably
accommodate the patrons of its facilities who have physical, mental or other
disabilities. In addition, the Company is obligated to ensure that
alterations to its lodging facilities conform to the specific requirements of
the ADA implementing regulations. The Company believes that it is in
substantial compliance with all current applicable regulations with respect to
accommodations for the disabled.
Item 2. PROPERTIES
The Company's lodging facilities are typically situated along interstate
highways and in secondary markets, offering a convenient lodging alternative
for many prospective customers. The facilities have an average size of 83
rooms, though individual properties range from 33 to 189 rooms, depending on
location and business environment. MOA's properties generally do not offer
large meeting or banquet facilities, in-house restaurants, or room service;
and most do not offer recreational facilities such as pools or fitness
centers. The motels do, however, typically provide free coffee, free local
calls, remote control television, fax service, and free parking. In addition,
many nationally and regionally recognized restaurant chains are generally
within close proximity of the motels.
The Company generally owns its motels in fee simple; however, the
underlying real property of five of the lodging facilities is subject to a
ground lease. Ownership of the buildings and improvements situated on such
properties reverts to the landlord upon the expiration of the lease term.
Most of the Company's properties were designed and built as limited
service economy lodging facilities. As such, they were designed to achieve
functional efficiencies and operate at lower fixed costs than most full
service or upscale lodging facilities. The properties generally employ
individual through-the-wall heating and cooling systems for each room. This
provides cost savings during periods of low occupancy and eliminates the need
to have skilled maintenance personnel on the payroll. Further, the Company's
motels have limited public areas to maintain.
The Company believes that the physical condition and general appearance
of a property have a significant impact on profitability. MOA has established
a strict maintenance and refurbishment program enacted to ensure high quality
and well maintained properties. This program seeks to maximize the
attractiveness of the Company's rooms with prudent levels of capital
investment.
Over the past three years, MOA has expended an average of approximately
7.5% of its annual motel room revenues on renovation and refurbishment of its
properties, including expenditures relating to recently acquired properties.
The Company believes that its facilities are currently well maintained and
conform to the Company's standards for cleanliness and attractiveness and
intends to maintain its facilities in such condition.
Information pertaining to the Company's 135 lodging facilities operated
as of March 31, 1997 is set forth in the following table.
Number Year
of Year Acquired by
Location Franchise Rooms Built the Company
- ---------- ---------- ------ ----- -----------
ALABAMA
Pelham.................... Travelodge 64 1989 1996
ARKANSAS
West Memphis (1).......... Super 8 62 1989 1989
CALIFORNIA
Indio..................... Holiday Inn Express 126 1986 1995
Santa Clara............... Days Inn 168 1984 1994
Santa Monica.............. Best Western 122 1991 1992
Santa Monica (1).......... Pacific Shore 168 1966 1993
West Los Angeles.......... Best Western 76 1993 1994
COLORADO
Longmont.................. Super 8 64 1989 1994
DELAWARE
Newark.................... Howard Johnson 141 1969 1996
FLORIDA
Fernandina Beach.......... Shoney's 134 1985 1994
Ft. Lauderdale............ Travelodge 118 1987 1996
Ft. Walton Beach.......... Shoney's 102 1987 1994
Jacksonville.............. Travelodge 119 1986 1996
Melbourne................. Shoney's 119 1990 1994
Orlando Centroplex (1).... Travelodge 75 1957 1996
Panama City............... Super 8 63 1986 1987
Pensacola................. Super 8 62 1985 1987
GEORGIA
Brunswick................. Super 8 62 1986 1987
Cartersville.............. Super 8 62 1986 1987
Columbus.................. Super 8 77 1985 1987
Douglas................... Shoney's 100 1986 1994
Dublin.................... Shoney's 100 1984 1994
Fitzgerald................ Shoney's 108 1985 1994
Greensboro................ Microtel 48 1997 1997
Hinesville................ Shoney's 163 1976 1994
Macon..................... Shoney's 120 1987 1994
Moultrie.................. Shoney's 100 1979 1994
Rome...................... Super 8 62 1986 1987
Vidalia................... Shoney's 128 1984 1994
Warner Robins............. Super 8 62 1986 1987
IDAHO
Boise..................... Super 8 110 1978 1994
Coeur D'Alene (1)......... Super 8 95 1983 1983
Lewiston.................. Super 8 62 1985 1985
Sandpoint................. Super 8 61 1984 1984
ILLINOIS
Bloomington............... Super 8 62 1985 1987
Champaign................. Super 8 61 1984 1987
Crystal Lake.............. Super 8 59 1983 1987
Decatur................... Super 8 62 1983 1987
East Moline............... Super 8 63 1988 1988
<PAGE>
Number Year
of Year Acquired by
Location Franchise Rooms Built the Company
- ---------- ---------- ------ ----- ---------
Litchfield................ Super 8 61 1987 1994
Naperville................ Travelodge 100 1983 1996
Okawville................. Super 8 40 1985 1988
Peru...................... Super 8 62 1986 1987
South Springfield......... Super 8 122 1987 1994
Springfield............... Super 8 65 1985 1994
Tuscola................... Super 8 66 1988 1994
Waukegan.................. Super 8 62 1986 1987
INDIANA
Columbus.................. Super 8 62 1984 1987
Elkhart................... Shoney's 61 1990 1994
Elkhart................... Super 8 62 1986 1989
Indianapolis.............. Days Inn 163 1985 1994
Muncie.................... Days Inn 62 1990 1994
Muncie.................... Super 8 63 1986 1989
Terre Haute............... Super 8 118 1985 1994
IOWA
Davenport................. Super 8 61 1984 1987
Des Moines................ Super 8 152 1985 1994
KANSAS
Leavenworth............... Super 8 60 1984 1989
Salina.................... Super 8 61 1984 1989
Topeka.................... Super 8 62 1984 1987
KENTUCKY
Danville.................. Super 8 49 1987 1987
Lexington................. Super 8 62 1987 1987
Louisville................ Super 8 100 1988 1988
Louisville................ Travelodge 108 1983 1996
LOUISIANA
Shreveport................ Super 8 143 1986 1994
MAINE
Ellsworth................. Comfort Inn 63 1993 1993
MICHIGAN
Battle Creek.............. Super 8 62 1985 1987
Detroit................... Travelodge 122 1986 1996
Grand Rapids.............. Super 8 62 1986 1987
Kalamazoo................. Super 8 62 1985 1987
Muskegon.................. Days Inn 106 1968 1993
Muskegon.................. Super 8 62 1986 1987
Saginaw................... Super 8 62 1985 1987
MINNESOTA
Hibbing................... Super 8 49 1993 1994
Red Wing.................. Super 8 60 1987 1996
Savage.................... Comfort Inn 75 1982 1994
MISSISSIPPI
Vicksburg................. Super 8 62 1988 1988
<PAGE>
Number Year
of Year Acquired by
Location Franchise Rooms Built the Company
- ---------- ---------- ------ ----- ---------
MISSOURI
Independence.............. Super 8 81 1983 1987
Joplin.................... Super 8 50 1985 1987
Liberty................... Super 8 60 1980 1987
NW Kansas City............ Super 8 50 1983 1987
St. Joseph................ Super 8 55 1985 1987
St. Louis................. Super 8 99 1984 1987
Springfield............... Super 8 50 1985 1987
MONTANA
Billings.................. Ramada Ltd. 116 1978 1994
Billings.................. Super 8 115 1979 1994
Dillon.................... Super 8 47 1985 1989
Great Falls............... Super 8 117 1978 1994
Helena.................... Super 8 102 1979 1988
Kalispell................. Super 8 74 1984 1988
NEBRASKA
Fremont................... Super 8 43 1986 1989
NEVADA
Carson City............... Super 8 63 1985 1985
Wendover.................. Super 8 74 1988 1988
NEW MEXICO
Las Cruces................ Super 8 61 1981 1987
Raton (1)................. Super 8 48 1983 1987
NORTH CAROLINA
Greensboro................ Travelodge 108 1985 1996
Weldon.................... Orchard Inn 50 1973 1993
NORTH DAKOTA
Bismarck.................. Super 8 61 1976 1987
Grand Forks............... Super 8 33 1983 1987
Minot..................... Super 8 60 1977 1987
OHIO
Akron..................... Super 8 59 1986 1987
Cambridge................. Travelodge 48 1968 1996
Canton.................... Days Inn 61 1985 1987
Cleveland/Beachwood....... Travelodge 127 1980 1996
Cleveland/Willoughby...... Travelodge 110 1984 1996
Columbus.................. Travelodge 108 1983 1996
St. Clairsville........... Super 8 62 1986 1987
PENNSYLVANIA
Lancaster................. Super 8 101 1990 1990
York...................... Super 8 94 1990 1990
SOUTH CAROLINA
Anderson.................. Super 8 62 1986 1987
Camden.................... Shoney's 84 1989 1994
Charleston................ Orchard Inn 89 1973 1993
Columbia.................. Travelodge 106 1985 1996
Greenwood................. Villager Lodge 62 1986 1987
Hilton Head............... Shoney's 136 1989 1994
<PAGE>
Number Year
of Year Acquired by
Location Franchise Rooms Built the Company
- ---------- ---------- ------ ----- ---------
SOUTH DAKOTA
Sioux Falls............... Super 8 95 1976 1987
TENNESSEE
Chattanooga............... Best Western 124 1972 1995
Chattanooga............... Super 8 74 1986 1987
East Memphis.............. Super 8 70 1990 1990
Johnson City.............. Super 8 63 1986 1987
Knoxville................. Super 8 139 1975 1993
Union City................ Super 8 62 1989 1989
UTAH
Salt Lake City............ Super 8 123 1983 1988
VIRGINIA
Charlottesville........... Super 8 65 1986 1987
Richmond.................. Shoney's 117 1985 1994
South Hill................ Super 8 49 1986 1987
WASHINGTON
Spokane................... Super 8 189 1982 1988
Wenatchee................. Orchard Inn 103 1984 1988
WISCONSIN
Ashland................... Super 8 70 1984 1988
Janesville................ Super 8 48 1985 1987
Kenosha................... Super 8 62 1984 1987
Madison................... Best Western 101 1983 1994
Oshkosh................... Super 8 61 1987 1994
Rice Lake................. Super 8 47 1984 1994
WYOMING
Cody...................... Super 8 64 1982 1982
Jackson................... Super 8 97 1983 1983
Total............... 11,233
======
==========================================
(1) Property is subject to a ground lease.
<PAGE>
Item 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings arising in the
ordinary course of business. The Company does not believe that any of these
actions, either individually or in the aggregate, will have a material adverse
effect on the Company's business, results of operations or financial
condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fiscal quarter ended December 31,
1996 to a vote of the security holders of the Company.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 13, 1997, there were approximately 12 holders of record of
the Company's Common Stock. No established public trading market exists for
the Company's common equity. The Company has been advised that since its
original issuance there have been a limited number of privately negotiated
sales of the Common Stock.
The Company has never paid cash dividends on its Common Stock. It is the
Company's present intention to retain all future earnings for use in its
business and, therefore, it does not expect to pay cash dividends on the
Common Stock in the foreseeable future. The declaration and payment of
dividends on the Common Stock is restricted by the indenture relating to the
$80 million principal amount of 12% Senior Subordinated Notes due April 15,
2004, Series B issued by the Company in April 1994 (the "Notes") and the
instruments relating to the Company's other indebtedness.
Item 6. SELECTED FINANCIAL DATA
The following table sets forth certain consolidated financial information
of the Company and its subsidiaries for the five fiscal years ended December
31, 1996, which has been derived from the audited financial statements, with
the exception of Operating Data and Same Property Data. This data should be
read in conjunction with the consolidated historical financial statements of
the Company and the notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1992 1993 (1) 1994 (1) 1995 (1) 1996 (1)
--------- --------- --------- --------- ---------
(dollars in thousands except Ratio,
Margin and Operating Data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Total revenues ............................ $ 45,712 $ 58,257 $ 87,067 $ 112,720 $ 128,271
Costs and expenses:
Motel operating ........................ 21,492 28,625 43,245 57,353 67,344
Marketing and royalty fees ............. 3,257 3,874 5,900 7,643 9,606
Corporate general and
administrative ....................... 3,028 3,371 4,596 5,590 6,833
Depreciation and amortization(2) ....... 5,678 6,609 8,569 12,618 13,995
--------- --------- --------- --------- ---------
Total direct expenses ..................... 33,455 42,479 62,310 83,204 97,778
--------- --------- --------- --------- ---------
Net operating revenue ..................... 12,257 15,778 24,757 29,516 30,493
Interest expense .......................... 6,398 11,449 20,297 27,831 31,573
--------- --------- --------- --------- ---------
Income (loss) from operations ............. 5,859 4,329 4,460 1,685 (1,080)
Net income before
extraordinary item ..................... 5,696 3,304 414 1,265 687
Net income ................................ 5,696 3,796 414 1,533 687
Net income before
extraordinary item per share(3) ........ $4.63 $0.53 $1.58 $0.86
Net income per share(3) ................... $5.32 $0.53 $1.91 $0.86
Other Financial Data
Net cash provided by operating
activities ............................. $ 12,426 $ 10,176 $ 10,494 $ 8,144 $ 13,477
Net cash used in investing activities ..... (3,954) (3,762) (104,474) (10,532) (50,498)
Net cash provided by (used in)
financing activities ................... (9,766) (9,444) 98,713 7,798 35,371
EBITDA(4) ................................. 17,935 22,387 33,326 42,134 44,487
EBITDA Margin (% of total
revenues)(4) ........................... 39.23% 38.43% 38.28% 37.38% 34.70%
Net operating revenue margin
(% of total revenues) .................. 26.81% 27.08% 28.43% 26.19% 23.66%
Refurbishment of investment properties .. . $ 2,241 $ 3,455 $ 6,818 $ 7,806 $ 9,857
Operating Data
Number of motels .......................... 76 82 125 125 135
Number of rooms ........................... 5,164 5,781 10,551 10,573 11,335
REVPAR(5) ................................. $ 24.45 $ 28.11 $ 28.38 $ 28.96 $ 28.96
ADR(6) .................................... $ 35.90 $ 37.67 $ 37.58 $ 40.25 $ 40.91
Occupancy percentage(7) ................... 66.16% 69.78% 70.18% 66.89% 66.25%
Balance Sheet Data
Total assets .............................. $ 150,868 $ 165,694 $ 310,567 $ 325,151 $ 368,433
Total debt ................................ 130,356 141,453 268,191 286,088 327,554
Total stockholders' equity ................ 11,492 16,326 20,745 22,279 22,966
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1992 1993 (1) 1994 (1) 1995 (1) 1996 (1)
--------- --------- --------- --------- ---------
(room revenues in thousands)
<S> <C> <C> <C> <C> <C>
Same Property Data:
75 Motels owned since
January 1, 1992:
Room revenues .......................... $ 43,556 $ 46,093 $ 48,641 $ 49,963 $ 49,704
REVPAR(5) .............................. $ 24.13 $ 25.68 $ 27.18 $ 27.78 $ 27.54
ADR(6) ................................. $ 35.70 $ 36.03 $ 35.67 $ 37.63 $ 37.87
Occupancy percentage(7) ................ 66.07% 69.50% 74.09% 71.89% 70.78%
76 Motels owned since
January 1, 1993:
Room revenues .......................... $ 48,612 $ 51,018 $ 52,655 $ 52,757
REVPAR(5) .............................. $ 27.31 $ 28.67 $ 29.55 $ 28.75
ADR(6) ................................. $ 36.88 $ 36.45 $ 38.52 $ 38.92
Occupancy percentage(7) ................ 69.92% 74.25% 72.26% 71.38%
83 Motels owned since
January 1, 1994:
Room revenues .......................... $ 58,577 $ 60,870 $ 61,217
REVPAR(5) .............................. $ 29.37 $ 30.46 $ 30.67
ADR(6) ................................. $ 37.54 $ 39.73 $ 40.46
Occupancy percentage(7) ................ 72.95% 71.44% 70.30%
117 Motels owned since
January 1, 1995:
Room revenues .......................... $ 95,704 $ 95,627
REVPAR(5) .............................. $ 29.71 $ 29.61
ADR(6) ................................. $ 40.41 $ 41.04
Occupancy percentage(7) ................ 68.85% 67.52%
</TABLE>
[FN]
(1) Results for the years ended December 31, 1993 and 1995 include gains on
early extinguishment of debt, net of income taxes, of $0.5 million and
$0.3 million, respectively. Results for the years ended December 31, 1994
and 1995 include the writeoff of $3.1 million of deferred costs and the
recovery of $0.4 million of offering costs previously written off,
respectively. The results for years ended December 31, 1995 and 1996
include a $0.5 million and $2.6 million gain on the sale of properties,
respectively.
(2) The Company changed its estimate of the useful life of its buildings from
35 to 40 years in 1994. The effect of this change decreased depreciation
by $1,154,000 for the year ended December 31, 1994.
(3) No earnings per share has been calculated for the year ended December 31,
1992 as all previous equity interests in the Company were cancelled in
1992 pursuant to the confirmation order entered by the Bankruptcy Court.
(4) EBITDA represents earnings before interest expense, income taxes,
depreciation, amortization, minority interest, gain on sale of properties,
write-off (recovery) of deferred offerring costs and gain on early
extinguishment of debt. EBITDA is not intended to represent cash flow or
any other measure of performance in accordance with GAAP. EBITDA is
included herein because management believes that certain investors find it
to be a useful tool for measuring the ability to service debt. EBITDA
should not be construed by the reader as an alternative to operating income
(as determined in accordance with GAAP) as an indicator of the Company's
operating performance, or to cash flows from operating activities (as
determined in accordance with GAAP) as a measure of liquidity.
(5) Revenue per available room ("REVPAR") represents motel operating revenues
divided by the total number of rooms available. Total available rooms
represents the number of rooms available for rent multiplied by the number
of days in the reported period.
(6) The average daily room rate ("ADR") represents total room revenues divided
by the total number of rooms occupied.
(7) The occupancy percentage represents total rooms occupied divided by total
available rooms.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE "SELECTED FINANCIAL
DATA" AND THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND
THE NOTES THERETO INCLUDED ELSEWHERE HEREIN. THE SUPPLEMENTAL HISTORICAL
OPERATING RESULTS PRESENTED BELOW FOR THE YEARS ENDED DECEMBER 31, 1996, 1995
AND 1994 HAVE BEEN PREPARED ON THE SAME BASIS AS THE AUDITED CONSOLIDATED
FINANCIAL STATEMENTS.
General
MOA operates principally in the economy limited service segment of the
lodging industry. As a result, its average room rates tend to be lower than
the average room rates of full service lodging facilities. However, due to
the limited nature of the public space and ancillary services provided by
limited service motels, the Company's expenses tend to be lower than those of
full service lodging facilities. The profitability of the lodging industry in
general is significantly dependent upon room rental rates and occupancy rates.
Due to the fixed nature of a relatively high portion of the Company's
expenses, changes in either room rates or occupancy percentages result in
significant changes in the operating profit of the Company's motels.
Between January 1, 1994 and December 31, 1996, the Company has acquired,
developed and sold a number of motels in various transactions summarized as
follows:
Number of
Date Transaction Rooms
---- ----------- ---------
January 1994 Purchased at an affiliate's 76
cost to build a Best Western
motel located in West Los
Angeles, CA which opened in 1993.
Also acquired the remaining 50%
interest in the Santa Monica, CA
Best Western motel in exchange for
a 1% common stock equity interest
in the Company.
April 1994 Purchased nine motels from 1,096
Midwest Lodging, Inc.
April 1994 Purchased all the outstanding 1,760
common stock of Tri-State Inns,
Inc. which owned fifteen motels.
May through Purchased seventeen additional 1,698
December 1994 motels.
<PAGE>
Number of
Date Transaction Rooms
---- ----------- ---------
December 1994 Purchased a motel located in 140
Charlotte, NC at book value
from an affiliate.
September and Purchased two motels located 250
December 1995 in Chattanooga, TN and Indio, CA.
December 1995 Sold two motels located in (260)
Charlotte, NC and Augusta, GA.
January 1996 Purchased nineteen motels 1,794
located in the eastern half
of the United States from
Forte USA, Inc.
January through Purchased two motels located in 201
March 1996 Newark, DE and Red Wing, MN.
Also purchased the land underlying
one of its existing properties.
May 1996 Sold a motel located in (102)
Newport, KY.
June 1996 Sold a motel located in (60)
Waukegan, IL.
August 1996 Sold three motels located (306)
in York, PA and Romulus, MI.
September 1996 Sold two motels located in (95)
Niagara Falls, NY and
Pittsfield, MA.
October 1996 Sold three motels located (447)
in West Des Moines, IA,
Phoenix, AZ and Orlando, FL
November 1996 Sold a motel located in (223)
Las Vegas, NV.
------
5,522
======
During such period, the Company has in the aggregate expended $124.3
million in cash (net of proceeds from sales of $20 million) and assumed $24.8
million in debt in conjunction with the above listed acquisitions. Cash was
funded from internal sources and $135.7 million in borrowings.
The above listed acquisitions have been accounted for under the purchase
method of accounting and therefore results from operations have been included
only since the date of acquisition.
<PAGE>
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
audited consolidated financial statements presented elsewhere herein.
<TABLE>
<CAPTION>
Supplemental Operating Results and Statistics
-----------------------------------------------------------
(unaudited)
Year Ended December 31
-----------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures Consolidated
------------------- ------------------- -------------------
1996 1995 1996 1995 1996 1995
--------- --------- --------- --------- --------- ---------
(dollars in thousands, except Other data)
<S> <C> <C> <C> <C> <C> <C>
Motel operations:
Motel operating revenues:
Room revenues ......................$ 96,568 $ 96,480 $ 23,079 $ 7,745 $ 119,647 $ 104,225
Ancillary motel revenues ........... 6,385 6,407 1,811 1,492 8,196 7,899
--------- --------- --------- --------- --------- ---------
Total motel operating revenues ... 102,953 102,887 24,890 9,237 127,843 112,124
Motel costs and expenses:
Motel operating expenses ........... 50,743 49,658 16,601 7,695 67,344 57,353
Marketing and royalty fees ......... 7,447 7,080 2,159 563 9,606 7,643
Depreciation and amortization ...... 11,273 10,112 1,935 614 13,208 10,726
--------- --------- --------- --------- --------- ---------
Total motel direct expenses ...... 69,463 66,850 20,695 8,872 90,158 75,722
----------- --------- --------- --------- --------- -------
$ 33,490 $ 36,037 $ 4,195 $ 365 37,685 36,402
========= ========= ========= =========
Corporate operations:
Other revenues ....................... 428 596
General and administrative expenses... 6,833 5,590
Depreciation and amortization ........ 787 1,892
--------- ---------
(7,192) (6,886)
--------- ---------
Net operating revenue .................. $ 30,493 $ 29,516
========= =========
Other data:
Number of motels at period end ....... 118 118 17 7 135 125
Number of rooms at period end ........ 9,553 9,565 1,764 1,008 11,317 10,573
Occupancy percentage ................. 67.30% 68.55% 62.25% 51.77% 66.25% 66.89%
ADR (1) .............................. $41.01 $ 40.36 $ 40.50 $ 38.94 $ 40.91 $ 40.25
REVPAR (2) ........................... $29.43 $ 29.50 $ 27.19 $ 24.04 $ 28.96 $ 28.96
Net operating revenue margin (3) ..... 23.77% 26.19%
Net motel revenue margin (4) ......... 46.35% 47.83% 26.56% 12.64% 42.54% 45.22%
</TABLE>
- -----------
[FN]
(1) ADR represents room revenues divided by the total number of rooms occupied.
(2) REVPAR represents total motel operating revenues divided by the total
number of rooms available.
(3) Net operating revenue margin represents net operating revenue divided by
total motel operating revenues plus corporate other revenues.
(4) Net motel revenue margin represents total motel operating revenues less
motel operating expenses and marketing and royalty fees, divided by motel
room revenues.
Total revenues consist principally of motel operating revenues. Motel
operating revenues are derived from room rentals and ancillary motel revenues
such as charges to guests for food and beverage service, long distance
telephone calls, fax machine use and from vending machines. Other revenues
include interest income, distributions on partnership interests in excess of
the Company's basis in such partnerships and other miscellaneous income.
Total revenues increased to $128,271,000 in 1996 from $112,720,000 in 1995, an
increase of $15,551,000 or 13.8%.
Motel revenues increased to $127,843,000 in 1996 from $112,124,000 in
1995, an increase of $15,719,000 or 14.0%. Approximately $15,653,000 of the
increase in motel revenues was attributable to the twenty-three motels
acquired and the thirteen motels divested, since January 1, 1995 and $66,000
of the increase related to motels owned during both periods. Motel revenues
for motels owned during both periods increased 0.1%. The increase in motel
revenues for motels owned during both periods was attributable to: 1996
having one additional day; an increase in the average daily room rate
("ADR"); and a decrease in the occupancy percentage. The ADR for the
motels owned during both periods increased to $41.01 in 1996 from $40.36
in 1995, an increase of $0.65 or 1.6%. The increase in ADR is reflective of
management's efforts to increase room rates at its lodging facilities. The
occupancy percentage in 1996 for the motels owned during both periods
decreased to 67.3% from 68.6% in 1995. Management attributes this decrease
to an increase in competitive supply and other factors outside of its
control. Revenue per available room ("REVPAR") for motels owned during
both periods decreased to $29.43 in 1996 from $29.50 in 1995, a decrease of
$0.07 or 0.2%. The acquired and divested motels had an occupancy
percentage of 62.25%, an ADR of $40.50 and a REVPAR of $27.19 for the
period which they were owned by the Company in 1996.
Motel operating expenses include payroll and related costs, utilities,
repairs and maintenance, property taxes, linens and other operating supplies.
Motel operating expenses increased to $67,344,000 in 1996 from $57,353,000 in
1995, a net increase of $9,991,000 or 17.4%. Approximately $8,906,000 of the
increase is attributable to the cost of operating the acquired and divested
motels since January 1, 1995. The cost of operating motels owned during both
periods increased to $50,743,000 in 1996 from $49,658,000 in 1995, an increase
of $1,085,000 or 2.2%. Payroll and related costs experienced the most
significant increase of all of the motel operation expenses. Management
attributes this increase to the affect of the minimum wage increase and
general tightening of the labor markets in many of the areas where the
Company's motels are located. Motel operating expenses as a percentage of
motel revenues increased to 52.7% in 1996 from 51.1% in 1995. Motel operating
expenses as a percentage of motel revenues for the motels owned in both
periods increased to 49.3% in 1996 from 48.3% in 1995. The decrease in the
operating margin for motels owned during both periods is primarily
attributable to the increase in motel operating expenses. Motel operating
expenses as a percent of motel revenues for the acquired and divested motels
was 66.7% in 1996.
Marketing and royalty fees include media advertising, billboard rental
expense, advertising fund contributions and royalty charges paid to
franchisors and other related marketing expenses. Marketing and royalty fees
increased to $9,606,000 in 1996 from $7,643,000 in 1995, an increase of
$1,963,000 or 25.7%. Approximately $1,596,000 of the increase in marketing and
royalty fees was attributable to the motels acquired and divested since
January 1, 1995. The marketing and royalty fees for motels owned during both
periods increased to $7,447,000 in 1996 from $7,080,000 in 1995, an increase
of $367,000 or 5.2%. For the motels owned during both periods, marketing and
royalty fees as a percent of room revenues increased to 7.7% in 1996 from 7.3%
in 1995.
Corporate general and administrative expenses include the costs of
corporate training, marketing, purchasing, administrative support and
accounting. The major components of these costs are salaries, wages and
related expenses, travel, rent and other administrative expenses. Corporate
general and administrative expenses increased $1,243,000 to $6,833,000 in 1996
from $5,590,000 in 1995, an increase of 22.2%. The increase resulted
principally from higher payroll costs due to additional corporate personnel
hired to manage the additional work load associated with the increase in the
number of motels since January 1, 1995. The Company also hired several
individuals to facilitate the Company's new construction projects. As a
percentage of total motel operating revenues, corporate general and
administrative expenses increased to 5.3% in 1996 from 5.0% in 1995.
Depreciation and amortization increased to $13,995,000 in 1996 from
$12,618,000 in 1995, an increase of $1,377,000 or 10.9%. Approximately
$1,321,000 of the increase in depreciation and amortization is attributable to
the addition of the motels acquired and divested since January 1, 1995.
Depreciation and amortization with respect to motels owned during both periods
increased $1,161,000 due to the Company's continued reinvestment in the
properties. Corporate depreciation and amortization decreased $1,105,000 to
$787,000 in 1996 from $1,892,000 in 1995. The decrease is principally a
result of the completion of the amortization of the of deferred financing
costs incurred with respect to the borrowings under the two-year $100 million
secured line of credit facility entered into with Nomura Asset Capital
Corporation ("NACC") in October 1994 (the "NACC credit line").
Net operating revenue increased to $30,493,000 in 1996 from $29,516,000
in 1995, an increase of $977,000 or 3.3%. The increase in net operating
revenues included an increase of $3,765,000 in net motel revenues (motel
revenues less motel operating expenses and marketing and royalty fees). Of
the $3,765,000 increase in net motel revenues, $5,151,000 resulted from the
motels acquired and divested since January 1, 1995. Net motel revenues for
motels owned during both periods decreased $1,386,000 or 3.0%. Net operating
revenue as a percent of total revenues was 23.8% and 26.2% in 1996 and 1995,
respectively.
Interest expense increased to $31,573,000 in 1996 from $27,831,000 in
1995, an increase of $3,742,000. The increase is principally due to an
increase in outstanding borrowings utilized to finance the acquisition of
motel properties.
Net income decreased to $687,000 in 1996 from $1,533,000 in 1995. Net
income for 1996 includes the gain on sale of properties of $1,581,000, net of
tax. Net income for 1995 includes the gain on sale of properties of $293,000,
net of tax, the reversal of the writeoff of deferred offering costs of
$247,000, net of tax, and the gain on early extinguishment of debt of
$268,000, net of tax.
<PAGE>
Year Ended December 31, 1995 Compared to the Year Ended December 31, 1994
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
audited consolidated financial statements presented elsewhere herein.
<TABLE>
<CAPTION>
Supplemental Operating Results and Statistics
-----------------------------------------------------------
(unaudited)
Year Ended December 31
-----------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures Consolidated
------------------- ------------------- -------------------
1995 1994 1995 1994 1995 1994
--------- --------- --------- --------- --------- ---------
(dollars in thousands, except Other data)
<S> <C> <C> <C> <C> <C> <C>
Motel operations:
Motel operating revenues:
Room revenues .........................$ 60,870 $ 58,577 $ 43,355 $ 21,954 $ 104,225 $ 80,531
Ancillary motel revenues .............. 4,447 4,236 3,452 1,871 7,899 6,107
--------- --------- --------- --------- --------- ---------
Total motel operating revenues .. . 65,317 62,813 46,807 23,825 112,124 86,638
Motel costs and expenses:
Motel operating expenses .............. 31,028 30,297 26,325 12,948 57,353 43,245
Marketing and royalty fees ............ 4,597 4,414 3,046 1,486 7,643 5,900
Depreciation and amortization ......... 6,533 6,305 4,193 1,585 10,726 7,890
--------- --------- --------- --------- --------- ---------
Total motel direct expenses ......... 42,158 41,016 33,564 16,019 75,722 57,035
--------- --------- --------- --------- --------- ---------
$ 23,159 $ 21,797 $ 13,243 $ 7,806 36,402 29,603
========= ========= ========= =========
Corporate operations:
Other revenues .......................... 596 429
General and administrative expenses ..... 5,590 4,596
Depreciation and amortization ........... 1,892 679
--------- ---------
(6,886) (4,846)
--------- ---------
Net operating revenue ..................... $ 29,516 $ 24,757
========= =========
Other data:
Number of motels at period end .......... 83 83 42 42 125 125
Number of rooms at period end ........... 5,887 5,857 4,686 4,694 10,573 10,551
Occupancy percentage .................... 71.44% 72.95% 61.23% 63.72% 66.89% 70.18%
ADR (1) .................................$ 39.73 $ 37.54 $ 41.00 $ 37.70 $ 40.25 $ 37.58
REVPAR (2) ..............................$ 30.46 $ 29.37 $ 27.10 $ 26.07 $ 28.96 $ 28.38
Net operating revenue margin (3) ........ 26.19% 28.43%
Net motel revenue margin (4) ............ 48.78% 47.97% 40.22% 42.78% 45.22% 46.56%
</TABLE>
- -----------
[FN]
(1) ADR represents room revenues divided by the total number of rooms occupied.
(2) REVPAR represents total motel operating revenues divided by the total
number of rooms available.
(3) Net operating revenue margin represents net operating revenue divided by
total motel operating revenues plus corporate other revenues.
(4) Net motel revenue margin represents total motel operating revenues less
motel operating expenses and marketing and royalty fees, divided by motel
room revenues.
Total revenues increased to $112,720,000 in 1995 from $87,067,000 in
1994, an increase of $25,653,000 or 29.5%.
Motel revenues increased to $112,124,000 in 1995 from $86,638,000 in
1994, an increase of $25,486,000 or 29.4%. Approximately $22,982,000 of the
increase in motel revenues was attributable to the forty-four motels acquired
and the two motels divested since January 1, 1994 and $2,504,000 of the
increase related to motels owned during both periods. Motel revenues for
motels owned during both periods increased 4.0%. The increase in motel
revenues for motels owned during both periods was attributable to an increase
in the average daily room rate ("ADR") partially offset by a decrease in the
occupancy percentage. The ADR for the motels owned during both periods
increased to $39.73 in 1995 from $37.54 in 1994, an increase of $2.19 or 5.8%.
The increase in ADR is reflective of management's efforts to increase room
rates at its lodging facilities. The occupancy percentage in 1995 for the
motels owned during both periods decreased to 71.4% from 72.9% in 1994.
Revenue per available room ("REVPAR") for motels owned during both periods
increased to $30.46 in 1995 from $29.37 in 1994, an increase of $1.09 or 3.7%.
The motels acquired and motels divested had an occupancy percentage of 61.23%,
an ADR of $41.00 and a REVPAR of $27.10 for the period which they were owned
by the Company in 1995.
Motel operating expenses include payroll and related costs, utilities,
repairs and maintenance, property taxes, linens and other operating supplies.
Motel operating expenses increased to $57,353,000 in 1995 from $43,245,000 in
1994, a net increase of $14,108,000 or 32.6%. Approximately $13,377,000 of
the increase is attributable to the cost of operating the motels acquired and
divested since January 1, 1994. The cost of operating motels owned during
both periods increased to $31,028,000 in 1995 from $30,297,000 in 1994, an
increase of $731,000 or 2.4%. Motel operating expenses as a percentage of
motel revenues increased to 51.1% in 1995 from 49.9% in 1994. Motel operating
expenses as a percentage of motel revenues for the motels owned in both
periods decreased to 47.5% in 1995 from 48.2% in 1994. The increase in the
operating margin for motels owned during both periods is primarily
attributable to the increase in room revenues. Motel operating expenses as a
percent of motel revenues for the motels acquired and motels divested since
January 1, 1994 was 56.2% in 1995.
Marketing and royalty fees include media advertising, billboard rental
expense, advertising fund contributions and royalty charges paid to
franchisors and other related marketing expenses. Marketing and royalty fees
increased to $7,643,000 in 1995 from $5,900,000 in 1994, an increase of
$1,743,000 or 29.5%. Approximately $1,560,000 of the increase in marketing and
royalty fees was attributable to the motels acquired and motels divested since
January 1, 1994. The marketing and royalty fees for motels owned during both
periods increased to $4,597,000 in 1995 from $4,414,000 in 1994, an increase
of $183,000 or 4.1%. For the motels owned during both periods, marketing and
royalty fees as a percent of room revenues increased to 7.6% in 1995 from 7.5%
in 1994.
Corporate general and administrative expenses include the costs of
corporate training, marketing, purchasing, administrative support and
accounting. The major components of these costs are salaries, wages and
related expenses, travel, rent and other administrative expenses. Corporate
general and administrative expenses increased $994,000 to $5,590,000 in 1995
from $4,596,000 in 1994, an increase of 21.6%. The increase resulted
principally from higher payroll costs due to additional corporate personnel
hired to manage the additional work load associated with the increase in the
number of motels operated by the Company since January 1, 1994. As a
percentage of total motel operating revenues, corporate general and
administrative expenses declined to 5.0% in 1995 from 5.3% in 1994.
Depreciation and amortization increased to $12,618,000 in 1995 from
$8,569,000 in 1994, an increase of $4,049,000 or 47.2%. Approximately
$2,608,000 of the increase in depreciation and amortization is attributable to
the motels acquired and motels divested since January 1, 1994. The Company
changed its estimate of the useful life of its buildings from 35 to 40 years
in 1994. The effect of this change decreased depreciation by $1,154,000 for
the year ended December 31, 1994. Corporate depreciation and amortization
increased $1,213,000 to $1,892,000 in 1995 from $679,000 in 1994. The
increase is principally a result of amortization of deferred financing costs
incurred in 1994 with respect to the issuance by the Company of the Notes in
April 1994 and borrowings under the two-year $100 million secured line of
credit facility entered into with Nomura Asset Capital Corporation ("NACC") in
October 1994 (the "NACC credit line").
Net operating revenue increased to $29,516,000 in 1995 from $24,757,000
in 1994, an increase of $4,759,000 or 19.2%. The increase in net operating
revenues included an increase of $9,635,000 in net motel revenues (motel
revenues less motel operating expenses and marketing and royalty fees). Of
the $9,635,000 increase in net motel revenues, $8,045,000 resulted from the
motels acquired and motels divested since January 1, 1994. Net motel revenues
for motels owned during both periods increased $1,590,000 or 5.7%. Net
operating revenue as a percent of total revenues was 26.2% and 28.4% in 1995
and 1994, respectively.
Interest expense increased to $27,831,000 in 1995 from $20,297,000 in
1994, an increase of $7,534,000. Approximately $2,866,000 of the increase is
due to the issuance of the Notes in April 1994. The remainder of the increase
is principally due to an increase in outstanding borrowings utilized to fund
acquisitions of lodging properties
The writeoff of deferred offering costs in 1994 of $3,121,000 represents
costs incurred by the Company during 1994, including management's estimates of
unbilled costs at December 31, 1994, related to a proposed formation of a real
estate investment trust (the "REIT"). During the fourth quarter of 1994, the
public market for initial REITs deteriorated to the point, in the opinion of
management, that the contemplated transaction would not achieve the desired
financial results and the transaction was abandoned. Accordingly, the legal
fees, underwriting fees and other costs and deferred expenses were expensed in
the fourth quarter of 1994. During the fourth quarter of 1995, management
determined that the previous estimates of unbilled costs exceeded the actual
costs and the Company recovered $404,000 of the writeoff.
Net income increased to $1,533,000 in 1995 from $414,000 in 1994. Net
income for 1995 includes the gain on sale of properties of $293,000, net of
tax, the reversal of the writeoff of deferred offering costs of $247,000, net
of tax, and the gain on early extinguishment of debt of $268,000, net of tax.
Net income for 1994 includes the writeoff of deferred offering costs of
$1,906,000, net of tax
Liquidity and Capital Resources
The Company's primary uses of its capital resources include debt service,
capital expenditures (primarily for motel refurbishment) and working capital;
in addition on a discretionary basis the Company utilizes its capital
resources for the development and acquisition of motel properties.
The Company's debt service requirements consist of the obligation to make
interest and principal payments on its outstanding indebtedness. As of
December 31, 1996, the Company has principal repayment obligations of
$10,207,437, $68,793,874 and $5,352,137 for the years ending December 31,
1997, 1998 and 1999, respectively. In January 1997, the Company sold a motel
for cash and the assumption of debt which reduced the principal repayment
obligations for 1997 from the $10,207,437 stated above to $7,866,190.
Management believes the Company will be able to extend the maturity or
refinance mortgage notes in the amount of $1,825,704 as of December 31,
1996 which would otherwise require repayment in 1997. Management believes
cash flows derived from the properties securing the approximate $62.5 million
of mortgage loans which mature in 1998 will be sufficient to allow for the
refinancing of such mortgage debt. Although the Company currently does not
have lines of credit outstanding, management believes sufficient resources
exists in the event of any unforeseen liquidity needs.
In January through March 1996, the Company borrowed approximately $30.9
million under the NACC credit line and $10.7 million from unrelated parties
to finance the acquisition of nineteen motels from Forte USA, Inc., a
subsidiary of Forte Hotels, Inc., two additional motel properties and the
land underlying a motel already owned.
In November 1996, the Company completed two separate financing transactions
with CSFB pursuant to which the Company borrowed $37,150,000 on a secured basis.
Approximately $29.8 million of the proceeds were utilized to repay the entire
outstanding borrowings under the Company's NACC credit line; $1.6 million of
the proceeds were utilized toward a partial paydown of the Company's borrowing
from HFS Incorporated; and the remaining net proceeds were retained for general
corporate purposes and are evidenced by mortgages. The terms of the notes and
mortgages, among other things, provide for a floating rate of interest adjusted
monthly based upon the thirty-day LIBOR rate plus 3.37% and monthly payments of
principal and interest based upon a twenty-year amortization period.
In November 1996, the Company contributed the total of approximately $2.5
million to a newly formed subsidiary, TAD Properties L.L.C. to cover
financing commitment fees and certain related expenses in connection with
prospective financing for a new construction motel development program
contemplated to be pursued by such subsidiary.
The Company's capital expenditure requirements principally include capital
improvements and the refurbishment of lodging facilities as part of an ongoing
strategy to provide well maintained facilities. The Company made capital
expenditures (exclusive of acquisitions and development of investment
properties) of $9,857,347, $7,805,508 and $6,817,513 in 1996, 1995 and 1994,
respectively. In addition, as of December 31, 1996, the Company has
$3,738,478 of cash restricted for future refurbishment, in accordance with
certain debt agreements. Management is not aware of any unusual required
level of future capital expenditures necessary to maintain its existing
properties.
For the year ended December 31, 1996 cash and cash equivalents decreased
$1,649,590 from $13,897,161 at December 31, 1995 to $12,247,571 at December
31, 1996. $13,477,147 of cash was provided by operating activities,
$50,497,836 of cash was utilized in investing activities and $35,371,099 of
cash was provided by financing activities. Net investing activities include:
$55,021,276 of cash utilized for motel acquisitions ($43,837,022), development
($5,639,529) and redevelopment of existing motel properties ($5,544,725);
$9,857,347 expended on renovation of existing motel properties; $1,575,913 of
cash utilized as an increase in cash restricted for refurbishment of
properties; and $15,956,700 of cash provided from the sale of investment
properties and collections on mortgage and other notes receivable. Cash
provided by financing activities include: $82,721,234 of proceeds from
borrowings less $5,361,159 of deferred financing costs; $41,674,691 of cash
utilized to repay indebtedness; and $314,285 of cash distributed to minority
interests.
The Company is not currently a party to any proceeding which, in management's
opinion, is likely to have a material adverse effect on the Company's
operating results or financial position.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of
Regulation S-K is not applicable.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following chart lists the Company's current directors and executive
officers.
Name Age Positions(s) with the Company
Paul F. Wallace 60 Director, Chairman and Chief Executive Officer
Kurt M. Mueller 40 Director, President and Chief Operating Officer
Carl W. Desch 81 Director
J. Anthony Kouba 49 Director
Louis A. Scarrone, M.D. 73 Director
Ronald P. Stewart 52 Director
C. Michael Dolan 56 Vice-Chairman-Development
Daniel W. Daniele 41 Executive Vice President
Valerie Gossman-Murzl 43 Vice President & Assistant Secretary
John D. Simon 50 Secretary & Treasurer
Robert Brandt 56 Vice President & Assistant Secretary
The following is a biographical summary of the experience of the
directors and executive officers of the Company:
Paul F. Wallace, formerly a Director and controlling stockholder of
EconoLodge, has been Chairman and Chief Executive Officer of the Company since
January 1994 and a Director of the Company since August 1992. Mr. Wallace
also serves on the Company's operations committee. Mr. Wallace was President
of the Broadstone Group from July 1978 until June of 1986, and he became the
President again in July of 1993. Mr. Wallace has been Chairman of the Board
and controlling stockholder of the Broadstone Group since July 1981, and is
currently the principal shareholder of a privately-held manufacturing company
and an investor in and operator of various real estate related projects.
Kurt M. Mueller has been President since January 1994 and a Director and
Chief Operating Officer of the Company since he joined MOA in May 1991. Mr.
Mueller served as Executive Vice President from May 1991 until January 1994.
In addition, Mr. Mueller currently serves on the Company's operations
committee and audit committee. From 1978 to 1991, Mr. Mueller was employed by
Ernst & Young LLP and most recently was a Senior Manager. During his career
at Ernst & Young LLP, he was on the audit staff and, during his last two
years, he worked in the Mergers and Acquisitions Group performing due
diligence financial and operational reviews.
Carl W. Desch, formerly a Director of EconoLodge, has been a Director of
the Company since April 1993 and serves on the Company's audit committee and
operations committee. Mr. Desch has been Chairman and Director of Citibank
(NY State), N.A. for over five years.
J. Anthony Kouba has been a Director of the Company since April 1995.
Mr. Kouba is a developer and operator of various real estate properties and
has been a licensed real estate broker in the State of California since 1975.
In addition, Mr. Kouba has been a member of the State Bar of California since
1972.
Louis A. Scarrone, M.D., formerly a Director of EconoLodge, has been a
Director of the Company since October 1993. He has been engaged in his own
private practice of internal medicine since 1955.
Ronald P. Stewart, formerly a Director of EconoLodge, has been a Director
of the Company since October 1993. Mr. Stewart has been Headmaster of York
Preparatory School in New York City since 1969 and Chairman of the Learning
Annex of New York since 1992.
C. Michael Dolan, is one of the founders of MOA and has been Vice-
Chairman-Development since January 1994. He served as a Director from April
1990 to May 1996. Mr Dolan served as Chairman and Chief Executive Officer of
the Company from April 1990 until January 1994.
Daniel W. Daniele has been Executive Vice President of the Company since
September 1994. From October 1, 1993 until September 1994, Mr. Daniele served
as the Principal and National Director Hospitality Consulting for Ernst &
Young LLP. From March 26, 1991 to September 30, 1993, Mr. Daniele served as a
Senior Manager and National Director Hospitality Consulting for Ernst & Young
LLP. From February 1, 1991 to March 25, 1991, he worked on an independent
consulting basis for Ernst & Young LLP, and from January 2, 1991 to January
31, 1991, he served as a Senior Principal for Pannel, Kerr, Forster. From
February 1978 to November 1990, Mr. Daniele was employed by Laventhol &
Horwath in various positions including the Senior Principal and National
Director Economy/Limited-Service Lodging.
Valerie Gossman-Murzl has been Vice President, with a special emphasis on
Training/Development and Human Resources since joining the Company in January
1990, and Assistant Secretary since May 1996. Prior to 1990, she was most
recently a Director of Human Resources for the Marriott Corporation
specializing in Employee Relations Law. During her 12-year career with
Marriott, she held a variety of positions in operations and other aspects
of the lodging industry.
John D. Simon has been Secretary and Treasurer of the Company since
joining the Company in August 1996. From April 1995 to August 1996, he worked
as an independent consultant. From January 1990 to March 1995, Mr. Simon was
Vice President-Property Financial Operations for The Balcor Company, a wholly-
owned subsidiary of American Express Co. From October 1988 to December 1989,
he served as Senior Controller for The Balcor Company.
Robert Brandt has been Vice President and Assistant Secretary of the
Company since November 1996. Mr. brandt has served as Vice President of Budget
Motel Supply Corporation, a subsididary of MOA, since 1990. From 1986 to
1990, he was Vice President of DRG Investments, in charge of motel development
for the Company.
Executive officers of the Company are appointed and serve at the
discretion of the Board of Directors. Each director of the Company is elected
for a period of one year and serves until his successor is duly elected and
qualified. None of the directors or executive officers of the Company has a
family relationship with any of the other directors or executive officers of
the Company.
Item 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to each of the Chief Executive Officer and the four other most highly
compensated executive officers of the Company, as of the end of the fiscal year,
for services rendered to the Company in all capacities during the last
three fiscal years:
SUMMARY COMPENSATION TABLE
Name and Principal Position Year Salary($) Bonus($)
Paul F. Wallace 1996 300,000 --
Chairman and Chief Executive Officer 1995 300,000 --
1994 300,000 --
C. Michael Dolan 1996 300,000 --
Vice Chairman - Development 1995 300,000 --
1994 300,000 --
Kurt M. Mueller 1996 400,000 50,000
President and Chief Operating Officer 1995 350,000 --
1994 262,500 --(1)
Daniel W. Daniele 1996 250,000 100,000
Executive Vice President(2) 1995 200,000 --
1994 50,000 --
Valerie Gossman-Murzl
Vice President & Assistant Secretary 1996 87,000 23,000
1995 80,000 19,000
_____________________________ 1994 77,250 18,000
(1) The Company entered into an employment contract with Mr. Mueller which
was effective through May 31, 1994. The agreement provided for a base annual
salary of $175,000 and provided for bonus amounts based on the Company's
performance in meeting certain financial performance measurements. Bonus
amounts aggregating $175,000 earned and accrued in 1993 were subsequently paid
in 1994.
(2) Mr. Daniele has been Executive Vice President of the Company since
September 1994.
The Company historically has and intends to continue to pay discretionary
bonuses to key employees, including property managers, as rewards for superior
financial performance. The Company does not maintain any employee pension,
profit sharing or savings plans for its employees nor does it currently have
any stock related plans for key executives.
Members of the Board of Directors do not receive compensation for serving
on the Board except that Messrs. Desch, Kouba, Stewart and Dr. Scarrone each
receive a $5,000 annual retainer and are paid $1,000 for each meeting. All
members of the Board of Directors receive reimbursement of reasonable expenses
incidental to attendance at meetings of the Board of Directors and all
committees.
Compensation Committee Interlocks and Insider Participation
The Company has no compensation committee of the Board of Directors.
During 1996, no officer or employee of the Company or its subsidiaries
participated in deliberations of the Company's Board of Directors concerning
executive officer compensation.
Employment Agreements and Compensation Arrangements
On September 14, 1994 the Company entered into an employment agreement
with Mr. Daniele providing for the employment of Mr. Daniele as Executive Vice
President of the Company until December 31, 1997. Pursuant to this agreement,
Mr. Daniele was entitled to a base salary of $200,000 in 1995 and will be
entitled to a base salary of $200,000 in each of 1996 and 1997. In addition,
pursuant to this agreement Mr. Daniele is eligible to receive an annual bonus
to be determined by the Board of Directors of the Company.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned by the only entity known to be the beneficial owner of more
than 5% of the Company's Common Stock, by each director and by all directors
and officers of the Company as a group as of March 13, 1997:
Shares of
Common
Stock Beneficially Percent of
Name and Address of Beneficial Owner Owned Class
Principal Stockholders:
New Image Realty, Inc............................. 677,228 85%
888 Seventh Avenue
Suite 3400
New York, NY 10106
Executive Officers and Directors:
Paul F. Wallace................................... 684,357(1) 86%
All Directors and Officers as a Group (11 persons) 684,357(2) 86%
_________________________
(1) Mr. Wallace is President, Chairman of the Board and controlling
stockholder of The Broadstone Group. The Broadstone Group owns 100% of the
outstanding Common Stock of New Image Realty, Inc. ("New Image"), which owns
85% of the outstanding Common Stock of MOA. Mr. Wallace is deemed to be a
beneficial owner of 677,228 shares of Common Stock of the Company owned by New
Image and 7,129 shares of Common Stock of the Company issued to Opal Inc. in
January 1994.
(2) Includes 677,228 shares of Common Stock of the Company held by New Image
and 7,129 shares of Common Stock of the Company held by Opal Inc. that are
deemed to be beneficially owned by Paul F. Wallace.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid $345,000, $190,000 and $185,000 for construction
management, brokerage commissions and for other services performed in 1994,
1995 and 1996, respectively, to a company in which Mr. Kouba has a minority
ownership interest.
The Company is a member of an affiliated group that files a consolidated
tax return for federal income tax purposes. During 1994, 1995 and 1996, the
Company made federal tax payments of approximately $2.5 million, $1.3 million,
and $0.5 million respectively, to affiliates of Paul F. Wallace, of which
approximately $1.0 million is available to offset required future federal tax
payments, if any.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1 & 2. Financial Statements and Schedules
See Index to Financial Statements in this Form 10-K.
3. Exhibits
The Exhibits listed in the accompanying Index to Exhibits are filed
as part of this Form 10-K.
(b) Reports on Form 8K
None.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
MOTELS OF AMERICA,INC. AND SUBSIDIARIES
Years Ended December 31, 1996, 1995 and 1994
Report of Independent Auditors .......................................F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 .........F-3
Consolidated Statements of Operations for each of the three years in
the period ended December 31, 1996 ...................................F-4
Consolidated Statements of Changes in Stockholders' Equity
for each of the three years in the period ended December 31, 1996 ....F-5
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1996 ................................F-6
Notes to Consolidated Financial Statements ...........................F-7
All schedules have been omitted because they are not required or are
not applicable, or the required information is included in the financial
statements or notes thereto.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Motels of America, Inc.
We have audited the consolidated balance sheets of Motels of America,
Inc. and Subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Motels of America, Inc. and Subsidiaries at December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
March 14, 1997
Chicago, Illinois
<PAGE>
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents ................................... $ 12,247,571 $ 13,897,161
Restricted cash ............................................. 3,738,478 2,162,565
Accounts receivable from property operations ................ 2,794,739 2,807,661
Operating supplies and prepaid expenses ..................... 2,879,660 3,348,796
Deposits and other assets ................................... 7,658,003 2,892,877
Mortgage and other notes receivable ......................... 8,932,281 2,787,833
Investment property:
Operating properties, net of accumulated depreciation ..... 307,696,323 278,280,698
Land held for development ................................. 4,046,536 4,046,536
------------- -------------
Total investment property ................................... 311,742,859 282,327,234
Financing and other deferred costs, net of accumulated
amortization of $4,162,912 in 1996 and $2,127,120 in 1995.. 18,438,910 14,926,635
------------- -------------
$ 368,432,501 $ 325,150,762
============= =============
LIABILITIES, MINORITY INTERESTS AND
STOCKHOLDERS' EQUITY
Trade accounts payable ...................................... $ 2,176,690 $ 1,554,145
Real estate taxes payable ................................... 2,611,873 1,963,058
Accrued interest payable .................................... 3,692,868 3,144,560
Other accounts payable and
accrued expenses .......................................... 3,847,484 4,077,730
Net deferred tax liability .................................. 3,684,565 4,165,559
Mortgage and other notes payable ............................ 251,147,547 209,972,514
12% Senior Subordinated Notes, net of unamortized
discount of $3,593,603 in 1996 and $3,884,900 in 1995...... 76,406,397 76,115,100
------------- -------------
Total liabilities ........................................... 343,567,424 300,992,666
Minority Interests .......................................... 1,899,176 1,879,451
Stockholders' equity:
Common stock, $.01 par value, 1,500,000 shares
authorized; 800,000 shares issued and outstanding ....... 8,000 8,000
Additional paid-in capital ................................ 15,294,284 15,294,284
Retained earnings ......................................... 7,663,617 6,976,361
------------- -------------
Total stockholders' equity .................................. 22,965,901 22,278,645
------------- -------------
$ 368,432,501 $ 325,150,762
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Motel operating revenues ....................... $ 127,842,502 $ 112,123,889 $ 86,638,169
Other revenues ................................. 428,277 596,481 428,824
-------------- -------------- --------------
Total revenues ................................... 128,270,779 112,720,370 87,066,993
Costs and expenses:
Motel operating expenses ....................... 67,343,939 57,353,233 43,245,316
Marketing and royalty fees ..................... 9,606,013 7,643,068 5,899,681
General and administrative ..................... 6,833,365 5,590,441 4,596,278
Depreciation and amortization .................. 13,994,963 12,617,306 8,568,790
-------------- -------------- --------------
Total direct expenses ............................ 97,778,280 83,204,048 62,310,065
-------------- -------------- --------------
Net operating revenue ............................ 30,492,499 29,516,322 24,756,928
Interest expense ................................. 31,572,501 27,830,864 20,296,594
-------------- -------------- --------------
Income (loss) from operations .................... (1,080,002) 1,685,458 4,460,334
Gain on sale of properties........................ 2,589,029 479,281 -
Recovery (writeoff) of deferred offering costs ... - 404,101 (3,120,918)
Minority interests................................ (334,010) (471,688) (623,572)
-------------- -------------- --------------
Income before income taxes and
extraordinary item ............................. 1,175,017 2,097,152 715,844
Income tax expense ............................... 487,761 831,709 301,425
-------------- -------------- --------------
Income before extraordinary item ................. 687,256 1,265,443 414,419
Gain on early extinguishment of debt, net of
applicable income taxes of $170,734 in 1995 .... - 267,946 -
-------------- -------------- --------------
Net income ....................................... $ 687,256 $ 1,533,389 $ 414,419
============== ============== ==============
Net income per common share:
Income before extraordinary item ............... $ 0.86 $ 1.58 $ 0.53
Extraordinary item ............................. - 0.33 -
-------------- -------------- --------------
Net income per common share .................... $ 0.86 $ 1.91 $ 0.53
============== ============== ==============
Weighted average number of
common shares outstanding ...................... 800,000 800,000 777,425
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
--------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 .......... $ 7,129 $ 11,290,133 $ 5,028,553 $ 16,325,815
Net income .......................... - - 414,419 414,419
Return of capital contribution to
stockholder for income taxes ...... - (303,978) - (303,978)
Issuance of common stock ............ 871 4,308,129 - 4,309,000
--------- ------------- ------------- -------------
Balance at December 31, 1994 ........ 8,000 15,294,284 5,442,972 20,745,256
Net income .......................... - - 1,533,389 1,533,389
--------- ------------- ------------- -------------
Balance at December 31, 1995 ........ 8,000 15,294,284 6,976,361 22,278,645
Net income .......................... - - 687,256 687,256
--------- ------------- ------------- -------------
Balance at December 31, 1996 ........ $ 8,000 $ 15,294,284 $ 7,663,617 $ 22,965,901
========= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows provided by operating activities:
Net income ................................................$ 687,256 $ 1,533,389 $ 414,419
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, amortization and accretion
of discount on notes ................................... 14,286,260 12,875,818 8,734,378
(Recovery) writeoff of deferred offering costs .......... - (404,101) 3,120,918
Minority interests of others in income from operations .. 334,010 471,688 623,572
Deferred income taxes ................................... (480,994) (607,038) (143,977)
Gain on sale of properties............................... (2,589,029) (479,281) -
Gain on early extinguishment of debt .................... - (438,680) -
Change in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable ................................... 54,855 (193,129) (933,854)
Operating supplies, prepaid expenses,
deposits and other assets ............................ (1,196,653) (2,706,016) (3,587,356)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses ................. 1,792,405 (1,268,500) 92,351
Accrued interest payable .............................. 589,037 (639,999) 2,173,921
------------- --------------- ---------------
Net cash provided by operating activities .................. 13,477,147 8,144,151 10,494,372
Cash flows used in investing activities:
Acquisition and development of investment properties ...... (55,021,276) (8,942,596) (95,615,269)
Refurbishment of investment properties .................... (9,857,347) (7,805,508) (6,817,513)
Cash restricted for refurbishment of properties ........... (1,575,913) 2,020,836 (3,225,643)
Net proceeds from sales of investment properties .......... 15,821,148 4,108,055 -
Collections on mortgage and other notes receivable ........ 135,552 86,865 1,184,407
------------- --------------- ---------------
Net cash used in investing activities ...................... (50,497,836) (10,532,348) (104,474,018)
Cash flows provided by financing activities:
Repayment of notes payable ................................ (41,674,691) (151,712,095) (32,688,475)
Proceeds from notes payable and
Senior Subordinated Notes ................................ 78,821,234 169,800,000 134,839,296
Distributions to minority interests ....................... (314,285) (414,511) (562,634)
Proceeds from issuance of common stock .................... - - 4,309,000
Return of capital contribution to
stockholder for income taxes ............................. - - (303,978)
Deferred financing costs and offering costs ............... (5,361,159) (9,875,712) (6,880,623)
------------- --------------- ---------------
Net cash provided by financing activities .................. 35,371,099 7,797,682 98,712,586
------------- --------------- ---------------
Net increase (decrease) in cash and cash equivalents ....... (1,649,590) 5,409,485 4,732,940
Cash and cash equivalents at beginning of period ........... 13,897,161 8,487,676 3,754,736
------------- --------------- ---------------
Cash and cash equivalents at end of period .................$ 12,247,571 $ 13,897,161 $ 8,487,676
============= =============== ===============
Supplementary disclosure of cash flow information:
Cash paid during the period for interest ..................$ 30,732,896 $ 28,218,093 $ 17,723,662
============= =============== ===============
Cash paid during the period for income taxes ..............$ 993,984 $ 1,904,260 $ 3,211,737
============= =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. Organization and Basis of Presentation
Motels of America, Inc., an 85%-owned subsidiary of New Image Realty,
Inc. ("New Image"), owns, develops, manages, and has equity interests in
various national brand affiliated limited service lodging facilities in 35
states throughout the United States. At December 31, 1996, the Company's
largest concentrations of lodging facilities were located in the State of
Illinois with 13 lodging facilities and the state of Georgia with 12 lodging
facilities. The consolidated financial statements include the accounts of
Motels of America, Inc. and all wholly owned subsidiaries and all entities in
which it has a majority or controlling interest (collectively, the "Company").
All significant intercompany accounts have been eliminated in consolidation.
Certain reclassifications of prior-period amounts have been made to conform
with the current-period presentation.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents represent highly liquid assets with a maturity
of three months or less when purchased.
Restricted Cash
Restricted cash represents cash that, under the terms of certain mortgage
notes, has been set aside for the refurbishment of motel properties.
Operating Properties
The Company's operating properties are stated at cost less accumulated
depreciation. Operating properties, excluding land, are depreciated using the
straight-line method over the estimated useful lives of the assets (buildings
- - 40 years; furniture and equipment - 7 years). During the fourth quarter of
1994, the Company changed its estimate of the useful life of its buildings
from 35 to 40 years, effective January 1, 1994, based on a review of the
depreciable lives of its assets. The effect of this change increased net
income by approximately $705,000 and net income per share by $0.91, net of
income taxes, for the year ended December 31, 1994.
Maintenance and repair costs are expensed as incurred, while significant
improvements, replacements and major renovations are capitalized.
The Company records impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. An impairment loss is measured as the difference between the
carrying value and fair value.
Land Held for Development
Land held for development, consisting of land purchased for future
development, is stated at the lower of cost or estimated net realizable value.
Land held for development is written down to net realizable value when
management believes that market conditions in a particular geographic location
become unfavorable for the development of new properties.
Financing and Other Deferred Costs
Financing costs are amortized over the terms of the related indebtedness
using the level yield method. Franchise costs are amortized using the
straight-line method over the life of the related franchise agreement.
Organization costs are amortized using the straight-line method over a period
of 60 months.
Earnings Per Share
Earnings per share is based on the weighted average number of shares of
common stock outstanding during each period.
3. Offering Costs
In 1994, in conjunction with the planned offering of a real estate
investment trust, the Company incurred $3,121,000 of costs. During the fourth
quarter of 1994, the offering was suspended due to a change in market factors
and the costs were written off. During 1995, management determined that the
estimated costs exceeded the actual costs and the Company recovered $404,000
of the writeoff.
4. Mortgage and Other Notes Receivable
Mortgage notes receivable in the amounts of $6,884,174 and $699,240 at
December 31, 1996 and 1995, respectively, represent notes collateralized by
motel properties. The notes provide for monthly principal and interest
(various rates of 8% to 10.5%) receipts over various terms through 2009,
although certain notes are callable prior to their due dates.
Other notes receivable in the amounts of $2,048,107 and $2,088,593 at
December 31, 1996 and 1995, respectively, bear interest at rates from 9% to
11% and are receivable over various terms through 2016.
Notes receivable of $5,995,813 at December 31, 1996 have been pledged as
collateral for a loan facility in which the Company participated along with one
of its affiliates, from which the loan proceeds to the Company were $3,900,000.
5. Operating Properties
The major classes of operating properties, at cost, are as follows:
December 31,
-----------------------------
1996 1995
-------------- --------------
Land $ 52,819,338 $ 44,008,320
Buildings 265,228,461 240,658,333
Furniture and Equipment 51,503,219 44,688,740
-------------- --------------
369,551,017 329,355,393
Less: Accumulated
depreciation (61,854,694) (51,074,695)
-------------- --------------
$ 307,696,323 $ 278,280,698
============== ==============
6. Notes Payable and Senior Subordinated Notes
In 1994, the Company completed an offering of $80,000,000 in principal
amount of 12% Senior Subordinated Notes due April 15, 2004, Series B. In
conjunction with this offering, 80,000 shares of common stock were also
issued. These Notes have been registered under the Securities Act of 1933 and
are freely transferable by holders thereof. Interest on the Notes is payable
semiannually. The Notes are not redeemable at the option of the Company prior
to April 15, 1999, except that, until April 15, 1997, the Company may redeem,
under certain conditions, up to $24 million principal amount of the Notes at
112%, plus accrued and unpaid interest to the date of redemption.
In October 1994, the Company obtained a two-year $100 million secured line
of credit facility (the "line of credit") with Nomura Asset Capital
Corporation ("NACC") designed to be used principally to finance the
acquisition of motel properties, including expenses and refurbishment costs
associated with such acquisitions. Borrowings under the line of credit were
secured by motel properties. The line of credit bore interest, payable
monthly, at an annual rate equal to LIBOR plus 3.33%. The line of credit had
no balance outstanding at December 31, 1995 and was repaid in October 1996.
The Company was required to pay a financing fee of 1% of any funds borrowed
thereunder.
In September 1995, the Company completed funding of a financing transaction
with NACC. Motels of America, L.L.C. (the "LLC"), a limited purpose
subsidiary, obtained a loan from NACC in the principal amount of $158.8
million evidenced by a Promissory Note due 2015. The Note is secured by 93
motel properties owned by the LLC. The loan requires fixed monthly payments
(based on a 20-year amortization schedule) of principal and interest totalling
approximately $1,390,000 through.
October 11, 2005; thereafter, if the loan is not repaid, excess cash flow as
defined is applied as additional principal payments. Interest accrues at
8.62% through October 11, 2005, and thereafter at a fixed rate per annum equal
to the greater of (i) 10.62% or (ii) the yield as of October 11, 2005 on ten-
year U.S. Treasury notes, plus 4.5%.
During 1995 the Company repaid a mortgage note recognizing a gain of
$267,946 net of applicable income taxes of $170,734.
In January 1996, the Company borrowed approximately $24.2 million under the
NACC line of credit and $10 million from an unrelated party to finance the
acquisition of nineteen motels from Forte USA, Inc. (see Note 9). In February
and March 1996, the Company borrowed approximately $700,000 from an unrelated
party and an additional $6.7 million under the NACC line of credit to finance
the acquisition of two additional motel properties and the land underlying one
of its properties (see Note 9). The $10 million note payable, repayable at
any time with a maturity date of January 31, 2001, bears interest, payable
quarterly, at 14% per annum and is secured by a guarantee of New Image.
In November 1996, the Company completed two separate financing transactions
with CS First Boston Corporation ("CSFB") pursuant to which the Company
borrowed approximately $37.2 million. The proceeds were utilized to repay the
entire outstanding borrowings under the NACC line of credit; and a partial
paydown of $1.6 million of the $10 million note referred to above. The CSFB
borrowings are secured by first mortgages on nineteen of the Company's motel
properties and a pledge of the stock of one of Motels of America, Inc.'s
subsidiaries. The terms of the notes and mortgages, among other things,
provide for a floating rate of interest adjusted monthly based on the
thirty-day LIBOR rate plus 3.37% and monthly payments of principal and
interest based on a twenty-year amortization period. The notes mature on
November 1, 1998.
In November 1996, the Company borrowed $3.9 million in a collateralized loan
facility, along with one of its affiliates. Such loan bears interest at the
rate of 250 basis points over the thirty-day LIBOR rate, payable monthly and
matures November 13, 1999.
In November 1996, the Company contributed the total of approximately $2.5
million to a newly formed subsidiary TAD Properties L.L.C. to cover financing
commitment fees and certain related expenses in connection with prospective
financing for new construction motel development program contemplated to be
pursued by the subsidiary.
The declaration and payment of dividends is restricted by the indenture
relating to the 12% Senior Subordinated Notes. At December 31, 1996, dividends
of $1,683,375 were eligible to be declared.
<PAGE>
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
6. Notes Payable and Senior Subordinated Notes-(Continued)
A summary of mortgage and other notes payable is as follows:
December 31,
1996 1995
Mortgage and other notes:
Mortgage note payable secured by 93
motels, with interest at 8.62% per annum
through October 10, 2005. Rate equal to
greater of 10.62% or ten-year Treasury
note plus 4.5% thereafter. Principal and
interest payable monthly; due October 11,
2015 . . . . . . . . . . . . . . . . . . $ 155,416,361 $ 158,337,556
Mortgage notes payable secured by 19
motels and a pledge of the stock of one
of Motels of America, Inc's subsidiaries,
with interest at a floating rate of LIBOR
plus 3.37%; Principal and interest
payable monthly; due November 1, 1998. . 37,089,632 ----
Various cross-collateralized, nonrecourse
mortgage notes secured by 7 motels and
the common stock of MOA Portfolio II,
Ltd., with interest at a floating rate of
LIBOR plus 1.75% with a cap of 9%;
monthly principal and interest payments;
due December 31, 1998 . . . . . . . . . . 19,485,345 20,505,824
Various mortgage notes payable currently
secured by 9 motels, with fixed interest
from 7% to 10.25%; principal and interest
payments payable monthly; due dates from
September 14, 1997 to November 1, 2001 . . . 7,404,715 12,039,408
Various mortgage notes payable currently
secured by 2 motels and undeveloped land,
with variable interest based on prime or
Treasury bill rates; principal and
interest payments payable monthly; due
dates from December 31, 1997 to June 1,
2001 . . . . . . . . . . . . . . . . . . 5,767,207 5,911,730
Mortgage note payable secured by a hotel,
with interest at LIBOR plus 1.75%,
principal and interest payments payable
monthly, due January 31, 2000 . . . . . 8,981,640 9,130,459
Note secured by Notes Receivable with
interest at a floating interest rate of
LIBOR plus 2.50%; monthly principal and
interest payment: due November 13,
1999 . . . . . . . . . . . . . . . . . . 3,900,000
Various notes payable secured by two
motels with fixed interest from 8% to
10%; principal and interest payment
payable monthly; due dates from June 28,
2000 to March 1, 2003 . . . . . . . . 804,815 ----
Mortgage note payable secured by a
guarantee of New Image Realty, Inc. with
a fixed interest rate of 14%; interest
payments payable quarterly; due January
23, 2001 . . . . . . . . . . . . . . . 8,400,000 ----
Industrial development revenue bonds
secured by a motel with interest payable
semiannually at 10.5%; annual sinking
fund redemptions of principal on December
1 through 2016 . . . . . . . . . . . . 3,645,000 3,700,000
Other notes payable . . . . . . . . . 252,832 347,537
------------- -------------
$251,147,547 $209,972,514
============= =============
Principal payments required on notes payable and the Senior Subordinated
Notes are scheduled as follows:
Years ended December 31,
1997 $ 10,207,437
1998 68,793,874
1999 5,352,137
2000 12,809,913
2001 14,070,464
Thereafter 219,913,722
-------------
$331,147,547
=============
<PAGE>
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
7. Leases
The Company leases certain properties, administrative offices, and
equipment under operating leases. The leases generally provide for the
Company to pay taxes, insurance, and maintenance expenses related to the
leased property. Rent expense was approximately $1,159,000, $988,000 and
$765,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Minimum annual rentals for leases on properties and the corporate office
for the five years subsequent to December 31, 1996 and thereafter, are
approximately as follows:
Years ended December 31,
1997 $ 769,000
1998 770,000
1999 755,000
2000 759,000
2001 680,000
Thereafter 14,546,000
------------
$18,279,000
============
8. Income Taxes
Total income tax expense was allocated as follows:
Year Ended December 31,
-----------------------------------------
1996 1995 1994
---------- ----------- ----------
Income from $ 487,761 $ 831,709 $ 301,425
Extraordinary item ---- 170,734 ----
---------- ----------- ----------
$ 487,761 $1,002,443 $ 301,425
========== =========== ==========
Income tax expense (benefit) attributable to income from operations
consists of:
Current Deferred Total
---------- ----------- ----------
Year ended December 31, 1996:
U.S. federal $ 910,476 $(516,139) $394,337
State and local 58,279 35,145 93,424
---------- ----------- ----------
$ 968,755 $(480,994) $487,761
========== =========== ==========
Year ended December 31, 1995:
U.S. federal $1,214,098 $(542,740) $671,358
State and local 224,649 (64,298) 160,351
---------- ----------- ----------
$1,438,747 $(607,038) $831,709
========== =========== ==========
Year ended December 31, 1994:
U.S. federal $ 16,445 $ 227,247 $243,692
State and local 428,957 (371,224) 57,733
---------- ----------- ----------
$ 445,402 $(143,977) $301,425
========== =========== ==========
8. Income Taxes-(Continued)
Income tax expense differs from the amounts computed by applying the U.S.
federal income tax rate of 34% to income before income taxes and extraordinary
item as a result of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
Computed "expected" tax expense $399,506 $713,032 $ 243,387
Increase in income
taxes resulting from:
State income taxes, net of
federal income tax benefit 61,659 105,832 38,104
Other, net 26,596 12,845 19,934
--------- --------- ----------
$487,761 $831,709 $ 301,425
========= ========= ==========
</TABLE>
The deferred tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts reported for income tax purposes are as follows:
December 31,
---------------------------
1996 1995
------------ ------------
Deferred tax assets:
Reserves $ (364,012) $ (376,706)
Certain bankruptcy costs (88,890) (182,042)
Partnership investments (3,681) (7,369)
Net state operating loss carryforwards (896,012) (990,823)
Federal tax credits carryover (792,394) (437,948)
Other, net (559,446) (222,541)
------------ ------------
Total deferred tax assets (2,704,435) (2,217,429)
Deferred tax liabilities:
Investment properties, principally
due to depreciation and purchase
accounting adjustments 6,389,000 6,382,988
------------ ------------
Total deferred tax liabilities 6,389,000 6,382,988
------------ ------------
Net deferred tax liabilities $ 3,684,565 $ 4,165,559
============ ============
<PAGE>
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
8. Income Taxes-(Continued)
The Company is a member of an affiliated group that files a consolidated
tax return for federal income tax purposes and has entered into a tax
allocation agreement with New Image and its parent corporation. In accordance
with the agreement, the Company's tax liability/benefit will be computed as if
the Company had filed its own consolidated tax return and is subject to tax on
all of its taxable income. During 1996 and 1995, the Company made federal tax
payments of approximately $0.5 million and $1.3 million, respectively, to the
parent corporation. At December 31, 1996, approximately $1.0 million is
available to offset required future federal tax payments to the parent
corporation, if any. For periods ending on or before February 28, 1994, any
current federal tax liability that would have been computed in accordance with
this agreement has been released and has been treated as a capital
contribution from New Image to the Company. At December 31, 1994,
stockholders' equity was reduced by $303,978 due to the federal tax benefit
realized from January 1, 1994 through February 28, 1994.
At December 31, 1996, the Company has net operating loss carryforwards
("NOLs") for state income tax purposes of approximately $11.2 million. The
NOLs, which are subject to certain limitations, expire at various dates
through 2010. At December 31, 1996, the Company also has approximately
$792,000 of tax credit carryforwards subject to certain limitations, which do
not expire.
9. Acquisitions and Divestitures
In January 1994, the Company acquired a hotel in Los Angeles, California in
exchange for $5,600,000 of outstanding advances to affiliates of the Company
and the assumption of $3,000,000 of debt. The hotel was built by New Image at
a total cost of approximately $8,600,000. Also in January 1994, the Company
acquired the previously unowned 50% interest in the Santa Monica Gateway hotel
and restaurant in exchange for a 1% common stock equity interest in Motels of
America, Inc., the result of which was an increase in investment properties of
$669,919.
In April, 1994, the Company acquired nine motel properties from Midwest
Lodging, Inc. ("Midwest") for $28,500,000 in cash. In addition, in April
1994, the Company acquired all of the outstanding stock of Tri-State for
$30,500,000 in cash, and the assumption of $15,000,000 of mortgage debt (see
Note 6) and a $6,750,000 note payable to certain former shareholders of Tri-
State. As a result of this transaction, the Company recorded a deferred tax
liability in the amount of $6,226,000. Tri-State owned fifteen motels and its
subsidiary owned certain restaurants and leasehold interests. Concurrently,
Tri-State's subsidiary was sold to the Company's parent which assumed the
$6,750,000 note.
In May through December 1994, the Company acquired seventeen additional
motel properties from unaffiliated parties for approximately $34.1 million in
cash and the assumption of $4.5 million of mortgage debt. The motels are
located principally in the Midwest and West regions of the United States.
In December 1994, the Company acquired a motel property in Charlotte, North
Carolina from an affiliate for $400,000 in cash and the assumption of
approximately $2.4 million of mortgage debt. The assets and liabilities
acquired are included in the financial statements at their historical basis as
they were acquired from a company under common control.
Pro forma unaudited results of perations for 1994 assuming the 1994
acquisitions had occurred at the beginning of 1994 are as follows:
1994
--------------
Total revenues $ 109,494,000
Net operating revenue 29,285,000
Income before extraordinary gain 492,000
Net operating income 492,000
Income before extraordinary gain
per common share 0.63
Net income per common share 0.63
Depreciation and amortization 10,105,000
In September and December 1995, the Company acquired two additional motel
properties from unaffiliated parties for approximately $4.7 million, of which
$3.7 million was paid from cash on hand and $1.0 million was borrowed. The
acquisitions have been accounted for as a purchase and the excess of the
purchase prices over the related historical bases have been allocated to the
investments in operating properties. The consolidated statements of
operations for the year ended December 31, 1995 reflect the operations of the
acquired motels for the period from the date of acquisition through December
31, 1995. Pro forma unaudited results of operations for 1994 and 1995
assuming the 1995 acquisitions had occurred at the beginning of 1994 would not
differ materially from the historical results.
In December 1995, the Company sold two motel properties for $4.1 million in
cash and a $300,000 note receivable; the Company recorded gains of $479,281.
In January 1996, the Company acquired nineteen motel properties from Forte
USA, Inc., a subsidiary of Forte Hotels, Inc., for $35.5 million.
In January through March 1996, the Company acquired two additional motel
properties and the land underlying one of its properties for approximately
$8.2 million.
In May through November 1996, the Company sold ten motel properties to
unaffiliated parties for approximately $15.8 million in net cash proceeds and
$6.3 million in notes receivable; the Company recorded a gain of $2.6 million.
Pro forma unaudited results for 1995 assuming the 1996 acquisitions had
occurred at the beginning of 1995 ar as shown below. Pro forma results for
1996 are not shown as such results would not differ materially from historical
results.
1995
-------------
Total revenue $131,865,949
Net operating revenue 34,179,661
Income before Extraordinary Gain 2,495,419
Net Income 2,763,365
Income before Extraordinary Gain
per common share 3.45
Net Income per common share 3.12
Depreciation and amortization 13,685,354
In January 1997, the Company sold a motel property for approximately
$0.9 million in cash and the assumption of $2.8 million of debt, the Company
recorded a gain of $0.7 million.
10. Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Mortgage and other notes receivable: The fair values of the Company's
mortgage and other notes receivable are estimated using discounted cash
flow analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings.
Mortgage and other notes payable: The fair values of the Company's mortgage
and other notes payable are estimated using discounted cash flow analyses,
based on the Company's current incremental borrowing rates for similar types
of borrowing arrangements.
12% Senior Subordinated Notes: The fair value of the Company's 12% Senior
Subordinated Notes are based on quoted market prices.
The carrying amounts and fair values of the Company's financial instruments
at December 31 are as follows:
Carrying Carying
Amount Fair Value Amount Fair Value
1996 1996 1995 1995
Cash and cash
equivalents $12,247,571 $12,247,571 $13,897,161 $13,897,161
Mortgage and
other notes
receivable 8,932,281 9,047,466 2,787,833 2,907,000
Secured notes
payable 251,147,547 250,506,863 209,972,514 207,886,000
12% Senior
Subordinated
Notes 76,406,397 68,800,000 76,115,100 79,400,000
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, therunto duly authorized, on the 24th day
of March, 1997.
MOTELS OF AMERICA, INC.
By: /s/ Kurt M. Mueller
----------------------------------
Kurt M. Mueller
President and Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Paul F. Wallace Director, Chairman and March 24, 1997
- --------------------------
Paul F. Wallace Chief Executive Offficer
Principal Executive Officer
/s/ Kurt M. Mueller Director, President and March 24, 1997
- --------------------------
Kurt M. Mueller Chief Operating Officer
Principal Executive Officer
/s/ Carl W. Desch Director March 24, 1997
- --------------------------
Carl W. Desch
/s/ J. Anthony Kouba Director March 24, 1997
- --------------------------
J. Anthony Kouba
/s/ Louis A. Scarrone, M.D. Director March 24, 1997
- --------------------------
Louis A. Scarrone, M.D.
/s/ Ronald P. Stewart Director March 24, 1997
- --------------------------
Ronald P. Stewart
/s/ John D. Simon Treasurer March 24, 1997
- -------------------------- and Secretary
John D. Simon
Principal Accounting Officer and
Principal Financial Officer
Supplemental Information to Be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
The Company did not submit an annual report to security holders
covering the registrants' last fiscal year. In addition, the Company did
not send proxy statements, any form of proxy or other proxy soliciting
material to security holders with respect to any annual or other meeting
of security holders.
<PAGE>
INDEX TO EXHIBITS
Sequential
Exhibit Page
Number Description Number
3.1 Certificate of Incorporation of Motels of America,
Inc. ("MOA" or the "Company") as amended to date,
incorporated by reference to Exhibit 3.1 to MOA's
Registration Statement on Form S-1 (No. 33-78866)
which became effective on July 13, 1994 (the "1994
Form S-1").
3.2 By-laws of MOA, incorporated by reference to
Exhibit 3.2 to the 1994 Form S-1.
4.1 Indenture dated April 14, 1994 for the 12% Senior
Subordinated Notes due 2004, incorporated by
reference to Exhibit 4.1 to the 1994 Form S-1.
4.2 Registration Rights Agreement dated as of April
14, 1994 by and among MOA, Alex. Brown and BT
Securities, incorporated by reference to Exhibit
4.2 to the 1994 Form S-1.
4.3 Loan Agreement between Motels of America, L.L.C.
and Nomura Asset Capital Corporation ("NACC")
dated as of September 15, 1995, incorporated by
reference to Exhibit 4.1 to MOA's Form 8-K filed
on November 4, 1995.
4.4 Form of Mortgage, Security Agreement, Assignment
of Rents and Fixture Filing between MOA-TL Corp.
and MOA-CS Corp., as Mortgagor to CS First Boston
Mortgage Capital Corp., as Mortgagee, dated as of
November 5, 1996.
10.1 Note Purchase Agreement dated as of October 20,
1994, among NACC and MOA, MOA Midwest Corp. and
Tri-State Inns, Inc. (the "Note Purchase
Agreement"), incorporated by reference to Exhibit
10.2 to MOA's Form 10-K for the fiscal year ended
December 31, 1994 (the "1994 Form 10-K").
10.1A Amendment No. 1 to the Note Purchase Agreement,
dated as of October 20, 1994, incorporated by
reference to Exhibit 10.2A to the 1994 Form 10-K.
10.1B Environmental Indemnity Agreement dated as of
October 20, 1994, incorporated by reference to
Exhibit 10.2B to the 1994 Form 10-K.
10.1C Amendment No. 2 to the Note Purchase Agreement,
dated as of December 16, 1994, incorporated by
reference to Exhibit 10.1B to MOA's Form 8-K filed
on February 7, 1996 (the "1996 Form 8-K").
Sequential
Exhibit Page
Number Description Number
10.1D Amendment No. 3 to the Note Purchase Agreement,
dated as of January 23, 1996, incorporated by
reference to Exhibit 10.1C to the 1996 Form 8-K.
10.2 Note Purchase Agreement dated as of January 23,
1996, among NACC and MOA-TL Corp., incorporated by
reference to Exhibit 10.2 to the 1996 Form 8-K.
10.3 $10,000,000 Promissory Note of MOA-TL Holding
Corp. payable to HFS Incorporated, dated as of
January 23, 1996, incorporated by reference to
Exhibit 10.3 to the 1996 Form 8-K.
10.4 Asset Purchase Agreement dated as of December 19,
1995, by and among MOA, Forte Hotels, Inc. and
Forte USA, Inc. (the "Asset Purchase Agreement"),
incorporated by reference to Exhibit 10.4 to the
1996 Form 8-K.
10.4A First Amendment to the Asset Purchase Agreement,
dated as of January 23, 1996, incorporated by
reference to Exhibit 10.4A to the 1996 Form 8-K.
10.5 Employment Agreement of Daniel W. Daniele dated
September 14, 1994, incorporated by reference to
Exhibit 10.14 to the 1994 Form 10-K.
10.6 $20,000,000 Promissory Note of MOA-TL Corp. payable
to CS First Boston Mortgage Capital Corp., dated as
of November 5, 1996.
10.7 $17,150,000 Promissory Note of MOA-CS Corp. payable
to CS First Boston Mortgage Capital Corp., dated as
of November 5, 1996.
21.1 Subsidiaries of MOA.
EXHIBIT 4.4
DRAFT DATED NOVEMBER 4, 1996
MARKED TO SHOW CHANGES
FROM DRAFT DATED OCTOBER 31, 1996
_________________________________________________________________________
MOA-TL CORP.,
as Mortgagor
to
CS FIRST BOSTON MORTGAGE CAPITAL CORP.,
as Mortgagee
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND FIXTURE FILING
_________________________
Dated: November __, 1996
PREPARED BY AND UPON RECORDATION RETURN TO:
Brown & Wood LLP
One World Trade Center
57th Floor
New York, New York 10048
Attention: David J. Weinberger, Esq.
_________________________________________________________________________
INDEX
Page
----
ARTICLE I: DEFINITIONS
Section 1.01. Certain Definitions. 6
ARTICLE II: COVENANTS, WARRANTIES
AND REPRESENTATIONS OF MORTGAGOR
Section 2.01. Payment of Debt 31
Section 2.02. Representations and Warranties of Mortgagor 31
Section 2.03. Further Acts, etc 40
Section 2.04. Recording of Mortgage, etc 40
Section 2.05. Representations and Warranties as to the
Mortgaged Property 41
Section 2.06. Removal of Lien 47
Section 2.07. Cost of Defending and Upholding this Mortgage
Lien 48
Section 2.08. Use of the Mortgaged Property 49
Section 2.10. Litigation 51
Section 2.11. 51
Section 2.12. Updates of Representations 51
ARTICLE III: INSURANCE AND CASUALTY RESTORATION
Section 3.01. Insurance Coverage 52
Section 3.02. Policy Terms 54
Section 3.03. Assignment of Policies 55
Section 3.04. Casualty Restoration 56
Section 3.05. Compliance with Insurance Requirements 61
Section 3.06. Event of Default During Restoration 62
Section 3.07. Application of Proceeds to Debt Reduction 63
ARTICLE IV: IMPOSITIONS
Section 4.01. Payment of Impositions, Utilities and
Taxes, etc. 63
Section 4.02. Deduction from Value 64
Section 4.03. No Joint Assessment 64
Section 4.04. Right to Contest 65
Section 4.05. No Credits on Account of the Debt 66
Section 4.06. Documentary Stamps. 66
ARTICLE V: CENTRAL CASH MANAGEMENT
Section 5.01. Cash Flow 66
Section 5.02. Establishment of Sub-Accounts. 67
Section 5.03. Permitted Investments 68
Section 5.04. Interest on Accounts 69
Section 5.05. Monthly Funding of Sub-Accounts 69
Section 5.06. Payment of Basic Carrying Costs 72
Section 5.07. Debt Service Payment Sub-Account 72
Section 5.08. Recurring Replacement Reserve Sub-Account 73
Section 5.09. Operation and Maintenance Expense Sub-Account 73
Section 5.10. 74
Section 5.11. 74
Section 5.12. Performance of Engineering Work 74
Section 5.13. Loss Proceeds 75
ARTICLE VI: CONDEMNATION
Section 6.01. Condemnation 77
ARTICLE VII: LEASES AND RENTS
Section 7.01. Assignment 78
Section 7.02. Management of Mortgaged Property 79
ARTICLE VIII: MAINTENANCE AND REPAIR
Section 8.01. Maintenance and Repair of the Mortgaged
Property; Alterations; Replacement of
Equipment 83
ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY
Section 9.01. Other Encumbrances 85
Section 9.02. No Transfer 85
Section 9.03. Due on Sale 85
Section 9.04. Permitted Sale 86
ARTICLE X: CERTIFICATES
Section 10.01. Estoppel Certificates 87
ARTICLE XI: NOTICES
Section 11.01. Notices 87
ARTICLE XII: INDEMNIFICATION
Section 12.01. Indemnification Covering Mortgaged Property 88
ARTICLE XIII: DEFAULTS
Section 13.01. Events of Default 89
Section 13.02. Remedies 92
Section 13.03. Payment of Debt After Default 96
Section 13.04. Possession of the Mortgaged Property 97
Section 13.05. Interest After Default 97
Section 13.06. Mortgagor's Actions After Default 97
Section 13.07. Control by Mortgagee After Default 98
Section 13.08. Right to Cure Defaults 98
Section 13.09. Late Payment Charge 99
Section 13.10. Recovery of Sums Required to Be Paid 99
Section 13.11. Marshalling and Other Matters 99
Section 13.12. Tax Reduction Proceedings 99
Section 13.13. General Provisions Regarding Remedies 100
ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS
Section 14.01. Compliance with Legal Requirements 101
Section 14.02. Compliance with Recorded Documents; No
Future Grants 102
ARTICLE XV: PREPAYMENT; RELEASE
Section 15.01. Prepayment 102
Section 15.02. Release of Mortgaged Property 103
Section 15.03. Repayment Fee 104
ARTICLE XVI: ENVIRONMENTAL COMPLIANCE
Section 16.01. Covenants, Representations and Warranties 105
Section 16.02. Environmental Indemnification 108
ARTICLE XVII: ASSIGNMENTS
Section 17.01. Participations and Assignments 109
ARTICLE XVIII: MISCELLANEOUS
Section 18.01. Right of Entry 110
Section 18.02. Cumulative Rights 110
Section 18.03. Liability 110
Section 18.04. Exhibits Incorporated 110
Section 18.05. Severable Provisions 110
Section 18.06. Duplicate Originals 110
Section 18.07. No Oral Change 110
SECTION 18.08. WAIVER OF COUNTERCLAIM, ETC. 111
Section 18.09. Headings; Construction of Documents; etc 111
Section 18.10. Sole Discretion of Mortgagee 111
Section 18.11. Waiver of Notice 111
Section 18.12. Covenants Run with the Land 111
SECTION 18.13. APPLICABLE LAW 112
Section 18.14. Security Agreement 112
Section 18.15. Actions and Proceedings 113
Section 18.16. Usury Laws 114
Section 18.17. Remedies of Mortgagor 114
Section 18.18. Offsets, Counterclaims and Defenses 114
Section 18.19. No Merger 114
Section 18.20. Restoration of Rights 115
Section 18.21. Waiver of Statute of Limitations 115
Section 18.22. Advances 115
Section 18.23. Application of Default Rate Not a Waiver 115
Section 18.24. Intervening Lien 115
Section 18.25. No Joint Venture or Partnership 116
Section 18.26. Time of the Essence. 116
Section 18.27. Mortgagor's Obligations Absolute. 116
Section 18.28. Publicity 116
Section 18.29. Securitization Opinions 117
Section 18.30. Cooperation with Rating Agencies 117
Section 18.31. Securitization Financials 117
Section 18.32. Exculpation 117
Section 18.33. Intentionally Deleted 119
Section 18.34. Certain Matters Relating to Mortgaged
Property in the State of Illinois 119
Section 18.35. Certain Matters Relating to Mortgaged
Property Located in the State of Michigan 120
Section 18.36. Certain Matters Relating to Mortgaged
Property Located in the State of Florida 122
Section 18.37. Certain Matters Relating to Mortgaged
Property Located in the State of Ohio 123
Section 18.38. Certain Matters Relating to Mortgaged
Property Located in the State of Kentucky 123
Section 18.39. Certain Matters Relating to Mortgaged
Property Located in the State of Alabama 124
Section 18.40. Certain Matters Relating to Mortgaged
Property Located in the State of
South Carolina 127
Exhibit A - Legal Description of Premises
Exhibit B - Initial Sub-Account Deposits
Exhibit C - Form of Cash Flow Statement
Exhibit D - Required Engineering Work
Exhibit E - Form of Sufficiency Notice
Exhibit F - Cross-collateralized Properties and Initial Allocated
Loan Amounts
Exhibit G - Form of Credit Card Payments Direction Letter
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE FILING
is made as of the ____ day of November, 1996, by the party set forth on the
signature page hereto as Mortgagor, having the address set forth on the
signature page hereto (hereinafter referred to as "Mortgagor"), to CS FIRST
BOSTON MORTGAGE CAPITAL CORP., having an address at 55 East 52nd Street, New
York, New York 10055 (hereinafter referred to as "Mortgagee").
W I T N E S S E T H:
WHEREAS, Mortgagee has authorized a loan (hereinafter referred to as the
"Loan") to the Mortgagor in the maximum principal sum of TWENTY MILLION
DOLLARS and NO/100 ($20,000,000.00) hereof (hereinafter referred to as the
"Loan Amount"), which Loan is evidenced by that certain note, dated the date
hereof (hereinafter referred to as the "Note") given by Mortgagor, as maker,
to Mortgagee, as payee;
WHEREAS, in consideration of the Loan, the Mortgagor has agreed to make
payments in amounts sufficient to pay and redeem, and provide for the payment
and redemption of the principal of, premium, if any, and interest on the Note
when due;
WHEREAS, Mortgagor desires by this Mortgage to provide for, among other
things, the issuance of the Note and for the deposit, deed and pledge by
Mortgagor with, and the creation of a security interest in favor of,
Mortgagee, as security for the Mortgagor's obligations to Mortgagee from time
to time pursuant to the Note and the other Loan Documents;
WHEREAS, Mortgagor and Mortgagee intend these recitals to be a material
part of this Mortgage; and
WHEREAS, all things necessary to make this Mortgage the valid and legally
binding obligation of Mortgagor in accordance with its terms, for the uses and
purposes herein set forth, have been done and performed.
NOW THEREFORE, to secure the payment of the principal of, prepayment
premium (if any) and interest on the Note and all other obligations,
liabilities or sums due or to become due under this Mortgage, the Note or any
other Loan Document, including, without limitation, interest on said
obligations, liabilities or sums (said principal, premium, interest and
other sums being hereinafter referred to as the "Debt"), and the performance
of all other covenants, obligations and liabilities of the Mortgagor pursuant
to the Loan Documents, Mortgagor has executed and delivered this Mortgage;
and Mortgagor has irrevocably granted, and by these presents and by the
execution and delivery hereof does hereby irrevocably grant, bargain, sell,
alien, demise, release, convey, assign, transfer, deed, hypothecate, pledge,
set over, warrant, mortgage and confirm to Mortgagee, its successors and
assigns, forever with power of sale, all right, title and interest of
Mortgagor in and to all of the following property, rights, interests and
estates:
(a) the plot(s), piece(s) or parcel(s) of real property described in
Exhibit A attached hereto and made a part hereof (individually and
collectively, hereinafter referred to as the "Premises");
(b) (i) all buildings, foundations, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and
improvements of every kind or nature now or hereafter located on the
Premises (hereinafter collectively referred to as the "Improvements");
and (ii) to the extent permitted by law, the name or names, if any, as
may now or hereafter be used for each Improvement, and the goodwill
associated therewith;
(c) all easements, negative reciprocal easements, rights-of-way, strips
and gores of land, streets, ways, alleys, passages, sewer rights, water,
water courses, water rights and powers, ditches, ditch rights, reservoirs
and reservoir rights, air rights and development rights, lateral support,
drainage, gas, oil and mineral rights, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way belonging, relating
or pertaining to the Premises or the Improvements and the reversion and
reversions, remainder and remainders, whether existing or hereafter
acquired, and all land lying in the bed of any street, road or avenue,
opened or proposed, in front of or adjoining the Premises to the center line
thereof and any and all sidewalks, drives, curbs, passageways, streets,
spaces and alleys adjacent to or used in connection with the Premises and/or
Improvements and all the estates, rights, titles, interests, property,
possession, claim and demand whatsoever, both in law and in equity, of
Mortgagor of, in and to the Premises and Improvements every part and
parcel thereof, with the appurtenances thereto;
(d) all machinery, equipment, fittings, apparatus, appliances, furniture,
furnishings, tools, fixtures (including but not limited to all inventory
and articles of personal property and accessions thereof and renewals,
replacements thereof and substitutions therefor (including, but not
limited to, beds, bureaus, chiffonniers, chests, chairs, desks, lamps,
mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains,
shades, venetian blinds, screens, paintings, hangings, pictures, divans,
couches, luggage carts, luggage racks, stools, sofas, chinaware, linens,
pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities,
dining room wagons, keys or other entry systems, bars, bar fixtures,
liquor and other drink dispensers, icemakers, radios, television sets,
intercom and paging equipment, electric and electronic equipment,
dictating equipment, private telephone systems, medical equipment,
potted plants, heating, lighting and plumbing fixtures, fire prevention
and extinguishing apparatus, cooling and air-conditioning systems,
elevators, escalators, fittings, plants, apparatus, stoves, ranges,
refrigerators, laundry machines, tools, machinery, engines, dynamos,
motors, boilers, incinerators, switchboards, conduits, compressors,
vacuum cleaning systems, floor cleaning, waxing and polishing equipment,
call systems, brackets, electrical signs, bulbs, bells, ash and fuel,
conveyors, cabinets, lockers, shelving, spotlighting equipment,
dishwashers, garbage disposals, washers and dryers)), other customary
hotel equipment and other property of every kind and nature whatsoever
owned by Mortgagor, or in which Mortgagor has or shall have an interest,
now or hereafter located upon, or in, and used in connection with the
Premises or the Improvements, or appurtenant thereto, and all building
equipment, materials and supplies of any nature whatsoever owned by
Mortgagor, or in which Mortgagor has or shall have an interest, now or
hereafter located upon, or in, and used in connection with the Premises
or the Improvements or appurtenant thereto, (hereinafter, all of the
foregoing items described in this paragraph (d) are collectively called
the "Equipment"), all of which, and any replacements, modifications,
alterations and additions thereto, to the extent permitted by applicable
law, shall be deemed to constitute fixtures (the "Fixtures"), and are
part of the real estate and security for the payment of the Debt and the
performance of Mortgagor's obligations. To the extent any portion of the
Equipment is not real property or Fixtures under applicable law, it shall
be deemed to be personal property, and this Mortgage shall constitute a
security agreement creating a security interest therein in favor of
Mortgagee under the UCC;
(e) all awards or payments, including interest thereon, which may
hereafter be made with respect to the Premises, the Improvements, the
Fixtures, or the Equipment, whether from the exercise of the right of
eminent domain (including but not limited to any transfer made in lieu of
or in anticipation of the exercise of said right), or for a change of grade,
or for any other injury to or decrease in the value of the Premises, the
Improvements or the Equipment or refunds with respect to the payment of
property taxes and assessments, and all other proceeds of the conversion,
voluntary or involuntary, of the Premises, Improvements, Equipment,
Fixtures or any other Mortgaged Property or part thereof into cash or
liquidated claims;
(f) all leases, tenancies, licenses, franchise agreements, and other
agreements affecting the use, enjoyment or occupancy of the Premises,
the Improvements, the Fixtures, or the Equipment or any portion thereof
now or hereafter entered into, whether before or after the filing by or
against Mortgagor of any petition for relief under the Bankruptcy Code
and all reciprocal easement agreements, license agreements and other
agreements with Pad Owners (hereinafter collectively referred to as the
"Leases"), together with all receivables, revenues, rentals, receipts and
payments received from the rental of guest rooms, meeting rooms, beverage
or food sales, and facilities, vending machines, telephone systems, guest
laundry and all other payments received from guests or visitors of the
Premises, and other items of revenue, receipts or income as identified in
the Uniform System of Accounts for Hotels, 8th Revised Edition,
International Association of Hospitality Accountants and Hotel Association
of New York, and all cash or security deposits, lease termination payments,
advance rentals and payments of similar nature and guarantees or other
security held by Mortgagor in connection therewith to the extent of
Mortgagor's right or interest therein and all remainders, reversions and
other rights and estates appurtenant thereto, and all base, fixed,
percentage or additional rents, and other rents, oil and gas or other
mineral royalties, and bonuses, issues, profits and rebates and refunds
or other payments made by any Governmental Authority from or relating to
the Premises, the Improvements, the Fixtures or the Equipment plus all
rents, common area charges and other payments, whether paid or accruing
before or after the filing by or against Mortgagor of any petition for
relief under the Bankruptcy Code (the "Rents") and all proceeds from the
sale or other disposition of the Leases and the right to receive and apply
the Rents to the payment of the Debt;
(g) all proceeds of and any unearned premiums on any insurance policies
covering the Premises, the Improvements, the Fixtures, the Rent or the
Equipment, including, without limitation, the right to receive and apply
the proceeds of any insurance, judgments, or settlements made in lieu
thereof, for damage to the Premises, the Improvements, the Fixtures or
the Equipment and all refunds or rebates of Impositions, and interest
paid or payable with respect thereto;
(h) all monies deposited or to be deposited in any funds or accounts
maintained or deposited with Mortgagee, or its assigns, in connection
herewith, including, without limitation, the Rent Account, the Security
Deposit Account (to the extent permitted by law), the Engineering Escrow
Sub-Account, the Central Account, the Basic Carrying Costs Sub-Account,
the Debt Service Payment Sub-Account, the Recurring Replacement Reserve
Sub-Account, the Operation and Maintenance Expense Sub-Account and the
Curtailment Reserve Sub-Account;
(i) all accounts receivable, contract rights, franchises, interests,
estate or other claims, both at law and in equity, relating to the Premises,
the Improvements, the Fixtures or the Equipment, not included in Rents;
(j) all claims against any Person with respect to any damage to the
Premises, the Improvements, the Fixtures or Equipment, including, without
limitation, damage arising from any defect in or with respect to the design
or construction of the Improvements, the Fixtures or the Equipment and any
damage resulting therefrom;
(k) all deposits or other security or advance payments, including rental
payments made by or on behalf of Mortgagor to others, with respect to
(i) insurance policies, (ii) utility services, (iii) cleaning, maintenance,
repair or similar services, (iv) refuse removal or sewer service,
(v) parking or similar services or rights and (vi) rental of Equipment,
if any, relating to or otherwise used in the operation of the Premises,
Improvements, the Fixtures or Equipment;
(l) all intangible property relating to the Premises, the Improvements,
the Fixtures or the Equipment or its operation, including, without
limitation, trade names, trademarks, logos, building names and goodwill;
(m) all advertising material, guaranties, warranties, building permits,
other permits, licenses, plans and specifications, shop and working
drawings, soil tests, appraisals and other documents, materials and/or
personal property of any kind now or hereafter existing in or relating to
the Premises, the Improvements, the Fixtures, and the Equipment;
(n) all drawings, designs, plans and specifications prepared by the
architects, engineers, interior designers, landscape designers and any other
consultants or professionals for the design, development, construction,
repair and/or improvement of the Mortgaged Property, as amended from time
to time;
(o) the right, in the name of and on behalf of Mortgagor, to appear in
and defend any action or proceeding brought with respect to the Premises,
the Improvements, the Fixtures or the Equipment and to commence any action
or proceeding to protect the interest of Mortgagee in the Premises, the
Improvements, the Fixtures or the Equipment; and
(p) all proceeds of each of the foregoing.
All of the foregoing items (a) through (p), together with all of the
right, title and interest of Mortgagor therein, are collectively
referred to as the "Mortgaged Property".
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the proper use and benefit of Mortgagee, and the successors
and assigns of Mortgagee in fee simple, forever.
PROVIDED, ALWAYS, and these presents are upon this express condition,
if Mortgagor shall well and truly pay and discharge the Debt and
perform and observe the terms, covenants and conditions set forth in the
Loan Documents, then these presents and the estate hereby granted shall
cease and be void.
AND Mortgagor covenants with and warrants to Mortgagee that:
II: DEFINITIONS
1. Certain Definitions.
For all purposes of this Mortgage, except as otherwise expressly
provided or unless the context clearly indicates a contrary intent:
(1) the capitalized terms defined in this Section have
the meanings assigned to them in this Section, and include the plural
as well as the singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(3) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Mortgage as a whole and not to any
particular Section, or other subdivision.
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For the
purposes of this definition, "control", when used with respect to any
specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have the meanings correlative to the
foregoing.
"Aggregate Debt Service Coverage" shall mean the quotient obtained by
dividing the aggregate Net Operating Income for all of the
Cross-collateralized Properties for a trailing twelve (12) month period
by the aggregate payments of interest, principal, and all other sums
(not including the amount of principal payable upon Maturity) due for
such period under the Note (determined as of the date the calculation
of Aggregate Debt Service Coverage is required or requested hereunder).
"Allocated Loan Amount" shall mean the Initial Allocated Loan Amount of
each Cross-collateralized Property as such amount may be adjusted from
time to time as hereinafter set forth. Upon each adjustment in the
principal portion of the Debt (each a "Total Adjustment"), whether as
a result of amortization, or prepayment or as otherwise expressly
provided herein or in any other Loan Document, each Allocated Loan
Amount shall be increased or decreased, as the case may be, by an
amount equal to the product of (i) the Total Adjustment, and (ii) a
fraction, the numerator of which is the applicable Allocated Loan
Amount (prior to the adjustment in question) and the denominator of
which is the Debt prior to the adjustment to the principal portion
of the Debt which results in the recalculation of the Allocated Loan
Amount. However, when the principal portion of the Debt is reduced as
a result of Mortgagee's receipt of (i) a Release Price or, in
connection with a Release, funds sufficient to prepay a portion of the
Debt in the amount of the Release Price, the Allocated Loan Amount for
the Cross-collateralized Property being released and discharged from
the encumbrance of the applicable Cross-collateralized Mortgage and
related Loan Documents shall be reduced to zero (the amount by which
such Allocated Loan Amount is reduced being referred to as the
"Released Allocated Amount"), and each other Allocated Loan Amount
shall be decreased by an amount equal to the product of (1) the excess
of (a) the Release Price over (b) the Released Allocated Amount and
(2) a fraction, the numerator of which is the applicable Allocated Loan
Amount (prior to the adjustment in question) and the denominator of
which is the aggregate of all of the Allocated Loan Amounts other than
the Allocated Loan Amount applicable to the Cross-collateralized
Property for which the Release Price was paid , or (ii) Net Proceeds,
the Allocated Loan Amounts for the Cross-collateralized Property with
respect to which the Net Proceeds were received shall be reduced to
zero (the amount by which such Allocated Loan Amount is reduced being
referred to as the "Foreclosed Allocated Amount") and each other
Allocated Loan Amount shall (x) if the Net Proceeds exceed the
Foreclosed Allocated Amount (such excess being referred to as the
"Surplus Net Proceeds"), be decreased by an amount equal to the product
of (1) the Surplus Net Proceeds and (2) a fraction, the numerator of
which is the applicable Allocated Loan Amount (prior to the adjustment
in question) and the denominator of which is the aggregate of all of
the Allocated Loan Amounts (prior to the adjustment in question) other
than the Allocated Loan Amount applicable to the Cross-collateralized
Property with respect to which the Net Proceeds were received (such
fraction being referred to as the "Net Proceeds Adjustment Fraction"),
(y) if the Foreclosed Allocated Amount exceeds the Net Proceeds (such
excess being referred to as the "Net Proceeds Deficiency"), be
increased by an amount equal to the product of (1) the Net Proceeds
Deficiency and (2) the Net Proceeds Adjustment Fraction, or (z) if the
Net Proceeds equal the Foreclosed Allocated Amount, remain unadjusted,
or (iii) Loss Proceeds or partial prepayments, made in accordance with
Section 15.01 hereof, the Allocated Loan Amount for the
Cross-collateralized Property with respect to which the Loss Proceeds
or voluntary prepayments, were received shall be decreased by an amount
equal to the sum of (A) with respect to Loss Proceeds, Loss Proceeds
which are applied towards the reduction of the Debt as set forth in
Article III hereof, if any, and (B) with respect to voluntary
prepayments, the amount of any such voluntary prepayment which is
applied towards the reduction of the Debt in accordance with the
provisions of the Note, if any, but in no event shall the Allocated
Loan Amount for the Cross-collateralized Property with respect to
which the Loss Proceeds or voluntary prepayments, were received be
reduced to an amount less than zero (the amount by which such Allocated
Loan Amount is reduced being referred to as the "Loss Proceeds or
Prepayment Allocated Amount") and each other Allocated Loan Amount
shall be decreased by an amount equal to the product of (1) the excess
of (a) the Loss Proceeds or such partial prepayments over (b) the Loss
Proceeds or Prepayment Allocated Amount, and (2) a fraction, the
numerator of which is the applicable Allocated Loan Amount (prior to
the adjustment in question) and the denominator of which is the
aggregate of all of the Allocated Loan Amounts (prior to the adjustment
in question) other than the Allocated Loan Amount applicable to the
Cross-collateralized Property to which such Loss Proceeds or partial
prepayments were applied.
"Annual Budget" shall have the meaning set forth in Section 2.09(i)
hereof.
"Appraisal" shall mean the appraisal of the Mortgaged Property and all
supplemental reports or updates thereto previously delivered to
Mortgagee in connection with the Loan.
"Appraiser" shall mean the Person who prepared the Appraisal.
"Approved Manager Standard" shall mean the standard of business
operations, practices and procedures customarily employed by entities
having a senior executive with at least seven (7) years' experience in
the management of motel properties which manages not less than 2,500
rooms, including, without limitation, certain motels which contain
more than 100 rooms.
"Architect" shall have the meaning set forth in Section 3.04(b)(i)
hereof.
"Assignment" shall mean the Assignment of Leases and Rents and
Security Deposits of even date herewith relating to the Mortgaged
Property given by Mortgagor to Mortgagee.
"Bank" shall mean LaSalle National Bank, or any successor bank
hereafter selected by Mortgagee.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq.
"Basic Carrying Costs" shall mean the sum of the following costs
associated with the Mortgaged Property: (a) Impositions and
(b) insurance premiums.
"Basic Carrying Costs Monthly Installment" shall mean Mortgagee's
estimate of one-twelfth (1/12th) of the annual amount for Basic Carrying
Costs. "Basic Carrying Costs Monthly Installment" shall also include,
if required by Mortgagee, a sum of money which, together with such
monthly installments, will be sufficient to make the payment of each
such Basic Carrying Cost at least thirty (30) days prior to the date
initially due. Should such Basic Carrying Costs not be ascertainable
at the time any monthly deposit is required to be made, the Basic
Carrying Costs Monthly Installment shall be determined by Mortgagee in
its reasonable discretion on the basis of the aggregate Basic Carrying
Costs for the prior Fiscal Year or month or the prior payment period for
such cost. As soon as the Basic Carrying Costs are fixed for the then
current Fiscal Year, month or period, the next ensuing Basic Carrying
Costs Monthly Installment shall be adjusted to reflect any deficiency
or surplus in prior monthly payments. If at any time during the term
of the Loan Mortgagee determines that there will be insufficient funds
in the Basic Carrying Costs Sub-Account to make payments when they
become due and payable, Mortgagee shall have the right to adjust the
Basic Carrying Costs Monthly Installment such that there will be
sufficient funds to make such payments.
"Basic Carrying Costs Sub-Account" shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 hereof and
maintained pursuant to Section 5.06 hereof.
"Business Day" shall mean any day other than (a) a Saturday or Sunday,
or (b) a day on which banking and savings and loan institutions in the
State of New York are authorized or obligated by law or executive order
to be closed, or at any time during which the Loan is an asset of a
securitization, the cities, states and/or commonwealths used in the
comparable definition of "Business Day" in the securitization documents.
"Central Account" shall mean an Eligible Account, maintained at the Bank,
in the name of Mortgagee or its successors or assigns (as secured party)
as may be designated by Mortgagee.
"Closing Date" shall mean the date of the Note.
"Code" shall mean the Internal Revenue Code of 1986, as amended and as
it may be further amended from time to time, any successor statutes
thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto.
"Collection Account" shall mean a demand deposit account designated by
Mortgagee, which shall be an Eligible Account, to which payments of
Debt are transferred.
"Condemnation Proceeds" shall mean all of the proceeds in respect to any
Taking or purchase in lieu thereof.
"Contractual Obligation" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"CPI" shall mean "The Consumer Price Index (New Series) (Base Period
1982-84=100) (all items for all urban consumers)" issued by the Bureau of
Labor Statistics of the United States Department of Labor (the "Bureau").
If the CPI ceases to use the 1982-84 average equaling 100 as the basis of
calculation, or if a change is made in the term, components or number of
items contained in said index, or if the index is altered, modified,
converted or revised in any other way, then the index shall be adjusted
to the figure that would have been arrived at had the change in the
manner of computing the index in effect at the date of this Mortgage not
been altered. If at any time during the term of this Mortgage the CPI
shall no longer be published by the Bureau, then any comparable index
issued by the Bureau or similar agency of the United States issuing
similar indices shall be used in lieu of the CPI.
"Cross-collateralized Mortgage" shall mean each mortgage, deed of trust,
deed to secure debt, security agreement, assignment of rents and
fixture filings as originally executed or as same may hereafter from
time to time be supplemented, amended, modified or extended by one or
more indentures supplemental thereto granted by Mortgagor to Mortgagee
as security for the Note.
"Cross-collateralized Property" shall mean each parcel or parcels of
real property encumbered by a Cross-collateralized Mortgage as
identified on Exhibit F attached hereto and made a part hereof.
"Current Month" shall mean each Interest Accrual Period.
"Debt" shall have the meaning set forth in the recitals hereto.
"Debt Service" shall mean the amount of interest and principal
payments due and payable in accordance with the Note during an
applicable period.
"Debt Service Coverage" shall mean, for any specified period, the
quotient obtained by dividing Net Operating Income for such specified
period by the sum of the (a) aggregate payments of interest, principal,
assuming payments based on a constant rate equal to the greater of
10.48% per annum and the actual constant rate, plus all other sums due
for such specified period under the Note (determined as of the date the
calculation of Debt Service Coverage is required or requested hereunder)
and (b) aggregate payments of interest and principal, and all other
sums due for such specified period pursuant to the terms of subordinate
financing, if any, then affecting the Mortgaged Property or, if Debt
Service Coverage is being calculated in connection with a request for
consent to any subordinate financing, then proposed.
"Debt Service Payment Sub-Account" shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 hereof and
maintained pursuant to Section 5.07 hereof for the purposes of making
Debt Service payments.
"Default" shall mean any Event of Default or event which would
constitute an Event of Default if all requirements in connection
therewith for the giving of notice, the lapse of time, and the happening
of any further condition, event or act, had been satisfied.
"Default Rate" shall mean the lesser of (a) the highest rate allowable
at law and (b) five hundred twenty five (525) basis points above the
Interest Rate.
"Default Rate Interest" shall mean, to the extent the Default Rate
becomes applicable, interest in excess of the interest which would have
accrued on (a) the principal amount of the Loan which is outstanding
from time to time and (b) any accrued but unpaid interest, if the
Default Rate was not applicable.
"Development Laws" shall mean all applicable subdivision, zoning,
environmental protection, wetlands protection, or land use laws or
ordinances, and any and all applicable rules and regulations of any
Governmental Authority promulgated thereunder or related thereto.
"Eligible Account" shall mean a segregated account which is either
(i) an account or accounts maintained with a depository institution or
trust company the long term unsecured debt obligations of which are
rated by each of the Rating Agencies (or, if not rated by Duff &
Phelps Credit Rating Co. ("DCR") or Fitch Investors Services L.P.
("Fitch"), otherwise acceptable to DCR or Fitch, as applicable, as
confirmed in writing that such account would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any certificates issued in connection with a
Securitization) in its highest rating category at all times (or, in the
case of the Collection Account and Basic Carrying Costs Sub-Account, the
long term unsecured debt obligations of which are rated at least "AA" or
the equivalent by each of the Rating Agencies (or, if not rated by DCR
or Fitch, otherwise acceptable to DCR or Fitch, as applicable, as
confirmed in writing that such account would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any certificates issued in connection with a
Securitization) or, if the funds in such account are to be held in such
account for less than 30 days, the short term obligations of which are
rated by each of the Rating Agencies (or, if not rated by DCR or Fitch,
otherwise acceptable to DCR or Fitch, as applicable, as confirmed in
writing that such account would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings
assigned to any certificates issued in connection with a Securitization)
in its highest rating category at all times) or (ii) a segregated trust
account or accounts maintained with a federal or state chartered
depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution
is subject to regulations substantially similar to 12 C.F.R. Section
9.10(b), having in either case a combined capital and surplus of at least
$100,000,000 and subject to supervision or examination by federal and
state authority, or otherwise acceptable (as evidenced by a written
confirmation from each Rating Agency that such account would not, in and
of itself, cause a downgrade, qualification or withdrawal of the then
current ratings assigned to any certificates issued in connection with
a Securitization) to each Rating Agency, which may be an account
maintained by Mortgagee or its agents. Eligible Accounts may bear
interest. The title of each Eligible Account shall indicate that the
funds held therein are held in trust for the uses and purposes set forth
herein.
"Engineer" shall have the meaning set forth in Section 3.04(b)(i)
hereof.
"Engineering Escrow Sub-Account" shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 hereof, maintained
pursuant to Section 5.12 hereof and funded on the Closing Date relating
to payments for any Required Engineering Work.
"Environmental Problem" shall mean any of the following:
(a) the presence of any Hazardous Material on, in, under, or
above all or any portion of the Mortgaged Property;
(b) the release or threatened release of any Hazardous Material
from or onto the Mortgaged Property;
(c) the violation or threatened violation of any Environmental
Statute with respect to the Mortgaged Property; or
(d) the failure to obtain or to abide by the terms or conditions
of any permit or approval required under any Environmental Statute with
respect to the Mortgaged Property.
A condition described above shall be an Environmental Problem regardless of
whether or not any Governmental Authority has taken any action in connection
with the condition and regardless of whether that condition was in existence
on or before the date hereof.
"Environmental Report" shall mean the environmental audit report for the
Mortgaged Property and any supplements or updates thereto, previously
delivered to Mortgagee in connection with the Loan.
"Environmental Statute" shall mean any effective, applicable or
relevant federal, state or local statute, ordinance, rule or regulation, any
judicial or administrative order (whether or not on consent) or judgment
applicable to Mortgagor or the Mortgaged Property including, without
limitation, any judgment or settlement based on common law theories,
and any provisions or condition of any permit, license or other
authorization binding on Mortgagor relating to (a) the protection of the
environment, the safety and health of persons (including employees) or the
public welfare from actual or potential exposure (or effects of exposure)
to any actual or potential release, discharge, disposal or emission
(whether past or present) of any Hazardous Materials or (b) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any Hazardous Materials, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act
of 1986, 42 U.S.C. Sect. 9601 et seq., the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976, as amended by
the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. Sect. 6901 et
seq., the Federal Water Pollution Control Act, as amended by the Clean Water
Act of 1977, 33 U.S.C. Sect. 1251 et seq., the Toxic Substances Control Act
of 1976, 15 U.S.C. Sect. 2601 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. Sect. 1101 et seq., the Clean Air Act of
1966, as amended, 42 U.S.C. Sect. 7401 et seq., the National Environmental
Policy Act of 1975, 42 U.S.C. Sect. 4321, the Rivers and Harbours Act of 1899,
33 U.S.C. Sect.401 et seq., the Endangered Species Act of 1973, as amended, 16
U.S.C. Sect. 1531 et seq., the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Sect. 651 et seq., and the Safe Drinking Water Act of 1974,
as amended, 42 U.S.C. Sect. 300(f) et seq., and all rules, regulations and
guidance documents promulgated or published thereunder.
"Equipment" shall have the meaning set forth in granting clause (d) of
this Mortgage.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated thereunder.
Section references to ERISA are to ERISA, as in effect at the date of this
Mortgage and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean any corporation or trade or business that
is a member of any group of organizations (a) described in Section 414(b) or
(c) of the Code of which Mortgagor or Indemnitor is a member and (b) solely
for purposes of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of
the Code of which Mortgagor or Indemnitor is a member.
"Event of Default" shall have the meaning set forth in Section 13.01
hereof.
"Excess Rent" shall have the meaning set forth in Section 5.05 hereof.
"First Interest Accrual Period" shall mean the period commencing on the
Closing Date and ending on the last day of the month in which the Closing
Date occurs.
"First Payment Date" shall mean the Payment Date in the month following
the month in which the Loan is initially funded.
"Fiscal Year" shall mean the twelve month period commencing on January 1
and ending on December 31 during each year of the term of this Mortgage, or
such other fiscal year of Mortgagor as Mortgagor may select from time to time
with the prior written consent of Mortgagee.
"Fixed Rate" shall have the meaning set forth in the Note.
"Fixtures" shall have the meaning set forth in granting clause (d) of
this Mortgage.
"Franchise Agreement" shall mean that certain franchise agreement
relating to the operation of the Premises, a copy of which was previously
delivered to Mortgagee in connection with the Loan, together with all renewals
and replacements thereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as of the date of the applicable financial report,
consistently applied.
"General Partner" shall mean, if Mortgagor is a partnership, each general
partner of Mortgagor and, if applicable, each general partner of such general
partner.
"Governmental Authority" shall mean, with respect to any Person, any
federal or State government or other political subdivision thereof and any
entity, including any regulatory or administrative authority or court,
exercising executive, legislative, judicial, regulatory or administrative or
quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal in each case, having jurisdiction over such
applicable Person or such Person's property and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.
"Hazardous Material" shall mean any flammable, explosive or radioactive
materials, hazardous materials or wastes, hazardous or toxic substances,
pollutants or related materials, asbestos or any material containing asbestos,
or any other substance or material as defined in or regulated by any
Environmental Statutes.
"Impositions" shall mean all taxes (including, without limitation, all
real estate, ad valorem, sales (including those imposed on lease rentals),
use, single business, gross receipts, value added, intangible, transaction,
privilege or license or similar taxes), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or
not commenced or completed prior to the date hereof and whether or not
commenced or completed within the term of this Mortgage), ground rents, water,
sewer or other rents and charges, excises, levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other governmental charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character in
respect of the Mortgaged Property and/or any Rent (including all interest and
penalties thereon), which at any time prior to, during or in respect of the
term hereof may be assessed or imposed on or in respect of or be a lien upon
(a) Mortgagor (including, without limitation, all franchise, single business
or other taxes imposed on Mortgagor for the privilege of doing business in the
jurisdiction in which the Mortgaged Property or any other collateral delivered
or pledged to Mortgagee in connection with the Loan is located) or Mortgagee,
(b) the Mortgaged Property or any part thereof or any Rent therefrom or any
estate, right, title or interest therein, or (c) any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in
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Mortgaged Property, or any part thereof, or the acquisition or financing of
the acquisition of the Mortgaged Property, or any part thereof, by Mortgagor.
Nothing contained herein shall require Mortgagor to pay municipal, state, or
federal income taxes imposed on Mortgagee or any corporate or franchise tax
imposed on Mortgagee, or any other tax payable by Mortgagee upon the payments
made by Mortgagee to Mortgagor under this Mortgage.
"Improvements" shall have the meaning set forth in the granting clause
(b) of this Mortgage.
"Indemnitor" shall mean any Person indemnifying Mortgagee with respect to
certain obligations of Mortgagor under the Loan Documents, including the
"Indemnitor" under an Indemnity Agreement of even date herewith.
"Independent" shall mean, when used with respect to any Person, a Person
who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in Mortgagor, or in any
Affiliate of Mortgagor or any constituent partner, shareholder, member or
beneficiary of Mortgagor and (c) is not connected with Mortgagor or any
Affiliate of Mortgagor or any constituent partner, shareholder, member or
beneficiary of Mortgagor as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions. Whenever
it is herein provided that any Independent Person's opinion or certificate
shall be provided, such opinion or certificate shall state that the Person
executing the same has read this definition and is Independent within the
meaning hereof.
"Initial Allocated Loan Amount" shall mean the portion of the Loan Amount
allocated to each Cross-collateralized Property as set forth on Exhibit F
annexed hereto and made a part hereof.
"Initial Basic Carrying Costs Deposit" shall equal the amount set forth
on Exhibit B attached hereto and made a part hereof.
"Initial Central Account Deposit" shall equal the amount set forth on
Exhibit B attached hereto and made a part hereof.
"Initial Engineering Deposit" shall equal the amount set forth on Exhibit
B attached hereto and made a part hereof.
"Institutional Lender" shall mean any of the following Persons:
(a) any bank, savings and loan association, savings institution, trust company
or national banking association, acting for its own account or in a fiduciary
capacity, (b) any charitable foundation, (c) any insurance company or pension
and/or annuity company, (d) any fraternal benefit society, (e) any pension,
retirement or profit sharing trust or fund within the meaning of Title I of
ERISA or for which any bank, trust company, national banking association or
investment adviser registered under the Investment Advisers Act of 1940, as
amended, is acting as trustee or agent, (f) any investment company or business
development company, as defined in the Investment Company Act of 1940, as
amended, (g) any small business investment company licensed under the Small
Business Investment Act of 1958, as amended, (h) any broker or dealer
registered under the Securities and Exchange Act of 1934, or any investment
adviser registered under the Investment Adviser Act of 1940, as amended,
(i) any government, any public employees' pension or retirement system, or
any other government agency supervising the investment of public funds, or
(j) any other entity all of the equity owners of which are Institutional
Lenders; provided that each of said Persons shall have net assets equal to
or greater than $500,000,000, be in the business of making commercial
mortgage loans, secured by properties of like type, size and value as the
Mortgaged Property and have a long term credit rating which is not less
than investment grade.
"Insurance Proceeds" shall mean all of the proceeds received under
the insurance policies required to be maintained by Mortgagor pursuant to
Article III hereof.
"Insurance Requirements" shall mean all terms of any insurance policy
required by this Mortgage, all requirements of the issuer of any such policy,
and all regulations and then current standards applicable to or affecting the
Mortgaged Property or any use or condition thereof, which may, at any time,
be recommended by the Board of Fire Underwriters, if any, having jurisdiction
over the Mortgaged Property, or such other Person exercising similar
functions.
"Interest Accrual Period" shall mean the First Interest Accrual Period
and, thereafter, each one (1) month period, which shall be a calendar month.
"Interest Shortfall" shall mean any shortfall in the amount of interest
required to be paid with respect to the Loan Amount on any Payment Date.
"Late Charge" shall have the meaning set forth in Section 13.09 hereof.
"Leases" shall have the meaning set forth in granting clause (f) of this
Mortgage.
"Legal Requirement" shall mean as to any Person, the certificate of
incorporation, by-laws, certificate of limited partnership, agreement of
limited partnership or other organization or governing documents of such
Person, and any law, statute, order, ordinance, judgement, decree,
injunction, treaty, rule or regulation (including, without limitation,
Environmental Statutes, Development Laws and Use Requirements) or
determination of an arbitrator or a court or other Governmental Authority
and all covenants, agreements, restrictions and encumbrances contained in
any instruments, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is subject.
"Loan" shall have the meaning set forth in the Recitals hereto.
"Loan Amount" shall have the meaning set forth in the Recitals hereto.
"Loan Documents" shall mean this Mortgage, the Note, the Assignment, and
any and all other agreements, instruments, certificates or documents executed
and delivered by Mortgagor or Affiliate of Mortgagor in connection with the
Loan.
"Loan Year" shall mean each 365 day period (or 366 day period if the
month of February in a leap year is included) commencing on the first day of
the month following the Closing Date (provided, however, that the first Loan
Year shall also include the period from the Closing Date to the end of the
month in which the Closing Date occurs).
"Loss Proceeds" shall mean, collectively, all Insurance Proceeds and all
Condemnation Proceeds.
"Major Space Lease" shall mean any Space Lease of a tenant or Affiliate
of such tenant where such tenant or such Affiliate leases, in the aggregate,
five percent (5%) or more of the Total GLA.
"Manager" shall mean the Person, other than Mortgagor, which manages the
Mortgaged Property on behalf of Mortgagor.
"Manager Certification" shall have the meaning set forth in Section 2.09
hereof.
"Material Adverse Effect" shall mean any event or condition that has a
material adverse effect on (a) the Mortgaged Property, (b) the business,
prospects, profits, operations or condition (financial or otherwise) of
Mortgagor, (c) the enforceability, validity, perfection or priority of the
lien of any Loan Document or (d) the ability of Mortgagor to perform any
obligations under any Loan Document; provided, however, that in determining
such effect, consideration shall be given to any condition(s) or event(s)
that in the aggregate should offset the effect of any adverse effect or
condition.
"Maturity", when used with respect to the Note, shall mean the Maturity
Date set forth in the Note or such other date pursuant to the Note on which
the final payment of principal, and premium, if any, on which the Note becomes
due and payable as therein or herein provided, whether at Stated Maturity or
by declaration of acceleration, or otherwise.
"Maturity Date" shall mean the Maturity Date set forth in the Note.
"Monthly Debt Service Payment" shall mean a monthly payment of principal
in an amount equal to that which is required to fully amortize the Loan based
upon a twenty year level amortization schedule, together with a monthly
payment of interest on the Principal Amount.
"Mortgage" shall mean this Mortgage as originally executed or as it may
hereafter from time to time be supplemented, amended, modified or extended by
one or more indentures supplemental hereto.
"Mortgaged Property" shall have the meaning set forth in the granting
clauses of this Mortgage.
"Mortgagee" shall mean the Mortgagee named herein and its successors or
assigns.
"Mortgagor" shall mean Mortgagor named herein and any successor to the
obligations of Mortgagor.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been, or were required to
have been, made by Mortgagor, Indemnitor or any ERISA Affiliate and which is
covered by Title IV of ERISA.
"Net Operating Income" shall mean, for any specified period, including
without limitation, the Fiscal Year or portion thereof during the term hereof,
Operating Income less Operating Expenses.
"Net Proceeds" shall mean the excess of (i)(x) the purchase price (at
foreclosure or otherwise) actually received by Mortgagee with respect to the
Mortgaged Property as a result of the exercise by Mortgagee of its rights,
powers, privileges and other remedies after the occurrence of an Event of
Default, or (y) in the event that Mortgagee (or Mortgagee's nominee) is the
purchaser at foreclosure by credit bid, then the amount of such credit bid,
in either case, over (ii) all costs and expenses, including, without
limitation, all attorneys' fees and disbursements and any brokerage fees,
if applicable, incurred by Mortgagee in connection with the exercise of such
remedies, including the sale of such Mortgaged Property after a foreclosure
against the Mortgaged Property.
"Note" shall have the meaning set forth in the recitals hereof.
"Notice Date" shall have the meaning set forth in Section 5.05 hereof.
"O&M Operative Period" shall mean the period commencing on the first
(1st) Payment Date on which the Aggregate Debt Service Coverage is less than
the Required Debt Service Coverage and ending upon the first Payment Date on
which the Aggregate Debt Service Coverage exceeds the Required Debt Service
Coverage for the prior month.
"Officer's Certificate" shall mean a certificate delivered to Mortgagee
by Mortgagor which is signed on behalf of Mortgagor by an authorized
representative of Mortgagor which states that the items set forth in such
certificate are true, accurate and complete in all respects.
"Operating Expenses" shall mean, for any specified period, including
without limitation the Fiscal Year or portion thereof during the term hereof,
all expenses during such period directly attributable to the operation, repair
and/or maintenance of the Mortgaged Property (including, without limitation,
Impositions, insurance premiums, management fees at the rate of three percent
(3%) of Operating Income (unless the actual management fee shall be increased
after the date hereof, in which case, at the increased rate), franchise or
licensing fees at the greater rate of five percent (5%) of Operating Income or
actual franchise or licensing fees, and Recurring Replacement Expeditures at
the Recurring Replacement Expenditure Monthly Amount). Operating Expenses
shall not (i) include interest, principal and premium, if any, due under the
Note or otherwise in connection with the Debt, (ii) income taxes,
(iii) capital improvements costs, (iv) any non-cash charge or expense
such as depreciation or amortization or (v) any Operating Expense relating
to or corresponding with any Operating Income excluded from Operating Income
pursuant to clause (i) of the definition of Operating Income.
"Operating Income" shall mean, for any specified period, including
without limitation the Fiscal Year or portion thereof during the term hereof,
all revenue during such period derived by Mortgagor arising from the Mortgaged
Property including, without limitation, room revenues, vending machines
revenues, beverage revenues, food revenues, and packaging revenues, rental
revenues (whether denominated as basic rent, additional rent, otherwise) and
other fees and charges payable pursuant to Leases or otherwise in connection
with the Mortgaged Property, and business interruption, rent or other similar
insurance proceeds. Operating Income shall not include (a) Insurance Proceeds
(other than proceeds of rent, business interruption or other similar insurance
allocable to the applicable period) and Condemnation Proceeds (other than
Condemnation Proceeds arising from a temporary taking or the use and occupancy
of all or part of the applicable Mortgaged Property allocable to the
applicable period), or interest accrued on such Condemnation Proceeds,
(b) proceeds of any financing, (c) proceeds of any sale, exchange or transfer
of the Mortgaged Property or any part thereof or interest therein, (d) capital
contributions or loans to Mortgagor or an Affiliate of Mortgagor, (e) any item
of income otherwise includable in Operating Income but paid directly by any
tenant to a Person other than Mortgagor except for real estate taxes paid
directly to any taxing authority by any tenant, (f) any other extraordinary,
non-recurring revenues, (g) Rent paid by or on behalf of any lessee under a
Space Lease which is the subject of any proceeding or action relating to its
bankruptcy, reorganization or other arrangement pursuant to federal bankruptcy
law or any similar federal or state law or which has been adjudicated a
bankrupt or insolvent unless such Space Lease has been affirmed by the trustee
in such proceeding or action, or (h) Rent paid by or on behalf of any lessee
under a Space Lease the demised premises of which are not occupied either by
suchlessee or by a sublessee thereof or (i) Rent derived from rental of guest
rooms in excess of seventy-five (75%) of the guest rooms, during any period
of time when the guest room occupancy rate for the Mortgaged Property exceeds
seventy-five percent (75%).
"Operation and Maintenance Expense Monthly Installment" shall mean with
respect to each Current Month in which funds are required to be allocated or
distributed pursuant to the terms of Section 5.05(d), or if an Event of
Default has occurred and be continuing, the lesser of (a) all amounts
remaining in the Central Account after the distributions made pursuant
to clauses (a) through (c) of Section 5.05 or (b), an amount equal to
either (x) 1/12 of the operating expenses set forth in the Annual Budget
(as same may be revised from time to time), or, in the event that Mortgagee
has not approved the Annual Budget, (y) 1/12 of the product of (i) 1.05 and
(ii) the actual Operating Expenses (exclusive of Impositions and insurance
premiums) for the immediately preceding Fiscal Year.
"Operation and Maintenance Expense Sub-Account" shall mean the
Sub-Account of the Central Account established pursuant to Section 5.02 hereof
and maintained pursuant to Section 5.09 hereof relating to the payment of
Operating Expenses (exclusive of Impositions and insurance premiums).
"Pad Owners" shall mean any owner of any fee interest in property
contiguous to or surrounded by the Mortgaged Property who has entered into a
reciprocal easement agreement or other agreement or agreements with Mortgagor
either (a) in connection with an existing or potential improvement on such
property or (b) relating to or affecting the Mortgaged Property.
"Payment Date" shall mean, with respect to each month, the first (1st)
calendar day in such month, or if such day is not a Business Day, the next
following Business Day.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Permitted Encumbrances" shall have the meaning set forth in Section
2.05(a) hereof.
"Permitted Investments" shall mean any one or more of the following
obligations or securities payable on demand or having a scheduled maturity
on or before the Business Day preceding the date upon which funds in the Cash
Collateral Account are required to be drawn, and having at all times the
required ratings, if any, provided for in this definition, unless, upon and
subsequent to a Securitization, each Rating Agency shall have confirmed in
writing to Mortgagee that a lower rating would not, in and of itself, result
in a downgrade, qualification or withdrawal of the then current ratings
assigned to any certificates issued in connection with a Securitization:
(b) obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States of America or any agency or
instrumentality thereof provided such obligations are backed by the full
faith and credit of the United States of America including, without
limitation, obligations of: the U.S. Treasury (all direct or fully
guaranteed obligations), the Farmers Home Administration (certificates of
beneficial ownership), the General Services Administration (participation
certificates), the U.S. Maritime Administration (guaranteed Title XI
financing), the Small Business Administration (guaranteed participation
certificates and guaranteed pool certificates), the U.S. Department of
Housing and Urban Development (local authority bonds) and the Washington
Metropolitan Area Transit Authority (guaranteed transit bonds); provided,
however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by Standard & Poor's, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with that index,
and (D) such investments must not be subject to liquidation prior to their
maturity;
(c) Federal Housing Administration debentures;
(d) obligations of the following United States of America government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations),
the Farm Credit System (consolidated systemwide bonds and notes), the
Federal Home Loan Banks (consolidated debt obligations), the Federal
National Mortgage Association (debt obligations), the Student Loan Marketing
Association (debt obligations), the Financing Corp. (debt obligations), and
the Resolution Funding Corp. (debt obligations); provided, however, that the
investments described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change, (B) if rated
by Standard & Poor's, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their maturity;
(e) federal funds, unsecured certificates of deposit, time deposits,
bankers' acceptances and repurchase agreements with maturities of not more
than 365 days of any bank, the short term obligations of which are rated in
the highest short term rating category by each Rating Agency (or, if not
rated by any Rating Agency other than Standard & Poor's, otherwise
acceptable to such Rating Agency or Agencies, as applicable, as confirmed in
writing that such investment would not in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings assigned
to any certificates issued in connection with a Securitization); provided,
however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by Standard & Poor's, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with that index,
and (D) such investments must not be subject to liquidation prior to their
maturity;
(f) fully Federal Deposit Insurance Corporation-insured demand and time
deposits in, or certificates of deposit of, or bankers' acceptances issued
by, any bank or trust company, savings and loan association or savings bank,
the short term obligations of which are rated in the highest short term
rating category by each Rating Agency (or, if not rated by any Rating Agency
other than Standard & Poor's, otherwise acceptable to such Rating Agency or
Agencies, as applicable, as confirmed in writing that such investment would
not, in and of itself, result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any certificates issued in connection
with a Securitization); provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by Standard & Poor's, must
not have an "r" highlighter affixed to their rating, (C) if such investments
have a variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be subject
to liquidation prior to their maturity;
(g) debt obligations with maturities of not more than 365 days and rated
by each Rating Agency (or, if not rated by any Rating Agency other than
Standard & Poor's, otherwise acceptable to such Rating Agency or Agencies,
as applicable, as confirmed in writing that such investment would not, in
and of itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to any certificates issued in connection with
a Securitization) in its highest long-term unsecured rating category;
provided, however, that the investments described in this clause must (A)
have a predetermined fixed dollar of principal due at maturity that cannot
vary or change, (B) if rated by Standard & Poor's, must not have an "r"
highlighter affixed to their rating, (C) if such investments have a variable
rate of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;
(h) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof)
with maturities of not more than 365 days and that is rated by each Rating
Agency (or, if not rated by any Rating Agency other than Standard & Poor's,
otherwise acceptable to such Rating Agency or Agencies, as applicable, as
confirmed in writing that such investment would not, in and of itself, result
in a downgrade, qualification or withdrawal of the then current ratings
assigned to any certificates issued in connection with a Securitization) in
its highest short-term unsecured debt rating; provided, however, that the
investments described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change, (B) if rated
by Standard & Poor's, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their maturity;
(i) the Federated Prime Obligation Money Market Fund (the "Fund") so
long as the Fund is rated "AAA" by each Rating Agency (or, if not rated by
any Rating Agency other than Standard & Poor's, otherwise acceptable to such
Rating Agency or Agencies, as applicable, as confirmed in writing that such
investment would not, in and of itself, result in a downgrade, qualification
or withdrawal of the then current ratings assigned to any certificates issued
in connection with a Securitization);
(j) any other demand, money market or time deposit, demand obligation or
any other obligation, security or investment, provided that if the Loan has
been included as an asset in a Securitization, each Rating Agency has
confirmed in writing to Mortgagee, that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any certificates issued in connection with a
Securitization); and
(k) such other obligations as are acceptable as Permitted Investments
to each Rating Agency, as confirmed in writing to Mortgagee, that such
obligations would not, in and of itself, result in a downgrade, qualification
or withdrawal of the then current ratings assigned to any certificates issued
in connection with a Securitization);
provided, however, that, in the judgment of Mortgagee, such instrument
continues to qualify as a "cash flow investment" pursuant to Code
Section 860G(a)(6) earning a passive return in the nature of interest and
that no instrument or security shall be a Permitted Investment if (i) such
instrument or security evidences a right to receive only interest payments
or (ii) the right to receive principal and interest payments derived from the
underlying investment provides a yield to maturity in excess of 120% of the
yield to maturity at par of such underlying investment.
"Person" shall mean any individual, corporation, partnership, joint
venture, estate, trust, unincorporated association, any federal, state,
county or municipal government or any bureau, department or agency thereof
and any fiduciary acting in such capacity on behalf of any of the foregoing.
"Plan" shall mean an employee benefit or other plan established or
maintained by Mortgagor, Indemnitor or any ERISA Affiliate during the
five-year period ended prior to the date of this Mortgage or to which
Mortgagor, Indemnitor or any ERISA Affiliate makes, is obligated to make
or has, within the five year period ended prior to the date of this Mortgage,
been required to make contributions (whether or not covered by Title IV of
ERISA or Section 302 of ERISA or Section 401(a) or 412 of the Code), other
than a Multiemployer Plan.
"Premises" shall have the meaning set forth in granting clause (a) of
this Mortgage.
"Principal Amount" shall mean the Loan Amount as such amount may be
reduced from time to time pursuant to the terms of this Mortgage, the Note
or the other Loan Documents.
"Principal Payments" shall mean all payments of principal made pursuant
to the terms of the Note.
"Property Agreements" shall mean all agreements, grants of easements
and/or rights-of-way, reciprocal easement agreements, permits, declarations
of covenants, conditions and restrictions, disposition and development
agreements, planned unit development agreements, management or parking
agreements, party wall agreements, franchise agreements or other instruments
affecting the Mortgaged Property, including, without limitation any Pad
Owners, but not including any brokerage agreements, management agreements,
service contracts, Space Leases or the Loan Documents.
"Rating Agency" shall mean Standard & Poor's Ratings Group, a division
of McGraw-Hill, Inc. ("Standard & Poor's"), Fitch Investors Services, Inc.,
Duff & Phelps Credit Rating Co., and Moody's Investors Service, Inc.,
collectively, and any successor to any of them; provided, however, that
at any time during which the Loan is an asset of a securitization, "Rating
Agency" shall mean the rating agency or rating agencies that from time to
time rate the securities issued in connection with such securitization.
"Realty" shall have the meaning set forth in Section 2.05(b) hereof.
"Recurring Replacement Expenditures" shall mean expenditures related to
the replacement of furniture, fixtures and equipment located at, or used in
connection with, the operation of the Mortgaged Property from time to time.
"Recurring Replacement Expenditure Monthly Amount" shall mean the amount
per month set forth on Exhibit B attached hereto and made a part hereof (the
"Initial Recurring Installments") until the first (1st) anniversary of the
date hereof and an amount per month in each subsequent Loan Year or portion
thereof occurring prior to the Maturity Date equal to the greater of
one-twelfth of (a) five percent (5%) of the Operating Income for the previous
Fiscal Year of Mortgagor and (b) the Initial Recurring Installments.
"Recurring Replacement Reserve Sub-Account" shall mean the Sub-Account
of the Central Account established pursuant to Section 5.02 hereof and
maintained pursuant to Section 5.08 hereof relating to the payment of
Recurring Replacement Expenditures.
"Rent" shall have the meaning set forth in granting clause (f) of this
Mortgage.
"Rent Account" shall mean an Eligible Account maintained in a bank
acceptable to Mortgagee in the joint names of Mortgagor and Mortgagee or
such other name as Mortgagee may designate in writing.
"Rent Roll" shall have the meaning set forth in Section 2.05 (n)
hereof.
"Required Debt Service Coverage" shall mean a Debt Service Coverage
of not less than 1.25.
"Required Debt Service Payment" shall mean, as of any Payment Date,
the amount of interest and principal then due and payable pursuant to the
Note, including, without limitation, any prepayments required to be made or
for which notice has been given under this Mortgage, Default Rate Interest
and premium, if any, paid in accordance therewith.
"Required Engineering Work" shall have the meaning set forth in
Section 5.02 hereof.
"Retention Amount" shall have the meaning set forth in Section
3.04(b)(vii) hereof.
"RR Deferral Debt Service Coverage" shall mean a Debt Service Coverage
of not less than 1.5.
"RR Deferral Period" shall mean the period commencing on the first
Payment Date following any month in which the Aggregate Debt Service Coverage
is equal to or greater than the RR Deferral Debt Service Coverage and ending
upon the first Payment Date on which the Aggregate Debt Service Coverage is
less than the RR Deferral Debt Service Coverage for the prior month.
"Securities Act" shall mean the Securities Act of 1933, as the same shall
be amended from time to time.
"Securitization" shall mean a public or private offering of securities by
Mortgagee or any of its Affiliates or their respective successors and assigns
which are collateralized, in whole or in part, by this Mortgage.
"Security Deposit Account" shall have the meaning set forth in Section
5.01 hereof.
"Single Purpose Entity" shall mean a corporation, partnership, joint
venture, trust or unincorporated association, which is formed or organized
solely for the purpose of holding, directly, an ownership interest in the
Mortgaged Property, does not engage in any business unrelated to the Mortgaged
Property, does not have any assets other than those related to its interest in
the Mortgaged Property or any indebtedness other than as permitted by this
Mortgage or the other Loan Documents, has its own separate books and records
and has its own accounts, in each case which are separate and apart from the
books and records and accounts of any other Person, and holds itself out as
being a Person, separate and apart from any other Person and which otherwise
satisfies the criteria of the Rating Agency, as in effect on the Closing Date,
for a single purpose entity.
"Solvent" shall mean, as to any Person, that (a) the sum of the assets of
such Person, at a fair valuation, exceeds its liabilities, including contingent
liabilities, (b) such Person has sufficient capital with which to conduct its
business as presently conducted and as proposed to be conducted and (c) such
Person has not incurred debts, and does not intend to incur debts, beyond its
ability to pay such debts as they mature. For purposes of this definition,
"debt" means any liability on a claim, and "claim" means (a) a right to
payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (b) a right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or
not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.
With respect to any such contingent liabilities, such liabilities shall
be computed in accordance with GAAP at the amount which, in light of all the
facts and circumstances existing at the time, represents the amount
which can reasonably be expected to become an actual or matured
liability.
"Space Leases" shall mean any Lease or sublease thereunder (including,
without limitation, any Major Space Lease) or any other agreement providing
for the use and occupancy of a portion of the Mortgaged Property as the same
may be amended, renewed or supplemented.
"State" shall mean any of the states which are members of the United
States of America.
"Stated Maturity", when used with respect to the Note or any installment
of interest and/or principal payment thereunder, shall mean the date specified
in the Note as the fixed date on which a payment of all or any portion of
principal and/or interest is due and payable.
"Sub-Accounts" shall have the meaning set forth in Section 5.02 hereof.
"Substantial Casualty" shall have the meaning set forth in Section 3.04
hereof.
"Taking" shall mean a condemnation or taking pursuant to the lawful
exercise of the power of eminent domain.
"Total GLA" shall mean the total gross leasable area of the Mortgaged
Property, including all Space Leases.
"Transfer" shall mean the conveyance, assignment, sale, mortgaging,
encumbrance, pledging, hypothecation, granting of a security interest in,
granting of options with respect to, or other disposition of (directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise,
and whether or not for consideration or of record) all or any portion of any
legal or beneficial interest (a) in all or any portion of the Mortgaged
Property; (b) if Mortgagor or, if Mortgagor is a partnership, any General
Partner, is a corporation, in the stock of Mortgagor or any General Partner;
(c) in Mortgagor (or any trust of which Mortgagor is a trustee); or (d) if
Mortgagor is a limited or general partnership, joint venture, trust, nominee
trust, tenancy in common or other unincorporated form of business association
or form of ownership interest, in any Person having a direct legal or
beneficial ownership in Mortgagor, excluding any legal or beneficial interest
in any constituent limited partner of Mortgagor but including any legal or
beneficial interest in any General Partner and shall also include, without
limitation to the foregoing, the following: an installment sales agreement
wherein Mortgagor agrees to sell the Mortgaged Property or any part thereof
or any interest therein for a price to be paid in installments; an agreement
by Mortgagor leasing all or a substantial part of the Mortgaged Property to
one or more Persons pursuant to a single or related transactions, or a sale,
assignment or other transfer of, or the grant of a security interest in,
Mortgagor's right, title and interest in and to any Leases or any Rent; any
instrument subjecting the Mortgaged Property to a condominium regime or
transferring ownership to a cooperative corporation; and the dissolution or
termination of Mortgagor or the merger or consolidation of Mortgagor with
any other Person.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
in which the Mortgaged Property is located.
"Underwritable Net Cash Flow" shall mean the cash flow determined by
Mortgagee for the Cross-collateralized Properties in accordance with
Mortgagee's underwriting standards for financings similar to the Loan and
in conformance, to the extent reasonably possible, as determined by Mortgagee,
with the standards of the Rating Agencies.
"Unscheduled Payments" shall mean (a) all Loss Proceeds that Mortgagor
has elected or is required to apply to the repayment of the Debt pursuant to
this Mortgage, the Note or any other Loan Documents, (b) any funds
representing a voluntary or involuntary principal prepayment other than
scheduled Principal Payments, (c) any Net Proceeds and (d) any amounts paid
from the Curtailment Reserve Sub-Account pursuant to Section 5.11 hereof.
"Use Requirements" shall mean any and all building codes, permits,
certificates of occupancy or compliance, laws, regulations, or ordinances
(including, without limitation, health, pollution, fire protection, medical
and day-care facilities, waste product and sewage disposal regulations),
restrictions of record, easements, reciprocal easements, declarations or other
agreements affecting the use of the Mortgaged Property or any part thereof.
"Welfare Plan" shall mean an employee welfare benefit plan as defined in
Section 3(1) of ERISA established or maintained by Mortgagor, Indemnitor or
any ERISA Affiliate or that covers any current or forms employee of Mortgagor,
Indemnitor or any ERISA Affiliate.
"Work" shall have the meaning set forth in Section 3.04(a)(i) hereof.
III: COVENANTS, WARRANTIES
AND REPRESENTATIONS OF MORTGAGOR
1. Payment of Debt. Mortgagor will pay the Debt at the time and in the
manner provided in the Note and the other Loan Documents, all in lawful money
of the United States of America in immediately available funds, subject to the
limitations of liability as set forth in Section 18.32 hereof.
2. Representations and Warranties of Mortgagor. Mortgagor represents and
warrants to Mortgagee:
(a) Organization and Authority. Mortgagor (i) is a general partnership,
limited partnership or corporation, as the case may be, duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its formation, (ii) has all requisite power and authority and all necessary
licenses and permits to own and operate the Mortgaged Property and to carry
on its business as now conducted and as presently proposed to be conducted
and (iii) is duly qualified, authorized to do business and in good standing
in the jurisdiction where the Mortgaged Property is located and in each other
jurisdiction where the conduct of its business or the nature of its activities
makes such qualification necessary. If Mortgagor is a limited partnership or
general partnership, each general partner of Mortgagor which is a corporation
is duly organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation.
(b) Power. Mortgagor and, if applicable, each General Partner has full
power and authority to execute, deliver and perform, as applicable, the Loan
Documents to which it is a party, to make the borrowings thereunder, to
execute and deliver the Note and to grant to Mortgagee a perfected and
continuing lien on and security interest in the Mortgaged Property, subject
only to the Permitted Encumbrances.
(c) Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents to which Mortgagor is a party, the making of the borrowings
thereunder, the execution and delivery of the Note, the grant of the liens on
the Mortgaged Property pursuant to the Loan Documents to which Mortgagor is a
party and the consummation of the Loan are within the powers of Mortgagor and
have been duly authorized by Mortgagor and, if applicable, the General
Partners, by all requisite action (and Mortgagor hereby represents that no
approval or action of any limited partner or shareholder, as applicable, of
Mortgagor is required to authorize any of the Loan Documents to which
Mortgagor is a party) and will constitute the legal, valid and binding
obligation of Mortgagor, enforceable against Mortgagor in accordance with
their terms, except as enforcement may be stayed or limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether considered in
proceedings at law or in equity) and will not (i) violate any provision of
its partnership agreement or partnership certificate or certificate of
incorporation or by-laws, as applicable, or, to its knowledge, any law,
judgment, order, rule or regulation of any court, arbitration panel or other
Governmental Authority, domestic or foreign, or other Person affecting or
binding upon Mortgagor or the Mortgaged Property, or (ii) violate any
provision of any indenture, agreement, mortgage, contract or other instrument
to which Mortgagor or, if applicable, any General Partner is a party or by
which any of their respective property, assets or revenues are bound, or be in
conflict with, result in an acceleration of any obligation or a breach of or
constitute (with notice or lapse of time or both) a default or require any
payment or prepayment under, any such indenture, agreement, mortgage, contract
or other instrument, or (iii) result in the creation or imposition of any
lien, except those in favor of Mortgagee as provided in the Loan Documents
to which it is a party.
(d) Consent. Neither Mortgagor nor, if applicable, any General Partner,
is required to obtain any consent, approval or authorization from, or to file
any declaration or statement with, any Governmental Authority or other agency
in connection with or as a condition to the execution, delivery or performance
of this Mortgage, the Note or the other Loan Documents which has not been so
obtained or filed.
(e) Interest Rate. The rate of interest paid under the Note and the
method and manner of the calculation thereof do not violate any usury or, to
their best knowledge, other law or applicable Legal Requirement.
(f) Other Agreements. Mortgagor is not a party to nor is otherwise bound
by any agreements or instruments which, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect. Neither Mortgagor nor,
if applicable, any General Partner, is in violation of its partnership
agreement or corporate organizational documents, as applicable, or other
restriction or any agreement or instrument by which it is bound, or any
judgment, decree, writ, injunction, order or award of any arbitrator, court
or Governmental Authority, or any Legal Requirement, in each case, applicable
to Mortgagor or the Mortgaged Property, except for such violations that would
not, individually or in the aggregate, have a Material Adverse Effect.
(g) Maintenance of Existence. (i) Mortgagor and, if applicable, each
General Partner at all times since their formation have been duly formed and
existing and shall preserve and keep in full force and effect their existence
as a Single Purpose Entity.
(i) Mortgagor and, if applicable, each General Partner, at all times
since their organization have complied, and will continue to comply, with
the provisions of its certificate and agreement of partnership or certificate
of incorporation and by-laws, as amended and as applicable, and the laws of
its jurisdiction of organization relating to partnerships or corporations,
as applicable.
(ii) All customary formalities regarding the partnership, or corporate
existence, as applicable, of Mortgagor, and if, applicable, each General
Partner have been observed at all times since its formation and will continue
to be observed.
(iii) Mortgagor and, if applicable, each General Partner, have at all
times accurately maintained, and will continue to accurately maintain, their
respective financial statements, accounting records and other partnership or
corporate documents separate from those of any other Person. Mortgagor and,
if applicable, each General Partner have not at any time since their
formation commingled, and will not commingle, their respective assets with
those of any other Person. Mortgagor has at all times since its formation
accurately maintained, and will continue to accurately maintain, its own bank
accounts (subject to the creation of accounts and sub-accounts established
for the account of Mortgagor by prior lender), payroll and separate books
of account.
(iv) Mortgagor and, if applicable, each General Partner, have at all
times paid, and will continue to pay, their own liabilities from their own
separate assets.
(v) Mortgagor and, if applicable, each General Partner, have at all
times identified themselves, and will continue to identify themselves, in all
dealings with the public, under their own names and as separate and distinct
entities. Mortgagor and, if applicable, each General Partner, have not at
any time identified themselves, and will not identify themselves, as being a
division of any other Person.
(vi) Mortgagor and, if applicable, each General Partner, have been at
all times, and will continue to be, adequately capitalized in light of the
nature of their respective businesses.
(vii) Mortgagor (A) does not own and will not own any encumbered asset
other than the Mortgaged Property, (B) is not engaged and will not engage in
any business other than the ownership, management and operation of the
Cross-collateralized Property, (C) will not enter into any contract or
agreement with any Affiliate of Mortgagor or, if applicable, any Affiliate of
a General Partner except upon terms and conditions that are intrinsically
fair and substantially similar to those that would be available on an
arm's-length basis with third parties other than an Affiliate, (D) has not
incurred and will not incur any debt, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other than the Loan, and
(E) has not made and will not make any loans or advances to any Person
(including any Affiliate).
(viii) Mortgagor will not change its name or principal place of
business without prior notice to, and consent of, the Mortgagee.
(ix) Mortgagor does not have, and will not have, any subsidiaries.
(x) Mortgagor will preserve and maintain its existence as a Delaware
corporation and all material rights, privileges, tradenames and franchises.
(xi) Neither Mortgagor, nor, if applicable, any General Partner, will
merge or consolidate with, or sell all or substantially all of its respective
assets to any Person, or liquidate, wind up or dissolve itself (or suffer any
liquidation, winding up or dissolution). Mortgagor will not acquire any
business or assets from, or capital stock or other ownership interest of, or
be a party to any acquisition of, any Person.
(xii) Mortgagor has not at any time since its formation assumed or
guaranteed, and will not assume or guarantee, the liabilities of its partners
or shareholders or any predecessor corporation or partnership, each as
applicable, any Affiliates, or any other Persons. Mortgagor has not at any
time since its formation acquired, and will not acquire, obligations or
securities of its partners or shareholders or any predecessor corporation or
partnership, each as applicable, or any Affiliates. Mortgagor has not at any
time since its formation made, and will not make, loans to its partners or
shareholders or any predecessor corporation or partnership, each as
applicable, or any Affiliates of any of such Persons.
(xiii) Mortgagor has not at any time since its formation entered into and
was not a party to, and, will not enter into or be a party to, any
transaction with its partners or shareholders, as applicable, or any
Affiliates of its partners except on terms which are no less favorable to
Mortgagor than would be obtained in a comparable arm's length transaction
with an unrelated third party.
(h) No Defaults. No Default or Event of Default has occurred and is
continuing or would occur as a result of the consummation of the
transactions contemplated by the Loan Documents. Mortgagor is not in default
in the payment or performance of any of its Contractual Obligations in any
respect which would result in a Materially Adverse Effect.
(i) Governmental Consents and Approvals. Mortgagor and, if applicable,
each General Partner, have obtained or made all necessary (i) consents,
approvals and authorizations, and registrations and filings of or with all
Governmental Authorities and (ii) consents, approvals, waivers and
notifications of partners, stockholders, creditors, lessors and other
nongovernmental Persons, in each case, which are required to be obtained or
made by Mortgagor or, if applicable, the General Partner, in connection with
the execution and delivery of, and the performance by Mortgagor of its
obligations under, the Loan Documents.
(j) Investment Company Act Status. Mortgagor is not an "investment
company," or a company "controlled" by an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended.
(k) Compliance with Law. Mortgagor is in compliance in all material
respects with all Legal Requirements to which it or the Mortgaged Property is
subject, including, without limitation, all Environmental Statutes, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities
Act and ERISA. No portion or the Mortgaged Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity.
(l) Financial Information. All financial data that has been delivered by
Mortgagor to Mortgagee (i) is true, complete and correct in all material
respects, (ii) accurately represents the financial condition and results of
operations of the Persons covered thereby in all material respects as of the
date on which the same shall have been furnished, and (iii) in the case of
audited financial statements, has been prepared in accordance with GAAP (or
such other accounting basis as is reasonably acceptable to Mortgagee)
throughout the periods covered. As of the date hereof, neither Mortgagor
nor, if applicable, any General Partner, has any contingent liability,
liability for taxes or other unusual or forward commitment not reflected in
such financial statements delivered to Mortgagee; since the date of the last
financial statements delivered by Mortgagor to Mortgagee except as otherwise
disclosed in such financial statements or notes thereto, there has been no
change in the assets, liabilities or financial position of Mortgagor nor, if
applicable, any General Partner, or in the results of operations of Mortgagor
which would have a Material Adverse Effect. Neither Mortgagor nor, if
applicable, any General Partner, has incurred any obligation or liability,
contingent or otherwise not reflected in such financial statements which
would have a Material Adverse Effect.
(m)Transaction Brokerage Fees. Mortgagor has not dealt with any
financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Mortgage.
All brokerage fees, commissions and other expenses payable in connection with
the transactions contemplated by the Loan Documents have been paid in full
contemporaneously with the execution of the Loan Documents and the funding
of the Loan. Mortgagor hereby agrees to indemnify and hold Mortgagee
harmless from and against any and all claims, liabilities, costs and expenses
of any kind in any way relating to or arising from (i) a claim by any Person
that such Person acted on behalf of Mortgagor in connection with the
transactions contemplated herein or (ii) any breach of the foregoing
representation. The provisions of this subsection (m) shall survive the
repayment of the Debt.
(n) Federal Reserve Regulations. No part of the proceeds of the Loan will
be used for the purpose of purchasing or acquiring any "margin stock" within
the meaning of Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System or for any other purpose which would be inconsistent
with such Regulations G, T, U or X or any other Regulations of such Board
of Governors, or for any purposes prohibited by Legal Requirements or by
the terms and conditions of the Loan Documents.
(o) Pending Litigation. There are no actions, suits or proceedings pending
or, to the best knowledge of Mortgagor, threatened against or affecting
Mortgagor or the Mortgaged Property in any court or before any Governmental
Authority which if adversely determined either individually or collectively
has or is reasonably likely to have a Material Adverse Effect.
(p) Solvency; No Bankruptcy. Each of Mortgagor and, if applicable, the
General Partner, (i) is and has at all times been Solvent and will remain
Solvent immediately upon the consummation of the transactions contemplated
by the Loan Documents and (ii) is free from bankruptcy, reorganization or
arrangement proceedings or a general assignment for the benefit of creditors
and is not contemplating the filing of a petition under any state or federal
bankruptcy or insolvency laws or the liquidation of all or a major portion
of such Person's assets or property and Mortgagor has no knowledge of any
Person contemplating the filing of any such petition against it or, if
applicable, the General Partner. None of the transactions contemplated
hereby will be or have been made with an intent to hinder, delay or defraud
any present or future creditors of Mortgagor and Mortgagor has received
reasonably equivalent value in exchange for its obligations under the Loan
Documents. Mortgagor's assets do not, and immediately upon consummation of
the transaction contemplated in the Loan Documents will not, constitute
unreasonably small capital to carry out its business as presently conducted
or as proposed to be conducted. Mortgagor does not intend to, nor believe
that it will, incur debts and liabilities beyond its ability to pay such
debts as they may mature.
(q) Use of Proceeds. The proceeds of the Loan shall be applied by Mortgagor
to, inter alia, (i) satisfy certain mortgage loans presently encumbering all
or a part of the Mortgaged Property, (ii) fund the Sub-Accounts in accordance
with Article V hereof and (iii) pay certain transaction costs incurred by
Mortgagor in connection with the Loan. No portion of the proceeds of the Loan
will be used for family, personal, agricultural or household use.
(r) Tax Filings. Mortgagor and, if applicable, each General Partner, have
filed all federal, state and local tax returns required to be filed or have
filed appropriate applications for extension and have paid or made adequate
provision for the payment of all federal, state and local taxes, charges and
assessments payable by Mortgagor and, if applicable, the General Partners.
Mortgagor and, if applicable, the General Partners, believe that their
respective tax returns properly reflect the income and taxes of Mortgagor and
said General Partner, if any, for the periods covered thereby, subject only
to reasonable adjustments required by the Internal Revenue Service or other
applicable tax authority upon audit.
(s) Not Foreign Person. Mortgagor is not a "foreign person" within the
meaning of Sect. 1445(f)(3) of the Code.
(t) ERISA. (a) The assets of Mortgagor and Indemnitor are not and will
not become treated as "plan assets", whether by operation of law or under
regulations promulgated under ERISA. Each Plan and Welfare Plan, and, to the
knowledge of Mortgagor, each Multiemployer Plan, is in compliance in all
material respects with, and has been administered in all material respects
in compliance with, its terms and the applicable provisions of ERISA, the
Code and any other applicable Legal Requirement, and no event or condition
has occurred and is continuing as to which Mortgagor would be under an
obligation to furnish a report to Mortgagee under clause (b)(i) of this
Section. Other than an application for a favorable determination letter
with respect to a Plan, there are no pending issues or claims before the
Internal Revenue Service, the United States Department of Labor or any court
of competent jurisdiction related to any Plan or Welfare Plan under which
Mortgagor, Indemnitor or any ERISA Affiliate, directly or indirectly (through
an indemnification agreement or otherwise), could be subject to any material
risk of liability under Section 409 or 502(i) of ERISA or Section 4975 of the
Code. No Welfare Plan provides or will provide benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect
to any current or former employee of Mortgagor, Indemnitor or any ERISA
Affiliate beyond his or her retirement or other termination of service
other than (i) coverage mandated by applicable law, (ii) death or disability
benefits that have been fully provided for by fully paid up insurance or
(iii) severance benefits.
(b) Mortgagor will furnish to Mortgagee as soon as possible, and
in any event within ten (10) days after Mortgagor knows or has reason to
believe that any of the events or conditions specified below with respect
to any Plan, Welfare Plan or Multiemployer Plan has occurred or exists, a
statement signed by a senior financial officer of Mortgagor setting forth
details respecting such event or condition and the action, if any, that
Mortgagor or its ERISA Affiliate proposes to take with respect thereto and
a copy of any report or notice required to be filed with or given to PBGC
(or any other relevant Governmental Authority) by Mortgagor or an ERISA
Affiliate with respect to such event or condition, if such report or notice
is required to be filed with the PBGC or any other relevant Governmental
Authority:
(i) any reportable event, as defined in Section 4043(b) of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has
not by regulation waived the requirement of Section 4043(a) of ERISA that
it be notified within thirty (30) days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section
412 of the Code of Section 302 of ERISA, including, without limitation,
the failure to make on or before its due date a required installment under
Section 412(m) of the Code of Section 302(e) of ERISA, shall be a reportable
event regardless of the issuance of any waivers in accordance with Section
412(d) of the Code), and any request for a waiver under Section 412(d) of
the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of intent
to terminate any Plan or any action taken by Mortgagor or an ERISA Affiliate
to terminate any Plan;
(ii) the institution by PBGC of proceedings under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by Mortgagor or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by PBGC with respect to
such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan by
Mortgagor or any ERISA Affiliate that results in liability under Section 4201
or 4204 of ERISA (including the obligation to satisfy secondary liability as
a result of a purchaser default) or the receipt by Mortgagor or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization
or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends
to terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any Multiemployer
Plan against Mortgagor or any ERISA Affiliate to enforce Section 515 of
ERISA, which proceeding is not dismissed within thirty (30) days;
(vi) the adoption of an amendment to any Plan that, pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of
tax-exempt status of the trust of which such Plan is a part if Mortgagor or
an ERISA Affiliate fails to timely provide security to the Plan in accordance
with the provisions of said Sections; or
(vii)the imposition of a lien or a security interest in connection with a
Plan.
(c) Mortgagor shall not knowingly engage in or permit any
transaction in connection with which Mortgagor, Indemnitor or any ERISA
Affiliate could be subject to either a civil penalty or tax assessed
pursuant to Section 502(i) or 502(l) of ERISA or Section 4975 of the Code,
permit any Welfare Plan to provide benefits, including without limitation,
medical benefits (whether or not insured), with respect to any current or
former employee of Mortgagor, Indemnitor or any ERISA Affiliate beyond his
or her retirement or other termination of service other than (i) coverage
mandated by applicable law, (ii) death or disability benefits that have been
fully provided for by paid up insurance or otherwise or (iii) severance
benefits, permit the assets of Mortgagor or Indemnitor to become "plan
assets", whether by operation of law or under regulations promulgated under
ERISA or adopt, amend (except as may be required by applicable law) or
increase the amount of any benefit or amount payable under, or permit any
ERISA Affiliate to adopt, amend (except as may be required by applicable
law) or increase the amount of any benefit or amount payable under, any
employee benefit plan (including, without limitation, any employee welfare
benefit plan) or other plan, policy or arrangement, except for normal
increases in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits
expense to Mortgagor, Indemnitor or any ERISA Affiliate.
(u) Labor Matters. Mortgagor is not a party to any collective bargaining
agreements.
3. Further Acts, etc. Mortgagor will, at the cost of Mortgagor, and
without expense to Mortgagee, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices
of assignments, 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
mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed,
confirmed, pledged, assigned and hypothecated, or which Mortgagor may be or
may hereafter become bound to convey or assign to Mortgagee, or for carrying
out or facilitating the performance of the terms of this Mortgage or for
filing, registering or recording this Mortgage and, on demand, will execute
and deliver and hereby authorizes Mortgagee in the event Mortgagor fails to
do so to execute in the name of Mortgagor or without the signature of
Mortgagor to the extent Mortgagee may lawfully do so, one or more financing
statements, chattel mortgages or comparable security instruments, to evidence
more effectively the lien hereof upon the Mortgaged Property. Mortgagor
grants to Mortgagee an irrevocable power of attorney coupled with an interest
for the purpose of protecting, perfecting, preserving and realizing upon the
interests granted pursuant to this Mortgage and to effect the intent hereof,
all as fully and effectually as Mortgagor might or could do; and Mortgagor
hereby ratifies all that Mortgagee shall lawfully do or cause to be done
by virtue hereof.
4. Recording of Mortgage, etc. Mortgagor forthwith upon the execution and
delivery of this Mortgage and thereafter, from time to time, will cause
this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property 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 protect the lien or
security interest hereof upon, and the interest of Mortgagee in, the
Mortgaged Property. Mortgagor will pay all filing, registration or
recording fees, and all expenses incident to the preparation, execution
and acknowledgment of this Mortgage, any mortgage supplemental hereto,
any security instrument with respect to the Mortgaged Property and any
instrument of further assurance, and all federal, state, county and
municipal, taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of this Mortgage,
any mortgage supplemental hereto, any security instrument with respect
to the Mortgaged Property or any instrument of further assurance, except
where prohibited by law to do so, in which event Mortgagee may declare so
much of the Debt as shall be equal to the Allocated Loan Amount for the
subject Mortgaged Property to be immediately due and payable. Mortgagor
shall hold harmless and indemnify Mortgagee, and its successors and
assigns, against any liability incurred as a result of the imposition
of any tax on the making and recording of this Mortgage.
5. Representations and Warranties as to the Mortgaged Property. Mortgagor
represents and warrants with respect to the Mortgaged Property as follows:
(a) Lien Priority. This Mortgage is a valid and enforceable first lien on
the Mortgaged Property, free and clear of all encumbrances and liens having
priority over the lien of this Mortgage, except for the items set forth as
exceptions to or subordinate matters in the title insurance policy insuring
the lien of this Mortgage, none of which, individually or in the aggregate,
materially interfere with the benefits of the security intended to be
provided by this Mortgage, materially affect the value or marketability of
the Mortgaged Property, impair the use or operation of the Mortgaged Property
or impair Mortgagor's ability to pay its obligations in a timely manner (such
items being the "Permitted Encumbrances").
(b) Title. Mortgagor has, subject only to the Permitted Encumbrances,
good, insurable and marketable fee simple title to the Premises, Improvements
and Fixtures (collectively the "Realty") and to all easements and rights
benefitting the Realty and has the right, power and authority to mortgage,
give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, assign,
and hypothecate the Mortgaged Property. Mortgagor will preserve its
interest in and title to the Mortgaged Property and will forever warrant
and defend the same to Mortgagee, its successors and assigns, against any
and all claims made by, through or under Mortgagor and will forever warrant
and defend the validity and priority of the lien and security interest created
herein against the claims of all Persons whomsoever claiming by, through or
under Mortgagor. The foregoing warranty of title shall survive the
foreclosure of this Mortgage and shall inure to the benefit of and be
enforceable by Mortgagee in the event Mortgagee acquires title to the
Mortgaged Property pursuant to any foreclosure. In addition, there are no
outstanding options or rights of first refusal to purchase the Mortgaged
Property or Mortgagor's ownership thereof.
(c) Taxes and Impositions. All taxes and other Impositions and
governmental assessments due and owing in respect of, and affecting, the
Mortgaged Property have been paid. Mortgagor has paid all Impositions which
constitute special governmental assessments in full, except for those
assessments which are permitted by applicable Legal Requirements to be paid in
installments, in which case all installments which are due and payable have
been paid in full. There are no pending, or to Mortgagor's best knowledge,
proposed special or other assessments for public improvements or otherwise
affecting the Mortgaged Property, nor are there any contemplated improvements
to the Mortgaged Property that may result in such special or other
assessments.
(d) Casualty; Flood Zone. The Realty is in good repair and free and
clear of any damage, destruction or casualty (whether or not covered by
insurance) that would materially affect the value of the Realty or the use
for which the Realty was intended. No portion of the Premises is located in
an "area of special flood hazard," as that term is defined in the regulations
of the Federal Insurance Administration, Department of Housing and Urban
Development, under the National Flood Insurance Act of 1968, as amended
(24 CFR Sect. 1909.1) or Mortgagor has obtained the flood insurance required
by Section 3.01(a)(vi) hereof. The Premises either does not lie in a 100 year
flood plain that has been identified by the Secretary of Housing and Urban
Development or any other Governmental Authority or, if it does, Mortgagor
has obtained the flood insurance required by Section 3.01(a)(vi) hereof.
(e) Completion; Encroachment. All Improvements necessary for the
efficient use and operation of the Premises, have been completed and none of
said Improvements lie outside the boundaries and building restriction lines
of the Premises. Except as set forth in the title insurance policy insuring
the lien of this Mortgage, no improvements on adjoining properties encroach
upon the Premises.
(f) Separate Lot. The Premises are taxed separately without regard to
any other real estate and constitute a legally subdivided lot under all
applicable Legal Requirements (or, if not subdivided, no subdivision or
platting of the Premises is required under applicable Legal Requirements),
and for all purposes may be mortgaged, conveyed or otherwise dealt with as
an independent parcel. The Mortgaged Property does not benefit from any tax
abatement or exemption.
(g) Use. The existence of all Improvements, the present use and
operation thereof and the access of the Premises and the Improvements to all
of the utilities and other items referred to in paragraph (k) below are in
compliance in all material respects with all Leases affecting the Mortgaged
Property and all applicable Legal Requirements, including, without
limitation, Environmental Statutes, Development Laws and Use Requirements.
Mortgagor has not received any notice from any Governmental Authority
alleging any uncured violation relating to the Mortgaged Property of any
applicable Legal Requirements.
(h) Licenses and Permits. Mortgagor currently holds and will continue
to hold all certificates of occupancy, licenses, registrations, permits,
consents, franchises and approvals of any Governmental Authority or any
other Person which are material for the lawful occupancy and operation of
the Realty or which are material to the ownership or operation of the
Mortgaged Property or the conduct of Mortgagor's business. All such
certificates of occupancy, licenses, registrations, permits, consents,
franchises and approvals are, to Mortgagor's best knowledge, current and
in full force and effect.
(i) Environmental Matters. Mortgagor has received and reviewed the
Environmental Report and, without further inquiry, has no reason to believe
that the Environmental Report contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained therein or herein, in light of the circumstances under which
such statements were made, not misleading.
(j) Property Proceedings. There are no actions, suits or proceedings
pending or threatened in any court or before any Governmental Authority
or arbitration board or tribunal (i) relating to (A) the zoning of the
Premises or any part thereof, (B) any certificates of occupancy, licenses,
registrations, permits, consents or approvals issued with respect to the
Mortgaged Property or any part thereof, (C) the condemnation of the
Mortgaged Property or any part thereof, or (D) the condemnation or relocation
of any roadways abutting the Premises required for access or the denial or
limitation of access to the Premises or any part thereof from any point of
access to the Premises, (ii) asserting that (A) any such zoning,
certificates of occupancy, licenses, registrations, permits, consents
and/or approvals do not permit the operation of any material portion of the
Realty as presently being conducted, (B) any material improvements located
on the Mortgaged Property or any part thereof cannot be located thereon or
operated with their intended use or (C) the operation of the Mortgaged
Property or any part thereof is in violation in any material respect of
any Environmental Statutes, Development Laws or other Legal Requirements
or Space Leases or Property Agreements or (iii) which (A) might affect the
validity or priority of any Loan Document or (B) have a Material Adverse
Effect. Mortgagor is not aware of any facts or circumstances which may
give rise to any actions, suits or proceedings described in the preceding
sentence.
(k) Utilities. The Premises has all necessary legal access to water, gas
and electrical supply, storm and sanitary sewerage facilities, other required
public utilities (with respect to each of the aforementioned items, by means
of either a direct connection to the source of such utilities or through
connections available on publicly dedicated roadways directly abutting the
Premises or through permanent insurable easements benefiting the Premises),
fire and police protection, parking, and means of direct access between the
Premises and public highways over recognized curb cuts (or such access to
public highways is through private roadways which may be used for ingress
and egress pursuant to permanent insurable easements).
(l) Mechanics' Liens. To Mortgagor's best knowledge, the Mortgaged
Property is free and clear of any mechanics' liens or liens in the nature
thereof, and no rights are outstanding that under law could give rise to any
such liens, any of which liens are or may be prior to, or equal with, the
lien of this Mortgage, except those which are insured against by the title
insurance policy insuring the lien of this Mortgage.
(m) Insurance. The Mortgaged Property is insured in accordance with the
requirements set forth in Article III hereof.
(n) Space Leases.
(i) Mortgagor has delivered a true, correct and complete schedule
of all Space Leases as of the date hereof, which accurately and completely
sets forth in all material respects, for each such Space Lease, the following
(collectively, the "Rent Roll"): the name and address of the tenant with
the name, title and telephone number of the contact person of such tenant;
the lease expiration date, extension and renewal provisions; the base rent
and percentage rent payable; all additional rent and pass-through
obligations; and the security deposit held thereunder and the location of
such deposit.
(ii) Each Space Lease constitutes the legal, valid and binding
obligation of Mortgagor and, to the knowledge of Mortgagor, is enforceable
against the tenant thereof. No default exists, or with the passing of time
or the giving of notice would exist, (A) under any Major Space Lease or (B)
under any otherSpace Leases which would, in the aggregate, have a Material
Adverse Effect.
(iii) No tenant under any Major Space Lease has, as of the date hereof,
paid Rent more than thirty (30) days in advance, and the Rents under such
Major Space Leases have not been waived, released, or otherwise discharged or
compromised.
(iv) All work to be performed by Mortgagor under the Major Space Leases
has been substantially performed, all contributions to be made by Mortgagor
to the tenants thereunder have been made except for any held-back amounts,
and all other conditions precedent to each such tenant's obligations
thereunder have been satisfied.
(v) Except as previously disclosed to Mortgagee in writing, there are
no options to terminate any Major Space Lease.
(vi) Each tenant under a Major Space Lease has entered into occupancy
of the demised premises to the extent required under the terms of its Major
Space Lease, and each such tenant is open and conducting business with the
public in the demised premises. To the best knowledge of Mortgagor, after
due inquiry, each tenant under a Lease other than a Major Space Lease has
entered into occupancy of its demised premises under its Lease to the extent
required under the terms of its Lease and each such tenant is open and
conducting business with the public in the demised premises.
(vii) Mortgagor has delivered to Mortgagee true, correct and complete
copies of all Major Space Leases described in the Rent Roll.
(viii) Each Major Space Lease is in full force and effect and (except
as disclosed on the Rent Roll) has not been assigned, modified, supplemented
or amended in any way.
(ix) Each tenant under each Major Space Lease is free from bankruptcy,
reorganization or arrangement proceedings or a general assignment for the
benefit of creditors.
(x) No Space Lease provides any party with the right to obtain a lien
or encumbrance upon the Mortgaged Property superior to the lien of this
Mortgage.
(o) Property Agreements.
(i) Mortgagor has delivered to Mortgagee true, correct and complete
copies of all material Property Agreements.
(ii) No Property Agreement provides any party with the right to obtain
a lien or encumbrance upon the Mortgaged Property superior to the lien of
this Mortgage.
(iii) No default exists or with the passing of time or the giving of
notice or both would exist under any Property Agreement which would,
individually or in the aggregate, have a Material Adverse Effect.
(iv) Mortgagor has not received or given any written communication
which alleges that a default exists or, with the giving of notice or the
lapse of time, or both, would exist under the provisions of any Property
Agreement.
(v) No condition exists whereby Mortgagor or any future owner of the
Mortgaged Property may be required to purchase any other parcel of land
which is subject to any Property Agreement or which gives any Person a right
to purchase, or right of first refusal with respect to, the Mortgaged
Property.
(vi) To the best knowledge of Mortgagor, no offset or any right of
offset exists respecting continued contributions to be made by any party to
any Property Agreement except as expressly set forth therein. Except as
previously disclosed to Mortgagee in writing, no material exclusions or
restrictions on the utilization, leasing or improvement of the Mortgaged
Property (including non-compete agreements) exists in any Property
Agreement.
(vii) All "pre-opening" requirements contained in all Property
Agreements (including, but not limited to, all off-site and on-site
construction requirements), if any, have been fulfilled, and, to the best of
Mortgagor's knowledge, no condition now exists whereby any party to any
such Property Agreement could refuse to honor its obligations thereunder.
(viii) All work, if any, to be performed by Mortgagor under each of the
Property amendments has been substantially performed, all contributions
to be made by Mortgagor to any party to such Property Agreements have been
made, and all other conditions to such party's obligations thereunder have
been satisfied.
(p) Personal Property. Mortgagor has delivered to Mortgagee a true,
correct and substantially complete schedule of all personal property, if any,
owned by Mortgagor and located upon the Mortgaged Property or used in
connection with the use or operation of the Mortgaged Property and Mortgagor
represents that it has good and marketable title to all such personal
property, free and clear of any liens, except for liens created under the
Loan Documents and liens which describe the equipment and other personal
property owned by tenants.
(q) Leasing Brokerage and Management Fees. Except as previously
disclosed to Mortgagee in writing, there are no brokerage fees or commissions
payable by Mortgagor with respect to the leasing of space at the Mortgaged
Property and there are no management fees payable by Mortgagor with respect
to the management of the Mortgaged Property.
(r) Security Deposits. All security deposits with respect to the Mortgaged
Property on the date hereof have been transferred to the Security Deposit
Account on the date hereof, and Mortgagor is in compliance with all Legal
Requirements relating to such security deposits as to which failure to
comply might, individually or in the aggregate, have a Material Adverse
Effect.
(s) [Intentionally Omitted].
(t) Representations Generally. The representations and warranties contained
in this Mortgage, and the review and inquiry made on behalf of Mortgagor
therefor, have all been made by Persons having the requisite expertise and
knowledge to provide such representations and warranties. No representation,
warranty or statement of fact made by or on behalf of Mortgagor in this
Mortgage or in any certificate, document or schedule furnished to Mortgagee
by Mortgagor or a consultant retained by Mortgagor in connection herewith,
contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained therein or herein not
misleading (which may be to Mortgagor's best knowledge where so provided
herein). There are no facts presently known to Mortgagor which have not
been disclosed to Mortgagee which would, individually or in the aggregate,
have a Material Adverse Effect nor as far as Mortgagor can reasonably
foresee might, individually or in the aggregate, have a Material Adverse
Effect.
6. Removal of Lien. (a) Mortgagor shall, at its expense, maintain this
Mortgage as a first lien on the Mortgaged Property and shall keep the
Mortgaged Property free and clear of all liens of any kind and nature
other than the Permitted Encumbrances. Mortgagor shall, within thirty (30)
days following Mortgagor's written receipt of notice of the filing thereof,
promptly discharge of record, by bond or otherwise, any such liens and,
promptly upon request by Mortgagee, shall deliver to Mortgagee evidence
reasonably satisfactory to Mortgagee of the discharge thereof.
(a) Without limitation to the provisions of Section 2.06(a) hereof,
Mortgagor shall (i) pay, from time to time when the same shall become due,
all 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, or on the revenues, rents, issues, income or
profits arising therefrom, (ii) cause to be removed of record (by payment
or posting of bond or settlement or otherwise) any mechanics', materialmens',
laborers' or other lien on the Mortgaged Property, or any part thereof, or
on the revenues, rents, issues, income or profit arising therefrom, and
(iii) in general, do or cause to be done, without expense to Mortgagee,
everything reasonably necessary to preserve in full the lien of this
Mortgage. If Mortgagor fails to comply with the requirements of paragraph
(b) of this Section 2.06, then, upon five (5) Business Days' prior notice
to Mortgagor, Mortgagee may, but shall not be obligated to, pay any such
lien, and Mortgagor shall, within five (5) Business Days after Mortgagee's
demand therefor, reimburse Mortgagee for all sums so expended, together
with interest thereon at the Default Rate from the date advanced, all of
which shall be deemed part of the Debt. Nothing contained herein shall be
deemed a consent or request of Mortgagee, express or implied, by inference
or otherwise, to the performance of any alteration, repair or other work by
any contractor, subcontractor or laborer or the furnishing of any materials
by any materialmen in connection therewith.
(c) Notwithstanding the foregoing, Mortgagor may contest any lien
(other than a lien relating to non-payment of Impositions, the contest of
which shall be governed by Section 4.04 hereof) of the type set forth in
subparagraph (b)(ii) of this Section 2.06 provided that, following prior
notice to Mortgagee (i) Mortgagor is contesting the validity of such lien
with due diligence and in good faith and by appropriate proceedings, without
cost or expense to Mortgagee or any of its agents, employees, officers, or
directors, (ii) Mortgagor shall preclude the collection of, or other
realization upon, any contested amount from the Mortgaged Property or any
revenues from or interest in the Mortgaged Property, (iii) neither the
Mortgaged Property nor any part thereof nor interest therein, shall be in
any danger of being sold, forfeited or lost by reason of such contest by
Mortgagor, (iv) such contest by Mortgagor shall not affect the ownership,
use or occupancy of the Mortgaged Property, (v) such contest by Mortgagor
shall not subject Mortgagee or Mortgagor to the risk of civil or criminal
liability (other than the civil liability of Mortgagor for the amount of the
lien in question), (vi) such lien is subordinate to the lien of this Mortgage,
(vii) Mortgagor has not consented to such lien, (viii) Mortgagor has given
Mortgagee prompt notice of the filing of such lien and the bonding thereof by
Mortgagor and, upon request by Mortgagee from time to time, notice of the
status of such contest by Mortgagor and/or confirmation of the continuing
satisfaction of the conditions set forth in this Section 2.06(c),
(ix) Mortgagor shall promptly pay the obligation secured by such lien upon
a final determination of Mortgagor's liability therefor, and (xi) Mortgagor
shall deliver to Mortgagee cash, a bond or other security acceptable to
Mortgagee equal to 125% of the contested amount pursuant to collateral
arrangements reasonably satisfactory to Mortgagee.
7. Cost of Defending and Upholding this Mortgage Lien. If any action or
proceeding is commenced to which Mortgagee is made a party relating to the
Loan Documents and/or the Mortgaged Property or Mortgagee's interest therein
or in which it becomes necessary to defend or uphold the lien of this
Mortgage or any other Loan Document, Mortgagor shall, on demand, reimburse
Mortgagee for all expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by Mortgagee in connection
therewith, and such sum, together with interest thereon at the Default
Rate from and after such demand until fully paid, shall constitute a part
of the Debt.
8. Use of the Mortgaged Property. Mortgagor will use, or cause to be used,
the Mortgaged Property for such use as is permitted pursuant to applicable
Legal Requirements including, without limitation, under the certificate of
occupancy applicable to the Mortgaged Property, and which is required by
the Loan Documents. Mortgagor shall not suffer or permit the Mortgaged
Property or any portion thereof to be used by the public, any tenant, or
any Person not subject to a Lease, in a manner as is reasonably likely to
impair Mortgagor's title to the Mortgaged Property, or in such manner as
may give rise to a claim or claims of adverse usage or adverse possession
by the public, or of implied dedication of the Mortgaged Property or any
part thereof.
9. Financial Reports. (a) Mortgagor will keep and maintain or will cause
to be kept and maintained on a fiscal year basis, in accordance with GAAP (or
such other accounting basis reasonably acceptable to Mortgagee) consistently
applied, proper and accurate books, records and accounts reflecting (i) all
of the financial affairs of Mortgagor and (ii) all items of income and
expense in connection with the operation of the Mortgaged Property or in
connection with any services, equipment or furnishings provided in connection
with the operation thereof, whether such income or expense may be realized by
Mortgagor or by any other Person whatsoever, excepting lessees unrelated to
and unaffiliated with Mortgagor who have leased from Mortgagor portions of the
Premises for the purpose of occupying the same. Mortgagee shall have the
right from time to time at all times during normal business hours upon
reasonable notice to examine such books, records and accounts at the office
of Mortgagor or other person maintaining such books, records and accounts and
to make such copies or extracts thereof as Mortgagee shall desire. After the
occurrence of an Event of Default, Mortgagor shall pay any costs and expenses
incurred by Mortgagee to examine Mortgagor's accounting records with respect
to the Mortgaged Property, as Mortgagee shall determine to be necessary or
appropriate in the protection of Mortgagee's interest.
(a) Mortgagor will furnish Mortgagee annually, as soon as performed but in
no event later than ninety (90) days following the end of each Fiscal Year of
Mortgagor, with a complete copy of the consolidated financial statement of
Motels of America ("MOA") audited by an Independent certified public
accountant that is acceptable to Mortgagee in accordance with GAAP (or such
other accounting basis reasonably acceptable to Mortgagee) consistently
applied covering, with respect to the Mortgagor and the Mortgaged Property,
(i) all of the financial affairs of Mortgagor and (ii) the operation of the
Mortgaged Property for such Fiscal Year and containing a statement of
revenues and expenses, a statement of assets and liabilities and a statement
of Mortgagor's equity. Notwithstanding the foregoing, for any Fiscal Year
in which an Event of Default has occurred or is continuing, Mortgagor shall
furnish to Mortgagee, as soon as performed, but in no event later than ninety
(90) days following the end of such Fiscal Year, a complete copy of a
financial statement of Mortgagor audited as provided above with respect to
MOA's financial statement covering (i) the financial affairs of Mortgagor
and (ii) the operation of the Mortgaged Property for such Fiscal Year
containing the information described above. Together with MOA's or
Mortgagor's annual financial statements, Mortgagor shall furnish to Mortgagee
an Officer's Certificate certifying as of the date thereof (i) that the
annual financial statements accurately represent the results of operation
and financial condition of Mortgagor and the Mortgaged Property all in
accordance with GAAP consistently applied, and (ii) whether there exists an
event or circumstance which constitutes, or which upon notice or lapse of time
or both would constitute, a Default under the Note or any other Loan Document
executed and delivered by Mortgagor, and if such event or circumstance exists,
the nature thereof, the period of time it has existed and the action then
being taken to remedy such event or circumstance.
(b) Mortgagor will furnish Mortgagee monthly, within thirty (30) Business
Days following the end of each month, with a true, complete and correct cash
flow statement with respect to the Mortgaged Property in the form attached
hereto as Exhibit C and made a part hereof, showing (i) all cash receipts of
any kind whatsoever and all cash payments and disbursements, and
(ii) year-to-date summaries of such cash receipts, payments and disbursements
together with a certification of the Manager stating that such cash flow
statement is true, complete and correct.
(c) Mortgagor will furnish Mortgagee monthly, within thirty (30) days
following the end of each month, with a certification of the Manager stating
that all Operating Expenses with respect to the Mortgaged Property which had
accrued as of the last day of the month preceding the delivery of the cash
flow statement referred to in clause (c) above have been fully paid or
otherwise reserved or provided for by the Manager (any such certification or
any certification furnished by a Manager pursuant to clause (c) above, a
"Manager Certification").
(d) Mortgagor will furnish Mortgagee annually, upon request by Mortgagee
therefor, within thirty (30) days following receipt of such request, with a
true, complete and correct rent roll for the Mortgaged Property, including
a list of which tenants are in default under their respective leases, dated
as of the date of Mortgagee's request, identifying each tenant, the monthly
rent and additional rent, if any, payable by such tenant, the expiration date
of such tenant's Lease, the security deposit, if any, held by Mortgagor under
the Lease, the space covered by the Lease, and the arrearages for such tenant,
if any, and such rent roll shall be accompanied by an Officer's Certificate,
dated as of the date of the delivery of such rent roll, certifying that such
rent roll is true, correct and complete in all material respects as of its
date.
(e) Mortgagor shall furnish to Mortgagee, within thirty (30) days after
Mortgagee's request therefor, with such further detailed information with
respect to the operation of the Mortgaged Property and the financial affairs
of Mortgagor as may be reasonably requested by Mortgagee.
(f) [Intentionally Omitted].
(g) Mortgagor will furnish Mortgagee annually, within ninety (90) days
after the end of each Fiscal Year, with a report setting forth (i) the Net
Operating Income for such Fiscal Year, (ii) the average occupancy rate of
the Mortgaged Property during such Fiscal Year, (iii) the capital repairs,
replacements and improvements performed at the Mortgaged Property during
such Fiscal Year and the aggregate Recurring Replacement Expenditures made
in connection therewith, and (iv) the balance contained in each of the
Sub-Accounts as of the end of such Fiscal Year (which balance Mortgagee
shall provide upon Mortgagor's written request therefor).
(h) Mortgagor will furnish Mortgagee, at least forty-five (45) days prior
to the end of each Fiscal Year, with an annual operating budget and capital
budget for the forthcoming Fiscal Year (jointly, the "Annual Budget") showing
a budget by month and quarter and for the forthcoming Fiscal Year as a whole
which shall be in form and substance reasonably acceptable to Mortgagee.
The Annual Budget shall be reviewed by Mortgagor and Mortgagee quarterly and
revised as reasonably determined by Mortgagee to reflect actual Operating
Expenses and capital improvement costs.
10. Litigation. Mortgagor will give prompt written notice to Mortgagee of
any litigation or governmental proceedings pending or threatened (in writing)
against Mortgagor which might have a Material Adverse Effect.
11. [Intentionally Omitted].
12. Updates of Representations. Mortgagor shall deliver to Mortgagee within
ten (10) Business Days of the request of Mortgagee (but not more frequently
than twice a year) an Officer's Certificate updating all of the
representations and warranties contained in this Mortgage and the other Loan
Documents and certifying that all of the representations and warranties
contained in this Mortgage and the other Loan Documents, as updated pursuant
to such Officer's Certificate, are true, accurate and complete as of the date
of such Officer's Certificate.
IV: INSURANCE AND CASUALTY RESTORATION
1. Insurance Coverage. Mortgagor shall, at its expense, maintain the
following insurance coverages with respect to the Mortgaged Property during
the term of this Mortgage:
(a) (i) Insurance against loss or damage by fire, casualty and other
hazards included in an "all-risk" extended coverage endorsement or its
equivalent, with such endorsements as Mortgagee may from time to time
reasonably require and which are customarily required by Institutional
Lenders of similarproperties similarly situated, covering the Mortgaged
Property in an amount not less than the greater of (A) 100% of the insurable
replacement value of the Mortgaged Property (exclusive of the Premises and
footings and foundations) and (B) such other amount as is necessary to
prevent any reduction in such policy by reason of and to prevent Mortgagor,
Mortgagee or any other insured thereunder from being deemed to be a
co-insurer.
(i) Commercial comprehensive general liability insurance against claims
for personal and bodily injury and/or death to one or more persons or
property damage, occurring on, in or about the Mortgaged Property (including
the adjoining streets, sidewalks and passageways therein) in such amounts as
Mortgagee may from time to time reasonably require (but in no event shall
Mortgagee's requirements be increased more frequently than once during
the term of the Loan and which are customarily required by Institutional
Lenders for similar properties similarly situated, but not less than
$10,000,000.00.
(ii) Business interruption, rent loss or other similar insurance (A) with
loss payable to Mortgagee, (B) covering all risks required to be covered by
the insurance provided for in Sectionb 3.01(a) (i) and (C) in an amount not
less than the amount Mortgagor is currently maintaining with no co-insurance
or such other amount as Mortgagee may reasonably determine in light of what
is customary and prudent under the circumstances. Mortgagee acknowledges
that the current type and amounts are acceptable. Mortgagor may affect such
coverage under a blanket insurance policy reasonably satisfactory to
Mortgagee. The amount of such insurance shall be determined not more
frequently than once each calendar year thereafter based on Mortgagor's
reasonable estimate of projected Rents, from the Mortgaged Property for the
next succeeding eighteen (18) months. In the event the Mortgaged Property
shall be damaged or destroyed, Mortgagor shall and hereby does assign to
Mortgagee all payment of claims under the policies of such insurance, and all
amounts payable thereunder, and all net amounts, shall be collected by
Mortgagee under such policies and shall be applied in accordance with this
Mortgage; provided, however, that nothing herein contained shall be deemed to
relieve Mortgagorof its obligations to timely pay all amounts due under the
Loan Documents.
(iii) War risk insurance when such insurance is obtainable from the United
States of America or any agency or instrumentality thereof at reasonable
rates (for the maximum amount of insurance obtainable) and if requested
by Mortgagee, and such insurance is then customarily required by
Institutional Lenders of similar properties similarly situated.
(iv) Insurance against loss or damages from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning equipment,
pressure vessels or similar apparatus now or hereafter installed at the
Mortgaged Property, in such amounts as Mortgagee may from time to time
reasonably require and which are then customarily required by Institutional
Lenders of similar properties similarly situated.
(v) Flood insurance in an amount equal to the full insurable value of the
Mortgaged Property or the maximum amount available, whichever is less,
if the Improvements are located in an area designated by the Secretary
of Housing and Urban Development as being "an area of special flood hazard"
under the National Flood Insurance Program (i.e., having a one percent or
greater chance of flooding), and if flood insurance is available under the
National Flood Insurance Act.
(vi) Worker's compensation insurance or other similar insurance which may
be required by Governmental Authorities or Legal Requirements.
(vii) Such other insurance as may from time to time be required by
Mortgagee and which is then customarily required by Institutional Lenders for
similar properties similarly situated, against other insurable hazards,
including, but not limited to, malicious mischief, vandalism, windstorm or
earthquake, which at the time are commonly insured against and generally
available in the case of properties similarly situated, due regard to be
given to the size and type of the Premises, Improvements, Fixtures and
Equipment and their location, construction and use.
(b) If Mortgagor is a partnership, Mortgagor shall cause the General
Partner to maintain fidelity insurance in an amount equal to or greater
than the annual Operating Income of the Mortgaged Property for the six (6)
month period immediately preceding the date on which the premium for such
insurance is due and payable.
(c) Mortgagor shall cause any Manager (other than Motels of America, Inc.
or its Affiliates) of the Mortgaged Property to maintain fidelity insurance
in an amount equal to One Million Five Hundred Thousand Dollars
($1,500,000.00) or such other amount as Mortgagee shall reasonably determine
in light of what is customary and prudent under the circumstances.
2. Policy Terms. (a) All insurance required by this Article III shall be in
the form (other than with respect to Sections 3.01(a)(vi) and (vii) above
when insurance in those two sub-sections is placed with a governmental
agency or instrumentality on such agency's forms) and amount and with
deductibles as, from time to time, shall be reasonably acceptable to
Mortgagee, under valid and enforceable policies issued by financially
responsible insurers authorized to do business in the State where the
Mortgaged Property is located, shall have a claims paying ability rating
of not less than "AA" from Standard & Poor's. Originals or certified
copies of all insurance policies shall be delivered to and held by Mortgagee.
All such policies (except policies for worker's compensation) shall name
Mortgagee as an additional named insured, shall provide for loss payable to
Mortgagee and shall contain (or have attached): (i) standard
"non-contributory mortgagee" endorsement or its equivalent relating, inter
alia, to recovery by Mortgagee notwithstanding the negligent or willful
acts or omissions of Mortgagor; (ii) a waiver of subrogation endorsement
as to Mortgagee; (iii) an endorsement indicating that neither Mortgagee
nor Mortgagor shall be or be deemed to be a co-insurer with respect to
any casualty risk insured by such policies and shall provide for a deductible
per loss of an amount not more than that which is customarily maintained by
owners of similar properties similarly situated, and (iv) a provision that
such policies shall not be canceled, terminated, denied renewal or amended,
including, without limitation, any amendment reducing the scope or limits of
coverage, without at least thirty (30) days' prior written notice to Mortgagee
in each instance. Not less than thirty (30) days prior to the expiration
dates of the insurance policies obtained pursuant to this Mortgage, originals
or certified copies of renewals of such policies (or certificates evidencing
such renewals) bearing notations evidencing the payment of premiums or
accompanied by other reasonable evidence of such payment (which premiums
shall not be paid by Mortgagor through or by any financing arrangement which
would entitle an insurer to terminate a policy) shall be delivered by
Mortgagor to Mortgagee. Mortgagor shall not carry separate insurance with
respect to the Mortgaged Property, concurrent in kind or form or contributing
in the event of loss, with any insurance required under this Article III.
(a) If Mortgagor fails to maintain and deliver to Mortgagee the original
policies or certificates of insurance required by this Mortgage, or if there
are insufficient funds in the Basic Carrying Costs Sub-Account to pay the
premiums for same, Mortgagee may, at its option, procure such insurance, and
Mortgagor shall pay, or as the case may be, reimburse Mortgagee for, all
premiums thereon promptly, upon demand by Mortgagee, with interest thereon
at the Default Rate from the date paid by Mortgagee to the date of repayment
and such sum shall constitute a part of the Debt.
(b) Mortgagor shall notify Mortgagee of the renewal premium of each
insurance policy and Mortgagee shall with advance notice to Mortgagor be
entitled to pay such amount on behalf of Mortgagor from the Basic Carrying
Costs Sub-Account. With respect to insurance policies which require periodic
payments (i.e., monthly or quarterly) of premiums, Mortgagee shall be
entitled to pay such amounts fifteen (15) days (or such lesser number of
days as Mortgagee shall determine) prior to the respective due dates of
such installments.
3. Assignment of Policies. (a) Mortgagor hereby assigns to Mortgagee the
proceeds of all insurance (other than liability insurance) obtained pursuant
to this Mortgage, all of which proceeds shall be payable to Mortgagee as
collateral and further security for the payment of the Debt and the
performance of the Mortgagor's obligations hereunder and under the other
Loan Documents, and Mortgagor hereby authorizes and directs the issuer of
any such insurance to make payment of such proceeds directly to Mortgagee.
Except as otherwise expressly provided in Section 3.04 or elsewhere in this
Article III, Mortgagee shall have the option, in its discretion, and
without regard to the adequacy of its security, to apply all or any part of
the proceeds it may receive pursuant to this Article in such manner as
Mortgagee may elect to any one or more of the following: (i) the payment
of the Debt, whether or not then due, in any proportion or priority as
Mortgagee, in its discretion, may elect, (ii) the repair or restoration
of the Mortgaged Property, (iii) the cure of any Default or (iv) the
reimbursement of the costs and expenses of Mortgagee incurred pursuant to
the terms hereof in connection with the recovery of the Insurance Proceeds.
Nothing herein contained shall be deemed to excuse Mortgagor from repairing
or maintaining the Mortgaged Property as provided in this Mortgage or
restoring all damage or destruction to the Mortgaged Property, regardless
of the sufficiency of the Insurance Proceeds, and the application or release
by Mortgagee of any Insurance Proceeds shall not cure or waive any Default
or notice of Default.
(a) In the event of the foreclosure of this Mortgage or any other transfer
of title or assignment of all or any part of the Mortgaged Property in
extinguishment, in whole or in part, of the Debt, all right, title and
interest of Mortgagor in and to all policies of insurance required by this
Mortgage shall inure to the benefit of the successor in interest to Mortgagor
or the purchaser of the Mortgaged Property. If, prior to the receipt by
Mortgagee of any proceeds, the Mortgaged Property or any portion thereof
shall have been sold on foreclosure of this Mortgage or by deed in lieu
thereof or otherwise, or any claim under such insurance policy arising during
the term of this Mortgage is not paid until after the extinguishment of the
Debt, and Mortgagee shall not have received the entire amount of the Debt
outstanding at the time of such extinguishment, whether or not a deficiency
judgment on this Mortgage shall have been sought or recovered or denied,
then, the proceeds of any such insurance to the extent of the amount of the
Debt not so received, shall be paid to and be the property of Mortgagee,
together with interest thereon at the Default Rate, and the reasonable
attorney's fees, costs and disbursements incurred by Mortgagee in connection
with the collection of the proceeds which shall be paid to Mortgagee and
Mortgagor hereby assigns, transfers and sets over to Mortgagee all of
Mortgagor's right, title and interest in and to such proceeds.
Notwithstanding any provisions of this Mortgage to the contrary, Mortgagee
shall not be deemed to be a trustee or other fiduciary with respect to its
receipt of any such proceeds, which may be commingled with any other monies
of Mortgagee; provided, however, that Mortgagee shall use such proceeds for
the purposes and in the manner permitted by this Mortgage. Any proceeds
deposited with Mortgagee shall be held by Mortgagee in an interest-bearing
account, but Mortgagee makes no representation or warranty as to the rate or
amount of interest, if any, which may accrue on such deposit and shall have
no liability in connection therewith. Interest accrued, if any, on the
proceeds shall be deemed to constitute a part of the proceeds for purposes of
this Mortgage. The provisions of this Section 3.03(b) shall survive the
termination of this Mortgage by foreclosure, deed in lieu thereof or otherwise
as consequence of the exercise of the rights and remedies of Mortgagee
hereunder after a Default.
4. Casualty Restoration. (a) (i) In the event of any damage to or
destruction of the Mortgaged Property, Mortgagor shall give prompt written
notice to Mortgagee (which notice shall set forth Mortgagor's good faith
estimate of the cost of repairing or restoring such damage or destruction, or
if Mortgagor cannot reasonably estimate the anticipated cost of restoration,
Mortgagor shall nonetheless give Mortgagee prompt notice of the occurrence of
such damage or destruction, and will diligently proceed to obtain estimates to
enable Mortgagor to quantify the anticipated cost and time required for such
restoration, whereupon Mortgagor shall promptly notify Mortgagee of such good
faith estimate) and, provided that restoration does not violate any Legal
Requirements, Mortgagor shall promptly commence and diligently prosecute to
completion the repair, restoration or rebuilding of the Mortgaged Property so
damaged or destroyed to a condition such that the Mortgaged Property shall be
at least equal in value to that immediately prior to the damage to the extent
practicable, in full compliance with all Legal Requirements and the provisions
of all Leases, and in accordance with Section 3.04(b) below. Such repair,
restoration or rebuilding of the Mortgaged Property are sometimes hereinafter
collectively referred to as the "Work".
(i) Mortgagor shall not adjust, compromise or settle any claim for
Insurance Proceeds without the prior written consent of Mortgagee, which
shall not be unreasonably withheld or delayed; provided, however, that, except
during the continuance of an Event of Default, Mortgagee's consent shall not
be required with respect to the adjustment, compromising or settlement of any
claim for Insurance Proceeds in an amount less than $25,000.
(ii) Subject to Section 3.04(a)(iv), Mortgagee shall apply any Insurance
Proceeds which it may receive towards the Work in accordance with Section
3.04(b) and the other applicable sections of this Article III.
(iii) If (A) a Default shall have occurred, (B) Mortgagee is not
reasonably satisfied that the Debt Service Coverage, after substantial
completion of the Work, will be at least equal to the Required Debt Service
Coverage, (C) more than seventy-five percent (75%) of the reasonably
estimated aggregate insurable value of the Mortgaged Property is damaged or
destroyed, (D) any Leases physically affected by such destruction shall not
continue in full force and effect or (E) Mortgagee is not reasonably satisfied
the Work can be completed six (6) months prior to Maturity (collectively, a
"Substantial Casualty"), Mortgagee shall have the option, in its sole
discretion to apply any Insurance Proceeds it may receive pursuant to this
Mortgage (less any cost to Mortgagee of recovering and paying out such
proceeds incurred pursuant to the terms hereof and not otherwise reimbursed
to Mortgagee, including, without limitation, reasonable attorneys' fees and
expenses) to the payment of the Debt or to allow such proceeds to be used for
the Work pursuant to the terms and subject to the conditions of Section
3.04(b) hereof and the other applicable sections of this Article III.
(iv) In the event that Mortgagee elects or is obligated hereunder to
allow Insurance Proceeds to be used for the Work, any excess proceeds
remaining after completion of such Work shall be applied to the payment of
the Debt.
(b) If any Condemnation Proceeds, in accordance with Section 6.01(a) or
any Insurance Proceeds in accordance with Section 3.04(a), are to be applied
to the repair, restoration or rebuilding of the Mortgaged Property, then such
proceeds shall be deposited into a segregated interest-bearing bank account at
the Bank, which shall be an Eligible Account, held by Mortgagee and shall be
paid out from time to time to Mortgagor as the Work progresses (less any cost
to Mortgagee of recovering and paying out such proceeds, including, without
limitation, reasonable attorneys' fees and costs allocable to inspecting the
Work and the plans and specifications therefor) subject to Section 5.13 hereof
and to all of the following conditions:
(i) An architect or engineer selected by Mortgagor and reasonably
acceptable to Mortgagee (an "Architect" or "Engineer") or a Person otherwise
reasonably acceptable to Mortgagee, shall have delivered to Mortgagee a
certificate estimating the cost of completing the Work, and, if the amount
set forth therein is more than the sum of the amount of Insurance Proceeds
then being held by Mortgagee in connection with a casualty and amounts agreed
to be paid as part of a final settlement under the insurance policy upon or
before completion of the Work, Mortgagor shall have delivered to Mortgagee
(A) cash collateral in an amount equal to such excess, (B) an unconditional,
irrevocable, clean sight draft letter of credit, in form, substance and issued
by a bank reasonably acceptable to Mortgagee, in the amount of such excess and
draws on such letter of credit shall be made by Mortgagee to make payments
pursuant to this Article III following exhaustion of the Insurance Proceeds
therefore or (C) a completion bond in form, substance and issued by a surety
company reasonably acceptable to Mortgagee.
(ii) If the cost of the Work is reasonably estimated by an Architect or
Engineer in a certification reasonably acceptable to Mortgagee to be equal to
or exceed twenty percent (20%) of the Allocated Loan Amount, such Work shall
be performed under the supervision of an Architect or Engineer, it being
understood that the plans and specifications with respect thereto shall
provide for Work so that, upon completion thereof, the Mortgaged Property
shall be at least equal in replacement value and general utility to the
Mortgaged Property prior to the damage or destruction.
(iii) Each request for payment shall be made on not less than ten (10) days'
prior notice to Mortgagee and shall be accompanied by a certificate of an
Architect or Engineer, or, if the Work is not required to be supervised by an
Architect or Engineer, by an Officer's Certificate stating (A) that payment is
for Work completed in compliance with the plans and specifications, if
required under clause (ii) above, (B) that the sum requested is required to
reimburse Mortgagor for payments by Mortgagor to date, or is due to the
contractor, subcontractors, materialmen, laborers, engineers, architects or
other Persons rendering services or materials for the Work (giving a brief
description of such services and materials), and that when added to all sums
previously paid out by Mortgagee does not exceed the value of the Work done
to the date of such certificate, (C) if the sum requested is to cover payment
relating to repair and restoration of personal property required or relating
to the Mortgaged Property, that title to the personal property items covered
by the request for payment is vested in Mortgagor (unless Mortgagor is lessee
of such personal property), and (D) that the Insurance Proceeds and other
amounts deposited by Mortgagor held by Mortgagee after such payment is more
than the estimated remaining cost to complete such Work; provided, however,
that if such certificate is given by an Architect or Engineer, such
Architector Engineer shall certify as to clause (A) above, and such Officer's
Certificate shall certify as to the remaining clauses above, and provided,
further, that Mortgagee shall not be obligated to disburse such funds if
Mortgagee determines, in Mortgagee's reasonable discretion, that Mortgagor
shall not be in compliance with this Section 3.04(b). Additionally, each
request for payment shall contain a statement signed by Mortgagor stating
that the requested payment is for Work satisfactorily done to date.
(iv) Each request for payment shall be accompanied by waivers of lien, to
the extent permitted by law, in customary form and substance, covering that
part of the Work for which payment or reimbursement is being requested and,
if required by Mortgagee, a search prepared by a title company or licensed
abstractor, or by other evidence satisfactory to Mortgagee that there has
not been filed with respect to the Mortgaged Property any mechanic's or other
lien or instrument for retention of title relating to any part of the Work not
discharged of record. Additionally, as to any personal property covered by
the request for payment, Mortgagee shall be furnished with evidence of having
incurred a payment obligation therefor and such further evidence reasonably
satisfactory to assure Mortgagee that UCC filings therefor provide a valid
first lien on the personal property.
(v) Mortgagee shall have the right to inspect the Work at all reasonable
times upon reasonable prior notice and may condition any disbursement of
Insurance Proceeds upon satisfactory compliance by Mortgagor with the
rovisions hereof. Neither the approval by Mortgagee of any required plans
and specifications for the Work nor the inspection by Mortgagee of the Work
shall make Mortgagee responsible for the preparation of such plans and
specifications, or the compliance of such plans and specifications of the
Work, with any applicable law, regulation, ordinance, covenant or agreement.
(vi) Insurance Proceeds shall not be disbursed more frequently than once
every thirty (30) days.
(vii) Until such time as the Work has been substantially completed,
Mortgagee shall not be obligated to disburse up to ten percent (10%) of the
cost of the Work (the "Retention Amount") to Mortgagor. Upon substantial
completion of the Work, Mortgagor shall send notice thereof to Mortgagee and,
subject to the conditions of Section 3.04(b)(i)-(iv), Mortgagee shall disburse
one-half of the Retention Amount to Mortgagor; provided, however, that the
remaining one-half of the Retention Amount shall be disbursed to Mortgagor
when Mortgagee shall have received copies of any and all final certificates
of occupancy or other certificates, licenses and permits required for the
ownership, occupancy and operation of the Mortgaged Property in accordance
with all Legal Requirements. Mortgagor hereby covenants to diligently seek
to obtain any such certificates, licenses and permits.
(viii) Upon failure on the part of Mortgagor promptly to commence the Work
or to proceed diligently and continuously to completion of the Work, which
failure shall continue after notice for thirty (30) days, Mortgagee may apply
any Insurance Proceeds or Condemnation Proceeds it then or thereafter holds to
the payment of the Debt in accordance with the provisions of the Note;
provided, however, that Mortgagee shall be entitled to apply at any time all
or any portion of the Insurance Proceeds or Condemnation Proceeds it then
holds to the extent necessary to cure any Event of Default under this
Mortgage, the Note or any other Loan Document.
(c) If Mortgagor (i) within one hundred twenty (120) days after the
occurrence of any damage to the Mortgaged Property or any portion thereof (or
such shorter period as may be required under any Major Space Lease) shall fail
to submit to Mortgagee for approval plans and specifications (if required
pursuant to Section 3.04(b)(ii) hereof) for the Work (approved by the
Architect and by all Governmental Authorities whose approval is required),
(ii) after any such plans and specifications are approved by all Governmental
Authorities, the Architect and Mortgagee, shall fail to promptly commence such
Work or (iii) shall fail to diligently prosecute such Work to completion,
then, in addition to all other rights available hereunder, at law or in
equity, Mortgagee, or any receiver of the Mortgaged Property or any portion
thereof, upon five (5) days' prior notice to Mortgagor (except in the event of
emergency in which case no notice shall be required), may (but shall have no
obligation to) perform or cause to be performed such Work, and may take such
other steps as it reasonably deems advisable. Mortgagor hereby waives, for
Mortgagor, any claim, other than for gross negligence or willful misconduct,
against Mortgagee and any receiver arising out of any act or omission of
Mortgagee or such receiver pursuant hereto, and Mortgagee may apply all or
any portion of the proceeds of insurance (without the need to fulfill any
other requirements of this Section 3.04) to reimburse Mortgagee and such
receiver, for all costs not reimbursed to Mortgagee or such receiver upon
demand together with interest thereon at the Default Rate from the date such
amounts are advanced until the same are paid to Mortgagee or the receiver.
(d) Subject to the limitations herein set forth, Mortgagor hereby
irrevocably appoints Mortgagee as its attorney-in-fact, coupled with an
interest, to collect and receive any insurance proceeds paid with respect to
any portion of the Mortgaged Property or the insurance policies required to
be maintained hereunder, and to endorse any checks, drafts or other
instruments representing any insurance proceeds whether payable by reason of
loss thereunder or otherwise.
5. Compliance with Insurance Requirements. Mortgagor promptly shall comply
with, and shall cause the Mortgaged Property to comply with, all Insurance
Requirements, even if such compliance requires structural changes or
improvements or would result in interference with the use or enjoyment of
the Mortgaged Property or any portion thereof provided Mortgagor shall have a
right to contest in good faith and with diligence such Insurance Requirements
provided (a) no Default or Event of Default shall exist during such contest
and such contest shall not subject the Mortgaged Property or any portion
thereof to any lien or affect the priority of the lien of this Mortgage,
(b) failure to comply with such Insurance Requirements will not subject
Mortgagee or any of its agents, employees, officers or directors to any civil
or criminal liability, (c) such contest will not cause any reduction in
insurance coverage, (d) such contest shall not affect the ownership, use or
occupancy of the Mortgaged Property, (e) the Mortgaged Property or any part
thereof or any interest therein shall not be in any danger of being sold,
forfeited or lost by reason of such contest by Mortgagor, (f) Mortgagor has
given Mortgagee prompt notice of such contest and, upon request by Mortgagee
from time to time, notice of the status of such contest by Mortgagor and/or
information of the continuing satisfaction of the conditions set forth in
clauses (a) through (e) of this Section 3.05, (g) upon a final determination
of such contest, Mortgagor shall promptly comply with the requirements
thereof, and (h) prior to and during such contest, Mortgagor shall furnish to
Mortgagee security satisfactory to Mortgagee, in its reasonable discretion,
against loss or injury by reason of such contest or the non-compliance with
such Insurance Requirement (and if such security is cash, Mortgagee shall
deposit the same in an interest-bearing account and interest accrued thereon,
if any, shall be deemed to constitute a part of such security for purposes of
this Mortgage, but Mortgagee (i) makes no representation or warranty as to the
rate or amount of interest, if any, which may accrue thereon and shall have
no liability in connection therewith and (ii) shall not be deemed to be a
trustee or fiduciary with respect to its receipt of any such security and
any such security may be commingled with other monies of Mortgagee). If
Mortgagor shall use the Mortgaged Property or any portion thereof in any
manner which could permit the insurer to cancel any insurance required to
be provided hereunder, Mortgagor immediately shall obtain a substitute
policy which shall satisfy the requirements of this Mortgage and which shall
be effective on or prior to the date on which any such other insurance policy
shall be canceled. Mortgagor shall not by any action or omission invalidate
any insurance policy required to be carried hereunder unless such policy is
replaced as aforesaid, or materially increase the premiums on any such policy
above the normal premium charged for such policy. Mortgagor shall cooperate
with Mortgagee in obtaining for Mortgagee the benefits of any insurance
proceeds lawfully or equitably payable to Mortgagee in connection with the
transaction contemplated hereby.
6. Event of Default During Restoration. Notwithstanding anything to the
contrary contained in this Mortgage including, without limitation, the
provisions of this Article 3, if, at the time of any casualty affecting the
Mortgaged Property or any part thereof, or at any time during any Work, or
at any time that Mortgagee is holding or is entitled to receive any Insurance
Proceeds pursuant to this Mortgage, a Default exists and is continuing
(whether or not it constitutes an Event of Default), Mortgagee shall then
have no obligation to make such proceeds available for Work and Mortgagee
shall have the right and option, to be exercised in its sole and absolute
discretion and election, with respect to the Insurance Proceeds, either to
retain and apply such proceeds in reimbursement for the actual costs, fees
and expenses incurred by Mortgagee in accordance with the terms hereof in
connection with the adjustment of the loss and any balance toward payment of
the Debt in such priority and proportions as Mortgagee, in its sole
discretion, shall deem proper, or towards the Work, upon such terms and
conditions as Mortgagee shall determine, or to cure such Event of Default, or
to any one or more of the foregoing as Mortgagee, in its sole and absolute
discretion, may determine. If Mortgagee shall receive and retain such
Insurance Proceeds, the lien of this Mortgage shall be reduced only by the
amount thereof received, after reimbursement to Mortgagee of expenses of
collection, and actually applied by Mortgagee in reduction of the principal
sum payable under the Note in accordance with the Note.
7. Application of Proceeds to Debt Reduction. (a) No damage to the
Mortgaged Property, or any part thereof, by fire or other casualty whatsoever,
whether such damage be partial or total, shall relieve Mortgagor from its
liability to pay in full the Debt and to perform its obligations under this
Mortgage and the other Loan Documents except to the extent any rent (business
interruption) insurance is paid to Mortgagee and applied to the Debt, and
subject to the provisions of Section 18.32 hereof.
(a) If any Insurance Proceeds are applied to reduce the Debt, Mortgagee
shall apply the same in accordance with the provisions of the Note.
V: IMPOSITIONS
1. Payment of Impositions, Utilities and Taxes, etc. (a) Mortgagor shall
pay or cause to be paid all Impositions at least five (5) days prior to the
date upon which any fine, penalty, interest or cost for nonpayment is imposed,
and furnish to Mortgagee, upon request, receipted bills of the appropriate
taxing authority or other documentation reasonably satisfactory to Mortgagee
evidencing the payment thereof. If Mortgagor shall fail to pay any
Imposition in accordance with this Section and is not contesting or
causing a contesting of such Imposition in accordance with Section 4.04
hereof, or if there are insufficient funds in the Basic Carrying Costs
Sub-Account to pay any Imposition, Mortgagee shall have the right, but
shall not be obligated, to pay that Imposition, and Mortgagor shall repay
to Mortgagee, on demand, any amount paid by Mortgagee, with interest thereon
at the Default Rate from the date of the advance thereof to the date of
repayment, and such amount shall constitute a portion of the Debt secured
by this Mortgage and the other Cross-collateralized Mortgages.
(a) Mortgagor shall, prior to the date upon which any fine, penalty,
interest or cost for the nonpayment is imposed, pay or cause to be paid all
charges for electricity, power, gas, water and other services and utilities
in connection with the Mortgaged Property, and shall, upon request, but not
more frequently than two (2) times in any given Loan year, deliver to
Mortgagee receipts or other documentation reasonably satisfactory to
Mortgagee evidencing payment thereof. If Mortgagor shall fail to pay any
amount required to be paid by Mortgagor pursuant to this Section 4.01 and is
not contesting such charges in accordance with Section 4.04 hereof, Mortgagee
shall have the right, but shall not be obligated, to pay that amount, and
Mortgagor will repay to Mortgagee, on demand, any amount paid by Mortgagee
with interest thereon at the Default Rate from the date of the advance thereof
to the date of repayment, and such amount shall constitute a portion of the
Debt secured by this Mortgage and the other Cross-collateralized Mortgages.
(b) Mortgagor shall pay all taxes, charges, filing, registration and
recording fees, excises and levies imposed upon Mortgagee by reason of or in
connection with its ownership of any Loan Document or any other instrument
related thereto, or resulting from the execution, delivery and recording of,
or the lien created by, or the obligation evidenced by, any of them, other
than income, franchise and other similar taxes imposed on Mortgagee and shall
pay all corporate stamp taxes, if any, and other taxes, required to be paid
on the Loan Documents. If Mortgagor shall fail to make any such payment
within ten (10) days after written notice thereof from Mortgagee, Mortgagee
shall have the right, but shall not be obligated, to pay the amount due, and
Mortgagor shall reimburse Mortgagee therefor, on demand, with interest thereon
at the Default Rate from the date of the advance thereof to the date of
repayment, and such amount shall constitute a portion of the Debt secured by
this Mortgage and the other Cross-collateralized Mortgages.
2. Deduction from Value. In the event of the passage after the date of this
Mortgage of any Legal Requirement deducting from the value of the Mortgaged
Property for the purpose of taxation, any lien thereon or changing in any
way the Legal Requirements now in force for the taxation of this Mortgage,
the other Cross-collateralized Mortgages and/or the Debt for federal, state
or local purposes, or the manner of the operation of any such taxes so as
to adversely affect the interest of Mortgagee, or impose any tax or other
charge on any Loan Document, then Mortgagor will pay such tax, with
interest and penalties thereon, if any, within the statutory period. In
the event the payment of such tax or interest and penalties by Mortgagor
would be unlawful, or taxable to Mortgagee or unenforceable or provide the
basis for a defense of usury, then in any such event, Mortgagee shall have
the option, by written notice of not less than thirty (30) days, to declare
the Debt immediately due and payable.
3. No Joint Assessment. Mortgagor shall not consent to or initiate the
joint assessment of the Premises or the Improvements (a) with any other real
property constituting a separate tax lot and Mortgagor represents and
covenants that the Premises and the Improvements are and shall remain a
separate tax lot or (b) with any portion of the Mortgaged Property which may
be deemed to constitute personal property, or any other procedure whereby
the lien of any taxes which may be levied against such personal property
shall be assessed or levied or charged to the Mortgaged Property as a single
lien.
4. Right to Contest. Mortgagor shall have the right, after prior notice to
Mortgagee, at its sole expense, to contest by appropriate legal proceedings
diligently conducted in good faith, without cost or expense to Mortgagee or
any of its agents, employees, officers or directors, the validity, amount or
application of any Imposition or any charge described in Section 4.01(b),
provided that (a) no Default or Event of Default shall exist during such
proceedings and such contest shall not (unless Mortgagor shall comply with
clause (d) of this Section 4.04) subject the Mortgaged Property or any portion
thereof to any lien or affect the priority of the lien of this Mortgage, (b)
failure to pay such Imposition or charge will not subject Mortgagee or any
of its agents, employees, officers or directors to any civil or criminal
liability, (c) the contest suspends enforcement of the Imposition or charge
(unless Mortgagor first pays the Imposition or charge), (d) prior to and
during such contest, Mortgagor shall furnish to Mortgagee security
satisfactory to Mortgagee, in its reasonable discretion, against loss or
injury by reason of such contest or the non-payment of such Imposition or
charge (and if such security is cash, Mortgagee may deposit the same in an
interest-bearing account and interest accrued thereon, if any, shall be
deemed to constitute a part of such security for purposes of this Mortgage,
but Mortgagee (i) makes no representation or warranty as to the rate or
amount of interest, if any, which may accrue thereon and shall have no
liability in connection therewith and (ii) shall not be deemed to be a
trustee or fiduciary with respect to its receipt of any such security and
any such security may be commingled with other monies of Mortgagee), (e) such
contest shall not affect the ownership, use or occupancy of the Mortgaged
Property, (f) the Mortgaged Property or any part thereof or any interest
therein shall not be in any danger of being sold, forfeited or lost by reason
of such contest by Mortgagor, (g) Mortgagor has given Mortgagee notice of the
commencement of such contest and upon request by Mortgagee, from time to time,
notice of the status of such contest by Mortgagor and/or confirmation of the
continuing satisfaction of clauses (a) through (f) of this Section 4.04, and
(h) upon a final determination of such contest, Mortgagor shall promptly
comply with the requirements thereof. Upon completion of any contest,
Mortgagor shall immediately pay the amount due, if any, and deliver to
Mortgagee proof of the completion of the contest and payment of the amount
due, if any, following which, Mortgagee shall return the security, if any,
deposited with Mortgagee pursuant to clause (d) of this Section 4.04.
Mortgagor shall not pay any Imposition in installments unless permitted by
applicable Legal Requirements, and shall, upon the request of Mortgagee,
deliver copies of all notices relating to any Imposition or other charge
covered by this Article IV to Mortgagee.
5. No Credits on Account of the Debt. Mortgagor will not claim or demand or
be entitled to any credit or credits on account of the Debt for any part of
the Impositions assessed against the Mortgaged Property or any part thereof
and no deduction shall otherwise be made or claimed from the taxable value of
the Mortgaged Property, or any part thereof, by reason of this Mortgage or the
Debt. In the event such claim, credit or deduction shall be required by Legal
Requirements, Mortgagee shall have the option, by written notice of not less
than thirty (30) days, to declare the Debt immediately due and payable, and
Mortgagor hereby agrees to pay such amounts not later than thirty (30) days
after such notice.
6. Documentary Stamps. If, at any time, the United States of America, any
State or Commonwealth thereof or any subdivision of any such State shall
require revenue or other stamps to be affixed to the Note or this Mortgage,
or impose any other tax or charges on the same, Mortgagor will pay the same,
with interest and penalties thereon, if any.
VI: CENTRAL CASH MANAGEMENT
1. Cash Flow. Mortgagor hereby acknowledges and agrees that the Rent (which
for the purposes of this Section 5.01 shall not include security deposits
from tenants under valid Leases held by Mortgagor and not applied towards
Rent) derived from the Mortgaged Property and Loss Proceeds shall be utilized
(a) to fund the Basic Carrying Costs Sub-Account, (b) to pay all amounts to
become due and payable under the Note by funding the Debt Service Payment
Sub-Account, (c) to fund the Recurring Replacement Reserve Sub-Account,
(d) to fund the Operation and Maintenance Expense Sub-Account to the extent
required, and (e) to fund the Curtailment Reserve Sub-Account. Mortgagor
shall cause the Manager to collect all security deposits from tenants under
valid Leases, which shall be held by the Manager, as agent for Mortgagor,
in accordance with applicable law and in a segregated demand deposit bank
account at such commercial or savings bank or banks as may be reasonably
satisfactory to Mortgagee (the "Security Deposit Account"). Mortgagor shall
notify Mortgagee of any security deposits held as letters of credit and,
upon Mortgagee's request, such letters of credit shall be promptly delivered
to Mortgagee. Mortgagor shall have no right to withdraw funds from the
Security Deposit Account; provided that, prior to the occurrence of an
Event of Default, Mortgagor may withdraw funds from the Security Deposit
Account to refund or apply security deposits as required by the Leases or by
applicable Legal Requirements. After the occurrence of an Event of Default,
all withdrawals from the Security Deposit Account must be approved by
Mortgagee, subject however, to tenant's rights under the Lease. All rental
payments made by tenants and other payments constituting Rent, other than
direct payments by credit cards which shall be paid directly into the Central
Account, shall be delivered to the Manager. The Manager shall collect all of
such Rent and shall deposit such funds, within two (2) Business Day after
receipt thereof in the Rent Account, the name and address of the bank in
which such account is located and the account number of which to be
identified in writing by Manager to Mortgagee. Mortgagor shall cause the
Manager to give to the bank in which the Rent Account is located an
irrevocable written instruction that all funds in such account in excess of
Five Hundred Dollars ($500.00) shall be automatically transferred through
automated clearing house funds ("ACH") or by Federal wire to the Central
Account prior to 5:00 p.m. (New York City time) on a twice weekly basis.
Within two (2) Business Days of the Closing Date, Mortgagor shall deliver
to Mortgagee a copy of the irrevocable notice which Mortgagor delivered to
the bank in which the Rent Account is located pursuant to the provisions of
this Section 5.01, the receipt of which is acknowledged in writing by such
bank. Additionally, Mortgagor shall, or shall cause Manager to send to each
respective credit card company or credit card clearing bank with which
Mortgagor or the Manager has entered into merchant's agreements (each, a
"Credit Card Company") a direction letter in the form of Exhibit G annexed
hereto and made a part hereof (the "Credit Card Payment Direction Letter")
directing such Credit Card Company to make all payments due in connection
with goods or services furnished at or in connection with the Mortgaged
Property by Federal wire or through ACH directly to the Central Account.
Without the prior written consent of Mortgagee, neither Mortgagor nor the
Manager shall (i) terminate, amend, revoke or modify any Credit Card Payment
Direction Letter in any manner or (ii) direct or cause any Credit Card Company
to pay any amount in any manner other than as specifically provided in the
related Credit Card Payment Direction Letter. Mortgagee may elect to change
the financial institution in which the Central Account shall be maintained;
however, Mortgagee shall give Mortgagor and the bank in which the Rent Account
is located not fewer than five (5) Business Days' prior notice of such change.
Neither Mortgagor nor Manager shall change such bank or the Rent Account
without the prior written consent of Mortgagee. All fees and charges of the
bank(s) in which the Rent Account and the Central Account is located shall
be paid by Mortgagor.
2. Establishment of Sub-Accounts. Mortgagee has established the Central
Account and the Rent Account in the name of Mortgagee. The Central Account
and the Rent Account shall be under the sole dominion and control of
Mortgagee. Mortgagor hereby irrevocably directs and authorizes Mortgagee
to withdraw funds from the Rent Account, and to deposit into and withdraw
funds from the Central Account, all in accordance with the terms and
conditions of this Mortgage. Mortgagor shall have no right of withdrawal
in respect of the Rent Account or the Central Account except as specifically
provided herein. Each transfer of funds to be made hereunder shall be made
only to the extent that funds are on deposit in the Rent Account, the Central
Account or the affected Sub-Account, and Mortgagee shall have no
responsibility to make additional funds available in the event that funds on
deposit are insufficient. The Central Account shall contain the Engineering
Escrow Sub-Account, the Basic Carrying Costs Sub-Account, the Debt Service
Payment Sub-Account, the Recurring Replacement Reserve Sub-Account, and the
Operation and Maintenance Expense Sub-Account, each of which accounts shall
be Eligible Accounts (each a "Sub-Account" and collectively, the
"Sub-Accounts") to which certain funds shall be allocated and from which
disbursements shall be made pursuant to the terms of this Mortgage. On the
date hereof, Mortgagor has deposited from the proceeds of the Loan the
Initial Central Account Deposit in the Central Account. In addition, on the
date hereof the Central Account shall also contain a Sub-Account entitled the
"Engineering Escrow Sub-Account" which initially shall be funded with the
Initial Engineering Deposit (representing the sum applicable to certain
engineering work as set forth on Exhibit D, attached hereto and made a part
hereof (collectively, "Required Engineering Work")). Disbursements from the
Engineering Escrow Sub-Account shall be made in accordance with Section 5.12
hereof.
3. Permitted Investments. Upon the written request of Mortgagor, Mortgagee
shall direct the Bank to invest and reinvest any balance in the Central
Account from time to time in Permitted Investments as instructed by
Mortgagor (which instruction may be made no more than one time per month),
provided that (a) if Mortgagor fails to so instruct Mortgagee, or upon the
occurrence of an Event of Default, Mortgagee may direct the Bank to invest
and reinvest such balance in Permitted Investments as Mortgagee shall
determine in its sole discretion, (b) the maturities of the Permitted
Investments on deposit in the Central Account shall, to the extent such dates
are ascertainable, be selected and coordinated to become due not later than
the day before any disbursements from the applicable Sub-Accounts must be
made, (c) all such Permitted Investments shall be held in the name and be
under the sole dominion and control of Mortgagee, and (d) no Permitted
Investment shall be made unless Mortgagee shall retain a perfected first
priority lien in such Permitted Investment securing the Debt and all filings
and other actions necessary to ensure the validity, perfection, and priority
of such lien have been taken. It is the intention of the parties hereto that
the entire amounts deposited in the Central Account (or as much thereof as
Mortgagee may reasonably arrange to invest) shall at all times be invested
in Permitted Investments, and that the Central Account shall be a so-called
"zero balance" account. All funds in the Central Account that are invested
in a Permitted Investment are deemed to be held in the Central Account for
all purposes of this Mortgage and the other Loan Documents. Mortgagee
shall not have any liability for any loss in investments of funds in the
Central Account that are invested in Permitted Investments whether Mortgagor
or Mortgagee selected such Permitted Investment in accordance herewith and
no such loss shall affect Mortgagor's obligation to fund, or liability for
funding, the Central Account and each Sub-Account, as the case may be.
Mortgagor agrees that Mortgagor shall include all such earnings on the
Central Account as income of Mortgagor (and, if Mortgagor is a partnership
or other pass-through entity, the partners, members or beneficiaries of
Mortgagor, as the case may be) for federal and applicable state and local
tax purposes. Mortgagor shall have no right whatsoever to direct the
investment of the proceeds in the Collection Account.
4. Interest on Accounts. All interest paid or other earnings on the
Permitted Investments of funds deposited into the Central Account made
hereunder shallbe deposited into the Central Account and shall be allocated to
the Sub-Account which contained the funds with respect to which such interest
was paid or other earnings earned. All such interest and earnings, once so
allocated, shall be treated as Rent allocated to such Sub-Account. All
interest paid or other earnings on funds deposited into the Rent Account
(i.e., those funds not transferred to the Central Account) shall be deposited
into the Rent Account and shall be treated as Rent deposited into such account
as of the day such interest and earnings are deposited therein.
5. Monthly Funding of Sub-Accounts. On each Notice Date during the term of
the Loan, commencing on the first (1st) Notice Date occurring after the month
in which the Loan is initially funded, Mortgagee shall allocate all funds
transferred or deposited into the Central Account among the Sub-Accounts and
otherwise as follows and in the following priority:
(a) first, to the Basic Carrying Costs
Sub-Account, until an amount equal to the Basic Carrying Costs Monthly
Installment for such Current Month has been allocated to the Basic Carrying
Costs Sub-Account;
(b) second, to the Debt Service Payment
Sub-Account, until an amount equal to the Required Debt Service Payment for
the Payment Date occurring in such Current Month has been allocated to the
Debt Service Payment Sub-Account;
(c) third, to the Recurring Replacement Reserve
Sub-Account, until an amount equal to the sum of (x) the amount, if any,
deducted therefrom during any preceding month to pay any amounts due pursuant
to clauses (a) or (b) above, to the extent not previously reimbursed to such
Sub-Account, plus (y) an amount equal to the Recurring Replacement Reserve
Monthly Installment for such month has been allocated to the Recurring
Replacement Reserve Sub-Account;
(d) fourth, provided that no Event of Default
has occurred and is continuing, disbursed to Mortgagor monthly, the amount
of Twenty-Nine Thousand One Hundred Sixty-Seven Dollars ($29,167.00).
(e) fifth, to the Operation and Maintenance
Expense Sub-Account, until an amount equal to the amount, if any, deducted
herefrom during any preceding month to pay any amounts due pursuant to
clauses (a) or (b) above, to the extent not previously reimbursed to
such Sub-Account and then until an amount equal to the Operation and
Maintenance Expense Monthly Installment has been allocated to such
Sub-Account;
(f) sixth, to the Recurring Replacement Reserve
Sub-Account, until an amount equal to the sum of (x) the amount, if any,
deducted therefrom during any preceding month to pay any amounts due pursuant
to clauses (a) or (b) above, to the extent not previously reimbursed to such
Sub-Account, plus (y) an amount equal to the sum of Seven Hundred Fifty
Thousand Dollars ($750,000.00) in excess of the total amounts deposited into
the Recurring Replacement Reserve Sub-Account pursuant to clause (c) above
has been allocated to the Recurring Replacement Reserve Sub-Account;
provided that no such allocation (y) shall be made during a RR Deferral
Period but shall recommence immediately upon expiration of a RR Deferral
Period; and
(g) seventh, with respect to any Current Month
for which funds are to be allocated to the Curtailment Reserve Sub-Account
pursuant to Section 5.11 hereof, all Excess Rent shall be allocated to the
Curtailment Reserve Sub-Account.
Mortgagee shall notify Mortgagor as soon as reasonably practicable
after the amounts set forth in clauses (a) through (c) and (e) and (f) above
have been transferred or deposited into the Central Account and allocated as
aforesaid to the extent such deposits are fully made prior to the Notice Date
in the then Current Month (the date such Sub-Accounts have been fully funded
in a given month is hereinafter referred to as the "Excess Rent Commencement
Date"). Provided that (I) no Event of Default has occurred and is continuing
and (II) Mortgagee has received the Manager's Certification referred to in
Section 2.09(d) hereof for the most recent period for which the same is due,
Mortgagee agrees that in each Current Month any amounts deposited into or
remaining in the Rent Account or Central Account after Mortgagee has
transferred sufficient funds to the Central Account to fund the Sub-Accounts
in accordance with, and has allocated the amounts set forth in, clauses
(a) through (c) and (e) and (f) above with respect to the Current Month and
any periods prior thereto, shall be disbursed by Mortgagee to Mortgagor (or
Manager, as agent for Mortgagor) on the Payment Date and on the 5th and 20th
day of such Current Month. The balance of the funds distributed to, or
withdrawn by, Mortgagor after payment of all Operating Expenses by or on
behalf of Mortgagor may be retained by Mortgagor.
As used herein, "Excess Rent" means the amounts available in the
Rent Account in any Current Month after the allocations under clauses (a)-(f)
above have been made. After the occurrence, and during the continuance, of
an Event of Default, no funds held in the Rent Account, and no funds held in
the Central Account, shall be distributed to, or withdrawn by, Mortgagor,
and Mortgagee shall have the right to apply all or any portion of the funds
held in either or both of such accounts to the Debt in Mortgagee's sole
discretion.
In the event that sufficient funds to fund all of the Sub-Accounts
pursuant to this Section 5.05 for the Payment Date in any Current Month are
not on deposit in the Central Account prior to 2:00 p.m. (New York City time)
on the Business Day immediately preceding the Payment Date ("the Notice
Date") for the then Current Month, Mortgagee shall deliver to Mortgagor,
via telecopy, on or before 4:00 P.M. (New York City time) on the Notice Date
a certificate in the form set forth as Exhibit E attached hereto and made a
part hereof stating that sufficient funds have not theretofore been deposited
into the Central Account for allocation to the various Sub-Accounts pursuant
to this Section 5.05. If any such certificate is delivered, Mortgagor shall
be obligated to deposit immediately available United States funds (in
addition to Rent) into the Central Account, prior to such Payment Date, in the
amount of such deficiency, and failure to make such deposit shall be an Event
of Default hereunder. If, on any Payment Date, the aggregate balance in the
Central Account (excluding funds allocated to any Sub-Account other than
funds allocated to the Debt Service Payment Sub-Account or the Basic Carrying
Costs Sub-Account) is insufficient to make the payment of the Basic Carrying
Costs Monthly Installment and the Required Debt Service Payment required to be
made pursuant to clauses (a) and (b) of this Section 5.05, then an Event of
Default shall exist hereunder. Mortgagee may (but shall not be obligated to)
withdraw funds and pay such deficiency from any Sub-Account in such order of
priority as Mortgagee determines in Mortgagee's sole discretion (in each case
to the extent funds are available in each such Sub-Account).
In the event that Mortgagee elects to apply the proceeds of any
Sub-Account to pay any Required Debt Service Payment or to fund any Basic
Carrying Costs, Mortgagor shall, upon demand, repay to Mortgagee the amount
of the funds so applied to replenish such Sub-Account up to the amount
contained therein immediately prior to such application (i.e., including
interest earned on the balance prior to withdrawal), and if Mortgagor shall
fail to repay such amounts within five (5) Business Days after such
application, an Event of Default shall exist hereunder, which Event of
Default shall not be cured unless and until Mortgagor repays such amount or
all Sub-Accounts have been fully funded from Rent for the then applicable
Current Month and all prior months. Mortgagee may, at its sole option,
replenish such Sub-Account(s) out of available Rent in subsequent months
which Mortgagor would have otherwise been entitled to receive.
6. Payment of Basic Carrying Costs. Mortgagor hereby agrees to pay all
Basic Carrying Costs with respect to Mortgagor, the Mortgaged Property and any
Rent derived therefrom or with respect thereto. At least five (5) Business
Days prior to the due date of any Basic Carrying Costs, and not more
frequently than once each month, Mortgagor may notify Mortgagee in writing
and request that Mortgagee pay such Basic Carrying Costs on behalf of
Mortgagor on or prior to the due date thereof, and, provided that no Event of
Default has occurred and that there are sufficient funds available in the
Basic Carrying Costs Sub-Account, Mortgagee shall make such payments out of
the Basic Carrying Costs Sub-Account before same shall be delinquent.
Together with each such request, Mortgagor shall furnish Mortgagee with bills
and all other documents necessary, as reasonably determined by Mortgagee, for
the payment of the Basic Carrying Costs which are the subject of such request.
Mortgagor's obligation to pay (or cause Mortgagee to pay) Basic Carrying
Costs pursuant to this Mortgage shall include, to the extent permitted by
applicable law, Impositions resulting from future changes in law which
impose upon Mortgagee an obligation to pay any property taxes or other
Impositions or which otherwise adversely affect Mortgagee's interests.
Provided that no Event of Default shall have occurred, all funds
deposited into the Basic Carrying Costs Sub-Account shall be held by
Mortgagee pursuant to the provisions of this Mortgage and shall be applied
in payment of Basic Carrying Costs in accordance with the terms hereof.
Should an Event of Default occur, the proceeds on deposit in the Basic
Carrying Costs Sub-Account may be applied by Mortgagee in payment of any
Basic Carrying Costs or may be applied to the payment of the Debt or any
other charges affecting all or any portion of the Cross-collateralized
Properties as Mortgagee in its sole discretion may determine; provided,
however, that no such application shall be deemed to have been made by
operation of law or otherwise until actually made by Mortgagee as herein
provided.
7. Debt Service Payment Sub-Account. On each Payment Date during the term
of the Loan, Mortgagee shall transfer to the Collection Account, from the Debt
Service Payment Sub-Account, an amount equal to the sum of (a) the Required
Debt Service Payment for such Payment Date and (b) any amounts deposited into
the Central Account that are either (i) Loss Proceeds that Mortgagee has
elected to apply to reduce the Debt in accordance with the terms of Article
III hereof or (ii) excess Loss Proceeds remaining after the completion of
any restoration required hereunder.
8. Recurring Replacement Reserve Sub-Account. Mortgagor hereby agrees to
pay all Recurring Replacement Expenditures with respect to Mortgagor and the
Mortgaged Property (without regard to the amount of money then available
in the Recurring Replacement Reserve Sub-Account). Provided that Mortgagee
has received written notice from Mortgagor at least five (5) Business Days
prior to the due date of any payment relating to Recurring Replacement
Expenditures and not more frequently than once each month, and further
provided that no Event of Default has occurred, that there are sufficient
funds available in the Recurring Replacement Reserve Sub-Account and
Mortgagor shall have theretofore furnished Mortgagee with lien waivers,
copies of bills, invoices and other reasonable documentation as may be
required by Mortgagee to establish that the Recurring Replacement
Expenditures which are the subject of such request represent amounts due
for completed or partially completed capital work and improvements performed
at the Mortgaged Property, Mortgagee shall make such payments out of the
Recurring Replacement Reserve Sub-Account.
Provided that no Event of Default shall have occurred, all funds
deposited into the Central Account relating to Recurring Replacement
Expenditures shall be held by Mortgagee pursuant to the provisions of this
Mortgage and shall be applied in payment of Recurring Replacement
Expenditures. Should an Event of Default occur, the proceeds on deposit
in the Recurring Replacement Reserve Sub-Account may be applied by Mortgagee
in payment of any Recurring Replacement Expenditures or may be applied to
the payment of the Debt or any other charges affecting all or any portion of
the Cross-collateralized Properties, as Mortgagee in its sole discretion may
determine; provided, however, that no such application shall be deemed to
have been made by operation of law or otherwise until actually made by
Mortgagee as herein provided.
9. Operation and Maintenance Expense Sub-Account. Mortgagor hereby agrees
to pay all Operating Expenses with respect to the Mortgaged Property (without
regard to the amount of money then available in the Operation and Maintenance
Expense Sub-Account). All funds allocated to the Operation and Maintenance
Expense Sub-Account shall be held by Mortgagee pursuant to the provisions of
this Mortgage. Any sums held in the Operation and Maintenance Expense
Sub-Account shall be disbursed to Mortgagor within five (5) Business Days
of receipt by Mortgagee from Mortgagor of an Officer's Certificate stating
that no Operating Expenses with respect to the Property are more than sixty
(60) days past due; provided, however, in the event that Mortgagor
legitimately disputes any invoice for an Operating Expense, and (i) no Event
of Default has occurred and is continuing hereunder, (ii) Mortgagor shall
demonstrate its ability to pay to the satisfaction of Mortgagee such disputed
sums together with all interest and late fees thereon when due, (iii)
Mortgagor has complied with all the requirements of this Mortgage relating
thereto, and (iv) the contesting of such sums shall not constitute a default
under any other instrument, agreement, or document to which Mortgagor is a
party, then Mortgagor may, after certifying to Mortgagee as to items (i)
through (iv) hereof, contest such invoice. Mortgagor may request a
disbursement from the Operation and Maintenance Expense Sub-Account no more
than one (1) time per calendar month. Should an Event of Default occur and be
continuing, the proceeds on deposit in the Operation and Maintenance Expense
Sub-Account may be applied by Mortgagee in payment of any Operating Expenses
for the Mortgaged Property or may be applied to the payment of the Debt or
other charges affecting all or any portion of the Mortgaged Property as
Mortgagee, in its sole discretion, may determine; provided, however, that no
such application shall be deemed to have been made by operation of law or
otherwise until actually made by Mortgagee as herein provided. All sums, if
any, remaining in the Operation and Maintenance Expense Sub-Account after the
payment of all Operating Expenses for the then Current Month shall be
deposited into the Recurring Replacement Reserve Sub-Account, as set forth in
Section 5.05 hereof.
10. [Intentionally Omitted].
11. Curtailment Reserve Sub-Account. Commencing on the Payment Date on
which the O&M Operative Period commences, and on each and every Payment Date
thereafter until the O&M Operative Period ends, Mortgagee shall allocate all
Excess Rent to the Curtailment Reserve Sub-Account in accordance with Section
5.05(e). On each Payment Date during any period for which funds have been
allocated to the Curtailment Reserve Sub-Account pursuant to Section 5.05(e)
hereof, Mortgagee shall transfer to the Collection Account an amount equal to
the lesser of (a) the amount available in the Curtailment Reserve Sub-Account,
and (b) the total Debt then outstanding under the Note and the other Loan
Documents. Any amounts so transferred to the Central Account shall be
allocated as provided in Section 5.05.
12. Performance of Engineering Work. (a) Mortgagor shall promptly commence
and diligently thereafter pursue to completion (without regard to the amount
of money then available in the Engineering Escrow Sub-Account) the Required
Engineering Work as follows: (i) work designated as either "approved work" or
"urgent work" on Exhibit D attached hereto and made a part hereof shall be
completed by no later than ninety (90) days from the date hereof, and (ii)
work designated as "deferred work" shall be completed by no later than the one
year anniversary of the date hereof. After Mortgagor completes an item of
Required Engineering Work set forth on Exhibit D hereto, Mortgagor may submit
to Mortgagee an invoice therefor with lien waivers and a statement from the
Engineer, reasonably acceptable to Mortgagee, indicating that the portion of
the Required Engineering Work in question has been completed in compliance
with all Legal Requirements, and Mortgagee shall, within twenty (20) days
thereafter, although in no event more frequently than once each month,
reimburse such amount to Mortgagor from the Engineering Escrow Sub-Account;
provided, however, that Mortgagor shall not be reimbursed more than the amount
set forth on Exhibit D hereto as the amount allocated to the portion of the
Required Engineering Work for which reimbursement is sought.
(b) From and after the date all of the Required Engineering Work is
substantially completed, Mortgagor may submit a written request, which request
shall be delivered together with final lien waivers and a statement from the
Engineer, as the case may be, reasonably acceptable to Mortgagee, indicating
that all of the Required Engineering Work has been completed in compliance
with all Legal Requirements, and Mortgagee shall, within twenty (20) days
thereafter, disburse any balance of the Engineering Escrow Sub-Account to
Mortgagor.
13. Loss Proceeds. In the event of a casualty to the Mortgaged Property,
unless Mortgagee elects, or is required pursuant to Article III hereof to make
all of the Insurance Proceeds available to Mortgagor for restoration,
Mortgagee and Mortgagor shall cause all such Insurance Proceeds to be paid by
the insurer directly to the Central Account, whereupon Mortgagee shall, after
deducting Mortgagee's third-party costs of recovering and paying out such
Insurance Proceeds, including without limitation, reasonable attorneys' fees,
apply same to reduce the Debt in accordance with the terms of the Note;
provided, however, that if Mortgagee elects, or is deemed to have elected, to
make the Insurance Proceeds available for restoration, all Insurance Proceeds
in respect of rent loss, business interruption or similar coverage shall be
maintained in the Central Account, to be applied by Mortgagee in the same
manner as Rent received from Manager with respect to the operation of the
Mortgaged Property; provided, further, however, that in the event that the
Insurance Proceeds of such rent loss, business interruption or similar
insurance policy are paid in a lump sum in advance, Mortgagee shall hold such
Insurance Proceeds in a segregated interest-bearing escrow account, which
shall be an Eligible Account, shall estimate, in Mortgagee's reasonable
discretion, the number of months required for Mortgagor to restore the damage
caused by the casualty, shall divide the aggregate rent loss, business
interruption or similar Insurance Proceeds by such number of months, and shall
disburse from such escrow account into the Central Account each month during
the performance of such restoration such monthly installment of said Insurance
Proceeds. In the event that Insurance Proceeds are to be applied toward
restoration, Mortgagee shall hold such funds in a segregated bank account at
the Bank, which shall be an Eligible Account, and shall disburse same in
accordance with the provisions of Section 3.04 hereof. Unless Mortgagee
elects, or is required pursuant to Section 6.01(a) hereof to make all of the
Condemnation Proceeds available to Mortgagor for restoration, Mortgagee and
Mortgagor shall cause all such Condemnation Proceeds to be paid to the Central
Account, whereupon Mortgagee shall, after deducting Mortgagee's costs of
recovering and paying out such Condemnation Proceeds, including without
limitation, reasonable attorneys' fees, apply same, by transferring such
amounts to the Collection Account, to reduce the Debt in accordance with the
terms of the Note; provided, however, that any Condemnation Proceeds received
in connection with a temporary Taking shall be maintained in the Central
Account, to be applied by Mortgagee in the same manner as Rent received from
Manager with respect to the operation of the Mortgaged Property; provided,
further, however, that in the event that the Condemnation Proceeds of any such
temporary Taking are paid in a lump sum in advance, Mortgagee shall hold such
Condemnation Proceeds in a segregated interest-bearing escrow account, which
shall be an Eligible Account. Mortgagee shall estimate, in Mortgagee's
reasonable discretion, the number of months that the Mortgaged Property shall
be affected by such temporary Taking, shall divide the aggregate Condemnation
Proceeds in connection with such temporary Taking by such number of months,
and shall disburse from such escrow account into the Central Account each
month during the pendency of such temporary Taking such monthly installment of
said Condemnation Proceeds. In the event that Condemnation Proceeds are to be
applied toward restoration, Mortgagee shall hold such funds in a segregated
bank account at the Bank, which shall be an Eligible Account, and shall
disburse same in accordance with the provisions of Section 3.04 hereof. If
any Loss Proceeds are received by Mortgagor, such Loss Proceeds shall be
received in trust for Mortgagee, shall be segregated from other funds of
Mortgagor, and shall be forthwith paid into the Central Account, or paid to
Mortgagee to hold in a segregated bank account at the Bank, in each case to be
applied or disbursed in accordance with the foregoing. Any Loss Proceeds made
available to Mortgagor for restoration in accordance herewith, to the extent
not used by Mortgagor in connection with, or to the extent they exceed the
cost of, such restoration, shall be deposited into the Central Account,
whereupon Mortgagee shall apply the same to reduce the Debt in accordance with
the terms of the Note.
VII: CONDEMNATION
1. Condemnation. (a) Mortgagor shall notify Mortgagee promptly of the
commencement or threat of any Taking of the Mortgaged Property or any portion
thereof. Mortgagee is hereby irrevocably appointed as Mortgagor's attorney-
in-fact, coupled with an interest, with exclusive power to collect, receive
and retain the proceeds of any such Taking and to make any compromise or
settlement in connection with such proceedings (subject to Mortgagor's
reasonable approval, except after the occurrence of an Event of Default, in
which event Mortgagor's approval shall not be required), subject to the
provisions of this Mortgage; provided, however, that Mortgagor may participate
in any such proceedings and shall be authorized and entitled to compromise or
settle any such proceeding with respect to Condemnation Proceeds in an amount
less than five percent (5%) of the outstanding principal sum of the Loan.
Mortgagor shall execute and deliver to Mortgagee any and all instruments
reasonably required in connection with any such proceeding promptly after
request therefor by Mortgagee. Except as set forth above, Mortgagor shall not
adjust, compromise, settle or enter into any agreement with respect to such
proceedings without the prior consent of Mortgagee which consent may not be
unreasonably withheld or delayed. All Condemnation Proceeds are hereby
assigned to and shall be paid to Mortgagee. With respect to Condemnation
Proceeds in an amount in excess of five percent (5%) of the outstanding
principal sum of the Loan, Mortgagor hereby authorizes Mortgagee to
compromise, settle, collect and receive such Condemnation Proceeds, and to
give proper receipts and acquittance therefor. Mortgagee shall have the
option, in Mortgagee's sole discretion, to apply such Condemnation Proceeds
(less any cost to Mortgagee of recovering and paying out such proceeds,
including, without limitation, reasonable attorneys' fees and disbursements
and costs allocable to inspecting any repair, restoration or rebuilding work
and the plans and specifications therefor) toward the payment of the Debt or
to allow such proceeds to be used for the Work. In the event Mortgagee elects
to make Condemnation Proceeds available to be used toward the restoration or
rebuilding of the Mortgaged Property to a usable whole, such Condemnation
Proceeds shall be disbursed in the manner and subject to the conditions set
forth in Section 3.04(b). Any excess proceeds remaining after completion of
such restoration or rebuilding shall be applied to the repayment of the Debt.
If the Condemnation Proceeds are used to reduce the Debt, they shall be
applied in accordance with the provisions of the Note. Mortgagor shall
promptly execute and deliver all instruments requested by Mortgagee for the
purpose of confirming the assignment of the Condemnation Proceeds to
Mortgagee.
(a) Application of all or any part of the Condemnation Proceeds to the Debt
shall be made in accordance with the provisions of Sections 3.06 and 3.07. No
application of the Condemnation Proceeds to the reduction of Mortgagor's Debt
shall have the effect of releasing the lien of this Mortgage until the
remainder of the Debt has been paid in full. In the case of any Taking,
Mortgagee, to the extent that Mortgagee has not been reimbursed by Mortgagor,
shall be entitled, as a first priority out of any Condemnation Proceeds, to
reimbursement for all costs, fees and expenses reasonably incurred in the
determination and collection of any Condemnation Proceeds. All Condemnation
Proceeds deposited with Mortgagee pursuant to this Section, until expended or
applied as provided herein, may be commingled with the general funds of
Mortgagee and shall constitute additional security for the payment of the Debt
and the payment and performance of Mortgagor's obligations, but Mortgagee
shall not be deemed a trustee or other fiduciary with respect to its receipt
of such Condemnation Proceeds or any part thereof. All awards so deposited
with Mortgagee shall be held by Mortgagee in an Eligible Account and invested
in Permitted Investments, but Mortgagee makes no representation or warranty as
to the rate or amount of interest, if any, which may accrue on any such
deposit and shall have no liability in connection therewith. For purposes
hereof, any reference to the award shall be deemed to include interest, if
any, which has accrued thereon.
VIII: LEASES AND RENTS
1.Assignment. (a) Mortgagor does hereby bargain, sell, assign and set over
unto Mortgagee, all of Mortgagor's interest in the Leases and Rents. The
assignment of Leases and Rents in this Section 7.01 is an absolute,
unconditional and present assignment from Mortgagor to Mortgagee and not an
assignment for security and the existence or exercise of Mortgagor's revocable
license to collect Rent shall not operate to subordinate this assignment to
any subsequent assignment. The exercise by Mortgagee of any of its rights or
remedies pursuant to this Section 7.01 shall not be deemed to make Mortgagee a
mortgagee-in-possession. In addition to the provisions of this Article VII,
Mortgagor shall comply with all terms, provisions and conditions of the
Assignment.
(a) So long as there shall exist and be continuing no Event of Default,
Mortgagor shall have a revocable license to take all actions with respect to
all Leases and Rents, present and future, including the right to collect and
use the Rents, subject to the terms of this Mortgage and the Assignment.
(b) In a separate instrument Mortgagor shall, as requested from time to time
by Mortgagee, assign to Mortgagee or its nominee by specific or general
assignment, any and all Leases, such assignments to be in form and content
reasonably acceptable to Mortgagee, but subject to the provisions of Section
7.01(b) hereof. Mortgagor agrees to deliver to Mortgagee, within thirty (30)
days after Mortgagee's request, a true and complete copy of every Lease and,
within ten (10) days after Mortgagee's request, a complete list of the Leases,
certified by Mortgagor to be true, accurate and complete and stating the
demised premises, the names of the lessees, the Rent payable under the Leases,
the date to which such Rents have been paid, the material terms of the Leases,
including, without limitation, the dates of occupancy, the dates of
expiration, any Rent concessions, work obligations or other inducements
granted to the lessees thereunder, and any renewal options.
(c) The rights of Mortgagee contained in this Article VII, the Assignment or
any other assignment of any Lease shall not result in any obligation or
liability of Mortgagee to Mortgagor or any lessee under a Lease or any party
claiming through any such lessee.
(d) At any time after an Event of Default, the license granted hereinabove
may be revoked by Mortgagee, and Mortgagee or a receiver appointed in
accordance with this Mortgage may enter upon the Mortgaged Property, and
collect, retain and apply the Rents toward payment of the Debt in such
priority and proportions as Mortgagee in its sole discretion shall deem
proper.
(e) In addition to the rights which Mortgagee may have herein, upon the
occurrence of any Event of Default, Mortgagee, at its option, may require
Mortgagor to pay monthly in advance to Mortgagee, or any receiver appointed to
collect the Rents, the fair and reasonable rental value for the use and
occupation of such part of the Mortgaged Property as may be used and occupied
by Mortgagor and may require Mortgagor to vacate and surrender possession of
the Mortgaged Property to Mortgagee or to such receiver and, in default
thereof, Mortgagor may be evicted by summary proceedings or otherwise.
2. Management of Mortgaged Property. (a) Mortgagor shall manage the
Mortgaged Property or cause the Mortgaged Property to be managed in a manner
which is consistent with the Approved Manager Standard. All Space Leases
shall provide for rental rates comparable to then existing local market rates
and terms and conditions which constitute good and prudent business practice
and are consistent with prevailing market terms and conditions, and shall be
arms-length transactions. All Leases shall provide that they are subordinate
to this Mortgage and that the lessees thereunder attorn to Mortgagee.
Mortgagor shall deliver copies of all Leases, amendments, modifications and
renewals to Mortgagee.
(a) Mortgagor (i) shall observe and perform all of its material obligations
under the Leases pursuant to applicable Legal Requirements and shall not do or
permit to be done anything to impair the value of the Leases as security for
the Debt; (ii) shall promptly, upon Mortgagee's request, send copies to
Mortgagee of all notices of default which Mortgagor shall receive under the
Leases; (iii) shall, consistent with the Approved Manager Standard, enforce
all of the terms, covenants and conditions contained in the Leases to be
observed or performed; (iv) shall not collect any of the Rents under the
Leases more than one (1) month in advance (except that Mortgagor may collect
in advance such security deposits as are permitted pursuant to applicable
Legal Requirements and are commercially reasonable in the prevailing market);
(v) shall not execute any other assignment of lessor's interest in the Leases
or the Rents except as otherwise expressly permitted pursuant to this
Mortgage; (vi) shall not cancel or terminate any of the Leases or accept a
surrender thereof in any manner inconsistent with the Approved Manager
Standard; (vii) shall not convey, transfer or suffer or permit a conveyance or
transfer of all or any part of the Premises or the Improvements or of any
interest therein so as to effect a merger of the estates and rights of, or a
termination or diminution of the obligations of, lessees thereunder; (viii)
shall notify Mortgagee of any material alteration, modification or change in
the terms of any guaranty of any Major Space Lease or cancellation or
termination of such guaranty promptly upon effectuation of same unless
altered, cancelled, modified or changed in the ordinary course of business;
(ix) shall, in accordance with the Approved Manager Standard, make all
reasonable efforts to seek lessees for space as it becomes vacant and enter
into Leases in accordance with the terms hereof; (x) shall not materially
modify, alter or amend any Major Space Lease or Property Agreement with any
Pad Owner without Mortgagee's consent, which consent will not be unreasonably
withheld or delayed; (xi) shall notify Mortgagee promptly if any Pad Owner
shall cease business operations which cessation may adversely affect the
Mortgaged Property or of the occurrence of any event of which it becomes aware
affecting a Pad Owner or its property which might have any material effect on
the Mortgaged Property; and (xii) shall, without limitation to any other
provision hereof, execute and deliver at the request of Mortgagee all such
further assurances, confirmations and assignments in connection with the
Mortgaged Property as are required herein and as Mortgagee shall from time to
time reasonably require.
(b) All security deposits of lessees, whether held in cash or any other
form, shall be treated by Mortgagor as trust funds, but shall not be
commingled with any other funds of Mortgagor and, if cash, shall be deposited
by Mortgagor in the Security Deposit Account. Any bond or other instrument
which Mortgagor is permitted to hold in lieu of cash security deposits under
applicable Legal Requirements shall be maintained in full force and effect
unless replaced by cash deposits as hereinabove described, shall be issued by
a Person reasonably satisfactory to Mortgagee, shall, if permitted pursuant to
Legal Requirements, at Mortgagee's option, name Mortgagee as payee or
mortgagee thereunder or be fully assignable to Mortgagee and shall, in all
respects, comply with applicable Legal Requirements and otherwise be
reasonably satisfactory to Mortgagee. Mortgagor shall, upon request, provide
Mortgagee with evidence reasonably satisfactory to Mortgagee of Mortgagor's
compliance with the foregoing. Following the occurrence and during the
continuance of any Event of Default, Mortgagor shall, upon Mortgagee's
request, if permitted by applicable Legal Requirements, turn over the security
deposits (and any interest thereon) to Mortgagee to be held by Mortgagee in
accordance with the terms of the Leases and all Legal Requirements.
(c) If the Underwritable Net Cash Flow for the Cross-collateralized
Properties for any twelve month period is less than eighty-five percent (85%)
of the Underwritable Net Cash Flow for the Cross-collateralized Properties as
of the date of this Mortgage (after adjustment for any Cross-collateralized
Properties for which a Sale or other prepayment has occurred), Mortgagee shall
have the right to terminate the existing Management Agreement and to appoint
an independent property manager selected by Mortgagee, in Mortgagee's sole
discretion, to manage the Mortgaged Property.
(d) Mortgagor covenants and agrees with Mortgagee that (i) the Mortgaged
Property will be managed at all times by the Manager pursuant to the
management agreement approved by Mortgagee (the "Management Agreement"), (ii)
after Mortgagor has knowledge of a fifty percent (50%) or more change in
control of the ownership of the Manager, Mortgagor will promptly give
Mortgagee notice thereof (a "Manager Control Notice") and (iii) the Management
Agreement may be terminated by Mortgagee at any time for cause (including, but
not limited to, Manager's gross negligence, willful misconduct or fraud) or at
any time following either (A) the occurrence of an Event of Default, or (B)
the receipt of a Manager Control Notice, and a substitute managing agent shall
be appointed by Mortgagor, subject to Mortgagee's approval, which may be given
or withheld in Mortgagee's sole discretion. Mortgagor may from time to time
appoint a successor manager to manage the Mortgaged Property with Mortgagee's
prior written consent which consent shall not be unreasonably withheld or
delayed, provided that, any such successor manager shall be a reputable
management company having a senior executive with at least seven (7) years'
experience in the management of motel properties in the State, shall be the
manager of at least 2,500 rooms, including, without limitation, certain
complexes which contain more than 100 rooms, and shall be reasonably
acceptable to Mortgagee. Mortgagor further covenants and agrees that
Mortgagor shall require the Manager (or any successor managers) to maintain at
all times during the term of the Loan worker's compensation insurance as
required by Governmental Authorities.
(e) Mortgagor shall (i) pay all sums required to be paid by Mortgagor under
the Franchise Agreement, (ii) diligently perform and observe all of the terms,
covenants and conditions of the Franchise Agreement on the part of Mortgagor
to be performed and observed to the end that all things shall be done which
are necessary to keep unimpaired the rights of Mortgagor under the Franchise
Agreement, and (iii) promptly notify Mortgagee of the giving of any notice to
Mortgagor of any default by Mortgagor in the performance or observance of any
of the terms, covenants or conditions of the Franchise Agreement on the part
of Mortgagor to be performed and observed and deliver to Mortgagee a true copy
of each such notice. Mortgagor shall not, without the prior consent of the
Mortgagee, surrender the Franchise Agreement or terminate or cancel the
Franchise Agreement or modify, change, supplement, alter or amend the
Franchise Agreement, in any respect, either orally or in writing, and
Mortgagor hereby assigns to Mortgagee as further security for the payment of
the Debt and for the performance and observance of the terms, covenants and
conditions of this Mortgage, all the rights, privileges and prerogatives of
Mortgagor to surrender the Franchise Agreement or to terminate, cancel,
modify, change, supplement, alter or amend the Franchise Agreement in any
respect, and any such surrender of the Franchise Agreement or termination,
cancellation, modification, change, supplement, alteration or amendment of the
Franchise Agreement without the prior consent of Mortgagee shall be void and
of no force and effect. If Mortgagor shall default in the performance or
observance of any material term, covenant or condition of the Franchise
Agreement on the part of Mortgagor to be performed or observed, then, without
limiting the generality of the other provisions of this Mortgage, and without
waiving or releasing Mortgagor from any of its obligations hereunder,
Mortgagee shall have the right, but shall be under no obligation, to pay any
sums and to perform any act or take any action as may be appropriate to cause
all the terms, covenants and conditions of the Franchise Agreement on the part
of Mortgagor to be performed or observed to be promptly performed or observed
on behalf of Mortgagor, to the end that the rights of Mortgagor in, to and
under the Franchise Agreement shall be kept unimpaired and free from default.
Mortgagee and any Person designated by Mortgagee shall have, and are hereby
granted, the right to enter upon the Mortgaged Property at any time and from
time to time for the purpose of taking any such action. If the franchisor
under the Franchise Agreement shall deliver to Mortgagee a copy of any notice
sent to Mortgagor of default under the Franchise Agreement, such notice shall
constitute full protection to Mortgagee for any action taken or omitted to be
taken by Mortgagee in good faith, in reliance thereon. Mortgagor shall, from
time to time, but not more frequently than four (4) times during the term of
the Loan, use its best efforts to obtain from the franchisor under the
Franchise Agreement such certificates of estoppel with respect to compliance
by Mortgagor with the terms of the Franchise Agreement as may be requested by
Mortgagee. Mortgagor shall exercise each individual option, if any, to extend
or renew the term of the Franchise Agreement upon demand by Mortgagee made at
any time within four (4) months of the last day upon which any such option may
be exercised, and Mortgagor hereby expressly authorizes and appoints Mortgagor
its attorney-in-fact to exercise any such option in the name of and upon
behalf of Mortgagor, which power of attorney shall be irrevocable and shall be
deemed to be coupled with an interest.
IX: MAINTENANCE AND REPAIR
1. Maintenance and Repair of the Mortgaged Property; Alterations;
Replacement of Equipment. Mortgagor hereby covenants and agrees:
(a) Mortgagor shall not (i) desert or abandon the Mortgaged Property, (ii)
change the use of the Mortgaged Property or cause or permit the use or
occupancy of any part of the Mortgaged Property to be discontinued if such
discontinuance or use change would violate any zoning or other law, ordinance
or regulation; (iii) consent to or seek any lowering of the zoning
classification, or greater zoning restriction affecting the Mortgaged
Property; or (iv) take any steps whatsoever to convert the Mortgaged Property,
or any portion thereof, to a condominium or cooperative form of ownership.
(b) Mortgagor shall, at its expense, (i) take good care of the Mortgaged
Property including grounds generally, and utility systems and sidewalks,
roads, alleys, and curbs therein, and shall keep the same in good, safe and
insurable condition and in compliance with all applicable Legal Requirements,
(ii) in the ordinary course, exercising good business judgment and consistent
with the Approved Manager Standard make all repairs to the Mortgaged Property,
above grade and below grade, interior and exterior, structural and
nonstructural, ordinary and extraordinary, unforeseen and foreseen, and
maintain the Mortgaged Property in a manner appropriate for the facility and
(iii) not commit or suffer to be committed any waste of the Mortgaged Property
or do or suffer to be done anything which will increase the risk of fire or
other hazard to the Mortgaged Property or impair the value thereof. Mortgagor
shall keep the sidewalks, vaults, gutters and curbs comprising, or adjacent
to, the Mortgaged Property, clean and free from dirt, snow, ice, rubbish and
obstructions. All repairs made by Mortgagor shall be made in a good and
workmanlike manner, using material and repaired consistent with the Approved
Manager Standard shall be equal or better in quality and class to the original
work and shall comply with all applicable Legal Requirements and Insurance
Requirements. To the extent any of the above obligations are obligations of
tenants under Space Leases or Pad Owners or other Persons under Property
Agreements, Mortgagor may fulfill its obligations hereunder by causing such
tenants, Pad Owners or other Persons, as the case may be, to perform their
obligations thereunder. As used herein, the terms "repair" and "repairs"
shall be deemed to include all necessary replacements.
(c) Mortgagor shall not demolish, remove, construct, or, except as otherwise
expressly provided herein, restore, or alter the Mortgaged Property or any
portion thereof, nor consent to or permit any such demolition, removal,
construction, restoration, addition or alteration which would diminish the
value of the Mortgaged Property without Mortgagee's prior written consent in
each instance, which consent shall not be unreasonably withheld or delayed.
(d) Mortgagor represents and warrants to Mortgagee that (i) there are no
fixtures, machinery, apparatus, tools, equipment or articles of personal
property attached or appurtenant to, or located on, or used in connection with
the management, operation or maintenance of the Mortgaged Property, except for
the Equipment and equipment leased by Mortgagor for the management, operation
or maintenance of the Mortgaged Property in accordance with the Loan
Documents; (ii) the Equipment and the leased equipment constitutes all of the
fixtures, machinery, apparatus, tools, equipment and articles of personal
property necessary to the proper operation and maintenance of the Mortgaged
Property; and (iii) all of the Equipment is free and clear of all liens,
except for the lien of this Mortgage and the Permitted Encumbrances. All
rights, title and interest of Mortgagor in and to all extensions,
improvements, betterment, renewals, appurtenances to, the Mortgaged Property
hereafter acquired by, or released to, Mortgagor or constructed, assembled or
placed by Mortgagor in the Mortgaged Property, and all changes and
substitutions of the security constituted thereby, shall be and, in each such
case, without any further mortgage, conveyance, assignment or other act by
Mortgagee or Mortgagor, shall become subject to the lien and security interest
of this Mortgage as fully and completely, and with the same effect, as though
now owned by Mortgagor and specifically described in this Mortgage, but at any
and all times Mortgagor shall execute and deliver to Mortgagee any documents
Mortgagee may reasonably deem necessary or appropriate for the purpose of
specifically subjecting the same to the lien and security interest of this
Mortgage.
(e) Notwithstanding the provisions of this Mortgage to the contrary,
Mortgagor shall have the right, at any time and from time to time, to remove
and dispose of Equipment which may have become obsolete or unfit for use or
which is no longer useful in the management, operation or maintenance of the
Mortgaged Property. Mortgagor shall promptly replace any such Equipment so
disposed of or removed with other Equipment of equal value and utility, free
of any security interest or superior title, liens or claims; except that, if
by reason of technological or other developments, replacement of the Equipment
so removed or disposed of is not necessary or desirable for the proper
management, operation or maintenance of the Mortgaged Property, Mortgagor
shall not be required to replace the same. All such replacements or
additional equipment shall be deemed to constitute "Equipment" and shall be
covered by the security interest herein granted.
X: TRANSFER OR ENCUMBRANCE OF THE MORTGAGED
PROPERTY
1. Other Encumbrances. Mortgagor shall not further encumber or permit the
further encumbrance in any manner (whether by grant of a pledge, security
interest or otherwise) of the Mortgaged Property or any part thereof or
interest therein, including, without limitation, of the Rents therefrom. In
addition, Mortgagor shall not further encumber and shall not permit the
further encumbrance in any manner (whether by grant of a pledge, security
interest or otherwise) of Mortgagor or any interest in Mortgagor except as
expressly permitted pursuant to this Mortgage.
2. No Transfer. Mortgagor acknowledges that Mortgagee has examined and
relied on the expertise of Mortgagor and, if applicable, each General Partner,
in owning and operating properties such as the Mortgaged Property in agreeing
to make the Loan and will continue to rely on Mortgagor's ownership of the
Mortgaged Property as a means of maintaining the value of the Mortgaged
Property as security for repayment of the Debt and Mortgagor acknowledges that
Mortgagee has a valid interest in maintaining the value of the Mortgaged
Property. Mortgagor shall not Transfer, nor permit the Transfer of, (a) the
Mortgaged Property or any part thereof, or any interest therein or (b) any or
all of the interests in Mortgagor, or if Mortgagor is a partnership, of any
General Partner, without the prior written consent of Mortgagee, which consent
Mortgagee may withhold in its sole and absolute discretion. Mortgagee shall
not be required to demonstrate any actual impairment of its security or any
increased risk of default hereunder in order to declare the Debt immediately
due and payable upon a Transfer without Mortgagee's consent. This provision
shall apply to every Transfer regardless of whether voluntary or not, or
whether or not Mortgagee has consented to any previous Transfer.
3. Due on Sale. Mortgagee may declare the Debt immediately due and payable
upon any Transfer or further encumbrance without Mortgagee's consent without
regard to whether any impairment of its security or any increased risk of
default hereunder can be demonstrated. This provision shall apply to every
Transfer or further encumbrance of the Mortgaged Property or any part thereof
or interest in the Mortgaged Property or in Mortgagor regardless of whether
voluntary or not, or whether or not Mortgagee has consented to any previous
Transfer or further encumbrance of the Mortgaged Property or interest in
Mortgagor.
4. Permitted Sale. Notwithstanding the foregoing provisions of this Article
IX, Mortgagee shall consent to a one time Transfer of the Mortgaged Property
in its entirety (hereinafter, "Sale") provided that each of the following
terms and conditions are, in the sole judgment of Mortgagee, satisfied: (i)
no Default is then continuing hereunder; (ii) Mortgagor gives Mortgagee
written notice of the terms of such prospective Sale not less than thirty (30)
days before the date on which such Sale is scheduled to close and,
concurrently therewith, gives Mortgagee all such information concerning the
proposed transferee of the Mortgaged Property (hereinafter, "Buyer") as
Mortgagee would require in evaluating an initial extension of credit to a
borrower and pays to Mortgagee a non-refundable application fee in the amount
of $5,000 and any proposed Buyer is or at the closing of such Sale will be a
Single Purpose Entity acceptable to Mortgagee; (iii) Mortgagor pays Mortgagee,
concurrently with the closing of such Sale, a non-refundable assumption fee in
an amount equal to all out-of-pocket costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred by Mortgagee in connection
with the Sale, plus, other than in connection with a Sale to an Affiliate, an
amount equal to one percent (1.0%) of the then outstanding principal balance
of the Note; (iv) the Buyer assumes and agrees to pay the Debt subject to the
provisions of the Note, this Mortgage and the other Loan Documents and, prior
to or concurrently with the closing of such Sale, the Buyer executes, without
any cost or expense to Mortgagee, such documents and agreements as Mortgagee
shall reasonably require to evidence and effectuate said assumption and
delivers such legal opinions as Mortgagee may require; (v) Mortgagor delivers
to Mortgagee, without any cost or expense to Mortgagee, such endorsements to
Mortgagee's title insurance policy, hazard insurance policy endorsements or
certificates and other similar materials as Mortgagee may deem necessary or
desirable at the time of the Sale, all in form and substance satisfactory to
Mortgagee, including, without limitation, an endorsement or endorsements to
Mortgagee's title insurance policy insuring the lien of this Mortgage,
extending the effective date of such policy to the date of execution and
delivery (or, if later, of recording) of the assumption agreement referenced
in clause (iv) above, with no additional exceptions added to such policy, and
insuring that fee title to the Mortgaged Property is vested in the Buyer; (vi)
Mortgagor executes and delivers to Mortgagee, without any cost or expense to
Mortgagee, a release of Mortgagee, its officers, directors, employees and
agents, from all claims and liability relating to the transactions evidenced
by the Loan Documents, through and including the date of the closing of the
Sale, which agreement shall be in form and substance satisfactory to Mortgagee
and shall be binding upon the Buyer; (vii) the Aggregate Debt Service Coverage
and the loan to value ratio of the Mortgaged Property (with the value of the
Mortgaged Property established as the price received by Mortgagor in
consideration for such sale) are no less and no greater, respectively, than as
of the Closing Date; and (vii) such Sale is not construed so as to relieve
Mortgagor of any personal liability under the Note or any of the other Loan
Documents for any acts or events occurring or obligations arising prior to or
simultaneously with the closing of such Sale, and Mortgagor executes, without
any cost or expense to Mortgagee, such documents and agreements as Mortgagee
shall reasonably require to evidence and effectuate the ratification of said
personal liability.
XI: CERTIFICATES
1. Estoppel Certificates. (a) After request by Mortgagee, Mortgagor,
within fifteen (15) days and at its expense, will furnish Mortgagee with a
statement, duly acknowledged and certified, setting forth (i) the amount of
the original principal amount of the Note, and the unpaid principal amount of
the Note, (ii) the rate of interest of the Note, (iii) the date payments of
interest and/or principal were last paid, (iv) any offsets or defenses to the
payment of the Debt, and if any are alleged, the nature thereof, (v) that the
Note and this Mortgage have not been modified or if modified, giving
particulars of such modification and (vi) that there has occurred and is then
continuing no Default or if such Default exists, the nature thereof, the
period of time it has existed, and the action being taken to remedy such
Default.
(a) Within fifteen (15) days after written request by Mortgagor, not more
than four times a year Mortgagee shall furnish to Mortgagor a written
statement confirming the amount of the Debt, the maturity date of the Note,
the date to which interest has been paid, and whether any Event of Default or
other Default has occurred and is then continuing.
XII: NOTICES
1. Notices. Any notice, demand, statement, request or consent made
hereunder shall be in writing and delivered personally or sent to the party to
whom the notice, demand or request is being made by Federal Express or other
nationally recognized overnight delivery service, as follows and shall be
deemed given when delivered personally or one (1) Business Day after being
deposited with Federal Express or such other nationally recognized delivery
service:
If to Mortgagee: To Mortgagee, at the address first written above,
with a copy to:
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
Attn: David J. Weinberger, Esq.
If to Mortgagor: To Mortgagor, at the address set forth on the
signature page hereto, with copy to:
Frank W. Cuiffo, Esq.
at Donovan, Leisure, Newton & Irvine
30 Rockefeller Plaza
New York, New York 10112
or such other address as either Mortgagor or Mortgagee shall hereafter specify
by written notice as provided herein, provided, however, that notwithstanding
any provision of this Article to the contrary, such notice of change of
address shall be deemed given only upon actual receipt thereof.
XIII: INDEMNIFICATION
1. Indemnification Covering Mortgaged Property. In addition, and without
limitation, to any other provision of this Mortgage or any other Loan
Document, Mortgagor shall protect, indemnify and save harmless Mortgagee and
its successors and assigns, and each of their agents, employees, officers and
directors, from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expense (including, without limitation,
reasonable attorneys' fees and expenses, whether incurred within or outside
the judicial process), imposed upon or incurred by or asserted against
Mortgagee and its assigns, or any of their agents, employees, officers or
directors, by reason of (a) ownership of this Mortgage, the Assignment, the
Mortgaged Property or any part thereof or any interest therein or receipt of
any Rents; (b) any accident, injury to or death of any person or loss of or
damage to property occurring in, on or about the Mortgaged Property or any
part thereof or on the adjoining sidewalks, curbs, parking areas, streets or
ways; (c) any use, nonuse or condition in, on or about, or possession,
alteration, repair, operation, maintenance or management of, the Mortgaged
Property or any part thereof or on the adjoining sidewalks, curbs, parking
areas, streets or ways; (d) any failure on the part of Mortgagor to perform or
comply with any of the terms of this Mortgage or the Assignment; (e)
performance of any labor or services or the furnishing of any materials or
other property in respect of the Mortgaged Property or any part thereof; (f)
any claim by brokers, finders or similar Persons claiming to be entitled to a
commission in connection with any Lease or other transaction involving the
Mortgaged Property or any part thereof; (g) any Imposition including, without
limitation, any Imposition attributable to the execution, delivery, filing, or
recording of any Loan Document, Lease or memorandum thereof; (h) any lien or
claim arising on or against the Mortgaged Property or any part thereof under
any Legal Requirement or any liability asserted against Mortgagee with respect
thereto; or (i) the claims of any lessee or any Person acting through or under
any lessee or otherwise arising under or as a consequence of any Lease.
Notwithstanding the foregoing provisions of this Section 12.01 to the
contrary, Mortgagor shall have no obligation to indemnify Mortgagee pursuant
to this Section 12.01 for liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses relative to the foregoing
which result from Mortgagee's, and its successors' or assigns', willful
misconduct or gross negligence. Any amounts payable to Mortgagee by reason of
the application of this Section 12.01 shall constitute a part of the Debt
secured by this Mortgage and other Loan Documents and shall become immediately
due and payable and shall bear interest at the Default Rate from the date the
liability, obligation, claim, cost or expense is sustained by Mortgagee, as
applicable, until paid. The provisions of this Section 12.01 shall survive
the termination of this Mortgage whether by repayment of the Debt, foreclosure
or delivery of a deed in lieu thereof, assignment or otherwise.
XIV: DEFAULTS
1. Events of Default. The Debt shall become immediately due at the option
of Mortgagee upon any one or more of the following events ("Event of
Default"):
(a) if the final payment or prepayment premium, if any, due under the Note
shall not be paid on Maturity;
(b) if any monthly payment of interest and/or principal due under the Note
(other than the sums described in (a) above) shall not be fully paid on the
date upon which the same is due and payable thereunder;
(c) if payment of any sum (other than the sums described in (a) above or (b)
above) required to be paid pursuant to the Note, this Mortgage or any other
Loan Document shall not be paid within five (5) days after Mortgagee delivers
written notice to Mortgagor that same is due and payable thereunder or
hereunder;
(d) except as otherwise permitted herein, if Mortgagor, Indemnitor or, if
Mortgagor or Indemnitor is a partnership, any general partner of Mortgagor or
Indemnitor shall institute or cause to be instituted any proceeding for the
termination or dissolution of Mortgagor, Indemnitor or any such general
partner;
(e) if the insurance policies required hereunder are not kept in full force
and effect, or if the insurance policies are not assigned and delivered to
Mortgagee as herein provided;
(f) if Mortgagor or Indemnitor attempts to assign its rights under this
Mortgage or any other Loan Document or any interest herein or therein, or if
any Transfer occurs other than in accordance with the provisions hereof;
(g) if any representation or warranty of Mortgagor or Indemnitor made herein
or in any other Loan Document or in any certificate, report, financial
statement or other instrument or agreement furnished to Mortgagee shall prove
false or misleading in any material respect;
(h) if Mortgagor, Indemnitor or any general partner of Mortgagor or
Indemnitor 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;
(i) if a receiver, liquidator or trustee of Mortgagor, Indemnitor or any
general partner of Mortgagor or Indemnitor shall be appointed or if Mortgagor,
Indemnitor or their respective general partners shall be adjudicated a
bankrupt or insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or
state law, shall be filed by or against, consented to, or acquiesced in by,
Mortgagor, Indemnitor or their respective general partners or if any
proceeding for the dissolution or liquidation of Mortgagor, Indemnitor or
their respective general partners shall be instituted; however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Mortgagor, Indemnitor or their respective general partners, as
applicable, upon the same not being discharged, stayed or dismissed within
sixty (60) days or if Mortgagor, Indemnitor or their respective general
partners shall generally not be paying its debts as they become due;
(j) if Mortgagor shall be in default beyond any notice or grace period, if
any, under any other mortgage or deed of trust or security agreement covering
any part of the Mortgaged Property without regard to its priority relative to
this Mortgage; provided, however, this provision shall not be deemed a waiver
of the provisions of Article IX prohibiting further encumbrances affecting the
Mortgaged Property or any other provision of this Mortgage;
(k) if the Mortgaged Property becomes subject (i) to any lien which is
superior to the lien of this Mortgage, other than a lien for real estate taxes
and assessments not due and payable, or (ii) to any mechanic's, materialman's
or other lien which is or is asserted to be superior to the lien of this
Mortgage, and such lien shall remain undischarged (by payment, bonding, or
otherwise) for ten (10) Business Days unless contested in accordance with the
terms hereof;
(l) if Mortgagor discontinues the operation of the Mortgaged Property or any
part thereof for reasons other than repair or restoration arising from a
casualty or condemnation for ten (10) days or more;
(m) except as permitted in this Mortgage, any material alteration,
demolition or removal of any of the Improvements without the prior consent of
Mortgagee;
(n) if Mortgagor or Indemnitor or any general partner of Mortgagor or
Indemnitor shall institute or cause to be instituted any proceeding for the
termination and dissolution of Mortgagor or Indemnitor;
(o) if Mortgagor consummates a transaction which would cause this Mortgage
or Mortgagee's rights under this Mortgage, the Note or any other Loan Document
to constitute a non-exempt prohibited transaction under ERISA or result in a
violation of a state statute regulating government plans subjecting Mortgagee
to liability for a violation of ERISA or a state statute;
(p) if an Event of Default shall occur under any of the other Cross-
collateralized Mortgages; or
(q) if Mortgagor shall be in default under any of the other terms, covenants
or conditions of the Note (other than as set forth in (a) through (p) above),
this Mortgage or any other Loan Document, other than as set forth in (a)
through (p) above, for ten (10) Business Days after notice from Mortgagee in
the case of any default which can be cured by the payment of a sum of money,
or for thirty (30) days after notice from Mortgagee in the case of any other
default or an additional thirty (30) days if Mortgagor is diligently and
continuously effectuating a cure of a curable non-monetary default, other than
as set forth in (a) through (p) above.
(r) if there is an Event of Default under that particular promissory note
dated January 26, 1996 made by MOA-TL Holding Corp. to HFS Incorporated, as
same may be amended, extended or otherwise revised from time to time.
2. Remedies. (a) Upon the occurrence and during the continuance of any
Event of Default, Mortgagee may, in addition to any other rights or remedies
available to it hereunder or under any other Loan Document, at law or in
equity, take such action, without notice or demand, as it reasonably deems
advisable to protect and enforce its rights against Mortgagor and in and to
the Mortgaged Property or any one or more of the Cross-collateralized
Properties or any one or more of them, including, but not limited to, the
following actions, each of which may be pursued singly, concurrently or
otherwise, at such time and in such order as Mortgagee may determine, in its
sole discretion, without impairing or otherwise affecting any other rights and
remedies of Mortgagee hereunder, at law or in equity: (i) declare all or any
portion of the unpaid Debt to be immediately due and payable; provided,
however, that upon the occurrence of any of the events specified in Section
13.01(i), the entire Debt will be immediately due and payable without notice
or demand or any other declaration of the amounts due and payable; or (ii)
bring an action to foreclose this Mortgage and without applying for a receiver
for the Rents, but subject to the rights of the tenants under the Leases,
enter into or upon the Mortgaged Property or any part thereof, either
personally or by its agents, nominees or attorneys, and dispossess Mortgagor
and its agents and servants therefrom, and thereupon Mortgagee may (A) use,
operate, manage, control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Mortgaged Property and conduct the business
thereat, (B) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged Property or any part thereof, (C) exercise
all rights and powers of Mortgagor with respect to the Mortgaged Property or
any part thereof, whether in the name of Mortgagor or otherwise, including,
without limitation, the right to make, cancel, enforce or modify leases,
obtain and evict tenants, and demand, sue for, collect and receive all
earnings, revenues, rents, issues, profits and other income of the Mortgaged
Property and every part thereof, and (D) apply the receipts from the Mortgaged
Property or any part thereof to the payment of the Debt, after deducting
therefrom all expenses (including, without limitation, reasonable attorneys'
fees and disbursements) reasonably incurred in connection with the aforesaid
operations and all amounts necessary to pay the Impositions, insurance and
other charges in connection with the Mortgaged Property or any part thereof,
as well as just and reasonable compensation for the services of Mortgagee's
third-party agents; or (iii) have an appraisal or other valuation of the
Mortgaged Property or any part thereof performed by an Appraiser (and
Mortgagor covenants and agrees it shall cooperate in causing any such
valuation or appraisal to be performed) and any cost or expense incurred by
Mortgagee in connection therewith shall constitute a portion of the Debt and
be secured by this Mortgage and shall be immediately due and payable to
Mortgagee with interest, at the Default Rate, until the date of receipt by
Mortgagee; or (iv) sell the Mortgaged Property or institute proceedings for
the complete foreclosure of this Mortgage, or take such other action as may be
allowed pursuant to Legal Requirements, at law or in equity, for the
enforcement of this Mortgage in which case the Mortgaged Property or any part
thereof may be sold for cash or credit in one or more parcels; or (v) with or
without entry, and to the extent permitted and pursuant to the procedures
provided by applicable Legal Requirements, institute proceedings for the
partial foreclosure of this Mortgage, or take such other action as may be
allowed pursuant to Legal Requirements, at law or in equity, for the
enforcement of this Mortgage for the portion of the Debt then due and payable,
subject to the lien of this Mortgage continuing unimpaired and without loss of
priority so as to secure the balance of the Debt not then due; or (vi) sell
the Mortgaged Property or any part thereof and any or all estate, claim,
demand, right, title and interest of Mortgagor therein and rights of
redemption thereof, pursuant to power of sale or otherwise, at one or more
sales, in whole or in parcels, in any order or manner, at such time and place,
upon such terms and after such notice thereof as may be required or permitted
by law, at the discretion of Mortgagee, and in the event of a sale, by
foreclosure or otherwise, of less than all of the Mortgaged Property, this
Mortgage shall continue as a lien on the remaining portion of the Mortgaged
Property; or (vii) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained in the
Loan Documents, or any of them; or (viii) recover judgment on the Note or any
guaranty either before, during or after (or in lieu of) any proceedings for
the enforcement of this Mortgage; or (ix) apply, ex parte, for the appointment
of a custodian, trustee, receiver, liquidator or conservator of the Mortgaged
Property or any part thereof, irrespective of the adequacy of the security for
the Debt and without regard to the solvency of Mortgagor or of any Person
liable for the payment of the Debt, to which appointment Mortgagor does hereby
consent and such receiver or other official shall have all rights and powers
permitted by applicable law and such other rights and powers as the court
making such appointment may confer, but the appointment of such receiver or
other official shall not impair or in any manner prejudice the rights of
Mortgagee to receive the Rent with respect to any of the Mortgaged Property
pursuant to this Mortgage or the Assignment; or (x) require, at Mortgagee's
option, Mortgagor to pay monthly in advance to Mortgagee, or any receiver
appointed to collect the Rents, the fair and reasonable rental value for the
use and occupation of any portion of the Mortgaged Property occupied by
Mortgagor and may require Mortgagor to vacate and surrender possession to
Mortgagee of the Mortgaged Property or to such receiver and Mortgagor may be
evicted by summary proceedings or otherwise; or (xi) without notice to
Mortgagor (A) apply all or any portion of the cash collateral in the Basic
Carrying Costs Sub-Account, including any interest and/or earnings therein, to
carry out the obligations of Mortgagor under this Mortgage and the other Loan
Documents, to protect and preserve the Mortgaged Property and for any other
purpose permitted under this Mortgage and the other Loan Documents and/or (B)
have all or any portion of such cash collateral immediately paid to Mortgagee
to be applied against the Debt in the order and priority set forth in the
Note; or (xii) pursue any or all such other rights or remedies as Mortgagee
may have under applicable law or in equity; provided, however, that the
provisions of this Section 13.02(a) shall not be construed to extend or modify
any of the notice requirements or grace periods provided for hereunder or
under any of the other Loan Documents. Mortgagor hereby waives, to the
fullest extent permitted by Legal Requirements, any defense Mortgagor might
otherwise raise or have by the failure to make any tenants parties defendant
to a foreclosure proceeding and to foreclose their rights in any proceeding
instituted by Mortgagee.
(a) Any time after an Event of Default Mortgagee shall have the power to
sell the Mortgaged Property or any part thereof at public auction, in such
manner, at such time and place, upon such terms and conditions, and upon such
public notice as Mortgagee may deem best for the interest of Mortgagee, or as
may be required or permitted by applicable law, consisting of advertisement in
a newspaper of general circulation in the jurisdiction and for such period as
applicable law may require and at such other times and by such other methods,
if any, as may be required by law to convey the Mortgaged Property in fee
simple by Mortgagee's deed with special warranty of title to and at the cost
of the purchaser, who shall not be liable to see to the application of the
purchase money. The proceeds or avails of any sale made under or by virtue of
this Section 13.02, together with any other sums which then may be held by
Mortgagee under this Mortgage, whether under the provisions of this Section
13.02 or otherwise, shall be applied as follows:
First: To the payment of the third-party costs and expenses
reasonably incurred in connection with any such sale and to advances, fees and
expenses, including, without limitation, reasonable fees and expenses of
Mortgagee's legal counsel as applicable, and of any judicial proceedings
wherein the same may be made, and of all expenses, liabilities and advances
reasonably made or incurred by Mortgagee under this Mortgage, together with
interest as provided herein on all such advances made by Mortgagee, and all
Impositions, except any Impositions or other charges subject to which the
Mortgaged Property shall have been sold;
Second: To the payment of the whole amount then due, owing and
unpaid under the Note for principal and interest thereon, with interest on
such unpaid principal at the Default Rate from the date of the occurrence of
the earliest Event of Default that formed a basis for such sale until the same
is paid;
Third: To the payment of any other portion of the Debt required to
be paid by Mortgagor pursuant to any provision of this Mortgage, the Note, or
any of the other Loan Documents; and
Fourth: The surplus, if any, to Mortgagor unless otherwise required
by Legal Requirements.
Mortgagee and any receiver or custodian of the Mortgaged Property or any part
thereof shall be liable to account for only those rents, issues, proceeds and
profits actually received by it.
(u) Mortgagee may adjourn from time to time any sale by it to be made
under or by virtue of this Mortgage 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 Legal Requirements,
Mortgagee, without further notice or publication, may make such sale at the
time and place to which the same shall be so adjourned.
(c) Upon the completion of any sale or sales made by Mortgagee under or
by virtue of this Section 13.02, Mortgagee, or any officer of any court
empowered to do so, shall execute and deliver to the accepted purchaser or
purchasers a good and sufficient instrument, or good and sufficient
instruments, granting, conveying, assigning and transferring all estate,
right, title and interest in and to the property and rights sold. Mortgagee
is hereby irrevocably appointed the true and lawful attorney-in-fact of
Mortgagor (coupled with an interest), in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the property
and rights so sold and for that purpose Mortgagee may execute all necessary
instruments of conveyance, assignment, transfer and delivery, and may
substitute one or more Persons with like power, Mortgagor hereby ratifying and
confirming all that its said attorney-in-fact or such substitute or
substitutes shall lawfully do by virtue hereof. Nevertheless, Mortgagor, if
so 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 sole judgement of Mortgagee, for
such purpose, and as may be designated in such request. Any such sale or
sales made under or by virtue of this Section 13.02, whether made under the
power of sale herein granted or under or by virtue of judicial proceedings or
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 property and rights so sold, and shall,
to the fullest extent permitted under Legal Requirements, 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.
(d) In the event of any sale made under or by virtue of this Section
13.02 (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or a judgment or decree of foreclosure and
sale), the entire Debt immediately thereupon shall, anything in the Loan
Documents to the contrary notwithstanding, become due and payable.
(x) Upon any sale made under or by virtue of this Section 13.02
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or 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 Debt the net sales price after deducting therefrom the
expenses of the sale and the costs of the action.
(f) No recovery of any judgment by Mortgagee and no levy of an execution
under any judgment upon the Mortgaged Property or any part thereof or upon any
other property of Mortgagor shall release the lien of this Mortgage 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 until all amounts due under the Note,
this Mortgage and the other Loan Documents are paid in full.
3. Payment of Debt After Default. If following the occurrence of any Event
of Default, Mortgagor shall tender payment of an amount sufficient to satisfy
the Debt in whole or in part at any time prior to a foreclosure sale of the
Mortgaged Property, and if at the time of such tender prepayment of the
principal balance of the Note is not permitted by the Note, Mortgagor shall,
in addition to the entire Debt, also pay to Mortgagee a sum equal to interest
which would have accrued on the principal balance of the Note at the Interest
Rate from the date of such tender to the earlier of (a) the Maturity Date or
(b) the first day of the period during which prepayment of the principal
balance of the Note would have been permitted together with a prepayment
consideration equal to the prepayment consideration which would have been
payable as of the first day of the period during which prepayment would have
been permitted. If at the time of such tender, prepayment of the principal
balance of the Note is permitted, such tender by Mortgagor shall be deemed to
be a voluntary prepayment of the principal balance of the Note, and Mortgagor
shall, in addition to the entire Debt, also pay to Mortgagee the applicable
prepayment consideration specified in the Note and this Mortgage.
4. Possession of the Mortgaged Property. Upon the occurrence of any Event
of Default hereunder and the acceleration of the Debt or any portion thereof,
Mortgagor, if an occupant of the Mortgaged Property or any part thereof, upon
demand of Mortgagee, shall immediately surrender possession of the Mortgaged
Property (or the portion thereof so occupied) to Mortgagee, and if Mortgagor
is permitted to remain in possession, the possession shall be as a month-to-
month tenant of Mortgagee and, on demand, Mortgagor shall pay to Mortgagee
monthly, in advance, a reasonable rental for the space so occupied and in
default thereof Mortgagor may be dispossessed. The covenants herein contained
may be enforced by a receiver of the Mortgaged Property or any part thereof.
Nothing in this Section 13.04 shall be deemed to be a waiver of the provisions
of this Mortgage making the Transfer of the Mortgaged Property or any part
thereof without Mortgagee's prior written consent an Event of Default.
5. Interest After Default. If any amount due under the Note, this Mortgage
or any of the other Loan Documents is not paid within any applicable notice
and grace period after same is due, whether such date is the stated due date,
any accelerated due date or any other date or at any other time specified
under any of the terms hereof or thereof, then, in such event, Mortgagor
shall pay interest on the amount not so paid from and after the date on which
such amount first becomes due at the Default Rate of interest; and such
interest shall be due and payable at such rate until the earlier of the cure
of all Events of Default or the payment of the entire amount due to Mortgagee,
whether or not any action shall have been taken or proceeding commenced to
recover the same or to foreclose this Mortgage. All unpaid and accrued
interest shall be secured by this Mortgage as part of the Debt. Nothing in
this Section 13.05 or in any other provision of this Mortgage shall constitute
an extension of the time for payment of the Debt.
6. Mortgagor's Actions After Default. 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 Debt, or of any
other nature in aid of the enforcement of the Loan Documents, Mortgagor will
(a) after receipt of notice of the institution of any such action, 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 the Mortgaged Property or any part
thereof and of all the earnings, revenues, rents, issues, profits and income
thereof.
7. Control by Mortgagee After Default. Notwithstanding the appointment of
any custodian, receiver, liquidator or trustee of Mortgagor, or of any of its
property, or of the Mortgaged Property or any part thereof, to the extent
permitted by Legal Requirements, Mortgagee shall be entitled to obtain
possession and control of all property now and hereafter covered by this
Mortgage and the Assignment in accordance with the terms hereof and thereof.
8. Right to Cure Defaults. (a) Upon the occurrence of any Event of
Default, Mortgagee or its agents may, but without any obligation to do so and
without notice to or demand on Mortgagor and without releasing Mortgagor from
any obligation hereunder, make or do the same in such manner and to such
extent as Mortgagee may deem necessary to protect the security hereof.
Mortgagee and its agents are authorized to enter upon the Mortgaged Property
or any part thereof for such purposes, or appear in, defend, or bring any
action or proceedings to protect Mortgagee's interest in the Mortgaged
Property or any part thereof or to foreclose this Mortgage or collect the
Debt, and the cost and expense thereof (including reasonable attorneys' fees
to the extent permitted by law), with interest as provided in this Section
13.08, shall constitute a portion of the Debt and shall be immediately due and
payable to Mortgagee upon demand. All such costs and expenses incurred by
Mortgagee or its agents in remedying such Event of Default or in appearing in,
defending, or bringing any such action or proceeding shall bear interest at
the Default Rate, for the period from the date so demanded to the date of
payment to Mortgagee. All such costs and expenses incurred by Mortgagee or
its agents together with interest thereon calculated at the above rate shall
be deemed to constitute a portion of the Debt and be secured by this Mortgage.
(a) If Mortgagee makes any payment or advance that Mortgagee is authorized
by this Mortgage to make in the place and stead of Mortgagor (i) relating to
the Impositions or tax liens asserted against the Mortgaged Property,
Mortgagee may do so according to any bill, statement or estimate procured from
the appropriate public office without inquiry into the accuracy of the bill,
statement or estimate or into the validity of any of the Impositions or the
tax liens or claims thereof; (ii) relating to any apparent or threatened
adverse title, lien, claim of lien, encumbrance, claim or charge, Mortgagee
will be the sole judge of the legality or validity of same; or (iii) relating
to any other purpose authorized by this Mortgage but not enumerated in this
Section 13.08, Mortgagee may do so whenever, in its judgment and discretion,
the payment or advance seems necessary or desirable to protect the Mortgaged
Property and the full security interest intended to be created by this
Mortgage. In connection with any payment or advance made pursuant to this
Section 13.08, Mortgagee has the option and is authorized, but in no event
shall be obligated, to obtain a continuation report of title prepared by a
title insurance company. The payments and the advances made by Mortgagee
pursuant to this Section 13.08 and the cost and expenses of said title report
will be due and payable by Mortgagor on demand, together with interest at the
Default Rate, and will be secured by this Mortgage.
9. Late Payment Charge. If any portion of the Debt is not paid in full
within five (5) days after the date on which it is due and payable hereunder,
Mortgagor shall pay to Mortgagee an amount equal to three percent (3%) of such
unpaid portion of the Debt ("Late Charge") to defray the expense incurred by
Mortgagee in handling and processing such delinquent payment, and such amount
shall constitute a part of the Debt.
10. Recovery of Sums Required to Be Paid. Mortgagee shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due and payable hereunder (after the
expiration of any grace period or the giving of any notice herein provided, if
any), without regard to whether or not the balance of the Debt shall be due,
and without prejudice to the right of Mortgagee thereafter to bring an action
of foreclosure, or any other action, for a default or defaults by Mortgagor
existing at the time such earlier action was commenced.
11. Marshalling and Other Matters. Mortgagor hereby waives, to the fullest
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement, redemption (both equitable and statutory) and
homestead laws now or hereafter in force and all rights of marshalling in the
event of any sale hereunder of the Mortgaged Property or any part thereof or
any interest therein. Nothing herein or in any other Loan Document shall be
construed as requiring Mortgagee to resort to any particular Cross-
collateralized Property for the satisfaction of the Debt in preference or
priority to any other Cross-collateralized Property but Mortgagee may seek
satisfaction out of all the Cross-collateralized Properties or any part
thereof in its absolute discretion. Further, Mortgagor hereby expressly
waives any and all rights of redemption from sale under any order or decree of
foreclosure of this Mortgage on behalf of Mortgagor, whether equitable or
statutory and on behalf of each and every Person acquiring any interest in or
title to the Mortgaged Property or any part thereof subsequent to the date of
this Mortgage and on behalf of all Persons to the fullest extent permitted by
applicable law.
12. Tax Reduction Proceedings. After an Event of Default, Mortgagor shall
be deemed to have appointed Mortgagee as its attorney-in-fact to seek a
reduction or reductions in the assessed valuation of the Mortgaged Property
for real property tax purposes or for any other purpose and to prosecute any
action or proceeding in connection therewith. This power, being coupled with
an interest, shall be irrevocable for so long as any part of the Debt remains
unpaid and any Event of Default shall be continuing.
13. General Provisions Regarding Remedies.
(a)Right to Terminate Proceedings. Mortgagee may terminate or rescind any
proceeding or other action brought in connection with its exercise of the
remedies provided in Section 13.02 at any time before the conclusion thereof,
as determined in Mortgagee's sole discretion and without prejudice to
Mortgagee.
(b) No Waiver or Release. The failure of Mortgagee to exercise any right,
remedy or option provided in the Loan Documents shall not be deemed a waiver
of such right, remedy or option or of any covenant or obligation contained in
the Loan Documents. No acceptance by Mortgagee of any payment after the
occurrence of an Event of Default and no payment by Mortgagee of any payment
or obligation for which Mortgagor is liable hereunder shall be deemed to waive
or cure any Event of Default. No sale of all or any portion of the Mortgaged
Property, no forbearance on the part of Mortgagee, and no extension of time
for the payment of the whole or any portion of the Debt or any other
indulgence given by Mortgagee to Mortgagor or any other Person, shall operate
to release or in any manner affect the interest of Mortgagee in the Mortgaged
Property or the liability of Mortgagor to pay the Debt. No waiver by
Mortgagee shall be effective unless it is in writing and then only to the
extent specifically stated.
(c) No Impairment; No Releases. The interests and rights of Mortgagee under
the Loan Documents shall not be impaired by any indulgence, including (i) any
renewal, extension or modification which Mortgagee may grant with respect to
any of the Debt; (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Mortgagee may grant with respect to the
Mortgaged Property or any portion thereof; or (iii) any release or indulgence
granted to any maker, endorser, guarantor or surety of any of the Debt.
(d) Effect on Judgment. No recovery of any judgment by Mortgagee and no
levy of an execution under any judgment upon any Mortgaged Property or any
portion thereof shall affect in any manner or to any extent the lien of the
other Cross-collateralized Mortgages upon the remaining Cross-collateralized
Properties or any portion thereof, or any rights, powers or remedies of
Mortgagee hereunder or thereunder. Such lien, rights, powers and remedies
of Mortgagee shall continue unimpaired as before.
(e) Relating to Certain States. With respect to any
Mortgaged Property in a State to which there are certain matters relating to
the exercise of remedies in Article XVIII hereof, such Article shall govern
with respect to the exercise of any remedies under this Article XIII, as
applicable.
XV: COMPLIANCE WITH REQUIREMENTS
1. Compliance with Legal Requirements. (a) Mortgagor shall promptly
comply with all present and future Legal Requirements, foreseen and
unforeseen, ordinary and extraordinary, whether requiring structural or
nonstructural repairs or alterations including, without limitation, all
zoning, subdivision, building, safety and environmental protection, land use
and development Legal Requirements, all Legal Requirements which may be
applicable to the curbs adjoining the Mortgaged Property or to the use or
manner of use thereof, and all rent control, rent stabilization and all other
similar Legal Requirements relating to rents charged and/or collected in
connection with the Leases. Mortgagor represents and warrants that the
Mortgaged Property is in compliance in all material respects with all Legal
Requirements as of the date hereof, no notes or notices of violations of any
Legal Requirements have been entered or received by Mortgagor and to best of
Mortgagor's knowledge, there is no basis for the entering of such note or
notices.
(a) Mortgagor shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Mortgagee, the validity or application of any Legal Requirement and to suspend
compliance therewith if permitted under applicable Legal Requirements,
provided (i) failure to comply therewith may not subject Mortgagee to any
civil or criminal liability, (ii) prior to and during such contest, Mortgagor
shall furnish to Mortgagee security reasonably satisfactory to Mortgagee, in
its discretion, against loss or injury by reason of such contest or non-
compliance with such Legal Requirement, (iii) no Default or Event of Default
shall exist during such proceedings and such contest shall not otherwise
violate any of the provisions of any of the Loan Documents, (iv) such contest
shall not, (unless Mortgagor shall comply with the provisions of clause (ii)
of this Section 14.01(b)) subject the Mortgaged Property to any lien or
encumbrance the enforcement of which is not suspended or otherwise affect the
priority of the lien of this Mortgage; (v) such contest shall not affect the
ownership, use or occupancy of the Mortgaged Property; (vi) the Mortgaged
Property or any part thereof or any interest therein shall not be in any
danger of being sold, forfeited or lost by reason of such contest by
Mortgagor; (vii) Mortgagor shall give Mortgagee prompt notice of the
commencement of such proceedings and, upon request by Mortgagee, notice of the
status of such proceedings and/or confirmation of the continuing satisfaction
of the conditions set forth in clauses (i)-(vi) of this Section 14.01(b); and
(viii) upon a final determination of such proceeding, Mortgagor shall take all
steps necessary to comply with any requirements arising therefrom.
(b) Mortgagor shall at all times comply with all applicable Legal
Requirements with respect to the construction, use and maintenance of any
vaults adjacent to the Mortgaged Property. If by reason of the failure to pay
taxes, assessments, charges, permit fees, franchise taxes or levies of any
kind or nature, the continued use of the vaults adjacent to Mortgaged Property
or any part thereof is discontinued, Mortgagor nevertheless shall, with
respect to any vaults which may be necessary for the continued use of the
Mortgaged Property, take such steps (including the making of any payment) to
insure the continued use of vaults or replacements.
2. Compliance with Recorded Documents; No Future Grants. Mortgagor shall
promptly perform and observe or cause to be performed and observed, all of the
terms, covenants and conditions of all Property Agreements and all things
necessary to preserve intact and unimpaired any and all appurtenances or other
interests or rights affecting the Mortgaged Property.
XVI: PREPAYMENT; RELEASE
1. Prepayment. (a) Except as set forth in Section 15.01(b) hereof, no
prepayment of the Debt may be made in whole or in part at any time prior to
the date which is the eighteenth (18th) month anniversary of the date hereof.
(a)Thereafter, Mortgagor may prepay the Loan, in whole or, from time to
time, in part, as of the last day of an Interest Accrual Period in accordance
with the following provisions:
(i)Mortgagee shall have received from Mortgagor, not less than fifteen
(15) days', nor more than sixty (60) days', prior written notice specifying
the date proposed for such prepayment and the amount which is to be prepaid.
(ii) Mortgagor shall also pay to Mortgagee all interest due through and
including the last day of the Interest Accrual Period in which such prepayment
is being made, together with any and all other amounts due and owing pursuant
to the terms of the Note, this Mortgage or the other Loan Documents.
(iii) Any partial prepayment shall be in a minimum amount not less than
$25,000 and shall be in whole multiples of $1,000 in excess thereof and no
partial prepayments may individually or in the aggregate reduce the Loan
Amount below an amount equal to fifty percent (50%) of the Loan Amount on the
date hereof.
(iv) No Event of Default shall have occurred and be continuing.
(v) Any partial prepayment of the Principal Amount, including, without
limitation, Unscheduled Payments, shall be applied to the installments of
principal last due hereunder and shall not release or relieve Mortgagor from
the obligation to pay the regularly scheduled installments of principal and
interest becoming due under the Note.
2.Release of Mortgaged Property. If Mortgagor prepays all or a portion of the
Loan pursuant to Section 15.01(b) hereof or if Mortgagee applies Loss Proceeds
from the Mortgaged Property towards the repayment of the Debt, Mortgagee
shall, promptly upon satisfaction of all the following terms and conditions
execute, acknowledge and deliver to Mortgagor a release of this Mortgage (a
"Release") in recordable form with respect to the Mortgaged Property.
(a) If such prepayment is a prepayment in part, but not in whole,
Mortgagee shall have received on the date proposed for such prepayment an
amount equal to the greater of (i) one hundred and twenty-five percent (125%)
of the Initial Allocated Loan Amount and (ii) ninety percent (90%) of the
gross sales price or gross refinancing proceeds of the Mortgaged Property but
not to exceed one hundred and fifty percent (150%) of the Initial Allocated
Loan Amount (the "Release Price").
(b) In the event of a prepayment pursuant to Section 15.01(b) hereof,
Mortgagee shall have received from Mortgagor evidence in form and substance
satisfactory to Mortgagee that the pro forma Aggregate Debt Service Coverage
of all Cross-collateralized Properties immediately following the Release is at
least equal to the greater of the Aggregate Debt Service Coverage as of the
Closing Date and the Aggregate Debt Service Coverage immediately prior to
effecting such Release, accompanied by an Officer's Certificate stating that
the statements, calculations and information comprising such evidence are
true, correct and complete in all respects; provided, however, that if
immediately following the Release, the Aggregate Debt Service Coverage shall
be greater than the Aggregate Debt Service Coverage as of the Closing Date but
less than the Aggregate Debt Service Coverage immediately prior to effecting
such Release, Mortgagor shall pay a Release Price equal to one hundred and
fifty percent (150%) of the Allocated Loan Amount:
(c) Mortgagor shall, at its sole expense, prepare any and all
documents and instruments necessary to effect the Release, all of which shall
be subject to the reasonable approval of Mortgagee, and Mortgagor shall pay
all costs reasonably incurred by Mortgagee (including, but not limited to,
reasonable attorneys' fees and disbursements, title search costs or
endorsement premiums) in connection with the review, execution and delivery of
the Release.
(d) No Event of Default has occurred and is continuing.
3. Repayment Fee. (a) Upon the repayment of all or any portion of the
Loan, whether on the Maturity Date or any other date (whether such repayment
is made voluntarily or involuntarily), Mortgagor shall be required to pay
Mortgagee on the date of such repayment, in addition to the Principal Amount
or a portion thereof which is to be prepaid, a non-refundable repayment fee
equal to two percent (2%) of the Principal Amount or portion thereof which is
to be repaid.
(a) Notwithstanding the foregoing, Mortgagor shall not be obligated to
pay the Repayment Fee from:
(i) the proceeds of a Sale permitted by Section 9.04 hereof; or
(ii) the proceeds of:
(B) a financing, or
(C) sale or issuance of equity made by or arranged through
Mortgagee in which Mortgagee has a participation sufficient to ensure
Mortgagee the right to earn an amount not less than the Repayment Fee
Mortgagee would otherwise earn but for this exception (A and B jointly
"Replacement Financing") provided that:
(2) upon notification from Mortgagor, at least
ninety (90) days, but not more than one hundred and twenty (120) days prior to
the Maturity Date, Mortgagee shall enter into good faith negotiations with
Mortgagor to establish terms and conditions for Replacement Financing; and
(3) Mortgagee shall offer to Mortgagor Replacement
Financing on terms which are based on then current market conditions as
determined by Mortgagee at its sole and absolute discretion.
XVII: ENVIRONMENTAL COMPLIANCE
1. Covenants, Representations and Warranties. (a) Mortgagor has not, at
any time, and, to Mortgagor's best knowledge after due inquiry and
investigation, except as set forth in the Environmental Report, no other
Person has at any time, handled, buried, stored, retained, refined,
transported, processed, manufactured, generated, produced, spilled, allowed to
seep, leak, escape or leach, or pumped, poured, emitted, emptied, discharged,
injected, dumped, transferred or otherwise disposed of or dealt with Hazardous
Materials on, to or from the Premises or any other real property owned and/or
occupied by Mortgagor, and Mortgagor does not intend to and shall not use the
Mortgaged Property or any part thereof or any such other real property for the
purpose of handling, burying, storing, retaining, refining, transporting,
processing, manufacturing, generating, producing, spilling, seeping, leaking,
escaping, leaching, pumping, pouring, emitting, emptying, discharging,
injecting, dumping, transferring or otherwise disposing of or dealing with
Hazardous Materials, except for use and storage for use of heating oil,
cleaning fluids, pesticides and other substances customarily used in the
operation of properties that are being used for the same purposes as the
Mortgaged Property is presently being used, provided such use and/or storage
for use is in compliance with the requirements hereof and the other Loan
Documents and does not give rise to liability under applicable Legal
Requirements or Environmental Statutes or be the basis for a lien against the
Mortgaged Property or any part thereof. In addition, without limitation to
the foregoing provisions, Mortgagor represents and warrants that, to the best
of its knowledge, after due inquiry and investigation, except as previously
disclosed in writing to Mortgagee, there is no asbestos in, on, over, or under
all or any portion of the fire-proofing or any other portion of the Mortgaged
Property.
(a) Mortgagor, to the best of its knowledge, knows of no seepage, leak,
escape, leach, discharge, injection, release, emission, spill, pumping,
pouring, emptying or dumping of Hazardous Materials into waters on, under or
adjacent to the Mortgaged Property or any part thereof or any other real
property owned and/or occupied by Mortgagor, or onto lands from which such
Hazardous Materials might seep, flow or drain into such waters, except as
disclosed in the Environmental Report.
(b) Mortgagor shall not permit any Hazardous Materials to be handled, buried,
stored, retained, refined, transported, processed, manufactured, generated,
produced, spilled, allowed to seep, leak, escape or leach, or to be pumped,
poured, emitted, emptied, discharged, injected, dumped, transferred or
otherwise disposed of or dealt with on, under, to or from the Mortgaged
Property or any portion thereof at any time, except for use and storage for
use of heating oil, ordinary cleaning fluids, pesticides and other substances
customarily used in the operation of properties that are being used for the
same purposes as the Mortgaged Property is presently being used, provided such
use and/or storage for use is in compliance with the requirements hereof and
the other Loan Documents and does not give rise to liability under applicable
Legal Requirements or be the basis for a lien against the Mortgaged Property
or any part thereof.
(c) Mortgagor represents and warrants that no actions, suits, or proceedings
have been commenced, or are pending, or to the best knowledge of Mortgagor,
are threatened in writing with respect to any Legal Requirement governing the
use, manufacture, storage, treatment, transportation, or processing of
Hazardous Materials with respect to the Mortgaged Property or any part
thereof. Mortgagor has received no notice of, and, except as disclosed in the
Environmental Report, has no knowledge of any fact, condition, occurrence or
circumstance which with notice or passage of time or both would give rise to a
claim under or pursuant to any Environmental Statute pertaining to Hazardous
Materials on, in, under or originating from the Mortgaged Property or any part
thereof or any other real property owned or occupied by Mortgagor or arising
out of the conduct of Mortgagor, including, without limitation, pursuant to
any Environmental Statute.
(d) Mortgagor has not waived any Person's liability with regard to the
Hazardous Materials in, on, under or around the Mortgaged Property, nor has
Mortgagor retained or assumed, contractually or by operation of law, any other
Person's liability relative to Hazardous Materials or any claim, action or
proceeding relating thereto.
(e)In the event that there shall be filed a lien against the Mortgaged
Property or any part thereof pursuant to any Environmental Statute pertaining
to Hazardous Materials, Mortgagor shall, within sixty (60) days or, in the
event that the applicable Governmental Authority has commenced steps to cause
the Premises or any part thereof to be sold pursuant to the lien, within
fifteen (15) days, from the date that Mortgagor receives notice of such lien,
either (i) pay the claim and remove the lien from the Mortgaged Property, or
(ii) furnish (A) a bond satisfactory to Mortgagee in the amount of the claim
out of which the lien arises, (B) a cash deposit in the amount of the claim
out of which the lien arises, or (C) other security reasonably satisfactory to
Mortgagee in an amount sufficient to discharge the claim out of which the lien
arises.
(f) Mortgagor represents and warrants that (i) except as disclosed in the
Environmental Report, Mortgagor has no knowledge of any violation of any
Environmental Statute or any Environmental Problem in connection with the
Mortgaged Property, nor has Mortgagor been requested or required by any
Governmental Authority to perform any remedial activity or other responsive
action in connection with any Environmental Problem and (ii) neither the
Mortgaged Property nor any other property owned by Mortgagor is included or,
to Mortgagor's best knowledge, proposed for inclusion on the National
Priorities List issued pursuant to CERCLA by the United States Environmental
Protection Agency (the "EPA") or on the inventory of other potential "Problem"
sites issued by the EPA and has not otherwise been identified by the EPA as a
potential CERCLA site or included or, to Mortgagor's knowledge, proposed for
inclusion on any list or inventory issued pursuant to any other Environmental
Statute, if any, or issued by any other Governmental Authority. Mortgagor
covenants that Mortgagor will comply with all Environmental Statutes affecting
or imposed upon Mortgagor or the Mortgaged Property.
(g) Mortgagor covenants that it shall promptly notify Mortgagee of the
presence and/or release of such Hazardous Material and of any request for
information or any inspection of the Mortgaged Property or any part thereof by
any Governmental Authority with respect to any Hazardous Materials and provide
Mortgagee with copies of such request and any response to any such request or
inspection. Mortgagor covenants that it shall, in compliance with applicable
Legal Requirements, conduct and complete all investigations, studies, sampling
and testing (and promptly shall provide Mortgagee with copies of any such
studies and the results of any such test) and all remedial, removal and other
actions necessary to clean up and remove all Hazardous Materials in, on, over,
under, from or affecting the Mortgaged Property or any part thereof in
accordance with all such Legal Requirements applicable to the Mortgaged
Property or any part thereof to the satisfaction of Mortgagee.
(h) Following the occurrence of an Event of Default hereunder, and without
regard to whether Mortgagee shall have taken possession of the Mortgaged
Property or a receiver has been requested or appointed or any other right or
remedy of Mortgagee has or may be exercised hereunder or under any other Loan
Document, Mortgagee shall have the right (but no obligation) to conduct such
investigations, studies, sampling and/or testing of the Mortgaged Property or
any part thereof as Mortgagee may, in its discretion, and consistent with
reasonable safety standards, determine to conduct, relative to Hazardous
Materials. All costs and expenses incurred in connection therewith including,
without limitation, consultants' fees and disbursements and laboratory fees,
shall constitute a part of the Debt and shall, upon demand by Mortgagee, be
immediately due and payable and shall bear interest at the Default Rate from
the date so demanded by Mortgagee until reimbursed.
(i) Mortgagor represents and warrants that the paint and painted surfaces
existing within the interior or on the exterior of the Mortgaged Property are
not flaking, peeling, cracking, blistering, or chipping, and do not contain
unlawful amounts of lead or are maintained in a condition that prevents
exposure of young children to lead-based paint, as of the date hereof, and
that the current inspections, operation, and maintenance program at the
Mortgaged Property with respect to lead-based paint is consistent with FNMA
guidelines and sufficient to ensure that all painted surfaces within the
Mortgaged Property shall be maintained in a condition that prevents exposure
of residents to lead-based paint. To Mortgagor's knowledge, there have been
no claims for adverse health effects from exposure on the Mortgaged Property
to lead-based paint or requests for the investigation, assessment or removal
of lead-based paint at the Mortgaged Property.
(j) Mortgagor represents and warrants that except in accordance with all
applicable Environmental Statutes and as disclosed in the Environmental
Report, (i) no underground treatment or storage tanks or pumps or water, gas,
or oil wells are or have been located about the Mortgaged Property, (ii) no
PCBs or transformers, capacitors, ballasts or other equipment that contain
dielectric fluid containing PCBs are located about the Mortgaged Property,
(iii) no insulating material containing urea formaldehyde is located about the
Mortgaged Property and (iv) no asbestos-containing material is located about
the Mortgaged Property.
2. Environmental Indemnification. Mortgagor shall defend, indemnify and
hold harmless Mortgagee, and its successors and assigns, and its employees,
agents, officers and directors from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature, known or unknown, contingent or otherwise, whether
incurred or imposed within or outside the judicial process, including, without
limitation, reasonable attorneys' and consultants' fees and disbursements and
investigations and laboratory fees arising out of, or in any way related to
any Environmental Problem, including without limitation:
(a) the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threat of release of any Hazardous Materials in, on,
over, under, from or affecting the Mortgaged Property or any part thereof
whether or not disclosed by the Environmental Report relative to the Mortgaged
Property;
(b) any personal injury (including wrongful death, disease or other health
condition related to or caused by, in whole or in part, any Hazardous
Materials) or property damage (real or personal) arising out of or related to
any Hazardous Materials in, on, over, under, from or affecting the Mortgaged
Property or any part thereof whether or not disclosed by the Environmental
Report relative to the Mortgaged Property;
(c) any action, suit or proceeding brought or threatened, settlement
reached, or order of any Governmental Authority relating to such Hazardous
Material whether or not disclosed by the Environmental Report relative to the
Mortgaged Property; and/or
(d) any violation of the provisions, covenants, representations or
warranties of Section 16.01 hereof or of any Legal Requirement which is based
on or in any way related to any Hazardous Materials in, on, over, under, from
or affecting the Mortgaged Property or any part thereof including, without
limitation, the cost of any work performed and materials furnished in order to
comply therewith whether or not disclosed by the Environmental Report relative
to the Mortgaged Property.
Notwithstanding the foregoing provisions of this Section 16.02 to the
contrary, Mortgagor shall have no obligation to indemnify Mortgagee for
liabilities, claims, damages, penalties, causes of action, costs and expenses
relative to the foregoing which result directly from Mortgagee's willful
misconduct or gross negligence. Any amounts payable to Mortgagee by reason of
the application of this Section 16.02 shall be secured by this Mortgage and
shall, upon demand by Mortgagee, become immediately due and payable and shall
bear interest at the Default Rate from the date so demanded by Mortgagee until
paid.
This indemnification shall survive the termination of this Mortgage
whether by repayment of the Debt, foreclosure or deed in lieu thereof,
assignment, or otherwise. The indemnity provided for in this Section 16.02
shall not be included in any exculpation of Mortgagor from personal liability
provided for in this Mortgage or in any of the other Loan Documents. Nothing
in this Section 16.02 shall be deemed to deprive Mortgagee of any rights or
remedies otherwise available to Mortgagee, including, without limitation,
those rights and remedies provided elsewhere in this Mortgage or the other
Loan Documents.
XVIII: ASSIGNMENTS
1. Participations and Assignments. Mortgagee shall have the right to assign
this Mortgage and/or any of the Loan Documents, and to transfer, assign or
sell participations and subparticipations (including blind or undisclosed
participations and subparticipations) in the Loan Documents and the
obligations hereunder to any Person; provided, however, that no such
participation shall increase, decrease or otherwise affect either Mortgagor's
or Mortgagee's obligations under this Mortgage or the other Loan Documents.
XIX: MISCELLANEOUS
1. Right of Entry. Mortgagee and its agents shall have the right to enter
and inspect the Mortgaged Property or any part thereof at all reasonable
times, and subject to the rights of guests and tenants and, except in the
event of an emergency, upon reasonable notice and to inspect Mortgagor's books
and records and to make abstracts and reproductions thereof.
2. Cumulative Rights. The rights of Mortgagee under this Mortgage shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Mortgagee shall be construed as an
election to proceed under any one provision herein to the exclusion of any
other provision. Mortgagee shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled, subject to the terms of this
Mortgage, to every right and remedy now or hereafter afforded by law.
3. Liability. If Mortgagor consists of more than one Person, the
obligations and liabilities of each such Person hereunder shall be joint and
several.
4. Exhibits Incorporated. The information set forth on the cover hereof,
and the Exhibits annexed hereto, are hereby incorporated herein as a part of
this Mortgage with the same effect as if set forth in the body hereof.
5. Severable Provisions. If any term, covenant or condition of the Loan
Documents including, without limitation, the Note or this Mortgage, is held to
be invalid, illegal or unenforceable in any respect, such Loan Document shall
be construed without such provision.
6. Duplicate Originals. This Mortgage may be executed in any number of
duplicate originals and each such duplicate original shall be deemed to
constitute but one and the same instrument.
7. No Oral Change. The terms of this Mortgage, together with the terms of
the Note and the other Loan Documents constitute the entire understanding and
agreement of the parties hereto and supersede all prior agreements,
understandings and negotiations between Mortgagor and Mortgagee with respect
to the Loan. This Mortgage, and any provisions hereof, may not be modified,
amended, waived, extended, changed, discharged or terminated orally or by any
act on the part of Mortgagor or Mortgagee, but only by an agreement in writing
signed by the party against whom enforcement of any modification, amendment,
waiver, extension, change, discharge or termination is sought.
8. WAIVER OF COUNTERCLAIM, ETC. MORTGAGOR HEREBY WAIVES THE RIGHT TO ASSERT
A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR
PROCEEDING BROUGHT AGAINST IT BY MORTGAGEE OR ITS AGENTS, AND WAIVES TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE
OTHER OR IN ANY COUNTERCLAIM MORTGAGOR MAY BE PERMITTED TO ASSERT HEREUNDER OR
WHICH MAY BE ASSERTED BY MORTGAGEE OR ITS AGENTS, AGAINST MORTGAGOR, OR IN ANY
MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS MORTGAGE
OR THE DEBT.
9. Headings; Construction of Documents; etc. The table of contents,
headings and captions of various paragraphs of this Mortgage are for
convenience of reference only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions hereof. Mortgagor
acknowledges that it was represented by competent counsel in connection with
the negotiation and drafting of this Mortgage and the other Loan Documents and
that neither this Mortgage nor the other Loan Documents shall be subject to
the principle of construing the meaning against the Person who drafted same.
10. Sole Discretion of Mortgagee. Whenever Mortgagee exercises any right
given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Mortgagee, the decision of Mortgagee to approve or disapprove
or to decide that arrangements or terms are satisfactory or not satisfactory
shall be in the sole discretion of Mortgagee (except where otherwise herein
expressly provided) and shall be final and conclusive, except as may be
otherwise specifically provided herein.
Section 18.35. Waiver of Notice. Mortgagor shall not be entitled to
any notices of any nature whatsoever from Mortgagee except with respect to
matters for which this Mortgage specifically and expressly provides for the
giving of notice by Mortgagee to Mortgagor and except with respect to matters
for which Mortgagor is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice.
12. Covenants Run with the Land. All of the grants, covenants, terms,
provisions and conditions herein shall run with the Premises, shall be binding
upon Mortgagor and shall inure to the benefit of Mortgagee, subsequent holders
of this Mortgage and their successors and assigns. Without limitation to any
provision hereof, the term "Mortgagor" shall include and refer to the
mortgagor named herein, any subsequent owner of the Mortgaged Property, and
its respective heirs, executors, legal representatives, successors and
assigns. The representations, warranties and agreements contained in this
Mortgage and the other Loan Documents are intended solely for the benefit of
the parties hereto, shall confer no rights hereunder, whether legal or
equitable, in any other Person and no other Person shall be entitled to rely
thereon.
13. APPLICABLE LAW. THIS MORTGAGE WAS NEGOTIATED IN NEW YORK, AND MADE BY
MORTGAGOR AND ACCEPTED BY MORTGAGEE IN THE STATE OF NEW YORK, AND THE PROCEEDS
OF THE NOTE WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A
SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION
EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS MORTGAGE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE
PROVISIONS FOR THE CREATION, PERFECTION, PRIORITY, ENFORCEMENT AND FORECLOSURE
OF THE LIENS AND SECURITY INTERESTS CREATED HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE MORTGAGED PROPERTY IS
LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW
OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND
ENFORCEABILITY OF ALL LOAN DOCUMENTS, AND THE DEBT OR OBLIGATIONS ARISING
HEREUNDER.
14. Security Agreement. (a) (i) This Mortgage is both a real property
mortgage and a "security agreement" within the meaning of the UCC. The
Mortgaged Property includes both real and personal property and all other
rights and interests, whether tangible or intangible in nature, of Mortgagor
in the Mortgaged Property. This Mortgage is filed as a fixture filing and
covers goods which are or are to become fixtures on the Mortgaged Property.
Mortgagor by executing and delivering this Mortgage has granted to Mortgagee,
as security for the Debt, a security interest in the Mortgaged Property to
the full extent that the Mortgaged Property may be subject to the UCC of the
State in which the Mortgaged Property is located (said portion of the
Mortgaged Property so subject to the UCC being called in this Section 18.14
the "Collateral"). If an Event of Default shall occur, Mortgagee, in addition
to any other rights and remedies which it may have, shall have and may
exercise immediately and without demand, any and all rights and remedies
granted to a secured party upon default under the UCC, including, without
limiting the generality of the foregoing, the right to take possession of the
Collateral or any part thereof, and to take such other measures as Mortgagee
may deem necessary for the care, protection and preservation of the
Collateral. Upon request or demand of Mortgagee following an Event of
Default, Mortgagor shall, at its expense, assemble the Collateral and make it
available to Mortgagee at a convenient place acceptable to Mortgagee.
Mortgagor shall pay to Mortgagee on demand any and all expenses, including
reasonable legal expenses and attorneys' fees, incurred or paid by Mortgagee
in protecting its interest in the Collateral and in enforcing its rights
hereunder with respect to the Collateral. Any disposition pursuant to the UCC
of so much of the Collateral as may constitute personal property shall be
considered commercially reasonable if made pursuant to a public sale which is
advertised at least twice in a newspaper in which sheriff's sales are
advertised in the county where the Premises is located. Any notice of sale,
disposition or other intended action by Mortgagee with respect to the
Collateral given to Mortgagor in accordance with the provisions hereof at
least ten (10) days prior to such action, shall constitute reasonable notice
to Mortgagor. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Mortgagee to the payment of the Debt in such
priority and proportions as Mortgagee in its discretion shall deem proper.
(i) The mention in a financing statement filed in the records normally
pertaining to personal property of any portion of the Mortgaged Property shall
not derogate from or impair in any manner the intention of this Mortgage.
Mortgagee hereby declares that all items of Collateral are part of the real
property encumbered hereby to the fullest extent permitted by law, regardless
of whether any such item is physically attached to the Improvements or whether
serial numbers are used for the better identification of certain items.
Specifically, the mention in any such financing statement of any items
included in the Mortgaged Property shall not be construed to alter, impair or
impugn any rights of Mortgagee as determined by this Mortgage or the priority
of Mortgagee's lien upon and security interest in the Mortgaged Property in
the event that notice of Mortgagee's priority of interest as to any portion of
the Mortgaged Property is required to be filed in accordance with the UCC to
be effective against or take priority over the interest of any particular
class of persons, including the federal government or any subdivision or
instrumentality thereof.
(b) Mortgagor hereby irrevocably appoints Mortgagee as its attorney-in-fact,
coupled with an interest, to file with the appropriate public office on its
behalf any financing or other statements signed only by Mortgagee, as secured
party, in connection with the Collateral covered by this Mortgage.
15. Actions and Proceedings. Mortgagee has the right to appear in and
defend any action or proceeding brought with respect to the Mortgaged Property
in its own name or, if required by Legal Requirements or, if in Mortgagee's
reasonable judgment, it is necessary, in the name and on behalf of Mortgagor,
which Mortgagee believes will adversely affect the Mortgaged Property or this
Mortgage and to bring any action or proceedings, in its name or in the name
and on behalf of Mortgagor, which Mortgagee, in its discretion, decides should
be brought to protect its interest in the Mortgaged Property.
16. Usury Laws. This Mortgage and the Note are subject to the express
condition, and it is the expressed intent of the parties, that at no time
shall Mortgagor be obligated or required to pay interest on the principal
balance due under the Note at a rate which could subject the holder of the
Note to either civil or criminal liability as a result of being in excess of
the maximum interest rate which Mortgagor is permitted by law to contract or
agree to pay. If by the terms of this Mortgage or the Note, Mortgagor is at
any time required or obligated to pay interest on the principal balance due
under the Note at a rate in excess of such maximum rate, such rate of interest
shall be deemed to be immediately reduced to such maximum rate and the
interest payable shall be computed at such maximum rate and all prior interest
payments in excess of such maximum rate shall be applied and shall be deemed
to have been payments in reduction of the principal balance of the Note.
17. Remedies of Mortgagor. In the event that a claim or adjudication is
made that Mortgagee has acted unreasonably or unreasonably delayed acting in
any case where by law or under the Note, this Mortgage or the Loan Documents,
it has an obligation to act reasonably or promptly, Mortgagee shall not be
liable for any monetary damages, and Mortgagor's remedies shall be limited to
injunctive relief or declaratory judgment.
18. Offsets, Counterclaims and Defenses. Any assignee of this Mortgage, the
Assignment and the Note shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to the Note, the Assignment or
this Mortgage which Mortgagor may otherwise have against any assignor of this
Mortgage, the Assignment and the Note and no such unrelated counterclaim or
defense shall be interposed or asserted by Mortgagor in any action or
proceeding brought by any such assignee upon this Mortgage, the Assignment or
the Note and any such right to interpose or assert any such unrelated offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by Mortgagor.
19. No Merger. If Mortgagor's and Mortgagee's estates become the same
including, without limitation, upon the delivery of a deed by Mortgagor in
lieu of a foreclosure sale, or upon a purchase of the Mortgaged Property by
Mortgagee in a foreclosure sale, this Mortgage and the lien created hereby
shall not be destroyed or terminated by the application of the doctrine of
merger and in such event Mortgagee shall continue to have and enjoy all of the
rights and privileges of Mortgagee as to the separate estates; and, as a
consequence thereof, upon the foreclosure of the lien created by this
Mortgage, any Leases or subleases then existing and created by Mortgagor shall
not be destroyed or terminated by application of the law of merger or as a
result of such foreclosure unless Mortgagee or any purchaser at any such
foreclosure sale shall so elect. No act by or on behalf of Mortgagee or any
such purchaser shall constitute a termination of any Lease or sublease unless
Mortgagee or such purchaser shall give written notice thereof to such lessee
or sublessee.
20. Restoration of Rights. In case Mortgagee shall have proceeded to
enforce any right under this Mortgage by foreclosure sale, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason
or shall have been determined adversely, then, in every such case, Mortgagor
and Mortgagee shall be restored to their former positions and rights hereunder
with respect to the Mortgaged Property subject to the lien hereof.
21. Waiver of Statute of Limitations. The pleadings of any statute of
limitations as a defense to any and all obligations secured by this Mortgage
are hereby waived to the full extent permitted by Legal Requirements.
22. Advances. This Mortgage shall cover any and all advances made pursuant
to the Loan Documents, rearrangements and renewals of the Debt and all
extensions in the time of payment thereof, even though such advances,
extensions or renewals be evidenced by new promissory notes or other
instruments hereafter executed and irrespective of whether filed or recorded.
Likewise, the execution of this Mortgage shall not impair or affect any other
security which may be given to secure the payment of the Debt, and all such
additional security shall be considered as cumulative. The taking of
additional security, execution of partial releases of the security, or any
extension of time of payment of the Debt shall not diminish the force, effect
or lien of this Mortgage and shall not affect or impair the liability of
Mortgagor and shall not affect or impair the liability of any maker, surety,
or endorser for the payment of the Debt.
23. Application of Default Rate Not a Waiver. Application of the Default
Rate shall not be deemed to constitute a waiver of any Default or Event of
Default or any rights or remedies of Mortgagee under this Mortgage, any other
Loan Document or applicable Legal Requirements, or a consent to any extension
of time for the payment or performance of any obligation with respect to which
the Default Rate may be invoked.
24. Intervening Lien. To the fullest extent permitted by law, any agreement
hereafter made pursuant to this Mortgage shall be superior to the rights of
the holder of any intervening lien.
25. No Joint Venture or Partnership. Mortgagor and Mortgagee intend that
the relationship created hereunder be solely that of mortgagor and mortgagee
or borrower and lender, as the case may be. Nothing herein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Mortgagor and Mortgagee nor to grant Mortgagee any
interest in the Mortgaged Property other than that of mortgagee or lender.
26. Time of the Essence. Time shall be of the essence in the performance of
all obligations of Mortgagor hereunder.
27. Mortgagor's Obligations Absolute. Mortgagor acknowledges that Mortgagee
and/or certain Affiliates of Mortgagee are engaged in the business of
financing, owning, operating, leasing, managing, and brokering real estate and
in other business ventures which may be viewed as adverse to or competitive
with the business, prospect, profits, operations or condition (financial or
otherwise) of Mortgagor. Except as set forth to the contrary in the Loan
Documents, all sums payable by Mortgagor hereunder shall be paid without
notice or demand, counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Mortgagor hereunder, subject to Section 18.32 hereof, shall
in no way be released, discharged, or otherwise affected (except as expressly
provided herein) by reason of: (a) any damage to or destruction of or any
Taking of the Mortgaged Property or any portion thereof or any other Cross-
collateralized Property; (b) any restriction or prevention of or interference
with any use of the Mortgaged Property or any portion thereof or any other
Cross-collateralized Property; (c) any title defect or encumbrance or any
eviction from the Premises or any portion thereof by title paramount or
otherwise; (d) any bankruptcy proceeding relating to Mortgagor, any General
Partner, or any guarantor or indemnitor, or any action taken with respect to
this Mortgage or any other Loan Document by any trustee or receiver of
Mortgagor or any such General Partner, guarantor or indemnitor, or by any
court, in any such proceeding; (e) any claim which Mortgagor has or might have
against Mortgagee; (f) any default or failure on the part of Mortgagee to
perform or comply with any of the terms hereof or of any other agreement with
Mortgagor; or (g) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, whether or not Mortgagor shall have notice or
knowledge of any of the foregoing.
28. Publicity. All promotional news releases, publicity or advertising by
Manager, Mortgagor or their respective Affiliates through any media intended
to reach the general public shall not refer to the Loan Documents or the
financing evidenced by the Loan Documents, or to Mortgagee or to CS First
Boston Corporation ("CSFB") without the prior written approval of Mortgagee or
CSFB, as applicable, in each instance, such approval not to be unreasonably
withheld or delayed. Mortgagee shall be authorized to provide information
relating to the Mortgaged Property, the Loan and matters relating thereto to
rating agencies, underwriters, potential securities investors, auditors,
regulatory authorities and to any Persons which may be entitled to such
information by operation of law.
29. Securitization Opinions. In the event the Loan is included as an asset
of a securitization by Mortgagee or any of its Affiliates, Mortgagor shall,
within ten (10) Business Days after Mortgagee's written request therefor, at
Mortgagor's sole cost and expense, deliver opinions in form and substance and
delivered by counsel reasonably acceptable to Mortgagee and the Rating Agency,
as may be reasonably required by Mortgagee and/or the Rating Agency in
connection with such securitization. Mortgagor's failure to deliver the
opinions required hereby within such ten (10) Business Day period shall
constitute an "Event of Default" hereunder.
30. Cooperation with Rating Agencies. Mortgagor covenants and agrees that
in the event the Loan is included as an asset of a securitization, Mortgagor
shall (a) gather any environmental information reasonably required by the
Rating Agency in connection with such a securitization, (b) at Mortgagee's
request, meet with representatives of the Rating Agency to discuss the
business and operations of the Mortgaged Property, and (c) cooperate with the
reasonable requests of the Rating Agency and Mortgagee in connection with all
of the foregoing and the preparation of any offering documents with respect
thereof.
31. Securitization Financials. Mortgagor covenants and agrees that, upon
Mortgagee's written request therefor in connection with a securitization in
which the Loan is to be included as an asset, Mortgagor shall, at Mortgagor's
sole cost and expense, promptly deliver audited financial statements and
related documentation prepared by an Independent certified public accountant
that satisfy securities laws and requirements for use in a public registration
statement (which may include up to three (3) years of historical audited
financial statements).
32. Exculpation. Notwithstanding anything herein or in any other Loan
Document to the contrary, Mortgagee shall not enforce the liability and
obligation of Mortgagor or (a) if Mortgagor is a partnership, its constituent
partners or any of their respective partners, (b) if Mortgagor is a trust, its
beneficiaries or any of their respective Partners (as hereinafter defined),
(c) if Mortgagor is a corporation, any of its shareholders, directors,
principals, officers or employees, or (d) if Mortgagor is a limited liability
company, any of its members (the Persons described in the foregoing clauses
(a)-(d), as the case may be, are hereinafter referred to as the "Partners") to
perform and observe the obligations contained in this Mortgage or any of the
other Loan Documents by any action or proceeding wherein a money judgment
shall be sought against Mortgagor or the Partners, except that Mortgagee may
bring a foreclosure action, action for specific performance, or other
appropriate action or proceeding (including, without limitation, an action to
obtain a deficiency judgment) solely for the purpose of enabling Mortgagee to
realize upon (i) Mortgagor's interest in the Mortgaged Property, (ii) the Rent
to the extent (x) received by Mortgagor (or actually received by its Partners)
after the occurrence of an Event of Default, or (y) distributed to Mortgagor
(or its Partners, but only to the extent received by its Partners) during or
with respect to any period for which Mortgagee did not receive a Manager
Certification accurate in all material respects confirming and certifying that
all Operating Expenses with respect to the Mortgaged Property which had
accrued as of the applicable date of such Manager Certification had been paid
(or if same had not been paid, that Manager had taken adequate reserves
therefor) (all Rent covered by clauses (x) and (y) being hereinafter referred
to as the "Recourse Distributions") and (iii) any other collateral given to
Mortgagee under the Loan Documents (collectively, the "Default Collateral");
provided, however, that any judgment in any such action or proceeding shall be
enforceable against Mortgagor and the Partners only to the extent of any such
Default Collateral. The provisions of this Section shall not, however, (a)
impair the validity of the Debt evidenced by the Note or in any way affect or
impair the lien of this Mortgage or any of the other Loan Documents or the
right of Mortgagee to foreclose this Mortgage following the occurrence of an
Event of Default; (b) impair the right of Mortgagee to name Mortgagor as a
party defendant in any action or suit for judicial foreclosure and sale under
this Mortgage; (c) affect the validity or enforceability of the Note, this
Mortgage, or any of the other Loan Documents, or impair the right of Mortgagee
to seek a personal judgment against the Indemnitor; (d) impair the right of
Mortgagee to obtain the appointment of a receiver; (e) impair the enforcement
of the Assignment; (f) impair the right of Mortgagee to obtain Loss Proceeds
due to Mortgagee pursuant to this Mortgage; (g) impair the right of Mortgagee
to enforce the provisions of Sections 5.12, 12.01 or 16.01, inclusive of this
Mortgage, even after repayment in full by Mortgagor of the Debt; (h) prevent
or in any way hinder Mortgagee from exercising, or constitute a defense, or
counterclaim, or other basis for relief in respect of the exercise of, any
other remedy against any or all of the collateral securing the Note as
provided in the Loan Documents; or (i) impair the right of Mortgagee to sue
for, seek or demand a deficiency judgment against Mortgagor solely for the
purpose of foreclosing the Mortgaged Property or any part thereof, or
realizing upon the Default Collateral; provided, however, that any such
deficiency judgment referred to in this clause (i) shall be enforceable
against Mortgagor and the Partners (but only to the extent distributed to and
actually received by such Partner) only to the extent of any of the Default
Collateral. The provisions of this Section 18.32 shall be inapplicable to
Mortgagor if any proceeding, action, petition or filing under the Federal
Bankruptcy Reform Act of 1978, as amended, or any similar state or federal law
now or hereafter in effect relating to bankruptcy, reorganization or
insolvency, or the arrangement or adjustment of debts, shall be filed by,
consented to or acquiesced in by or with respect to Mortgagor, or if Mortgagor
shall institute any proceeding for its dissolution or liquidation, or shall
make an assignment for the benefit of creditors, in which event Mortgagee
shall have recourse against all of the assets of Mortgagor including, without
limitation, any right, title and interest of Mortgagor in and to the Mortgaged
Property, any partnership interests in Mortgagor and any Recourse
Distributions received by the Partners of Mortgagor (but excluding the other
assets of such Partners to the extent Mortgagee would not have had recourse
thereto other than in accordance with the provisions of this Section 18.32).
33. Intentionally Deleted.
34. Certain Matters Relating to Mortgaged Property in the State of Illinois.
With respect to the Mortgaged Property which is located in the State of
Illinois, notwithstanding anything contained herein to the contrary:
(a) COMPLIANCE WITH ILLINOIS MORTGAGE FORECLOSURE LAW
(i) If any provision in this Mortgage is determined to be
inconsistent with any provision of the Illinois Mortgage Foreclosure Law
(Chapter 110, Paragraphs 15-1101 et seq., Illinois Revised Statutes) (the
"IMFL"), the provisions of the IMFL shall take precedence over the provisions
of this Mortgage, but shall not invalidate or render unenforceable any other
provisions of this Mortgage that can be construed in a manner consistent with
the IMFL.
(ii) If any provision of this Mortgage shall grant to Mortgagee any
rights or remedies upon an Event of Default which are more limited than the
rights that would otherwise be vested in Mortgagee under the IMFL in the
absence of such provision, Mortgagee shall be vested with the rights granted
in the IMFL to the full extent permitted by law.
(iii) Without limiting the generality of the foregoing, all expenses
incurred by Mortgagee to the extent reimbursable under Paragraphs 15-1510 and
15-1512 of the IMFL, whether incurred before or after any decree or judgment
of foreclosure, and whether enumerated in this Mortgage, shall be added to the
indebtedness secured by this Mortgage or by the judgment of foreclosure.
(iv) Without limiting the generality of the foregoing, this Mortgage
also secures all future advances made pursuant to the terms of this Mortgage
or the other Loan Documents made after this Mortgage is recorded, including
but not limited to all monies so advanced by Mortgagee in accordance with the
terms of this Mortgage to (i) preserve or restore the Mortgaged Property, (ii)
preserve the lien of this Mortgage or the priority thereof or (iii) enforce
this Mortgage, and, to the full extent permitted by Subsection (b)(5) of
Section 15-1302 of the IMFL or other law, shall be a lien from the time this
Mortgage is recorded.
(b) WAIVER OF STATUTORY RIGHTS
Mortgagor acknowledges that the transaction of which this Mortgage is a
part is a transaction which does not include either agricultural real estate
(as defined in Paragraph 15-1201 of the IMFL, or residential real estate (as
defined in Paragraph 15-1219 of the IMFL), and to the full extent permitted by
law, voluntarily and knowingly waives Mortgagor's rights to reinstatement and
redemption as allowed under Paragraph 15-1601(b) of the IMFL, and to the full
extent permitted by law, the benefits of all present and future valuation,
appraisement, homestead, exemption, stay, redemption and moratorium laws under
any state or federal law.
(c) THIS INSTRUMENT IS EFFECTIVE AND SHALL BE EFFECTIVE AS A FINANCING
STATEMENT FILED AS A FIXTURE FILING WITH RESPECT TO ALL GOODS WHICH ARE OR ARE
TO BECOME FIXTURES INCLUDED WITHIN THE MORTGAGED PROPERTY AND IS TO BE FILED
FOR RECORD OR REGISTERED IN THE REAL ESTATE RECORDS OF COOK COUNTY, ILLINOIS.
THE ADDRESS OF MORTGAGEE [SECURED PARTY] AND THE MAILING ADDRESS OF MORTGAGOR
[DEBTOR] ARE SET FORTH WITHIN. A PHOTOGRAPHIC OR OTHER REPRODUCTION OF THIS
INSTRUMENT OF ANY FINANCING STATEMENT RELATING TO THIS INSTRUMENT SHALL BE
SUFFICIENT AS A FINANCING STATEMENT.
(d) Mortgagor and Mortgagee intend that this Mortgage shall secure not
only sums advanced as of the date hereof but also all advances provided for in
the Loan Documents; provided, however, that the maximum amount secured by this
Mortgage shall in no event exceed One Hundred Million Dollars ($100,000,000).
35. Certain Matters Relating to Mortgaged Property Located in the State
of Michigan
With respect to the Mortgaged Property which is located in the State of
Michigan, notwithstanding anything contained herein to the contrary:
(a) Mortgagee shall have all the rights, benefits and privileges set
forth in this Mortgage subject to the provisions of MCLA 554.231.
(b) The failure of Mortgagor to pay taxes in accordance with the
terms hereof shall constitute waste.
(c) In the event of a default under this Mortgage, power is granted
to Mortgagee to sell the Mortgaged Property or any part thereof at public
auction and to convey same to the purchaser after notice as required by the
statutes of the State of Michigan for foreclosure of mortgages by
advertisement being Sections 600.3201, et seq., Michigan Compiled Laws, as
amended.
This Mortgage contains a power of sale which permits the Mortgagee to
cause the Mortgaged Property to be sold by advertisement rather than pursuant
to court action; and Mortgagor hereby voluntarily and knowingly waives any
right Mortgagee may have by virtue of any applicable constitutional provision
or statute to any notice or court hearing prior to the exercise of the power
of sale, except as may be expressly required by the Michigan statute governing
foreclosures by advertisement. By execution of the Mortgage, Mortgagor
represents and acknowledges that the meaning and the consequences of the
foregoing have been discussed as fully as desired by Mortgagor with
Mortgagor's legal counsel.
As additional security for the Debt and performance of the covenants and
agreements herein and in any other agreement contained, pursuant to Michigan
Compiled Laws 554.231 et seq., as amended, Mortgagor hereby assigns and
conveys to Mortgagee and grants Mortgagee security interests in any and all
leases, written or unwritten, of the Mortgaged Property or any part thereof,
heretofore, now or hereafter entered into and demising any part of the
Mortgaged Property, and all rents, issues, income and profits derived from the
use of the Mortgaged Property or any portion thereof, whether due or to become
due.
Mortgagor's failure, refusal or neglect to pay any taxes levied against
the Mortgaged Property or any insurance premiums due upon policies of
insurance covering the Mortgaged Property, shall constitute waste under
Michigan Compiled Laws 600.2927, and Mortgagee shall have a right to
appointment of a receiver of the Mortgaged Property and of the earnings,
income and profits thereof, with such powers as the Court making such
appointment confers, and Mortgagor hereby irrevocably consents to such
appointment in such event, and agrees to pay Mortgagee's costs and expenses
incurred in such proceeding, including reasonably attorneys fees. Payment by
Mortgagee for and on behalf of Mortgagor of any delinquent taxes, assessments,
or insurance premiums payable by Mortgagor under the terms of this Mortgage
shall not cure the default herein described, nor shall it in any manner impair
Mortgagee's right to the appointment of a receiver as set forth herein.
36. Certain Matters Relating to Mortgaged Property Located in the State of
Florida. With respect to the Mortgaged Property which is located in the State
of Florida, notwithstanding anything contained herein to the contrary:
(a) It is agreed that any additional sum or sums advanced by the then
holder of the Note to or for the benefit of Mortgagor or Mortgagor's permitted
assignees, whether such advances are obligatory or are made at the option of
Mortgagee, or otherwise, at any time within twenty (20) years from the date of
this Mortgage, with interest thereon at the rate agreed upon at the time of
each additional loan or advance, shall be equally secured with and have the
same priority as the Debt and be subject to all of the terms and provisions of
this Mortgage, whether or not such additional loan or advance is evidenced by
a promissory note of Mortgagor and whether or not identified by a recital that
it is secured by this Mortgage; provided that the aggregate amount of
outstanding Debt so secured at any one time shall not exceed the sum of ONE
HUNDRED MILLION and No/100 Dollars ($100,000,000.00), plus interest and
disbursements made for the payment of taxes, levies or insurance on the
Mortgaged Property with interest on such disbursements. It is understood and
agreed that this future advance provision shall not be construed to obligate
Mortgagee to make any such additional loans or advances. It is further agreed
that any additional note or notes executed and delivered under this future
advance provision shall be included in the words "Note" or "Debt" wherever
either appears in the context of this Mortgage. Mortgagor, for itself and its
successors in title and its successors and permitted assigns, hereby expressly
waives and relinquishes any rights granted under Section 697.04 of the Florida
Statutes, or otherwise, to limit the amount of indebtedness that may be
secured by this Mortgage at any time during the term of this Mortgage.
Mortgagor further covenants not to file for record any notice limiting the
maximum principal amount that may be secured by this Mortgage and agrees that
any such notice, if filed, shall be null and void; and except as hereinafter
provided, of no effect. In the event that, notwithstanding the foregoing
covenant, Mortgagor or its successor in title files for record any notice
limiting the maximum principal amount that may be secured by this Mortgage in
violation of the foregoing covenant, the Debt shall, at the option of
Mortgagee, become immediately due and payable.
(b) The maximum principal sum secured by this Mortgage is one hundred
fifty percent (150%) of the Initial Allocated Loan Amount of the Mortgaged
Property.
37. Certain Matters Relating to Mortgaged Property Located in the State
of Ohio.
With respect to the Mortgaged Property which is located in the State of
Ohio, notwithstanding anything contained herein to the contrary:
(a) Paragraph (d) of the granting clause shall be amended by deleting
the words "and are part of the real estate" which is found immediately after
the definition of "Fixtures" and inserting the words "and are goods that are
or are to become fixtures" in their place.
(b) The following shall be inserted at the end of Section 18.23
hereof:
This Mortgage is an Open-End Mortgage, and Mortgagor and Mortgagee
intend that this Mortgage shall secure not only the sums advanced as of the
date hereof, but also the unadvanced balance of the Note, which sums Mortgagee
is obligated to advance, and in addition shall secure any and all advances
provided for in the Loan Documents; provided, however, that the maximum amount
of the principal portion of the Debt that may be outstanding at any time is
One Hundred Million and No/100 Dollars ($100,000,000.00).
(c) The following shall be inserted after the word "Debt" on the
seventh line of the "NOW THEREFORE" paragraph found on page one hereof:
as well as to secure the unpaid balance of advances made by Mortgagee for
the payment of taxes, assessments, insurance premiums, and costs incurred for
the protection of the Mortgaged Property.
38. Certain Matters Relating to Mortgaged Property Located in the State
of Kentucky.
With respect to the Mortgaged Property which is located in the
Commonwealth of Kentucky, notwithstanding anything contained herein to the
contrary:
(a) The first paragraph of page 1 shall be amended to include "New
York County" in the address of the Mortgagee. KRS 382.430.
(b) "which Note has a maturity date of November 1, 1998" shall be
inserted at the end of the second paragraph on page 1.
(c) Following is the signature of the person who prepared the
instrument, David J. Weinberger, and such is deemed to be included as part of
the preparer's reference on the cover page hereof. KRS 382.335.
________________________
(d) The following additional subparagraph shall be inserted in
Section 18.14:
(c) FOR PURPOSES OF THE UNIFORM COMMERCIAL CODE THE FOLLOWING
INFORMATION IS FURNISHED:
1. The name and address of the record owner of the real estate
described in this instrument is:
MOA-TL Corp.
701 Lee Street, Suite 1000
Des Plaines, Illinois 60016
2. the name and address of the Debtor (Mortgagor) is:
MOA-TL Corp.
701 Lee Street, Suite 1000
Des Plaines, Illinois 60016
3. the name and address of the Secured Party (Mortgagee) is:
CS First Boston Mortgage Capital Corp.
55 East 52nd Street
New York, New York 10055
4. Information concerning the security interest evidenced by this
instrument may be obtained from the Secured Party at its address above.
5. This document covers goods which are or are to become fixtures.
39. Certain Matters Relating to Mortgaged Property Located in the State
of Alabama.
With respect to the Mortgaged Property which is located in the State of
Alabama, notwithstanding anything contained herein to the contrary:
(a) The following shall be inserted at the end of Section 2.05:
(u) The money, property or services that are the subject of the
transactions provided for in the Loan Documents are not primarily for
personal, family or household purposes as contemplated by Section 5-19-1(2) of
the Code of Alabama 1975, as amended.
(b) The following shall be substituted for the first sentence of
Section 13.021:
Any time after an Event of Default, this Mortgage shall be subject
to foreclosure and may be foreclosed as now provided by law in case of past-
due mortgages, and Mortgagee shall be authorized, at its option, whether or
not possession of the Mortgaged Property is taken, to sell the Mortgaged
Property (or such part of parts thereof as Mortgagee may from time to time
elect to sell) under the power of sale which is hereby given to Mortgagee, at
public outcry, to the highest bidder for cash, at the front or main door of
the courthouse of the county in which the Premises to be sold, or a
substantial or material part thereof, is located, after first giving notice by
publication one a week for three successive weeks of the time, place and terms
of such sale, together with a description of the Mortgaged Property to be
sold, by publication in some newspaper published in the county or counties in
which the Premises to be sold is located. If there is Premises to be sold in
more than one county, publication shall be made in all counties where the
Premises to be sold is located, but if no newspaper is published in any such
county, the notice shall be published in a newspaper published in an adjoining
county for three successive weeks. The sale shall be held between the hours
of 11:00 a.m. and 4:00 p.m. on the day designated for the exercise of the
power of sale hereunder. Mortgagee may bid at any sale held under this
Mortgage and may purchase the Mortgaged Property, or any part thereof, if the
highest bidder therefor. The purchase at any such sale shall be under no
obligation to see to the proper application of the purchase money. At any
sale all or any part of the Mortgaged Property, real, personal, or mixed, may
be offered for sale in parcels or en masse for one total price, and the
proceeds of any such sale en masse shall be accounted for in one amount
without distinction between the items included therein and without assigning
to them any proportion of such proceeds, Mortgagor hereby waiving the
application of any doctrine of marshalling or like proceeding. In case
Mortgagee, in the exercise of the power of sale herein given, elects to sell
the Mortgaged Property in parts or parcels, sales thereof may be held from
time to time, and the power of sale granted herein shall not be fully
exercised until all of the Mortgaged Property not previously sold shall have
been sold or all the Debt shall have been paid in full and this Mortgage shall
have been terminated as provided herein. In case of any sale of the Mortgaged
Property as authorized by this paragraph, all pre-requisites to the sale shall
be presumed to have been performed, and in any conveyance given hereunder all
statements of facts, or other recitals therein made, as to the nonpayment of
any of the Debt or as to the advertisement of sale, or the time, place and
manner of sale, or as to any other fact or thing, shall be taken in all courts
of law or equity as rebuttably presumptive evidence that the facts so stated
or recited are true.
(c) The following shall be substituted for the second sentence of
Section 18.14(a)(i):
This Mortgage shall be effective as a financing statement filed as a
fixture filing for purposes of Article 9 of the Uniform Commercial Code. The
fixture filing covers all goods that are or are to become affixed to the
Realty. The goods are described by item or type in the granting clauses on
pages 2-6 hereof. Mortgagor is the debtor, and Mortgagee is the second party.
The names of this debtor (Mortgagor) and the secured party (Mortgagee) are
given in the first paragraph of this Mortgage. This Mortgage is signed by the
debtor (Mortgagor) as a fixture filing. The mailing address of Mortgagee set
out in the first paragraph of this Mortgage is an address of the secured party
from which information concerning the security interest may be obtained. The
mailing address of the Mortgagor set out on the signature page of this
Mortgage is a mailing address for the debtor. A statement indicating the
types, or describing the items, of collateral is set forth in this Section
18.14 and in the granting clauses on pages 2-6 of this Mortgage. The real
estate to which the goods are or are to be affixed is described in Exhibit A.
The Mortgagor is a record owner of the real estate.
(d) This Mortgage is given to secure the Debt; provided, however,
that notwithstanding anything to the contrary contained herein: (i) the
maximum amount of the principal obligations secured by this Mortgage (the
"Principal Obligations") shall not exceed $_______________ (the "Maximum
Principal Amount"); (ii) the Maximum Principal Amount of the Principal
Obligations secured by this Mortgage shall be deemed to be the first Principal
Obligations to be advanced and the last Principal Obligations to be repaid;
(iii) the security afforded by this Mortgage for the Debt shall not be reduced
by any payments or other sums applied to the reduction of the Debt so long as
the total amount of the outstanding Principal Obligations exceeds the Maximum
Principal Amount and thereafter shall be reduced only to the extent that any
such payments and other sums are actually applied by the Mortgagee, in
accordance with the Loan Documents, to reduce the outstanding Principal
Obligations to an amount less than the Maximum Principal Amount; and (iv) the
limitation contained in this Section 18.33 on the Maximum Principal Amount
shall only pertain to Principal Obligations and shall not be construed as
limiting the amount of interest, fees, expenses, indemnified amounts and other
Debt secured hereby that are not Principal Obligations, it being the intention
of the parties to this Mortgage that this Mortgage shall secure any Principal
Obligations remaining unpaid at the time of foreclosure up to the Maximum
Principal Amount, plus interest thereon, all costs of collateral and all other
amounts (except Principal Obligations in excess of the Maximum Principal
Amount) included in the Debt.
40. Certain Matters Relating to Mortgaged Property Located in the State
of South Carolina.
With respect to the Mortgaged Property Located in the State of South
Carolina, notwithstanding anything contained herein to the contrary:
(a) COMPLIANCE WITH SOUTH CAROLINA MORTGAGE FORECLOSURE LAW:
(i) If any provision of this Mortgage is determined to be
inconsistent with any provisions of the South Carolina Code of Laws (1976)
(the "Code") as deal with Mortgage Foreclosures or the South Carolina Rules of
Civil Procedure (the "SCRCP"), the Code and SCRCP shall take precedence over
the provisions of this Mortgage, but shall not invalidate or render
unenforceable any other provisions of this Mortgage that can be construed in a
manner consistent with the Code or SCRCP.
(ii) Section 3.01(a)(i) shall be amended to add the following
sentence at the end of said paragraph: "Provided, however, that in no instance
shall Mortgagee require Mortgagor to purchase casualty insurance on the
Mortgaged Property in excess of the replacement cost of the Improvements."
(iii) Section 13.13(a) shall be amended to add the following
sentence at the end of said paragraph: "Provided, however, that any such
termination or recision shall be in accordance with and subject to the
provisions of South Carolina Code of Laws (1976) as deal with Mortgage
Foreclosures and the South Carolina Rules of Civil Procedure.
(iv) The following shall be inserted at the end of Section
18.22: "This Mortgage secures future advances which may be made by Mortgagee,
provided that the total amount of indebtedness secured hereunder may not
exceed the sum of One Hundred Million and no/100ths Dollars ($1,000,000.00),
plus interest thereon, attorney's fees and court costs, together with such
other advances as may be authorized by law.
(b) The following shall be inserted after the word "Mortgagor" at the
beginning of the first sentence of Section 7.01(a): ", subject to
Impositions".
IN WITNESS WHEREOF, Mortgagor has duly executed this Mortgage the day and
year first above written.
Mortgagor's Address MOA-TL CORP., Mortgagor
701 Lee Street By : ____________________
Suite 1000 Name: John Simon
Des Plaines, IL 60016 Title: Treasurer
EXHIBIT A
Legal Description
EXHIBIT B
Initial Sub-Account Deposits
Initial Basic Carrying Costs Deposit: $___________
Initial Central Account Deposit: $___________
Initial Engineering Deposit: $___________
Initial Recurring Installments: $___________
EXHIBIT C ** TO BE MODIFIED BY CSFB **
Property:____________________________
Location:____________________________
Cash Flow Statement for Month of:____________ Year:
Current Year to
Month Date
REVENUE
Net Rental Revenue
Other Revenue __________ _________
Effective Gross Income
OPERATING EXPENSES
Common Area Maintenance
Payroll
Administration
Leasing
Service
Clean & Decorate
Utilities
Repairs & Maintenance
Taxes
Insurance
Management Fees
Other __________ _________
Total Operating Expenses __________ _________
Net Operating Income
RECURRING EXPENSES
To Include Expenses for: Carpet
Replacement, Appliance Replacement,
HVAC/Water Heater Replacement;
Miniblinds/Drapes/Ceiling Fans: __________ _________
NON-RECURRING EXPENSES
To Include Capital Expenses for:
Playground, Major Signage,
Lawns/Trees/Shrubs, Paving/Parking, Roof
Replacement, Carpentry/Siding/Balconies,
Exterior Paint, Major Concrete/Sidewalks,
Foundations, Major Exterior, Boiler
Replacement, Major HVAC Replacement,
Plumbing Replace, Electrical Replace,
Other Major, Fire & Storm, Ins. Loss
Recovery: __________ _________
Net Cash
Certified By:_____________________________
Name:_____________________________
Title:_____________________________
Management Company:_____________________________
EXHIBIT D
Required Engineering Work
EXHIBIT E
Re: [Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing]
dated as of ________, 199_ by ____________
as Mortgagor, to ________________________
as Mortgagee (the "Mortgage")
Gentlemen:
This certificate is delivered in accordance with Article V of the
Mortgage. All capitalized terms not defined herein shall have the meanings
described to them in the Mortgage.
To date, the funds deposited into the Central Account are not sufficient
to fund or pay, to the extent required to be funded or paid, the Debt Service
Payment Sub-Account, the Basic Carrying Costs Sub-Account, the Operation and
Maintenance Expense Sub-Account, the Recurring Replacement Reserve Sub-
Account, and the Curtailment Reserve Sub-Account. The amount of the
deficiency is ___________ Dollars ($______), and such amount must be deposited
into the Central Account prior to the next Payment Date or an Event of Default
will exist under the Mortgage.
_________________________, Mortgagee
By:_______________________________
Name:
Title:
EXHIBIT F
Cross-collateralized Properties
EXHIBIT G
[BORROWER'S LETTERHEAD]
__________ __. 199_
[Credit Card Company]
Re: [$_________] Loan made by [Lender] to
[Borrower]
Premises: _____________________________________
_____________________________________
The undersigned hereby directs and authorizes ____________________
to deliver all sums payable to or on behalf of [Borrower] or
[Property Manager] by __________________ in connection with the
[Property] to the following account:
Account No. ________________________
ABA No. ____________________________
Account of [Lender]
____________________________________
This letter and the direction and authorization contained herein may
not be amended, modified, revoked or superseded without the prior written
consent of [Lender] its successors or assigns in each instance.
Very truly yours,
[Borrower]
Acnowledged and Agreed to:
[Credit Card Company]
By:_______________________
Name:
Title:
EXHIBIT 10.6
PROMISSORY NOTE
Date of Note: As of November 5, 1996
Note Amount: $20,000,000.00
FOR VALUE RECEIVED, the undersigned having an address c/o 701 Lee Street,
Suite 1000, Des Plaines, Illinois 60016, as maker (hereinafter referred to as
"Maker") does hereby covenant and promise to pay, in immediately available
funds, to the order of CS FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware
corporation having an address at 55 East 52nd Street, New York, New York 10055
(hereinafter referred to as "Payee"), or at such other place as Payee may from
time to time designate in writing, the principal sum of Twenty Million and
No/100 Dollars ($20,000,000.00) and all other amounts due or becoming due
hereunder, with interest thereon from the date hereof at the Interest Rate (as
hereinafter defined), to be paid in lawful money of the United States of
America, as herein provided.
Interest, as calculated herein, shall be computed for any Payment Date on
the basis of a 360 day year for the actual number of days elapsed on so much
of the Principal Amount as is outstanding as of the last day of the month
preceding such Payment Date.
1. DEFINITIONS
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms in this Note
shall include in the singular number the plural and in the plural number the
singular. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Mortgage.
"Determination Date" shall mean, in each calendar month during the term
of this Note, beginning in the second calendar month following the month in
which the Closing Date occurs, the first (1st) day of each month, if such
first (1st) day is a Business Day, and if not, the Business Day immediately
following such first (1st) day.
"Due Date" shall have the meaning set forth in Section 2.01(c) hereof.
"First LIBOR Reference Period" shall mean the period commencing on the
Closing Date and ending on the last day of the calendar month in which the
Closing Date occurs.
"Interest Determination Date" shall mean the second LIBOR Business Day
prior to the Payment Date. As used herein, LIBOR Business Day shall mean any
day on which banks are open for dealing in foreign currency and exchange in
London, England.
"Interest Rate" shall mean the rate per annum (expressed as a percentage)
equal to the LIBOR Rate plus the LIBOR Margin except for the First LIBOR
Reference Period for which the Interest Rate shall be 8.75%.
"LIBOR Margin" shall mean from the closing date through and including
October 31, 1997 three hundred and thirty-seven (337) basis points per annum.
From and after November 1, 1997 LIBOR Margin shall mean three hundred and
sixty-two (362) basis points per annum.
"LIBOR Rate" shall mean the London interbank offered rate for one-month
United States Dollar deposits established by the Payee in accordance with the
terms of this Note on each Interest Determination Date.
"Loan Amount" shall mean Twenty Million and no/100 Dollars
($20,000,000.00).
"Maturity Date" shall have the meaning set forth in Section 2.01(a)(iii)
hereof.
"Maximum Amount" shall have the meaning set forth in Section 4.07 hereof.
"Mortgages" shall have the meaning set forth in Section 3.01 hereof.
"Payment" shall have the meaning set forth in Section 2.02(a) hereof.
"Principal Payments" shall have the meaning set forth in
Section 2.01(a)(ii) hereof.
"Principals" shall have the meaning set forth in Section 4.04 hereof.
"Reuters Screen LIBO Page" shall mean the display page designated as
"LIBO" on the Reuters Monitor Money Rates Service.
2. INTEREST AND AMORTIZATION PAYMENTS
Section 2.01. (a) Payments under this Note, calculated in accordance
with the terms hereof, shall be due and payable as follows:
(i) interest shall be due and payable on each and every Payment Date at the
Interest Rate in effect for the Interest Accrual Period ending the day
preceding the Payment Date, and (y) payments to be applied in reduction of the
Principal Amount (the "Principal Payments") shall be due and payable on the
Payment Date of each and every calendar month commencing in December, 1996 in
accordance with, and to be applied in reduction of the Principal Amount, as
set forth in Section 2.01(b) hereof; and
(ii) the entire outstanding Principal Amount, together with all accrued and
unpaid interest and any other charges due hereon shall be due and payable
November 1, 1998 (the "Maturity Date").
(b) Monthly installments of Principal Payments shall be paid in
amounts sufficient to fully amortize the then unpaid Principal Amount over a
twenty (20) year term based on the Interest Rate.
(c) To the extent Payments are or become due and payable under this Note or
any of the other Loan Documents on a day (the "Due Date") which is not a
Business Day, such Payments are and shall be due and payable on the first
Business Day immediately following the Due Date for such Payments and in such
event, the interest which accrues on the Loan from the Due Date to the first
Business Day immediately following the Due Date shall not be due and payable
until the next succeeding Due Date and shall not be compounded.
(d) On each Interest Determination Date until all sums due under this Note
and the other Loan Documents have been paid in full, the LIBOR Rate shall be
the rate (expressed as a percentage per annum) for deposits in U.S. Dollars
for a one (1) month period that appears on Telerate Page 3750 (or the
successor page thereto) as of 11:00 a.m., London time, of such Interest
Determination Date to the extent available. If such rate does not appear on
Telerate Page 3750 as of 11:00 a.m., London time, on the applicable Interest
Determination Date, the LIBOR Rate will be the arithmetic mean of the offered
rates (expressed as a percentage per annum) for deposits in U.S. dollars for a
one (1) month period that appear on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on such Interest Determination Date, if at least two such
offered rates so appear. If fewer than two such offered rates appear on the
Reuters Screen LIBO Page as of 11:00 a.m., London time, on the applicable
Interest Determination Date, the Payee will request the principal London
office of any four (4) major reference banks in the London interbank market
selected by the Payee in its sole discretion to provide such bank's offered
quotation (expressed as a percentage per annum) to prime banks in the London
interbank market for deposits in U.S. dollars for a one (1) month period as of
11:00 a.m., London time, on such Interest Determination Date for amounts of
not less than $1,000,000.00. If at least two such offered quotations are so
provided, the LIBOR Rate will be the arithmetic mean of such quotation. If
fewer than two such quotations are so provided, the Payee will request any
three (3) major banks in New York City selected by the Payee in its sole
discretion to provide such bank's rate (expressed as a percentage per annum)
for loans in U.S. dollars to leading European banks for a one (1) month period
as of approximately 11:00 a.m. New York City time, on the applicable Interest
Determination Date for amounts of not less than $1,000,000.00. If at least
two such rates are so provided, the LIBOR Rate will be the arithmetic mean of
such rates. If fewer than two such rates are so provided, then the LIBOR Rate
will be the LIBOR Rate in effect on the preceding Interest Determination Date.
The establishment of the LIBOR Rate on each Interest Determination Date by the
Payee and the Payee's calculation of the rate of interest applicable to this
Note shall (in the absence of manifest error) be final and binding.
(e) If any law, treaty, rule or regulation or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject or any change therein or in the interpretation or
application thereof, shall make it unlawful for the Payee to make or maintain
the interest rate based upon the LIBOR Rate plus the LIBOR Margin or to give
effect to its obligations as contemplated hereby, then upon notice by the
Payee to Maker, the Interest Rate shall be automatically converted to the
interest rate which was established on the immediately preceding Interest
Determination Date.
Section 2.02. Application of Payments.
(a) Each and every payment (a "Payment") made by Maker to Payee in accordance
with the terms of this Note and/or the terms of any of the other Loan
Documents, including, without limitation, all payments of interest and
principal, shall be applied as follows:
(1) Payments, other than Unscheduled Payments, shall be applied (i) first, to
all interest (other than Default Rate Interest) which shall be due and payable
pursuant to the terms hereof as of the date the Payment is received; (ii)
second, to the payment of Principal Amount; and (iii) third, to all Late
Charges, Default Rate Interest or premiums, if any, and other sums payable
hereunder or under the other Loan Documents (other than those sums included in
clauses (i) and (ii) of this Section 2.02(a)(1)) in such order and priority as
determined by Payee in its sole discretion.
(2) Unscheduled Payments shall be applied at the end of the Interest Accrual
Period in which such Unscheduled Payments are received (i) first, to the
Principal Amount until the entire Principal Amount has been fully amortized,
and (ii) second, the balance, if any, in the manner provided in subparagraph
(1) above of this Section 2.02(a) (to the extent applicable after giving
effect to any payments previously made pursuant to this Section 2.02).
(b) To the extent that Maker makes a Payment or Payee receives any Payment or
proceeds for Maker's benefit, which are subsequently invalidated, declared to
be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
obligations of Maker hereunder intended to be satisfied by such Payment or
proceeds shall be revived and continue as if such Payment or proceeds had not
been received by Payee.
3. Default Rate. Time is of the essence with respect to the times s et
forth herein for the repayment of the Principal Amount and the interest
thereon. Should any amounts due hereunder or under any other Loan Document
not be paid in full on the date when the same shall be due and payable
(whether by acceleration, prepayment permitted hereunder or otherwise), then
in such event, the rate of interest to be paid on the entire Principal Amount
of this Note and all such other amounts shall be increased to the Default Rate
and shall be computed from the Due Date through and including the date, if
any, upon which such Default is fully cured. The foregoing provisions shall
not be construed as a waiver by Payee of its right to pursue any other
remedies available to it under the Mortgages or any other Loan Document, nor
shall it be construed to limit in any way the application of the Default Rate.
4. Voluntary Prepayments. Maker shall be permitted to repay the Principal
Amount of this Loan only on the terms and conditions and to the extent
provided in Article XV of the Mortgages. All such repayments shall be applied
in accordance with Section 2.02(a)(2) hereof.
SECTION 3. DEFAULTS
Section 3.01. Defaults. This Note is secured, inter alia, by (i)
certain mortgages, deeds of trust and deeds to secure debt, security
agreements, assignments of rents and fixture filings (each herein referred to
as a "Mortgage" and collectively as the "Mortgages") all of even date herewith
covering property, of Maker, as more particularly described in each Mortgage,
and (ii) certain assignments of leases and rents and security deposits of even
date herewith made by Maker. All terms, covenants, conditions and agreements
of the Loan Documents, including without limitation, the Mortgages, and the
due on sale provision contained within the Mortgages, hereby constitute part
of this Note, as if the same had been fully set forth herein. Each Event of
Default under the Mortgages shall be an Event of Default hereunder.
Section 3.02 Remedies. Upon the occurrence of an Event of Default, the
entire Principal Amount, accrued interest and all other sums due and payable
hereunder, under the Mortgages or other Loan Documents shall become
immediately due and payable at the option of Payee and immediately, and
without notice to Maker, interest on the Principal Amount shall accrue at the
Default Rate. Failure to exercise this option shall not constitute a waiver
of the right to exercise the same in the event of any subsequent Default or to
exercise any other remedy available to Payee relating to such Default. If
there is more than one Maker of this Note, subject to the provisions of
Section 4.04 hereof, the undersigned Persons shall each be jointly and
severally liable to pay the entire Loan Amount and all other sums becoming due
hereunder or under the other Loan Documents.
SECTION 4. MISCELLANEOUS
Section 4.01. Waivers. (a) Maker acknowledges that the Loan evidenced
by this Note is a commercial transaction and, to the fullest extent permitted
by Legal Requirements, as to this Note, the Mortgages and any other Loan
Documents securing this Note, Maker hereby waives all applicable exemption
rights, whether under the constitution of the State of New York or otherwise
and also waives valuation and appraisement, presentment, protest and demand,
notice of protest, demand and dishonor and nonpayment of this Note and, except
as specifically provided herein or in the other Loan Documents, all other
notices or demands to the fullest extent permitted pursuant to Legal
Requirements, and hereby expressly agrees that the maturity of this Note or
payment hereunder, may be extended from time to time without in any way
affecting the liability of Maker or of any guarantor of this Note. No notice
to, or demand on Maker shall entitle Maker to any other or future notice or
demand in the same, similar or other circumstances. Maker further consents to
the release of any Person liable for this obligation without affecting the
liability of any other party hereto or any guarantor hereof. The remedies of
Payee provided herein, in the Mortgages and the other Loan Documents, are
cumulative and concurrent, and may be pursued singly, successively, or
together, at the sole discretion of Payee, and may be exercised as often as
the occasion therefor shall occur. Any delay on the part of Payee in
exercising any right hereunder shall not operate as a waiver of any right, and
any waiver granted for one occasion shall not operate as a waiver in the event
of a subsequent Default.
(b) This Note cannot be modified, terminated, extended, amended or discharged
orally. No requirement hereof may be waived at any time except by a writing
signed by Payee, nor shall any waiver be operative upon other than a single
occasion. All rights and remedies herein specified are intended to be
cumulative and not in substitution for any right or remedy otherwise
available. In any action or proceeding to recover any sum herein provided
for, to the extent permitted by applicable Legal Requirements, no defense of
adequacy of security, or that resort must first be had to any other Person,
shall be asserted. All references herein to Maker and to Payee shall be
deemed to include its successors and assigns.
Section 4.02. Taxes. Maker agrees that if, at any time, the United
States of America, or any State or Commonwealth thereof or any subdivision of
any such State, shall require revenue or other stamps to be affixed to this
Note or the Mortgages, or impose any other tax or charges on the same, Maker
will pay the same, with interest and penalties thereon, if any.
Section 4.03. Invalidity. Wherever possible, each provision of this
Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note is held to be invalid or
unenforceable by a court of competent jurisdiction, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note, and the other provisions of this Note shall remain in full force
and effect and shall be liberally construed in favor of Payee in order to
effect the provisions of this Note.
Section 4.04. Exculpation.
Notwithstanding anything to the contrary contained in this Note or
the other Loan Documents, the obligations of Maker hereunder shall be non-
recourse except with respect to the Mortgaged Property, which for the purposes
of this Note shall be deemed to include the term Trust Property, if
applicable, and as otherwise provided in Section 18.32 of the Mortgage, the
terms of which are incorporated herein.
Section 4.05. Governing Law. (a) This Note was negotiated in New York,
and delivered by Maker and accepted by Payee in the State of New York, and the
proceeds of this Note were disbursed from New York, which State Maker agrees
has a substantial relationship to Payee and Maker and to the transaction
embodied hereby, in all respects, including, without limiting the generality
of the foregoing, matters of construction, validity, enforceability and
performance. This Note and the obligations arising hereunder shall be
governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts made and performed in such State (without regard
to the conflicts of law rules thereof) and any applicable law of the United
States of America, except that at all times the provisions for the creation,
perfection, and enforcement of the liens and security interests created
pursuant to the Mortgages and pursuant to the other Loan Documents shall be
governed by and construed according to the law of the State in which the
applicable Cross-collateralized Property is located, it being understood that,
to the fullest extent permitted by law of such State, the law of the State of
New York shall govern the validity and the enforceability of all Loan
Documents, and the obligations arising hereunder or thereunder. To the
fullest extent permitted by law, Maker hereby unconditionally and irrevocably
waives any claim to assert that the law of any other jurisdiction governs this
Note and this Note shall be governed by and construed in accordance with the
laws of the State of New York pursuant to Sect. 5-1401 of the New York General
Obligations Law.
(b) Any legal suit, action or proceeding against Maker or Payee arising out
of or relating to this Note shall be instituted in any federal or state court
in New York, New York, pursuant to Sect. 5-1402 of the New York General
Obligations Law, and Maker waives any objection which it may now or hereafter
have to the laying of venue of any such suit, action or proceeding, and Maker
hereby irrevocably submits to the jurisdiction of any such court in any suit,
action or proceeding. Maker does hereby designate and appoint Donovan,
Leisure, Newton & Irvine, having an address at 30 Rockefeller Plaza, New York,
New York 10112, as its authorized agent to accept and acknowledge on its
behalf service of any and all process which may be served in any such suit,
action or proceeding in any federal or state court in New York, New York, and
agrees that service of process upon said agent at said address and written
notice of said service of Maker mailed or delivered to Maker in the manner
provided in the Mortgages, shall be deemed in every respect effective service
of process upon Maker, in any such suit, action or proceeding in the State of
New York. Maker (i) shall give prompt notice to the Payee of any changed
address of its authorized agent hereunder, (ii) may at any time and from time
to time designate a substitute authorized agent with an office in New York,
New York (which office shall be designated as the address for service of
process), and (iii) shall promptly designate such a substitute if its
authorized agent ceases to have an office in New York, New York or is
dissolved without leaving a successor.
Section 4.06. Further Assurances. Maker shall execute and acknowledge
(or cause to be executed and acknowledged) and deliver to Payee all documents,
and take all actions, required by Payee from time to time to confirm the
rights created or now or hereafter intended to be created under this Note and
the other Loan Documents, to protect and further the validity, priority and
enforceability of this Note and the other Loan Documents, to subject to the
Loan Documents any property of Maker intended by the terms of any one or more
of the Loan Documents to be encumbered by the Loan Documents, or otherwise
carry out the purposes of the Loan Documents and the transactions contemplated
thereunder; provided, however, that no such further actions, assurances and
confirmations shall increase Maker's obligations under this Note.
Section 4.07. Maximum Amount. It is the intention of Maker and Payee to
conform strictly to the usury and similar laws relating to interest from time
to time in force, and all agreements between Maker and Payee, whether now
existing or hereafter arising and whether oral or written, are hereby
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed
to be paid in the aggregate to Payee as interest hereunder or under the other
Loan Documents exceed the maximum permissible under applicable usury or such
other laws (the "Maximum Amount"). In the event, for any reason whatsoever,
any payment by or act of Maker pursuant to the terms hereof or pursuant to any
requirements of any provision hereof or of the other Loan Documents shall
result in payment of interest which would exceed the Maximum Amount, then ipso
facto the obligation of Maker to pay interest or perform such act or
requirement shall be reduced to the limit authorized under such Legal
Requirements, so that in no event shall Maker be obligated to pay any
interest, perform any act, or be bound by any requirement which would result
in payment of interest in excess of a sum which is lawfully collectible, and
all sums in excess of those lawfully collectible as interest shall, without
further agreement or notice between or by any party hereto, be deemed applied
upon principal immediately upon receipt of such moneys by Payee, with the same
force and effect as though Maker had specifically designated such sums to be
applied to principal prepayment. Notwithstanding any provision herein to the
contrary, however, no such application shall give rise to an obligation on the
part of Maker to pay any prepayment premium, if any, payable pursuant to the
Loan Documents. The provisions of this paragraph shall control every other
provision of this Note.
Section 4.08. Costs of Collection. Maker agrees to pay all costs and
expenses of collection incurred by Payee, in addition to principal, interest,
and premiums, if any, and Late Charges, including, without limitation,
reasonable attorneys' fees and disbursements, all costs and expenses incurred
in connection with the pursuit by Payee of any of its rights or remedies
hereunder, under the Mortgages or any of the other Loan Documents or the
protection of or realization of collateral or in connection with Payee's
collection efforts, whether or not suit on this Note, on any of the other Loan
Documents or any foreclosure proceeding is filed, and all such costs and
expenses shall be payable on demand with interest thereon to be calculated at
the Default Rate and shall be secured by the Mortgages and all other
collateral at any time held by Payee as security for Maker's obligations to
Payee.
Section 4.09. Waiver of Jury Trial. Maker, to the fullest extent it may
lawfully do so, waives any right it may have to trial by jury in any action,
including, without limitation, any tort action, to interpose any counterclaim
in any action (other than a compulsory counterclaim), and to have the same
consolidated with any other or separate action brought on or with respect to
this Note, the Mortgages or any other Loan Document.
Section 4.10. Headings. The section headings in this Note are included
herein for convenience of reference only and shall not constitute a part of
this Note for any other purpose.
Section 4.11. Participation. Payee shall have the right to assign this
Note in whole, but not in part, the Mortgages and/or any of the other Loan
Documents, and to transfer, assign or sell participation and subparticipations
(including blind or undisclosed participation and subparticipations) in the
Mortgages and the other Loan Documents and the obligations hereunder to any
Person; provided, however, that no participation shall increase, decrease or
otherwise affect either Maker's or Payee's obligations hereunder, under the
Mortgages or under any of the other Loan Documents.
IN WITNESS WHEREOF, this Note has been duly executed by Maker, the day
and year first above written.
Witness: MOA-TL CORP.,
a Delaware corporation
________________________ By:___________________
John Simon
Its: Treasurer
EXHIBIT 10.7
PROMISSORY NOTE
Date of Note: As of November 5, 1996
Note Amount: $17,150,000.00
FOR VALUE RECEIVED, the undersigned having an address c/o 701 Lee Street,
Suite 1000, Des Plaines, Illinois 60016, as maker (hereinafter referred to as
"Maker"), does hereby covenant and promise to pay, in immediately available
funds, to the order of CS FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware
corporation having an address at 55 East 52nd Street, New York, New York 10055
(hereinafter referred to as "Payee"), or at such other place as Payee may from
time to time designate in writing, the principal sum of Seventeen Million One
Hundred Fifty Thousand and No/100 Dollars ($17,150,000.00) and all other
amounts due or becoming due hereunder, with interest thereon from the date
hereof at the Interest Rate (as hereinafter defined), to be paid in lawful
money of the United States of America, as herein provided.
Interest, as calculated herein, shall be computed for any Payment Date on
the basis of a 360 day year for the actual number of days elapsed on so much
of the Principal Amount as is outstanding as of the last day of the month
preceding such Payment Date.
1. DEFINITIONS
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms in this Note
shall include in the singular number the plural and in the plural number the
singular. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Mortgage.
"Determination Date" shall mean, in each calendar month during the term
of this Note, beginning in the second calendar month following the month in
which the Closing Date occurs, the first (1st) day of each month, if such
first (1st) day is a Business Day, and if not, the Business Day immediately
following such first (1st) day.
"Due Date" shall have the meaning set forth in Section 2.01(c) hereof.
"First LIBOR Reference Period" shall mean the period commencing on the
Closing Date and ending on the last day of the calendar month in which the
Closing Date occurs.
"Interest Determination Date" shall mean the second LIBOR Business Day
prior to the Payment Date. As used herein, LIBOR Business Day shall mean any
day on which banks are open for dealing in foreign currency and exchange in
London, England.
"Interest Rate" shall mean the rate per annum (expressed as a percentage)
equal to the LIBOR Rate plus the LIBOR Margin except for the First LIBOR
Reference Period for which the Interest Rate shall be 8.75%.
"LIBOR Margin" shall mean from the closing date through and including
October 31, 1997 three hundred and thirty-seven (337) basis points per annum.
From and after November 1, 1997 LIBOR Margin shall mean three hundred and
sixty-two (362) basis points per annum.
"LIBOR Rate" shall mean the London interbank offered rate for one-month
United States Dollar deposits established by the Payee in accordance with the
terms of this Note on each Interest Determination Date.
"Loan Amount" shall mean Seventeen Million One Hundred Fifty Thousand and
no/100 Dollars ($17,150,000.00).
"Maturity Date" shall have the meaning set forth in Section 2.01(a)(iii)
hereof.
"Maximum Amount" shall have the meaning set forth in Section 4.07 hereof.
"Mortgages" shall have the meaning set forth in Section 3.01 hereof.
"Payment" shall have the meaning set forth in Section 2.02(a) hereof.
"Principal Payments" shall have the meaning set forth in Section
2.01(a)(ii) hereof.
"Principals" shall have the meaning set forth in Section 4.04 hereof.
"Reuters Screen LIBO Page" shall mean the display page designated as
"LIBO" on the Reuters Monitor Money Rates Service.
2. INTEREST AND AMORTIZATION PAYMENTS
Section 2.01. (a) Payments under this Note, calculated in accordance
with the terms hereof, shall be due and payable as follows:
(i) interest shall be due and payable on each and every Payment Date at the
Interest Rate in effect for the Interest Accrual Period ending the day
preceding the Payment Date, and (y) payments to be applied in reduction of the
Principal Amount (the "Principal Payments") shall be due and payable on the
Payment Date of each and every calendar month commencing in December, 1996 in
accordance with, and to be applied in reduction of the Principal Amount, as
set forth in Section 2.01(b) hereof; and
(ii) the entire outstanding Principal Amount, together with all accrued and
unpaid interest and any other charges due hereon shall be due and payable
November 1, 1998 (the "Maturity Date").
(b) Monthly installments of Principal Payments shall be paid in amounts
sufficient to fully amortize the then unpaid Principal Amount over a twenty
(20) year term based on the Interest Rate.
(c) To the extent Payments are or become due and payable under this Note or
any of the other Loan Documents on a day (the "Due Date") which is not a
Business Day, such Payments are and shall be due and payable on the first
Business Day immediately following the Due Date for such Payments and in such
event, the interest which accrues on the Loan from the Due Date to the first
Business Day immediately following the Due Date shall not be due and payable
until the next succeeding Due Date and shall not be compounded.
(d) On each Interest Determination Date until all sums due under this Note
and the other Loan Documents have been paid in full, the LIBOR Rate shall be
the rate (expressed as a percentage per annum) for deposits in U.S. Dollars
for a one (1) month period that appears on Telerate Page 3750 (or the
successor page thereto) as of 11:00 a.m., London time, of such Interest
Determination Date to the extent available. If such rate does not appear on
Telerate Page 3750 as of 11:00 a.m., London time, on the applicable Interest
Determination Date, the LIBOR Rate will be the arithmetic mean of the offered
rates (expressed as a percentage per annum) for deposits in U.S. dollars for a
one (1) month period that appear on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on such Interest Determination Date, if at least two such
offered rates so appear. If fewer than two such offered rates appear on the
Reuters Screen LIBO Page as of 11:00 a.m., London time, on the applicable
Interest Determination Date, the Payee will request the principal London
office of any four (4) major reference banks in the London interbank market
selected by the Payee in its sole discretion to provide such bank's offered
quotation (expressed as a percentage per annum) to prime banks in the London
interbank market for deposits in U.S. dollars for a one (1) month period as of
11:00 a.m., London time, on such Interest Determination Date for amounts of
not less than $1,000,000.00. If at least two such offered quotations are so
provided, the LIBOR Rate will be the arithmetic mean of such quotation. If
fewer than two such quotations are so provided, the Payee will request any
three (3) major banks in New York City selected by the Payee percentage per
annum) for loans in U.S. dollars to leading European banks for a one (1) month
period as of approximately 11:00 a.m. New York City time, on the applicable
Interest Determination Date for amounts of not less than $1,000,000.00. If at
least two such rates are so provided, the LIBOR Rate will be the arithmetic
mean of such rates. If fewer than two such rates are so provided, then the
LIBOR Rate will be the LIBOR Rate in effect on the preceding Interest
Determination Date. The establishment of the LIBOR Rate on each Interest
Determination Date by the Payee and the Payee's calculation of the rate of
interest applicable to this Note shall (in the absence of manifest error) be
final and binding.
(e) If any law, treaty, rule or regulation or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject or any change therein or in the interpretation or
application thereof, shall make it unlawful for the Payee to make or maintain
the interest rate based upon the LIBOR Rate plus the LIBOR Margin or to give
effect to its obligations as contemplated hereby, then upon notice by the
Payee to Maker, the Interest Rate shall be automatically converted to the
interest rate which was established on the immediately preceding Interest
Determination Date.
Section 2.02. Application of Payments.
(a) Each and every payment (a "Payment") made by Maker to Payee in accordance
with the terms of this Note and/or the terms of any of the other Loan
Documents, including, without limitation, all payments of interest and
principal, shall be applied as follows:
(1) Payments, other than Unscheduled Payments, shall be applied (i) first, to
all interest (other than Default Rate Interest) which shall be due and payable
pursuant to the terms hereof as of the date the Payment is received; (ii)
second, to the payment of Principal Amount; and (iii) third, to all Late
Charges, Default Rate Interest or premiums, if any, and other sums payable
hereunder or under the other Loan Documents (other than those sums included in
clauses (i) and (ii) of this Section 2.02(a)(1)) in such order and priority as
determined by Payee in its sole discretion.
(2) Unscheduled Payments shall be applied at the end of the Interest Accrual
Period in which such Unscheduled Payments are received first, to the Principal
Amount until the entire Principal Amount has been fully amortized, and (ii)
second, the balance, if any, in the manner provided in subparagraph (1) above
of this Section 2.02(a) (to the extent applicable after giving effect to any
payments previously made pursuant to this Section 2.02).
(b) To the extent that Maker makes a Payment or Payee receives any Payment or
proceeds for Maker's benefit, which are subsequently invalidated, declared to
be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
obligations of Maker hereunder intended to be satisfied by such Payment or
proceeds shall be revived and continue as if such Payment or proceeds had not
been received by Payee.
3. Default Rate. Time is of the essence with respect to the times set
forth herein for the repayment of the Principal Amount and the interest
thereon. Should any amounts due hereunder or under any other Loan Document
not be paid in full on the date when the same shall be due and payable
(whether by acceleration, prepayment permitted hereunder or otherwise), then
in such event, the rate of interest to be paid on the entire Principal Amount
of this Note and all such other amounts shall be increased to the Default Rate
and shall be computed from the Due Date through and including the date, if
any, upon which such Default is fully cured. The foregoing provisions shall
not be construed as a waiver by Payee of its right to pursue any other
remedies available to it under the Mortgages or any other Loan Document, nor
shall it be construed to limit in any way the application of the Default Rate.
4. Voluntary Prepayments. Maker shall be permitted to repay the Principal
Amount of this Loan only on the terms and conditions and to the extent
provided in Article XV of the Mortgages. All such repayments shall be applied
in accordance with Section 2.02(a)(2) hereof.
SECTION 3. DEFAULTS
Section 3.01. Defaults. This Note is secured, inter alia, by (i)
certain mortgages, deeds of trust and deeds to secure debt, security
agreements, assignments of rents and fixture filings (each herein referred to
as a "Mortgage" and collectively as the "Mortgages") all of even date herewith
covering property, of Maker, as more particularly described in each Mortgage,
(ii) certain assignments of leases and rents and security deposits of even
date herewith made by Maker, and (iii) certain pledge of shares of stock of
even date herewith made by Maker. All terms, covenants, conditions and
agreements of the Loan Documents, including without limitation, the Mortgages,
and the due on sale provision contained within the Mortgages, hereby
constitute part of this Note, as if the same had been fully set forth herein.
Each Event of Default under the Mortgages shall be an Event of Default
hereunder.
Section 3.02 Remedies. Upon the occurrence of an Event of Default, the
entire Principal Amount, accrued interest and all other sums due and payable
hereunder, under the Mortgages or other Loan Documents shall become
immediately due and payable at the option of Payee and immediately, and
without notice to Maker, interest on the Principal Amount shall accrue at the
Default Rate. Failure to exercise this option shall not constitute a waiver
of the right to exercise the same in the event of any subsequent Default or to
exercise any other remedy available to Payee relating to such Default. If
there is more than one Maker of this Note, subject to the provisions of
Section 4.04 liable to pay the entire Loan Amount and all other sums becoming
due hereunder or under the other Loan Documents.
SECTION 4. MISCELLANEOUS
Section 4.01. Waivers. (a) Maker acknowledges that the Loan evidenced
by this Note is a commercial transaction and, to the fullest extent permitted
by Legal Requirements, as to this Note, the Mortgages and any other Loan
Documents securing this Note, Maker hereby waives all applicable exemption
rights, whether under the constitution of the State of New York or otherwise
and also waives valuation and appraisement, presentment, protest and demand,
notice of protest, demand and dishonor and nonpayment of this Note and, except
as specifically provided herein or in the other Loan Documents, all other
notices or demands to the fullest extent permitted pursuant to Legal
Requirements, and hereby expressly agrees that the maturity of this Note or
payment hereunder, may be extended from time to time without in any way
affecting the liability of Maker or of any guarantor of this Note. No notice
to, or demand on Maker shall entitle Maker to any other or future notice or
demand in the same, similar or other circumstances. Maker further consents to
the release of any Person liable for this obligation without affecting the
liability of any other party hereto or any guarantor hereof. The remedies of
Payee provided herein, in the Mortgages and the other Loan Documents, are
cumulative and concurrent, and may be pursued singly, successively, or
together, at the sole discretion of Payee, and may be exercised as often as
the occasion therefor shall occur. Any delay on the part of Payee in
exercising any right hereunder shall not operate as a waiver of any right, and
any waiver granted for one occasion shall not operate as a waiver in the event
of a subsequent Default.
(b) This Note cannot be modified, terminated, extended, amended or discharged
orally. No requirement hereof may be waived at any time except by a writing
signed by Payee, nor shall any waiver be operative upon other than a single
occasion. All rights and remedies herein specified are intended to be
cumulative and not in substitution for any right or remedy otherwise
available. In any action or proceeding to recover any sum herein provided
for, to the extent permitted by applicable Legal Requirements, no defense of
adequacy of security, or that resort must first be had to any other Person,
shall be asserted. All references herein to Maker and to Payee shall be
deemed to include its successors and assigns.
Section 4.02. Taxes. Maker agrees that if, at any time, the United
States of America, or any State or Commonwealth thereof or any subdivision of
any such State, shall require revenue or other stamps to be affixed to this
Note or the Mortgages, or impose any other tax or charges on the same, Maker
will pay the same, with interest and penalties thereon, if any.
Section 4.03. Invalidity. Wherever possible, each provision of this
Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note is held to be invalid or
unenforceable by a court of competent jurisdiction, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note, and the other provisions of this Note shall remain in full force
and effect and shall be liberally construed in favor of Payee in order to
effect the provisions of this Note.
Section 4.04. Exculpation.
Notwithstanding anything to the contrary contained in this Note or the
other Loan Documents, the obligations of Maker hereunder shall be non-recourse
except with respect to the Mortgaged Property, which for the purposes of this
Note shall be deemed to include the term Trust Property, if applicable, and as
otherwise provided in Section 18.32 of the Mortgage, the terms of which are
incorporated herein.
Section 4.05. Governing Law. (a) This Note was negotiated in New York,
and delivered by Maker and accepted by Payee in the State of New York, and the
proceeds of this Note were disbursed from New York, which State Maker agrees
has a substantial relationship to Payee and Maker and to the transaction
embodied hereby, in all respects, including, without limiting the generality
of the foregoing, matters of construction, validity, enforceability and
performance. This Note and the obligations arising hereunder shall be
governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts made and performed in such State (without regard
to the conflicts of law rules thereof) and any applicable law of the United
States of America, except that at all times the provisions for the creation,
perfection, and enforcement of the liens and security interests created
pursuant to the Mortgages and pursuant to the other Loan Documents shall be
governed by and construed according to the law of the State in which the
applicable Cross-collateralized Property is located, it being understood that,
to the fullest extent permitted by law of such State, the law of the State of
New York shall govern the validity and the enforceability of all Loan
Documents, and the obligations arising hereunder or thereunder. To the
fullest extent permitted by law, Maker hereby unconditionally and irrevocably
waives any claim to assert that the law of any other jurisdiction governs this
Note and this Note shall be governed by and construed in accordance with the
laws of the State of New York pursuant to Sect. 5-1401 of the New York General
Obligations Law.
(b) Any legal suit, action or proceeding against Maker or Payee arising out
of or relating to this Note shall be instituted in any federal or state court
in New York, New York, pursuant to Sect. 5-1402 of the New York General
Obligations Law, and Maker waives any objection which it may now or hereafter
have to the laying of venue of any such suit, action or proceeding, and Maker
hereby irrevocably submits to the jurisdiction of any such court in any suit,
action or proceeding. Maker does hereby designate and appoint Donovan,
Leisure, Newton & Irvine, having an address at 30 Rockefeller Plaza, New York,
New York 10112, as its authorized agent to accept and acknowledge on its
behalf service of any and all process which may be served in any such suit,
action or proceeding in any federal or state court in New York, New York, and
agrees that service of process upon said agent at said address and written
notice of said service of Maker mailed or delivered to Maker in the manner
provided in the Mortgages, shall be deemed in every respect effective service
of process upon Maker, in any such suit, action or proceeding in the State of
New York. Maker (i) shall give prompt notice to the Payee of any changed
address of its authorized agent hereunder, (ii) may at any time and from time
to time designate a substitute authorized agent with an office in New York,
New York (which office shall be designated as the address for service of
process), and (iii) shall promptly designate such a substitute if its
authorized agent ceases to have an office in New York, New York or is
dissolved without leaving a successor.
Section 4.06. Further Assurances. Maker shall execute and acknowledge
(or cause to be executed and acknowledged) and deliver to Payee all documents,
and take all actions, required by Payee from time to time to confirm the
rights created or now or hereafter intended to be created under this Note and
the other Loan Documents, to protect and further the validity, priority and
enforceability of this Note and the other Loan Documents, to subject to the
Loan Documents any property of Maker intended by the terms of any one or more
of the Loan Documents to be encumbered by the Loan Documents, or otherwise
carry out the purposes of the Loan Documents and the transactions contemplated
thereunder; provided, however, that no such further actions, assurances and
confirmations shall increase Maker's obligations under this Note.
Section 4.07. Maximum Amount. It is the intention of Maker and Payee to
conform strictly to the usury and similar laws relating to interest from time
to time in force, and all agreements between Maker and Payee, whether now
existing or hereafter arising and whether oral or written, are hereby
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed
to be paid in the aggregate to Payee as interest hereunder or under the other
Loan Documents exceed the maximum permissible under applicable usury or such
other laws (the "Maximum Amount"). In the event, for any reason whatsoever,
any payment by or act of Maker pursuant to the terms hereof or pursuant to any
requirements of any provision hereof or of the other Loan Documents shall
result in payment of interest which would exceed the Maximum Amount, then ipso
facto the obligation of Maker to pay interest or perform such act or
requirement shall be reduced to the limit authorized under such Legal
Requirements, so that in no event shall Maker be obligated to pay any
interest, perform any act, or be bound by any requirement which would result
in payment of interest in excess of a sum which is lawfully collectible, and
all sums in excess of those lawfully collectible as interest shall, without
further agreement or notice between or by any party hereto, be deemed applied
upon principal immediately upon receipt of such moneys by Payee, with the same
force and effect as though Maker had specifically designated such sums to be
applied to principal prepayment. Notwithstanding any provision herein to the
contrary, however, no such application shall give rise to an obligation on the
part of Maker to pay any prepayment premium, if any, payable pursuant to the
Loan Documents. The provisions of this paragraph shall control every other
provision of this Note.
Section 4.08. Costs of Collection. Maker agrees to pay all costs and
expenses of collection incurred by Payee, in addition to principal, interest,
and premiums, if any, and Late Charges, including, without limitation,
reasonable attorneys' fees and disbursements, all costs and expenses incurred
in connection with the pursuit by Payee of any of its rights or remedies
hereunder, under the Mortgages or any of the other Loan Documents or the
protection of or realization of collateral or in connection with Payee's
collection efforts, whether or not suit on this Note, on any of the other Loan
Documents or any foreclosure proceeding is filed, and all such costs and
expenses shall be payable on demand with interest thereon to be calculated at
the Default Rate and shall be secured by the Mortgages and all other
collateral at any time held by Payee as security for Maker's obligations to
Payee.
Section 4.09. Waiver of Jury Trial. Maker, to the fullest extent it may
lawfully do so, waives any right it may have to trial by jury in any action,
including, without limitation, any tort action, to interpose any counterclaim
in any action (other than a compulsory counterclaim), and to have the same
consolidated with any other or separate action brought on or with respect to
this Note, the Mortgages or any other Loan Document.
Section 4.10. Headings. The section headings in this Note are included
herein for convenience of reference only and shall not constitute a part of
this Note for any other purpose.
Section 4.11. Participation. Payee shall have the right to assign this
Note in whole, but not in part, the Mortgages and/or any of the other Loan
Documents, and to transfer, assign or sell participation and subparticipations
(including blind or undisclosed participation and subparticipations) in the
Mortgages and the other Loan Documents and the obligations hereunder to any
Person; provided, however, that no participation shall increase, decrease or
otherwise affect either Maker's or Payee's obligations hereunder, under the
Mortgages or under any of the other Loan Documents.
IN WITNESS WHEREOF, this Note has been duly executed by Maker, the day
and year first above written.
Witness: MOA-CS CORP.,
a Delaware corporation
________________________ By:_____________________________________
John Simon
Its: Treasurer
Exhibit 21.1
Information pertaining to the subsidiaries of Motels of America, Inc. as
of March 13, 1997 is set forth in the following table:
Name of Subsidiary State of Incorporation
Ben Franklin Florida Enterprises, Inc. Florida
Broadleaf Hotels, Inc. California
Budget Motel Supply Corporation Delaware
Central Park Motel Corp. Delaware
Gateway Restaurant, Inc. California
Kansas City Hotel Corporation Kansas
Megan Park, Inc. Illinois
Motels of America, L.L.C. Delaware
MOA Centro, Corp Delaware
MOA Investor Corp. Delaware
MOA Membership Corp Delaware
MOA Portfolio II, Ltd. Delaware
MOA-CS Corp. Delaware
MOA-TL Corp. Delaware
MOA-TL Holding Corp. Delaware
Pacshore Initial Corp. Delaware
The Products Group, Inc Delaware
TAD Membership Corp. Delaware
TAD Properties, L.L.C. Delaware
Tri-State Inns, Inc. Georgia
York Motel Corp. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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<RECEIVABLES> 11,727,020
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<PP&E> 369,551,017
<DEPRECIATION> 61,854,694
<TOTAL-ASSETS> 368,432,501
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<BONDS> 327,553,944
0
0
<COMMON> 8,000
<OTHER-SE> 22,957,901
<TOTAL-LIABILITY-AND-EQUITY> 368,432,501
<SALES> 0
<TOTAL-REVENUES> 128,270,779
<CGS> 0
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<INTEREST-EXPENSE> 31,572,501
<INCOME-PRETAX> 1,175,017
<INCOME-TAX> 487,761
<INCOME-CONTINUING> 687,256
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<NET-INCOME> 687,256
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<EPS-DILUTED> 0.86
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