Loan Agreement - Merrill Lynch Mortgage Lending Inc., Ruby Miami Airport LP, Ruby Miami Lakes LP, Ruby Mt. Laurel LP, Ruby Ft. Worth Southwest LP, Ruby Newark LP, Ruby Portland Scarborough LP and Ruby Boston Tewksbury LP d/b/a Ruby Boston Tewksbury Hotel LP
(Pool 6)
LOAN AGREEMENT
Dated as of June 17, 2005
by and among
RUBY MIAMI AIRPORT LIMITED PARTNERSHIP,
RUBY MIAMI LAKES LIMITED PARTNERSHIP,
RUBY MT. LAUREL LIMITED PARTNERSHIP,
RUBY FT. WORTH SOUTHWEST LIMITED PARTNERSHIP,
RUBY NEWARK LIMITED PARTNERSHIP,
RUBY PORTLAND SCARBOROUGH LIMITED PARTNERSHIP and
RUBY BOSTON TEWKSBURY LIMITED PARTNERSHIP d/b/a RUBY BOSTON
TEWKSBURY HOTEL LIMITED PARTNERSHIP
(collectively, as Borrowers)
and
MERRILL LYNCH MORTGAGE LENDING, INC.
(as Lender)
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 CERTAIN DEFINITIONS ....................................................... 1
Section 1.1. Definitions .................................................. 1
ARTICLE 2 GENERAL TERMS ............................................................. 24
Section 2.1. Amount of the Loan ........................................... 24
Section 2.2. Use of Proceeds .............................................. 24
Section 2.3. Security for the Loan ........................................ 24
Section 2.4. Borrowers' Notes ............................................. 24
Section 2.5. Principal, Interest and Other Payments ....................... 25
Section 2.6. Prepayment ................................................... 26
Section 2.7. Application of Payments ...................................... 27
Section 2.8. Payment of Debt Service, Method and Place of Payment ......... 27
Section 2.9. Taxes ........................................................ 27
Section 2.10. Defeasance ................................................... 27
Section 2.11. Central Cash Management ...................................... 30
Section 2.12. Security Agreement ........................................... 37
Section 2.13. Secondary Market Transactions ................................ 39
Section 2.14. Property Substitutions ....................................... 41
Section 2.15. Permitted Mezzanine Financing ................................ 44
ARTICLE 3 CONDITIONS PRECEDENT ...................................................... 47
Section 3.1. Conditions Precedent to the Making of the Loan ............... 47
Section 3.2. Form of Loan Documents and Related Matters ................... 51
ARTICLE 4 REPRESENTATIONS AND WARRANTIES ............................................ 51
Section 4.1. Representations and Warranties of Borrower ................... 51
Section 4.2. Survival of Representations and Warranties ................... 60
ARTICLE 5 AFFIRMATIVE COVENANTS ..................................................... 60
Section 5.1. Borrower Covenants ........................................... 60
ARTICLE 6 NEGATIVE COVENANTS ........................................................ 75
Section 6.1. Borrower Negative Covenants .................................. 75
ARTICLE 7 DEFAULTS .................................................................. 77
Section 7.1. Event of Default ............................................. 77
i
<PAGE>
Section 7.2. Remedies ..................................................... 79
Section 7.3. Remedies Cumulative .......................................... 80
Section 7.4. Lender's Right to Perform .................................... 80
ARTICLE 8 MISCELLANEOUS ............................................................. 81
Section 8.1. Survival ..................................................... 81
Section 8.2. Lender's Discretion .......................................... 81
Section 8.3. Governing Law ................................................ 81
Section 8.4. Modification, Waiver in Writing .............................. 82
Section 8.5. Delay Not a Waiver ........................................... 83
Section 8.6. Notices ...................................................... 83
Section 8.7. Trial By Jury ................................................ 84
Section 8.8. Headings ..................................................... 85
Section 8.9. Assignment ................................................... 85
Section 8.10. Severability ................................................. 85
Section 8.11. Preferences .................................................. 85
Section 8.12. Waiver of Notice ............................................. 85
Section 8.13. Remedies of Borrower ......................................... 86
Section 8.14. Exculpation .................................................. 86
Section 8.15. Exhibits Incorporated ........................................ 88
Section 8.16. Offsets, Counterclaims and Defenses .......................... 88
Section 8.17. No Joint Venture or Partnership .............................. 88
Section 8.18. Waiver of Marshalling of Assets Defense ...................... 88
Section 8.19. Waiver of Counterclaim ....................................... 88
Section 8.20. Conflict; Construction of Documents .......................... 89
Section 8.21. Brokers and Financial Advisors ............................... 89
Section 8.22. Counterparts ................................................. 89
Section 8.23. Estoppel Certificates ........................................ 89
Section 8.24. Payment of Expenses .......................................... 89
Section 8.25. Bankruptcy Waiver ............................................ 90
Section 8.26. Entire Agreement ............................................. 90
Section 8.27. Dissemination of Information ................................. 90
Section 8.28. Limitation of Interest ....................................... 91
Section 8.29. Indemnification .............................................. 91
ii
<PAGE>
Section 8.30. Borrower Acknowledgments ..................................... 92
Section 8.31. Publicity .................................................... 92
Section 8.32. Intentionally omitted ........................................ 92
Section 8.33. Cross-Collateralization ...................................... 92
Section 8.34. Time of the Essence .......................................... 92
Section 8.35. FINAL AGREEMENT .............................................. 93
Section 8.36. [Intentionally omitted] ...................................... 93
Section 8.37. Joint and Several Liability .................................. 93
Section 8.38. Loan Modification ............................................ 93
Section 8.39. Consent Fees ................................................. 93
Section 8.40. Insurance, Casualty and Condemnation Provisions .............. 93
Exhibit A Additional Definitions
Exhibit B Deferred Maintenance
Exhibit C Individual Properties and Allocated Loan Amounts
Exhibit D Managers
Exhibit E Operating Budget
Exhibit F FF&E Financing
Exhibit G Organizational Chart
Exhibit H Property Improvement Plans
Exhibit I Required Expenditure Amounts for Individual Properties
Exhibit J Capital Improvements and PIP Schedule
Schedule 1 Litigation
Schedule 2 Amortization Schedule
iii
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, made as of June 17, 2005, is by and between
MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (in such capacity,
and together with its successors and assigns "Lender"), and RUBY MIAMI AIRPORT
LIMITED PARTNERSHIP, RUBY MIAMI LAKES LIMITED PARTNERSHIP, RUBY MT. LAUREL
LIMITED PARTNERSHIP, RUBY FT. WORTH SOUTHWEST LIMITED PARTNERSHIP, RUBY NEWARK
LIMITED PARTNERSHIP, RUBY PORTLAND SCARBOROUGH LIMITED PARTNERSHIP and RUBY
BOSTON TEWKSBURY LIMITED PARTNERSHIP d/b/a RUBY BOSTON TEWKSBURY HOTEL LIMITED
PARTNERSHIP, each a Delaware limited partnership (individually and collectively,
as the context may require, together with each Borrower's successors and
assigns, "Borrower").
RECITALS
WHEREAS, Borrowers desire to obtain a loan (the "Loan") from Lender
in the aggregate principal amount of $31,995,000 (the "Loan Amount") which Loan
is evidenced by (a) a certain Promissory Note, dated as of the date hereof (as
may be modified, amended, supplemented, extended or consolidated in writing, and
any note(s) issued in exchange therefor or in replacement thereof, including
without limitation any modification pursuant to Section 2.13, the "Note"), made
by the Borrowers, each as maker, in favor of Lender, as payee in the original
principal amount of the Loan Amount; and
WHEREAS, Lender is willing to make the Loan on the condition that
Borrowers join in the execution and delivery of this Agreement which shall
establish the terms and conditions of the Loan.
NOW, THEREFORE, in consideration of the making of the Loan by
Lender, and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1. Definitions.
For all purposes of this Agreement:
(a) the capitalized terms defined in this Article I have the
meanings assigned to them in this Article I, and include the plural as well as
the singular;
(b) all accounting terms have the meanings assigned to them in
accordance with GAAP;
(c) the words "herein", "hereof", and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section, or other subdivision; and
<PAGE>
(d) the following terms have the following meanings:
"Account Collateral" means the Cash Collateral Account (including
all Sub-Accounts), each Manager Account, all amounts deposited or held in such
accounts, and all Proceeds of any or all of the foregoing.
"Adjusted Net Cash Flow" means, with respect to each Individual
Property, for any period, the Net Operating Income for the twelve (12) months
trailing such period (Net Operating Income to be calculated for the purposes of
this definition of "Adjusted Net Cash Flow" without deduction for actual base
management fees or incentive management fees paid pursuant to any Management
Agreement for such period, or the Capital Reserve Amount for such period)
reduced by (i) annual base management fees, pro rated for the applicable period,
equal to the greater of (a) 3% of Gross Revenues per annum and (b) actual base
management fees paid pursuant to the applicable Management Agreement, (ii) an
annual reserve with respect to leases, purchases and replacements of FF&E, pro
rated for the applicable period, equal to the greater of (a) 4% of Gross
Revenues per annum, and (b) the amount required to be reserved during such
period with respect to leases, purchases and replacements of FF&E pursuant to
the applicable Management Agreement, and (iii) actual incentive management fees
paid pursuant to the applicable Management Agreement for the applicable period,
all as determined by Lender in its reasonable discretion.
"Affiliate" of any specified Person means any other Person
controlling, controlled by or under common control with such specified Person.
For the purposes of this Agreement, "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 or other beneficial interests, by contract or otherwise; and the
terms "controls", "controlling" and "controlled" have the meanings correlative
to the foregoing.
"Agreement" means this Loan Agreement, as the same may from time to
time hereafter be modified, supplemented or amended.
"Allocated Loan Amount" means, with respect to each Individual
Property, the Allocated Loan Amount for such Individual Property set forth on
Exhibit C attached hereto, as such amounts shall be adjusted from time to time
as hereinafter set forth. Upon each adjustment in the amount of Indebtedness due
to the making of a prepayment of the Loan in accordance with the terms hereof,
each Allocated Loan Amount shall be decreased by an amount equal to the product
of (i) the amount of such payment 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 total of all Allocated Loan Amounts (prior to
the adjustment in question). Notwithstanding the foregoing sentence to the
contrary, when the Indebtedness is reduced as the result of Lender's receipt of
proceeds with respect to a Condemnation or Casualty affecting one hundred
percent (100%) of any Individual Property, the Allocated Loan Amount for such
Individual Property with respect to which the Insurance Proceeds or Condemnation
Proceeds were received shall, at Lender's sole discretion, be reduced to zero
(such Allocated Loan Amount prior to reduction being referred to as the
"Withdrawn Allocated Amount"), and each other Allocated Loan Amount shall, if
the Withdrawn Allocated Amount exceeds such proceeds (such excess being referred
to as the "Proceeds Deficiency"), be increased by an amount equal to
2
<PAGE>
the product of (1) the Proceeds Deficiency 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 Withdrawn
Allocated Amount. The "Allocated Loan Amount" for any Qualified Substitute
Property, following the occurrence of a Property Substitution, shall be the
Allocated Loan Amount, as of the date of such Property Substitution, for the
Individual Property replaced by such Qualified Substitute Property.
"Appraisal" means an appraisal of any Individual Property prepared
in accordance with the requirements of FIRREA prepared by an independent third
party appraiser holding an MAI designation, who is state licensed or state
certified if required under the laws of the state where such Individual Property
is located, who meets the requirements of FIRREA and who is otherwise reasonably
satisfactory to Lender.
"Approved Budget" has the meaning provided in Section 5.1(Q)(x).
"Appurtenant Rights" means, collectively, "Appurtenant Rights" as
defined in each Mortgage.
"Assignment of Agreements" shall mean, with respect to each
Individual Property, a first priority Assignment of Management Agreement and
Agreements Affecting Real Estate, in form and substance satisfactory to Lender,
dated as of the Closing Date, from each applicable Borrower, as assignor, to
Lender, as assignee, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Assignment of Leases" shall mean, with respect to each Individual
Property, a first priority Assignment of Leases and Rents, in form and substance
satisfactory to Lender, dated as of the Closing Date from the applicable
Borrower, as assignor, to Lender, as assignee, assigning to Lender all of such
Borrower's right, title and interest in and to the Leases and the Rents, as the
same may thereafter from time to time be supplemented, amended, modified or
extended by one or more written agreements supplemental thereto.
"Basic Carrying Costs" means the following costs with respect to
each Individual Property: (i) Impositions applicable to such Property; and (ii)
insurance premiums for policies of insurance required or permitted to be
maintained by the applicable Borrower pursuant to this Agreement or the other
Loan Documents.
"Basic Carrying Costs Monthly Installment" means, collectively, with
respect to all Individual Properties, Lender's reasonable and good faith
estimate of one-twelfth (1/12th) of the annual amount of the aggregate Basic
Carrying Costs for all Individual Properties (provided, that Lender may
calculate reasonably and in good faith the monthly amount to assure that funds
are reserved in sufficient amounts to enable the payment of all Impositions,
including, without limitation, taxes and insurance premiums thirty (30) days
prior to their respective due dates). If the Basic Carrying Costs for any
Individual Property for the then current Fiscal Year or payment period are not
ascertainable by Lender at the time a monthly deposit is required to be made,
the Basic Carrying Costs Monthly Installment with respect to such Individual
Property shall be
3
<PAGE>
Lender's reasonable and good faith estimate based on one-twelfth (1/12th) of the
aggregate Basic Carrying Costs for such Individual Property for the prior Fiscal
Year or payment period, with reasonable adjustments as determined by Lender. As
soon as the Basic Carrying Costs are fixed for the then current Fiscal Year or
period, the next ensuing Basic Carrying Costs Monthly Installment shall be
adjusted to reflect any deficiency or surplus in prior Basic Carrying Costs
Monthly Installments.
"Basic Carrying Costs Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of Basic Carrying Costs.
"Borrower" has the meaning provided in the preamble to this
Agreement.
"Business Day" means any day other than a Saturday, a Sunday or a
legal holiday on which national banks are not open for general business in (i)
the State of New York, (ii) the state where the corporate trust office of the
any trustee in connection with a Secondary Market Transaction is located, or
(iii) the state where the servicing offices of the any servicer in connection
with a Secondary Market Transactions are located.
"Capital Improvement Costs" means, collectively, with respect to
each Individual Property, the costs incurred by Borrowers in connection with (a)
capital improvements to the Individual Properties (other than capital
improvements referred to in clauses (i) and (ii) of Section 5.1(W)), and (b) the
financing of furniture, fixture and equipment leases or purchases in the
ordinary course of operating the Individual Properties in the manner each is
operated as of the Closing Date.
"Capital Reserve Amount" means, with respect to each Individual
Property, an amount equal to the greater of (i) four percent (4%) of projected
annual Gross Revenue set forth in the then current Approved Budget and (ii) the
amount required to be reserved per annum with respect to Capital Improvement
Costs pursuant to the applicable Management Agreement.
"Capital Reserve True-Up Amount" means an amount as of December 31
of each calendar year equal to the difference between (i) four percent (4%) of
actual Gross Revenue for such calendar year and (ii) the Capital Reserve Amount
for such calendar year; provided that for the period ending December 31, 2005
such amount shall be calculated using the prorated period from the Closing Date
through and including December 31, 2005.
"Capital Reserve Monthly Installment" means an amount equal to one
twelfth (1/12th) of the aggregate Capital Reserve Amounts for all Individual
Properties.
"Capital Reserve Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of Capital Improvement Costs.
"Cash Collateral Account" has the meaning provided in Section
2.11(b).
"Cash Collateral Account Agreement" has the meaning provided in
Section 2.12(c).
4
<PAGE>
"Cash Collateral Account Bank" means the bank chosen by Lender to
hold the Cash Collateral Account, or any successor bank hereafter selected by
Lender in accordance with the terms hereof.
"Cash Management Fee Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of fees payable to the Cash Collateral Account Bank.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and as
it may be further amended from time to time, any successor statutes thereto,
together with applicable U.S. Department of Treasury regulations issued pursuant
thereto in temporary or final form.
"Collateral" means, collectively, the "Collateral" as defined in
each Mortgage.
"Combined Debt Service" means, for any period, the sum of (a) Debt
Service, and (b) Mezzanine Debt Service.
"Condemnation Proceeds" has the meaning, with respect to each
Individual Property, provided in the Mortgage for such Individual Property.
"Contingent Obligation" means any obligation of any Borrower
guaranteeing any indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of any
Borrower, whether or not contingent; (i) to purchase any such primary
obligation, or any property constituting direct or indirect security therefor;
(ii) to advance or supply funds (x) for the purchase or payment of any such
primary obligation or (y) to maintain working capital or equity capital of the
primary obligor; (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner or obligee under any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (iv) otherwise to assure or hold harmless the owner or obligee
under such primary obligation against loss in respect thereof. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
anticipated liability in respect thereof (assuming that the applicable Borrower
is required to perform thereunder) as determined by Lender in good faith.
"Cooperation Agreement" means that certain Cross-Collateralization
and Cooperation Agreement dated as of even date herewith, between Borrower,
certain other "Borrowers" named therein and Lender, as the same may be amended,
modified or supplemented from time to time.
"Current Interest Accrual Period" has the meaning provided in
Section 2.11(d).
"Debt Service" means, for any period, the aggregate of all
principal, interest payments, Default Rate interest, Late Charges and other
amounts that accrue or are due and payable in accordance with the Loan Documents
during such period.
5
<PAGE>
"Debt Service Coverage Ratio" means, for any period, the quotient
obtained by dividing (1) the aggregate Adjusted Net Cash Flow for all Individual
Properties for the specified period by (2) the aggregate Debt Service due for
such period, assuming that the Loan is payable in accordance with a 25-year
amortization schedule.
"Debt Service Payment Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of Debt Service.
"Deed of Trust Trustee" means, with respect to each Individual
Property, the trustee, if any, under the Mortgage for such Individual Property.
"Default" means the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would be an Event of Default.
"Default Collateral" has the meaning provided in Section 8.14.
"Default Rate" means a per annum interest rate equal to the lesser
of (i) the Maximum Amount or (ii) the Interest Rate plus five percent (5%).
"Defeasance Collateral" means U.S. Obligations (i) having maturity
dates on or prior to, but as close as possible to, successive scheduled Payment
Dates (after the Defeasance Release Date) upon which Payment Dates interest and
principal payments are required under the Full Defeased Note or the Defeased
Note, as the case may be, through and including the Maturity Date and (ii) in
amounts sufficient to pay all scheduled principal and interest payments on the
Full Defeased Note or the Defeased Note, as the case may be, on each Payment
Date through and including the Maturity Date and any tax payable in respect of
any income earned by Borrower or Successor Obligor from such U.S. Obligations
and (iii) the proceeds of which shall be payable directly to the Cash Collateral
Account.
"Defeasance Deposit" means the amount that will be sufficient to
purchase the Defeasance Collateral.
"Defeasance Release Date" has the meaning provided in Section 2.10.
"Defeased Note" has the meaning provided in Section 2.10.
"Deferred Maintenance" has the meaning provided in Section 5.1(V).
"Deferred Maintenance Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of Deferred Maintenance Costs.
"Deferred Maintenance Costs" means costs incurred by Borrower in
connection with any Deferred Maintenance.
"Eligible Account" means (i) an account maintained with a federal or
state chartered depository institution or trust company whose (x) commercial
paper, short-term debt
6
<PAGE>
obligations or other short-term deposits are rated at least A-1 by S&P and the
equivalent by each other Rating Agency if the deposits in such account are to be
held in such account for thirty (30) days or less or (y) long-term unsecured
debt obligations are rated at least A by S&P and the equivalent by each other
Rating Agency if the deposits in such account are to be held in such account for
more than thirty (30) days; or (ii) a segregated trust account maintained with
the trust department of a federal or state chartered depository institution or
trust company acting in its fiduciary capacity which institution or trust
company is subject to regulations regarding fiduciary funds on deposit
substantially similar to 12 C.F.R. Section 9.10(b); or (iii) an account
otherwise acceptable to each Rating Agency, 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 security issued in
connection with a Secondary Market Transaction.
"Embargoed Person" has the meaning provided in Section 4.1(LL).
"Engineer" means any reputable Independent engineer, properly
licensed in the relevant jurisdiction and approved by Lender in Lender's
reasonable discretion.
"Engineering Report(s)" means, with respect to each Individual
Property, the structural engineering report(s) with respect to such Individual
Property (i) prepared by an Engineer, (ii) addressed to or permitted by such
preparer to be relied upon by Lender, (iii) prepared based on a scope of work
determined by Lender in Lender's discretion, and (iv) in form and content
acceptable to Lender in Lender's discretion, together with any amendments or
supplements thereto.
"Entity" means a (a) corporation, if the applicable Borrower is
listed as a corporation in the preamble to this Agreement, (b) limited
partnership, if the applicable Borrower is listed as a limited partnership in
the preamble to this Agreement or (c) limited liability company, if the
applicable Borrower is listed as a limited liability company in the preamble to
this Agreement.
"Environmental Indemnified Parties" includes Lender, any Person who
is or will have been involved with the servicing of the Loan, Persons who may
hold or acquire or will have held a full or partial interest in the Loan
(including, but not limited to, Investors or prospective Investors, as well as
custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in the Loan for the benefit of third parties) as well as the
respective directors, officers, shareholders, partners, employees, agents,
servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including but not limited to any other Person who holds or acquires
or will have held a participation or other full or partial interest in the Loan
or the collateral therefor, whether during the term of the Loan or as a part of
or following a foreclosure of the collateral for the Loan and including, but not
limited to, any successors by merger, consolidation or acquisition of all or a
substantial portion of Lender's assets and business).
"Environmental Indemnity" means the Environmental Indemnity
Agreement in form and substance satisfactory to Lender dated as of the Closing
Date from Borrower to Lender relating to all Individual Properties, as the same
may thereafter be from time to time supplemented, amended, modified or extended
by one or more agreements supplemental thereto.
7
<PAGE>
"Environmental Law" means any present and future federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law, relating to protection of human health or the environment, relating
to Hazardous Substances, relating to liability for or costs of other actual or
threatened danger to human health or the environment, including, without
limitation, the following statutes, as amended, any successor thereto, and any
regulations promulgated pursuant thereto, and any state or local statutes,
ordinances, rules, regulations and the like addressing similar issues: the
Comprehensive Environmental Response, Compensation and Liability Act; the
Emergency Planning and Community Right-to-Know Act; the Hazardous Substances
Transportation Act; the Resource Conservation and Recovery Act (including but
not limited to Subtitle I relating to underground storage tanks); the Solid
Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances
Control Act; the Safe Drinking Water Act; the Occupational Safety and Health
Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide
and Rodenticide Act; the Endangered Species Act; the National Environmental
Policy Act; and the River and Harbors Appropriation Act, and including, without
limitation, any present and future federal, state and local laws, statutes
ordinances, rules, regulations and the like, as well as common law: requiring
notification or disclosure of Releases of Hazardous Substances or other
environmental condition of any or all of the Individual Properties to any
Governmental Authority or other Person, whether or not in connection with
transfer of title to or interest in any or all of the Individual Properties.
"Environmental Liens" means, with respect to each Individual
Property, all liens and other encumbrances imposed on any Borrower which owns
such Individual Property pursuant to any Environmental Law, whether due to any
act or omission of any Borrower or any other person.
"Environmental Report(s)" means, with respect to each Individual
Property, environmental audit report(s) (i) prepared by a reputable
environmental Engineer approved by Lender in Lender's discretion, (ii) addressed
to or permitted by such environmental Engineer to be relied upon by Lender (iii)
prepared based on a scope of work determined by Lender in Lender's discretion,
and (iv) in form and content acceptable to Lender in Lender's discretion,
together with any amendments or supplements thereto delivered to Lender.
"Equity Interests" means (i) if the applicable Borrower is a limited
partnership, limited partnership interests in Borrower, or (ii) if the
applicable Borrower is a limited liability company, membership interests in
Borrower; or (iii) if the applicable Borrower is a corporation, the share or
stock interests in the applicable Borrower; provided, however, Equity Interests
shall not include any direct or indirect legal or beneficial ownership interest,
or any other interest of any nature or kind whatsoever, of any SPE Equity Owner
in any Borrower or in any other SPE Equity Owner, as applicable.
"ERISA" means 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
Agreement and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
8
<PAGE>
"ERISA Affiliate" means any corporation or trade or business that is
a member of any group of organizations (i) described in Section 414(b) or (c) of
the Code, of which any Borrower is a member, and (ii) 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 any ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code, of which any
Borrower is a member.
"Event of Default" has the meaning set forth in Section 7.1.
"Exchange Act" has the meaning set forth in Section 2.13.
"Extra Funds" has the meaning set forth in Section 2.11(f).
"FF&E" means furniture, furnishings, fixtures, soft goods, case
goods, signage, audio-visual equipment, kitchen equipment, carpeting, equipment,
including front desk and back-of-the-house computer equipment, but shall not
include (i) items included within "Property and Equipment" under the Uniform
System of Accounts including, but not limited to, lined, china, glassware,
tableware, uniforms and similar items, whether used in connection with the
public space or guest rooms, or (ii) any computer software or accompanying
documentation (including any future upgrades, enhancements, additions,
substitutions or modifications thereof), other than computer software which is
generally commercially available, which are used by Manager in connection with
operating or otherwise providing services to the hotel at the Property.
"FF&E Financing" shall mean, with respect to an Individual Property,
the personal property leases and personal property financing set forth with
respect to such Individual Property on Exhibit F, attached hereto and
incorporated herein and all renewals, amendments and extensions thereof.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as the same may be amended from time to time.
"Fiscal Year" means the 12-month period ending on December 31 of
each year or such other fiscal year of Borrowers as Borrowers may select from
time to time with the prior written consent of Lender, such consent not to be
unreasonably withheld or delayed.
"Full Defeased Note" has the meaning set forth in Section 2.10.
"GAAP" means generally accepted accounting principles consistently
applied in the United States of America as of the date of the applicable
financial report.
"Governmental Authority" means any foreign, national, federal,
state, regional or local government, or any other political subdivision of any
of the foregoing, in each case with jurisdiction over any Borrower, all or any
portion of the Collateral, or any SPE Equity Owner, or any Person with
jurisdiction over any Borrower, any Individual Property or any SPE Equity Owner,
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
9
<PAGE>
"Gross Revenue" means, with respect to each Individual Property, the
total dollar amount of all income and receipts whatsoever received by the
Borrower or any Manager or any agent thereof which owns, operates or manages the
applicable Individual Property.
"Hazardous Substance" means, without limitation, any and all
substances (whether solid, liquid or gas) defined, listed, or otherwise
classified as pollutants, toxic or hazardous wastes, toxic or hazardous
substances, toxic or hazardous materials, extremely hazardous wastes, or words
of similar meaning or regulatory effect under any present or future
Environmental Laws including but not limited to petroleum and petroleum
products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
lead, radon, radioactive materials, flammables and explosives, but excluding
substances of kinds and in small amounts ordinarily and customarily used or
stored in similar properties for the purposes of cleaning or other maintenance
or operations and otherwise in compliance with all Environmental Laws.
"Hotel Operations Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of Operating Expenses.
"Impositions" means, collectively, "Impositions" as defined in each
Mortgage.
"Indebtedness" means, at any given time, the Principal Indebtedness,
together with all accrued and unpaid interest thereon and all other obligations
and liabilities due or to become due to Lender pursuant hereto, under the Notes
or in accordance with any of the other Loan Documents, and all other amounts,
sums and expenses paid by or payable to Lender hereunder or pursuant to the
Notes or any of the other Loan Documents.
"Indemnified Party" shall have the meaning set forth in Section
2.13.
"Independent" means, when used with respect to any Person, a Person
who: (i) does not have any direct financial interest or any material indirect
financial interest in any Borrower or in any Affiliate of any Borrower
(including, without limitation, in any SPE Equity Owner), (ii) is not connected
with any Borrower or any Affiliate of any Borrower (including, without
limitation, any SPE Equity Owner), as an officer, employee, promoter,
underwriter, trustee, partner, member, manager, creditor, director or person
performing similar functions (other than in his or her capacity as Independent
Director), and (iii) is not a member of the immediate family of a Person defined
in (i) or (ii) above.
"Independent Director" means, with respect to each Borrower, a duly
appointed member of the board of directors (or with respect to a Single Member
LLC, the board of managers) of the relevant entity who shall not have been, at
the time of such appointment or at any time while serving as a director or
manager of the relevant entity and may not have been at any time in the
preceding five years (except in a capacity as an "Independent Director" for one
or more Affiliates otherwise satisfying the requirements of this definition),
(a) a direct or indirect legal or beneficial owner in such entity or any of its
affiliates or any Borrower or any of their respective affiliates, (b) a
creditor, supplier, employee, officer, director (other than in its capacity as
Independent Director), family member, manager, or contractor of such entity or
any of its affiliates or any Borrower or any of their respective affiliates, or
(c) a Person who controls
10
<PAGE>
(directly, indirectly, or otherwise) such entity or any of its affiliates or any
Borrower or any of their respective affiliates or any creditor, supplier,
employee, officer, director, family member, manager, or contractor of such
Person or any of its affiliates or any Borrower or any of their respective
affiliates.
"Individual Properties" shall mean, collectively, each and every
Individual Property, subject to substitutions and releases of properties in
accordance with the terms of this Agreement.
"Individual Property" shall mean, with respect to each individual
property described on Exhibit C attached hereto, "Property" as defined in the
related Mortgage for such individual property.
"Initial Deferred Maintenance Amount" means the amount shown as such
on Exhibit A.
"Insurance Proceeds" has the meaning, with respect to each
Individual Property, provided in the Mortgage for such Individual Property.
"Insurance Requirements" has the meaning, with respect to each
Individual Property, provided in the Mortgage for such Individual Property.
"Interest Accrual Period" shall mean, with respect to any Payment
Date, a period commencing on the first (1st) day of the calendar month preceding
the month in which such Payment Date occurs and ending on the day immediately
prior to the first (1st) day of the next calendar month. The first Interest
Accrual Period shall commence on the Closing Date and continue through and
including the day immediately prior to the first (1st) day of the calendar month
following the month in which the Closing Date occurs.
"Interest Rate" means, for any Interest Accrual Period, 5.3175% per
annum or the Default Rate for the applicable Note, as and when applicable
pursuant to this Agreement.
"Investor" has the meaning provided in Section 8.27.
"Land" means, collectively, "Land" as defined in each Mortgage.
"Late Charge" means the lesser of (i) five percent (5%) of any
unpaid amount and (ii) the maximum late charge permitted to be charged under the
laws of the State of New York.
"Leases" means, collectively, "Leases" as defined in each Mortgage.
"Legal Requirements" means all statutes, laws, rules, orders,
regulations, ordinances, judgments, orders, decrees and injunctions of
Governmental Authorities affecting any Borrower, the Loan Documents, the
Collateral or any part thereof, or the ownership, construction, use, alteration
or operation thereof, or any part thereof, enacted or entered and in force as of
the relevant date, and all Permits and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to any Borrower, at any time in force
affecting the Collateral or any part thereof,
11
<PAGE>
including, without limitation, any which (i) may require repairs, modifications,
or alterations in or to the Collateral or any part thereof, or (ii) in any way
limit the use and enjoyment thereof, and further including, without limitation,
all Environmental Laws and the Americans with Disabilities Act, as they may be
amended from time to time, together with all regulations promulgated pursuant
thereto or in connection therewith.
"Lender" has the meaning provided in the preamble to this Agreement.
"Liabilities" has the meaning set forth in Section 2.13.
"Lien" means any mortgage, deed of trust, deed to secure debt, lien
(statutory or other), pledge, easement, restrictive covenant, hypothecation,
assignment, preference, priority, security interest, or any other encumbrance or
charge on or affecting any portion of the Collateral or any Borrower, or any
interest in any of the foregoing, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement or similar instrument under the UCC or comparable law of
any other jurisdiction, domestic or foreign, and mechanic's, materialmen's and
other similar liens and encumbrances.
"Loan" has the meaning provided in the Recitals hereto.
"Loan Amount" has the meaning provided in the Recitals hereto.
"Loan Documents" means, collectively, this Agreement, the Note, the
Mortgages, the Assignments of Leases, the Assignments of Agreements, the
Manager's Subordinations, the Environmental Indemnity, the Cash Collateral
Account Agreement, the PIP Guaranty, the Cooperation Agreement and all other
agreements, instruments, certificates and documents executed or delivered by or
on behalf of Borrower or any Affiliate to evidence or secure the Loan or
otherwise in satisfaction of the requirements of this Agreement, any Mortgage or
the other documents listed above.
"Losses" means any losses, actual damages, costs, fees, expenses,
claims, suits, judgments, awards, liabilities (including but not limited to
strict liabilities), obligations, debts, fines, penalties, charges, costs of
Remediation (whether or not performed voluntarily), amounts paid in settlement,
litigation costs, reasonable attorneys' fees, engineers' fees, environmental
consultants' fees, and investigation costs (including but not limited to costs
for sampling, testing and analysis of soil, water, air, building materials, and
other materials and substances whether solid, liquid or gas), of whatever kind
or nature, and whether or not incurred in connection with any judicial or
administrative proceedings, actions, claims, suits, judgments or awards.
"Management Agreement" means the Management Agreement entered into
between Manager and each Borrower pertaining to the management of each
Individual Property in the form attached to the Manager's Subordinations.
"Manager" means, individually or collectively, as the context may
require, each manager under a Management Agreement. As of the date hereof, the
Manager of each Individual Property is set forth on Exhibit D attached hereto.
No replacement or substitute
12
<PAGE>
Manager shall be selected, approved or consented to by any Borrower other than
in accordance with the terms hereof.
"Manager Account" means, with respect to each Individual Property,
the "Operating Accounts" (as defined in the applicable Management Agreement)
maintained by the applicable Manager pursuant to the applicable Management
Agreement.
"Manager's Subordination" means, with respect to each Individual
Property, the Subordination, Non-Disturbance and Attornment Agreement in form
and substance satisfactory to Lender, dated as of the Closing Date, executed by
the applicable Manager, each applicable Borrower which owns the Individual
Property, and Lender, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Marriott" means Marriott International, Inc., a Delaware
corporation, or any Affiliate thereof.
"Material Adverse Effect" means a material adverse effect upon (i)
the business or the financial position or results of operation of any Borrower,
(ii) the ability of any Borrower to perform, or of Lender to enforce, any of the
Loan Documents or (iii) the value of (x) the Collateral with respect to any
Individual Property taken as a whole or (y) any Individual Property.
"Maturity Date" means July 1, 2015 or such earlier date resulting
from acceleration of the Indebtedness by Lender.
"Maximum Amount" means the maximum rate of interest designated by
applicable laws relating to payment of interest and usury.
"Mezzanine Borrower" has the meaning set forth in Section 2.15(a).
"Mezzanine Debt Service" shall mean, with respect to any particular
period of time, scheduled principal and/or interest payments and all other
amounts that accrue or are due and payable under the Mezzanine Loan for such
period.
"Mezzanine Debt Service Payment Sub Account" shall have the meaning
provided in Section 2.11(c).
"Mezzanine Deposit Account" means any deposit account established in
connection with a Mezzanine Loan for the deposit of Mezzanine Debt Service.
"Mezzanine Lender" has the meaning set forth in Section 2.15(a).
"Mezzanine Loan" has the meaning set forth in Section 2.15(a).
"Mezzanine Loan Agreement" means a loan agreement governing a
Mezzanine Loan.
13
<PAGE>
"Mold" means any mold or fungus in violation of Legal Requirements
present at or in any Individual Property.
"Mortgage" means, with respect to each Individual Property, the
first priority Mortgage, Deed of Trust or Deed to Secure Debt, Assignment of
Rents, Security Agreement and Fixture Filing or such other comparable document
which is customarily used by prudent lenders in the jurisdiction in which such
Individual Property is located, in form and substance satisfactory to Lender in
Lender's discretion, dated as of the Closing Date, granted by each applicable
Borrower which owns such Individual Property to Lender (or, in the case of a
Deed of Trust, to Deed of Trust Trustee for the benefit of Lender) with respect
to such Individual Property as security for the Loan, as the same may thereafter
from time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto.
"Mortgaged Property" means, collectively, or individually (as the
context requires), the "Mortgaged Property" or the "Trust Estate" as defined in
the Mortgage for each Individual Property.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Operating Income" means, with respect to each Individual
Property, for any period the excess, if any, of Operating Income for such period
over Operating Expenses for such period.
"Note" shall have the meaning set forth in the Recitals hereto.
"OFAC List" means the list of specially designated nationals and
blocked persons subject to financial sanctions that is maintained by the U.S.
Treasury Department, Office of Foreign Assets Control and any other similar list
maintained by the U.S. Treasury Department, Office of Foreign Assets Control
pursuant to any Legal Requirements (or is such list does not exist, the similar
list then being maintained by the United States, including, without limitation,
trade embargo, economic sanctions, or other prohibitions imposed by Executive
Order of the President of the United States. The OFAC List currently is
accessible through the internet website at www.treas.gov/ofac/t11sdn.pdf.
"Officer's Certificate" means, with respect to each Borrower, a
certificate of such Borrower which is signed by the managing equity owner of
such Borrower.
"Operating Expenses" means, with respect to each Individual
Property, for any period, all expenditures by the Borrower which owns the
Individual Property, as and to the extent required to be expensed under GAAP
during such period in connection with the ownership, operation, maintenance,
repair or leasing of such Individual Property, including, without limitation or
duplication expenses in connection with cleaning, repair, replacement, painting
and maintenance; wages, benefits, payroll taxes, uniforms, insurance costs and
all other related expenses for employees of such Borrower or any Affiliate
engaged in repair, operation, maintenance of such Individual Property or service
to tenants, patrons or guests of such Individual Property, as applicable; any
management and franchise fees and expenses; the cost of
14
<PAGE>
all electricity, oil, gas, water, steam, heat, ventilation, air conditioning and
any other energy, utility or similar item and overtime services; the cost of
cleaning supplies; Impositions; business interruption, liability, casualty and
fidelity insurance premiums; legal, accounting and other professional fees and
expenses incurred in connection with the ownership, leasing or operation of any
Individual Property, including, without limitation, collection costs and
expenses; costs and expenses of security and security systems; trash removal and
exterminating costs and expenses; advertising and marketing costs; costs of
environmental audits and monitoring, environmental, investigation, remediation
or other response actions or any other expenses incurred with respect to
compliance with Environmental Laws; and all other ongoing expenses which in
accordance with GAAP are required to be or are included in such Borrower's
annual financial statements as operating expenses of such Individual Property.
Operating Expenses shall be calculated in accordance with GAAP.
Notwithstanding the foregoing, Operating Expenses shall not include
(v) Capital Improvement Costs, (w) any taxes imposed on the applicable
Borrower's net income, (x) depreciation or amortization of intangibles or (y)
Debt Service and other payments in connection with the Indebtedness.
"Operating Income" means, with respect to each Individual Property,
for any period, for Borrower which owns the Individual Property, all revenue
derived from the ownership and operation of each Individual Property from
whatever source, including, without limitation: all amounts payable as Rents and
all other amounts payable under Leases or other third party agreements relating
to the ownership and operation of such Individual Property; business
interruption insurance proceeds; and all other amounts which in accordance with
GAAP are required to be or are included in such Borrower's annual financial
statements as operating income of such Individual Property but excluding any
lease termination payments, use and occupancy or other taxes on receipts
required to be accounted for by Borrower to any Governmental Authority, refunds
on uncollectible accounts, sales of furniture, fixtures and equipment, Insurance
Proceeds (other than business interruption insurance), Condemnation Proceeds,
rents, revenues and receipts received by tenants and concessionaires located at
the Individual Properties, unforfeited security deposits, utility and other
similar deposits and any disbursements to Borrower from the Cash Collateral
Account and any Sub-Accounts.
"Other Borrowings" means, without duplication (but not including the
Indebtedness or any Transaction Costs payable in connection with the
Transactions), (i) all indebtedness of any Borrower for borrowed money or for
the deferred purchase price of property or services, (ii) all indebtedness of
any Borrower evidenced by a note, bond, debenture or similar instrument, (iii)
the face amount of all letters of credit issued for the account of any Borrower
and, without duplication, all unreimbursed amounts drawn thereunder, (iv) all
indebtedness of any Borrower secured by a Lien on any property owned by any
Borrower whether or not such indebtedness has been assumed, (v) all Contingent
Obligations of any Borrower, and (vi) all payment obligations of any Borrower
under any interest rate protection agreement (including, without limitation, any
interest rate swaps, caps, floors, collars or similar agreements) and similar
agreements.
"Payment Date" shall mean the first (1st) day of each month
commencing on August 1, 2005, and continuing to and including the Maturity Date;
provided, however, that for
15
<PAGE>
purposes of making payments hereunder, but not for purposes of calculating
interest accrual periods, if the first (1st) day of a given month shall not be a
Business Day, then the Payment Date for such month shall be the preceding
Business Day.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Permits" means, collectively, "Permits" as defined in each
Mortgage.
"Permitted Encumbrances" means, with respect to each Individual
Property, (i) the Lien created by the Mortgage for such Individual Property or
the other Loan Documents, (ii) all Liens and other matters disclosed in the
Title Insurance Policy concerning the Individual Property, or any part thereof
which have been approved by Lender in Lender's discretion, (iii) Liens, if any,
for Impositions with respect to imposed by any Governmental Authority not yet
due or delinquent or being contested in good faith and by appropriate
proceedings in accordance with the Mortgage for such Individual Property, (iv)
without limiting the foregoing, any and all governmental, public utility and
private restrictions, covenants, reservations, easements, licenses or other
agreements of an immaterial nature which may hereafter be granted by each
applicable Borrower which owns the Individual Property after the Closing Date
and which do not materially and adversely affect (unless otherwise approved by
Lender in writing) (a) the ability of any Borrower to pay any of its obligations
to any Person as and when due, (b) the marketability of title to such Individual
Property, (c) the fair market value of such Individual Property, or (d) the use
or operation of such Individual Property as of the Closing Date and thereafter,
(v) rights of existing and future tenants, licensees and concessionaries
pursuant to Leases in effect as of the date hereof or entered into in accordance
with the Loan Documents and/or the Management Agreements, (vi) FF&E Financing
applicable to the Individual Property, (vii) liens in favor of Lender, and
(viii) liens securing any Mezzanine Loan permitted under Section 2.15.
"Permitted Investments" has the meaning provided in the Cash
Collateral Account Agreement.
"Permitted Transfers" shall mean, with respect to each Individual Property and
each Borrower: (i) provided that no Event of Default has occurred and is
continuing, Permitted Encumbrances; (ii) provided that no Event of Default has
occurred and is continuing, all transfers of worn out or obsolete furnishings,
fixtures or equipment that are reasonably promptly replaced with property of
equivalent value and functionality in the ordinary course of operation of each
Individual Property; (iii) provided that no Event of Default has occurred and is
continuing, all Leases; (iv) [intentionally omitted]; (v) provided that no Event
of Default has occurred and is continuing, transfers of Equity Interests which
in the aggregate during the term of the Loan (a) do not exceed forty-nine
percent (49%) of the total interests in any Borrower and (b) do not result in
any partner's, member's or other Person's interest in any Borrower exceeding
forty-nine percent (49%) of the total interests in any Borrower; (vi) provided
that no Event of Default has occurred and is continuing, any other transfer of
Equity Interests provided that (a) Borrower provides thirty (30) days' prior
written notice of such transfer to Lender, (b) prior to any Secondary Market
Transaction, Lender shall have consented to such transfer, such consent not to
be unreasonably withheld or delayed, (c) after any Secondary Market Transaction,
Borrower shall have delivered (or shall have caused to be delivered) to Lender
Rating Agency Confirmation
16
<PAGE>
with respect to such transfer, (d) Borrower shall have delivered (or shall have
caused to be delivered) to Lender and the Rating Agencies opinion letters of
counsel relating to such transfer (including, without limitation, tax, REMIC and
bankruptcy opinions, and a new substantive non-consolidation opinion
substantially identical in form and substance to the substantive
non-consolidation opinion delivered on behalf of Borrower as of the Closing
Date), each in form and substance reasonably satisfactory to Lender (in Lender's
reasonable discretion) and satisfactory to the Rating Agencies, (e) following
the proposed transfer, Borrower shall satisfy all applicable Rating Agency
criteria with respect to bankruptcy remoteness and special purpose entities, and
(f) Borrower pays all reasonable expenses incurred by Lender in connection with
such transfer (provided, that no assumption, transfer or similar fee shall be
payable to Lender in connection with such transfer); (vii) transfers, issuance,
conversions, pledges and redemptions of stock, membership interests and
partnership interests in Ashford Hospitality Trust, Inc., a Maryland
corporation, Ashford OP General Partner LLC, a Delaware limited liability
company, Ashford OP Limited Partner LLC, a Delaware limited liability company,
or Ashford Hospitality Limited Partnership, a Delaware limited partnership (or
their respective successors), (viii) the merger or consolidation of Ashford
Hospitality Trust, Inc., Ashford OP General Partner LLC, Ashford OP Limited
Partner LLC or Ashford Hospitality Limited Partnership (or their respective
successors), (ix) provided that no Event of Default has occurred and is
continuing, the sale of all (but not fewer than all) of the Individual
Properties to another party (collectively, the "Transferee Borrower"), provided
that (a) Borrower provides thirty (30) days' prior written notice of such sale
to Lender, (b) prior to any Secondary Market Transaction, Lender shall have
consented to such sale, such consent not to be unreasonably withheld or delayed,
(c) after any Secondary Market Transaction, Borrower shall have delivered (or
shall have caused to be delivered) to Lender Rating Agency Confirmation with
respect to such sale, (d) the identity, experience, financial condition and
creditworthiness of the Transferee Borrower shall be satisfactory to Lender in
its reasonable discretion, (e) Borrower and/or Transferee Borrower shall have
delivered (or shall have caused to be delivered) to Lender and the Rating
Agencies opinion letters of counsel relating to such sale (including, without
limitation, tax, REMIC and bankruptcy opinions, and a new substantive
non-consolidation opinion), each in form and substance reasonably satisfactory
to Lender (in Lender's reasonable discretion) (provided, that the new
substantive non-consolidation opinion shall be deemed satisfactory to Lender so
long as it is substantially identical in form and substance to the substantive
non-consolidation opinion delivered on behalf of Borrower as of the Closing
Date) and satisfactory to the Rating Agencies, (f) Transferee Borrower shall
satisfy all applicable Rating Agency criteria with respect to bankruptcy
remoteness and special purpose entities, (g) Borrower and Transferee Borrower
shall execute and deliver any and all documentation as may be reasonably
required by Lender or required by the Rating Agencies, as the case may be
(including, without limitation, assumption documents), in form and substance
reasonably satisfactory to Lender or satisfactory to the Rating Agencies, as the
case may be, in Lender's reasonable discretion or the Rating Agencies'
discretion, as applicable, (h) Borrower shall deliver (or cause to be delivered)
to Lender an endorsement to the Title Insurance Policy relating to the change in
the identity of the vestee and the execution and delivery of the transfer
documentation in form and substance reasonably acceptable to Lender and (i)
Borrower or Transferee Borrower pays all reasonable expenses incurred by Lender
in connection with such sale, including, without limitation, Lender's reasonable
attorneys fees and expenses, all recording fees, all fees of the Rating Agencies
and all fees payable to the Title Company for the delivery to Lender of the
endorsement referred to in
17
<PAGE>
clause (h) above (provided, that no assumption, transfer or similar fee shall be
payable to Lender in connection with such sale), and (j) upon closing of the
sale, Borrower shall be released from all obligations accruing from and after
the date of such sale under the Note and the other Loan Documents with respect
to the indebtedness secured by the Individual Properties sold, (x) any lien or
security interest granted directly or indirectly in any Equity Interest in
Borrower as security for a Mezzanine Loan in accordance with Section 2.15, (xi)
any Partial Defeasance or Full Defeasance in accordance with Section 2.10, and
(xii) any Property Substitution in accordance with Section 2.14.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, 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.
"PIP Costs" means the costs described on Exhibit H.
"PIP Guaranty" means the Capital Expenditures and PIP Guaranty in
form and substance satisfactory to Lender, dated as of the Closing Date, from
Ashford Hospitality Limited Partnership to Lender, as the same may thereafter be
from time to time supplemented, amended, modified or extended by one or more
agreements supplemental thereto.
"PIP Work" has the meaning set forth in Section 5.1(W).
"Plan" means an employee benefit or other plan established or
maintained by any Borrower or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Principal Indebtedness" means the principal amount of the entire
Loan outstanding as the same may be increased or decreased, as a result of
prepayment or otherwise, from time to time.
"Prepayment Premium" means, to the extent applicable, with respect
to any prepayment of the Principal Indebtedness or acceleration of the Loan, an
amount equal to the greater of (i) Yield Maintenance and (ii) one percent
(1.00%) of the Principal Indebtedness being prepaid or accelerated.
"Proceeds" means all "proceeds," as such term is defined in the UCC,
and, to the extent not included in such definition, all proceeds whether cash or
non-cash, movable or immovable, tangible or intangible (including all Insurance
Proceeds, all Condemnation Proceeds and proceeds of proceeds), from the
Collateral, including, without limitation, those from the sale, exchange,
transfer, collection, loss, damage, disposition, substitution or replacement of
any of the Collateral and all income, gain, credit, distributions and similar
items from or with respect to the Collateral.
"Property Improvement Plan" has the meaning provided in Section
4.1(QQ).
"Property Substitution" has the meaning provided in Section 2.14.
18
<PAGE>
"Qualified Substitute Property" means the fee simple interest in
real property located in the United States of America, together with all
buildings and other improvements thereon and leasehold interests therein, added
to the Property subject to the Liens of the Loan Documents in connection with a
Property Substitution pursuant to Section 2.14 after satisfaction of the
conditions described therein. No Qualified Substitute Property may be subject to
a ground lease.
"Qualified Successor Borrower" means a Single-Purpose Entity that
assumes the Loan in connection with a Property Substitution pursuant to Section
2.14 and that is wholly owned (directly or indirectly) by Ashford Hospitality
Limited Partnership.
"Rating Agencies" means Fitch, Inc., Moody's Investors Service,
Inc., S&P, and Dominion Bond Rating Service Limited, or any successor thereto,
and any other nationally recognized statistical rating organization but only to
the extent that any of the foregoing have been or will be engaged by Lender or
its designees in connection with or in anticipation of a Secondary Market
Transaction (each, individually a "Rating Agency").
"Rating Agency Confirmation" means a written confirmation from each
of the Rating Agencies rating any securities issued in connection with a
Secondary Market Transaction that an action shall not result in a downgrade,
withdrawal or qualification of any securities issued in connection with a
Secondary Market Transaction.
"Recourse Distributions" has the meaning provided in Section 8.14.
"Release" with respect to any Hazardous Substance includes but is
not limited to any release, deposit, discharge, emission, leaking, leaching,
spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping,
dumping, disposing or other movement of Hazardous Substances.
"Remediation" (and its correlative terms) includes but is not
limited to any response, remedial, removal, or corrective action; any activity
to clean up, detoxify, decontaminate, contain or otherwise remediate any
Hazardous Substance; any actions to prevent, cure or mitigate any Release of any
Hazardous Substance; any action to comply with any Environmental Laws or with
any permits issued pursuant thereto; any inspection, investigation, study,
monitoring, assessment, audit, sampling and testing, laboratory or other
analysis, or evaluation relating to any Hazardous Substances or to anything
referred to herein, including the preparation of any plans, studies, reports or
documents with respect thereto.
"REMIC" means a real estate mortgage investment conduit as defined
under Section 860D of the Code.
"Rents means, collectively, "Rents" as defined in each Mortgage.
"Required Debt Service Payment" means, on any Payment Date, the Debt
Service then due and payable by Borrowers.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.
19
<PAGE>
"Secondary Market Transaction" shall have the meaning set forth in
Section 2.13.
"Secretary's Certificate" means, with respect to each Borrower and
Manager, the certificate in form and substance satisfactory to Lender in
Lender's discretion dated as of the Closing Date.
"Securities Act" has the meaning provided in Section 2.13.
"Single Member LLC" means a limited liability company that (i) is
either (a) a single member limited liability company or (b) a multiple member
limited liability company that does not have a Single-Purpose Entity that owns
at least one percent (1%) of the equity interests in such limited liability
company as its managing member, and (ii) is organized under the laws of the
State of Delaware.
"Single-Purpose Entity" means a corporation, limited partnership, or
limited liability company which, at all times since its formation and thereafter
(i) was and will be organized solely for the purpose of (w) owning, leasing,
operating, managing, financing and maintaining any or all of the Individual
Properties or (x) [intentionally omitted] or (y) acting as the managing member
of the limited liability company which owns any or all of the Individual
Properties or (z) acting as the general partner of a limited partnership which
owns any or all of the Individual Property, (ii) has not and will not engage in
any business unrelated to (x) the ownership, leasing, operating, managing,
financing and maintaining of any or all of the Individual Properties or (y)
acting as a member of a limited liability company which owns any or all of the
Individual Properties or (z) acting as a general partner of a limited
partnership which owns any or all of the Individual Properties, (iii) has not
and will not have any assets other than (x) those related to any or all of the
Individual Properties or (y) its member interest in the limited liability
company which owns any or all of the Individual Properties or (z) its general
partnership interest in the limited partnership which owns any or all of the
Individual Properties, as applicable, (iv) has not and will not engage in, seek
or consent to any dissolution, winding up, liquidation, consolidation or merger,
and, except as otherwise expressly permitted by this Agreement, has not and will
not engage in, seek or consent to any asset sale, transfer of partnership or
membership or shareholder interests, or amendment of its limited partnership
agreement, articles of incorporation, articles of organization, certificate of
formation or operating agreement (as applicable), (v) if such entity is a
limited partnership, has and will have at all times while the Loan is
outstanding as its only general partners, general partners which are and will be
Single-Purpose Entities which are corporations or a Single Member LLC, (vi) if
such entity is a corporation or a Single Member LLC, at all relevant times while
the Loan is outstanding, has and will have at least two Independent Directors,
(vii) the board of directors of such entity (or if such entity is a Single
Member LLC, the entity, each member, each director, each manager, the board of
managers, if any, and all other Persons on behalf of such entity), has not taken
and will not take any action requiring the unanimous affirmative vote of one
hundred percent (100%) of the members and all directors and managers, as
applicable, unless all of the directors or managers, as applicable, including,
without limitation, all Independent Directors, shall have participated in such
vote, (viii) has not and will not fail to correct any known misunderstanding
regarding the separate identity of such entity, (ix) if such entity is a limited
liability company (other than a Single Member LLC), has and will have at least
one member that is and will be a Single-Purpose Entity which is and will be a
corporation, and such corporation is and will be the managing
20
<PAGE>
member of such limited liability company, (x) without the unanimous consent of
all of the partners, directors or managers (including, without limitation, all
Independent Directors) or members, as applicable, has not and will not with
respect to itself or to any other entity in which it has a direct or indirect
legal or beneficial ownership interest (w) file a bankruptcy, insolvency or
reorganization petition or otherwise institute insolvency proceedings or
otherwise seek any relief under any laws relating to the relief from debts or
the protection of debtors generally; (x) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar
official for such entity or such entity's properties; (y) make any assignment
for the benefit of such entity's creditors; or (z) take any action that might
cause such entity to become insolvent, (xi) has maintained and will maintain its
accounts, books and records separate from any other Person or entity, (xii) has
maintained and will maintain its books, records, resolutions and agreements as
official records, (xiii) has not commingled and will not commingle its funds or
assets with those of any other entity except as permitted by the Loan Documents,
(xiv) has held and will hold its assets in its own name, (xv) has conducted and
will conduct its business in its name and will not permit its name, identity or
type of entity to be changed, (xvi) has maintained and will maintain its
financial statements, accounting records and other entity documents separate
from any other Person or entity, except to the extent that such Person or entity
is required to file consolidated tax returns by law; provided, that any such
consolidated financial statement shall contain a footnote indicating that
separate assets and liabilities are neither available to pay the debts of the
consolidated entity nor constitute obligations of the consolidated entity,
(xvii) has paid and will pay its own liabilities out of its own funds and
assets, (xviii) has observed and will observe all partnership, corporate or
limited liability company formalities as applicable, (xix) has maintained and
will maintain an arms-length relationship with its Affiliates, (xx) if (x) such
entity owns all of any portion of any or all of the Individual Properties, has
and will have no indebtedness other than the Indebtedness, unsecured trade
payables in the ordinary course of business relating to the ownership and
operation of such Individual Property which (1) are not evidenced by a
promissory note (2) when aggregated with the unsecured trade payables of all
other Borrowers do not exceed, at any time, a maximum amount of two and one-half
percent (2.5%) of the original Loan Amount and (3) are paid within 60 days of
the date incurred (unless same are being contested in accordance with the terms
of this Agreement), or other indebtedness that has been fully discharged on or
prior to the date hereof, or (y) if such entity acts as the general partner of a
limited partnership which owns such Individual Property, has and will have no
indebtedness other than unsecured trade payables in the ordinary course of
business relating to acting as general partner of the limited partnership which
owns such Individual Property which (1) do not exceed, at any time, $10,000 and
(2) are paid within 60 days of the date incurred, or (z) if such entity acts as
a managing member of a limited liability company which owns such Individual
Property, has and will have no indebtedness other than unsecured trade payables
in the ordinary course of business relating to acting as a member of the limited
liability company which owns such Individual Property which (1) do not exceed,
at any time, $10,000 and (2) are paid within 60 days of the date incurred, (xxi)
has not and will not assume or guarantee or become obligated for the debts of
any other entity or hold out its credit as being available to satisfy the
obligations of any other entity except for the Indebtedness, (xxii) has not
acquired and will not acquire obligations or securities of its partners, members
or shareholders, (xxiii) has allocated and will allocate fairly and reasonably
shared expenses, including, without limitation, shared office space and use
separate stationery, invoices and checks, (xxiv) except pursuant hereto, has not
and will not pledge its assets for the benefit of
21
<PAGE>
any other person or entity, (xxv) has held and identified itself and will hold
itself out and identify itself as a separate and distinct entity under its own
name and not as a division or part of any other person or entity, (xxvi) has not
made and will not make loans to any person or entity, (xxvii) has not and will
not identify its partners, members or shareholders, or any affiliates of any of
them as a division or part of it, (xxviii) if such entity is a limited liability
company (other than a Single Member LLC), such entity shall dissolve only upon
the bankruptcy of the managing member, and such entity's articles of
organization, certificate of formation and/or operating agreement, as
applicable, shall contain such provision, (xxix) has not entered and will not
enter into or be a party to, any transaction with its partners, members,
shareholders or its affiliates except in the ordinary course of its business and
on terms which are intrinsically fair and are no less favorable to it than would
be obtained in a comparable arms-length transaction with an unrelated third
party and which are fully disclosed to Lender in writing in advance, (xxx) has
paid and will pay the salaries of its own employees from its own funds, (xxxi)
has maintained and intends to maintain adequate capital in light of its
contemplated business operations, (xxxii) if such entity is a limited liability
company (other than a Single Member LLC) or limited partnership, and such entity
has one or more managing members or general partners, as applicable, then such
entity shall continue (and not dissolve) for so long as a solvent managing
member or general partner, as applicable, exists and such entity's
organizational documents shall contain such provision, (xxxiii) if such entity
is a Single Member LLC, its organizational documents shall provide that, as long
as any portion of the Indebtedness remains outstanding, upon the occurrence of
any event that causes the last remaining member of such Single Member LLC to
cease to be a member of such Single Member LLC (other than (y) upon an
assignment by such member of all of its limited liability company interest in
such Single Member LLC and the admission of the transferee, if permitted
pursuant to the organizational documents of such Single Member LLC and the Loan
Documents, or (z) the resignation of such member and the admission of an
additional member of such Single Member LLC, if permitted pursuant to the
organizational documents of such Single Member LLC and the Loan Documents), the
individuals acting as the Independent Directors of such Single Member LLC shall,
without any action of any Person and simultaneously with the last remaining
member of the Single Member LLC ceasing to be a member of the Single Member LLC,
automatically be admitted as non-economic members of the Single Member LLC (the
"Special Member") and shall preserve and continue the existence of the Single
Member LLC without dissolution, and (xxxiv) if such entity is a Single Member
LLC, its organizational documents shall provide that for so long as any portion
of the Indebtedness is outstanding, no Special Member may resign or transfer its
rights as Special Member unless (y) a successor Special Member has been admitted
to such Single Member LLC as a Special Member, and (z) such successor Special
Member has also accepted its appointment as the Independent Director.
"Special Member" has the meaning provided in the definition of
"Single-Purpose Entity."
"SPE Equity Owner" means, with respect to each Borrower, Ruby Senior
General Partner III LLC, a Delaware limited liability company.
"SPE Equity Owner's Certificate" means the SPE Equity Owner's
Certificate in form and substance satisfactory to Lender dated as of the Closing
Date.
22
<PAGE>
"Start-Up Day" means the "start-up day," within the meaning of
Section 860G(a)(9) of the Code, of any REMIC that holds the Notes.
"Sub-Account" shall have the meaning provided in Section 2.11(c).
"Successor Obligor" has the meaning provided in Section 2.10.
"Survey" means, with respect to each Individual Property, a survey
of such Individual Property satisfactory to Lender, (i) prepared by a registered
Independent surveyor satisfactory to Lender and Title Insurer and containing a
surveyor's certification satisfactory to Lender, (ii) together with a metes and
bounds or platted lot/block legal description of the land corresponding with the
survey, and (iii) prepared based on a scope of work determined by Lender in
Lender's discretion.
"Taking" has the meaning, with respect to each Individual Property,
provided in the Mortgage for such Individual Property.
"Tax Fair Market Value" means, with respect to each Individual
Property, the fair market value of such Individual Property, and (x) shall not
include the value of any personal property or other property that is not an
"interest in real property" within the meaning of Treasury Regulation Sections
1.860G-2 and 1.856-3(c), or is not "qualifying real property" within the meaning
of Treasury Regulation Section 1.593-11(b)(iv), and (y) shall be reduced by the
"adjusted issue price" (within the meaning of Code Section 1272(a)(4)) (the "Tax
Adjusted Issue Price") of any indebtedness, other than the Loan, secured by a
Lien affecting such Individual Property, which Lien is prior to or on a parity
with the Lien created under the Mortgage for such Individual Property.
"Title Instruction Letter" means an instruction letter in form and
substance satisfactory to Lender in Lender's discretion.
"Title Insurance Policy" means, with respect to each Individual
Property, a loan policy of title insurance for such Individual Property issued
by Title Insurer with respect to such Individual Property in an amount
acceptable to Lender and insuring the first priority lien in favor of Lender
created by the Mortgage for such Individual Property, in each case acceptable to
Lender in Lender's discretion.
"Title Insurer" means First American Title Insurance Company and
Stewart Title Guaranty Company, as co-insurers.
"Transaction Costs" means all fees, costs, expenses and
disbursements of Lender relating to the Transactions, including, without
limitation, all appraisal fees, legal fees, accounting fees and the costs and
expenses described in Section 8.24.
"Transactions" means the transactions contemplated by the Loan
Documents.
"Transfer" means any conveyance, transfer (including, without
limitation, any transfer of any direct or indirect legal or beneficial interest
(including, without limitation, any profit interest) in any Borrower or any SPE
Equity Owner), any sale, any Lease (including,
23
<PAGE>
without limitation, any amendment, extension, modification, waiver or renewal
thereof), or any Lien, whether by law or otherwise, of, on or affecting any
Collateral, any Borrower or any SPE Equity Owner, other than a Permitted
Transfer.
"UCC" means, with respect to any Collateral, the Uniform Commercial
Code in effect in the jurisdiction in which the relevant Collateral is located.
"UCC Searches" has the meaning provided in Section 3.1.
"U.S. Obligations" means obligations or securities not subject to
prepayment, call or early redemption which are direct obligations of, or
obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America.
"Yield Maintenance" means, if all or any portion of the Note is
accelerated or prepaid, the amount that, when added to the amount otherwise due
as a result of such acceleration or prepayment, would be sufficient to purchase
U.S. Obligations (a) having maturity dates on or prior to, but as close as
possible to, successive scheduled Payment Dates (after the date of such
acceleration of the Note) upon which Payment Dates interest and principal
payments are required under the Note through the Maturity Date and (b) in
amounts sufficient to pay all scheduled principal and interest payments on the
Note on each Payment Date through and including the Maturity Date; provided,
however, under no circumstances shall Yield Maintenance be less than zero.
ARTICLE 2
GENERAL TERMS
Section 2.1. Amount of the Loan. Lender shall lend to Borrowers a total
aggregate amount equal to the Loan Amount.
Section 2.2. Use of Proceeds. Proceeds of the Loan shall be used for the
following purposes: (a) to pay the acquisition costs for each Individual
Property by Borrower, (b) to fund any upfront reserves or escrow amounts
required hereunder, and (c) to pay any Transaction Costs. Any excess will be
available to Borrowers (and appointed at Borrower's request) and may be used for
any lawful purpose.
Section 2.3. Security for the Loan. The Notes and each Borrower's
obligations hereunder and under the other Loan Documents shall be secured by all
Mortgages, the Assignments of Leases, the Assignments of Agreements, the
Manager's Subordinations, and the security interests and Liens granted in this
Agreement and in the other Loan Documents.
Section 2.4. Borrowers' Notes.
(a) Each Borrowers' obligation to pay the principal of and
interest on the Loan (including Late Charges, Default Rate interest, and the
Prepayment Premium, if any), shall be evidenced by this Agreement and by the
Notes, duly executed and delivered by all
24
<PAGE>
Borrowers. The Note shall be payable as to principal, interest, Late Charges,
Default Rate interest and Prepayment Premium, if any, as specified in this
Agreement, with a final maturity on the Maturity Date. Borrowers shall pay all
outstanding Indebtedness on the Maturity Date.
(b) Lender is hereby authorized, at its option, to endorse on
a schedule attached to the Notes (or on a continuation of such schedule attached
to the Notes and made a part thereof) an appropriate notation evidencing the
date and amount of each payment of principal, interest, Late Charges, Default
Rate interest and Prepayment Premium, if any, in respect thereof, which schedule
shall be made available to Borrowers, at Borrowers' sole cost and expense on
reasonable advance notice, for examination at Lender's offices.
Section 2.5. Principal, Interest and Other Payments.
(a) Accrual of Interest. Interest shall accrue on the
outstanding principal balance of the Notes and all other amounts due to Lender
under the Loan Documents at the Interest Rate.
(b) Monthly Payments of Interest and Principal.
(i) On the Payment Date occurring in August, 2005, and
on each Payment Date thereafter to and including the Payment Date
occurring in July, 2010, Borrower shall pay to Lender a monthly payment of
interest only on the unpaid Principal Indebtedness, in the amounts set
forth on the amortization schedule attached hereto as Schedule 2, which
payments shall be calculated using the Interest Rate.
(ii) On the Payment Date occurring in August, 2010, and
on each Payment Date thereafter, Borrower shall pay to Lender a monthly
constant payment in the amount of $193,005.56,which amount is calculated
by using the Interest Rate and a 25-year amortization schedule.
(c) Payment Dates. All payments required to be made pursuant
to paragraph (b) above shall be made beginning on the first Payment Date;
provided, however, that Borrower shall pay interest for the first Interest
Accrual Period on the Closing Date.
(d) Calculation of Interest. Interest shall accrue on the
outstanding principal balance of the Loan and all other amounts due to Lender
under the Loan Documents commencing upon the Closing Date. Interest shall be
computed on the actual number of days elapsed, based on a 360 day year.
(e) Default Rate Interest. Upon the occurrence and during the
continuance of an Event of Default, and at the sole option of Lender and without
need for notice to the Borrowers, the entire unpaid amount outstanding hereunder
and under the Notes will bear interest at the Default Rate.
(f) Late Charge. If Borrowers fail to make any payment of any
sums due under the Loan Documents on the date when the same is due, Borrowers
shall pay a Late Charge.
25
<PAGE>
(g) Other Payments. On each Payment Date, Borrowers shall pay
to Lender (for allocation as set forth herein) the Basic Carry Costs Monthly
Installment, the Required Debt Service Payment, the Capital Reserve Monthly
Installment and any and all fees and other amounts then due to the Cash
Collateral Account Bank, all for the then Current Interest Accrual Period,
except as otherwise provided in Section 2.11.
(h) Maturity Date. On the Maturity Date, Borrowers shall pay
to Lender all amounts owing under the Loan Documents including, without
limitation, interest, principal, Late Charges, Default Rate interest and any
Prepayment Premium.
(i) Prepayment Premium. Upon any prepayment of the Principal
Indebtedness, including, without limitation, in connection with an acceleration
of the Loan, but excluding a prepayment made in connection with Section 2.6(b)
hereof, Borrowers shall pay to Lender on the date of such prepayment or
acceleration of the Loan the Prepayment Premium applicable thereto. All
Prepayment Premium payments hereunder shall be deemed earned by Lender upon the
funding of the Loan.
Section 2.6. Prepayment.
(a) Provided no Event of Default has occurred and is
continuing, Borrower may voluntarily prepay the Indebtedness in full and not in
part (i) only on or prior to the day that is two (2) years after the Start-Up
Day, and such prepayment shall be subject to payment of Prepayment Premium, and
(ii) only on or after the date which is sixty (60) days prior to the Maturity
Date and there shall be no Prepayment Premium or penalty assessed against
Borrower by reason of such prepayment; provided, however, that Borrower shall
give to Lender at least fifteen (15) days prior written notice of any such
prepayment. Any prepayment of the Loan shall be made on a Payment Date, and if
any such prepayment is not made on a Payment Date, Borrower shall also pay to
Lender interest calculated at the Interest Rate that would have accrued on such
prepaid Principal Indebtedness through the end of the Interest Accrual Period in
which such prepayment occurs. Notwithstanding the foregoing, Permitted
Transfers, defeasance in accordance with Section 2.10 and Property Substitutions
in accordance with Section 2.14 are not prepayments.
(b) Subject to Section 8.40, at any time during the term of
the Loan, if any Borrower is required by Lender under the provisions of any
Mortgage to prepay the Loan or any portion thereof in the event of damage to or
destruction of, or a Taking of any Individual Property, such Borrower shall pay
any Insurance Proceeds or Condemnation proceeds in the following manner and
order of priority (i) first, to prepay the Loan to the full extent of the
Insurance Proceeds or the Condemnation Proceeds, as applicable, to the extent of
the Allocated Loan Amount for the applicable Individual Property, and (ii) to
the Borrowers.
(c) All prepayments of the Indebtedness made pursuant to this
Section shall be applied by Lender in accordance with the provisions of Section
2.7 hereof.
(d) No Borrower shall be permitted at any time to prepay all
or any part of the Loan except as expressly provided in this Section.
26
<PAGE>
Section 2.7. Application of Payments.
At all times, all proceeds of repayment, including without
limitation any payment or recovery on the Collateral and any prepayments on the
Loan, shall be applied to the Note and to such amounts payable by Borrowers
under the Loan Documents and in such order and in such manner as Lender shall
elect in Lender's discretion.
Section 2.8. Payment of Debt Service, Method and Place of Payment.
(a) Except as otherwise specifically provided herein, all
payments and prepayments under this Agreement and the Notes shall be made to
Lender not later than 12:00 noon, New York City time, on the date when due, and
shall be made in lawful money of the United States of America in federal or
other immediately available funds to an account specified to Borrower by Lender
in writing, and any funds received by Lender after such time, for all purposes
hereof, shall be deemed to have been paid on the next succeeding Business Day.
(b) All payments made by any Borrower hereunder or by any
Borrower under the other Loan Documents, shall be made irrespective of, and
without any deduction for, any set-offs or counterclaims.
Section 2.9. Taxes.
All payments made by any Borrower under this Agreement and under the
other Loan Documents shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, and
all liabilities with respect thereto, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority (all such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions,
withholdings and liabilities, collectively, "Applicable Taxes"). If any Borrower
shall be required by law to deduct any Applicable Taxes from or in respect of
any sum payable hereunder to Lender, the following shall apply: (i) such
Borrower shall make all such required deductions, (ii) the sum payable to Lender
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.9(a)), Lender receives an amount equal to the sum Lender would
have received had no such deductions been made and (iii) such Borrower shall pay
the full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law. Payments made pursuant to this Section 2.9(a)
shall be made within ten (10) Business Days after Lender makes written demand
therefor.
Section 2.10. Defeasance.
Borrower shall not be permitted at any time to defease all or any
portion of the Loan except as expressly provided in this Section 2.10. Provided
that no Event of Default has occurred and is continuing, after the date which is
two (2) years after the Start-Up Day of the last Note securitized, Borrower may
voluntarily defease all of the Loan (a "Full Defeasance") or a portion of the
Loan (a "Partial Defeasance"), in either case, subject to the satisfaction of
the following conditions precedent:
27
<PAGE>
(a) Any Full Defeasance or Partial Defeasance of the Loan by
Borrower shall be made on a Payment Date,
(b) Borrower shall provide not less than fifteen (15) days
prior written notice to Lender specifying (i) a Payment Date (the "Defeasance
Release Date") on which the Full Defeasance or Partial Defeasance is to occur,
and (ii) in the event of a Partial Defeasance, the Individual Property proposed
to be defeased; provided, that, Borrower shall be required to defease the Loan
on the Defeasance Release Date specified in such notice unless such notice is
revoked in writing by Borrower prior to the such Defeasance Release Date in
which event Borrower shall immediately reimburse Lender for any reasonable costs
incurred by Lender in connection with Borrower's giving of such notice and
revocation,
(c) Borrower shall have paid to Lender all principal and
interest accrued and unpaid on the Principal Indebtedness to and including the
Defeasance Release Date,
(d) Borrower shall pay to Lender all reasonable out-of-pocket
fees and expenses associated with the Full Defeasance or Partial Defeasance, as
applicable (including, without limitation, fees of Rating Agencies and
accountants, and fees incurred in connection with the delivery of opinion
letters related to such Full Defeasance or Partial Defeasance, as applicable),
reasonable fees and out-of-pocket costs of any loan servicer (if any) in
connection with the Full Defeasance or Partial Defeasance, as applicable, and
all other sums then due and payable under the Loan Documents,
(e) Borrower shall either deposit with Lender an amount equal
to the Defeasance Deposit, or, at Lender's request, deliver to Lender the
Defeasance Collateral. In connection with the foregoing, Borrower appoints
Lender as Borrower's agent for the purpose of applying the Defeasance Deposit to
purchase the Defeasance Collateral,
(f) Borrower shall execute and deliver to Lender all documents
reasonably required by Lender (i) in the case of a Full Defeasance, to amend and
restate the Note in a principal amount equal to the then outstanding principal
balance of the Loan (the "Full Defeased Note"), and (ii) in the case of a
Partial Defeasance, to issue two substitute notes as follows: (A) one promissory
note in a principal amount equal to 125% of the Allocated Loan Amount of the
Individual Property to be defeased (the "Defeased Note"); and (B) the other
promissory note having a principal balance equal to the Allocated Loan Amounts
of all Individual Properties (including the Individual Property being defeased)
less the amount of the Defeased Note (the "Undefeased Note"). The Defeased Note
and the Undefeased Note shall have terms identical to the terms of the Note,
except for the principal balance and a pro rata allocation of the Required Debt
Service Payment. Neither a Full Defeased Note nor a Defeased Note may be the
subject of any further defeasance; after a Partial Defeasance, all references
herein and in the other Loan Documents to "Note" shall be deemed to mean the
Undefeased Note, unless expressly provided otherwise,
28
<PAGE>
(g) Borrower shall deliver to Lender the following items:
(i) a security agreement, in form and substance
reasonably satisfactory to Lender, creating a first priority perfected
Lien on the Defeasance Deposit and the Defeasance Collateral (the
"Security Agreement"),
(ii) for execution by Lender, a release of each
applicable Individual Property being defeased from the lien of the
applicable Mortgage in a form appropriate for the jurisdiction in which
such Individual Property is located,
(iii) an Officer's Certificate of Borrower certifying
that the requirements set forth in this Section 2.10 have been satisfied
including, without limitation, that no Event of Default has occurred and
is continuing,
(iv) an opinion of counsel in form and substance
reasonably satisfactory to Lender stating, among other things, (A) that,
the Defeasance Collateral has been duly and validly assigned and delivered
to Lender and Lender has a first priority perfected security interest in
and Lien on the Defeasance Deposit and a first priority perfected security
interest in and Lien on the Defeasance Collateral and the Proceeds thereof
and (B) that the subject Partial Defeasance will not adversely affect the
status of any REMIC formed in connection with a Secondary Market
Transaction, and
(v) such other certificates, documents or instruments as
Lender may reasonably request including, without limitation, (A) written
confirmation from the relevant Rating Agencies that such Partial
Defeasance will not cause any Rating Agency to withdraw, qualify or
downgrade the then-applicable rating on any security issued in connection
with any Secondary Market Transaction and (B) a certificate from an
Independent certified public accountant certifying that the Defeasance
Collateral complies with all of the requirements of this Section 2.10, and
(h) In the case of a Partial Defeasance, the Debt Service
Coverage Ratio with respect to the Undefeased Note shall be equal to or greater
than (i) 1.57:1.00, and (ii) the Debt Service Coverage Ratio with respect to the
Loan for the trailing twelve (12) months immediately prior to such Partial
Defeasance.
Upon compliance with the requirements of this Section 2.10, the
Individual Property which is the subject of such Full Defeasance or Partial
Defeasance shall be released from the lien of the applicable Mortgage, and shall
thereafter no longer be subject to restrictions on transfer set forth herein.
In connection with a defeasance of the Loan, Borrower shall assign
to an entity, which entity which shall be a Special-Purpose Entity (the
"Successor Obligor"), all of Borrower's obligations under the Full Defeased Note
or Defeased Note, as the case may be, the other Loan Documents and the Security
Agreement, together with the pledged Defeasance Collateral. The Successor
Obligor shall assume, in a writing or writings reasonably satisfactory to
Lender, all of Borrower's obligations under the Full Defeased Note or the
Defeased Note, as the case may be, the other Loan Documents and the Security
Agreement and, upon such assignment, Borrower shall, except as set forth herein,
be relieved of its obligations hereunder.
29
<PAGE>
If a Successor Borrower assumes Borrower's obligations, Lender may require as a
condition to such defeasance, such additional legal opinions from Borrower's or
Successor Obligor's counsel as Lender reasonably deems necessary to confirm the
valid creation and authority of the Successor Borrower (including a
non-consolidation opinion), the assignment and assumption of the Loan, the
Security Agreement and the Defeasance Collateral between Borrower and Successor
Borrower, and the enforceability of the assignment documents and of the Loan
Documents as the obligation of Successor Borrower. Borrower shall pay all
out-of-pocket costs and expenses incurred by Lender, including Lender's
reasonable attorney's fees and expenses, incurred in connection with Successor
Borrower's assumption of the Loan, the Security Agreement and the Defeasance
Collateral.
Nothing in this Section 2.10 shall release Borrower from any
liability or obligation relating to any environmental matters arising under
Section 5.1(F).
Section 2.11. Central Cash Management.
(a) Manager Account.
(i) Borrowers shall cause all Rents and all other items
of Gross Revenue to be deposited or transferred directly into the related
Manager Account immediately upon payment of the same. Without in any way
limiting Borrowers' obligations pursuant to the preceding sentence,
Borrowers and each Manager shall deposit or cause the transfer of directly
into the relevant Manager Account all Rents, other items of Gross Revenue
and all Credit Card Receivables received by any Borrower and each Manager
in violation or contradiction of the preceding sentence within one (1)
Business Day after receipt thereof.
(ii) Any breach of this Section by any Borrower shall be
an Event of Default; provided, however, that any breach of this Section
that arises by reason of any act or omission within the exclusive control
or responsibility of a Manager operating under a Management Agreement
shall not be an Event of Default hereunder so long as Borrower is taking
prompt, diligent and commercially reasonable action to require such
Manager to remedy such Event of Default.
(b) Cash Collateral Account. Pursuant to each Manager's
Subordination, Borrowers will authorize and direct each Manager to promptly
transfer all funds due and payable to Borrower (in accordance with the terms of
the Management Agreement and the Manager's Subordination) deposited in the
Manager Account for such Borrower's Individual Property to a cash collateral
account that is an Eligible Account established by Lender in Lender's name (the
"Cash Collateral Account"). Lender may elect to change the financial institution
at which the Cash Collateral Account shall be maintained. Lender shall give
Borrowers not less than thirty (30) days prior notice of each change. The Cash
Collateral Account shall be under the sole dominion and control of Lender. No
Borrower shall have any right of withdrawal in respect to the Cash Collateral
Account.
(c) Establishment of Sub-Accounts. The Cash Collateral Account
shall contain a Debt Service Payment Sub-Account, a Basic Carrying Costs
Sub-Account, a
30
<PAGE>
Capital Reserve Sub-Account, a Cash Management Fee Sub-Account, a Hotel
Operations Sub-Account, a Deferred Maintenance Sub-Account and a Mezzanine Debt
Service Payment Sub-Account (if applicable), each of which accounts
(individually, a "Sub-Account" and collectively, the "Sub-Accounts") shall be an
Eligible Account to which certain funds shall be allocated and from which
disbursements shall be made pursuant to the terms of this Loan Agreement.
(d) Monthly Funding of Sub-Accounts. During each Interest
Accrual Period and, except as provided below, during the term of the Loan
commencing with the Interest Accrual Period in which the Closing Date occurs
(each, the "Current Interest Accrual Period"), Lender shall allocate all funds
then on deposit in the Cash Collateral Account among the Sub-Accounts as follows
and in the following priority:
(i) first, to the Basic Carrying Costs Sub-Account,
until an amount equal to the Basic Carrying Costs Monthly Installment for
the Current Interest Accrual Period has been allocated to the Basic
Carrying Costs Sub-Account, provided, that so long as (A) Marriott is
Manager of each Individual Property, (B) no default has occurred and is
continuing under the Management Agreement applicable to each Individual
Property beyond any applicable notice and cure periods set forth therein,
(C) Marriott is making all required payments as and when due pursuant to
the Management Agreement and/or the Manager's Subordination, and (D) with
respect to Impositions, sufficient funds have been deducted from Gross
Revenues (as defined under the applicable Management Agreement) to provide
for payment in full of the next due installments of Impositions in
accordance with the terms hereof, as reasonably determined by Lender based
on Marriott's periodic reporting obligations under the Management
Agreement and/or Manager's Subordination or otherwise, funds shall be
allocated to the Basic Carrying Costs Sub-Account pursuant to this Section
2.11(d)(ii) only in an amount equal to the portion of the Basic Carrying
Costs Monthly Installment relating to Impositions not otherwise reserved
for and paid by Manager pursuant to the Management Agreement;
(ii) second, to the Debt Service Payment Sub-Account,
until an amount equal to the Required Debt Service Payment for the Payment
Date immediately after the Current Interest Accrual Period has been
allocated to the Debt Service Payment Sub-Account;
(iii) third, to the Capital Reserve Sub-Account, until
an amount equal to the Capital Reserve Monthly Installment for the Current
Interest Accrual Period has been allocated to the Capital Reserve
Sub-Account (and, upon calculation of the Capital Reserve True-Up Amount,
if the Capital Reserve True-Up Amount is a positive number, until an
amount equal to the Capital Reserve True-Up Amount has been allocated to
the Capital Reserve Sub-Account), provided, that so long as (A) Marriott
is Manager of each Individual Property, (B) no default has occurred and is
continuing under the Management Agreement applicable to each Individual
Property beyond any applicable notice and cure periods set forth therein,
and (C) Marriott is making all required payments as and when due pursuant
to the Management Agreement and/or the Manager's Subordination, funds
shall be allocated to the Capital Reserve Sub-Account pursuant to this
Section 2.11(d)(iv) only in an amount equal to the portion of the Capital
31
<PAGE>
Reserve Monthly Installment and the Capital Reserve True-Up Amount
relating to Capital Improvement Costs not otherwise reserved for and paid
by Manager pursuant to the Management Agreement and/or the Manager's
Subordination;
(iv) fourth, funds sufficient to pay the amounts then
due Cash Collateral Account Bank shall be deposited in the Cash Management
Fee Sub-Account;
(v) fifth, to the Hotel Operations Sub-Account, until an
amount equal to the amount of operating expenses for such Interest Accrual
Period as set forth on the Approved Budget has been allocated to the Hotel
Operations Sub-Account (provided, however, that such amounts shall be
deemed inclusive of any amounts disbursed in accordance with Section
2.11(f) below), provided, that so long as (A) Marriott is Manager of each
Individual Property, (B) no default has occurred and is continuing under
the Management Agreement applicable to each Individual Property beyond any
applicable notice and cure periods set forth therein, and (C) Marriott is
making all required payments as and when due pursuant to the Management
Agreement and/or the Manager's Subordination, no funds shall be allocated
to the Hotel Operations Sub-Account pursuant to this Section 2.11(d)(vi);
(vi) sixth, to the Hotel Operations Sub-Account, until
an amount equal to any Extra Funds approved pursuant to Section 2.11(f)
has been allocated to such Sub-Account, provided, that so long as (A)
Marriott is Manager of each Individual Property, (B) no default has
occurred and is continuing under the Management Agreement applicable to
each Individual Property beyond any applicable notice and cure periods set
forth therein, and (C) Marriott is making all required payments as and
when due pursuant to the Management Agreement and/or the Manager's
Subordination, no funds shall be allocated to the Hotel Operations
Sub-Account pursuant to this Section 2.11(d)(vii);
(vii) seventh, in the event that a permitted Mezzanine
Financing under Section 2.15 has occurred, for the benefit of the
Mezzanine Borrower, to the Mezzanine Debt Service Payment Sub-Account,
until an amount equal to the scheduled monthly interest payment portion of
Mezzanine Debt Service for the applicable monthly payment date set forth
in the Mezzanine Loan Agreement for the then current interest accrual
period set forth in the Mezzanine Loan Agreement has been allocated to the
Mezzanine Debt Service Payment Sub-Account;
(viii) eighth, provided that (i) no Event of Default has
occurred and is continuing and (ii) Lender has received all financial
information described in Section 5.1(Q) for the most recent periods for
which the same are due, Lender agrees that in each Current Interest
Accrual Period any amounts deposited into or remaining in the Cash
Collateral Account after the minimum amounts set forth in clauses (i)
through (vii), inclusive, above, have been satisfied with respect to the
Current Interest Accrual Period and any periods prior thereto shall be
disbursed by Lender on a weekly basis, at Borrowers' expense, to (A) at
any time while the Mezzanine Loan is outstanding, the Mezzanine Deposit
Account (to the extent, if any, required under the Mezzanine Loan
Agreement), and (B) at any time after the Mezzanine Loan has been repaid
in full or at
32
<PAGE>
any time during which there is no Mezzanine Loan, such account that
Borrowers may request in writing. Lender and its agents shall not be
responsible for monitoring Borrowers' use of any funds disbursed from the
Cash Collateral Account or any of the Sub-Accounts. If an Event of Default
has occurred and is continuing, any amounts deposited into or remaining in
the Cash Collateral Account shall be for the account of Lender and may be
withdrawn by Lender to be applied in any manner at any time to amounts
owing under the Loan Documents as Lender may elect in Lender's discretion
or maintained in the Cash Collateral Account as security for the
Indebtedness.
If an Event of Default has occurred and exists or if on any Payment
Date the balance in any Sub-Account is insufficient to make the required payment
due from such Sub-Account, Lender may, in its sole discretion, in addition to
any other rights and remedies available hereunder, withdraw funds from any other
Sub-Account to (a) pay such deficiency, or (b) apply to payment of the
Indebtedness. If Lender elects to apply funds of any such Sub-Account to pay any
Required Debt Service Payment, Borrowers shall, upon demand, repay to Lender the
amount of such withdrawn funds to replenish such Sub-Account, and if Borrowers
fail to repay such amounts within one five (5) days after notice of such
withdrawal, an Event of Default shall exist hereunder. Notwithstanding the
foregoing, on the Closing Date Borrowers shall deposit the Initial Deferred
Maintenance Amount into the Deferred Maintenance Sub-Account.
(e) Payment of Basic Carrying Costs, Debt Service, Capital
Improvement Costs, Cash Collateral Account Bank Fees.
(i) Payment of Basic Carrying Costs.
(x) At least five (5) Business Days prior to the due
date of any Basic Carrying Cost payment, and not more frequently than once each
Interest Accrual Period, Borrowers shall notify Lender in writing and request
that Lender make such Basic Carrying Cost payment on behalf of the applicable
Borrowers on or prior to the due date thereof. Together with each such request,
Borrowers shall furnish Lender with copies of bills and other documentation as
may be reasonably required by Lender to establish that such Basic Carrying Cost
payment is then due. Lender shall be entitled to conclusively rely on all bills
or other documentation received from any Borrower, in each case without
independent investigation or verification. Lender shall make such payments out
of the Basic Carrying Cost Sub-Account before the same shall be delinquent to
the extent that there are funds available in the Basic Carrying Cost Sub-Account
and Lender has received appropriate documentation to establish the amount(s) due
and the due date(s) as and when provided above. Notwithstanding anything herein
to the contrary, so long as (A) Marriott is Manager of each Individual Property,
(B) no default has occurred and is continuing under the Management Agreement
applicable to each Individual Property beyond any applicable notice and cure
periods set forth therein, (C) Marriott is making all required payments as and
when due pursuant to the Management Agreement and/or the Manager's
Subordination, and (D) with respect to Impositions, sufficient funds have been
deducted from Gross Revenues (as defined under the applicable Management
Agreement) to provide for payment in full of the next due installments of
Impositions in accordance with the terms hereof, as reasonably determined by
Lender based on Marriott's periodic reporting obligations under the Management
Agreement and/or Manager's Subordination or otherwise, this Section
2.11(e)(i)(x) shall only
33
<PAGE>
apply to the payment of Impositions not otherwise reserved for and paid by
Manager pursuant to the Management Agreement and/or the Manager's Subordination.
(y) Except to the extent that Lender is obligated to pay
Basic Carrying Costs from the Basic Carrying Costs Sub-Account pursuant to the
terms of this Section, Borrowers shall pay or shall cause payment of all Basic
Carrying Costs with respect to itself and the Individual Properties in
accordance with the provisions of the Mortgages. Borrowers' obligation to pay or
to cause payment (or to enable Lender to pay) Basic Carrying Costs pursuant to
this Agreement shall include, to the extent permitted by applicable law,
Impositions resulting from future changes in law which impose upon Lender or any
Deed of Trust Trustee an obligation to pay any property taxes or other
Impositions or which otherwise adversely affect Lender's or the Deed of Trust
Trustee's interests. (In the event such a change in law prohibits any Borrower
from assuming liability for payment of any such Imposition, the outstanding
Indebtedness shall, at the option of Lender, become due and payable on the date
that is one hundred twenty (120) days after such change in law; and failure to
pay such amounts on the date due shall be an Event of Default.) If an Event of
Default has occurred, the proceeds on deposit in the Basic Carrying Costs
Sub-Account may be applied by Lender in any manner as Lender in its discretion
may determine.
(ii) Payment of Debt Service. At or before 12:00 noon,
New York City time, on each Payment Date during the term of the Loan,
Lender shall transfer to Lender's own account from the Debt Service
Payment Sub-Account an amount equal to the Required Debt Service Payment
for the applicable Payment Date. Borrowers shall be deemed to have timely
made the Required Debt Service Payment pursuant to Section 2.8 regardless
of the time Lender makes such transfer as long as sufficient funds are on
deposit in the Debt Service Payment Sub-Account at 12:00 noon, New York
City time on the applicable Payment Date. At all times after such Payment
Date Lender may, at its option, transfer amounts in the Debt Service
Payment Sub-Account to Lender's own account, provided that Borrowers shall
receive credit against the Required Debt Service Payment in the amounts so
transferred to Lender such that in any given Current Interest Accrual
Period Borrowers shall not be required to deposit into the Debt Service
Payment Sub-Account any amounts in excess of the aggregate amount of the
Required Debt Service Payment for such Current Interest Accrual Period.
(iii) Payment of Capital Improvement Costs. Not more
frequently than once each Interest Accrual Period, and provided that no
Default or Event of Default has occurred and is continuing, Borrowers may
notify Lender in writing and request that Lender release to a Borrower or
its designee funds from the Capital Reserve Sub-Account, to the extent
funds are available therein, for payment of Capital Improvement Costs.
Together with each such request, Borrowers shall furnish Lender or cause
to be furnished to Lender copies of bills and other documentation as may
be reasonably required by Lender to establish that such Capital
Improvement Costs are reasonable (provided such Capital Improvement Costs
shall be deemed reasonable if such Capital Improvement Costs are reflected
in the Approved Budget), that the work relating thereto has been completed
and that such amounts are then due or have been paid. Lender shall approve
or disapprove such request, within ten (10) Business Days after Lender's
34
<PAGE>
receipt of such request, provided such request shall be deemed approved if
no response is received from Lender within twenty (20) Business Days after
Lender's receipt of such request and related documentation, and, if
approved or deemed approved, Lender shall release the funds to each
applicable Borrower or such Borrower's designee within ten (10) Business
Days after Lender's approval. Notwithstanding anything herein to the
contrary, so long as (A) Marriott is Manager of each Individual Property,
(B) no default has occurred and is continuing under the Management
Agreement applicable to each Individual Property beyond any applicable
notice and cure periods set forth therein, and (C) Marriott is making all
required payments as and when due pursuant to the Management Agreement,
this Section 2.11(e)(iii) shall only apply to the payment of Capital
Improvement Costs not otherwise paid by Manager pursuant to the Management
Agreement and/or the Manager's Subordination.
(iv) Payment of Deferred Maintenance Costs. Not more
frequently than once each Interest Accrual Period, and provided that no
Event of Default has occurred and is continuing, Borrower may notify
Lender in writing and request that Lender release to Borrower funds from
the Deferred Maintenance Sub-Account, to the extent funds are available
therein, for payment of Deferred Maintenance Costs. Together with each
such request, Borrower shall furnish Lender with copies of bills and other
documentation reasonably required by Lender to establish that such
Deferred Maintenance Costs are reasonable, that the work relating thereto
has been completed and that such amounts are then due or have been paid.
Lender shall approve or disapprove such request within ten (10) Business
Days after Lender's receipt of such request, provided such request shall
be deemed approved if no response is received from Lender within twenty
(20) Business Days after Lender's receipt of such request and related
documentation, and, if approved or deemed approved, Lender shall release
the funds to each applicable Borrower or such Borrower's designee within
ten (10) Business Days after Lender's approval.
(v) Payment of Cash Collateral Account Bank Fees. Not
more frequently than once each Interest Accrual Period, Lender shall
transfer to the Cash Collateral Account Bank an amount equal to the amount
of the monthly fee payable to the Cash Collateral Account Bank under the
Cash Collateral Account Agreement.
(f) Payment of Operating Expenses.
(i) Provided that no Event of Default has occurred and
is continuing, and provided that all amounts required to be deposited into
the Sub-Accounts set forth in Sections 2.11(d)(i) through (vi) for the
Current Interest Accrual Period have been deposited therein, Lender shall
transfer within two Business Days thereafter at Borrowers' sole cost and
expense, to an account designated by the Borrowers, all amounts contained
in the Hotel Operating Sub-Accounts up to an amount equal to the amount
set forth in the Approved Budget for such Interest Accrual Period
provided, however, that the aggregate withdrawals from the Hotel Operating
Sub-Account pursuant to this Section 2.11(f)(i) for any Interest Accrual
Period shall not exceed the amount set forth in the Approved Budget for
such Interest Accrual Period (except to the extent set forth in subsection
(ii), below).
35
<PAGE>
(ii) Provided that no Event of Default has occurred and
is continuing, if in a given Interest Accrual Period, Borrowers require
amounts in excess of the amounts set forth in the Approved Budget for such
Interest Accrual Period for Operating Expenses ("Extra Funds"), Borrowers
may deliver a written request to Lender to allocate an amount equal to
Extra Funds to the Hotel Operations Sub-Account as set forth in Section
2.11(d)(vii) and for a disbursement of Extra Funds stating (1) the amount
of such Extra Funds and (2) the purpose for which such amount is intended
with attachments of copies of bills and other documentation as may be
required by Lender to establish that such Operating Expenses are
reasonable and that such amounts are then due or expected to become due in
that month. Lender shall approve or disapprove such request, within ten
(10) Business Days after Lender's receipt of such request and related
documentation, provided such request shall be deemed approved if no
response is received from Lender within ten (10) Business Days after
Lender's receipt of such request and related documentation, and, if
approved or deemed approved, Lender shall release the funds to each
applicable Borrower or such Borrower's designee within five (5) Business
Days after Lender's approval.
(iii) Notwithstanding anything herein to the contrary,
so long as (A) Marriott is Manager of each Individual Property, (B) no
default has occurred and is continuing under the Management Agreement
applicable to each Individual Property beyond any applicable notice and
cure periods set forth therein, and (C) Marriott is making all required
payments as and when due pursuant to the Management Agreement and/or the
Manager's Subordination, this Section 2.11(f) shall not apply.
(g) Payment of Mezzanine Debt Service. In the event that a
permitted Mezzanine Financing under Section 2.15 has occurred, at or before
12:00 noon, New York City time, on each Payment Date during the term of the
Loan, Lender shall transfer to Mezzanine Lender's account from the Mezzanine
Debt Service Payment Sub-Account an amount equal to the Mezzanine Debt Service
for the applicable payment date.
(h) Permitted Investments. Upon the written request of
Borrowers, which request may be made once per Interest Accrual Period, Lender
shall direct the Cash Collateral Account Bank to invest and reinvest any balance
in the Cash Collateral Account from time to time in Permitted Investments as
instructed by Borrowers; provided, however, that: (i) if Borrowers fail to so
instruct Lender, or if a Default or an Event of Default shall have occurred and
is continuing, Lender shall direct the Cash Collateral Account Bank to invest
and reinvest such balance in Permitted Investments as Lender shall determine in
Lender's discretion; (ii) the maturities of the Permitted Investments on deposit
in the Cash Collateral 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 Sub-Accounts must be made; (iii) all such
Permitted Investments shall be held in the name and be under the sole dominion
and control of Lender; (iv) no Permitted Investment shall be made unless Lender
shall retain a first priority perfected Lien in such Permitted Investment and
all filings and other actions necessary to ensure the validity, perfection, and
priority of such Lien have been taken; (v) Lender shall only be required to
follow the written investment instructions which were most recently received by
Lender and Borrowers shall be bound by such last received investment
instructions; and (vi) any request from Borrowers containing investment
instructions shall contain an Officer's Certificate from
36
<PAGE>
Borrowers (which may be conclusively relied upon by Lender and its agents) that
any such investments constitute Permitted Investments. It is the intention of
the parties hereto that all amounts deposited in the Cash Collateral Account
shall at all times be invested in Permitted Investments. All funds in the Cash
Collateral Account that are invested in a Permitted Investment are deemed to be
held in such Cash Collateral Account for all purposes of this Agreement and the
other Loan Documents. Lender shall have no liability for any loss in investments
of funds in the Cash Collateral Account that are invested in Permitted
Investments (unless invested contrary to Borrowers' request other than after the
occurrence of a Default or an Event of Default) and no such loss shall affect
Borrowers' obligation to fund, or liability for funding, the Cash Collateral
Account and each Sub-Account, as the case may be. Borrowers and Lender agree
that Borrowers shall include all such earnings and losses (other than those for
Lender's account in accordance with the immediately preceding sentence) on the
Cash Collateral Account as income of the applicable Borrowers for federal and
applicable state tax purposes. Borrowers shall be responsible for any and all
fees, costs and expenses with respect to Permitted Investments.
(i) Interest on Accounts. All interest paid or other earnings
on the Permitted Investments made hereunder shall be income of the applicable
Borrower and applied in the manner and priority set forth in Section 2.11(d)
hereof.
(j) Termination of Central Cash Management. The obligations of
Borrowers under Section 2.11 and Section 2.12 to maintain and fund or to cause
the maintenance and funding of the Manager Accounts and the Cash Collateral
Account shall terminate in their entirety and be of no further force or effect
upon the satisfaction of each of the following conditions: (i) no Default or
Event of Default shall have occurred and be continuing; (ii) the release of all
Mortgages by Lender in accordance with the provisions of this Agreement and the
other Loan Documents; and (iii) Borrowers' receipt of Lender's written
acknowledgment that the conditions described in (i) and (ii) above have been
satisfied to Lender's satisfaction.
Section 2.12. Security Agreement.
(a) Pledge of Accounts. To secure the full and punctual
payment and performance of all of the Indebtedness, each Borrower hereby sells,
assigns, conveys, pledges and transfers to Lender and grants to Lender a first
priority and continuing Lien on and security interest in and to its Account
Collateral.
(b) Covenants. Each Borrower covenants that (i) all Rents and
all other items of Gross Revenue shall be deposited or transferred into the
relevant Manager Account, in accordance with Section 2.11(a), and (ii) so long
as any portion of the Indebtedness is outstanding, no Borrower shall open (nor
permit any Manager or any Person to open) any other account for the collection
of any Rents or any other items of Gross Revenue, other than (A) a replacement
Manager Account pursuant to the terms of the applicable Management Agreement,
and (B) any account held by Borrower in the locality where the applicable
Individual Property is located for the purposes of the collection of any Rents
or any other items of Gross Revenue prior to the time such Rents or items of
Gross Revenue are deposited in the Manager Account pursuant to the terms of this
Agreement.
37
<PAGE>
(c) Instructions and Agreements. On or before the Closing
Date, Borrowers and the Cash Collateral Account Bank will execute and deliver a
Cash Collateral Account Agreement in form and substance satisfactory to Lender
in Lender's discretion (the "Cash Collateral Account Agreement") and consistent
with the terms of this Agreement. Each Borrower agrees that prior to the payment
in full of the Indebtedness, the Cash Collateral Account Agreement shall be
irrevocable by any Borrower without the prior written consent of Lender.
(d) Financing Statements; Further Assurances. Each Borrower
hereby authorizes Lender to file a financing statement or statements in
connection with the Account Collateral in the form required to properly perfect
Lender's security interest in the Account Collateral to the extent that it may
be perfected by such a filing. Each Borrower agrees that at any time and from
time to time, at the expense of Borrowers, such Borrower shall promptly execute
and deliver all further instruments, and take all further action, that Lender
may reasonably request, in order to perfect and protect the pledge, security
interest and Lien granted or purported to be granted hereby, or to enable Lender
to exercise and enforce Lender's rights and remedies hereunder with respect to,
the Account Collateral.
(e) Transfers and Other Liens. Each Borrower agrees that it
will not sell or otherwise dispose of any of the Account Collateral other than
pursuant to the terms hereof and of the other Loan Documents, or create or
permit to exist any Lien upon or with respect to all or any of the Account
Collateral, except for the Liens granted to Lender under this Agreement.
(f) Lender's Reasonable Care. Beyond the exercise of
reasonable care in the custody thereof, Lender shall not have any duty as to any
Account Collateral or any income thereon in Lender's possession or control or in
the possession or control of any agents for, or of Lender, or the preservation
of rights against any Person or otherwise with respect thereto. Lender shall be
deemed to have exercised reasonable care in the custody of the Account
Collateral in Lender's possession if the Account Collateral is accorded
treatment substantially equal to that which Lender accords Lender's own
property, it being understood that Lender shall not be liable or responsible for
(i) any loss or damage to any of the Account Collateral, or for any diminution
in value thereof from a loss of, or delay in Lender's acknowledging receipt of,
any wire transfer from any Manager Account or (ii) any loss, damage or
diminution in value by reason of the act or omission of Lender, or Lender's
agents, employees or bailees, except for any loss, damage or diminution in value
resulting from the gross negligence, fraud or willful misconduct of Lender, its
agents or employees.
(g) Lender Appointed Attorney-In-Fact. Each Borrower hereby
irrevocably constitutes and appoints Lender as such Borrower's true and lawful
attorney-in-fact, with full power of substitution, at any time after the
occurrence and during the continuance of an Event of Default to execute,
acknowledge and deliver any instruments and to exercise and enforce every right,
power, remedy, option and privilege of such Borrower with respect to the Account
Collateral, and do in the name, place and stead of such Borrower, all such acts,
things and deeds for and on behalf of and in the name of such Borrower with
respect to the Account Collateral, which such Borrower could or might do or
which Lender may deem necessary or desirable to more fully vest in Lender the
rights and remedies provided for herein with respect to
38
<PAGE>
the Account Collateral and to accomplish the purposes of this Agreement. The
foregoing powers of attorney are irrevocable and coupled with an interest.
(h) Continuing Security Interest; Termination. This Section
shall create a continuing pledge of, Lien on and security interest in the
Account Collateral and shall remain in full force and effect until payment in
full of the Indebtedness. Upon payment in full of the Indebtedness, each
applicable Borrower shall be entitled to the return, upon such Borrower's
written request and at Borrowers' expense, of such of the Account Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof, and
Lender shall execute such instruments and documents as may be reasonably
requested by such Borrower in writing to evidence such termination and the
release of the pledge and Lien hereof, provided, however, that such Borrower
shall pay on demand all of Lender's expenses in connection therewith.
Section 2.13. Secondary Market Transactions.
(a) Each Borrower hereby acknowledges that Lender may in one
or more transactions (i) sell or securitize the Loan or portions thereof in one
or more transactions through the issuance of securities, which securities may be
rated by one or more of the Rating Agencies, (ii) sell or otherwise transfer the
Loan or any portion thereof one or more times, (iii) sell participation
interests (including without limitation, senior and subordinate participation
interests) in the Loan one or more times, (iv) re-securitize the securities
issued in connection with any securitization, or (v) further divide the Loan
into more separate notes or components or change the principal balances (but not
increase the aggregate principal balance) or interest rates of the Notes
(including, without limitation, senior and subordinate notes or components) (the
transactions referred to in clauses (i) through (v), each a "Secondary Market
Transaction" and collectively "Secondary Market Transactions").
(b) With respect to any Secondary Market Transaction described
in Section 2.13(a)(v) above, such notes or note components may be assigned
different interest rates, so long as, at such time the weighted average of the
relevant interest rates equals the Interest Rate; provided, that after an Event
of Default each Borrower recognizes that, in the case of prepayments, the
weighted average interest rate of the Loan may increase because Lender shall
have the right to apply principal payments to one or more notes or components
with lower rates of interest before applying principal payments to one or more
notes or components with higher rates of interest; and provided, further, that
the principal balance of the Note shall not change. Lender shall have the same
rights to sell or otherwise transfer, participate or securitize one or more of
the divided, amended, modified or otherwise changed notes or components,
individually or collectively, as Lender has with respect to the Loan.
(c) Each Borrower agrees that it shall cooperate with Lender
and use such Borrower's commercially reasonably efforts to facilitate the
consummation of each Secondary Market Transaction including, without limitation,
by: (i) amending or causing the amendment of this Agreement and the other Loan
Documents, and executing such additional documents, instruments and agreements
including amendments to such Borrower's organizational documents and preparing
financial statements as requested by the Rating Agencies to conform the terms of
the Loan to the terms of similar loans underlying completed or pending secondary
market transactions having or seeking ratings similar to those then being sought
in
39
<PAGE>
connection with the relevant Secondary Market Transaction; (ii) promptly and
reasonably providing such information (including, without limitation, financial
information) as may be requested in connection with the preparation of a private
placement memorandum, prospectus or a registration statement required to
privately place or publicly distribute the securities in a manner which does not
conflict with federal or state securities laws; (iii) providing in connection
with each of (A) a preliminary and a final private placement memorandum or other
offering documents or (B) a preliminary and final prospectus, as applicable, an
indemnification certificate (x) certifying that such Borrower has carefully
examined such private placement memorandum, prospectus, registration statement
or other offering document, as applicable, including, without limitation, the
sections entitled "Special Considerations," "Description of the Mortgage Loan,"
"The Underlying Mortgaged Property," "The Manager," "Borrower" and "Certain
Legal Aspects of the Mortgage Loan," and such sections (and any other sections
requested) insofar as they relate to a Borrower, its Affiliates, the Loan or any
Individual Property does not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading;
provided, however, that such Borrower shall not be required to indemnify Lender
for any losses relating to untrue statements or omissions which such Borrower
identified to Lender in writing at the time of such Borrower's examination of
such memorandum or prospectus, as applicable, and (y) indemnifying (i) Lender
and each of its affiliates and their respective successors and assigns
(including their respective officers, directors, partners, employees, attorneys,
accountants, professionals and agents and each other person, if any, controlling
Lender or any of its affiliates within the meaning of either Section 15 of the
Securities Act of 1933, as amended (the "Securities Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (each,
including Lender, an "Indemnified Party") and the (ii) party that has filed the
registration statement relating to the Secondary Market Transaction (the
"Registration Statement"), each of its directors and officers who have signed
the Registration Statement and each Person that controls such Party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(collective, the "Underwriter Group"), for any losses, claims, damages, costs,
expenses or liabilities (including, without limitation, all liabilities under
all applicable federal and state securities laws) (collectively, the
"Liabilities") to which any of them may become subject (a) insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact relating to any Borrower, its Affiliates,
the Loan, any Individual Property and any Manager contained in such sections or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated in such sections or necessary in order to
make the statements in such sections, in light of the circumstances under which
they were made, not misleading or (b) as a result of any untrue statement of
material fact in any of the financial statements of any Borrower incorporated
into any placement memorandum, prospectus, registration statement or other
document connected with the issuance of securities or the failure to include in
such financial statements or in any placement memorandum, prospectus,
registration statement or other document connected with the issuance of
securities any material fact relating to any Borrower, its Affiliates, any
Individual Property, the Loan and any Manager necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and (z) agreeing to reimburse the Indemnified Party and the
Underwriter Group for any legal or other expenses reasonably incurred by the
Indemnified Party and the Underwriter Group in connection with investigating or
defending the Liabilities; (iv) causing to be rendered such customary opinion
letters as shall be
40
<PAGE>
requested by the Rating Agencies for other secondary market or transactions
having or seeking ratings comparable to that then being sought for the relevant
Secondary Market Transaction; (v) making such representations, warranties and
covenants, as may be reasonably requested by the Rating Agencies and comparable
to those required in other secondary market transactions having or seeking the
same rating as is then being sought for the Secondary Market Transaction; (vi)
providing such information regarding the Collateral as may be reasonably
requested by the Rating Agencies or otherwise required in connection with the
formation of a REMIC; and (vii) providing any other information and materials
required in the Secondary Market Transaction.
(d) Each Borrower agrees to participate and cooperate in any
meetings with the Rating Agencies or Investors, and providing any other
information and materials reasonably required in the Secondary Market
Transaction to make the certificates offered in such Secondary Market
Transaction saleable in the secondary market and to obtain ratings from two or
more rating agencies.
(e) Each Borrower acknowledges and agrees that the Lender may,
at any time on or after the Closing Date, assign its duties, rights or
obligations hereunder or under any Loan Document in whole, or in part, to a
servicer and/or a trustee in Lender's discretion. Nothing herein shall in any
way limit Lender's right to sell all or a portion of the Loan in a transaction
which is not a Secondary Market Transaction.
(f) Liability for costs and expenses relating to any
transaction described in this Section 2.13 shall be governed by Section 12 of
the Cooperation Agreement.
(g) Notwithstanding anything to the contrary contained herein
or in any other Loan Document, Lender reserves the right to increase, decrease,
or otherwise re-allocate the outstanding principal balance of the Note, and each
Borrower covenants and agrees to execute amendments to the Note, this Agreement,
and the other Loan Documents and the Borrowers' organizational documents
reasonably requested by Lender in connection with any such re-allocation,
provided that such modification shall not (a) increase the aggregate outstanding
principal balance of the Note, (b) change the stated maturity date of the Loan
as set forth herein, or (c) modify or amend any other economic or other term of
the Loan.
Section 2.14. Property Substitutions. Subject to the terms and conditions
set forth in this Section 2.14, Borrower may, from time to time, replace an
Individual Property with a Qualified Substitute Property (a "Property
Substitution"), provided, in the case of each Property Substitution, the
following conditions are met:
(a) The aggregate of (i) the Allocated Loan Amount with
respect to the Individual Property to be replaced, plus (ii) the Allocated Loan
Amounts with respect to all Individual Properties previously or simultaneously
replaced by Property Substitutions, shall be less than 50% of the then-current
principal balance of the Loan;
(b) no Event of Default shall have occurred and be continuing
on such date either before or after the Property Substitution;
(c) Borrower shall have given Lender at least thirty (30)
days' prior written notice of any Property Substitution, identifying the
proposed Individual Property to be
41
<PAGE>
replaced, the proposed Qualified Substitute Property, and the proposed date of
the Property Substitution (which date may be extended by up to thirty (30) days,
provided that Borrower gives Lender reasonable prior written notice of
Borrower's requirement to extend the date for such Property Substitution). If
such Property Substitution does not occur on such date (as may have been
extended), (i) such Borrower's notice will be deemed rescinded, and (ii)
Borrower shall on such date reimburse Lender for all expenses actually incurred
by Lender in connection with the proposed Property Substitution;
(d) the then-current market value of any proposed Qualified
Substitute Property (as determined by an Appraisal acceptable to a reasonable
commercial mortgage lender) shall equal or exceed the then-current market value
of the Individual Property proposed to be replaced immediately prior to the
Property Substitution (as determined by an Appraisal acceptable to a reasonable
commercial mortgage lender);
(e) the Net Operating Income of any proposed Qualified
Substitute Property for the twelve-month period trailing the date of
determination shall equal or exceed the Net Operating Income of the Individual
Property proposed to be replaced during such period, as would be determined by a
reasonable commercial mortgage lender following notice of the proposed Property
Substitution;
(f) after giving effect to the Property Substitution, the Debt
Service Coverage Ratio for the aggregate of all Individual Properties for the
trailing twelve (12) months shall be no less than the greater of (i) 1.57:1:00,
and (ii) the Debt Service Coverage Ratio with respect to the Loan for the
trailing twelve (12) months immediately prior to the Property Substitution, as
would be determined by a reasonable commercial mortgage lender;
(g) each Qualified Substitute Property shall be (i) fully
constructed and operating for a minimum of twelve (12) months, and (ii) a
limited service hotel property or full service hotel property, in each case
operating under a Marriott franchise or any other brand affiliated with the
foregoing;
(h) each of the representations and warranties contained in
this Agreement shall be true and correct in all material respects with respect
to the applicable Individual Borrower acquiring the applicable Qualified
Substitute Property, as well as to the Qualified Substitute Property, on and as
of the date of the Property Substitution (and such Individual Borrower's
acquisition of such Qualified Substitute Property shall be deemed to constitute
their representation to such effect);
(i) (i) the applicable Individual Borrower shall have
executed, acknowledged and delivered to Lender, with respect to each Qualified
Substitute Property, a Mortgage and an Assignment of Leases, and such other
customary documents and agreements as are generally required by reasonable
commercial mortgage lenders, in each case with such state-specific modifications
as shall be recommended by counsel admitted to practice in such state and
selected by Lender, and (ii) each other Individual Borrower shall have executed
such additional customary Loan Documents and such modifications to and
reaffirmations of the existing Loan
42
<PAGE>
Documents to which it is a party as a reasonable commercial mortgage lender
would customarily require;
(j) each Mortgage shall secure the entire Indebtedness,
provided that in the event that the jurisdiction in which the applicable
Qualified Substitute Property is located imposes a mortgage recording,
intangibles or similar tax and does not permit the allocation of indebtedness
for the purpose of determining the amount of such tax payable, the principal
amount secured by such Mortgage shall be equal to 125% of the Allocated Loan
Amount of the Individual Property replaced by the Qualified Substitute Property
as of immediately prior to such Property Substitution;
(k) Lender shall have received copies of all Leases in effect
with respect to the Qualified Substitute Property (together with such estoppels
and subordination, non-disturbance and attornment agreements as a reasonable
commercial mortgage lender would customarily require), UCC and other credit and
public records search reports, certificates of insurance, title insurance
policies and endorsements, surveys, evidence of zoning compliance, copies of
material Permits, contracts and agreements, environmental and engineering
reports, operating statements and other financial information, and such other
customary certificates, documents and instruments relating to the Loan,
Borrower, or the Qualified Substitute Property as a reasonable commercial
mortgage lender would customarily require, in each case reasonably acceptable to
Lender;
(l) if corrective measures are recommended by any applicable
environmental or engineering report, the applicable Individual Borrower shall
have deposited with the Lender, pursuant to customary documentation reasonably
satisfactory to Lender, 125% of the amount required to fund such corrective
measures, which funds shall be made available to such Individual Borrower upon
completion of such corrective measures to an extent that would be satisfactory
to a reasonable commercial mortgage lender, and the applicable Individual
Borrower shall covenant to perform such corrective measures within the time
period recommended in such reports;
(m) Lender shall have received applicable REMIC opinions and
such other customary opinions of counsel as Lender may require, in form and
content acceptable to a reasonable commercial mortgage lender (including a new
non-consolidation opinion);
(n) no Individual Property may be replaced with more than one
Qualified Substitute Property;
(o) if the owner of the proposed Qualified Substitute Property
is not a current Borrower under the Loan then such owner must be a Qualified
Successor Borrower;
(p) Lender shall have received a copy of the management
agreement for the Qualified Substitute Property and a tri-party subordination
agreement or similar agreement, as applicable, among the applicable Individual
Borrower, the manager thereunder, and Lender, in form and content as executed in
connection with the Loan, or otherwise acceptable to a reasonable commercial
mortgage lender;
43
<PAGE>
(q) (i) Prior to the Start-Up Day, Lender shall have consented
to the Property Substitution, such consent not to be unreasonably withheld or
delayed, and (ii) on or after the Start-Up Day, Borrower shall have delivered or
caused to be delivered to Lender confirmation by each of the applicable Rating
Agencies that the Property Substitution will not result in ay qualification,
withdrawal or downgrading of any existing ratings of securities created in any
applicable Secondary Market Transaction; and
(r) Borrower shall have paid or reimbursed Lender for all
out-of-pocket costs and expenses actually incurred by Lender in connection with
the foregoing (including the reasonable fees and expenses of legal counsel and
all fees and expenses of the Rating Agencies, if any), and shall have paid all
reasonable fees and out-of-pocket costs of any loan servicer (if any) in
connection with any Property Substitution.
Upon the satisfaction of the conditions set forth in Section 2.14,
(i) Lender shall execute customary instruments reasonably satisfactory to a
reasonable commercial mortgage lender releasing and discharging the applicable
Individual Property from the Liens of the Loan Documents, and (ii) if as a
result of the Property Substitution, any Individual Borrower no longer owns any
Individual Property, then Lender shall execute customary instruments reasonably
satisfactory to a reasonable commercial mortgage lender releasing and
discharging such Individual Borrower from its obligations under the Loan
Documents (other than any liability or obligation relating to any environmental
matters arising under Section 5.1(F) of this Agreement).
Section 2.15. Permitted Mezzanine Financing.
(a) Notwithstanding anything herein to the contrary, provided
that (i) no Default or Event of Default has occurred and is continuing, (ii) the
Debt Service Coverage Ratio for the twelve (12) month period trailing the date
of determination is at least 1.5:1, and (iii) the principal amount of the Loan
as of the date of determination does not exceed seventy percent (70%) of the
aggregate fair market value of the Property as reasonably determined by Lender
based upon an Appraisal, obtained at Borrower's sole cost and expense, dated not
more than sixty (60) days prior to the date of determination, Borrower may, at
Borrower's sole cost and expense, elect on a one-time basis to obtain a
mezzanine loan (a "Mezzanine Loan") from a lender or lenders (any such party or
parties, collectively, the "Mezzanine Lender"), which Mezzanine Loan may be
secured by a pledge of Mezzanine Borrower's (hereinafter defined) direct equity
interests in Borrower or in any SPE Equity Owner; provided, further, that
Borrower shall be permitted hereunder to obtain a Mezzanine Loan only upon
satisfaction of the following additional terms and conditions:
(i) Lender shall have received at least sixty (60) and
no more than ninety (90) days' prior written notice of the proposed
Mezzanine Loan;
(ii) the aggregate unpaid principal amounts of the Loan
and the Mezzanine Loan immediately after the effective date of the
Mezzanine Loan shall not exceed seventy five percent (75%) of the
aggregate fair market value of the Property as reasonably determined by
Lender based upon an Appraisal, obtained at Borrower's sole cost and
expense, dated not more than sixty (60) days prior to the date of
determination;
44
<PAGE>
(iii) the Combined Debt Service Coverage Ratio for the
period from the effective date of the Mezzanine Loan through the Maturity
Date, as reasonably determined by Lender, is at least 1.35:1.00 based upon
the assumption that Adjusted Net Cash Flow for such period will be
consistent with Adjusted Net Cash Flow for the twelve (12) month period
trailing the effective date of the Mezzanine Loan;
(iv) the term of the Mezzanine Loan (including any
extension terms) shall be co-terminus with the term of the Loan;
(v) Borrower shall have created and inserted into
Borrower's organizational structure a new Single-Purpose Entity (the
"Mezzanine Borrower") which will be wholly-owned by the equity owners of
Borrower, and the sole asset of which will be all of the direct and
indirect equity interests in Borrower and/or SPE Equity Owner;
(vi) the Mezzanine Lender shall have executed and
delivered to Lender a mezzanine intercreditor agreement in substantial
conformity to intercreditor agreements required by the Rating Agencies;
(vii) Borrower shall have delivered to Lender written
confirmation from each Rating Agency that the Mezzanine Loan would not
result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any security issued in connection with a Secondary
Market Transaction;
(viii) Borrower shall have delivered to Lender, at
Borrower's sole cost and expense, a non-consolidation opinion in form and
substance acceptable to the Rating Agencies reflecting the Mezzanine Loan;
(ix) Borrower shall have paid or reimbursed Lender for
all reasonable, out-of-pocket costs and expenses incurred by Lender
(including, without limitation, reasonable attorneys' fees and
disbursements) in connection with the Mezzanine Loan and Borrower shall
have paid or shall have caused Mezzanine Borrower to pay all title
premiums, recording charges, filing fees, taxes or other expenses
(including, without limitation, mortgage and intangibles taxes and
documentary stamp taxes) payable in connection with the Mezzanine Loan;
and
(x) Borrower shall certify in writing to Lender that the
requirements set forth in this Section 2.15 (a) have been satisfied.
In connection with the foregoing, Lender agrees that, upon
satisfaction of the terms and conditions of clauses (i) through (x) of this
Section 2.15(a), Lender shall cooperate with Borrower and Lender shall use good
faith efforts to facilitate the consummation of the Mezzanine Loan.
Notwithstanding anything in this Loan Agreement to the contrary,
Lender shall not have any obligation to provide mezzanine financing to Borrower
or any Affiliate or principal of Borrower.
45
<PAGE>
(b) In connection with any Permitted Transfer set forth in
clause (A)(ix) of the definition thereof, the Borrower selling its interest in
any Individual Property, or Ashford Hospitality Trust, Inc., a Maryland
corporation, or any Affiliate of Ashford Hospitality Trust, Inc., may provide
mezzanine financing for the purchase of the Individual Properties, subject to
the following terms and conditions:
(i) no Event of Default shall have occurred and is
continuing;
(ii) the aggregate principal amounts of the mezzanine
financing to be provided under this Section 2.15(b) and any other
financing obtained by such purchaser shall not exceed 90% of the price for
which such purchaser is purchasing the Individual Properties;
(iii) the term of the mezzanine loan provided under this
Section 2.15(b) (including any extension terms) shall be co-terminus with
the term of the Loan;
(iv) there shall be a new Single-Purpose Entity inserted
in purchaser's organizational structure which will be wholly-owned by the
equity owners of such purchaser, and the sole asset of which will be all
of the direct and indirect equity interests in purchaser;
(v) the mezzanine lender shall have executed and
delivered to Lender a mezzanine intercreditor agreement in substantial
conformity to intercreditor agreements required by the Rating Agencies;
(vi) Borrower shall have delivered to Lender written
confirmation from each Rating Agency that the mezzanine loan under this
Section 2.15(b) would not result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any security issued in
connection with a Secondary Market Transaction;
(vii) Borrower shall have delivered to Lender, at
Borrower's sole cost and expense, a non-consolidation opinion in form and
substance acceptable to the Rating Agencies reflecting the mezzanine loan
under this Section 2.15(b);
(viii) Borrower shall have paid or reimbursed Lender for
all reasonable, out-of-pocket costs and expenses incurred by Lender
(including, without limitation, reasonable attorneys' fees and
disbursements) in connection with the mezzanine loan and Borrower shall
have paid or shall have caused the mezzanine borrower to pay all title
premiums, recording charges, filing fees, taxes or other expenses
(including, without limitation, mortgage and intangibles taxes and
documentary stamp taxes) payable in connection with the mezzanine loan
under this Section 2.15(b); and
(ix) Borrower shall certify in writing to Lender that
the requirements set forth in this Section 2.15 (b) have been satisfied.
46
<PAGE>
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to the Making of the Loan.
(a) As a condition precedent to the making of the Loan, each
Borrower shall have satisfied the following conditions (unless waived by Lender
in accordance with Section 8.4) on or before the Closing Date:
(A) Loan Documents.
(i) Loan Agreement. Each Borrower shall have
executed and delivered this Agreement to Lender.
(ii) Note. Each Borrower shall have executed and
delivered to Lender the Note.
(iii) Mortgage. Each applicable Borrower shall
have executed and delivered to Lender the Mortgages and the Mortgages
shall have been irrevocably delivered to an authorized title agent for the
Title Insurer for recordation in the appropriate filing offices in the
jurisdiction in which the applicable Individual Properties are located.
(iv) Supplemental Mortgage Affidavits. The Liens
to be created by each Mortgage are intended to encumber the applicable
Individual Property described therein to the full extent of each
Borrower's obligations under the Loan Documents. As of the Closing Date,
each Borrower shall have paid all state, county and municipal recording
and all other taxes imposed upon the execution and recordation of the
Mortgages.
(v) Assignment of Leases. Each applicable Borrower
shall have executed and delivered to Lender the Assignments of Leases, and
the Assignments of Leases shall have been irrevocably delivered to an
authorized title agent for the Title Insurer for such recordation in the
appropriate filing offices in the jurisdiction in which the applicable
Individual Property is located.
(vi) Assignment of Agreements. Each applicable
Borrower shall have executed and delivered to Lender the Assignments of
Agreements, and the Assignments of Agreements shall, to the extent prudent
pursuant to local practice, have been irrevocably delivered to an
authorized title agent for the Title Insurer for such recordation in the
appropriate filing offices in the jurisdiction in which the applicable
Individual Property is located.
(vii) Financing Statements. Each applicable
Borrower and its partners or members (and their shareholders), as
applicable, shall have authorized Lender to file all financing statements
required by Lender and such financing statements
47
<PAGE>
shall have been irrevocably delivered to an authorized title agent for the
Title Insurer for such recordation in the appropriate filing offices in
each of the appropriate jurisdictions.
(viii) Manager's Subordination. Each Manager and
each applicable Borrower shall have executed and delivered to Lender the
Manager's Subordinations.
(ix) Intentionally omitted.
(x) REA Estoppels. Borrower shall have delivered
to Lender an executed REA estoppel letter, which shall be in form and
substance satisfactory to Lender, from each party to any REA required by
Lender with respect to any Individual Property.
(xi) Environmental Indemnity. Each Borrower shall
have executed and delivered to Lender the Environmental Indemnity.
(xii) Cash Collateral Account Agreement. Each
Borrower, each Manager and Cash Collateral Account Bank shall have
executed and delivered the Cash Collateral Account Agreement and shall
have delivered an executed copy of such Cash Collateral Account Agreement
to Lender.
(xiii) PIP Guaranty. Ashford Hospitality Limited
Partnership shall have executed and delivered to Lender the PIP Guaranty.
(B) Opinions of Counsel. Lender shall have received from
counsel satisfactory to Lender, legal opinions in form and substance
satisfactory to Lender in Lender's discretion (including, without limitation, a
bankruptcy opinion). All such legal opinions will be addressed to Lender and the
Rating Agencies, dated as of the Closing Date, and in form and substance
satisfactory to Lender, the Rating Agencies and their counsel. Each applicable
Borrower hereby instructs any of the foregoing counsel, to the extent that such
counsel represents such Borrower, to deliver to Lender such opinions addressed
to Lender and the Rating Agencies.
(C) Secretary's Certificates and SPE Equity Owner's
Certificate. Lender shall have received a Secretary's Certificate acceptable to
Lender with respect to each applicable Borrower's managing equity owner and each
applicable SPE Equity Owner's Certificate with respect to the applicable
Borrower.
(D) Insurance. Lender shall have received certificates
of insurance demonstrating insurance coverage in respect of each Individual
Property as required by and in accordance with the Mortgages.
(E) Lien Search Reports. Lender shall have received
satisfactory reports of UCC (collectively, the "UCC Searches"), federal tax
lien, bankruptcy, state tax lien, judgment and pending litigation searches
conducted by a search firm reasonably acceptable to Lender. Such searches shall
have been received in relation to each Borrower and each equity owner in each
Borrower and each Manager.
48
<PAGE>
(F) Title Insurance Policy. Lender shall have received
(i) a Title Insurance Policy for each Individual Property or a marked-up
commitment (in form and substance satisfactory to Lender) from Title Insurer to
issue a Title Insurance Policy for each Individual Property and (ii) a fully
executed copy of the Title Instruction Letter from the Title Insurer.
(G) Environmental Matters. Lender shall have received an
Environmental Report with respect to each Individual Property.
(H) Consents, Licenses, Approvals. Lender shall have
received copies of all consents, licenses and approvals, if any, required in
connection with the execution, delivery and performance by each Borrower under,
and the validity and enforceability of, the Loan Documents, and such consents,
licenses and approvals shall be in full force and effect.
(I) Additional Matters. Lender shall have received such
other Permits, certificates (including certificates of occupancy reflecting the
permitted uses of the Individual Properties as of the Closing Date), opinions,
documents and instruments (including, without limitation, written proof from the
appropriate Governmental Authority regarding the zoning of each Individual
Property in form and substance satisfactory to Lender in Lender's discretion)
relating to the Loan as may be required by Lender and all other documents and
all legal matters in connection with the Loan shall be satisfactory in form and
substance to Lender. Each Borrower shall provide Lender with information
reasonably satisfactory to Lender regarding Basic Carrying Costs on or before
the Closing Date.
(J) Representations and Warranties. The representations
and warranties herein and in the other Loan Documents shall be true and correct
in all material respects.
(K) No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any Governmental Authority shall have
been issued or entered, and no litigation shall be pending or threatened, which
in the judgment of Lender would have a Material Adverse Effect.
(L) Survey. Lender shall have received a Survey for each
Individual Property.
(M) Engineering Report. Lender shall have received an
Engineering Report for each Individual Property.
(N) Appraisal. Lender shall have received an Appraisal
satisfactory to Lender with respect to each Individual Property which shall be
(i) prepared by an Appraiser approved by Lender in Lender's reasonable
discretion, (ii) prepared based on a scope of work determined by Lender in
Lender's reasonable discretion and (iii) in form and content acceptable to
Lender in Lender's reasonable discretion.
(O) Security Deposits. Borrowers shall be in compliance
with all applicable Legal Requirements relating to all security deposits held
for any Leases.
49
<PAGE>
(P) Service Contracts and Permits. Borrowers shall have
delivered to Lender true, correct and complete copies of all material contracts
and Permits relating to each Individual Property.
(Q) Site Inspection. Unless waived by Lender in
accordance with Section 8.4, Lender shall have performed, or caused to be
performed on its behalf, an on-site due diligence review of each Individual
Property to be acquired or refinanced with the Loan, the results of which shall
be satisfactory to Lender in Lender's discretion.
(R) Use. Each Individual Property shall be operating and
operated only as a hotel of the same class and in a similar manner as each such
Individual Property is operated on the Closing Date.
(S) Financial Information. Lender shall have received
all financial information (which financial information shall be satisfactory to
Lender in Lender's discretion) relating to each Individual Property including,
without limitation, audited financial statements of each Borrower for the
calendar year ending December 31, 2004, if any, and other financial reports
requested by Lender in Lender's reasonable discretion. Such financial
information shall be (i) prepared by an accounting firm approved by Lender in
Lender's reasonable discretion, (ii) prepared based on a scope of work
determined by Lender in Lender's reasonable discretion and (iii) in form and
content acceptable to Lender in Lender's reasonable discretion.
(T) Management Agreements. Lender shall have received
the Management Agreements.
(U) Leases; Tenant Estoppels; Subordination,
Nondisturbance and Attornment Agreements. With respect to each Individual
Property, Borrowers shall have delivered a true, complete and correct rent roll
and a copy of each of the Leases identified in such rent roll, and each Lease
shall be satisfactory to Lender in Lender's reasonable discretion.
(V) Subdivision. Evidence satisfactory to Lender
(including title endorsements) that the Land relating to each Individual
Property constitutes a separate lot for conveyance and real estate tax
assessment purposes.
(W) Transaction Costs. Borrowers shall have paid or
caused to be paid all Transaction Costs.
(b) Lender shall not be obligated to make the Loan unless and
until each of the applicable conditions precedent set forth in this Section 3.1
is satisfied and until Borrower provides any other information reasonably
required by Lender.
(c) In connection with the Loan, Borrower shall execute and/or
deliver to Lender all additions, amendments, modifications and supplements to
the items set forth in this Article III, including, without limitation,
amendments, modifications and any supplements to the Note, any Mortgage, any
Assignment of Leases, any Assignment of Agreements, and Manager's Subordination,
if reasonably requested by Lender to effectuate the provisions hereof, and to
provide Lender with the full benefit of the security intended to be provided
under the Loan
50
<PAGE>
Documents. Without in any way limiting the foregoing, such additions,
modifications and supplements shall include those deemed reasonably desirable by
Lender's counsel in the jurisdiction in which the applicable Individual Property
is located.
(d) The making of the Loan shall constitute, without the
necessity of specifically containing a written statement to such effect, a
confirmation, representation and warranty by Borrower to Lender that all of the
applicable conditions to be satisfied in connection with the making of the Loan
have been satisfied (unless waived by Lender in accordance with Section 8.4 or
otherwise made known to Lender by the Borrowers,) and that all of the
representations and warranties of Borrowers set forth in the Loan Documents are
true and correct in all material respects as of the date of the making of the
Loan.
Section 3.2. Form of Loan Documents and Related Matters.
The Loan Documents and all of the certificates, agreements, legal
opinions and other documents and papers referred to in this Article III, unless
otherwise specified, shall be delivered to Lender, and shall be in form and
substance satisfactory to Lender.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of Borrower. Each Borrower
represents, warrants and covenants as follows as to all Borrowers and all
Individual Properties:
(A) Organization. That each Borrower (i) is a duly
organized and validly existing Entity in good standing under the laws of the
State of its formation, (ii) is duly qualified as a foreign Entity in each
jurisdiction in which the nature of its business, the applicable Individual
Properties or any of the Collateral makes such qualification necessary or
desirable, (iii) has the requisite Entity power and authority to carry on its
business as now being conducted, and (iv) has the requisite Entity power to
execute and deliver, and perform its obligations under, the Loan Documents.
(B) Authorization. The execution and delivery by each
applicable Borrower of the Loan Documents, each Borrower's performance of its
obligations thereunder and the creation of the security interests and Liens
provided for in the Loan Documents (i) have been duly authorized by all
requisite Entity action on the part of each Borrower, (ii) will not violate any
provision of any applicable Legal Requirements, any order, writ, decree,
injunction or demand of any court or other Governmental Authority, any
organizational document of any Borrower or any indenture or agreement or other
instrument to which any Borrower is a party or by which Borrower is bound
except, with respect to violations of any such indentures, agreements or other
instruments, where such violation would not have a Material Adverse Effect,
(iii) will not be in conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under, or result in the creation
or imposition of any Lien of any nature whatsoever upon any of the property or
assets of any Borrower pursuant to, any indenture or agreement or instrument,
and (iv) have been duly executed and delivered by each Borrower. Except for
those obtained or filed on or prior to the Closing Date, no Borrower is
51
<PAGE>
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
the Loan Documents. The Loan Documents to which any Borrower or any Manager is a
party have been duly authorized, executed and delivered by such parties.
(C) Single-Purpose Entity.
(i) Each Borrower and each SPE Equity Owner has
been, and will continue to be, a duly formed and existing Entity, and a
Single-Purpose Entity.
(ii) Each SPE Equity Owner at all times since its
formation has been, and will continue to be, a duly formed and existing
limited liability company or a limited partnership in good standing under
the laws of the jurisdiction of its formation and a Single-Purpose Entity,
is duly qualified as a foreign entity in each other jurisdiction in which
the nature of its business or any of the Collateral makes such
qualification necessary or desirable, and no Borrower will take action to
cause any SPE Equity Owner not to be a duly formed and existing limited
liability company in good standing under the laws of the jurisdiction of
its formation and a Single-Purpose Entity.
(iii) Each Borrower at all times since its
formation has complied, and will, at all times while the Loan is
outstanding, continue to comply, with the provisions of all of its
organizational documents, and the laws of the state in which such Borrower
was formed relating to the Entity.
(D) Litigation. Except as disclosed on Schedule 1
attached hereto, there are no actions, suits or proceedings at law or in equity
by or before any Governmental Authority or other agency now pending and served
or, to the knowledge of any Borrower, threatened against any Borrower, any SPE
Equity Owner, any Manager or any Individual Property which, if determined
against the Borrowers, SPE Equity Owner, Manager or Individual Property could
reasonably be expected to have a Material Adverse Effect.
(E) Agreements. No Borrower is a party to any agreement
or instrument or subject to any restriction which is likely to have a Material
Adverse Effect. Each applicable Borrower is not in default in any material
respect in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any indenture, agreement or instrument to
which it is a party or by which such Borrower or the applicable Individual
Property is bound which could reasonably be expected to have a Material Adverse
Effect.
(F) No Bankruptcy Filing. No Borrower is contemplating
either the filing of a petition under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of any Borrower's
assets or property, and no Borrower has any knowledge of any Person
contemplating the filing of any such petition against any Borrower.
(G) Full and Accurate Disclosure. No statement of fact
made by Borrower in the Loan Documents contains any untrue statement of a
material fact or omits to
52
<PAGE>
state any material fact necessary to make statements contained herein or therein
not misleading. There is no fact presently known to any Borrower which has not
been disclosed to Lender which materially adversely affects, nor as far as any
Borrower can foresee, might materially adversely affect the business, operations
or condition (financial or otherwise) of any Borrower.
(H) Management Agreements. Each Management Agreement is
valid, binding and enforceable and in full force and effect and has not been
modified (other than by written instrument provided to Lender or except as
otherwise disclosed to Lender in writing) and there are no material defaults
under any of them, nor to Borrowers' knowledge has any event occurred that with
the passage of time, the giving of notice or both would result in such a
material default under the terms of each Management Agreement.
(I) Compliance. Except as expressly disclosed in the
Engineering Reports, the Environmental Reports, the PZR zoning reports or the
Surveys delivered to Lender by Borrower, each applicable Borrower, each
Individual Property and each applicable Borrower's use thereof as a hotel and
operations thereat comply in all material respects with all applicable Legal
Requirements and all Insurance Requirements. No Borrower is in default or
violation of any order, writ, injunction, decree or demand of any Governmental
Authority, the violation of which is reasonably likely to have a Material
Adverse Effect. Borrowers further represent and covenant that parking at the
Individual Property know as TownPlace Suites Ft. Worth, Texas is sufficient to
satisfy all applicable Legal Requirements, or that the applicable Borrower has
the capability to and will restripe the parking areas at such Individual
Property in conformance with all applicable Legal Requirements if requested or
required by any Governmental Authority to comply with such Legal Requirements.
(J) Other Debt and Obligations. No Borrower has any
financial obligation under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which any Borrower is a party, or
by which Borrower or any Individual Property is bound, other than (a) unsecured
trade payables incurred in the ordinary course of business relating to the
ownership and operation of an Individual Property which are not evidenced by a
promissory note and when aggregated with the unsecured trade payables of all
other Borrowers do not exceed a maximum amount of two and one-half percent
(2.5%) of the Loan Amount and are paid within sixty (60) days of the date
incurred (unless same are being contested in accordance with the terms of this
Agreement), and (b) obligations under the Mortgage and the other Loan Documents.
No Borrower has borrowed or received other debt financing that has not been
heretofore repaid in full and no Borrower has any known material contingent
liabilities.
(K) ERISA. (a) Each Plan and, to the knowledge of any
Borrower, 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 federal or
state law, and no event or condition has occurred as to which any Borrower would
be under an obligation to furnish a report to Lender under Section 5.1(S).
(b) As of the date hereof and throughout the term
of the Loan (a) no Borrower is or will be an "employee benefit plan," as defined
in Section 3(3) of
53
<PAGE>
ERISA, subject to Title I of ERISA, or a "plan," as defined in Section
4975(e)(1) of the Code, subject to Code Section 4975, (b) no Borrower is or will
be a "governmental plan" within the meaning of Section 3(32) of ERISA, (c) none
of the assets of any Borrower constitutes or will constitute "plan assets" of
one or more of any such plans under 29 C.F.R. Section 2510.3-101 or otherwise,
and (d) transactions by or with each Borrower do not and will not violate state
statutes regulating investment of, and fiduciary obligations with respect to,
governmental plans and such state statutes do not in any manner affect the
ability of the Borrower to perform its obligations under the Loan Documents or
the ability of Lender to enforce any and all of its rights under the Loan
Agreement.
(L) Solvency. No Borrower has entered into this Loan
Agreement or any Loan Document with the actual intent to hinder, delay, or
defraud any creditor, and each Borrower has received reasonably equivalent value
in exchange for its obligations under the Loan Documents. Giving effect to the
transactions contemplated hereby and the agreements set forth herein, the fair
saleable value of each of Borrower's assets exceeds and will, immediately
following the execution and delivery of this Agreement, exceed such Borrower's
total liabilities, including, without limitation, subordinated, unliquidated, or
disputed liabilities or Contingent Obligations. The fair saleable value of each
Borrower's assets is and will, immediately following the execution and delivery
of this Agreement, be greater than such Borrower's probable liabilities,
including the maximum amount of its Contingent Obligations or its debts as such
debts become absolute and matured. No Borrower's assets do and, immediately
following the execution and delivery of this Agreement, will, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. No Borrower intends to, or believes that it will, incur debts
and liabilities (including, without limitation, Contingent Obligations and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
each Borrower).
(M) Not Foreign Person. No Borrower is a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
(N) Investment Company Act; Public Utility Holding
Company Act. No Borrower is (i) an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended, (ii) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of either a "holding company"
or a "subsidiary company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or (iii) subject to any other federal or state
law or regulation which purports to restrict or regulate its ability to borrow
money.
(O) No Defaults. No Event of Default or, to Borrower's
knowledge, Default exists under or with respect to any Loan Document.
(P) Labor Matters. No Borrower is a party to any
collective bargaining agreements.
(Q) Title to the Property. Each Borrower owns either
good, indefeasible and marketable fee simple or leasehold title to the
applicable Individual Properties
54
<PAGE>
which it owns, free and clear of all Liens, other than the Permitted
Encumbrances applicable to such Individual Property. There are no outstanding
options to purchase or rights of first refusal affecting any Individual
Property. The Permitted Encumbrances do not and are not likely to materially and
adversely affect (i) the ability of any Borrower to pay in full all sums due
under the Notes or any of its other obligations in a timely manner or (ii) the
use of any Individual Property for the use currently being made thereof, the
operation of such Individual Property as currently being operated or the value
of any Individual Property.
(R) Use of Proceeds; Margin Regulations. Each Borrower
will use the proceeds of the Loan for the purposes described in Section 2.2. No
part of the proceeds of the Loan will be used for the purpose of purchasing or
acquiring any "margin stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulation U or any other Regulations of such Board of
Governors, or for any purposes prohibited by applicable Legal Requirements.
(S) Financial Information. All historical financial data
concerning any Borrower or any Individual Property (including without limitation
all rent rolls and operating statements) that has been delivered by any Borrower
to Lender is true, complete and correct in all material respects. Since the
delivery of such data, except as otherwise disclosed in writing to Lender, there
has been no material adverse change in the financial position of any Borrower or
Individual Property, or in the results of operations of any Borrower. No
Borrower has incurred any obligation or liability, contingent or otherwise, not
reflected in such financial data which might materially adversely affect its
business operations or any Individual Property.
(T) Condemnation. No Taking has been commenced or, to
any Borrower's knowledge, is contemplated with respect to all or any portion of
any Individual Property or for the relocation of roadways providing access to
any Individual Property.
(U) Utilities and Public Access. Except as otherwise
disclosed on the Surveys, each Individual Property has adequate rights of access
to public ways and is served by adequate water, sewer, sanitary sewer and storm
drain facilities as are adequate for full utilization of such Individual
Property for its current purpose. Except as otherwise disclosed by the Surveys,
all public utilities necessary to the continued use and enjoyment of each
Individual Property as presently used and enjoyed are located in the public
right-of-way abutting the premises, and all such utilities are connected so as
to serve each Individual Property either (i) without passing over other property
or, (ii) if such utilities pass over other property, pursuant to valid
easements. All roads necessary for the full utilization of each Individual
Property for its current purpose have been completed and dedicated to public use
and accepted by all Governmental Authorities or are the subject of access
easements for the benefit of such Individual Property.
(V) Environmental Compliance. Except as disclosed in the
Environmental Reports, each of Borrower represents, warrants and covenants, as
to itself and its applicable Individual Property: (a) there are no Hazardous
Substances or underground storage tanks in, on, or under such Individual
Property, except those that are both (i) in compliance with all Environmental
Laws and with permits issued pursuant thereto and (ii) which do not require
Remediation; (b) there are no past, present or threatened Releases of Hazardous
Substances in,
55
<PAGE>
on, under, from or affecting any Individual Property which have not been fully
Remediated in accordance with Environmental Law; (c) there is no Release or
threat of any Release of Hazardous Substances which has or is migrating to any
Individual Property; (d) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection with
any Individual Property which has not been fully Remediated in accordance with
Environmental Law; (e) such Borrower does not know of, and has not received, any
written or oral notice or other communication from any Person (including but not
limited to a governmental entity) relating to Hazardous Substances or the
Remediation thereof, of possible liability of any Person pursuant to any
Environmental Law, other environmental conditions in connection with any
Individual Property, or any actual or potential administrative or judicial
proceedings in connection with any of the foregoing; and (f) such Borrower has
truthfully and fully provided to Lender, in writing, any and all information
relating to conditions in, on, under or from each Individual Property that is
known to such Borrower and that is contained in files and records of such
Borrower, including but not limited to any reports relating to Hazardous
Substances in, on, under or from such Individual Property and/or to the
environmental condition of each Individual Property.
(W) No Joint Assessment; Separate Lots. No Borrower has
or shall suffer, permit or initiate the joint assessment of any applicable
Individual Property (i) with any other real property constituting a separate tax
lot, and (ii) with any portion of any Individual 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 any Individual Property as a single lien. Each Individual
Property is comprised of one or more parcels, each of which constitutes a
separate tax lot and none of which constitutes a portion of any other tax lot.
(X) Assessments. Except as disclosed in the Title
Insurance Policy and any title exception documents referenced therein, there are
no pending or, to the knowledge of any Borrower, proposed special or other
assessments for public improvements or otherwise affecting any Individual
Property, nor, to the knowledge of any Borrower, are there any contemplated
improvements to any Individual Property that may result in such special or other
assessments.
(Y) Mortgage and Other Liens. The Mortgages create valid
and enforceable first mortgage Liens on each Individual Property as security for
the repayment of the Indebtedness, subject only to the Permitted Encumbrances
applicable to such Individual Property. Each security agreement, assignment,
pledge, grant or other hypothecation which is contained in any Loan Document
establishes and creates a valid and enforceable lien on and a security interest
in, or claim to, the rights and property described therein. All property covered
by each such security agreement, assignment, pledge, grant or other
hypothecation is subject to a UCC financing statement filed and/or recorded, as
appropriate, in all places necessary to perfect a valid first priority lien with
respect to the rights and property that are the subject of such security
agreement, assignment, pledge, grant or other hypothecation to the extent
governed by the UCC to the extent such a security interest in such property is
perfectible by the filing of a UCC financing statement.
56
<PAGE>
(Z) Enforceability. The Loan Documents executed by each
applicable Borrower in connection with the Loan are the legal, valid and binding
obligations of each such Borrower, enforceable against each such Borrower in
accordance with their terms, subject only to bankruptcy, insolvency and other
limitations on creditors' rights generally and to equitable principles. Such
Loan Documents are, as of the Closing Date, not subject to any right of
rescission, set-off, counterclaim or defense by any Borrower, including the
defense of usury, nor will the operation of any of the terms of the Notes, any
Mortgage, or such other Loan Documents, or the exercise of any right thereunder,
render any Mortgage unenforceable against any Borrower, in whole or in part, or
subject to any right of rescission, set-off, counterclaim or defense by any
Borrower, including the defense of usury, and no Borrower has asserted any right
of rescission, set-off, counterclaim or defense with respect thereto.
(AA) No Liabilities. No Borrower has any liabilities or
obligations including, without limitation, Contingent Obligations (and
including, without limitation, liabilities or obligations in tort, in contract,
at law, in equity, pursuant to a statute or regulation, or otherwise) other than
those liabilities and obligations expressly permitted by this Agreement.
(BB) No Prior Assignment. As of the Closing Date, (i)
Lender is the assignee of each Borrower's interest under the Leases, and (ii)
there are no prior assignments of the Leases or any portion of the Rents due and
payable or to become due and payable which are presently outstanding.
(CC) Certificate of Occupancy. Borrowers have provided
to Lender copies of all Permits for each Individual Property necessary to use
and operate the Individual Property for the use described in Section 3.1(R)
where such Permits are available, or otherwise confirmation of issuance of such
Permits either in the PZR Report or from the applicable zoning authority, and
where such Permits require re-issuance in the event of a transfer of title to an
Individual Property, the applicable Borrower is diligently pursuing a Permit in
the name of the applicable Borrower. The use being made of each Individual
Property is in conformity with the certificate of occupancy and/or Permits for
each such Individual Property and any other restrictions, covenants or
conditions affecting each such Individual Property to the extent that any
existing nonconformity would not have a Material Adverse Effect. Each such
Individual Property contains all equipment necessary to use and operate each
such Individual Property in a first-class manner.
(DD) Flood Zone. Except as shown on a Survey, no
Individual Property is located in a flood hazard area as designated by the
Federal Emergency Management Agency.
(EE) Physical Condition. Except as disclosed in an
Engineering Report, each Individual Property is free of material structural
defects and all building systems contained therein are in good working order in
all material respects subject to ordinary wear and tear.
(FF) Intellectual Property. All trademarks, trade names
and service marks owned by any Borrower or that are pending, or under which any
Borrower is
57
<PAGE>
licensed, are in good standing and uncontested. There is no right under any
trademark, trade name or service mark necessary to the business of any Borrower
as presently conducted or as Borrower contemplates conducting its business. No
Borrower has infringed, is infringing, or has received notice of infringement
with respect to asserted trademarks, trade names and service marks of others. To
Borrower's knowledge, there is no infringement by others of trademarks, trade
names and service marks of any Borrower.
(GG) Intentionally Omitted.
(HH) Title Insurance. Each Individual Property is
covered by either an American Land Title Association (ALTA) mortgagee's title
insurance policy, or a commitment to issue such a title insurance policy,
insuring a valid first lien on such Individual Property, which is in full force
and effect and is freely assignable to and will inure to the benefit of Lender
and any successor or assignee of Lender, including but not limited to the
trustee in a Securitization, subject only to the Permitted Encumbrances.
(II) Tax Fair Market Value. The Allocated Loan Amount
with respect to each Individual Property does not exceed the Tax Fair Market
Value of such Individual Property. The Loan Amount does not exceed the aggregate
Tax Fair Market Values of the Individual Properties. If any Note is
significantly modified prior to the closing date of a Secondary Market
Transaction so as to result in a taxable exchange under Code Section 1001,
Borrowers will, if requested by Lender, represent that the amount of such Note
does not exceed the aggregate Tax Fair Market Value of the applicable Individual
Property as of the date of such significant modification.
(JJ) Leases. (a) Each Borrower is the sole owner of the
entire lessor's interest in the Leases; (b) the Leases are the valid, binding
and enforceable obligations of the applicable Borrowers and the applicable
tenant or lessee thereunder; (c) the terms of all alterations, modifications and
amendments to the Leases are reflected in the certified rent roll statement
delivered to and approved by Lender; (d) no Rents reserved in any Leases have
been assigned or otherwise pledged or hypothecated; (e) no Rents have been
collected for more than one (1) month in advance; (f) the premises demised under
the Leases have been completed and the tenants under the Leases have accepted
the same and have taken possession of the same on a rent-paying basis; (g) there
exists no offset or defense to the payment of any portion of any Rents; (h) no
Lease contains an option to purchase, right of first refusal to purchase,
expansion right, or any other similar provision; and (i) no Person has any
possessory interest in, or right to occupy, any Individual Property except under
and pursuant to a Lease.
(KK) Bank Holding Company. No Borrower is a "bank
holding company" or a direct or indirect subsidiary of a "bank holding company"
as defined in the Bank Holding Company Act of 1956, as amended, and Regulation Y
thereunder of the Board of Governors of the Federal Reserve System.
(LL) Embargoed Person. None of the funds or other assets
of any Borrower or any SPE Equity Owner constitute property of, or are
beneficially owned, directly or indirectly, by any person, entity or government
subject to trade restrictions under federal law, including, without limitation,
the International Emergency Economic Powers Act, 50
58
<PAGE>
U.S.C. Sections 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1
et seq. , and any executive orders or regulations promulgated thereunder, with
the result that (i) the investment in any Borrower or any SPE Equity Owner, as
applicable (whether directly or indirectly), is prohibited by law, or (ii) the
Loan made by the Lender is in violation of law ("Embargoed Person"); (b) no
Embargoed Person has any interest of any nature whatsoever in any Borrower or
any SPE Equity Owner, as applicable (whether directly or indirectly), with the
result that (i) the investment in any Borrower or any SPE Equity Owner, as
applicable (whether directly or indirectly) is prohibited by law, or (ii) the
Loan is in violation of law; and (c) none of the funds of any Borrower or any
SPE Equity Owner, as applicable, have been derived from any unlawful activity
with the result that (i) the investment in any Borrower or any SPE Equity Owner,
as applicable (whether directly or indirectly) is prohibited by law, or (ii) the
Loan is in violation of law.
(MM) Illegal Activity. No portion of any of each
Individual Property has been or will be purchased, improved, equipped or
furnished with proceeds of any illegal activity.
(NN) Compliance. No Borrower, and to the best of each
Borrower's knowledge after due and diligent inquiry, neither (a) any Person
owning an interest in a Borrower or any SPE Equity Owner, (b) each Manager, and
(c) any tenant at each Individual Property: (i) is currently identified on the
OFAC List ("OFAC List"), and (ii) is not a Person with whom a citizen of the
United States is prohibited to engage in transactions by any trade embargo,
economic sanction, or other prohibition of any Legal Requirement (including the
September 24, 2001, Executive Order Blocking Property and Prohibiting
Transactions With Person Who Commit, Threaten to Commit, or Support Terrorism),
and (iii) is not in violation of the U.S. Federal Bank Secrecy Act, as amended,
and its implementing regulations (31 C.F.R. part 103), the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, Public Law 107-56 and the regulations
promulgated thereunder, any order issued with respect to anti-money laundering
by the U.S. Department of the Treasury's Office of Foreign Assets Control, or
any other anti-money laundering law. Each Borrower has implemented procedures,
and will consistently apply those procedures throughout the term of the Loan, to
ensure the foregoing representations and warranties remain true and correct
during the term of the Loan.
(OO) Operating Budget. Attached hereto as Exhibit E is a
true, complete and correct copy of the operating budget for each Borrower's
Individual Property for the period between the Closing Date and December 31,
2005, which Operating Budget has been approved by Lender pursuant to the terms
of this Agreement.
(PP) Organizational Chart. Attached hereto as Exhibit G
is a true, complete and correct copy of the Borrowers' organizational chart.
(QQ) Property Improvement Plans. Attached hereto as
Exhibit H is (i) a true, complete and correct copy of all property improvement
plans or similar agreements affecting each Individual Property (each, a
"Property Improvement Plan"), and (ii) a true, complete and correct description
of the estimated amounts to be expended and time frames for required expenditure
and completion pursuant to each Property Improvement Plan.
59
<PAGE>
Section 4.2. Survival of Representations and Warranties.
Each Borrower agrees that (i) all of the representations and
warranties of each Borrower set forth in this Agreement and in the other Loan
Documents delivered on the Closing Date are made as of the Closing Date (except
as expressly otherwise provided) and (ii) all representations and warranties
made by each Borrower shall survive the delivery of the Note and continue for so
long as any amount remains owing to Lender under this Agreement, the Note or any
of the other Loan Documents; provided, however, that the representations,
warranties and covenants set forth in Section 4.1(V), Section 4.1(LL), Section
4.1(NN) and Sections 5.1(D) through 5.1(G), inclusive, shall survive in
perpetuity and shall not be subject to the exculpation provisions of Section
8.14. All representations, warranties, covenants and agreements made in this
Agreement or in the other Loan Documents shall be deemed to have been relied
upon by Lender notwithstanding any investigation heretofore or hereafter made by
Lender or on its behalf. Without limiting any other provision of this Agreement,
with respect to each Secondary Market Transaction, within three (3) days of
receipt of Lender's request, each Borrower shall deliver to Lender a
certification (a) remaking all of the representations and warranties contained
in this Agreement as of the date of such Secondary Market Transaction, or (y)
otherwise specifying any changes in or qualifications to such representations
and warranties as of such date as may be necessary to make such representations
consistent with the facts as they exist on such date.
ARTICLE 5
AFFIRMATIVE COVENANTS
Section 5.1. Borrower Covenants.
Each Borrower covenants and agrees that, from the date hereof and
until payment in full of the Indebtedness:
(A) Existence; Compliance with Legal Requirements;
Insurance. Each Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its Entity existence, rights,
licenses, Permits and franchises necessary for the conduct of its business and
to comply or to initiate compliance in all material respects with all applicable
Legal Requirements and Insurance Requirements applicable to it and each
Individual Property. Each Borrower shall notify Lender promptly of any written
notice or order that such Borrower receives from any Governmental Authority
relating to such Borrower's failure to comply with such applicable Legal
Requirements relating to such Borrower's applicable Individual Property and
promptly take any and all actions necessary to bring its operations at such
Individual Property into compliance with such applicable Legal Requirements (and
shall fully comply with the requirements of such Legal Requirements that at any
time are applicable to its operations at any Individual Property) provided, that
such Borrower at its expense may, after prior notice to the Lender, contest by
appropriate legal, administrative or other proceedings conducted in good faith
and with due diligence, the validity or application, in whole or in part, of any
such applicable Legal Requirements as long as (i) neither the applicable
Collateral nor any part thereof or any interest therein, will be sold, forfeited
or lost or subject to a continuing Lien if such Borrower pays the amount or
satisfies the condition being contested, and
60
<PAGE>
such Borrower would have the opportunity to do so, in the event of such
Borrower's failure to prevail in the contest, (ii) Lender would not, by virtue
of such permitted contest, be exposed to any risk of any civil liability or
criminal liability, and (iii) such Borrower shall have furnished to the Lender
additional security in respect of the claim being contested or the loss or
damage that may result from such Borrower's failure to prevail in such contest
in such amount as may be reasonably requested by Lender but in no event less
than one hundred twenty-five percent (125%) of the amount of such claim. Each
Borrower shall at all times maintain, preserve and protect, or cause the
maintenance, preservation and protection of, all franchises and trade names and
preserve or cause the preservation of all the remainder of its property
necessary for the continued conduct of its business and keep the applicable
Individual Properties, or cause the same to be kept, in good repair, working
order and condition, except for reasonable wear and use, and from time to time
make, or cause to be made, all necessary repairs, renewals, replacements,
betterments and improvements thereto, all as more fully provided in the
Mortgages. Borrowers shall keep their Individual Properties insured at all
times, as provided in the Mortgages.
(B) Impositions and Other Claims. Subject to Section
2.11(e)(i)(x) hereof, Borrowers shall pay and discharge or cause to be paid and
discharged all Impositions, as well as all lawful claims for labor, materials
and supplies or otherwise, which could become a Lien, all as more fully provided
in, and subject to any rights to contest contained in, the Mortgages.
(C) Litigation. Each Borrower shall give prompt written
notice to Lender of any litigation or governmental proceedings pending or
threatened against such Borrower which is reasonably likely to have a Material
Adverse Effect.
(D) Environmental.
(i) Borrowers covenant and agree that: (a) all
uses and operations on or of the Individual Properties, whether by any
Borrower or any other Person, shall be in compliance with all
Environmental Laws and permits issued pursuant thereto; (b) there shall be
no Releases of Hazardous Substances in, on, under or from any Individual
Property; (c) there shall be no Hazardous Substances used, present or
Released in, on, under or from any Individual Property, except those that
are (i) in compliance in all material respects with all Environmental Laws
and with permits issued pursuant thereto, if required under Environmental
Laws; (ii) fully disclosed to Lender in writing; and (iii) which do not
require Remediation, (d) Borrowers shall keep each Individual Property
free and clear of all Environmental Liens; (e) Borrowers shall, at its
sole cost and expense, fully and expeditiously cooperate in all activities
pursuant to Section 5.1(E) of this Agreement, including but not limited to
providing all relevant information and making knowledgeable Persons
available for interviews; (f) intentionally omitted; (g) such Borrower
shall, at its sole cost and expense, (i) effectuate Remediation of any
condition (including but not limited to a Release of a Hazardous Substance
or violation of Environmental Laws) in, on, under or from each Individual
Property for which Remediation is legally required; (ii) comply with all
Environmental Laws; (iii) comply with any directive from any governmental
authority; and (iv) take any other reasonable action necessary or
appropriate for protection of human health or the environment, if required
under Environmental Laws; (h) Borrowers shall not do or allow any tenant
or
61
<PAGE>
other user of any Individual Property to do any act that materially
increases the dangers to human health or the environment, poses an
unreasonable risk of harm to any Person (whether on or off any Individual
Property), impairs or may impair the value or marketability of any
Individual Property, is contrary to any requirement of any insurer,
constitutes a public or private nuisance, constitutes waste, or violates
in any material respect any covenant, condition, agreement or easement
applicable to any Individual Property; (i) Borrowers shall immediately
notify Lender in writing of (A) any unlawful presence or Releases or
threatened Releases of Hazardous Substances in, on, under, from or
migrating towards any Individual Property; (B) any material non-compliance
with any Environmental Laws related in any way to any Individual Property;
(C) any actual or potential Environmental Lien; (D) any Remediation of
environmental conditions relating to any Individual Property required by
Environmental Laws; and (E) any written notice or other communication of
which any Borrower becomes aware from any source whatsoever (including but
not limited to a governmental entity) relating in any way to Release,
presence, or Release or threatened Release of Hazardous Substances in
violation of Environmental Laws or the Remediation thereof, Law, other
environmental conditions in connection with any Individual Property, or
any actual or potential administrative or judicial proceedings in
connection with anything referred to in this Agreement; and (j) without
limiting the foregoing, upon becoming aware of the presence of or
potential for Mold in violation of applicable Environmental Laws on any
Individual Property, at its sole cost and expense Borrowers shall (i)
undertake or cause an investigation to identify the source(s) of such
Mold, including any water intrusion, and develop and implement a plan for
the Remediation of any Mold required under applicable Environmental Laws;
(ii) perform, or cause to be performed, all acts required under applicable
Environmental Laws for the Remediation of the Mold in a timely manner
given the circumstances; (iii) properly dispose in accordance with all
applicable Environmental Laws of any materials generated as a result of or
in connection with the foregoing items (i) and (ii); and (iv) provide
Lender with evidence of Borrower's compliance with the requirements of
each of the foregoing to Lender's reasonable satisfaction.
(E) Environmental Cooperation and Access. In the event
the Environmental Indemnified Parties reasonably believe that an environmental
condition exists on any Individual Property that, in the discretion of the
Lender, could endanger any tenants or other occupants of any Individual Property
or their guests or the general public or materially and adversely affects the
value of any Individual Property, upon reasonable notice from the Lender,
Borrowers shall, at any Borrowers' sole cost and expense, promptly cause an
engineer or consultant satisfactory to the Lender to conduct any environmental
assessment or audit (the scope of which shall be determined in the sole and
absolute discretion of Lender) and take any samples of soil, groundwater or
other water, air, or building materials or any other invasive testing reasonably
requested by Lender and promptly deliver the results of any such assessment,
audit, sampling or other testing; provided, further, that such Borrowers, the
Environmental Indemnified Parties and any other Person designated by the
Environmental Indemnified Parties, including but not limited to any receiver,
any representative of a governmental entity, and any environmental consultant,
shall have the right, but not the obligation, to enter upon such Individual
Property at all reasonable times (without materially interfering with the
business conducted at the Individual Property) to assess any and all aspects of
the environmental condition of such Individual Property and its use, including
but not limited to conducting any environmental assessment or audit (the
62
<PAGE>
scope of which shall be determined in the reasonable discretion of Lender) and
taking samples of soil, groundwater or other water, air, or building materials,
and reasonably conducting other invasive testing (which shall be at Borrowers'
sole cost and expense if Borrowers fail to conduct or deliver an assessment or
audit as required pursuant to this Section), Borrowers shall cooperate with and
provide the Environmental Indemnified Parties and any such Person designated by
the Environmental Indemnified Parties with access to each Individual Property.
(F) Environmental Indemnity. Borrowers covenant and
agree, at their sole cost and expense, to protect, defend, indemnify, release
and hold Environmental Indemnified Parties harmless from and against any and all
Losses imposed upon or incurred by or asserted against any Environmental
Indemnified Parties and directly or indirectly arising out of or in any way
relating to any one or more of the following (other than Losses imposed upon or
incurred by or asserted against any Environmental Indemnified Parties to the
extent that the Borrowers can prove (1) that such Losses were caused exclusively
by actions, conditions or events that occurred entirely after the date that
Lender (or Lender's designee or transferee by reason of exercise of remedies)
actually acquired title to the applicable Individual Property, and (2) that such
Losses were not caused or occasioned by the actions or inactions of any
Borrower, any Manager or any agent, employee, contractor or any Affiliate of any
of the foregoing): (a) any presence or use of any Hazardous Substances in, on,
above, under, from or affecting any Individual Property; (b) any past, present
or threatened Release of Hazardous Substances in, on, above, under, from or
affecting any Individual Property; (c) any activity by any Borrower, any Person
affiliated with any Borrower, and any tenant or other user of such Individual
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management, abatement,
removal, handling, transfer or transportation to or from such Individual
Property of or exposure to any Hazardous Substances at any time located in,
under, on or above such Individual Property; (d) any activity by any Borrower,
any Person affiliated with any Borrower, and any tenant or other user of such
Individual Property in connection with any actual or proposed Remediation of any
Hazardous Substances at any time located in, under, on, above or affecting such
Individual Property, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including but not limited to any removal,
remedial or corrective action; (e) any past, present or threatened
non-compliance or violations of any Environmental Laws (or permits issued
pursuant to any Environmental Law) in connection with such Individual Property
or operations thereon, including but not limited to any failure by any Borrower,
any Person affiliated with any Borrower, and any tenant or other user of any
Individual Property to comply with any order of any governmental authority in
connection with any Environmental Laws; (f) the imposition, recording or filing
or the threatened imposition, recording or filing of any Environmental Lien
encumbering any Individual Property; (g) any administrative processes or
proceedings or judicial proceedings in any way connected with any matter
addressed in this Agreement; (h) any past, present or threatened injury to,
destruction of or loss of natural resources in any way connected with any
Individual Property, including but not limited to costs to investigate and
assess such injury, destruction or loss; (i) any acts of such Borrower, any
Person affiliated with any Borrower, and any tenant or other user of any
Individual Property in arranging for disposal or treatment, or arranging with a
transporter for transport for disposal or treatment, of Hazardous Substances at
any facility or incineration vessel containing such or similar Hazardous
Substances; (j) any acts of such Borrower, any Person affiliated with any such
Borrower, and any tenant or other user of such Individual Property in accepting
any Hazardous
63
<PAGE>
Substances for transport to disposal or treatment facilities, incineration
vessels or sites from which there is a Release, or a threatened Release of any
Hazardous Substance which causes the incurrence of costs for Remediation; (k)
any personal injury, wrongful death, or property or other damage arising under
any statutory or common law or tort law theory, including but not limited to
damages assessed for private or public nuisance or for the conducting of an
abnormally dangerous activity on or near such Individual Property; and (l) any
misrepresentation or inaccuracy in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to this
Agreement or any other Loan Document. IT IS EXPRESSLY ACKNOWLEDGED AND AGREED BY
EACH BORROWER THAT THE INDEMNITY (AND/OR THE RELEASE) CONTAINED IN THIS SECTION
5.1(F) PROTECTS LENDER FROM THE CONSEQUENCES OF LENDER'S ACTS OR OMISSIONS,
INCLUDING WITHOUT LIMITATION, THE NEGLIGENT ACTS OR OMISSIONS OF LENDER TO THE
EXTENT PERMITTED BY LAW; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL
BE DEEMED TO RELIEVE THE LENDER FROM LIABILITY DUE TO ITS FRAUD, WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE.
(G) Duty to Defend. Upon written request by any
Environmental Indemnified Party, Borrowers shall defend same (if requested by
any Environmental Indemnified Party, in the name of the Environmental
Indemnified Party) by attorneys and other professionals reasonably approved by
the Environmental Indemnified Parties. Borrowers shall, within five Business
Days of receipt thereof, give written notice to Lender of (i) any notice, advice
or other communication from any governmental entity or any source whatsoever
with respect to Hazardous Substances on, from or affecting any Individual
Property, and (ii) any legal action brought against any party or related to any
Individual Property, with respect to which any Borrower may have liability under
this Agreement. Such notice shall comply with the provisions of Section 8.6
hereof.
(H) Intentionally omitted.
(I) Management Agreements.
(i) Each Individual Property shall be operated
under the terms and conditions of the applicable Management Agreement.
Each Borrower shall (x) pay all sums required to be paid by the owner
under each Management Agreement, (y) diligently perform, observe and
enforce all of the terms, covenants and conditions of each Management
Agreement on the part of the owner thereunder to be performed, observed
and enforced to the end that all things shall be done which are necessary
to keep unimpaired the rights of said owner under each Management
Agreement, (z) promptly notify Lender of the giving of any written notice
to any Borrower of any default by the owner in the performance or
observance of any of the terms, covenants or conditions of any Management
Agreement on the part of the owner thereunder to be performed and observed
(which Borrower may contest in accordance with the terms of the Management
Agreement) and deliver to Lender a true copy of each such notice, and (aa)
promptly deliver to Lender a copy of each financial statement, business
plan, capital expenditure plan, notice of a default under the Management
Agreement, report regarding operations at the related Individual Property,
estimates of any monetary nature and any other items
64
<PAGE>
reasonably requested by Lender, in each case received by any Borrower
under any Management Agreement.
(ii) No Borrower shall, without the prior consent
of the Lender (which consent shall not be unreasonably withheld),
surrender any Management Agreement or terminate or cancel any Management
Agreement or modify, change, supplement, alter or amend, in any material
respect, any Management Agreement, either orally or in writing, and each
Borrower hereby assigns to Lender as further security for the payment of
the Indebtedness and for the performance and observance of the terms,
covenants and conditions of this Loan Agreement, any and all rights,
privileges and prerogatives of each Borrower to surrender any Management
Agreement or to terminate, cancel, modify, change, supplement, alter or
amend, in any material respect, any Management Agreement, and any such
surrender of any Management Agreement or termination, cancellation,
modification, change, supplement, alteration or amendment of any
Management Agreement without the prior consent of Lender (which consent
shall not be unreasonably withheld) shall be void and of no force and
effect.
(iii) If any Borrower shall default in the
performance or observance of any material term, covenant or condition of
any Management Agreement on the part of the Borrower thereunder to be
performed or observed beyond any applicable notice and cure periods
contained therein, and Borrower is not contesting the validity of such
default in good faith in accordance with the terms of the Management
Agreement, then, without limiting the generality of the other provisions
of this Agreement, and without waiving or releasing any Borrower from any
of its obligations hereunder, Lender shall have the right, but shall be
under no obligation, to pay any sums and to perform any act or take any
action as may be appropriate to cause all the terms, covenants and
conditions of such Management Agreement on the part of the owner to be
performed or observed to be promptly performed or observed on behalf of
such Borrower, to the end that the rights of said Borrower in, to and
under such Management Agreement shall be kept unimpaired and free from
default. Any such amounts so advanced by Lender together with interest
thereon from the date expended by Lender of the Default Rate shall be part
of the Indebtedness and Borrower shall immediately repay such amounts to
Lender upon demand. Pursuant to the terms of the applicable Assignment of
Management Agreement, Lender and any person designated by Lender shall
have, and are hereby granted, the right to enter upon the applicable
Individual Property at any time and from time to time for the purpose of
taking any such action. If any Manager shall deliver to Lender a copy of
any notice sent to any Borrower of any default under any Management
Agreement, and Borrower is not contesting said default in good faith in
accordance with the terms of the Management Agreement, such notice shall
constitute full protection to Lender for any action taken or omitted to be
taken by Lender in good faith, in reliance thereon.
(iv) Each Borrower shall exercise each individual
option, if any, to extend or renew the term of each Management Agreement
upon demand by Lender made at any time within ninety (90) days prior to
the last day upon which any such option may be exercised, and each
Borrower hereby expressly authorizes and appoints Lender as its
attorney-in-fact to exercise any such option in the name of and
65
<PAGE>
upon behalf of such Borrower should such Borrower fail to do so, which
power of attorney shall be irrevocable and shall be deemed to be coupled
with an interest.
(v) Any sums expended by Lender pursuant to this
Section shall bear interest at the Default Rate from the date such cost is
incurred to the date of payment to Lender, shall be deemed to constitute a
portion of the Indebtedness, shall be secured by the lien of the Mortgage
and the other Loan Documents and shall be immediately due and payable
within two (2) Business Days after demand by Lender therefor.
(vi) Each Borrower shall, promptly upon request of
Lender, but no more than two (2) times in any calendar year during the
term of the Loan (unless (x) an Event of Default has occurred and is
continuing or (y) such request is occasioned in connection with a
Secondary Market Transaction) use its diligent best efforts to obtain and
deliver (or cause to be delivered) an estoppel certificate from each
Manager (A) certifying (1) that the Management Agreement is unmodified and
in full force and effect (or if there have been modifications, that the
same, as modified, is in full force and effect and stating the
modifications), and (2) the date through which the management fees due
under the Management Agreement have been paid; (B) stating whether or not
to the best knowledge of Manager (1) there is a continuing default by
Borrower in the performance or observance of any covenant, agreement or
condition contained in the Management Agreement, or (2) there shall have
occurred any event that, with the giving of notice or passage of time or
both, would become such a default, and, if so, specifying each such
default or occurrence of which Manager may have knowledge; and (C) stating
such other information as Lender may reasonably request. Such statement
shall be binding upon Manager and may be relied upon by Lender and/or such
third party specified by Lender.
(vii) Upon the termination of any Management
Agreement, subject to Section 5.1(P), each Borrower shall promptly enter
into a new Management Agreement with a replacement Manager, which shall
deliver a comfort or similar letter and/or a Manager's Subordination to
and in favor of Lender, all upon terms and conditions acceptable to Lender
in its discretion.
(J) Access to Property. Each Borrower shall permit
agents, representatives and employees of Lender to inspect their Individual
Properties or any part thereof at such reasonable times as may be requested by
Lender upon reasonable advance written notice and without materially interfering
with the business conducted at the Individual Property.
(K) Notice of Default. Each Borrower shall promptly
advise Lender of any material adverse change in such Borrower's condition,
financial or otherwise, or of the occurrence of any Default or Event of Default.
(L) Cooperate in Legal Proceedings. Except with respect
to any claim by any Borrower against Lender, such Borrower shall cooperate with
Lender with respect to any proceedings before any Governmental Authority which
may in any way affect the rights of Lender hereunder or any rights obtained by
Lender under any of the Loan Documents
66
<PAGE>
and, in connection therewith, not prohibit Lender, at its election, from
participating in any such proceedings.
(M) Perform Loan Documents. Borrowers shall observe,
perform and satisfy all the terms, provisions, covenants and conditions required
to be observed, performed or satisfied by them, and shall pay when due all
costs, fees and expenses required to be paid by them, under the Loan Documents
executed and delivered by such Borrower.
(N) Insurance Benefits; Condemnation Claims. Each
Borrower shall cooperate with Lender in settling any insurance or condemnation
claim and/or obtaining for Lender the benefits of any Insurance Proceeds and/or
Condemnation Proceeds lawfully or equitably payable to Lender in connection with
any Individual Property, and Lender shall be reimbursed for any expenses
incurred in connection therewith (including reasonable attorneys' fees and
disbursements) and the payment by any Borrower of the expense of an Appraisal on
behalf of Lender in case of a fire or other casualty affecting any Individual
Property or any part thereof out of such Insurance Proceeds and/or Condemnation
Proceeds, all as more specifically provided in the Mortgages.
(O) Further Assurances. Borrowers shall, at Borrowers'
sole cost and expense:
(i) upon Lender's request therefor given from time
to time after the occurrence of any Event of Default pay for (a) reports
of UCC, federal tax lien, state tax lien, judgment and pending litigation
searches with respect to any Borrower and (b) searches of title to any
Individual Property, each such search to be conducted by search firms
reasonably designated by Lender in each of the locations reasonably
designated by Lender.
(ii) furnish to Lender all instruments, documents,
boundary surveys, footing or foundation surveys, certificates, plans and
specifications, appraisals, title and other insurance reports and
agreements, and each and every other document, certificate, agreement and
instrument required to be furnished pursuant to the terms of the Loan
Documents;
(iii) execute and deliver to Lender such
documents, instruments, certificates, assignments and other writings, and
do such other acts necessary, to evidence, preserve and/or protect the
Collateral at any time securing or intended to secure the Notes, as Lender
may require in Lender's discretion; and
(iv) do and execute all and such further lawful
acts, conveyances and assurances for the better and more effective
carrying out of the intents and purposes of this Agreement and the other
Loan Documents, as Lender shall require from time to time in its
reasonable discretion.
(P) Management of Property.
(i) Each Individual Property will be managed at
all times by the applicable Manager pursuant to a Management Agreement
unless terminated
67
<PAGE>
as herein provided. Subject to Section 5.1(I), each Borrower shall comply
with the terms of and enforce its rights under the Management Agreement in
all material respects. The Management Agreement shall be terminated by
Borrower, at Lender's request, upon thirty (30) days prior written notice
to Borrower and the applicable Manager if the applicable Manager commits
any act which would permit termination by any Borrower under the
Management Agreement, and such act remains uncured beyond any applicable
cure period set forth in the Management Agreement. If a manager is
terminated pursuant hereto, or the Management Agreement is otherwise
terminated by Manager pursuant to the terms contained therein, Borrowers
shall promptly seek to appoint a replacement manager acceptable to Lender
in Lender's discretion, and Borrowers' failure to appoint an acceptable
manager within thirty (30) days after Lender's request of Borrowers to
terminate the Management Agreement or other termination of the Management
Agreement shall constitute an immediate Event of Default. Borrowers may
from time to time appoint a successor manager to manage an Individual
Property, which successor manager shall be approved in writing by Lender
in Lender's discretion.
(ii) In the event that Marriott is Manager
pursuant to a Management Agreement and elects not to renew the term of the
Management Agreement at the end of the initial term or any renewal term of
the Management Agreement in accordance with the terms thereof, or the
Management Agreement is otherwise terminated by Manager pursuant to the
terms contained therein, then Borrower, upon notice of Marriott's election
not to renew the Management Agreement or within thirty (30) days of any
other termination of the Management Agreement, shall promptly seek to
appoint (x) a replacement manager acceptable to Lender and the Rating
Agencies, each in their discretion, and (y) a replacement hotel franchise,
acceptable to Lender and the Rating Agencies, each in their discretion, to
occupy and operate at the applicable Individual Property. Borrowers'
failure to appoint an acceptable manager by the time the Management
Agreement expires by its terms or within thirty (30) days of any other
termination of the Management Agreement, shall constitute an immediate
Event of Default. Borrowers' failure to enter into hotel management and
operating agreements and other documents in connection therewith (such as
subordinations and comfort letters) acceptable to Lender and the Rating
Agencies, each in their discretion, with an acceptable hotel franchise to
operate a hotel at the applicable Individual Property by the time the
Management Agreement expires by its terms shall constitute an immediate
Event of Default. For the purposes of this paragraph, (1) Remington
Lodging and Hospitality, L.P. shall be deemed an acceptable replacement
manager, and (2) Starwood Hotels & Resorts Worldwide, Inc., Hilton Hotels
Corporation, Marriott International, Inc. or any brand of any of them
shall be deemed an acceptable replacement hotel franchise, and the
approval of any of the foregoing as manager or hotel franchise, as
applicable, by Lender and the Rating Agencies will not be required.
(Q) Financial Reporting.
(i) Each Borrower shall keep and maintain or shall
cause to be kept and maintained, on a Fiscal Year basis, in accordance
with GAAP, books, records and accounts reflecting in reasonable detail all
of the financial affairs of such Borrower, and all items of income and
expense in connection with the operation of
68
<PAGE>
the applicable Individual Properties and in connection with any services,
equipment or furnishings provided in connection with the operation of such
Individual Properties. Lender, at Lender's cost and expense, whether such
income or expense may be realized by the applicable Borrower or by any
other Person whatsoever, shall have the right from time to time and at all
times during normal business hours upon reasonable prior written notice to
such Borrower to examine such books, records and accounts at the office of
such Borrower or other Person maintaining such books, records and accounts
and to make such copies or extracts thereof as Lender shall desire. After
the occurrence of an Event of Default, Borrowers shall pay any out of
pocket costs and expenses incurred by Lender to examine any and all of
such Borrower's books, records and accounts as Lender shall determine in
Lender's discretion to be necessary or appropriate in the protection of
Lender's interest.
(ii) Borrower shall furnish to Lender annually
within ninety (90) days following the end of each Fiscal Year, a true,
complete, correct and accurate copy of the consolidated financials of
Ashford Hospitality Trust, Inc. audited by a "Big Four" accounting firm or
other firm reasonably acceptable to Lender accompanied by an unqualified
opinion from an Independent certified public accountant acceptable to
Lender in Lender's discretion, and each Borrower shall furnish financial
statements and all such financial statements above shall (a) be in form
and substance reasonably acceptable to Lender, (b) be prepared in
accordance with GAAP, (c) include or be accompanied by without limitation,
a statement of operations (profit and loss), a statement of cash flows, a
calculation of Net Operating Income for all applicable Individual
Properties, a balance sheet, an aged accounts receivable report and such
other information or reports as shall be requested by Lender or any
applicable Rating Agency, (d) be accompanied by an Officer's Certificate
from a senior executive of such Borrower certifying as of the date thereof
(x) that such statement is true, correct, complete and accurate, and
fairly reflects the results of operations and financial condition of such
Borrower for the relevant period, and (y) notice of whether there exists
an Event of Default or Default, and if such Event of Default or Default
exists, the nature thereof, the period of time it has existed and the
action then being taken to remedy same.
(iii) Intentionally Omitted.
(iv) Each Borrower shall furnish to Lender within
twenty (20) days following the end of each calendar month, a true,
correct, complete and accurate monthly unaudited financial statement which
shall (a) be in form and substance reasonably acceptable to Lender, (b) be
prepared in accordance with GAAP, (c) include, without limitation, a
statement of operations (profit and loss), a statement of cash flows, a
calculation of Net Operating Income for all applicable Individual
Properties, a consolidated balance sheet, an aged accounts receivable
report and such other information or reports as shall be requested by
Lender or any applicable Rating Agency and (d) be accompanied by an
Officer's Certificate from a senior executive of such Borrower certifying
as of the date thereof (x) that such statement is true, correct, complete
and accurate and fairly reflects the results of operations and financial
condition of such Borrower for the relevant period, and (y) notice of
whether there exists an Event of
69
<PAGE>
Default or Default, and if such Event of Default or Default exists, the
nature thereof, the period of time it has existed and the action then
being taken to remedy same.
(v) Each Borrower shall furnish to Lender, within
thirty (30) days following the end of each calendar month:
(1) a true, complete, correct and accurate
rent roll and occupancy report and such other occupancy and rate statistics as
Lender shall reasonably request;
(2) Smith Travel Star Reports for the
applicable month for each Individual Property in "Microsoft Excel" format (if
available);
(3) operating statements for each Individual
Property, containing (a) monthly, year-to-date and trailing twelve month (or
Marriott's trailing thirteen-month reporting period) results compared to the
results from the prior year for the same periods for each Individual Property,
and (b) monthly, year-to-date and trailing twelve month (or Marriott's trailing
thirteen-month reporting period) results compared to the results from the prior
year for the same periods for each Individual Property on a consolidated basis,
and Borrowers shall use commercially reasonable efforts to provide such
statements in "Microsoft Excel" format;
(4) updated quality scores for the
applicable month for each Individual Property, including detailed criteria and
thresholds, if available;
(5) summary reports of franchise
terminations, defaults, reflagging efforts and conversions for each Individual
Property (if applicable);
Each such document shall (a) be delivered to Lender in form and substance as
delivered by Manager pursuant to the terms of the Management Agreement and any
side letter agreement relating thereto, and (b) be accompanied by an Officer's
Certificate from a senior executive of each Borrower certifying as of the date
thereof and to such party's knowledge (x) that such statement is true, correct,
complete and accurate and (y) notice of whether there exists an Event of Default
or Default, and if such Event of Default or Default exists, the nature thereof,
the period of time it has existed and the action then being taken to remedy
same.
(vi) Each Borrower shall furnish to Lender, within
twenty (20) days after request, such further information with respect to
the operation of all applicable Individual Properties and the financial
affairs of such Borrower or the applicable Manager as may be reasonably
requested by Lender from time to time including, without limitation, all
business plans prepared for such Borrower and for the operation of all
such Individual Properties.
(vii) Each Borrower shall furnish to Lender,
within twenty (20) days after request, such further information regarding
any Plan or
70
<PAGE>
Multiemployer Plan and any reports or other information required to be
filed under ERISA as may be requested by Lender.
(viii) Each Borrower shall, concurrently with such
Borrower's delivery to Lender, provide a copy of the items required to be
delivered to Lender under this Section 5.1(Q) to the Lender and any
servicer and/or special servicer that may be retained in conjunction with
the Loan or any Secondary Market Transaction (upon written direction from
Lender with reasonable prior written notice of such servicer and/or
special servicer). Each Borrower shall furnish to Lender written notice,
within two (2) Business Days after receipt by such Borrower of any Rents
or other items of Gross Revenue that any Borrower is not required by this
Agreement to deposit in any Manager Account, Cash Collateral Account,
together with such other documents and materials relating to such Rents or
other items of Gross Revenue as Lender reasonably requests.
(ix) Each Borrower shall provide Lender with updated
information (reasonably satisfactory to Lender) concerning its related
Basic Carrying Costs for the next succeeding Fiscal Year prior to the
termination of each Fiscal Year.
(x) Each Borrower shall furnish to Lender annually no
less than thirty (30) days prior to the beginning of each Fiscal Year, a
true, complete, correct and accurate copy of such Borrower's draft annual
capital and operating budget for each such Borrower's Individual Property
(each, an "Approved Budget"), which Approved Budgets shall be subject to
Lender's prior review and approval, which may be granted or withheld in
Lender's sole and absolute discretion. Borrowers shall promptly revise and
resubmit to Lender, for Lender's review and approval, any draft annual
capital and operating budget to which Lender has objected and requested
revisions. Until such time that Lender approves or is deemed to have
approved an Approved Budget, the most recently approved Approved Budget
shall apply; provided that such approved Approved Budget shall be adjusted
to reflect (x) matters in the proposed Approved Budget approved by Lender,
(y) as to matters in the proposed Approved Budget not yet approved by
Lender (i) increases for expenses actually incurred which vary in relation
to gross revenues to the extent of increases in such gross revenues
("Variable Expenses"), and (ii) expenditures actually incurred which are
beyond the reasonable control of Borrower such as taxes, utilities and
insurance ("Uncontrollable Expenses"). Notwithstanding anything contained
in the Loan Documents to the contrary, expenditures shall be deemed in
compliance with and made pursuant to the Approved Budget even though such
expenditures exceed the amount budgeted therefore in the Approved Budget
if such expenditures are for Variable Expenses or Uncontrollable Expenses.
(R) Conduct of Business. Each Borrower shall cause the
operation of the Individual Properties to be conducted at all times in a manner
consistent with the following:
(i) to maintain or cause to be maintained the
standard of operations at each Individual Property at all times at a level
necessary to insure a level of quality for each such Individual Property
consistent with similar facilities in the same competitive market;
71
<PAGE>
(ii) to operate or cause to be operated each
Individual Property in a prudent manner in compliance in all material
respects with applicable Legal Requirements and Insurance Requirements
relating thereto and cause all licenses, Permits, and any other agreements
necessary for the continued use and operation of each Individual Property
to remain in effect except to the extent the failure thereof would not
have a Material Adverse Effect; and
(iii) to maintain or cause to be maintained
sufficient inventory and equipment of types and quantities at each
Individual Property to enable Borrowers or the applicable Manager to
operate the Individual Properties.
(S) ERISA.
(a) Each Borrower shall deliver to Lender as soon
as possible, and in any event within ten (10) days after such Borrower knows or
has reason to believe that any of the events or conditions specified below with
respect to any Plan or Multiemployer Plan maintained by Borrower or any ERISA
Affiliate of either of them has occurred or exists, a statement signed by a
senior financial officer of such Borrower setting forth details respecting such
event or condition and the action, if any, that such Borrower 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 by such Borrower or an ERISA
Affiliate with respect to such event or condition):
(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 30 days of the
occurrence of such event (provided that a failure to meet the minimum
funding standard of Section 412 of the Code or 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 or 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
Borrower or an ERISA Affiliate to terminate any Plan;
(iii) 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 any Borrower 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 any Borrower or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary
72
<PAGE>
liability as a result of a purchaser default) or the receipt by any
Borrower 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 any Borrower 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 any Borrower or an ERISA Affiliate fails to timely
provide security to the Plan in accordance with the provisions of said
Sections; and
(vii) the imposition of a lien or a security
interest in connection with a Plan.
(b) No Borrower shall engage in any transaction
which would cause any obligation, or action taken or to be taken, hereunder (or
the exercise by Lender of any of its rights under the Notes, this Agreement or
the other Loan Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
(c) Each applicable Borrower hereby certifies and
shall deliver to Lender such certifications or other evidence from time to time
throughout the term of the Loan, as reasonably requested by Lender, that (A)
such Borrower is not an "employee benefit plan" as defined in Section 3(3) of
ERISA, which is subject to Title I of ERISA, a "plan" as defined in Section 4975
of the Code, which is subject to Section 4975 of the Code, or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (B) such Borrower is not
subject to state statutes regulating investments and fiduciary obligations with
respect to governmental plans or, if such Borrower is subject to such statutes,
such statutes do not in any manner affect the ability of the such Borrower to
perform its obligations under the Loan Documents or the ability of Lender to
enforce any and all of its rights under the Loan Agreement; and (C) one or more
of the following circumstances is true: (i) Equity interests in such Borrower
are publicly offered securities, within the meaning of 29 C.F.R. Section
2510.3-101(b)(2); (ii) Less than twenty-five percent of each outstanding class
of equity interests in such Borrower are held by "benefit plan investors" within
the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (iii) such Borrower
qualifies as an "operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c).
(d) If an investor or equity owner in any Borrower
is (directly or indirectly) a plan that is not subject to Title I of ERISA or
Section 4975 of the Code, but is subject to the provisions of any federal,
state, local, non-U.S. or other laws or regulations that are similar to those
portions of ERISA or the Code (collectively, "Other Plan Laws"), the assets of
such Borrower shall not constitute the assets of such plan under such Other Plan
Laws.
73
<PAGE>
(T) Single Purpose Entity. Each Borrower and each SPE
Equity Owner shall at all times be a Single-Purpose Entity.
(U) Trade Indebtedness. Each Borrower will pay its trade
payables within sixty (60) days of the date incurred, unless such Borrower is in
good faith contesting such Borrower's obligation to pay such trade payables in a
manner reasonably satisfactory to Lender (which may include Lender's requirement
that such Borrower post security with respect to the contested trade payable).
(V) Deferred Maintenance. Borrower shall, within six (6)
months of the date hereof, perform the deferred maintenance work (the "Deferred
Maintenance") to the Property itemized on Exhibit B hereto. Furthermore,
Borrowers shall diligently perform, or cause to be performed, in a timely and
workmanlike manner all repairs and maintenance contemplated by and itemized in
the Approved Budget.
(W) PIP Requirements and Capital Improvements. Borrowers
shall (i) complete all work required to be performed in the Property Improvement
Plans for each Individual Property (collectively, the "PIP Work") on or prior to
the relevant dates set forth in the Property Improvement Plans (as such dates
may be extended by Manager from time to time), and (ii) perform all capital
improvements to each Individual Property (other than the PIP Work) contemplated
by and itemized in the Capital Improvements and PIP Schedule attached hereto as
Exhibit J on or prior to December 31, 2006; provided, that notwithstanding
anything herein or in any other Loan Documents to the contrary, with respect to
each Individual Property, (x) Borrowers shall not spend an unreasonable amount
on the foregoing items (i) and (ii) (it being agreed that, with respect to any
PIP Work, an amount less than or equal to the related PIP Costs shall be a
reasonable amount, and, with respect to any capital improvement, an amount less
than or equal to the related cost of such capital improvement shown on Exhibit J
shall be deemed a reasonable amount), (y) Borrowers shall spend at least an
amount equal to the "Required Expenditure Amount" shown opposite such Individual
Property on Exhibit I hereto on the foregoing items (i) and (ii) of this
subsection, exclusive of any amounts reserved for or otherwise reimbursed to any
Borrower pursuant to the terms of this Agreement or any Management Agreement,
including, without limitation, any amounts which are reimbursable from the
Capital Reserve Sub-Account or from any account relating to FF&E and repairs
maintained pursuant to any Management Agreement, and (z) Borrowers shall, on or
prior to December 31, 2006 (or, with respect to PIP Work, within five (5)
Business Days of any later date of completion if such date has been extended by
Manager), furnish Lender with copies of bills and other documentation as may be
reasonably requested by Lender to establish that that such PIP Work and capital
improvements have been completed and that the conditions set forth in the
foregoing clauses (x) and (y) of this subsection have been fulfilled and the
amounts referenced therein paid in full.
(X) Compliance with Anti-Terrorism, Embargo, Sanctions
and Anti-Money Laundering Laws. Each Borrower shall comply with all Legal
Requirements relating to money laundering, anti-terrorism, trade embargoes and
economic sanctions, now or hereafter in effect. Upon Lender's request from time
to time during the term of the Loan, each Borrower shall certify in writing to
Lender that such Borrower's representations, warranties and obligations under
Section 4.1(NN) and this Section remain true and correct and have not been
74
<PAGE>
breached. Each Borrower shall immediately notify Lender in writing if any
representations, warranties or covenants are no longer true or have been
breached or if such Borrower has a reasonable basis to believe that they may no
longer be true or have been breached. In connection with such an event, such
Borrower shall comply with all Legal Requirements and directives of Governmental
Authorities and, at Lender's request, provide to Lender copies of all notices,
reports and other communications exchanged with, or received from, Governmental
Authorities relating to such an event. Borrowers shall also promptly reimburse
to Lender any and all costs and expenses incurred by Lender in evaluating the
effect of such an event on the Loan and Lender's interest in the collateral for
the Loan, in obtaining any necessary license from Governmental Authorities as
may be necessary for Lender to enforce its rights under the Loan Documents, and
in complying with all Legal Requirements applicable to Lender as the result of
the existence of such an event and for any penalties or fines imposed upon
Lender as a result thereof.
ARTICLE 6
NEGATIVE COVENANTS
Section 6.1. Borrower Negative Covenants.
Each Borrower covenants and agrees that, until payment in full of
the Indebtedness, it will not do, directly or indirectly, any of the following
unless Lender consents thereto in writing:
(A) Liens on the Property. Incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any Lien with
respect to any Individual Property or any portion thereof, except: (i) Liens in
favor of Lender, and (ii) the Permitted Encumbrances.
(B) Transfer. Except as expressly permitted by or
pursuant to this Agreement, any Mortgage or the other Loan Documents (except as
otherwise approved by Lender in writing in Lender's discretion), allow any
Transfer to occur or modify, change, supplement, alter, amend, fail to comply
with, in any material respect, or terminate the Management Agreement, or enter
into a new Management Agreement, with respect to any Individual Property except
as permitted under this Agreement.
(C) Other Borrowings. Incur, unsecured trade payables
(not evidenced by a promissory note) incurred in the ordinary course of business
relating to the ownership and operation of the applicable Borrower's Individual
Properties which when aggregated with the unsecured trade payables of all other
Borrowers do not exceed, at any time, a maximum amount of two and one-half
percent (2.5%) of the Loan Amount and are paid within sixty (60) days of the
date incurred, create, assume, become or be liable in any manner with respect to
Other Borrowings.
(D) Change In Business. Cease to be a Single-Purpose
Entity or make any material change in the scope or nature of its business
objectives, purposes or
75
<PAGE>
operations, or undertake or participate in activities other than the continuance
of its present business.
(E) Debt Cancellation. Cancel or otherwise forgive or
release any material claim or debt owed to the Borrower by any Person, except
for adequate consideration or in the ordinary course of such Borrower's business
or otherwise if such cancellation, release or forgiveness is prudent and
commercially reasonable.
(F) Affiliate Transactions. Except as otherwise
permitted under the Loan Documents, enter into, or be a party to, any
transaction with an Affiliate of any Borrower, except in the ordinary course of
business and on terms which are no less favorable to such Borrower or such
Affiliate than would be obtained in a comparable arm's length transaction with
an unrelated third party, and, if the amount to be paid to the Affiliate
pursuant to the transaction or series of related transactions is greater than
Fifty Thousand Dollars ($50,000.00) (determined annually on an aggregate basis)
fully disclosed to Lender in advance.
(G) Creation of Easements. Create, or permit any
Individual Property or any part thereof to become subject to, any easement,
license or restrictive covenant, other than a Permitted Encumbrance. Without
limiting the generality of the immediately preceding sentence, no Borrower shall
enter into, consent to, grant, amend, modify, restate or supplement any
document, instrument or agreement affecting, related to or impacting upon any
Individual Property, the title thereto or any portion or aspect thereof,
including, without limitation, any easement, reciprocal easement agreement, or
any declaration of easements or covenants other than a Permitted Encumbrance.
(H) Certain Restrictions. Enter into any agreement which
expressly restricts the ability of any Borrower to enter into amendments,
modifications or waivers of any of the Loan Documents.
(I) Issuance of Equity Interests. Issue or allow to be
created any stocks or shares or shareholder, partnership or membership
interests, as applicable, or other ownership interests other than the stocks,
shares, shareholder, partnership or membership interests and other ownership
interests which are outstanding or exist on the Closing Date or any security or
other instrument which by its terms is convertible into or exercisable or
exchangeable for stock, shares, shareholder, partnership or membership interests
or other ownership interests in any Borrower, unless otherwise permitted under
this Agreement in connection with any Mezzanine Loan. No Borrower shall allow to
be issued or created any stock in any Borrower's general partner or managing
member, as applicable, other than the stock which is outstanding or existing on
the Closing Date or any security or other instrument which by its terms is
convertible into or exercisable or exchangeable for any stock in such Borrower's
general partner or managing member, as applicable.
(J) Assignment of Licenses and Permits. Assign or
transfer any of its interest in any Permits pertaining to any Individual
Property, or assign, transfer or remove or permit any other Person to assign,
transfer or remove any records pertaining to any Individual Property without
Lender's prior written consent which consent may be granted or refused in
Lender's discretion.
76
<PAGE>
(K) Place of Business. Change its chief executive office
or its principal place of business or place where its books and records are kept
without giving Lender at least thirty (30) days' prior written notice thereof
and promptly providing Lender such information as Lender may reasonably request
in connection therewith.
ARTICLE 7
DEFAULTS
Section 7.1. Event of Default.
The occurrence of one or more of the following events shall be an
"Event of Default" hereunder:
(i) if on any Payment Date the funds in the Debt Service
Payment Sub-Account are insufficient to pay the Required Debt Service
Payment due on such Payment Date and the Borrowers fail to pay such
insufficiency on such Payment Date; provided that Borrowers shall have an
additional two Business Days past the related Payment Date to make any
such payment, but only once during any twelve month period;
(ii) intentionally omitted;
(iii) if the Borrowers fail to pay the outstanding
Indebtedness on the Maturity Date;
(iv) if on any Payment Date the Borrowers fail to pay
the Basic Carrying Costs Monthly Installment, the Capital Reserve Monthly
Installment, the Cash Collateral Account Bank Fees due on such Payment
Date (to the extent Borrowers are obligated to make such payments
hereunder); provided that Borrowers shall have an additional two (2)
Business Days past the related Payment Date to make any such payment, but
only once during any twelve (12) month period;
(v) if on the date any payment of a Basic Carrying Cost
would become delinquent, the funds in the Basic Carrying Costs Sub-Account
together with any funds in the Cash Collateral Account not allocated to
another Sub-Account are insufficient to make such payment and Borrower has
not otherwise paid such Basic Carrying Cost or funded such shortfall to
Lender; provided that Borrowers shall have an additional two (2) Business
Days past the related Payment Date to make any such payment, but only once
during any twelve (12) month period;
(vi) the occurrence of the events identified elsewhere
in the Loan Documents as constituting an "Event of Default";
(vii) any breach of Sections 2.11(a) (subject, however,
to the proviso in Section 2.11(a)(ii)) , 2.11(b), 2.11(e), 5.1(T), 5.1(V),
5.1(W), 5.1(X), or 6.1(B);
(viii) intentionally omitted;
77
<PAGE>
(ix) intentionally omitted;
(x) if any Borrower fails to pay any other amount
payable pursuant to this Agreement or any other Loan Document within two
(2) Business Days of the date when due and payable in accordance with the
provisions hereof or thereof, as the case may be;
(xi) if any representation or warranty made herein by
Borrowers or in any other Loan Document, or in any report, certificate,
financial statement or other Instrument, agreement or document furnished
by any Borrower in connection with this Agreement, the Note or any other
Loan Document executed and delivered by such Borrower shall be false in
any material respect as of the date such representation or warranty was
made or remade;
(xii) if any Borrower, any of such Borrower's partners
or members, as applicable, or any SPE Equity Owner makes an assignment for
the benefit of creditors;
(xiii) if a receiver, liquidator or trustee shall be
appointed for any Borrower, any of such Borrower's partners, members or
shareholders, as applicable, or any SPE Equity Owner or if any Borrower,
any of such Borrower's partners, members or shareholders, as applicable,
or any SPE Equity Owner shall be adjudicated as 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 such Borrower, any
of such Borrower's partners, members or shareholders, as applicable, or
any SPE Equity Owner or if any proceeding for the dissolution or
liquidation of such Borrower, any of such Borrower's partners, members or
shareholders, as applicable, or any SPE Equity Owner shall be instituted;
provided, however, that if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by such Borrower, any of
such Borrower's partners, members or shareholders, as applicable, or any
SPE Equity Owner as the case may be, upon the same not being discharged,
stayed or dismissed within ninety (90) days; or if such Borrower, any of
such Borrower's partners, members or shareholders, as applicable, or any
SPE Equity Owner shall generally not be paying its debts as they become
due;
(xiv) if any Borrower attempts to delegate its
obligations or assign its rights under this Agreement, any of the other
Loan Documents or any interest herein or therein;
(xv) if any provision of any organizational document of
any Borrower or any SPE Equity Owner is amended or modified in any
respect, or if any Borrower, any SPE Equity Owner or any of their
respective partners, members, or shareholders as applicable, fails to
perform or enforce the provisions of such organizational documents or
attempts to dissolve any Borrower or any SPE Equity Owner; or if any
Borrower or any SPE Equity Owner or any of their respective partners,
members or shareholders, as applicable, breaches any of the covenants set
forth in Sections 5.1(T) or 6.1(D);
78
<PAGE>
(xvi) [Intentionally omitted];
(xvii) if an event or condition specified in Section
5.1(S) shall occur or exist with respect to any Plan, Multiemployer Plan
or plan and, as a result of such event or condition, together with all
other such events or conditions, Borrower or any ERISA Affiliate or any
affiliate shall incur or in the opinion of Lender shall be reasonably
likely to incur a liability to a Plan, a Multiemployer Plan, PBGC or plan
(or any combination of the foregoing) which would constitute, in the
determination of Lender, a Material Adverse Effect;
(xviii) any breach of Section 5.1(I) or 5.1(P), or, if
without Lender's prior written consent, except as expressly permitted in
this Agreement, (A) any Manager resigns or is removed or is replaced, (B)
any Management Agreement is entered into for any Individual Property or
(C) there is any material change in or termination of any Management
Agreement for any Individual Property;
(xix) any "Event of Default" under any of the other
"Loan Agreements" referenced in the Cooperation Agreement;
(xx) [Intentionally omitted];
(xxi) if any Borrower shall be in default under any of
the other obligations, agreements, undertakings, terms, covenants,
provisions or conditions of this Agreement, the Notes, any Mortgage or the
other Loan Documents, not otherwise referred to in this Section 7.1, for
ten (10) days after written notice to any Borrower from Lender or its
successors or assigns, in the case of any default which can be cured by
the payment of a commercially reasonable sum of money or for thirty (30)
days after written notice from Lender or its successors or assigns, in the
case of any other default (unless otherwise provided herein or in such
other Loan Document); provided, however, that if such non-monetary default
under this subparagraph is susceptible of cure but cannot reasonably be
cured within such thirty (30) day period and provided further that such
Borrower shall have commenced to cure such default within such thirty (30)
day period and thereafter diligently and expeditiously proceeds to cure
the same, such thirty (30) day period shall be extended for such time as
is reasonably necessary for such Borrower in the exercise of due diligence
to cure such default, but in no event shall such period exceed ninety (90)
days after the original notice from Lender; and
(xxii) if any of the assumptions set forth in that
certain non-consolidation opinion from the Borrowers' counsel to Lender
dated as of the date hereof shall be untrue in any material respect.
Section 7.2. Remedies.
(a) Upon the occurrence and during the continuance of an Event
of Default, all or any one or more of the rights, powers and other remedies
available to Lender against Borrowers or any Borrower under this Agreement, the
Note, any Mortgages or any of the other Loan Documents, or at law or in equity
may be exercised by Lender at any time and from time to time (including, without
limitation, the right to accelerate and declare the outstanding
79
<PAGE>
principal amount, unpaid interest, Default Rate interest, Late Charges,
Prepayment Premium and any other amounts owing by such Borrower to be
immediately due and payable), without notice or demand, whether or not all or
any portion of the Indebtedness shall be declared due and payable, and whether
or not Lender shall have commenced any foreclosure proceeding or other action
for the enforcement of its rights and remedies under any of the Loan Documents
with respect to all or any portion of the Collateral. Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in the other Loan
Documents. Notwithstanding anything contained to the contrary herein, the
outstanding principal amount, unpaid interest, Default Rate interest, Late
Charges, Prepayment Premium and any other amounts owing by any Borrower shall be
accelerated and immediately due and payable, without any election by Lender upon
the occurrence of an Event of Default described in Section 7.1(xii) or Section
7.1 (xiii). Notwithstanding that this Agreement may refer to a continuing Event
of Default, and without limiting any Borrower's right to cure a Default which
may, with the passage of time, become an Event of Default, no Borrower shall
have any right pursuant to this Agreement to cure any Event of Default unless
permitted by Lender in writing.
Section 7.3. Remedies Cumulative.
The rights, powers and remedies of Lender under this Agreement shall
be cumulative and not exclusive of any other right, power or remedy which Lender
may have against any Borrower or any other Person pursuant to this Agreement or
the other Loan Documents executed by or with respect to any Borrower or any
other Person, or existing at law or in equity or otherwise. Lender's rights,
powers and remedies may be pursued singly, concurrently or otherwise, at such
time and in such order as Lender may determine in Lender's discretion. No delay
or omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent Default
or Event of Default or to impair any remedy, right or power consequent thereon.
Any and all of Lender's rights with respect to the Collateral shall continue
unimpaired, and each Borrower shall be and remain obligated in accordance with
the terms hereof, notwithstanding (i) the release or substitution of Collateral
at any time, or of any rights or interest therein or (ii) any delay, extension
of time, renewal, compromise or other indulgence granted by Lender in the event
of any Default or Event of Default with respect to the Collateral or otherwise
hereunder. Notwithstanding any other provision of this Agreement, but subject to
Section 8.14 hereof, Lender reserves the right to seek a deficiency judgment or
preserve a deficiency claim, in connection with the foreclosure of any or all
Mortgages, to the extent necessary to foreclose on other parts of the
Collateral.
Section 7.4. Lender's Right to Perform.
If any Borrower fails to perform any covenant or obligation
contained herein and such failure shall continue for a period of (5) five
Business Days after such Borrower's receipt of written notice thereof from
Lender, without in any way limiting Section 7.1 hereof, Lender may,
80
<PAGE>
but shall have no obligation to, itself perform, or cause performance of, such
covenant or obligation, and the expenses of Lender incurred in connection
therewith shall be payable by Borrowers to Lender upon demand. Notwithstanding
the foregoing, Lender shall have no obligation to send notice to such Borrower
of any such failure.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Survival.
Subject to Section 4.2, this Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement and the execution and delivery by Borrowers to Lender of the Notes,
and shall continue in full force and effect so long as any portion of the
Indebtedness is outstanding and unpaid. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of any such party. All covenants, promises and agreements
in this Agreement contained, by or on behalf of Borrower, shall inure to the
benefit of the respective successors and assigns of Lender. Nothing in this
Agreement or in any other Loan Document, express or implied, shall give to any
Person other than the parties and the holder(s) of the Notes and the other Loan
Documents, and their legal representatives, successors and assigns, any benefit
or any legal or equitable right, remedy or claim hereunder.
Section 8.2. Lender's Discretion.
Whenever pursuant to this Agreement or any other Loan Document,
Lender exercises any right, option or election given to Lender to approve or
disapprove, or consent or withhold consent, or any arrangement or term is to be
satisfactory to Lender or is to be in Lender's discretion, the decision of
Lender to approve or disapprove, consent or withhold consent, or to decide
whether arrangements or terms are satisfactory or not satisfactory or acceptable
or not acceptable to Lender in Lender's discretion, shall (except as is
otherwise specifically herein provided) be in the sole and absolute discretion
of Lender. Whenever pursuant to this Agreement or any other Loan Document (a)
the Rating Agencies are given any right to approve or disapprove, (b)
confirmation is required from the Rating Agencies that an action will not result
in a downgrade or withdrawal of the ratings in a Secondary Market Transaction or
(c) any arrangement or term is to be satisfactory to the Rating Agencies, the
approval of Lender shall be substituted therefore prior to the date that all or
any portion of the Loan is included in a REMIC, among other things, Lender's
reasonable determination of Rating Agency criteria.
Section 8.3. Governing Law.
(a) The proceeds of the Note delivered pursuant hereto 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 limitation, matters of construction,
validity and performance, this Agreement and the obligations arising
81
<PAGE>
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. To the fullest extent
permitted by law, each Borrower hereby unconditionally and irrevocably waives
any claim to assert that the law of any other jurisdiction governs this
Agreement and the Note, and this Agreement and the Note shall be governed by and
construed in accordance with the laws of the State of New York pursuant to
Section 5-1401 of the New York General Obligations Law.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST ANY BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW OR IN ANY FEDERAL OR STATE COURT IN THE JURISDICTION IN
WHICH THE COLLATERAL IS LOCATED, AND EACH BORROWER WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY EACH SUIT, ACTION OR
PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY EACH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH BORROWER DOES HEREBY
DESIGNATE AND APPOINT CSC NETWORKS, 500 CENTRAL AVENUE, ALBANY, NEW YORK,
12206-2290, AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY EACH SUIT, ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT AND AGREES THAT SERVICE OF PROCESS UPON
SAID AGENT AT SAID ADDRESS (OR AT EACH OTHER OFFICE AS MAY BE DESIGNATED BY EACH
BORROWER FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS HEREOF) WITH A COPY TO
EACH BORROWER AT ITS PRINCIPAL EXECUTIVE OFFICES, ATTENTION: GENERAL COUNSEL AND
WRITTEN NOTICE OF SAID SERVICE OF EACH BORROWER MAILED OR DELIVERED TO EACH
BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY EACH SUIT, ACTION OR
PROCEEDING. EACH BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED
ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO
TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT (WHICH OFFICE SHALL BE DESIGNATED
AS THE ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE EACH
A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE OR IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.
Section 8.4. Modification, Waiver in Writing.
No modification, amendment, extension, discharge, termination or
waiver of any provision of this Agreement, the Notes or any other Loan Document,
or consent to any departure by any Borrower therefrom, shall in any event be
effective unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to or demand on any Borrower
shall entitle such Borrower to any other or future notice or demand in the same,
similar or other circumstances.
82
<PAGE>
Section 8.5. Delay Not a Waiver.
Neither any failure nor any delay on the part of Lender in insisting
upon strict performance of any term, condition, covenant or agreement, or
exercising any right, power, remedy or privilege hereunder, or under the Note,
or of any other Loan Document, or any other instrument given as security
herefore, shall operate as or constitute a waiver thereof, nor shall a single or
partial exercise thereof preclude any other future exercise, or the exercise of
any other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, the Note or any other Loan Document, Lender shall not be deemed
to have waived any right either to require prompt payment when due of all other
amounts due under this Agreement, the Note or the other Loan Documents, or to
declare a default for failure to effect prompt payment of any such other amount.
Section 8.6. Notices.
All notices, consents, approvals and requests required or permitted
hereunder or under any other Loan Document shall be given in writing and shall
be effective for all purposes if hand delivered or sent by (a) hand delivery,
with proof of attempted delivery, (b) certified or registered United States
mail, postage prepaid, (c) expedited prepaid delivery service, either commercial
or United States Postal Service, with proof of attempted delivery, or (d) by
telecopier (with answerback acknowledged) provided that such telecopied notice
must also be delivered by one of the means set forth in (a), (b) or (c) above,
addressed to the parties as follows:
83
<PAGE>
If to Lender: Merrill Lynch Mortgage Lending, Inc.
4 World Financial Center, 16th Floor
New York, New York 10080
Attn: Robert Spinna
Telecopier: 212-449-7684
with a copy to: Dechert LLP
One Market Street
Spear Tower, Suite 1600
San Francisco, CA 94105
Attn: Joseph B. Heil, Esquire
Telecopier: 415-262-4555
If to Borrower: [Applicable Borrower]
c/o Ashford Hospitality Limited Partnership
14185 Dallas Parkway
Suite 1100
Dallas, TX 75254
Attn: David Brooks, Esquire
Telecopier: (972)490-9605
with a copy to: Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attn: Brigitte Kimichik, Esquire
Telecopier: (214)659-4764
A party receiving a notice which does not comply with the technical
requirements for notice under this Section 8.6 may elect to waive any
deficiencies and treat the notice as having been properly given. A notice shall
be deemed to have been given: (a) in the case of hand delivery, at the time of
delivery; (b) in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; (c) in the case of expedited prepaid
delivery upon the first attempted delivery on a Business Day; or (d) in the case
of telecopier, upon receipt of answerback confirmation, provided that such
telecopied notice was also delivered as required in this Section 8.6. All
notices given by Lender hereunder that are effective against any Borrower shall
be deemed effective against all Borrowers. Any notice given to Lender by any
Borrower hereunder shall be deemed binding against all Borrowers.
Section 8.7. Trial By Jury.
EACH BORROWER AND LENDER, TO THE FULLEST EXTENT THAT THEY MAY
LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH
RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.
84
<PAGE>
Section 8.8. Headings.
The Article and Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
Section 8.9. Assignment.
Lender shall have the right to assign in whole or in part this
Agreement and/or any of the other Loan Documents and the obligations hereunder
or thereunder to any Person and to participate all or any portion of the Loan
evidenced hereby, including without limitation, any servicer or trustee in
connection with a Secondary Market Transaction. Lender shall provide any
Borrower with written notice of any such assignment; provided, however, that
such notice shall not be a condition of Lender's right to assign this Agreement
and/or any of the Loan Documents and the failure to deliver such notice shall
not constitute a default under this Loan Agreement. At the option of Lender, the
Loan may be serviced by a servicer and\or trustee selected by Lender and Lender
may delegate all or any portion of its responsibilities under this Agreement and
the other Loan Documents to such servicer and\or trustee pursuant to a servicing
agreement between Lender and such servicer and\or trustee.
Section 8.10. Severability.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, 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 Agreement.
Section 8.11. Preferences.
Lender shall have no obligation to marshal any assets in favor of
any Borrower or any other party or against or in payment of any or all of the
obligations of any Borrower pursuant to this Agreement, the Notes or any other
Loan Document. Lender shall have the continuing and exclusive right to apply or
reverse and reapply any and all payments by any Borrower to any portion of the
obligations of any Borrower hereunder. To the extent any Borrower makes a
payment or payments to Lender for any Borrower's benefit, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the obligations hereunder or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.
Section 8.12. Waiver of Notice.
No Borrower shall be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Agreement
or the other Loan Documents specifically and expressly provide for the giving of
notice by Lender to such Borrower and
85
<PAGE>
except with respect to matters for which such Borrower is not, pursuant to
applicable Legal Requirements, permitted to waive the giving of notice. Each
Borrower hereby expressly waives the right to receive any notice from Lender
with respect to any matter for which this Agreement or the other Loan Documents
does not specifically and expressly provide for the giving of notice by Lender
to such Borrower.
Section 8.13. Remedies of Borrower.
In the event that a claim or adjudication is made that Lender or its
agents, has acted unreasonably or unreasonably delayed acting in any case where
by law or under this Agreement, the Notes, any Mortgage or the other Loan
Documents, Lender or such agent, as the case may be, has an obligation to act
reasonably or promptly, Borrower agrees that neither Lender nor its agents,
shall be liable for any monetary damages, and each Borrower's sole remedies
shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.
Section 8.14. Exculpation.
Except as otherwise set forth in this Section 8.14 and Section 4.2
to the contrary, Lender shall not enforce the liability and obligation of any
Borrower to perform and observe the obligations contained in this Agreement, the
Note, any Mortgage or any of the other Loan Documents executed and delivered by
any Borrower except that Lender may pursue any power of sale, bring a
foreclosure action, action for specific performance, action for money judgment,
or other appropriate action or proceeding (including, without limitation, to
obtain a deficiency judgment) against any or all Borrowers or any other Person
solely for the purpose of enabling Lender to realize upon (a) any Collateral,
and (b) any Rents to the extent (x) received by any Borrower or any Manager (or
any of their affiliates), after the occurrence of an Event of Default or (y)
distributed to any Borrower or any Manager, or their respective shareholders, or
partners or members, as applicable, or affiliates during or with respect to any
period for which Lender did not receive the full amounts it was entitled to
receive as prepayments of the Loan pursuant to Section 2.6(b) (all Rents covered
by clauses (x) and (y) being hereinafter referred to as the "Recourse
Distributions") and (c)) any other collateral given to Lender under the Loan
Documents ((a), (b), and (c) collectively, the "Default Collateral"); provided,
however, that any judgment in any action or proceeding shall be enforceable only
to the extent of any Default Collateral. The provisions of this Section 8.14
shall not, however, (a) impair the validity of the Indebtedness evidenced by the
Loan Documents or in any way affect or impair the Liens of any Mortgage or any
of the other Loan Documents or the right of Lender to foreclose any Mortgage
following an Event of Default; (b) impair the right of Lender to name any Person
as a party defendant in any action or suit for judicial foreclosure and sale
under any Mortgage; (c) affect the validity or enforceability of the Note, any
Mortgage or the other Loan Documents; (d) impair the right of Lender to obtain
the appointment of a receiver; (e) impair the right of Lender to bring suit for
and recover against any Person any damages, losses, expenses, liabilities or
costs resulting from fraud, willful misrepresentation, waste of all or any
portion of any Individual Property, or wrongful removal or disposal of all or
any portion of any Individual Property by any Person in connection with this
Agreement, the Note, any Mortgage or the other Loan Documents; (f) impair the
right of Lender to obtain the Recourse Distributions received by any
86
<PAGE>
Person; (g) impair the right of Lender to bring suit for and recover against any
Person with respect to any misappropriation of security deposits or Rents
collected more than one (1) month in advance; (h) impair the right of Lender to
obtain Insurance Proceeds or Condemnation Proceeds due to Lender pursuant to any
Mortgage; (i) impair the right of Lender to enforce the provisions of Sections
4.1(V) or 5.1(D) through 5.1(G), inclusive of this Agreement, Section 2.8 of
each Mortgage or the Environmental Indemnity even after repayment in full by any
Borrower of the Indebtedness; (j) prevent or in any way hinder Lender 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; (k) impair the
right of Lender to bring suit for and recover against any person with respect to
any misapplication of any funds (including, without limitation, insurance
proceeds and condemnation proceeds); (l) impair the right of Lender to sue for,
seek or demand a deficiency judgment against any Person solely for the purpose
of foreclosing on any Collateral or any part thereof, or realizing upon the
Default Collateral, or (m) impair the right of Lender to bring suit for and
recover against any Person any damages, losses, expenses, liabilities or costs
in the event that Borrower shall take any action of any kind or nature
whatsoever, either directly or indirectly to oppose, impede, obstruct,
challenge, hinder, frustrate, enjoin or otherwise interfere with (A)
[intentionally omitted], (B) Lender or the party acquiring any Individual
Property following the occurrence of a foreclosure or deed in lieu thereof being
deemed the "Owner" under the Management Agreement, or (C) the execution,
delivery or effectiveness of a new Management Agreement directly between Lender
or the party acquiring any Individual Property following a foreclosure or deed
in lieu thereof and applicable Manager; provided, however, that any deficiency
judgment referred to in this Section 8.14(m) shall be enforceable only to the
extent of any of the Default Collateral. The preceding provisions of this
Section 8.14 shall be inapplicable to any Person if (i) any petition for
bankruptcy, reorganization or arrangement pursuant to federal or state law
against any Borrower shall be filed by any Borrower or any Affiliate of any
Borrower, (ii) if an involuntary bankruptcy or other insolvency proceeding is
commenced against any Borrower (by a party other than Lender) but only if such
Borrower has consented or acquiesced to such proceeding or if Borrower or any
Affiliate of Borrower has acted in concert with, colluded or conspired with the
party to cause the filing thereof or has consented to or acquiesced thereto,
(iii) if any Borrower shall institute any proceeding for the dissolution or
liquidation of any Borrower, (iv) if any Borrower shall make an assignment for
the benefit of creditors, (v) if any Borrower shall breach any representation,
warranty or covenant in Section 4.1(C) (such that such breach was considered by
a court as a factor in the court's finding for a consolidation of the assets of
a Borrower with the assets of another person or entity or as a result thereof
Lender suffers any material damage, cost, liability or expense; provided,
however, that in the absence of an actual consolidation, recourse may be had
against Borrower only to the extent of losses for such breach), 4.1(V), 4.1(AA),
5.1(T) (such that such breach was considered by a court as a factor in the
court's finding for a consolidation of the assets of a Borrower with the assets
of another person or entity or as a result thereof Lender suffers any material
damage, cost, liability or expense; provided, however, that in the absence of an
actual consolidation, recourse may be had against Borrower only to the extent of
losses for such breach) or 5.1(X), (v) if any Borrower allows any Transfer to
occur in violation of Section 6.1(B) hereof or otherwise fails to obtain
Lender's prior written consent to any Transfer to the extent any consent is
required in the Loan Documents, (vi) any Borrower interferes with Lender's
exercise of any of its rights or
87
<PAGE>
remedies hereunder or (vii) if any Borrower breaches any representation or
warranty contained in Section 4.1(S).
Section 8.15. Exhibits Incorporated.
The information set forth on the cover, heading and recitals hereof,
and the Exhibits attached hereto, are hereby incorporated herein as a part of
this Agreement with the same effect as if set forth in the body hereof.
Section 8.16. Offsets, Counterclaims and Defenses.
Any assignee of Lender's interest in and to this Agreement, the
Note, any Mortgage and the other Loan Documents shall take the same free and
clear of all offsets, counterclaims or defenses which are unrelated to the Loan,
this Agreement, the Note, any Mortgage and the other Loan Documents which any
Borrower may otherwise have against any assignor, and no such unrelated
counterclaim or defense shall be interposed or asserted by any Borrower in any
action or proceeding brought by any such assignee upon this Agreement, the Note,
any Mortgage and other Loan Documents 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 each Borrower.
Section 8.17. No Joint Venture or Partnership.
Each Borrower and Lender intend that the relationship created
hereunder be solely that of borrower and lender. Nothing herein is intended to
create a joint venture, partnership, tenants-in-common, or joint tenancy
relationship between any Borrower and Lender nor to grant Lender any interest in
any Individual Property other than that of mortgagee or lender.
Section 8.18. Waiver of Marshalling of Assets Defense.
To the fullest extent that each Borrower may legally do so, each
Borrower waives all rights to a marshalling of the assets of each such Borrower,
and others with interests in such Borrower, and of any Individual Property, or
to a sale in inverse order of alienation in the event of foreclosure of the
interests hereby created, and agrees not to assert any right under any laws
pertaining to the marshalling of assets, the sale in inverse order of
alienation, homestead exemption, the administration of estates of decedents, or
any other matters whatsoever to defeat, reduce or affect the right of Lender
under the Loan Documents to a sale of any Individual Property for the collection
of the Indebtedness without any prior or different resort for collection, or the
right of Lender or Deed of Trust Trustee to the payment of the Indebtedness in
preference to every other claimant whatsoever.
Section 8.19. Waiver of Counterclaim.
Each Borrower hereby waives the right to assert a counterclaim,
other than compulsory counterclaim, in any action or proceeding brought against
Borrower by Lender or Lender's agents.
88
<PAGE>
Section 8.20. Conflict; Construction of Documents.
In the event of any conflict between the provisions of this
Agreement and the provisions of the Notes, any Mortgage or any of the other Loan
Documents, the provisions of this Agreement shall prevail. The parties hereto
acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Loan Documents and that the Loan Documents shall
not be subject to the principle of construing their meaning against the party
which drafted same.
Section 8.21. Brokers and Financial Advisors.
Borrower and Lender hereby represent that they have dealt with no
financial advisors, brokers, underwriters, placement agents, agents or finders
in connection with the transactions contemplated by this Agreement. Each
Borrower hereby agrees to indemnify and hold Lender harmless from and against
any and all claims, liabilities, costs and expenses of any kind in any way
relating to or arising from a claim by any Person, that such Person acted on
behalf of any Borrower in connection with the transactions contemplated herein.
The provisions of this Section shall survive the expiration and termination of
this Agreement and the repayment of the Indebtedness.
Section 8.22. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 8.23. Estoppel Certificates.
Each Borrower and Lender each hereby agree at any time and from time
to time upon not less than fifteen (15) days prior written notice by any
Borrower or Lender (but no more than four (4) times per year unless (i) an Event
of Default has occurred and is continuing or (ii) such request is occasioned in
connection with a Secondary Market Transaction) to execute, acknowledge and
deliver to the party specified in such notice, a statement, in writing,
certifying that this Agreement is unmodified and in full force and effect (or if
there have been modifications, that the same, as modified, is in full force and
effect and stating the modifications hereto), and stating whether or not, to the
knowledge of such certifying party, any Default or Event of Default has
occurred, and, if so, specifying each such Default or Event of Default;
provided, however, that it shall be a condition precedent to Lender's obligation
to deliver the statement pursuant to this Section, that Lender shall have
received, together with Borrower's request for such statement, an Officer's
Certificate stating that no Default or Event of Default exists as of the date of
such certificate (or specifying such Default or Event of Default).
Section 8.24. Payment of Expenses.
Borrowers shall, whether or not the Transactions are consummated,
pay all Transaction Costs, which shall include, without limitation, reasonable
out-of-pocket fees, costs, expenses, and disbursements of Lender and its
attorneys, local counsel, accountants and other contractors in connection with
(i) the negotiation, preparation, execution and delivery of the
89
<PAGE>
Loan Documents and the documents and instruments referred to therein, (ii) the
creation, perfection or protection of Lender's Liens in the Collateral
(including, without limitation, fees and expenses for title and lien searches
and filing and recording fees, intangibles taxes, personal property taxes,
mortgage recording taxes, due diligence expenses, travel expenses, and
accounting firm fees, costs of the Appraisals, Environmental Reports (and an
environmental consultant), Surveys and the Engineering Reports), (iii) the
negotiation, preparation, execution and delivery of any amendment, waiver or
consent relating to any of the Loan Documents, and (iv) the preservation of
rights under and enforcement of the Loan Documents and the documents and
instruments referred to therein, including any restructuring or rescheduling of
the Indebtedness, to the extent expressly required hereunder.
Section 8.25. Bankruptcy Waiver.
Each Borrower hereby agrees that, in consideration of the recitals
and mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, if
any Borrower (i) files with any bankruptcy court of competent jurisdiction or be
the subject of any petition under Title 11 of the U.S. Code, as amended, (ii) is
the subject of any order for relief issued under Title 11 of the U.S. Code, as
amended, (iii) files or is the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or law relating to bankruptcy, insolvency or
other relief of debtors, (iv) has sought or consents to or acquiesces in the
appointment of any trustee, receiver, conservator or liquidator or (v) is the
subject of any order, judgment or decree entered by any court of competent
jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future federal or state act or law
relating to bankruptcy, insolvency or other relief for debtors, the automatic
stay provided by the Federal Bankruptcy Code shall be modified and annulled as
to Lender, so as to permit Lender to exercise any and all of its rights and
remedies, upon request of Lender made on notice to any Borrower and any other
party in interest but without the need of further proof or hearing. Neither
Borrower nor any Affiliate of any Borrower shall contest the enforceability of
this Section.
Section 8.26. Entire Agreement.
This Agreement, together with the Exhibits hereto and the other Loan
Documents constitutes the entire agreement among the parties hereto with respect
to the subject matter contained in this Agreement, the Exhibits hereto and the
other Loan Documents and supersedes all prior agreements, understandings and
negotiations between the parties.
Section 8.27. Dissemination of Information.
If Lender determines at any time to participate in a Secondary
Market Transaction, Lender may forward to each purchaser, transferee, assignee,
servicer, participant or investor in such securities (collectively, the
"Investor"), any Rating Agency rating such securities, any organization
maintaining databases on the underwriting and performance of commercial loans,
trustee, counsel, accountant, and each prospective Investor, all documents and
information which Lender now has or may hereafter acquire relating to the Loan,
any Borrower,
90
<PAGE>
any direct or indirect equity owner of any Borrower, any guarantor, any
indemnitor and each Individual Property, which shall have been furnished by such
Borrower any Affiliate of any Borrower, any guarantor, any indemnitor, or any
party to any Loan Document, or otherwise furnished in connection with the Loan,
as Lender in its discretion determines necessary or desirable.
Section 8.28. Limitation of Interest.
It is the intention of each Borrower and Lender to conform strictly
to applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law, then, in that event, notwithstanding
anything to the contrary in any Loan Document, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under any Loan
Document or otherwise in connection with the Loan shall under no circumstances
exceed the maximum amount of interest allowed by applicable law, and any excess
shall be credited to principal by Lender (or if the Loan shall have been paid in
full, refunded to any Borrower); and (ii) in the event that maturity of the Loan
is accelerated by reason of an election by Lender resulting from any default
hereunder or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest may never include more than
the maximum amount of interest allowed by applicable law, and any interest in
excess of the maximum amount of interest allowed by applicable law, if any,
provided for in the Loan Documents or otherwise shall be cancelled automatically
as of the date of such acceleration or prepayment and, if theretofore prepaid,
shall be credited to principal (or if the principal portion of the Loan and any
other amounts not constituting interest shall have been paid in full, refunded
to any Borrower.)
In determining whether or not the interest paid or payable under any
specific contingency exceeds the maximum amount allowed by applicable law,
Lender shall, to the maximum extent permitted under applicable law (a) exclude
voluntary prepayments and the effects thereof, and (b) amortize, prorate,
allocate and spread, in equal parts, the total amount of interest throughout the
entire contemplated term of the Loan so that the interest rate is uniform
throughout the entire term of the Loan; provided, that if the Loan is paid and
performed in full prior to the end of the full contemplated term hereof, and if
the interest received for the actual period of existence thereof exceeds the
maximum amount allowed by applicable law, Lender shall refund to any Borrower
the amount of such excess, and in such event, Lender shall not be subject to any
penalties provided by any laws for contracting for, charging or receiving
interest in excess of the maximum amount allowed by applicable law.
Section 8.29. Indemnification.
Borrowers shall indemnify and hold Lender and each other Indemnified
Party harmless against any and all losses, claims, damages, costs, expenses
(including the fees and disbursements of outside counsel retained by any such
person) or liabilities in connection with, arising out of or as a result of the
transactions and matters referred to or contemplated by this Agreement, except
to the extent that it is finally judicially determined that any such loss,
claim, damage, cost, expense or liability resulted directly and solely from the
gross negligence, fraud or willful misconduct of such Indemnified Party. If any
Indemnified Party becomes involved in
91
<PAGE>
any action, proceeding or investigation in connection with any transaction or
matter referred to or contemplated in this Agreement, Borrowers shall
periodically reimburse any Indemnified Party upon demand herefore in an amount
equal to its reasonable legal and other expenses (including the costs of any
investigation and preparation) incurred in connection therewith to the extent
such legal or other expenses are the subject of indemnification hereunder. IT IS
EXPRESSLY ACKNOWLEDGED AND AGREED BY EACH BORROWER THAT THE INDEMNITY (AND/OR
THE RELEASE) CONTAINED IN THIS SECTION 8.29 PROTECTS LENDER FROM THE
CONSEQUENCES OF LENDER'S ACTS OR OMISSIONS, INCLUDING WITHOUT LIMITATION, THE
NEGLIGENT ACTS OR OMISSIONS OF LENDER TO THE EXTENT PERMITTED BY LAW; PROVIDED,
HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE THE LENDER
FROM LIABILITY DUE TO ITS FRAUD, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.
Section 8.30. Borrower Acknowledgments.
Each Borrower hereby acknowledges to and agrees with Lender that (i)
the scope of Lender's business is wide and includes, but is not limited to,
financing, real estate financing, investment in real estate and other real
estate transactions which may be viewed as adverse to or competitive with the
business of such Borrower or its Affiliates and (ii) such Borrower has been
represented by competent legal counsel and such Borrower has consulted with such
counsel prior to executing this Loan Agreement and of the other Loan Documents.
Section 8.31. Publicity.
Lender shall have the right to issue press releases, advertisements
and other promotional materials describing Lender's participation in the
origination of the Loan or the Loan's inclusion in any Secondary Market
Transaction effectuated or to be effectuated by Lender. All news releases,
publicity or advertising by any Borrower or their affiliates through any media
intended to reach the general public which refers to the Loan Documents or the
financing evidenced by the Loan Documents, to the Lender, Merrill Lynch Mortgage
Lending, Inc., or any of their respective affiliates shall be subject to the
prior written approval of Lender and Merrill Lynch Mortgage Lending, Inc.,
except for disclosures required by law which shall not require Lender approval
but which shall require prior written notice to Lender.
Section 8.32. Intentionally omitted.
Section 8.33. Cross-Collateralization. Notwithstanding anything herein or
in any of the other Loan Documents to the contrary, (a) the Loan and the
Indebtedness shall be secured by each Individual Property, and (b) the Loan and
the Indebtedness shall be cross-collateralized and cross-defaulted with each of
the other "Loans" referenced in the Cooperation Agreement and the indebtedness
relating thereto, each as described in and in accordance with the terms of the
Cooperation Agreement.
Section 8.34. Time of the Essence. Each Borrower and Lender agrees that
time is of the essence with regard to all obligations under this Agreement and
the other Loan Documents.
92
<PAGE>
Section 8.35. FINAL AGREEMENT. THE WRITTEN LOAN DOCUMENTS TO WHICH THIS
NOTICE RELATES REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 8.36. [Intentionally omitted]
Section 8.37. Joint and Several Liability. Each of the Borrowers shall be
jointly and severally liable for payment of the Indebtedness and performance of
all other obligations of Borrowers (or any of them) under this Agreement and any
other Loan Documents.
Section 8.38. Loan Modification. Borrowers and Lender acknowledge and
agree that the Loan and the security therefore are subject to modification
pursuant to and in accordance with the terms of the Cooperation Agreement.
Section 8.39. Consent Fees. In the event that Borrower intends to
effectuate a transaction not permitted under this Agreement or under any of the
other Loan Documents, in connection with obtaining the consent of Lender or, if
a Secondary Market Transaction has occurred, any loan servicer, Borrower shall
be required to pay to Lender or any such loan servicer a maximum fee of $10,000
plus any reasonable out-of-pocket costs and expenses of Lender or such loan
servicer, as the case may be.
Section 8.40. Insurance, Casualty and Condemnation Provisions.
Notwithstanding anything herein or in any of the other Loan Documents to the
contrary, so long as (a) Marriott is Manager of each Individual Property, (b)
Borrower participates in Manager's insurance programs as set forth in the
Management Agreement, (c) no default has occurred and is continuing under any
Management Agreement beyond the expiration of any applicable notice and cure
periods, and (d) Manager is making all required insurance payments as and when
due pursuant to each Management Agreement, Borrower shall not be required to
make escrow payments relating to insurance matters to the Basic Carrying Costs
Sub-Account hereunder. So long as (x) Marriott is Manager of each Individual
Property, (y) Borrower participates in Manager's insurance programs as set forth
in the Management Agreement, (z) no default has occurred and is continuing under
any Management Agreement beyond the expiration of any applicable notice and cure
periods, Borrower shall strictly enforce the insurance, casualty and
condemnation requirements and obligations set forth in the Manager's
Subordination, and shall provide to Lender acceptable evidence that such
insurance is, at all times, in full force and effect as regards to each
Individual Property. Notwithstanding anything herein or in any of the other Loan
Documents to the contrary, unless and until Marriott is no longer Manager of
each Individual Property pursuant to the terms and provisions of the Management
Agreement, Lender acknowledges and agrees that the insurance, casualty and
condemnation requirements set forth in the Manager's Subordination shall govern
and control over any inconsistent provisions set forth in the provisions of this
Agreement or any of the other Loan Documents. If at any time Marriott is no
longer Manager of each Individual Property pursuant to the terms and provisions
of the Management Agreement, Borrower shall comply with all of the insurance,
casualty and condemnation requirements and obligations set forth in this
Agreement and in the other Loan Documents.
93
<PAGE>
[Signatures on the following pages]
94
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
LENDER:
MERRILL LYNCH MORTGAGE
LENDING, INC. a Delaware corporation
By: /s/ Michael Brody
Title:
[signatures continued on following page]
S-1
<PAGE>
BORROWERS:
/s/ David A. Brooks, Chief Legal Officer
S-2
<PAGE>
EXHIBIT A
Additional Definitions
Initial Deferred Maintenance Amount $19,863
A-1
<PAGE>
EXHIBIT B
Deferred Maintenance
Individual Property Deferred Maintenance
----------------------------------- ------------------------------------
TownPlace Suites Miami Lakes, FL ADA related issues
TownPlace Suites Miami Airport, FL ADA related issues
TownPlace Suites Mt. Laurel, NJ None
TownPlace Suites Ft. Worth, TX Repair exterior walls, repair
gutters and downspouts
TownPlace Suites Silicon Valley, CA None
TownPlace Suites Portland, ME Roof shingles, repair/replace roof
fascia, repair leaks in exterior
walls, ADA related issues
TownPlace Suites Boston, MA Repair asphalt pavement cracks
B-1
<PAGE>
EXHIBIT C
Individual Properties and Allocated Loan Amounts
Individual Property Allocated Loan Amount
----------------------------------- ---------------------
TownPlace Suites Miami Lakes, FL $ 5,602,000
TownPlace Suites Miami Airport, FL $ 4,778,000
TownPlace Suites Mt. Laurel, NJ $ 5,640,000
TownPlace Suites Ft. Worth, TX $ 4,625,000
TownPlace Suites Silicon Valley, CA $ 4,075,000
TownPlace Suites Portland, ME $ 4,950,000
TownPlace Suites Boston, MA $ 2,325,000
C-1
<PAGE>
EXHIBIT D
Managers
Individual Property Allocated Loan Amount
----------------------------------- ---------------------------------
TownPlace Suites Miami Lakes, FL TownePlace Management Corporation
TownPlace Suites Miami Airport, FL TownePlace Management Corporation
TownPlace Suites Mt. Laurel, NJ TownePlace Management Corporation
TownPlace Suites Ft. Worth, TX TownePlace Management Corporation
TownPlace Suites Silicon Valley, CA TownePlace Management Corporation
TownPlace Suites Portland, ME TownePlace Management Corporation
TownPlace Suites Boston, MA TownePlace Management Corporation
D-1
<PAGE>
EXHIBIT E
Operating Budget for Closing Date through 12/31/2005
Attached following this page.
E-1
<PAGE>
EXHIBIT F
FF&E FINANCING
PROPERTY LESSOR LEASED MATERIAL
-------------- ---------------- ----------------------------
TP Miami GE Capital Copier
TP Scarborough CIT Group Office equipment
Imagistics Copier
Marriott Telecommunications equipment
Verizon/Williams Phone equipment
Communication
TP Tewksbury Imagistics Copier/fax
Pitney Bowes Postage meter
TP Ft. Worth Xerox Copier
TP Newark CIT Group Office equipment
Marriott Telecommunications equipment
TP Mt Laurel CIT Group Phone switch
STSN Computer systems
Xerox Copier
F-1
<PAGE>
EXHIBIT G
Organizational Chart
Attached following this page.
G-1
<PAGE>
EXHIBIT H
Property Improvement Plans
Attached following this page.
H-1
<PAGE>
EXHIBIT I
Required Expenditure Amounts for Individual Properties
Individual Property Required Expenditure Amount
----------------------------------- ---------------------------
TownPlace Suites Miami Lakes, FL $ 497,260
TownPlace Suites Miami Airport, FL $ 497,380
TownPlace Suites Mt. Laurel, NJ $ 612,000
TownPlace Suites Ft. Worth, TX $ 549,000
TownPlace Suites Silicon Valley, CA $ 507,000
TownPlace Suites Portland, ME $ 445,800
TownPlace Suites Boston, MA $ 576,670
I-1
<PAGE>
EXHIBIT J
Capital Improvements and PIP Schedule
Required PIP Work and Capital Required PIP Work and Required
Individual Property Improvements Capital Improvements Costs Completion Date
-------------------- ------------------------------- -------------------------- ---------------
TownPlace Suites Replace carpet and wall vinyl; $ 497,260 12/31/06
Miami Lakes, FL update upholstery where needed;
ensure compliance with brand
standards.
TownPlace Suites Replace carpet and wall vinyl; $ 497,380 12/31/06
Miami Airport, FL update upholstery where needed;
ensure compliance with brand
standards.
TownPlace Suites Mt. Replace carpet and wall vinyl; $ 612,000 12/31/06
Laurel, NJ update upholstery where needed;
ensure compliance with brand
standards.
TownPlace Suites Ft. Replace carpet and wall vinyl; $ 549,000 12/31/06
Worth, TX update upholstery where needed;
ensure compliance with brand
standards.
TownPlace Suites Replace carpet and wall vinyl; $ 507,000 12/31/06
Silicon Valley, CA update upholstery where needed;
ensure compliance with brand
standards.
TownPlace Suites Replace carpet and wall vinyl; $ 445,800 12/31/06
Portland, ME update upholstery where needed;
ensure compliance with brand
standards.
TownPlace Suites Replace carpet and wall vinyl; $ 576,670 12/31/06
Boston, MA update upholstery where needed;
ensure compliance with brand
standards.
J-1
<PAGE>
SCHEDULE 1
Litigation
1-1
<PAGE>
SCHEDULE 2
Amortization Schedule
Attached following this page.
2-1