LOAN AGREEMENT

EXHIBIT 10.59

 

 

LOAN AGREEMENT

 

Dated as of October 28, 2003

 

Between

 

POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED

 

as Borrower

 

and

 

LEHMAN BROTHERS HOLDINGS INC. D/B/A LEHMAN CAPITAL,

A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.

as Lender

 

TABLE OF CONTENTS

 

 

-i-

 

-ii-

 

-iii-

 

-iv-

 

 

-v-

 

-vi-

LOAN AGREEMENT

 

THIS LOAN AGREEMENT , dated as of October 28, 2003 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “Agreement”), between LEHMAN BROTHERS HOLDINGS INC. D/B/A LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC, a Delaware corporation, having its principal place of business at 399 Park Avenue, 8 ^th Floor, New York, New York 10022 (“Lender”) and POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED, a Delaware corporation having an address c/o Wyndham International, Inc., 1950 Stemmons Freeway, Suite 6001, Dallas, Texas 75207, (“Borrower”).

 

W   I   T N E S S E T H :

 

WHEREAS , Borrower desires to obtain the Loan (as hereinafter defined) from Lender; and

 

WHEREAS , Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (as hereinafter defined).

 

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 hereto hereby covenant, agree, represent and warrant as follows:

 

I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION

 

Section 1.1 Definitions

 

For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent:

 

“Acceptable Counterparty” means any Counterparty to the Interest Rate Cap Agreement that has and shall maintain, until the expiration of the applicable Interest Rate Cap Agreement, a long-term unsecured debt rating of not less than “AA-” by S&P and “Aa3” by Moodys.

 

“Account Collateral” shall mean: (i) the Accounts, and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in the Accounts from time to time; (ii) any and all amounts invested in Permitted Investments; (iii) all interest, dividends, Cash, instruments and other property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing; and (iv) to the extent not covered by clauses (i) - (iii) above, all “proceeds” (as defined under the UCC as in effect in the State in which the Accounts are located) of any or all of the foregoing.

 

“Accounts” shall mean, collectively, the Property Account, the Tax Account, the Insurance Premium Account, the Required Repair Account, the Replacement Reserve Account, the Ground Rent Account, the Debt Service Account, and the Lockbox Account.

 

“Accounts Receivable” shall have the meaning set forth in Article I of the Security Instrument.

 

“Acquired Property” shall have the meaning set forth in Section 5.1.10(j)(i).

“Acquired Property Statements” shall have the meaning set forth in Section 5.1.10(j)(i).

 

“Additional Insolvency Opinion” shall have the meaning set forth in Section 4.1.31.

 

“Adjusted Prime Rate” shall mean an interest rate per annum equal to the Prime Rate in effect from time to time plus 1% per annum.

 

“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or executive officer of such Person or of an Affiliate of such Person.

 

“Affiliated Loans” shall mean a loan made by Lender to an Affiliate of Borrower or any Guarantor.

 

“Affiliated Manager” shall mean any managing agent which is an Affiliate of, or in which Borrower, Principal, or any Guarantor (or its successor) or any transferee permitted pursuant to the terms of Section 5.2.12 hereof has, directly or indirectly, any legal, beneficial or economic interest.

 

“ALTA” shall mean American Land Title Association, or any successor thereto.

 

“Annual Budget” shall mean the operating budget, including all planned Capital Expenditures (which shall include a reasonable allowance for any customary and reasonable market-rate supervisory fees or charges, including “reimbursable costs” for travel and lodging, and any other fee commonly referred to as “purchasing fees”, charged by Borrower, Manager or any Affiliated Person for services rendered in connection therewith), prepared by Borrower for the applicable Fiscal Year or other period that may be specified herein.

 

“Applicable Contribution” shall have the meaning set forth in Section 9.5(f) hereof.

 

“Applicable Interest Rate” shall mean (A) from and including the Closing Date through the last day of the Initial Interest Period, an interest rate per annum equal to the greater of (X) (a) the Eurodollar Rate; or (b) the Adjusted Prime Rate, if the Loan begins bearing interest at the Adjusted Prime Rate in accordance with the provisions of Section 2.2.3 hereof and (Y) 4.50% per annum; and (B) from and including the first day of the Interest Period immediately following the Initial Interest Period and for each successive Interest Period through and including the date on which the Debt is paid in full, an interest rate per annum equal to the greater of (i) (I) the Eurodollar Rate or (II) the Adjusted Prime Rate, if the Loan begins bearing interest at the Adjusted Prime Rate in accordance with the provisions of Section 2.2.3 hereof and (ii) 4.50% per annum.

 

“Applicable Laws” shall mean all existing and future federal, State, Commonwealth of Puerto Rico and local laws, orders, ordinances, governmental rules and regulations and court orders.

 

“Application Period” shall have the meaning set forth in Section 7.5.2 hereof.

 

“Appraisal” shall mean an appraisal 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 the Property is located, who meets the requirements of FIRREA and who is otherwise satisfactory to Lender.

 

- 2 -

“Approved Annual Budget” shall have the meaning set forth in Section 5.1.10(d) hereof.

 

“Approved Expenses” shall have the meaning set forth in Section 3.7(b)(viii) hereof.

 

“Assignment of Interest Rate Cap” shall mean that certain Collateral Assignment of Interest Rate Cap Agreement made by Borrower in favor of Lender as security for the Loan, consented to by the Counterparty, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Assignment of Leases” shall mean that certain first priority Assignment of Leases and Rents, dated as of the Closing Date, from Borrower, as assignor, to Lender, as assignee, assigning to Lender all of Borrower’s interest in and to the Leases and Rents of the Property as security for the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Assignment of Management Agreement” shall mean that certain Conditional Assignment of Management Agreement dated the date hereof among Lender, Borrower and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Award” shall mean any compensation paid by any Governmental Authority to (or on behalf of) Borrower in connection with a Condemnation in respect of all or any part of the Property.

 

“Bankruptcy Code” shall mean 11 U.S.C. § 101 et seq., and the rules and regulations adopted and promulgated pursuant thereto, as the same may be amended from time to time.

 

“Basic Carrying Costs” shall mean the sum of the following costs associated with the Property for the relevant Fiscal Year or payment period: (i) Taxes, (ii) Insurance Premiums and (iii) Ground Rent.

 

“Benefit Amount” shall have the meaning set forth in 9.5(d) hereof.

 

“Borrower” shall have the meaning set forth in the introductory paragraph hereto, together with its successors and assigns.

 

“Borrower Expense Account” shall have the meaning set forth in Section 3.1(b)(viii).

 

“Breakage Costs” shall have the meaning given to it in Section 2.2.3(d) hereof;

 

“Business Day” shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York, New York are not open for business.

 

“Business Party” shall have the meaning set forth in Section 4.1.37(aa).

 

“Capital Expenditures” shall mean, for any period, the amount expended for items capitalized under GAAP and the Uniform System of Accounts (including expenditures for building improvements or major repairs, leasing commissions and tenant improvements and the acquisition of furniture, fixtures and equipment).

 

- 3 -

“Cash” shall mean coin or currency of the United States of America or immediately available federal funds, including such funds delivered by wire transfer.

 

“Casino Budget” shall mean a Capital Expenditure budget prepared by Borrower and reasonably acceptable to Lender with respect to the casino only and any updates to same prepared by Borrower and reasonably acceptable to Lender.

 

“Casualty” shall have the meaning specified in Section 6.2 hereof.

 

“Casualty Consultant” shall have the meaning set forth in Section 6.4(b)(iii) hereof.

 

“Casualty Retainage” shall have the meaning set forth in Section 6.4(b)(iv) hereof.

 

“Change of Control” shall mean (A) the acquisition, including through mergers, consolidation or otherwise, by any Person or Group (excluding the Excluded Group) of direct or indirect beneficial ownership as defined in Rule 13 d-3 under the Exchange Act of more than 50% of (i) the outstanding shares of common stock of Wyndham or (ii) the total voting power of all classes of capital stock of Wyndham entitled to vote generally in the election of directors, unless such Person or Group owned at least 50% of the interests described in clause (i) or (ii) above in Wyndham prior to such merger or consolidation; or (B) the election by any Person or Group (other than the Excluded Group) of a sufficient number of its or their nominees to the Board of Directors of Wyndham such that such nominees, when added to any existing directors remaining on such Board of Directors after such election who are affiliates or associates of such Person or Group, shall constitute a majority of such Board of Directors.

 

“Closing Date” shall mean the date of the funding of the Loan.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended from time to time, and any successor statutes thereto, and all applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

 

“Collateral” shall mean the Property, the Accounts, the Reserve Funds, the Guaranty, the Personal Property, Rents, the Accounts Receivable, the Account Collateral, and all other real or personal property (including any mortgage notes) of Borrower or any Guarantor that is at any time pledged, mortgaged or otherwise given as security to Lender for the payment of the Debt under the Security Instrument, this Agreement or any other Loan Document.

 

“Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting the Property or any part thereof.

 

“Contract Rate” shall mean, at the time of any calculation, an interest rate constant per annum equal to ten and one-quarter percent (10.25%).

 

“Contribution” shall have the meaning set forth in 9.5(a) hereof.

 

“Counterparty” shall mean the Person which is the issuer of the Interest Rate Cap Agreement.

 

- 4 -

“Cure Contract Rate” shall mean, at the time of any calculation, an interest rate constant per annum equal to ten and one-half percent (10.50%).

 

“Debt” shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note together with all interest accrued and unpaid thereon and all other sums due to Lender in respect of the Loan under the Note, this Agreement, the Security Instrument or any other Loan Document.

 

“Debt Service” shall mean, with respect to any particular period of time, interest payments and all Monthly Scheduled Amortization Payments due under the Note for such period.

 

“Debt Service Account” shall have the meaning set forth in Section 3.1(b).

 

“Debt Service Coverage Ratio” shall mean a ratio in which:

 

(a) the numerator is the Net Operating Income (excluding any interest income) for the 12 full calendar month period preceding the date of calculation as set forth in the statements required hereunder, without deduction for (i) the actual management fees (excluding the national sales office fee, the central marketing fee and the reservation fee as provided in the Management Agreement) incurred in connection with the operation of the Property, (ii) amounts paid to the Reserve Funds, less (A) management fees equal to the greater of (1) assumed base management fees of three percent (3%) of Gross Income From Operations or (2) the actual management fees incurred (excluding the national sales office fee, the central marketing fee and the reservation fee as provided in the Management Agreement), (B) assumed Replacement Reserve Fund contributions equal to the FF&E Factor multiplied by Gross Income From Operations and (C) Lease Termination Payments; and

 

(b) the denominator is the aggregate amount of Debt Service and Mezzanine Debt Service which would be due and payable for such 12 full calendar month period, calculated at an interest rate constant (said constant includes both interest and amortization) equal to the Contract Rate and Mezzanine Contract Rate, respectively.

 

“Debt Service Reserve” shall have the meaning set forth in Section 7.5.1 hereof.

 

“Debt Service Reserve Deposit” shall mean an amount equal to $1,503,125.00.

 

“Default” shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default.

 

“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the maximum rate permitted by applicable law, or (b) five percent (5%) above the Applicable Interest Rate.

 

“Disclosure Document” shall have the meaning set forth in Section 5.1.10(j) hereof.

 

“Eligible Account” shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or State chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or

 

- 5 -

State chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a State chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and State authority. An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

 

“Eligible Institution” shall mean with respect to any depository institution or trust company, (a) the short term unsecured debt obligations or commercial paper of which are rated at least A-1+ by S&P and P-1 by Moody’s in the case of accounts in which funds are held for 30 days or less, or (b) the long term unsecured debt obligations of which are rated at least “AA” by S&P and “Aa2” by Moody’s in the case of accounts in which funds are held for more than 30 days.

 

“Emergency Repairs” shall have the meaning set forth in Section 6.4(d).

 

“Employee Parking Lot Parcel” shall mean that certain parcel of land more particularly described on Exhibit H attached hereto and made a part hereof.

 

“Employee Parking Lot Lease” shall have the meaning set forth in Section 8.1 (xxiv).

 

“Environmental Indemnity” shall mean that certain Environmental Indemnity Agreement executed by Borrower and Indemnitor in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Environmental Law” shall mean any present and future federal, State and local laws, statutes, ordinances, rules, regulations, standards, policies and other governmental directives or requirements, as well as common law, that apply to Borrower or the Property and relate to Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act and the Resource Conservation and Recovery Act.

 

“Environmental Liens” shall have the meaning set forth in Section 5.1.19 hereof.

 

“Environmental Reports” shall have the meaning set forth in 4.1.41.

 

“Equipment” shall have the meaning set forth in Section 5.2.12(e).

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

 

“Eurodollar Rate” shall mean, with respect to any Interest Period, an interest rate per annum equal to LIBOR plus 2.5 % per annum.

 

“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.

 

“Excess Cash Flow” shall have the meaning set forth in Section 3.7(b)(xi) hereof.

 

“Excess Cash Flow Account” shall have the meaning set forth in Section 3.1(b)(xi) hereof.

 

- 6 -

“Exchange Act” shall have the meaning set forth in Section 9.2(a) hereof.

 

“Exchange Act Filing” shall have the meaning set forth in Section 9.2(a) hereof.

 

“Excluded Group” shall mean those holders of Series B Convertible Preferred Stock of Wyndham listed on Exhibit E hereto and their Affiliates.

 

“Extension Fee” shall mean (i) with respect to the first Extension Term only, $0.00 and (ii) with respect to the second and third Extension Terms, an amount equal to one-half of one percent (.5%) of the then outstanding principal amount of the Loan at the time of the commencement of the related Extension Term.

 

“Extension Notice” shall have the meaning set forth in Section 2.2.1(b)(ii) hereof.

 

“Extension Term” shall have the meaning set forth in Section 2.2.1(b) hereof.

 

“Extraordinary Expense” shall mean an operating expense or capital expenditure with respect to the Property that (i) is not set forth on or made or deemed made in compliance with and pursuant to the Approved Annual Budget (ii) is not an Approved Expense and (iii) is not subject to payment by withdrawals from the Replacement Reserve Account or paid in connection with an emergency at the Property. Borrower shall deliver promptly to Lender a reasonably detailed explanation of such proposed Extraordinary Expense for the reasonable approval of Lender.

 

“Extraordinary Expense Account” shall have the meaning set forth in Section 3.1(b)(ix) hereof.

 

“FF&E Factor” shall mean collectively, (A) when being applied to Gross Income From Operations excluding any Gross Income From Operations attributable to the operations of the casino (net-wins), four percent (4%) and (B) when being applied to Gross Income From Operations attributable to the operations of the casino (net-wins), (1) one percent (1%) during the first and second Loan Years and (2) the greater of (i) one percent (1.0%) and (ii) a percentage equal to the ratio that the budgeted costs of Replacements with respect to the casino, based on the Casino Budget, bears to Gross Income From Operations for the period of such calculation, during the third, fourth and fifth Loan Years.

 

“FIRREA” means the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as the same may be amended from time to time.

 

“Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during the term of the Loan.

 

“Fitch” shall mean Fitch, Inc.

 

“Flood Insurance Acts” shall have the meaning set forth in Section 6.1(a)(vii) hereof.

 

“Force Majeure” shall mean the failure of Borrower to perform any obligation hereunder by reason of any act of God, enemy or hostile government action, civil commotion, insurrection, sabotage, strikes or lockouts or any other reason solely due to cause or causes beyond the control of Borrower or any Affiliate of Borrower.

 

- 7 -

“Foreign Taxes” shall mean any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority excluding, in the case of Lender or any successor and/or assign of Lender, net income and franchise taxes imposed on such entity.

 

“GAAP” shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report.

 

“Governmental Authority” shall mean any court, board, agency commission, office or other authority of any nature whatsoever for any governmental unit (federal, State, Commonwealth of Puerto Rico, county, district, municipal, city, country or otherwise) or quasi governmental unit whether now or hereafter in existence.

 

“Gross Income From Operations” shall mean all income, computed in accordance with GAAP and the Uniform System of Accounts, derived by Borrower from the ownership and operation of the Property from whatever source, including, but not limited to, Rents, Accounts Receivable, utility charges, escalations, forfeited security deposits, interest on credit accounts, service fees or charges, license fees, parking fees, rent concessions or credits, other required pass-throughs, amounts relating to the operation of all casinos at the Property (net-wins only) and interest on Reserve Funds, but excluding sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, refunds an uncollectible accounts, sales of furniture, fixtures and equipment, Insurance Proceeds (other than business interruption or other loss of income insurance), Awards, rents, revenues and receipts received by tenants and concessionaires located at the Property, unforfeited security deposits, utility and other similar deposits and any disbursements to Borrower from the Reserve Funds.

 

“Ground Lease” shall mean the Employee Parking Lot Lease and any ground lease which creates Borrower’s leasehold estate in the Leasehold Property.

 

“Ground Lease Escrow Fund” shall have the meaning set forth in Section 7.6 hereof.

 

“Ground Rent” shall have the meaning set forth in Section 7.6 hereof.

 

“Ground Rent Account” shall have the meaning set forth in Section 3.1(b)(vii) hereof.

 

“Group” shall mean any Person or Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Exchange Act, together with all affiliates and associates (as defined in Rule 12 b-2 under the Exchange Act) thereof.

 

“Guarantor” shall mean Wyndham.

 

“Guaranty” shall mean that certain guaranty of recourse obligations, dated as of the date hereof, from Guarantor to Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Hazardous Materials” shall mean petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (“PCBs”) and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is friable; toxic mold; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Property is prohibited by any federal, State or local

 

- 8 -

authority; any substance that requires special handling; and any other material or substance now or in the future defined as a “hazardous substance,” “hazardous material”, “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” “pollutant” or other words of similar import within the meaning of any Environmental Law.

 

“Improvements” shall mean the building, fixtures, additions, enlargements, extensions, modifications, repairs, replacements, and improvements now or hereinafter erected or located on the Land.

 

“Indebtedness” of a Person, at a particular date, means the sum (without duplication) at such date of (a) all indebtedness or liability of such Person for borrowed money; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations under letters of credit; (e) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or otherwise to assure a creditor against loss; and (f) obligations secured by any Liens, whether or not the obligations have been assumed.

 

“Indemnified Parties” shall mean Lender, any Person or entity who is or will have been involved in the origination of the Loan, any Person or entity who is or will have been involved in the servicing of the Loan, any Person or entity in whose name the encumbrance created by the Security Instrument is or will have been recorded, Persons and entities who may hold or acquire or will have held a full or partial interest in the Loan, the holders of any Securities, 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, members, 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 or entity who holds or acquires or will have held a participation or other full or partial interest in the Loan or the Property, whether during the term of the Loan or as a part of or following a foreclosure of 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), provided, however, that any indemnification provided for in any of the Loan Documents shall not, directly or indirectly, extend to the benefit of or be transferred to any transferee or assignee of any Indemnified Party (other than to the successor or assigns of an Indemnified Party succeeding to such Indemnified Party’s direct or indirect interest in the Loan) or to any purchaser or future owner of any portion of the Property, unless such purchaser or owner was previously an Indemnified Party.

 

“Indemnitor” shall mean Wyndham.

 

“Independent Director” shall have the meaning set forth in Section 4.1.37(aa).

 

“Initial Interest Period” shall mean the period commencing from and including the Closing Date to and including (a) the 14 ^th day of the month in which the Closing Date occurs, if the Closing Date occurs prior to the 14 ^th day of the month or (b) the 14 ^th day of the immediately succeeding calendar month after the Closing Date, if the Closing Date occurs on or after the 14 ^th day of the month.

 

- 9 -

“Insolvency Opinion” shall mean that certain non-consolidation opinion letter dated the Closing Date delivered by Akin, Gump, Strauss, Hauer & Feld, L.L.P. in connection with the Loan.

 

“Institutional Lender” shall mean any insurance company, bank, trust company, savings and loan association, savings bank, investment bank or similar financial institution.

 

“Insurance Premium Account” shall have the meaning set forth in Section 3.1(b)(ii).

 

“Insurance Premiums” shall have the meaning set forth in Section 6.1(a) hereof.

 

“Insurance Proceeds” shall have the meaning set forth in Section 6.4(b) hereof.

 

“Interest Period” shall mean, in connection with the calculation of interest accrued with respect to any specified Payment Date, the period from and including the fifteenth (15 ^th ) day of the prior month to and including the fourteenth (14 ^th ) day of the calendar month in which the applicable Payment Date occurs; provided, however, that with respect to the first Payment Date occurring after the Closing Date, the Interest Period shall be the period from and including the Closing Date to and including (a) the 14 ^th day of the month in which such Payment Date occurs, if the Closing Date occurs prior to the 14 ^th day of the month or (b) the 14 ^th day of the immediately succeeding calendar month after the Closing Date, if the Closing Date occurs on or after the 14 ^th day of the month. Each Interest Period shall be a full month and shall not be shortened by reason of any payment of the Loan prior to the expiration of such Interest Period.

 

“Interest Rate Cap Agreement” shall mean an Interest Rate Cap Agreement (together with the confirmation and schedules relating thereto), between the Counterparty and Borrower obtained by Borrower. The Interest Rate Cap Agreement shall be written on the then current standard ISDA documentation, shall conform to the requirements of the Rating Agencies for interest rate cap agreements and shall provide for interest periods and calculations consistent with the payment terms of the Agreement. After delivery of a Replacement Interest Rate Cap Agreement to Lender, the term “Interest Rate Cap Agreement” shall be deemed to mean such Replacement Interest Rate Cap Agreement.

 

“Interest Rate Cap Event” shall mean the earlier to occur of (i) the date on which LIBOR first equals or exceeds 5.75% or (ii) notice from Lender that a Securitization is expected to occur within the ten next (10) days.

 

“Interest Shortfall” shall have the meaning set forth in Section 2.3.1(b).

 

“Investor” shall have the meaning set forth in Section 5.1.10(g).

 

“Land” shall mean the real property described on Exhibit J attached hereto and made a part hereof.

 

“Lease Termination Payments” shall mean all payments made to Borrower in connection with any termination, cancellation, surrender, sale or other disposition of any Lease.

 

“Leasehold Property” shall mean, the Employee Parking Lot Parcel.

 

“Leases” shall have the meaning set forth in Article I of the Security Instrument with respect to the Property.

 

- 10 -

“Legal Requirements” shall mean, with respect to the Property, all federal, State, Commonwealth of Puerto Rico, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting the Property or any part thereof, or the zoning, construction, use, alteration, occupancy or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all material covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting the Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to the Property or any part thereof, or (b) in any way limit the use and enjoyment thereof.

 

“Lehman” shall have the meaning set forth in Section 9.2(b) hereof.

 

“Lehman Group” shall have the meaning set forth in Section 9.2(b) hereof.

 

“Lender” shall have the meaning set forth in the introductory paragraph hereto, together with its successors and assigns.

 

“Letter of Credit” shall mean a transferable, clean, irrevocable, unconditional, standby letter of credit in form, substance and amount reasonably satisfactory to Lender in its reasonable discretion, issued or confirmed by a commercial bank with a long term debt obligation rating of AA or better by S&P or Aa2 or better by Moodys as determined by the Rating Agencies and otherwise satisfactory to Lender in its reasonable discretion (the “Issuing Bank”). Lender consents to JPMorgan Chase Bank being the issuer of any Letter of Credit delivered to Lender. The Letter of Credit shall be payable upon presentation of a sight draft only to the order of Lender or, upon the transfer of the Loan, to another party, as the case may be, at a New York City bank; provided, however, Borrower may provide Lender with a replacement Letter of Credit meeting all of the requirements hereof in lieu of Lender transferring the existing Letter of Credit then held by Lender. The Letter of Credit shall have an initial expiration date of not less than one (1) year and shall be automatically renewed for successive twelve (12) month periods for the term of the Loan and shall provide for multiple draws. The Letter of Credit shall be transferable by Lender and its successors and assigns at a New York City bank.

 

“Liabilities” shall have the meaning set forth in Section 9.2(b) hereof.

 

“LIBOR” shall mean, for the Initial Interest Period, the quoted offered rate for one-month United States dollar deposits with leading banks in the London interbank market that appears as of 11:00 a.m. (London time) on the Closing Date on the display page designated as Telerate Page 3750, and for each Interest Period thereafter, the quoted offered rate for one-month United States dollar deposits with leading banks in the London interbank market that appears as of 11:00 a.m. (London time) on the related LIBOR Determination Date on the display page designated as Telerate Page 3750.

 

If, as of such time on the Closing Date or any LIBOR Determination Date, no quotation is given on Telerate Page 3750, then the Lender shall establish LIBOR on such LIBOR Determination Date by requesting four Reference Banks meeting the criteria set forth herein to provide the quotation offered by its principal London office for making one-month United States dollar deposits with leading banks in the London interbank market as of 11:00 a.m., London time, on such LIBOR Determination Date.

 

- 11 -

(i) If two or more Reference Banks provide such offered quotations, then LIBOR for the next Interest Period shall be the arithmetic mean of such offered quotations (rounded upward if necessary to the nearest whole multiple of 1/1,000%).

 

(ii) If only one or none of the Reference Banks provides such offered quotations, then LIBOR for the next Interest Period shall be the Reserve Rate.

 

(iii) If on any LIBOR Determination Date, Lender is required but is unable to determine the LIBOR in the manner provided in paragraphs (i) and (ii) above, LIBOR for the next Interest Period shall be LIBOR as determined on the preceding LIBOR Determination Date.

 

The establishment of LIBOR on each LIBOR Determination Date by the Lender shall be final and binding absent manifest error.

 

“LIBOR Business Day” shall mean a day upon which United States dollar deposits may be dealt in on the London and the New York City interbank markets and commercial banks and foreign exchange markets are open in London and New York City.

 

“LIBOR Determination Date” shall mean, with respect to any Interest Period, the date that is two (2) LIBOR Business Days prior to the fifteenth (15 ^th ) calendar day of the month in which such Interest Period commences.

 

“Licenses” shall have the meaning set forth in Section 4.1.21 hereof.

 

“Lien” shall mean, any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting Borrower, the Property, any portion thereof or any interest therein, 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, and mechanic’s, materialmen’s and other similar liens and encumbrances.

 

“Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement and the other Loan Documents as the same may be amended or split pursuant to the terms hereof.

 

“Loan Documents” shall mean, collectively, this Agreement, the Note, the Security Instrument, the Pledge Agreement, the Assignments of Leases, the Environmental Indemnity, the Assignment of Management Agreement, the Guaranty, and all other documents executed and/or delivered in connection with the Loan (but specifically excluding the Mezzanine Loan Documents).

 

“Loan Year” shall mean each 365 or 366, as applicable, day period thereafter commencing on the Closing Date.

 

“Lockbox Account” shall have the meaning set forth in Section 3.1(b) hereof.

 

“Lockbox Bank” shall mean any Eligible Institution selected by Lender.

 

“Lockout Period” shall mean the period commencing on the Closing Date and ending on the next occurring Payment Date following the second (2 ^nd ) anniversary of the Closing Date.

 

- 12 -

“Losses” shall mean any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, direct actual damages or losses, costs, expenses, fines, fees, charges, judgments, awards, amounts paid in settlement of whatever kind or nature (including, but not limited to, reasonable attorneys’ fees and other costs of defense).

 

“Management Agreement” shall mean the management agreement entered into by and between Borrower and Manager, pursuant to which the Manager is to provide management and other service with respect to the Property (including, without limitation, the service agreement between Manager and WMC Puerto Rico, Inc.) or, if the context requires, the Replacement Management Agreement executed in accordance with the terms and provisions of this Agreement.

 

“Manager” shall collectively mean Williams Hospitality Group Inc. and WMC Puerto Rico Inc . or, if the context requires, a Qualified Manager who is managing the Property in accordance with the terms and provisions of this Agreement.

 

“Material Lease” shall mean any Lease (a) demising in excess of 2,500 square feet or (b) for parking operations/facilities.

 

“Maturity Date” shall mean the next occurring Payment Date following the second (2 ^nd ) anniversary of the Closing Date or, if the Maturity Date has been extended pursuant to Section 2.2.1(b) hereof, the last day of the applicable Extension Term, or such other date on which the final payment of principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise.

 

“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such State or States whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan.

 

“Mezzanine Borrower” shall mean PPRA Mezz Borrower, Inc.

 

“Mezzanine Contract Rate” shall have the meaning ascribed to the term “Contract Rate” in the Mezzanine Loan Agreement.

 

“Mezzanine Debt Service” shall mean, with respect to any particular period of time, interest payments, and monthly scheduled amortization payments due under the Mezzanine Note for such period.

 

“Mezzanine Default” shall have the meaning ascribed to the term “Default” in the Mezzanine Loan Agreement.

 

“Mezzanine Event of Default” shall have the meaning ascribed to the term “Event of Default” in the Mezzanine Loan Agreement.

 

“Mezzanine Extension Option” shall have the meaning ascribed to the term “Extension Option” in the Mezzanine Loan Agreement.

 

“Mezzanine Lender” shall mean the owner and holder of the Mezzanine Loan.

 

- 13 -

“Mezzanine Loan” shall mean that certain loan made on the Closing Date by Mezzanine Lender to Mezzanine Borrower on the date hereof pursuant to the Mezzanine Loan Agreement, as the same may be amended or split pursuant to the terms of the Mezzanine Loan Documents.

 

“Mezzanine Loan Account” shall have the meaning set forth in Section 3.1(b)(x) hereof.

 

“Mezzanine Loan Agreement” shall mean that certain Loan Agreement (Mezzanine Loan) dated as of the date hereof between Mezzanine Borrower and Mezzanine Lender.

 

“Mezzanine Loan Documents” shall mean all documents or instruments evidencing, securing or guaranteeing the Mezzanine Loan, including without limitation, the Mezzanine Loan Agreement.

 

“Mezzanine Note” shall mean that certain Secured Promissory Note dated as of the date hereof given by Mezzanine Borrower to Mezzanine Lender in the principal amount of $29,500,000.00.

 

“Miami Lease” shall mean that certain lease dated June 5, 2001 between Leticia Eulalia Ferrer Cintron, as landlord and Posadas de Regency, Inc. (“Regency”), as tenant.

 

“Miramar Parcel” shall mean that certain parcel as more particularly described on Exhibit G attached hereto and made a part hereof.

 

“Miramar Parcel Lease” shall have the meaning set forth in Section 8.1(a)(xxv) hereof.

 

“Monthly Debt Service Payment Amount” shall mean the amount of interest and the Monthly Scheduled Amortization Payment due and payable on each Payment Date pursuant to the Note and Article II hereof.

 

“Monthly Ground Rent Deposit” shall have the meaning set forth in Section 7.6 hereof.

 

“Monthly Insurance Premium Deposit” shall have the meaning set forth in Section 7.2 hereof.

 

“Monthly Mezzanine Debt Service Payment Amount” shall mean the monthly amount of interest and monthly scheduled amortization payments due and payable pursuant to the Mezzanine Loan Agreement and the Mezzanine Note.

 

“Monthly Scheduled Amortization Payments” shall mean the amount of principal set forth on Schedule V hereto to be paid on each Payment Date.

 

“Monthly Tax Deposit” shall have the meaning set forth in Section 7.2 hereof.

 

“Moody’s” shall mean Moody’s Investors Service, Inc.

 

“Net Cash Flow” for any period shall mean the amount obtained by subtracting Operating Expenses and Capital Expenditures for such period from Gross Income From Operations for such period.

 

“Net Cash Flow Schedule” shall have the meaning set forth in Section 5.1.10(b) hereof.

 

- 14 -

“Net Cash Flow After Debt Service” for any period shall mean the amount obtained by subtracting Debt Service for such period from Net Cash Flow for such period.

 

“Net Liquidation Proceeds after Debt Service” shall have the meaning set forth in the Mezzanine Loan Agreement.

 

“Net Operating Income” means the amount obtained by subtracting Operating Expenses from Gross Income From Operations.

 

“Net Proceeds” shall have the meaning set forth in Section 6.4(b) hereof.

 

“Net Proceeds Deficiency” shall have the meaning set forth in Section 6.4(b)(vi) hereof.

 

“Note” shall mean that certain promissory note of even date herewith in the principal amount of SIXTY-FIVE MILLION AND 00/100 DOLLARS ($65,000,000.00) made by Borrower in favor of Lender, as the same may be amended, restated, replaced, supplemented, severed, split, or otherwise modified from time to time.

 

“O&M Program” shall mean the lead based paint maintenance program developed by Borrower and approved by Lender, as the same may be amended, replaced, supplemented or otherwise modified from time to time.

 

“Obligations” shall have the meaning set forth in Section 9.5(a) hereof.

 

“Offering Document Date” shall have the meaning set forth in Section 5.1.10(j)(iv).

 

“Offering Materials” shall have the meaning set forth in Section 9.2(b).

 

“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed by an authorized officer of Borrower.

 

“Operating Expenses” shall mean the total of all expenditures, computed in accordance with GAAP and the Uniform System of Accounts, of whatever kind relating to the operation, maintenance and management of the Property that are incurred on a regular monthly or other periodic basis, including without limitation, utilities, ordinary repairs and maintenance, insurance premiums, license fees, property taxes and assessments, advertising expenses, management fees, franchise fees, payroll and related taxes, computer processing charges, operational equipment or other lease payments (including any Ground Rents payable under any Ground Lease) as permitted hereunder, and other similar costs, but excluding depreciation, amortization of intangible items, Debt Service, Mezzanine Debt Service, Capital Expenditures and contributions to the Reserve Funds.

 

“Other Charges” shall mean all Ground Rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof.

 

“Paydown Amount” shall have the meaning set forth in Section 3.2.

 

“Payment Date” shall mean the ninth (9th) day of each calendar month during the term of the Loan or, if such day is not a Business Day, the immediately preceding Business Day.

 

- 15 -

“Performance Cure” shall have the meaning set forth in Section 3.7(b).

 

“Permitted FF&E Financing” shall have the meaning set forth in Section 5.2.12(e).

 

“Permitted Encumbrances” shall mean, with respect to the Property, collectively, (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy or marked up final title commitment (including those disclosed in and insured over thereby) relating to the Property or any part thereof, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent or being contested in good faith and by appropriate proceedings in accordance with the terms hereof, (d) any and all easements, licenses, covenants, restrictions or other agreements which may hereafter be granted by Borrower in accordance with the terms hereof, (e) rights of existing and future tenants, licensees and concessionaires, as tenants, licensees or concessionaires only, pursuant to Leases in effect as of the date hereof or entered into in accordance with the terms hereof, (f) any Lien and security interest expressly permitted pursuant to Section 4.1.37 hereof, and (g) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s sole discretion.

 

“Permitted Investments” shall mean any one or more of the following obligations or securities acquired at a purchase price of not greater than par, including those issued by Servicer, the trustee under any Securitization or any of their respective Affiliates, payable on demand or having a maturity date not later than the Business Day immediately prior to the first Payment Date following the date of acquiring such investment and meeting one of the appropriate standards set forth below:

 

(i) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America including, without limitation, obligations of: the U.S. Treasury (all direct or fully guaranteed obligations), the Farmers Home Administration (certificates of beneficial ownership), the General Services Administration (participation certificates), the U.S. Maritime Administration (guaranteed Title XI financing), the Small Business Administration (guaranteed participation certificates and guaranteed pool certificates), the U.S. Department of Housing and Urban Development (local authority bonds) and the Washington Metropolitan Area Transit Authority (guaranteed transit bonds); provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(ii) Federal Housing Administration debentures;

 

(iii) obligations of the following United States government sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal National Mortgage Association (debt obligations), the Financing Corp. (debt obligations), and the Resolution Funding Corp.

 

- 16 -

(debt obligations); provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(iv) federal funds, unsecured certificates of deposit, time deposits, bankers’ acceptances and repurchase agreements with maturities of not more than 365 days of any bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities or any class thereof); provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(v) fully Federal Deposit Insurance Corporation-insured demand and time deposits in, or certificates of deposit of, or bankers’ acceptances with maturities of not more than 365 days and issued by, any bank or trust company, savings and loan association or savings bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities or any class thereof); provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(vi) debt obligations with maturities of not more than 365 days and at all times rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) in its highest long-term unsecured rating category; provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments

 

- 17 -

have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(vii) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) with maturities of not more than 365 days and that at all times is rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities or any class thereof) in its highest short-term unsecured debt rating; provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(viii) units of taxable money market funds with maturities of not more than 365 days and, which funds are regulated investment companies, seek to maintain a constant net asset value per share and invest solely in obligations backed by the full faith and credit of the United States, which funds have the highest rating available from each Rating Agency (or, if not rated by an Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) for money market funds; and

 

(ix) any other security, obligation or investment which has been approved as a Permitted Investment in writing by (a) Lender and (b) each Rating Agency, as evidenced by a written confirmation that the designation of such security, obligation or investment as a Permitted Investment will not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities by such Rating Agency;

 

provided, however, that no obligation or security shall be a Permitted Investment if (A) such obligation or security evidences a right to receive only interest payments or (B) the right to receive principal and interest payments on such obligation or security are derived from an underlying investment that provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment.

 

“Person” shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any Governmental Authority and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

“Personal Property” shall have the meaning set forth in Article I of the Security Instrument with respect to the Property.

 

- 18 -

“Physical Conditions Report” shall mean, with respect to the Property, a structural engineering report prepared by a company satisfactory to Lender regarding the physical condition of the Property, satisfactory in form and substance to Lender in its sole discretion, which report shall, among other things, (a) confirm that the Property and its use complies, in all material respects, with all applicable Legal Requirements (including, without limitation, zoning, subdivision and building laws) and (b) include a copy of the use permits with respect to all Improvements on the Property.

 

“Plan” shall mean an employee benefit plan (as defined in section 3(3) of ERISA) whether or not subject to ERISA or a plan or other arrangement within the meaning of section 4975 of the Code.

 

“Plan Assets” shall mean assets of a Plan within the meaning of section 29 C.F.R. section 2510.3-101 or similar law.

 

“Pledge Agreement” shall mean that certain Mortgage Notes Pledge and Security Agreement dated the Closing Date given by Borrower to Lender.

 

“Policies” shall have the meaning specified in Section 6.1(a) hereof.

 

“Prime Rate” shall mean, for a particular date, the annual rate of interest publicly announced by Citibank, N.A. in New York, New York, as its base rate in effect for such date, as such rate shall change from time to time. If Citibank, N.A. ceases to announce a base rate, Prime Rate shall mean the rate of interest published in The Wall Street Journal from time to time as the “Prime Rate” for such particular date. If more than one “Prime Rate” is published in The Wall Street Journal for a day, the average of such “Prime Rates” shall be used, and such average shall be rounded up to the nearest one-eighth of one percent (0.125%). If The Wall Street Journal ceases to publish the “Prime Rate”, Lender shall select an equivalent publication that publishes such “Prime Rate”, and if such “Prime Rates” are no longer generally published or are limited, regulated or administered by a governmental or quasigovernmental body, then Lender shall select, in its reasonable discretion, a comparable interest rate index.

 

“Principal” shall have the meaning specified in Section 4.1.37 hereof.

 

“Prohibited Person” shall mean any Person:

 

(a) listed in the Annex to, or otherwise subject to the provisions of, the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”);

 

(b) that is owned or controlled by, or acting for or on behalf of, any person or entity that is listed to the Annex to, or is otherwise subject to the provisions of, the Executive Order;

 

(c) with whom Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering law, including the Executive Order;

 

(d) who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order;

 

- 19 -

(e) that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov.ofac/t11sdn.pdf or at any replacement website or other replacement official publication of such list; or

 

(f) who is an Affiliate of or affiliated with a Person listed above.

 

“Property” shall mean, each parcel of real property, the Improvements thereon and all personal property owned by Borrower and encumbered by the Security Instrument together with all of Borrower’s rights pertaining to such Property and Improvements, as more particularly described on Exhibit I attached hereto and made a part hereof.

 

“Property Account” shall have the meaning specified in Section 3.1 (a) hereof.

 

“Property Account Bank” shall mean Banco Popular, provided that the ratings assigned to their long term debt obligations are at least one level below the current ratings assigned to Banco Popular as of the date hereof by the Rating Agencies or any other bank located and principally doing business in Puerto Rico, provided the long term debt obligation of such other local bank is rated at least A- by S&P, A2 by Moody’s and A by Fitch or any other bank, provided that such other bank remains an Eligible Institution, and any successor Eligible Institutions or other Eligible Institutions or banks selected by Borrower, subject to Lender’s reasonable approval.

 

“Provided Information” shall have the meaning set forth in Section 9.1 (a) hereof.

 

“Public Company” shall mean a corporation or other Person whose (i) stock or ownership interests or (ii) depository receipts or their equivalent are publicly traded on a nationally recognized stock exchange, including, without limitation, NASDAQ or on the leading recognized stock exchange in Spain, Germany, Italy, Canada, France, Tokyo, Australia, Singapore, England or Hong Kong, or in another country which requires companies publicly traded on such leading exchange to provide public information reasonably comparable to that required in the United States.

 

“Puerto Rico Business Day” shall mean any day other than a Saturday, Sunday or any other day on which national banks in Puerto Rico are not open for business.

 

“Qualified Manager” shall mean a reputable and experienced professional management organization (a) which manages, together with its affiliates, ten (10) or more first class hotel properties of a type and size similar to the Property, totaling in the aggregate no less than 3,000 rooms, and (b) prior to whose employment as manager of the Property (i) prior to the occurrence of a Securitization (defined below), such employment shall have been approved by Lender, which approval shall not be unreasonably withheld, conditioned or delayed, applying the standards of a reasonably prudent institutional mortgage lender, and (ii) after the occurrence of a Securitization, Lender shall have received written confirmation from the Rating Agencies that the employment of such manager will not result in a downgrade, withdrawal or qualification of the initial, or if higher, then current ratings of the Securities or any class thereof.

 

“Qualified Transferee” shall mean any one of the following entities, subject to the reasonable determination of Lender that such entity satisfies the applicable requirements set forth in this definition:

 

(a)

a pension fund, pension trust or pension account that has total assets of at least $500 million that are managed by an entity that controls or manages at least $1 billion of real estate equity assets;

 

- 20 -

(b)

a pension fund advisor that controls or manages at least $1 billion of real estate equity assets immediately prior to any proposed transfer hereunder;

 

(c)

an insurance company that is subject to supervision by the insurance commission, or a similar official or agency, of a State or territory of the United States (including the District of Columbia), which has a net worth, as of a date no more than six (6) months prior to the date of the proposed transfer hereunder, of at least $500 million and controls real estate equity assets of at least $1 billion immediately prior to any proposed transfer hereunder;

 

(d)

a corporation organized under the banking or trust company laws of the United States or any State or territory of the United States (including the District of Columbia) that has a combined capital and surplus of at least $500 million and that immediately prior to a proposed transfer hereunder controls real estate equity assets of at least $1 billion; or

 

(e)

any entity (a)(i) with a long-term unsecured debt rating from the Rating Agencies of at least BBB- (or its equivalent) or (b) (1) that owns or operates, together with its Affiliates, at least ten (10) first class hotel properties, (2) that has a net worth as of a date no more than six (6) months prior to the date of any proposed transfer hereunder of at least $500 million and (3) that controls, together with its Affiliates, real estate equity assets of at least $1 billion immediately prior to any proposed transfer hereunder.

 

“Rating Agencies” shall mean each of S&P, Moody’s, and Fitch, and any other nationally-recognized statistical rating agency which has been approved by Lender, provided that, following a Securitization, the same has rated the Securities.

 

“Reference Bank” shall mean a leading bank engaged in transactions in Eurodollar deposits in the international Eurocurrency market that has an established place of business in London. If any such Reference Bank should be removed from the Telerate Page 3750 or in any other way fail to meet the qualifications of a Reference Bank, Lender may designate alternative Reference Banks meeting the criteria specified above.

 

“Regency Lease” shall mean that certain lease dated as of October 28, 2003 between Regency as landlord and Borrower, as tenant.

 

“Registration Statement” shall have the meaning set forth in Section 9.2(b) hereof.

 

“Related Party” shall mean any direct or indirect member, shareholder, partner, employee, director, affiliate, executive officer, principal, agent or representative of Borrower or any successor or assigns of any of the foregoing provided, however, if a Related Party is a Public Company, the holders of its shares shall not be deemed Related Parties.

 

- 21 -

“Release” with respect to any Hazardous Materials means any release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials.

 

“REMIC Trust” shall mean a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code that holds the Note.

 

“Rents” shall have the meaning set forth in Article I of the Security Instrument.

 

“Replacement Interest Rate Cap Agreement” means an interest rate cap agreement from an Acceptable Counterparty that complies with the terms and conditions of this Agreement.

 

“Replacement Management Agreement” shall mean, collectively, (a) either (i) a management agreement with a Qualified Manager substantially in the same form and substance as the Management Agreement, or (ii) a management agreement with a Qualified Manager, which management agreement shall be acceptable to Lender, which acceptance shall not be unreasonably withheld, conditioned or delayed, applying the standards of prudent mortgage loan lenders for the management of properties similar in size, scope and value of the Property by comparable managers in form and substance, provided, with respect to this subclause (ii), Lender, at its option, may require that Borrower obtain confirmation from the applicable Rating Agencies that such management agreement will not result in a downgrade, withdrawal or qualification of the then current rating of the Securities or any class thereof; and (b) a conditional assignment of management agreement substantially in the form then used by Lender (or such other form acceptable to Lender, which acceptance shall not be unreasonably withheld, conditioned or delayed, applying the requirements of prudent mortgage loan lenders for the management of properties similar in size, scope and value of the Property by comparable managers), executed and delivered to Lender by Borrower and such Qualified Manager at Borrower’s expense.

 

“Replacement Reserve Account” shall have the meaning set forth in Section 3.1(b)(iv) hereof.

 

“Replacement Reserve Fund” shall have the meaning set forth in Section 7.3.1 hereof

 

“Replacement Reserve Deposit” shall mean the positive number obtained by subtracting (i) the actual amount spent by Borrower for Replacements (including payments under Permitted FF&E Financing) for the calendar month (the “Subject Month”) which is two (2) months prior to the month in which the applicable Replacement Reserve Deposit is due and payable (such amount actually spent by Borrower hereinafter referred to as the “Actual Amount”) and (ii) the balance of any Shortfall (as defined in Section 7.3.1 hereof) from (iii) the product of (a) the applicable Gross Income From Operations for the Subject Month multiplied by (b) the FF&E Factor.

 

“Replacements” shall have the meaning set forth in Section 7.3.1 hereof.

 

“Required Application Ratio” shall have the meaning set forth in Section 7.5.2 hereof.

 

“Required Ratio” shall mean (a) if the Mezzanine Loan has not been paid off in full pursuant to the terms of the Mezzanine Loan Documents, 1.25 to 1.00 and (b) if the Mezzanine Loan has been paid off in full pursuant to the terms of the Mezzanine Loan Documents 1.8173 to 1.00.

 

- 22 -

“Required Repair Account” shall have the meaning set forth in Section 3.1(b)(v) hereof.

 

“Required Repair Fund” shall have the meaning set forth in Section 7.1.1 hereof.

 

“Required Repairs” shall have the meaning set forth in Section 7.1.1 hereof.

 

“Reserve Fund Deposits” shall mean the amounts to be deposited into the Reserve Funds for any given month.

 

“Reserve Funds” shall mean the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Required Repair Fund, the Ground Lease Escrow Fund, the Debt Service Reserve or any other escrow fund established by the Loan Documents.

 

“Reserve Rate” shall mean the rate per annum which Lender determines to be either (i) the arithmetic mean (rounded upwards if necessary to the nearest whole multiple of 1/1,000%) of the one-month United States dollar lending rates that at least three major New York City banks selected by Lender are quoting, at 11:00 a.m. (New York time) on the relevant LIBOR Determination Date, to the principal London offices of at least two of the Reference Banks, or (ii) in the event that at least two such rates are not obtained, the lowest one-month United States dollar lending rate which New York City banks selected by Lender are quoting as of 11:00 a.m. (New York time) on such LIBOR Determination Date to leading European banks.

 

“Restoration” shall mean the repair and restoration of the Property after a Casualty or Condemnation as nearly as possible to the condition the Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender.

 

“Restricted Party” shall mean Borrower, Principal, Mezzanine Borrower, any Guarantor, any Indemnitor, or any Affiliated Manager or any shareholder, partner, member or non-member manager, or any direct or indirect legal or beneficial owner of, Borrower, Principal, Mezzanine Borrower, any Guarantor, any Indemnitor, any Affiliated Manager or any non-member manager provided, however, that if a Restricted Party is a Public Company, the holders of its shares shall not be deemed Restricted Parties.

 

“S&P” shall mean Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc.

 

“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, transfer or pledge of a legal or beneficial interest.

 

“Securities” shall have the meaning set forth in Section 9.1 hereof.

 

“Securitization” shall have the meaning set forth in Section 9.1 hereof.

 

“Securities Act” shall have the meaning set forth in Section 9.2(a) hereof.

 

“Security Deposits” shall have the meaning set forth in Section 5.1.17(e).

 

“Security Instrument” shall mean, that first priority Security Agreement executed and delivered by Borrower encumbering all property owned by Borrower other than the real property and Improvements, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

- 23 -

“Servicer” shall have the meaning set forth in Section 9.3 hereof.

 

“Servicing Agreement” shall have the meaning set forth in Section 9.3 hereof.

 

“Severed Loan Documents” shall have the meaning set forth in Section 8.1(c) hereof.

 

“Spread Maintenance Payment” means a payment to Lender in an amount equal to the outstanding principal balance immediately prior to a prepayment under the last paragraph of Section 2.3.1 hereof, multiplied by 2.5%, divided by 12 and multiplied by the number of months remaining in the Lockout Period.

 

“Standard Statements” shall have the meaning set forth in Section 5.1.10(j)(i).

 

“State” shall mean, the State or Commonwealth in which the Property or any part thereof is located.

 

“Strike Rate” shall mean 5.75%.

 

“Survey” shall mean, a survey prepared by a surveyor licensed in the State where the Property is located and reasonably satisfactory to Lender and the company or companies issuing the Title Insurance Policies, and containing a certification of such surveyor reasonably satisfactory to Lender.

 

“Tax Account” shall have the meaning set forth in Section 3.1(b)(i).

 

“Tax and Insurance Escrow Fund” shall have the meaning set forth in Section 7.2 hereof.

 

“Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against the Property or part thereof.

 

“Telerate Page 3750” means the display designated as page 3750 on the Dow Jones Telerate Service (or such other page as may replace page 3750 on that service or such other service as may be nominated by the British Bankers-Association as the information vendor for the purposes of displaying British Bankers-Association Interest Settlement Rates for U.S. dollar deposits).

 

“Threshold Amount” shall mean, an amount equal to five percent (5%) of the outstanding Loan Amount.

 

“Title Insurance Policy” shall mean, an ALTA mortgagee title insurance policy in the form (reasonably acceptable to Lender) (or, if the Property is located in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and reasonably acceptable to Lender) issued with respect to the Property and insuring the lien of the Security Instrument encumbering the Property.

 

“Transfer” shall have the meaning set forth in Section 5.2.12(a) hereof.

 

“Transferee” shall have the meaning set forth in Section 5.2.12(e) hereof.

 

“Triggering Event” shall mean the earliest of (i) the occurrence of an Event of Default, or (ii) the date on which the Debt Service Coverage Ratio for the twelve (12) full calendar months immediately preceding the date of calculation (calculated assuming an interest rate constant equal to the Contract Rate) is less than the Required Ratio.

 

- 24 -

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the State in which the Property is located.

 

“Underwriter Group” shall have the meaning set forth in Section 9.2(b) hereof.

 

“Uniform System of Accounts” shall mean the Uniform System of Accounts for Hotels in effect from time to time as approved by the American Hotel and Motel Association.

 

“Wyndham” shall mean Wyndham International, Inc.

 

“Wyndham Condado Hotel” shall mean that certain Property located at 999 Ashford Avenue, Santurce, Puerto Rico and known as the Wyndham Condado Plaza Hotel & Casino.

 

Section 1.2 Principles of Construction .All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise. Unless otherwise specified, the words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.

 

II. GENERAL TERMS

 

Section 2.1 Loan Commitment; Disbursement to Borrower .

 

2.1.1 Agreement to Lend and Borrow .

 

Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date.

 

2.1.2 Single Disbursement to Borrower .

 

Borrower may request and receive only one borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed.

 

2.1.3 The Note, Security Instrument and Loan Documents .

 

The Loan shall be evidenced by the Note and secured by the Security Instrument, the Assignments of Leases and the other Loan Documents.

 

2.1.4 Use of Proceeds.

 

Borrower shall use the proceeds of the Loan to (a) repay and discharge any existing loans relating to the Property, (b) pay all past-due Basic Carrying Costs, if any, with respect to the Property, (c) make deposits into the Reserve Funds required on the Closing Date in the amounts provided herein, (d) pay costs and expenses incurred in connection with the closing of the Loan, as approved by Lender, or (e) fund any working capital requirements of the Property. The balance, if any, shall be distributed to Borrower.

 

- 25 -

Section 2.2 Interest; Loan Payments; Late Payment Charge; Extension .

 

2.2.1 Interest Generally .

 

Interest on the outstanding principal balance of the Loan shall accrue from the Closing Date to and including the last day of the Interest Period during which the Maturity Date occurs at the Applicable Interest Rate. Monthly installments of interest only, in arrears, together with the Monthly Scheduled Amortization Payments shall be paid on each Payment Date commencing on the second Payment Date following the Closing Date and on each subsequent Payment Date thereafter up to and including the Maturity Date. Interest on the outstanding principal amount of the Loan for the period commencing on the Closing Date through and including the 14 ^th day of the month in which the first Payment Date following the Closing Date occurs shall be paid by Borrower on the Closing Date. The outstanding principal balance of the Loan together with all accrued and unpaid interest thereon shall be due and payable on the Maturity Date (including, without limitation, all interest that would accrue on the outstanding principal balance of the Loan through the end of the Interest Period during which the Maturity Date occurs (even if such period extends beyond the Maturity Date)).

 

(a) Principal . The Monthly Scheduled Amortization Payments shall be paid on the second Payment Date following the Closing Date and on each subsequent Payment Date thereafter. Upon the occurrence and the continuance of a Triggering Event, on each Payment Date Lender shall apply funds in the Excess Cash Flow Account to pay down the outstanding principal balance of the Loan subject to Section 3.13 hereof.

 

(b) Extension of the Maturity Date . Borrower shall have the option to extend the term of the Loan beyond the initial Maturity Date for three (3) successive terms (each, an “Extension Term”) of one (1) year each (each, an “Extension Term”) to (x) the Payment Date occurring one year following the initial Maturity Date, (y) the Payment Date occurring one year following the expiration of the first Extension Term and (z) the Payment Date occurring one year following the expiration of the second Extension Term (each such date, the “Extended Maturity Date”), respectively, and, as to each Extension Term, upon satisfaction of the following terms and conditions:

 

(i) no Event of Default shall have occurred and be continuing at the time the applicable Extension Term is exercised and on the date that the applicable Extension Term is commenced;

 

(ii) Borrower shall notify Lender of its irrevocable election to extend the Maturity Date as aforesaid not earlier than one hundred twenty (120) days and no later than sixty (60) days prior to the then applicable Maturity Date (the “Extension Notice”);

 

(iii) Borrower shall obtain and deliver to Lender prior to commencement of such Extension Term, one or more Replacement Interest Rate Cap Agreements, which Replacement Interest Rate Cap Agreements shall be effective commencing on the first day of such Extension Term and shall have a maturity date not earlier than the next succeeding Extended Maturity Date;

 

(iv) in connection with the exercise of the second and third Extension Term, Borrower shall have paid to Lender the Extension Fee on or before the commencement of such extension term; and

 

- 26 -

(v) the Mezzanine Extension Term corresponding to the applicable Extension Term shall have been exercised in accordance with the terms of the Mezzanine Loan Agreement, unless the Mezzanine Loan has been paid in full in accordance with the terms and conditions of the Mezzanine Loan Agreement.

 

(c) All references in this Agreement and in the other Loan Documents to the Maturity Date shall mean the applicable Extended Maturity Date in the event the applicable Extension Term is exercised.

 

(d) All payments and other amounts due under the Note, this Agreement and the other Loan Documents shall be made without any setoff or defense or irrespective of, and without deduction for, counterclaims. Borrower shall not be barred from bringing a counterclaim in a separate action.

 

2.2.2 Interest Calculation; LIBOR determination

 

Interest on the outstanding principal balance of the Loan shall be calculated by multiplying (a) the actual number of days elapsed in the period for which the calculation is being made by (b) a daily rate based on a three hundred sixty (360) day year by (c) the outstanding principal balance.

 

2.2.3 Eurodollar Rate Unascertainable; Illegality; Increased Costs .

 

(a) (i) If Lender shall have determined (which determination shall be conclusive and binding upon Borrower absent manifest error) that by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining LIBOR, then Lender shall forthwith give notice by telephone of such determination, confirmed in writing, to Borrower at least one (1) Business Day prior to the last day of the related Interest Period. If such notice is given, the Loan shall bear interest at the Adjusted Prime Rate beginning on the first day of the next succeeding Interest Period.

 

(ii) If, pursuant to the terms of this Section 2.2.3(a), the Loan is bearing interest at the Adjusted Prime Rate and Lender shall determine (which determination shall be conclusive and binding upon Borrower absent manifest error) that the event(s) or circumstance(s) which resulted in such conversion shall no longer be applicable, Lender shall give notice thereof to Borrower by telephone of such determination, confirmed in writing, to Borrower as soon as reasonably practical, but in no event later than one (1) Business Day prior to the last day of the then current Interest Period. If such notice is given, the Loan shall bear interest at the Eurodollar Rate beginning on the first day of the next succeeding Interest Period. Notwithstanding any provision of this Agreement to the contrary, in no event shall Borrower have the right to elect to have the Loan bear interest at either the Eurodollar Rate or the Adjusted Prime Rate.

 

(b) If any requirement of law or any change therein or in the interpretation or application thereof, shall hereafter make it unlawful for Lender in good faith to make or maintain the Loan bearing interest at the Eurodollar Rate, (I) the obligation of Lender hereunder to make the Loan bearing interest at the Eurodollar Rate shall be canceled forthwith and (II) the Loan shall automatically bear interest at the Adjusted Prime Rate on the next succeeding Payment Date or within such earlier period as required by law. Borrower hereby agrees promptly to pay Lender (within fifteen (15) days of Lender’s written demand therefor), any additional amounts necessary to compensate Lender for any reasonable costs incurred by Lender in making any

 

- 27 -

conversion in accordance with this Agreement, including, without limitation, any interest or fees payable by Lender to lenders of funds obtained by it in order to make or maintain the Loan hereunder. Upon written demand from Borrower, Lender shall demonstrate in reasonable detail the circumstances giving rise to Lender’s determination and the calculation substantiating the Adjusted Prime Rate and any additional costs incurred by Lender in making the conversion. Lender’s written notice of such costs, as certified to Borrower, shall be conclusive absent manifest error.

 

(c) In the event that any change in any requirement of law or in the interpretation or application thereof, or compliance in good faith by Lender with any request or directive (whether or not having the force of law) hereafter issued from any central bank or other Governmental Authority:

 

(I)

shall hereafter impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of Lender which is not otherwise included in the determination of LIBOR hereunder;

 

(II)

shall, if the Loan is then bearing interest at the Eurodollar Rate, hereafter have the effect of reducing the rate of return on Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration Lender’s policies with respect to capital adequacy) by any amount deemed by Lender to be material; or

 

(III)

shall, if the Loan is then bearing interest at the Eurodollar Rate, hereafter impose on Lender any other condition, the result of which is to increase the cost to Lender of making, renewing or maintaining loans or extensions of credit or to reduce any amount receivable hereunder;

 

then, in any such case, Borrower shall promptly pay Lender (within fifteen (15) days of Lender’s written demand therefor), any additional amounts necessary to compensate Lender for such additional cost or reduced amount receivable which Lender deems to be material as reasonably determined by Lender. If Lender becomes entitled to claim any additional amounts pursuant to this Section 2.2.3(c), Lender shall provide Borrower with at least thirty (30) days prior written notice specifying in reasonable detail the event or circumstance by reason of which it has become so entitled and the additional amount required to fully compensate Lender for such additional cost or reduced amount. A certificate as to any additional costs or amounts payable pursuant to the foregoing sentence submitted by Lender to Borrower shall be conclusive in the absence of manifest error. This provision shall survive payment of the Note and the satisfaction of all other obligations of Borrower under the Note, this Agreement and the other Loan Documents.

 

(d) Borrower agrees to indemnify Lender and to hold Lender harmless from any loss or expense which Lender sustains or incurs as a consequence of (I) any default after the expiration of any applicable notice or grace periods by Borrower in payment of the principal of or interest on the Loan while bearing interest at the Eurodollar Rate, including, without limitation, any such loss or expense arising from interest or fees payable by Lender to lenders of

 

- 28 -

funds obtained by it in order to maintain the Eurodollar Rate, (II) any prepayment (whether voluntary or mandatory) of the Loan on a day that (A) is not the Payment Date immediately prior to the last day of an Interest Period with respect thereto or (B) is the Payment Date immediately prior to the last day of an Interest Period with respect thereto if Borrower did not give the prior written notice of such prepayment required pursuant to the terms of this Agreement, including, without limitation, such loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain the Eurodollar Rate hereunder and (III) the conversion (for any reason whatsoever, whether voluntary or involuntary) of the Applicable Interest Rate from the Eurodollar Rate to the Adjusted Prime Rate with respect to any portion of the outstanding principal amount of the Loan then bearing interest at the Eurodollar Rate on a date other than the Payment Date immediately prior the last day of an Interest Period, including, without limitation, such loss or expenses arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain the Eurodollar Rate hereunder (the amounts referred to in clauses (I), (II) and (III) are herein referred to collectively as the “Breakage Costs”). This provision shall survive payment of the Loan in full and the satisfaction of all other obligations of Borrower under this Agreement and the other Loan Documents.

 

2.2.4 Payment on Maturity Date .

 

Borrower shall pay to Lender on the Maturity Date the outstanding principal balance, all accrued and unpaid interest thereon, and all other amounts due hereunder and under the Note, the Security Instrument, and the other Loan Documents.

 

2.2.5 Payments after Default .

 

Except as provided in Section 3.23 hereof, upon the occurrence and during the continuance of an Event of Default, (a) interest on the outstanding principal balance of the Loan and, to the extent permitted by law, overdue interest and other amounts due in respect of the Loan, shall accrue at the Default Rate, calculated from the date such payment was due without regard to any grace or cure periods contained herein and (b) Lender shall be entitled to receive and Borrower shall pay to Lender on each Payment Date an amount equal to the Excess Cash Flow for the prior month, such amount to be applied by Lender to the payment of the Debt in such order as Lender shall determine in its sole discretion, including, without limitation, alternating applications thereof between interest and principal. Interest at the Default Rate and Excess Cash Flow shall be computed from the occurrence of the Event of Default until the actual receipt and collection of the Debt (or that portion thereof that is then due). To the extent permitted by applicable law, interest at the Default Rate shall be added to the Debt, shall itself accrue interest at the same rate as the Loan and shall be secured by the Security Instrument. This paragraph shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence and continuance of any Event of Default; the acceptance of any payment of Excess Cash Flow shall not be deemed to cure or constitute a waiver of any Event of Default; and Lender retains its rights under the Note to accelerate and continue to demand payment of the Debt upon the happening and during the continuance of any Event of Default, despite any payment of Excess Cash Flow.

 

2.2.6 Late Payment Charge .

 

Except as provided in Section 3.23 hereof, if any Monthly Debt Service Payment Amount is not paid by Borrower on the date on which it is due, Borrower shall pay to Lender upon

 

- 29 -

demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. Any such amount shall be secured by the Security Instrument and the other Loan Documents to the extent permitted by applicable law.

 

2.2.7 Usury Savings .

 

This Agreement and the Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

 

2.2.8 Taxes .

 

If the Loan is bearing interest at the Eurodollar Rate, all payments made by Borrower hereunder shall be made free and clear of, and without reduction for or on account of, Foreign Taxes, excluding, in the case of Lender, taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction under the laws of which Lender is organized or any political subdivision thereof and, in the case of Lender, taxes measured by its overall net income, and franchise taxes imposed on it, by the jurisdiction of Lender’s applicable lending office or any political subdivision thereof. If any non-excluded Foreign Taxes are required to be withheld from any amounts payable to Lender hereunder (and such Foreign Taxes are not a result of activities of Lender unrelated to the Loan or Borrower), the amounts so payable to Lender shall be increased to the extent necessary to yield to Lender (after payment of all non-excluded Foreign Taxes) interest or any such other amounts payable hereunder at the rate or in the amounts specified hereunder. Whenever any non-excluded Foreign Tax is payable pursuant to applicable law by Borrower, Borrower shall send to Lender an original official receipt, if available, or certified copy thereof showing payment of such non-excluded Foreign Tax. Borrower hereby indemnifies Lender for any incremental taxes, interest or penalties that may become payable by Lender which may result from any failure by Borrower to pay any such non-excluded Foreign Tax when due to the appropriate taxing authority of which Lender has used its commercially reasonable efforts to provide Borrower with prior written notice of or any failure by Borrower to remit to Lender the required receipts or other required documentary evidence, provided, however, in the event that Lender or any successor and/or assign of Lender is not incorporated under the laws of the United States of America or a state thereof Lender agrees that, prior to the first date on which any payment is due such entity hereunder, it will deliver to Borrower (i) two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI or successor applicable form, as the case may be, certifying in each case that such entity is entitled

 

- 30 -

to receive payments under the Note, without deduction or withholding of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax. Each entity required to deliver to Borrower a Form W-8BEN or W-8ECI or Form W-9 pursuant to the preceding sentence further undertakes to deliver to Borrower two further copies of the said letter and W-8BEN or W-8ECI or Form W-9, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such letter or form expires (which, in the case of the Form W-8ECI, is the last day of each U.S. taxable year of the non-U.S. entity) or becomes obsolete or after the occurrence of any event requiring a change in the most recent letter and form previously delivered by it to Borrower, and such other extensions or renewals thereof as may reasonably be requested by Borrower, certifying in the case of a Form W-8BEN or W-8ECI that such entity is entitled to receive payments under the Note without deduction or withholding of any United States federal income taxes, unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such entity from duly completing and delivering any such letter or form with respect to it and such entity advises Borrower that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-9, establishing an exemption from United States backup withholding tax. Notwithstanding the foregoing, if such entity fails to provide a duly completed Form W-8BEN or W-8ECI or other applicable form and, under applicable law, in order to avoid liability for Foreign Taxes, Borrower is required to withhold on payments made to such entity that has failed to provide the applicable form, Borrower shall be entitled to withhold the appropriate amount of Foreign Taxes. In such event, Borrower shall promptly provide to such entity evidence of payment of such Foreign Taxes to the appropriate taxing authority and shall promptly forward to such entity any official tax receipts or other documentation with respect to the payment of the Foreign Taxes as may be issued by the taxing authority.

 

Section 2.3 Prepayments .

 

2.3.1 Voluntary Prepayments .

 

Except as otherwise provided herein, Borrower shall not have the right to prepay the Loan in whole or part prior to the expiration of the Lockout Period. Borrower may, at its option, prepay the Loan in whole, but not in part (except as otherwise expressly permitted herein), upon satisfaction of the following conditions:

 

(a) Borrower shall provide prior written notice to Lender specifying the date (the “Prepayment Date”) upon which the prepayment is to be made, which notice shall be delivered to Lender not less than ten (10) Business Days prior to such payment.

 

(b) Borrower shall pay to Lender, simultaneously with such prepayment, (i) if the Prepayment Date is not a Payment Date, (A) all accrued and unpaid interest calculated at the Applicable Interest Rate on the amount of principal being prepaid through and including the Prepayment Date together with an amount equal to the interest that would have accrued at the Applicable Interest Rate on the amount of principal being prepaid through the end of the Interest Period in which such prepayment occurs, notwithstanding that such Interest Period extends beyond the Prepayment Date, (B) in addition to the payments required in clause (A) above, if such prepayment is made during the period from and including the first day after a Payment Date through and including the last day of the Interest Period in which such Payment Date occurs, all

 

- 31 -

interest on the principal amount being prepaid which would have accrued from the first day of the Interest Period immediately following the Interest Period in which the prepayment occurs (the “Succeeding Interest Period”) through and including the end of the Succeeding Interest Period, calculated at the Applicable Interest Rate if such prepayment occurs on or after the Libor Determination Date for the Succeeding Interest Period (the “Interest Shortfall”), and (ii) all Breakage Costs, if any, and without duplication of sums paid pursuant to clause (i) with respect to such prepayment.

 

(c) each prepayment shall be in an aggregate principal amount of $1,000,000.00 or any integral multiple of $100,000.00 in excess thereof;

 

(d) Mezzanine Borrower shall have simultaneously with such prepayment made a pro rata prepayment of the Mezzanine Loan.

 

Subject to the terms of Section 3.7(b) hereof, Borrower may at any time (1) prepay a portion of the Loan or (2) deposit a Letter of Credit, in each case in an amount and to the extent necessary to cure a Triggering Event pursuant to Section 3.7(b) provided Borrower satisfies the requirements of Section 2.3.1(b) hereof. Additionally, in the event Borrower elects to sell the Property prior to the expiration of the Lockout Period, Borrower shall have the right to prepay the Loan in full provided the following conditions are satisfied: (i) No Event of Default has occurred and is continuing (ii) the sale is to an unrelated third party, (iii) Borrower pays all accrued and unpaid interest on the outstanding principal balance of the Loan through the date of prepayment, (iv) Borrower pays the Spread Maintenance Payment, (v) Borrower pays all Breakage Costs, if any and (vi) Borrower pays all other sums due under this Agreement, the Note and the other Loan Documents. In the event the Loan is prepaid after the expiration of the Lockout Period, no Spread Maintenance Payment shall be due, provided however, Borrower shall pay all other sums required to be paid pursuant to the Note, this Agreement and the other Loan Documents.

 

2.3.2 Mandatory Prepayments .

 

(a) On the next occurring Payment Date following the date on which Borrower actually receives any Net Proceeds, including prior to the expiration of the Lockout Period, if and to the extent Lender is not obligated to and does not otherwise make such Net Proceeds available to Borrower for the restoration of the Property, Borrower shall prepay the outstanding principal balance of the Note in an amount equal to one hundred percent (100%) of such Net Proceeds. Any partial prepayment under this Section 2.3.2 shall be applied to the last payments of principal due under the Loan. All Net Proceeds applied pursuant to this Section 2.3.2(a) shall be applied to the Loan and no portion of the Net Proceeds shall be applied to the Mezzanine Loan.

 

(b) Borrower shall have the right at any time to obtain a release of the Property if Lender has elected to apply the Net Proceeds of a Casualty or Condemnation of the Property towards the reduction of the then outstanding principal balance of the Note pursuant to this Section 2.3.2, provided, that, (i) no Event of Default has occurred and shall be continuing under this Agreement, the Note, the Security Instrument or any of the other Loan Documents, (ii) Borrower pays all accrued and unpaid interest on the amount of principal being prepaid through the date of prepayment, (iii) Borrower pays all Breakage Costs, if any, without duplications of the amounts provided for the proceeding clause (ii) above, and (iv) Borrower pays all other sums then due under this Agreement, the Note, and the other Loan Documents.

 

- 32 -

2.3.3 Prepayments After Default .

 

If, following an Event of Default, Lender shall accelerate the Debt and Borrower thereafter tenders payment of all or any part of the Debt, or if all or any portion of the Debt is recovered by Lender after such Event of Default such tender or recovery shall be deemed a voluntary prepayment by Borrower in violation of the prohibition against prepayment of the Loan prior to the Lockout Period and Borrower shall pay in addition to the Debt, (i) the Interest Shortfall, (ii) Breakage Costs, if any, without duplication of any sums paid pursuant to the preceding clause (i), and (iii) all other sums due and payable under the Note, this Agreement and the other Loan Documents.

 

2.3.4 Making of Payments .

 

Each payment by Borrower hereunder or under the Note shall be made in funds settled through the New York Clearing House Interbank Payments System or other funds immediately available to Lender by 12:00 noon, New York City time, on or prior to the date such payment is due, to Lender by deposit to such account as Lender may designate by written notice to Borrower. Whenever any payment hereunder or under the Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the first Business Day succeeding such scheduled due date. All payments made by Borrower hereunder or under the Note or the other Loan Documents shall be made irrespective of, and without any deduction for, any setoff, defense or counterclaims. Borrower shall not be barred from bringing a counterclaim in a separate action or any compulsory counterclaim.

 

Section 2.4 Interest Rate Cap Agreement .

 

(a) Upon the occurrence of an Interest Rate Cap Event, Borrower shall obtain and shall thereafter maintain in effect, an Interest Rate Cap Agreement, which shall be coterminous with the Loan (as the same may be extended) and have a notional amount which shall not at any time be less than the outstanding principal balance of the Loan and which shall at all times have a strike rate equal to the Strike Rate. The Counterparty shall be obligated under the Interest Rate Cap Agreement to make monthly payments equal to the excess of 1 month LIBOR over the Strike Rate, calculated on the notional amount with interest accrual periods and payment dates that match those of the Loan. The notional amount of the Interest Rate Cap Agreement may be reduced from time to time in amounts equal to any prepayment of the principal of the Loan in accordance with Sections 2.3 and 2.5 hereof.

 

(b) Borrower shall collaterally assign to Lender pursuant to an Assignment of Interest Rate Cap Agreement substantially in the form annexed hereto as Exhibit C, all of its right, title and interest to receive any and all payments under the Interest Rate Cap Agreement (and any related guarantee, if any) and shall deliver to Lender an executed counterpart of such Interest Rate Cap Agreement and notify the Counterparty of such collateral assignment (either in such Interest Rate Cap Agreement or by separate instrument). The Counterparty shall agree in writing to make all payments it is required to make under the Interest Rate Cap Agreement directly to Lender or such other entity or account as directed by Lender. At such time as the Loan is repaid in full, all of Lender’s right, title and interest in the Interest Rate Cap Agreement shall terminate and Lender shall promptly execute and deliver at Borrower’s sole cost and expense, such documents as may be required to evidence Lender’s release of the Interest Rate Cap Agreement and to notify the Counterparty of such release.

 

- 33 -

(c) Borrower shall comply with all of its obligations under the terms and provisions of the Interest Rate Cap Agreement. All amounts paid by the Counterparty under the Interest Rate Cap Agreement shall be deposited immediately into the Lockbox Account or if the Lockbox Account is not then required to be in effect, into such account as specified by Lender in writing. Borrower shall take all actions reasonably requested by Lender to enforce Lender’s rights under the Interest Rate Cap Agreement in the event of a default by the Counterparty and shall not waive, amend or otherwise modify any of its rights thereunder.

 

(d) In the event of any downgrade, withdrawal or qualification of the long-term unsecured debt credit rating of the Counterparty below “AA-” (or its equivalent) by the Rating Agencies, Borrower shall replace the Interest Rate Cap Agreement with a Replacement Interest Rate Cap Agreement not later than ten (10) Business Days following receipt of notice from Lender or Servicer of such downgrade, withdrawal or qualification.

 

(e) In the event that Borrower fails to purchase and deliver to Lender the Interest Rate Cap Agreement or any Replacement Interest Cap Agreement as and when required hereunder, Lender may purchase such Interest Rate Cap Agreement and the cost incurred by Lender in purchasing such Interest Rate Cap Agreement shall be paid by Borrower to Lender with interest thereon at the Default Rate from the date such cost was incurred by Lender until such cost is paid by Borrower to Lender.

 

(f) Each Interest Rate Cap Agreement shall contain the following language or its equivalent: “In the event of any downgrade, withdrawal or qualification of the rating of the Counterparty below “AA-” (or the equivalent) by the Rating Agencies, the Counterparty must, within 30 days, either (x) post collateral on terms acceptable to each Rating Agency or (y) find a replacement Acceptable Counterparty, at the Counterparty’s sole cost and expense, acceptable to each Rating Agency (notwithstanding the foregoing, if the Counterparty’s rating is downgraded to “A” or lower, only the option described in clause (y) will be acceptable); provided that, notwithstanding such a downgrade, withdrawal or qualification, unless and until the Counterparty transfers the Interest Rate Cap Agreement to a replacement Acceptable Counterparty pursuant to the foregoing clause (y), the Counterparty will continue to perform its obligations under the Interest Rate Cap Agreement. Failure to satisfy the foregoing shall constitute an Additional Termination Event as defined by Section 5(b)(v) of the ISDA Master Agreement, with the Counterparty as the Affected Party.”

 

(g) In connection with an Interest Rate Cap Agreement, Borrower shall obtain and deliver to Lender an opinion of counsel from counsel for the Counterparty (upon which Lender and its successors and assigns may rely) which shall provide, in relevant part, that:

 

(1) the Counterparty is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has the organizational power and authority to execute and deliver, and to perform its obligations under, the Interest Rate Cap Agreement;

 

(2) the execution and delivery of the Interest Rate Cap Agreement by the Counterparty, and any other agreement which the Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been and remain duly authorized by all necessary action and do not contravene any provision of its certificate of incorporation or by-laws (or equivalent organizational documents) or any law, regulation or contractual restriction binding on or affecting it or its property;

 

- 34 -

(3) all consents, authorizations and approvals required for the execution and delivery by the Counterparty of the Interest Rate Cap Agreement, and any other agreement which the Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been obtained and remain in full force and effect, all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with any governmental authority or regulatory body is required for such execution, delivery or performance; and

 

(4) the Interest Rate Cap Agreement, and any other agreement which the Counterparty has executed and delivered pursuant thereto, has been duly executed and delivered by the Counterparty and constitutes the legal, valid and binding obligation of the Counterparty, enforceable against the Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

Section 2.5 Intentionally Omitted .

 

2.5.1 Release on Payment in Full .

 

Lender shall, at the expense of Borrower, upon payment in full of all principal and interest due on the Loan and all other amounts due and payable under the Loan Documents in accordance with the terms and provisions of the Note and this Agreement, release the Lien of the Security Instrument on the Property not theretofore released.

 

III. CASH MANAGEMENT

 

Section 3.1 Establishment of Accounts .

 

(a) Borrower shall, simultaneously herewith, (i) establish one or more accounts (individually and collectively, the “Property Account”) with Property Account Bank into which Borrower shall deposit, or cause to be deposited, all Gross Income From Operations, and (ii) execute an agreement with Lender and the Property Account Bank providing for the control of the Property Account substantially in the form of Exhibit A attached herewith (the “Property Account Agreement”).

 

(b) In addition, Borrower shall simultaneously herewith establish accounts with the Lockbox Bank (the “Lockbox Account”), into which Borrower shall deposit or cause to be deposited all sums on deposit in the Property Account, in accordance with Sections 3.6 and 3.7 hereof. The Lockbox Bank shall establish the following Accounts (which may be book entry sub-accounts) into which Gross Income From Operations shall be deposited or allocated:

 

(i) An account with Lockbox Bank into which Borrower shall deposit, or cause to be deposited, the Monthly Tax Deposit (the “Tax Account”);

 

(ii) An account with Lockbox Bank into which Borrower shall deposit, or cause to be deposited, the Monthly Insurance Premium Deposit (the “Insurance Premium Account”);

 

- 35 -

(iii) An account with Lockbox Bank into which Borrower shall deposit, or cause to be deposited, the Monthly Debt Service Payment Amount (the “Debt Service Account”);

 

(iv) An account with Lockbox Bank into which Borrower shall deposit, or cause to be deposited, the Replacement Reserve Deposit (the “Replacement Reserve Account”);

 

(v) An account with Lockbox Bank into which Borrower shall deposit, or cause to be deposited, the Required Repair Fund (the “Required Repair Account”);

 

(vi) intentionally omitted;

 

(vii) An account with Lockbox Bank into which Borrower shall deposit, or cause to be deposited, the Monthly Ground Rent Deposit (the “Ground Rent Account”);

 

(viii) An account with Lockbox Bank into which Approved Expenses shall be deposited (the “Borrower Expense Account”);

 

(ix) An account with Lockbox Bank into which Extraordinary Expenses shall be deposited (the “Extraordinary Expense Account”);

 

(x) An account with Lockbox Bank into which Borrower shall deposit, or cause to be deposited, the Monthly Mezzanine Debt Service Payment Amount (the “Mezzanine Loan Account”); and

 

(xi) An account with Lockbox Bank into which Excess Cash Flow shall be deposited (the “Excess Cash Flow Account”).

 

In the event Lender waives the requirement for Borrower to maintain the Property Account and the Lockbox Account, Lender hereby consents to the Mezzanine Borrower establishing and maintaining a Property Account and Lockbox Account with Mezzanine Lender that would operate as provided in this Article 3.

 

Section 3.2 Deposits into Lockbox Account .

 

(a) Borrower represents, warrants and covenants that (i) Borrower shall, or shall cause Manager to, deposit all Gross Income From Operations and any other sums generated by the Property into the Property Account within one (1) Puerto Rico Business Day of receipt, (ii) Borrower shall instruct the Manager to deposit all Gross Income From Operations and other sums generated by the Property collected by Manager, if any, pursuant to the Management Agreement into the Property Account within one (1) Puerto Rico Business Day of receipt, (iii) Borrower shall deposit, or shall cause the Manager to deposit, all Accounts Receivable for the Property into the Property Account within one (1) Puerto Rico Business Day of receipt, (iv) Borrower shall send a notice, substantially in the form of Exhibit D, to all consumer credit/ charge card organizations or entities which sponsor or administer such cards (including the American Express Card, the Visa Card and the Mastercard) as are accepted for payment at the Property, directing them to pay all sums due to Borrower (or to Manager, as the case may be), directly to the Property Account, (v) Borrower shall deposit or shall cause Counterparty to deposit all sums payable to Lender under the Interest Rate Cap Agreement directly into the

 

- 36 -

Lockbox Account; (vi) there shall be no other accounts maintained by Borrower or any other Person into which revenues from the ownership and operation of the Property are directly deposited, and (vii) neither Borrower nor any other Person shall open any other such account with respect to the direct deposit of income in connection with the Property. Until deposited into the Property Account, any Gross Income From Operations from the Property held by Borrower shall be deemed to be Collateral and shall be held in trust by it for the benefit, and as the property, of Lender and shall not be commingled with any other funds or property of Borrower.

 

(b) Borrower represents, warrants and covenants that, (i) Borrower will continue to deposit all Gross Income From Operations it receives into the Property Account, (ii) Borrower, or Lender on behalf of Borrower, shall instruct the Manager to continue to deposit all Gross Income From Operations and all other sums collected by Manager, if any, pursuant to the Management Agreement into the Property Account and (iii) Borrower shall have no right to withdraw any funds from the Property Account or Lockbox Account Bank except for dollar-for-dollar change of currency into different denominations, and, as otherwise provided herein or with Lender’s prior written consent, but bank fees, returned checks and credit cards chargebacks and commissions may be debited and paid from the Property Account.

 

(c) Borrower warrants and covenants that it shall not rescind, withdraw or change any notices or instructions required to be sent by it pursuant to this Section 3.2 without Lender’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned.

 

Section 3.3 Account Name .

 

(a) The Property Account, the Lockbox Account, the Tax Account, the Insurance Premium Account, the Replacement Reserve Account, the Required Repair Account, the Ground Rent Account, and the Debt Service Account, shall each be in the name of Borrower for the benefit of Lender as mortgagee.

 

(b) In the event Lender transfers or assigns the Loan, Borrower acknowledges that the Property Account Bank and Lockbox Bank, at Lender’s request, shall change the name of each account to the name of the transferee or assignee. In the event Lender retains a servicer to service the Loan, Borrower acknowledges that the Property Account Bank and Lockbox Bank at Lender’s request, shall change the name of each account to the name of the servicer, as agent for Lender.

 

Section 3.4 Eligible Accounts .

 

Borrower shall, and Borrower shall cause Property Account Bank and Lockbox Bank to maintain each Account as an Eligible Account.

 

Section 3.5 Permitted Investments .

 

Sums on deposit in any Account described in Section 3.1(b)(i) through and including (ix) (other than the Property Account or Lockbox Account) may be invested in Permitted Investments provided (i) such investments are then regularly offered by Property Account Bank or Lockbox Bank, as the case may be, for accounts of this size, category and type, (ii) such investments are permitted by applicable federal, State, Commonwealth of Puerto Rico and local rules, regulations and laws, (iii) the maturity date of the Permitted Investment is not later than the date on which sums in the applicable Account are required for payment of an obligation for which such Account was created, and (iv) no Event of Default shall have occurred and be

 

- 37 -

continuing. Borrower shall have the right to direct Property Account Bank or Lockbox Bank, as the case may be, to invest sums on deposit in such Accounts (other than the Property Account and the Lockbox Account) in Permitted Investments. All income earned from Permitted Investments shall be the property of Borrower. Borrower hereby irrevocably authorizes and directs Property Account Bank or Lockbox Bank, as the case may be, to hold any income earned from Permitted Investments as part of the Accounts. Borrower shall be responsible for payment of any federal, State or local income or other tax applicable to income earned from Permitted Investments. No other investments of the sums on deposit in the Accounts shall be permitted except as set forth in this Section 3.5. Lender shall not be liable for any loss sustained on the investment of any funds constituting the Reserve Funds or of any funds deposited in the related Accounts.

 

Section 3.6 The Initial Deposits .

 

Lender shall determine, in its reasonable discretion, the initial deposit amounts (the “Initial Deposits”) required to be deposited in each of the Tax Account, the Insurance Premium Account, the Replacement Reserve Account, the Required Repair Account, and the Ground Rent Account and Borrower shall deposit the respective Initial Deposits into each Account on the Closing Date.

 

Section 3.7 Transfer To and Disbursements from the Lockbox Account .

 

On each Puerto Rico Business Day that is also a Business Day, following the Closing Date Property Account Bank shall transfer all available funds on deposit in the Property Account to the Lockbox Account.

 

(a) Lockbox Bank shall withdraw all funds on deposit in the Lockbox Account on each Business Day of each month.

 

(b) Lockbox Bank shall disburse the funds in the Lockbox Account in the following order of priority:

 

(i) First, funds sufficient to pay the Monthly Ground Rent Deposit, if any, shall be deposited in the Ground Rent Account;

 

(ii) Second, funds sufficient to pay the Monthly Tax Deposit shall be deposited in the Tax Account;

 

(iii) Third, funds sufficient to pay the Monthly Insurance Premium Deposit shall be deposited in the Insurance Premium Account;

 

(iv) Fourth, funds sufficient to pay the Monthly Debt Service Payment Amount shall be deposited into the Debt Service Account to be applied (A) first, to the payment of accrued and unpaid interest computed at the Applicable Interest Rate; and (B) second to the Monthly Scheduled Amortization Payment and the reduction of the principal sum;

 

(v) Fifth, funds sufficient to pay any required Replacement Reserve Deposit shall be deposited in the Replacement Reserve Account;

 

- 38 -

(vi) Sixth, funds sufficient to pay any interest accruing at the Default Rate, and late payment charges, if any, shall be deposited in the Debt Service Account;

 

(vii) Seventh, to the payment of Lockbox Bank for fees and expenses incurred in connection with this Agreement and the accounts established hereunder;

 

(viii) Eighth, funds sufficient to pay all costs and expenses, calculated on a cash basis, required to be paid during such month by or on behalf of Borrower in connection with the ownership and operation of the Property in accordance with the Approved Annual Budget, (“Approved Expenses”) shall be deposited in the Borrower Expense Account after deposits for items (i) through (vii) above have been made (provided deposits to the Borrower Expense Account shall not include amounts which have previously been paid pursuant to items (i) through (vii) above);

 

(ix) Ninth, funds sufficient to pay any Extraordinary Expenses for such month which have been approved by Lender (and that have not been previously paid pursuant to items (i) through (viii) above) shall be deposited in the Extraordinary Expense Account after deposits for items (i) through (viii) above have been made;

 

(x) Tenth, provided no Event of Default has occurred and is continuing and the Mezzanine Loan has not been paid off in full, funds sufficient to pay (A) the Monthly Mezzanine Debt Service Payment Amount and (B) any Net Liquidation Proceeds After Debt Service, shall be deposited into the Mezzanine Loan Account to be applied in accordance with the Mezzanine Loan Agreement;

 

(xi) Eleventh, following a Triggering Event and for so long as such Triggering Event remains uncured, all amounts remaining in the Lockbox Account after deposits for items (i) through (x) (the “Excess Cash Flow”) shall be deposited into the Excess Cash Flow Account and subject to Section 3.13 hereof, used by Lender to pay down the outstanding principal amount of the Loan; and

 

(xii) Twelfth, provided no Triggering Event has occurred and is continuing, all amounts remaining in the Lockbox Account after deposits for items (i) through (xi) for the current month and all prior months shall be disbursed (A) if Lender has received written notice from Mezzanine Lender that a default has occurred and is continuing after expiration of all applicable grace and cure periods under the Mezzanine Loan Documents, to an account designated by Mezzanine Lender or (B) if the immediately preceding clause (A) is not applicable, to Borrower in accordance with Borrower’s written instructions.

 

The Triggering Event shall be deemed cured (unless the cause of such Triggering Event was the occurrence of an Event of Default) on the first monthly test date on which the Debt Service Coverage Ratio (assuming an interest rate constant equal to the Cure Contract Rate) for the twelve (12) full calendar months for which Net Operating Income has been calculated based on the financial statements required to be delivered under Section 5.1.10 immediately preceding the date of calculation is equal to or greater than the Required Ratio and in connection with such cure Borrower shall no longer be required to deposit Excess Cash Flow into the Excess Cash Flow Account. The Required Ratio may be obtained by, (i) prepaying the Loan (or a portion thereof) subject to the terms of this Agreement, the Note or any of the other Loan Documents (the amount of such paydown, the “Paydown Amount”), (ii) posting cash collateral or a Letter of

 

- 39 -

Credit in the Paydown Amount) or (iii) improved performance of the Property (a “Performance Cure”). In the event Borrower has cured the Triggering Event by posting cash collateral or a Letter of Credit in the Paydown Amount and the performance of the Property improve so that the Required Ratio is maintained without the cash collateral or Letter of Credit, as applicable, Lender shall promptly return the applicable cash collateral or Letter of Credit to Borrower upon Borrower’s written request therefor and, subject to Section 3.13 hereof, any sums in the Excess Cash Flow Account shall be distributed to Borrower. Borrower’s right to cure the Triggering Event shall be limited to two (2) times in each calendar year. In the event that (i) Borrower posts cash collateral or a Letter of Credit in the Paydown Amount and a subsequent Performance Cure occurs and (ii) Borrower does not request the return of the cash collateral or Letter of Credit as permitted hereunder, the occurrence of the Performance Cure (and the continued posting of the applicable cash collateral or Letter of Credit) shall not constitute a second cure for the purpose of the immediately preceding sentence. After the occurrence and during the continuance of an Event of Default, Lender shall be permitted to draw on any cash collateral or Letter of Credit deposited pursuant to this paragraph and apply the sums towards the Debt in whatever order and priority Lender desires.

 

Section 3.8 Withdrawals From the Tax Account and the Insurance Premium Account .

 

Lender shall withdraw funds from the Tax Account to pay Taxes on or before the date Taxes are due and payable. Lender shall have the right to withdraw funds from the Insurance Premium Account to pay Insurance Premiums on or before the date Insurance Premiums are due and payable. Lockbox Bank shall disburse funds from the Tax Account and the Insurance Premium Account in accordance with Lender’s written request therefor on the Business Day following Lockbox Bank’s receipt of such written request.

 

Section 3.9 Withdrawals from the Replacement Reserve Account.

 

Lender shall disburse funds on deposit in the Replacement Reserve Account in accordance with the provisions of Section 7.3 hereof.

 

Section 3.10 Withdrawals from the Required Repair Account.

 

Lender shall disburse funds on deposit in the Required Repair Account in accordance with the provisions of Section 7.1 hereof .

 

Section 3.11 Withdrawals from the Borrower Expense Account.

 

Provided that no Event of Default has occurred and is continuing, Borrower shall have the right to withdraw funds from the Borrower Expense Account for the payment of Approved Expenses. Such withdrawals shall be in accordance with the Approved Annual Budget.

 

Section 3.12 Withdrawals from the Extraordinary Expense Account.

 

Provided that no Event of Default has occurred and is continuing, Borrower shall have the right to withdraw funds from the Extraordinary Expense Account for the payment of Extraordinary Expenses.

 

Section 3.13 Withdrawals from the Excess Cash Flow Account .

 

- 40 -

Provided no Event of Default has occurred and is continuing, on each Payment Date all funds in the Excess Cash Flow Account shall be applied pro-rata by Lender to pay down the outstanding principal balance of the Loan and the Mezzanine Loan. During the continuance of an Event of Default, all Excess Cash Flow shall be applied by Lender to pay down the Loan only. Notwithstanding the foregoing, provided no Event of Default has occurred and is continuing and the Triggering Event has not been continuing for three (3) consecutive months, Borrower shall have the right to direct Lender to use the funds in the Excess Cash Flow Account to either (i) pay down the Loan and the Mezzanine Loan pro-rata or (ii) hold the funds in the Excess Cash Flow Account as additional collateral for the Loan; provided, however, if the Triggering Event remains uncured for three (3) consecutive months, all sums in the Excess Cash Flow Account shall thereafter be applied pro rata by Lender to pay down the Loan and the Mezzanine Loan, provided further, if the Triggering Event is cured pursuant to the terms of Section 3.7 hereof without taking into account the funds in the Excess Cash Flow Account, the funds in the Excess Cash Flow Account shall be disbursed to Borrower.

 

Section 3.14 Withdrawals from the Debt Service Account .

 

Lender shall withdraw funds from the Debt Service Account (taking into account any disbursement of the Debt Service Reserve) pursuant to the terms and conditions of Section 7.5 hereof to pay the Monthly Debt Service Payment Amount on or after the date when due, together with any late payment charges or interest accruing at the Default Rate.

 

Section 3.15 Withdrawals from the Mezzanine Account .

 

Lender shall withdraw funds from the Mezzanine Loan Account to pay the Monthly Mezzanine Debt Service Payment Amount by the date and time when due, together with any late payment charges or interest accruing pursuant to the Mezzanine Loan Documents.

 

Section 3.16 Withdrawals from the Ground Rent Account .

 

Lender shall withdraw funds from the Ground Rent Account in accordance with Section 7.6 hereof.

 

Section 3.17 Intentionally Omitted .

 

Section 3.18 Sole Dominion and Control .

 

Borrower acknowledges and agrees that the Accounts are subject to the sole dominion, control and discretion of Lender, its authorized agents or designees, including Property Account Bank and Lockbox Bank, subject to the terms hereof; and Borrower shall have no right of withdrawal with respect to any Account except with the prior written consent of Lender or as otherwise provided herein.

 

Section 3.19 Security Interest .

 

Borrower hereby grants to Lender a first priority security interest in each of the Accounts and the Account Collateral as additional security for the Debt.

 

- 41 -

Section 3.20 Rights on Default .

 

Notwithstanding anything to the contrary in this Article 3, upon the occurrence and during the continuance of an Event of Default, Lender shall promptly notify Property Account Bank and Lockbox Bank in writing of such Event of Default and, without notice from Property Account Bank, Lockbox Bank or Lender, (a) Borrower shall have no further right in respect of (including, without limitation, the right to instruct Lockbox Bank or Property Account Bank to transfer from) the Accounts, (b) Lender may direct Lockbox Account Bank to liquidate and transfer any amounts then invested in Permitted Investments to the Accounts or reinvest such amounts in other Permitted Investments as Lender may reasonably determine is necessary to perfect or protect any security interest granted or purported to be granted hereby or pursuant to the other Loan Documents or to enable Lockbox Bank, as agent for Lender, or Lender to exercise and enforce Lender’s rights and remedies hereunder or under any other Loan Document with respect to any Account or any Account Collateral, and (c) Lender shall have all rights and remedies with respect to the Accounts and the amounts on deposit therein and the Account Collateral as described in this Agreement and in the Security Instrument, in addition to all of the rights and remedies available to a secured party under the UCC, and, notwithstanding anything to the contrary contained in this Agreement or in the Security Instrument, may apply the amounts of such Accounts as Lender determines in its sole discretion including, but not limited to, payment of the Debt.

 

Section 3.21 Financing Statement; Further Assurances .

 

Borrower shall (a) execute and deliver to Lender for filing a financing statement or statements under the UCC and (b) obtain from Property Account Bank and Lockbox Bank control agreements whereby such Property Account Bank and Lockbox Bank, respectively, agree to comply with Lender’s instructions without further consent from Borrower in connection with any of the Accounts and the Account Collateral with respect thereto in the form required to properly perfect Lender’s security interest therein. Borrower agrees that at any time and from time to time, at the expense of Borrower, Borrower will promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary or desirable, or that Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby (including, without limitation, any security interest in and to any Permitted Investments) or to enable Lockbox Bank or Lender to exercise and enforce its rights and remedies hereunder with respect to any Account or Account Collateral.

 

Section 3.22 Borrower’s Obligation Not Affected .

 

The insufficiency of funds on deposit in the Accounts shall not absolve Borrower of the obligation to make any payments, as and when due pursuant to this Agreement and the other Loan Documents, and such obligations shall be separate and independent, and not conditioned on any event or circumstance whatsoever.

 

Section 3.23 Payments Received Under this Agreement .

 

Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, and provided no Event of Default has occurred and is continuing, Borrower’s obligations with respect to the monthly payment of Debt Service and amounts due for the Ground Lease Escrow Fund, Tax and Insurance Escrow Fund, Replacement Reserve Fund and any other payment reserves established pursuant to this Agreement or any other Loan Document shall (provided Lender is not prohibited from withdrawing or applying any funds in the Accounts by operation of law or otherwise) be deemed satisfied (and no Default or Event of Default shall

 

- 42 -

result therefrom) to the extent sufficient amounts are deposited in the Lockbox Account established pursuant to this Agreement to satisfy such obligations on the dates each such payment is required, regardless of whether any of such amounts are so applied by Lender.

 

Section 3.24 Intentionally Omitted .

 

Section 3.25 Lender Reliance .

 

Lender shall have no duty to confirm, inquire or determine whether a Mezzanine Event of Default has occurred. Lender may rely on any notice it believes in good faith to be genuine and given by Mezzanine Lender.

 

Section 3.26 Borrower Access to Lockbox Account .

 

Subject to the capability of the Servicer, Borrower shall have the right to access information regarding the Lockbox Account.