Deed In Lieu of Foreclosure Transactions

Transcription

DEED IN LIEU OF FORECLOSURE TRANSACTIONS
Ned W. Graber
I.
INTRODUCTION
Confronted with the inability to continue to make payments to a lender in
accordance with the loan documents, a borrower may offer to convey the mortgaged property to
the lender in exchange for not foreclosing on the property and settlement of the secured debt.
This deed in lieu of foreclosure transaction can offer significant benefits to both borrower and
lender, but presents risks and costs to the parties that require careful analysis and structure. If the
disadvantages outweigh the benefits, the lender must to be prepared to abandon the deed in lieu
transaction and proceed with foreclosure or another resolution. This article will examine the
benefits of a deed in lieu transaction, the due diligence that a lender should conduct, the
bankruptcy and equitable risks, subordinate lien and title insurance issues involved in these
transactions and negotiation of the settlement agreement. Attached to this paper are a checklist
for deed in lieu transactions and a form settlement agreement for a hotel property.
II.
BENEFITS
A deed in lieu of foreclosure provides several benefits to a lender and borrower.
The primary benefit to a lender of a deed in lieu is quick control of the income and operation of
the property, allowing the mortgagee to initiate actions to maximize the value of the property.
Control also enables a lender to market the property for resale sooner. Accelerated control is
particularly attractive in slow judicial foreclosure states such as Ohio and New York. Deeds in
lieu are rarely used in quick action trustee sale states like Texas. In fact, the Texas Supreme
Court stated in 1987 "there is no such deed as a deed-in-lieu of foreclosure."! In the case study,
the lender seeks to gain control of the property to negotiate the expansion lease and retain the
major tenant. A deed in lieu can save the parties the time and expense of foreclosure and
receivership. A borrower may benefit in transactions in which the lender pays for part or all of
the expenses of the transfer, such as transfer taxes, title policy and recording costs. A sales
commission normally incurred in a sale of the property by a borrower to a third party will be
saved. The delay of waiting for expiration of the redemption period can be avoided by recording
of the deed. A deed in lieu reduces the risk of deterioration and waste to the property. If in
construction, a deed in lieu can avoid work stoppages. A partially completed project is worth
only a fraction of the outstanding loan and expeditious completion is necessary to maximize
recovery. With respect to completed projects, a voluntary turnover can be less disruptive to
tenants and vendors. Interruption of services to the property can also be avoided. The lender is
1 Flag-Redfern Oil Co. v. Humble Exploration Co., 744 S.W.2nd 6, 8 (Tex. 1987); The court's
unenlightened position that was corrected by statute, TEX. PROPERTY CODE, §51.006.
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able to capitalize on the borrower's cooperation and obtain better and more complete information
about the property. Not only is the borrower more willing to operate the property through
closing in accordance with the lender's standards, but borrowers will often agree to deliver more
information and original documents regarding the property. Other covenants and warranties may
be negotiated in the settlement agreement. As with any other workout, a settlement agreement is
an opportunity to correct deficiencies in loan documentation. The lender may be able to avoid
the risk of delay of a filing of a petition in bankruptcy. The filing of a deed in lieu is private
transaction. The stigma of a foreclosure for the property and adverse credit rating can be avoided
for the borrower. If the lender takes title in a subsidiary, it avoids the publicity and notoriety of a
public sale. A quick closing can end the borrower's responsibility for payment of property
expenses, insurance and property taxes. The parties can reach a final settlement of their
liabilities under the loan documents. The borrower and guarantors can be released from claims
for deficiency and carve-out liabilities and the lender can receive a release from any lender
liability claims.
III.
DUE DILIGENCE
A.
Property Review. A deed in lieu of foreclosure is an acquisition of title to
real property and should be approached with the same due diligence and scrutiny of the purchase
of any other property. A lender needs to understand all the obligations and responsibilities of
ownership of the property. At a minimum, operating statements and books and records for the
property should obtained and reviewed to understand the revenues, payables, capital
expenditures, and security and utility deposits. The lender should review all contracts and other
agreements relating to the property, including management contracts, brokerage agreements,
equipment leases· and service contracts, and determine whether the contracts are assignable and
whether to continue or terminate them upon closing. Replacement agreements may be needed in
the event of any terminations. The lender may want to obtain estoppels from certain vendors and
counterparties. For example, if the title to the property is held under a ground lease, the lender
will want a current estoppel certificate from the ground lessor. A current rent roll and all leases
and lease guaranties should be obtain and review to determine the obligations of the landlord and
tenants, and confirm that that the tenants are required to attorn to a successor owner. It may be
necessary to obtain subordination, non-disturbance and attornment agreements from some
tenants and estoppels should be obtained from all tenants. If not already in its files, the lender
should obtain copies of and review all permits, certificates of occupancy and other approvals for
the property, plans and specifications, warranties, and insurance policies. The adequacy of the
insurance policies should be assessed, payment of premiums confirmed, and a determination
made whether to continue the policies or place new insurance at closing. The property should be
inspected to determine its condition, identify needed repairs and unsafe conditions and
conditions of non-compliance with applicable handicap access or other laws and regulations.
Public records should be searched for any outstanding violations and whether the property
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complies with existing zoning, land use and other laws and regulations. The lender should
determine whether all property, gross receipt, income, sales, withholding and payroll taxes have
been paid by the borrower. The lender should discover the status of any pending tax protests.
The lender should also conduct searches for any pending litigation or claims against the property
or borrower.
Environmental. The lender must obtain an updated Phase I environmental
report on the property. A mortgage lender acquiring title to a property by either a deed in lieu of
foreclosure or by foreclosure may become an "owner or operator" with strict liability for future
costs and expenses of remediation of hazardous substances under federal or state environmental
laws unless the lender can prove it qualifies as a "bona fide prospective purchaser." This defense
requires the owner to show that prior to purchasing or acquiring title to the property, it conducted
all appropriate inquiry of the previous ownership and uses of the property consistent with good
commercial or customary practices. 2 Thus, the lender cannot rely upon the old environmental
report delivered at the time of the loan closing. This defense imposes continuing obligations
upon the owner during its period of ownership regarding known contaminants. In some cases,
the inquiry may lead the lender to conclude that it does not want to accept a deed to the property
or foreclose on the property, and the lender may want to reconsider accepting a discounted
payoff or a discounted sale of the mortgage loan.
A lender should not accept a deed to the property unless it is confident that the
cost of the clean-up is small. It has been suggested that a lender might accept title to a
contaminated property in an entity controlled by the lender, but the lender may find that it is
unable to resell the property to another purchaser without paying or indemnifying the purchaser
for the costs of remediation. A lender may face the risk of an third party or the government
piercing the corporate veil of the controlled entity to seek recovery directly from the lender.
Moreover, a lender should determine whether the protection of secured lender exemptions extend
to the controlled entity of the lender accepting a deed in lieu of foreclosure.
Several states have adopted their own environmental liability schemes, such as
Responsibility Transfer Acts which require the recording of environmental disclosure statements
upon the recording of property transfer. Some of these states require the assumption of the
responsibility to remediate known environmental conditions and permit any party to the
transaction to void the transaction for non-compliance. The lender should determine whether any
applicable state statutes require compliance or exempt a deed in lieu of foreclosure. 3
B.
240 C.P.R. §312 (2010); ASTM EI527-05; In addition, the "secured creditor" exemption can provide
exemption from the status of an owner or operator even where the lender has taken title through
foreclosure (including a deed in lieu), 42 U.S.C. A. §9601(20) (2010); See TEX. WATER CODE
§26.3514(D) (Vernon 2010) dealing with storage tanks.
3 Indiana Responsible Party Transfer Act, IC 13-25.3; The Connecticut Transfer Act C.O.S.A. 22a134(1)(C) exempts a transferee of a deed in lieu of foreclosure, as defined in and that qualifies for the
secured lender exemption pursuant to §22a-452f(b).
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C.
Title Search. A lender must obtain title and UCC financing searches of
the property to identify all matters and liens affecting the property. Unlike a foreclosure, a
voluntary transfer of the property pursuant to a deed in lieu conveys title to the lender subject to
all subordinate encumbrances. 4 Many lenders will not accept a deed in lieu if any subordinate
liens are revealed by the searches, even if it is anticipated that there will only be short time
between recording of title and a later foreclosure cutting off the junior liens. For example,
pension fund lenders do not want to be subject to acquisition indebtedness. The lender may not
want to face the risk of dealing with other secured creditors in the event of a bankruptcy filing or
a loan workout. Finally, a lender rarely will want to incur the substantial expenses of negotiating
and closing a deed in lieu transaction and subsequently be compelled to pay for all the expenses
of a subsequent foreclosure.
If the lender accepts the deed in lieu of foreclosure, even if title and UCC
financing searches are clean of junior liens, there is no guarantee that a subordinate lien will not
appear after closing of the transaction so it is important that the lender preserve its mortgage lien.
A lender in consideration of a deed in lieu transaction should carefully review local law on the
issue of merger. Under the common law doctrine of merger the combination in the same person
of greater estate of land, such a fee simple title, with a lesser estate, such as mortgage,
extinguishes the lesser interest through a merger into the greater estate, leaving no mortgage lien
to foreclosure. 5 Contrary to Section 8.5 of the Restatement on Property (Mortgages) which
provides that the doctrine of merger applies to mortgages, several state foreclosure statutes
provide that "a deed in lieu of foreclosure, whether to the mortgagee or mortgagee's nominee,
shall not effect a merger of the mortgagee's interest as mortgagee and the mortgagee's interest
derived from the deed in lieu of foreclosure. ,,6 Section 51.006 of the Texas Property Code
allows a lender that has accepted a deed in lieu of foreclosure the option either (1) to void the
deed within four years of the date of the deed if the debtor failed to disclose a lien or
encumbrance and the lender has no personal knowledge of the undisclosed lien or encumbrances
when it accepted the deed and reinstate the deed of trust without impairment of it priority, or (2)
foreclose its deed of trust without electing to void the deed. Other states rely upon the intention
of the parties to determine whether the mortgage lien merges into the deed. However, the Sixth
Circuit Court of Appeals in United States Leather, Inc. 7 did not enforce the anti-merger provision
in a deed in lieu of foreclosure because the rights of an innocent third party lender would be lost
through a fraud or inequitable conduct by the parties to the deed where a mortgagee attempted to
avoid paying a debt it had previously acknowledged owing. s Clear intent to preserve the
mortgage lien should be placed in the settlement agreement and in the deed. In some states, it is
prudent to take title in a separate entity controlled by the lender to avoid merger and
extinguishment of the mortgage lien. Careful review of the state income and transfer taxes
North Texas Building & Loan Ass'n v. Overton, 86 S.W.2d 738 (Tex. 1935).
See Ann M. Burkhart, Freeing Mortgages of Merger, 40 VAND. L. REV. 283, 342 (1987).
6 S.H.A. 735 ILCS 5/15-140l.
th
7 United States Leather, Inc. v. Mitchell Mfg. Group, Inc., 276 F.3d 782 (6 Cir. 2002).
8 John C. Murray, Deeds in Lieu: Subsequent Foreclosure of Mortgage (2006).
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5
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should be made before deciding to use a separate entity. For example, life insurance companies
are not subject to state income taxes, but a corporation or limited liability company controlled by
the insurance company may be. For this reason, a business trust may be preferable for the
controlled entity. In addition, some states impose transfer taxes upon transfers to a separate
entity, but not to the lender holding the debt.
Finally, the lender should not, intentionally or inadvertently, extinguish the debt
or cancel the mortgage lien before the property is ultimately resold to another third party
purchaser. This means that a lender should give a covenant not to sue to the borrower and not a
general release that may extinguish the debt and make a subsequent foreclosure impossible. A
covenant not to sue has demonstrated the intent not to merge and overcome the mortgagor's
burden of proof. 9 It should be noted, however, that if a new owner title policy is being issued to
the lender, the title company may request that the mortgage lien be released of record. I believe
that this request is based upon Section 2.a in the 1992 ALTA Loan Policy that provides for
continuation of coverage only if the insured acquires the property by "conveyance in lieu of
foreclosure, or other legal manner which discharges the lien of the insured mortgage." This
provision does not appear in the new 2006 ATLA Loan Policy and therefore the title company
should recognize procedures to preserve the mortgage lien.1O Reservation of the mortgage lien
protects the lender against unknown subordinate encumbrances and allows reinstatement of the
loan documents in the event that following recordation of the deed, the transfer is set aside by
bankruptcy court as a fraudulent conveyance or preference.
A lender should be, cautious about accepting a deed in lieu with known
subordinate liens. There is a comment in the Restatement Third of Property, that a "mortgagee
who takes a deed in lieu with actual knowledge of a junior lien will lose the right to foreclose
irrespective of whether there is merger intent."ll Professor Burkhart has also written "the senior
mortgagee should be prohibited from exercising its lien in this situation regardless of whether it
has manifested any intent concerning merger. Each time a deed in lieu transaction is negotiated
with the understanding that the mortgagee will acquire title subject to junior liens, the senior
mortgagee has waived its right to eliminate those liens."I2 If the title or vee searches reveal
subordinate liens, the lender may want to continue the benefits of a cooperative borrower and
request that the borrower stipulate to the foreclosure of the property and appointment, if
necessary of a receiver. In a friendly foreclosure, the lender could obtain the advantages of a
comprehensive settlement agreement with the borrower and save time and expense. In the
alternative, if the amount of the subordinate liens is small, the expense of negotiating settlement
of the subordinate liens and proceeding with the deed in lieu may be less than the costs of
completing the foreclosure.
9 Sanderson v. Hadlett, 832 So. 2d 845 (Fla. App. 4th Dist. 2002); See also Michael F. Jones, Structuring
the Deed in Lieu of Foreclosure Transaction, 19 REAL PROP., PROB. & TR. J. 58, 70 (Spring 1984).
10 John C. Murray, Deeds in Lieu of Foreclosure - Title Insurance Issue, ACMA ABSTRACT (Spring
2011).
11 RESTATEMENT THIRD OF PROPERTY (MORTGAGES) §8.5 Comment.
12 Ann M. Burkhart, Freeing Mortgages of Merger, 40 VAND. L. REV. 283, 348-49 (1987).
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D.
Bankruptcy Concerns. A transfer to the lender can be voided under the
Bankruptcy Code as a fraudulent conveyance if there is a lack of fair consideration. Section
548(a)( I) of the Bankruptcy Code provides that
"the trustee may void any transfer ... of an interest of the debtor in property, or any
obligation... incurred by the debtor, that was made or incurred on or within two years
before the date of filing of the petition, if the debtor voluntarily or involuntarily ...
received less than a reasonably equivalent value in exchange for such transfer or
obligation; ... and was insolvent on the date that the transfer was made or such obligation
was incurred, or became insolvent as a result of such transfer or obligation ... ,,13
In addition, a trustee may set aside a transfer using any applicable state fraudulent conveyance
statute which may be broader in scope. 14 A transfer can also be voided if made with the intent "to
hinder, delay or defraud a creditor", but actual fraud is very difficult to prove and unlikely to be
present in any arms-length deed in lieu transaction. In extreme cases, equitable subordination
has been applied where the lender's behavior was overreaching. IS If the transfer is set aside, the
lender will be considered a creditor, but if the lender's lien is shown to be unperfected, the lender
will be treated as an unsecured creditor. This is a reason to confirm perfection of a lender's lien
before recording a deed in lieu of foreclosure. If set aside, the trustee can either order the
transferee to reconvey the property to the debtor or to pay to the trustee the difference between
the value of the property as determined by the court and the sales price. I6
Satisfaction of an antecedent debt is considered value. Where the outstanding debt,
including interest, default interest, and late charges, exceeds the value of the property, the debtor
has received reasonably equivalent value. This is the reason it is critical to obtain a solid
appraisal of the property from an independent qualified third party appraiser to establish that
adequate consideration is being given for the property. A more difficult situation is where the
value of the property and the debt are approximately equivalent. Most lenders prefer a margin of
safety to avoid an evidentiary battle of appraisers. . If the value of the property exceeds the
amount of the debt, the borrower and its constituent partners, members or shareholders of the
borrower may have an incentive to challenge the transfer in bankruptcy court to recover their
equity in the property. To avoid this situation, the lender might consider paying to the borrower
at the time of the transfer an amount in cash equal to the shortfall between the difference
between the amount of the debt and the value property. If the transaction is nevertheless voided
I3 11 U.S. C. A. §548(a)(1) (Supp 2011); The preference period was extended from one to two years by
Bankruptcy Abuse Prevention and Consumer Act of 2005.
14 A trustee can bring an action before the closing of the bankruptcy case using a state fraudulent
conveyance law within of 2 years after the entry of order of relief or 1 year after appointment of the
trustee, 11 U.S.C. A. §544(b) and §546(a); Section 3 of the Uniform Fraudulent Conveyance Act requires
the transfer to be made in "good faith."
15 11 U.S.C.A. §51O.
16 11 U.S.C.A. §550.
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by a bankruptcy court, the cash payment would be not be refunded to the lender until after the
plan of reorganization has been approved or the property is sold in the bankruptcy case. I7 The
better approach under these circumstances is to proceed with a foreclosure because title taking
through a foreclosure is not treated as a fraudulent conveyance under the Bankruptcy Code. IS
Most lenders, after analyzing the risks under these circumstances where the value of the property
exceeds the debt, will decline acceptance of a deed in lieu of foreclosure.
A transfer to a lender by an insolvent borrower may be voided as a preferential transfer
by a bankruptcy trustee in a subsequent bankruptcy filing made within 90 days of the date of the
transfer. I9 The debtor must be insolvent or made insolvent at the time of the transfer. While
there is a presumption of insolvency of the debtor within 90 days preceding the date of filing,20
the inability to pay debts as these become due does not indicate that the borrower is insolvent
under the Bankruptcy Code. Insolvency is a balance sheet test. The trustee must prove all five
elements in Section 547(b). If the lender can show that the borrower is solvent (which may not
be possible if the borrower is a single asset entity), there is no preferential transfer. A lender
should therefore obtain a current financial statement for the borrower to determine its solvency
under the Bankruptcy Code. More importantly, the transfer can be only be a preference if the
creditor receives more of its claim than it would have received in a distribution from the
bankruptcy if the transfer has never been made. Once again, establishing the value of the
property is critical to determining what the creditor is entitled to receive in a distribution. The
creditor is entitled to receive the value of the property that does not exceed its secured debt.
Therefore, if the value of the property is less than the secured debt, there is no preference and the
transfer cannot be voided by the trustee. The lender should confirm that its debt is properly
secured and perfected. An unperfected security interest will fail this test and can be voided by the
trustee. For example, a security interest in a cooperative apartment would be unsecured if the
lender failed to properly file and continue VCC financing statements.
III.
DOCUMENTATION
A.
Negotiation. The motivations and positions of the parties are important
in negotiating a settlement agreement. Both parties approach the possible transaction burdened
with a misjudgment of the original loan transaction and the performance of the property and
borrower. A borrower of a non-recourse loan is in a stronger bargaining position than an obligor
of a personally guaranteed loan because the non-recourse lender's opportunity to recover
depends solely upon the improvement of the value of the property. While a recourse lender may
prefer to pursue the personal liabilities of the borrower and guarantors, a non-recourse lender has
a strong incentive to obtain title to the property quickly. It is important to identify who is able to
11 U.S.C.A.§548(c).
18 BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S. Ct. 1757 (1994).
19 11 U.S.C. §548(a); The ninety day period can be extended to 1 year if the transferee is an insider, Levit
v. Ingersoll Rand Fin. Corp., 874 F. 2d 1186 (7"' Cir. 1989).
20 11 U.S.C.A.§547(t).
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negotiate for the borrower. 21 An awareness of possible conflicts among the parties constituting
the borrower is important. The general partner or managers may want a release of all obligations
under the loan documents and may want to retain project management. The limited partners or
investors will be concerned about tbeir lost opportunity and tax liabilities. Their differences may
create conflicting demands and the parties constituting tbe borrower may need separate counsel.
The negotiating party for the borrower needs to remember his fiduciary duties to the other
partners. Conveying the property to tbe lender in return for a release that benefits only the
general partners may constitute use of a partnership asset for nonpartnership purposes. 22
Do not assume that the authority to make the original loan is sufficient to
consummate the proposed transfer. The organizational documents of the borrower should be
reviewed to determine tbe authority of the borrower to convey the property. The lender needs to
confirm what consents are required for the proposed transaction and whether all necessary
parties are willing and able to deliver such consents. A lack of consensus among the borrower
parties can easily derail the transaction.
A borrower may be using the negotiation of the settlement agreement as a
delaying tactic to retain title to tbe property.23 A realistic schedule for tbe negotiations and
closing of the transaction should be established, and if agreement is not reached within a
reasonable time, the lender may have to proceed with foreclosure. The lender may want to
initiate a foreclosure at the same time that the deed in lieu transaction is being negotiated to give
the lender more leverage in the negotiations and forestall delays, but this approach imposes
additional expenses on the lender.
Voluntary Conveyance.
A deed in lieu conveyance must be a
voluntary transaction under state law. Every borrower has a right to redeem its property with full
payment of the obligation within certain time frames. A borrower cannot lose its right of
redemption, except through a valid foreclosure action or in a conveyance for adequate
consideration. Jack Murray has written:
B.
Unless the offer of conveyance by the borrower is voluntary, there is a significant risk
that the borrower may later contest the transaction. Factors that taint a transaction
include undue pressure, fraud (actual or constructive), unconscionable advantage, duress,
undue influence, or grossly inadequate consideration. For example, if the borrower
successfully argues duress or undue influence, the entire transaction may be set aside. In
the alternative, the borrower may choose to recover the value of the property, the equity
21 Douglas R. Prince, Counseling the Borrower on Friendly Foreclosures and Deeds in Lieu, 10 PRAC.
REAL ESTATE LAWYER 37 (March 1994).
22 Alan Bromberg & Larry Ribstein, BROMBERG AND RIB STEIN ON PARTNERSHIP §6.07 (1995).
23 Diane S. Coscarelli, The Deed in Lieu of Foreclosure: To Do or Not to Do? (ACMA Annual Meeting
2009); Dianne S. Coscarelli, Avoiding the Traps in Workouts and Deeds in Lieu of Foreclosure, 13
PRAC. REAL ESTATE LAWYER 7 (July 1997); Nancy J. Appleby, Counseling the Lender on
Friendly Foreclosures and Deeds in Lieu, 10 PRAC. REAL ESTATE LAWYER 21 (March 1994).
8
of redemption, or the profits realized on sale. Additionally, if the lender's conduct is
flagrant or outrageous, courts may assess punitive damages against the lender. 24
Moreover, if the transaction is set aside by reason of a lender's conduct, the title company may
raise a defense of "acts of insured" to any claims. The best practice is to document that the
transaction originated after a loan default with an offer from or on behalf of the borrower to
tender a deed to the lender. The documentation should state the reasons for the offer. This will
forestall later claims by the borrower or others of undue influence, duress, oppression or the
absence of good faith. The lender should respond setting forth the written conditions under
which the lender is willing to accept the voluntary conveyance. All these conditions must be
satisfied before the lender is obligated to close the transaction. 25
C.
Settlement Agreement. It is important for both the borrower and lender to
document the transaction in a comprehensive settlement agreement. The draftsmen should be
mindful that courts view deeds in lieu with suspicion because of the common unequal bargaining
power between lenders and borrowers. Viewing the transaction as an arms-length purchase of
the property, the lender will want representations, title warranties, extensive deliverables and title
insurance. A borrower will prefer a simple transaction without these items involving delivery of
a deed in exchange for a full release of all liabilities under the loan documents. The agreement
should recite the voluntary nature of the transaction and set forth the consideration for the
conveyance. If the loan is recourse, consideration is most likely the full or partial forgiveness of
the debt. If non-recourse, the consideration is the value of the property. Waiver of the right to
foreclose immediately and exercise other remedies is also consideration. The borrower should
confirm the amount of the debt, the default, the value of the property, and that it has no equity in
the property. The lender may ask for a representation of solvency of the borrower, but this may
not be possible for a single asset borrower. The transaction should be described as an absolute
conveyance with no continuing rights or interests of the borrower in the property or rights of
redemption. Recitation should be made that the debt is not being extinguished and that there is
no intent to merge the debt into the deed. The lender needs to identify all of the personal and
real property that is to be transferred and address any special circumstances that require
particular attention, such as liquor licenses, hotels, cooperatives and condominiums.
The borrower will want to be released from any deficiency (if the loan is
recourse) and all carve-out liabilities (if the loan is non-recourse) and all other obligations under
the loan documents. The reasons for providing a covenant not to sue rather than a release have
been discussed above. The agreement should clearly state what is and what is not being released
24 John C. Murray, Deeds in Lieu of Foreclosure: Practical and Legai Considerations, 26 REAL PROP.
PROB.& TR. J. No.3, 459, at 463 (Fall 1991).
25 The unilateral execution and recording of a deed by a borrower to a lender is not binding upon
the lender absence evidence that the lender accepted the deed, Martin v. Uvalde Savings and Loan
Assn., 773 S.W. 2d 808 (Tex Civ. App. - San Antonio1989); Hennessey v. Bell, 775 S.W.2d 650 (Tex
Civ. App.-Corpus Christi 1988), writ denied.
9
or covered by the covenant not to sue, and whether the guarantors are being released or covered.
Acceptance of a deed in lieu of foreclosure generally does not preclude the lender seeking a
deficiency, but to avoid an inadvertent release, it is advisable to review any applicable state
statute governing this type of transaction. For example, an lllinois statute provides that
"Acceptance of a deed in lieu of foreclosure shall relieve from personal liability all persons who
owe payment or the performance of other obligations secured by a mortgage, including
guarantors of such indebtedness or obligations, except to the extent a person agrees not to be
relieved in an instrument executed contemporaneously.,,26 The lender will want to exclude from
the covenant not to sue the representations and covenants of the borrower in the settlement
agreement, deed warranties and environmental indemnifications. The borrower and guarantors
should release any claims against the lender.
The covenant not to sue should provide that in
the event the transaction is subsequently set aside in a bankruptcy or other action, the covenant is
null and void and all the loan documents are reinstated. 27 The covenant should contain a
reservation of any claims against any other guarantors or other parties not being released. If not
being fully released, the guarantor's consent should be obtained. The borrower's counsel should
opine on the due authorization, execution, validity and enforceability of the settlement
documents and that the mortgage and related security interests are valid and properly perfected
under applicable state law. Finally, it is not in the interest of the lender for the terms of the
settlement agreement to be shared with other borrowers or discussed among borrowers, so a
confidentiality provision is recommended.
D.
Absolute Conveyance. The borrower may seek to retain control of the
property by asking to remain in possession of the property, or to manage the property after the
recording of the deed, or request a right to repurchase, right of first refusal, or share in the
profits. The lender should be very cautious regarding these requests. These rights may be
inconsistent with intent to divest title. 28 Each of these rights could be considered the equivalent
of an equitable mortgage or may be deemed voidable as a clog on the equity of redemption. 29
For example, when a borrower defaulted under an arrangement by which it transferred the
property to a lender who agreed to reconvey the property to the borrower upon completion of
debt payment, the court held this arrangement a mortgage. 30 A transfer has been held a mortgage
when the borrower leased back the property and retained an option to purchase the property for
the amount of the debt,3! or retained possession and paid taxes, insurance, maintenance expenses,
S.H.A. 735 ILCS 5/15-1401.
A title company may raise an exception in its owner policy for this reinstatement right, John C. Murray,
Deed in Lieu of Foreclosure - Title Insurance Issues, 10, ACMA ABSTRACT (Spring 2011).
28 Riley v. W.R. Holdings UC, 138 P.3d 316 (Id. 2006).
29 In Re All American Hold Corp, 8 B.R. 459 (Bankr. S.D. Fla. 1981); See John C. Murray, Clogging
Revisited, 33 REAL PROP. PROB. & TR. J. No.2, 279 (Summer 1998).
30 Davis v. Stone, 236 F. Supp. 553 (D.D.C. 1964).
31 Beeler v. American Trust Co., 147 P. 2d 583 (Cal. 1944).
26
27
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and utilities. 32 In determining whether an equitable mortgage exists, a court will consider
whether a debt exists, presence or absence of counsel, the relationship of the parties, the parties'
sophistication, adequacy of consideration and who retained possession of the property.33 Rights
to repurchase or profit sharing should be avoided. If the borrower manages the property after the
conveyance, the engagement should be on daily basis terminable at will by the lender. The
borrower should not be granted any authority to control the development, leasing or sale of the
property. The best practice is to engage a new manager unaffiliated with the borrower to take
over management of the property at closing. If the borrower is to lease any portion of the
property after closing, the term should be short and rent at a market rate. Finally, the settlement
agreement should clearly recite that the transaction is intended to be an absolute conveyance of
the property and not a transfer for security purposes. If the conveyance is recharacterized as an
equitable mortgage, not only will the lender have to resort to a judicial foreclosure to regain the
property, but the lender will not have the benefit of the customary provisions and remedies, such
as waivers of redemption, right to trustee's sale, or right to obtain a receiver. The equitable
mortgage would have a different priority. As a mortgagee in possession, the lender could also be
subject to claims by the borrower of mismanagement of the property.
E.
Deed in Escrow. The borrower may seek to retain possession of the
property for a certain period of time by proposing to place a deed into escrow with instructions to
deliver it to the lender upon the failure to meet certain goals. This arrangement affords a
borrower additional time to stabilize the situation. The lender should carefully consider the risks
of a placing a deed in escrow before adopting any escrow arrangement. 34 The deed will be
frozen in escrow if the borrower later asserts to the escrow agent any dispute regarding the
transaction. Courts will closely scrutinize deeds in escrow to determine whether it clogs the
equity of redemption. A transaction may be characterized as merely a refinance or continuation
of the old loan and void the deed as an attempt to evade the foreclosure process. 35
Unenforceability is based upon the theory that the deed is merely security for the mortgage
loan,36 or that the borrower at the time of original. loan transaction could not have waived its right
of redemption,37 or that the deed is voidable as a clog on the equity of redemption?8 Other
Striker v. Trans-West Discount Corp., 155 Cal. Rpt. 132 (Cal. Ct. App. 1970).
Flack v. McClure, 565 N.E.2d 131 (ll!. App. Ct. 1990).
34 John C. Murray, Mortgage Workouts: Deeds in Escrow, 41 REAL PROP. PROB. & TR. J. No.2, 185
32
33
(Summer 2006) .
. 35 Any deed in escrow executed in connection with the original loan transaction is void and
unenforceable, First Illinois Bank v. Hans, 143 lil. App. 3d. 1033,493 N.B. 2d 1171 (2'd Dist. 1986).
36 Katheiser v. Hawkins, 645 P.2d 967 (Nev. 1982); See also Hendrickson v JGR Properties Inc., 2008
WL 5053440, Ohio Ct. of App., December 2008) discussed in Roger Bernhardt, Bad Timing for Deeds in
Lieu, ACMA ABSTRACT (Fall 2009).
37 Marple v. Wyoming Production Credit Ass'n., 750 P.2d 1315, 1320 (Wyo. 1988).
38 C. Phillip Johnson Full Gospel Ministries, Inc. v. Investors Financial Services LLC, No. 115 (Md. Ct of
App. Filed Jan. 31, 2011); Debra P. Stark, Avoiding the Recharacterization of Certain Deed-in-Lieu
11
courts have held that an executory deed arrangement is an equitable mortgage which must be
foreclosed in order to enforce the agreement. 39 A deed in escrow has been considered a
mortgage because of a recital of the existence of debt, that the borrower retained management of
the property and the documents allowed the borrower to recover the property when the debt was
paid. 4o Parol evidence is admissible to show that an absolute deed on its face was intended as
security for an obligation and should be considered a mortgage. 41 The parties' intention may be
shown by their statements, a substantial disparity between the value received by the grantor and
the actual value of the property, continued possession by the grantor, continued payment of taxes
by the grantor, improvements made by the grantor, and the relationship of the parties before and
after the conveyance, and existence of contingencies that could unwind the transaction. 42
Under certain circumstances, however, a deed in escrow delivered in connection with a
workout may be enforceable. There must be a default and fair and adequate consideration given
to the borrower. In Ringling Brothers,43 the court found that the mortgagor received valuable
new consideration and upheld the executory deed. The mortgagor received new loan proceeds
and the pending foreclosure proceedings were halted. The court also noted that the transaction
involved commercial and not residential real estate, the mortgagor was represented by counsel,
the mortgagor had no equity in the property and the mortgagor had acknowledged it could not
pay and had made no attempt to pay the debt. In Russo v. Wolbers, the court stated that "the
exchange must be fair, frank, honest, and without fraud, misconduct, undue influence, oppression
or unconscionable advantage of the poverty, distress or fears of the mortgagor.,,44 Forbearance
to foreclose and acceptance of the property in full satisfaction of the debt,45 and an extension of
the loan and release of a borrower's personalliabilitl6 have been held adequate consideration.
Finally, the lender must analyze the risk that during the period the deed is in escrow, the
borrower will file bankruptcy. A bankruptcy court will consider that the property remains part of
the borrower's estate because title has not transferred to the lender under an escrow of an
executory deed. 47 The automatic stay of Section 362(d) of the Bankruptcy Code will also
Foreclosure Transactions: Ensuring That What You Draft is What You Get, 110 BANKING L. J., 330
(1993).
39
40
McGuigan v. Miller, 117 Cal. App 739,750,4 P. 2d 607,611-12 (1931).
Wallace v. McCabe, 245 N.Y.S. 2d 854 (Sup. C!. 1964).
RESTATEMENT THIRD OF PROPERTY (MORTGAGES) §3.2 (1997); Compare MlNN. STAT.
ANN. §559.18 (2010) and GA. CODE ANN. §44-14-32 (2011) which prohibits parol evidence to show a
deed absolute on its face is a mortgage, unless there is fraud; with ARIZ. REV. STAT. ANN. §33-702(A)
which permits parol evidence.
42 John C. Murray, Deed in Lieu of Foreclosure - Title Insurance Issues, ACMA ABSTRACT (Spring
2011).
43 Ringling Brothers Joint Venture v. Huntington National Bank, 595 So.2d 180 (Fla. Dis!. Ct. Ap. 1992).
44 116 Mich. App. 327, 389 (1982).
45
297 Mich. 315,297 N.W. 505 (Mich. 1941) .
.,; Verity v. Metropolis Land Co., 288 N.Y.S. 625 (N.Y. App. Div 1936).
47 In re Sky Group International, Inc., 108 B.R. 86, 92 (Bankr. W.D. Pa. 1989); Matter of Scanlon, 80
B.R. 131, 134 (Bankr. S.D. Iowa 1987).
41
12
prohibit the delivery of the deed from escrow to the lender. 48 Of course, one method to
bankruptcy proof an executor deed arrangement is to incorporate the escrow into an approved
reorganization plan confirmed by the bankruptcy court. 49 Another alternative to the deed in
escrow in judicial foreclosure states is a stipulation by the borrower that the foreclosure
judgment can be entered in the future if the terms of the stipulation are breached.
F.
Title Insurance. A lender should consider purchase of an owner's title
policy to mitigate the risk of subordinate encumbrances. Who pays for a new policy is
negotiable, but the expense probably falls on the lender more often than the borrower. A lender
will want a new owner's policy whenever title is transferred to an entity controlled by the lender.
If the lender anticipates resale of the property within a short period of time, a lender may want to
inquire whether a binder is available. A new title policy is necessary to insure current title
because, even if title is accepted by the lender, the existing mortgagee title policy covers title to
the property only as of the date of the recording of the mortgage. A title company should be
involved early in the transaction for review of title and to address its requirements. The title
company will want to confirm the amount of the debt and review a copy of the appraisal,
settlement agreement, deed, and sometimes financial information on the borrower. Title
companies prefer an appraisal showing that the property value is at least 10-20% less than the
debt. 50 The lender may want to obtain a non-merger endorsement to its mortgagee title policy
where available, insuring that vesting of title in the lender does not invalidate or make the
mortgage unenforceable, and an endorsement insuring the continued validity and priority of its
mortgage lien. 51 Until last year, title insurers were deleting the creditor rights exception by an
endorsement for loss or damage by the insured by reason of a fraudulent transfer or avoidable
preference under federal bankruptcy or state insolvency laws, including costs of defense.
However effective March 8, 2010, the American Land Title Association withdrew ALTA Forms
21 and 21.06 and shortly thereafter the equivalent California Land Title Association Forms 131
and 131-06 were also withdrawn. All major title insurance groups have ceased to issue a creditor
rights endorsement. 52 As a result lenders must increase their scrutiny of bankruptcy risks of deed
in lieu transactions.
G.
Taxes and Reporting Requirements. Tax considerations may also affect
the transaction. If the loan is non-recourse, the borrower will realize the same gain whether the
property is taken by foreclosure or transferred by a deed in lieu. However, if the loan is
In re Stockbridge Funding Corp., 145 B.R. 797,811 (Bankr. S.D.N.Y. 1992).
Matter of Howe, 913 F. 2d 1138 (5 th Cir. 1990).
50 John C. Murray, Deed in Lieu of Foreclosure - Title Insurance Issues, ACMA ABSTRACT (Spring
48
49
2011).
51CLTA 107.11-06; SE-233 (D.C.).
52 The creditor rights endorsement was never available in Florida, New Mexico, New York, or Texas;
Title companies have ceased to issue in Florida and elsewhere ALTA 1970 Policy that contains creditors
rights protection.
13
recourse, the transaction will be bifurcated with the portion of the debt equal to the value of the
property treated as a disposition of the property and the remaining portion treated as personal
debt which may be treated as cancellation of debt, unless the taxpayer is insolvent. The parties
may be able to alter the timing of the impact of income taxes on the borrower with scheduling of
the closing. Section 6050J of the Internal Revenue Code imposes a requirement upon the lender
to report the acquisition of all property mortgaged as security for a debt, including by deeds in
lieu of foreclosure. The lender must file Forms 1096 and 1099-A by February 28 of the year
following the calendar year of the transfer. The lender should also obtain at closing a FIRPT A
certificate to establish that the borrower is not a foreign entity for which withholding is required.
With respect to state taxes, the lender should determine whether it needs upon taking title to the
property to register to do business in the state or qualify the controlled entity taking title.
Transfer taxes can add substantial costs to the transaction. If the borrower is
unwilling to pay this cost, the burden will fallon the lender. The parties should determine
whether transfer taxes will have to be paid with recording the deed in lieu. Applicability varies
by jurisdiction. Some states exempt foreclosures, but not deeds in lieu, some exempt both, and
some impose taxes on foreclosures, but not deeds in lieu. In some states the exemption applies
solely to the holder of the debt, so a conveyance from the borrower to the lender's controlled
entity without transfer of the debt may not qualify for the exemption. The amount of the tax
depends upon the value of the property, and there may be a deduction for the amount of the
outstanding debt. Bankruptcy court is an option to avoid transfer taxes because conveyance of
property from a debtor to a lender made pursuant to a confirmed bankruptcy plan of
reorganization is exempt from state or local stamp and transfer taxes. 53 The lender should
conflITil that the borrower has paid all franchise taxes, income, sales, unemployment and other
taxes which may become a lien against the property or impose liability upon a transferee. Some
states have withholding or preclearance requirements for transferors.
IV.
CONCLUSION
The delivery and acceptance of a deed in lieu of foreclosure can benefit all parties
provided that proper due diligence is performed, risks are accurately assessed, and the documents
are carefully and properly prepared. The transaction requires an absolute and voluntary
conveyance with adequate consideration, anti-merger provisions, covenant not to sue with
appropriate reservations and reinstatement, proper turnover of the property, title insurance and
proper settlement of applicable tax and other obligations to protect the lender.
ATTACHMENTS:
1. Checklist for Acceptance of a Deed in Lieu of Foreclosure
2. Deed in Lieu of Foreclosure Settlement Agreement
53
11 U.S.C.A.§ 1146(a).
14
CHECKLIST FOR ACCEPTING A DEED IN LIEU OF FORECLOSURE
A. Due Diligence Review
o
o
o
o
o
o
o
o
o
o
o
o
o
o
Operating Statements, Books and Records, Rent Roll, Leases, Contracts, Licenses
and Permits
Inspect Property and Public Records for Compliance of Property
Confirm Payment of Taxes and Insurance Premiums
Current Title Commitment and Copies of all Exceptions
Survey
Confirm Proper Perfection of Liens and Adequacy of Loan Documents
Determine No Subordinate Liens or Resolve Subordinate Liens
UCC, Bankruptcy and Litigation Searches
Confirm Amount of Debt and Default
Current Financial Statement of Borrower and Guarantors
Appraisal; Determine Risk of Reversal of Transaction in Bankruptcy
Phase I Environmental Report
Organizational Documents of Borrower; Determine Authority to Convey and
Availability of Consents
Relevant Local Law on Deeds in Lieu, Merger of Mortgages, Transfer Taxes,
Withholding, Environmental Transfer Responsibilities etc.
B. Settlement Agreement
o Representations: Default, Debt Exceeds the Property Value; Status of the
Property; Authority to Convey; Sophistication of Borrower and Representation by
Counsel
o Recite Consideration for Transfer
o Recite Voluntary Offer by Borrower to Convey
o Recite Absolute Conveyance with Borrower Retaining no Property Interests or
Control of Property
o Waiver of Rights of Redemption
o Operating Covenants Prior to Closing, leasing, turning over rents, etc.
o Release of Lender
o Covenant Not to Sue
o Anti-merger Provision and Recitation that Debt is Not Extinguished
o Form Separate Entity, if necessary, or Confirm Lender is Qualified to do Business
in State
o Reaffirmation of Loan Documents
15
o
o
o
o
Reinstatement of Loan Documents if Transfer Reversed in Bankruptcy.
Establish Responsibility to Pay Expenses, Taxes, Title Insurance etc.
Guarantor Consent to Transaction
Confidentiality Provision
C. Deliverables
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
o
Tenant Estoppels
SANDAs
Third Party Estoppels
Notice to Tenants and Vendors of Transfer
Security Deposits
Original Leases, Tenant Files and Continuing Contracts
Original Permits, Licenses, Certificates of Occupancy, Warranties, Plans &
Specifications etc.
Keys, Security Codes
Cancel N on-continuing Contracts
Deed and Recording Forms
Bill of Sale
Assignment of Leases and Other Contracts and Rights
FIRPTA Certificate
Covenant Not to Sue
Opinion Letter of Borrower's Counsel
Evidence of Authority; Incumbency Certificate, etc.
Owner Title Policy, and Endorsement of Mortgagee Title Policy
Transfer Taxes, Forms and Payment, if applicable
Assignment of Tax Appeals, if applicable
Tax Withholding and Pre-Clearance Requirements, if applicable
Forms 1099 and 1099A
Bulk Sale Notice, if applicable
Responsibility Property Transfer Form, if applicable
Proration of Taxes, Revenues and Operating Expenses
Transfer Utilities
New Insurance Coverage
New Management Contract
Execute New Service Contracts
Closing Statement
16
Dated
,20_
DEED-IN-LIEU OF FORECLOSURE SETTLEMENT AGREEMENT
by and between
_ _ _ _ _ _ _ LIFE INSURANCE COMPANY,
a _ _ _ _ corporation
("Lender")
and
a _ _ _ _ limited partnership
("Borrower")
GUEST SUITES AND CONFERENCE CENTER
DEED-IN-LIEU OF FORECLOSURE SETTLEMENT AGREEMENT
THIS DEED-IN-LIEU OF FORECLOSURE SETTLEMENT AGREEMENT (this
"Agreement") is made as of the Effective Date, by and between
LIFE
INSURANCE
COMPANY,
a
corporation
("Lender"),
and
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _, a
limited partnership ("Borrower").
R E CIT A T ION S:
A.
Borrower is the sole owner of the hotel known as
Guest Suites and
Conference Center,
in
County,
and all rights and
obligations related thereto (the "Hotel"), including, but not limited to: (i) fee simple absolute title
to and ownership of those certain parcels of real property particularly described on Exhibit A
attached hereto (the "Land", as more specifically defined in Section 1.1 herein), (ii) the Hotel
and all other buildings, improvements, structures, and all other items of real estate located on the
Land (the "Improvements"), (iii) the Personal Property (as hereinafter defined) associated
therewith, (iv) the operations associated with the Hotel as conducted on Borrower's behalf,
(v) the Management Agreement (as hereinafter defined), (vi) the Franchise Agreement (as
hereinafter defined), and (vii) all leases, licenses and other ancillary commercial operations
located on the Land and the Improvements (collectively, the "Project").
B.
Borrower has defaulted under the Loan Documents. All required default notices
have been sent to Borrower by Lender, all applicable notice and cure periods have lapsed, and
Lender has the right under the Loan Documents to accelerate the maturity of the Loan. All
amounts owed by Borrower under the Loan Documents continue to be due and owing to Lender
without any counterclaims, setoffs or defenses by Borrower.
C.
The value of the Project is substantially less than the outstanding balance of the
Mortgage Loan, and Borrower has no equity in the Property.
D.
Borrower does not wish to repay (or cause to be repaid) the Mortgage Loan and
has voluntarily offered and agreed to transfer ownership of the Hotel and all other right, title and
interest in Borrower in and to the Project to Lender, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the parties, it is agreed:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the indicated meanings:
"Advance Bookings" shall mean reservations and agreements made or entered into by
Borrower and/or Manager in the Ordinary Course of Business prior to Closing for hotel rooms,
meeting rooms and other conference facilities and/or banquet facilities to be utilized after
Deed in Ueu of Foreclosure Settlement Agreement
1
Closing, or for catering services or other hotel services to be provided after Closing at or by the
Hotel.
"Affiliate" of a Person shall mean any other Person that is directly or indirectly (through
one or more intermediaries) controlled by, under common control with, or controlling such
Person. For purposes of this definition, "control" shall mean (i) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of any
Person or the power to veto major policy decisions of any Person, whether through the
ownership of voting securities, by contract or otherwise, or (ii) any other Person in which such
Person has a direct or indirect equity interest constituting at least a majority interest of the total
equity of such other Person. When determining an Affiliate of Borrower, "Person" shall include
for purposes of determining common control, any individual who is the ultimate, indirect owner
of Borrower and that individual's spouse, lineal descendants, parents and their lineal descendants,
parents' siblings and their lineal descendants, and grandparents and their lineal descendants.
"Agreement" shall have the definition ascribed to such term in the introductory
paragraph.
"Applicable Laws" shall mean any applicable building, zoning, subdivision,
environmental, health, safety or other governmental laws, statutes, ordinances, resolutions, rules,
codes, regulations, orders or determinations of any Governmental Authority or of any insurance
boards of underwriters (or other body exercising similar functions), or any restrictive covenants
or deed restrictions affecting the Project or the ownership, operation, use, maintenance or
condition thereof.
"Assignment and Assumption Agreement" shall mean an assignment and assumption
agreement in substantially the form attached hereto as Exhibit D whereby Borrower assigns and
Lender assumes all of Borrower's right, title and interest in and to the Advanced Bookings,
Franchise Agreement (if applicable), the Operating Agreements, the Management Agreement (if
applicable), and the Leased Property Agreements.
"Assignment of Occupancy Agreements" shall mean an assignment agreement in
substantially the form attached hereto as Exhibit E whereby Borrower assigns and Lender
assumes all of its right, title and interest in and to the Occupancy Agreements.
"Authorizations" shall mean all licenses (inclusive of all liquor licenses), permits and
approvals required by any governmental or quasi-governmental agency, body, department,
commission, board, bureau, instrumentality or office, or otherwise appropriate with respect to the
construction, ownership, operation, leasing, maintenance, or use of the Project or any part
thereof.
"Bill of Sale" shall mean a bill of sale in substantially the form attached hereto as
Exhibit C whereby Borrower conveys its right, title and interest in and to the Personal Property
(other than Leased Property) to Lender, together with any Warranties and Guaranties related
thereto.
"Borrower" shall have the definition ascribed to such term in the introductory paragraph.
Deed in Lieu of Foreclosure Settlement Agreement
2
"Borrower Released Parties" shall mean the Borrower and its Affiliates, and the officers,
directors, members, partners, employees, agents and attorneys of the foregoing.
"Capital Reserve Accounts" shall mean all funds reserved and set aside for expenditure
for capital items or similar or related expenditures, if any, including, without limitation, any such
sums as may be held or required by the Manager, Franchisor or Lender.
"Closing" shall mean the consummation of the transfer of the Property pursuant to this
Agreement and shall be deemed to occur on the Closing Date.
"Closing Date" shall mean
, 20_, unless Lender and Borrower
mutually agree to a different date on which the Closing shall occur. Lender shall have the onetime right to extend the Closing Date, upon written notice thereof to Borrower, by up to
thirty (30) days if Lender deems such extension necessary relative to the satisfaction of the
condition precedent set forth in Section 5.1(c) below.
"Closing Documents" shall mean the documents defined as such in Section 7.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Covenant Not to Sue" shall mean the Covenant Not to Sue to be executed by Lender, in
substantially the form attached hereto as Exhibit G.
"Deed" shall mean the special warranty deed in substantially the form attached hereto as
Exhibit B conveying fee simple absolute title to the Real Property from Borrower to Lender [or
its Designee].
"Deposits" shall mean all deposits made in connection with security deposits paid by
tenants under the Leases and any and all other deposits made by, to or on behalf of Borrower or
Manager.
["Designee" shall mean the entity controlled by Lender and designed by the Lender to
accept title to the Property.]
"Effective Date" (or other similar phrases such as "date of this Agreement" or "date
hereof') shall have the definition ascribed to such term in Section 10.19 hereof.
"Environmental Laws" shall mean, collectively, all federal, state and local environmental,
safety or health laws and ordinances and rules of common law, including but not limited to, the
Occupational Safety and Health Act of 1970, as amended (29 U.S.C.. 651 et seq.), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
(42 U.S.C.. 960 et seq.), the Hazardous Material Transportation Act (49 U.S.C.. 1081 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C.. 6091 et seq.), the Toxic Substances Control
Act of 1976, as amended (15 U.S.C.. 2601 et seq.), the Clean Air Act (42 U.S.C.. 7401 et seq.),
the Safe Drinking Water Act (42 U.S.C .. 300f-300j), and the Federal Water Pollution Control
Act (33 U.S.C.. 1251-1387), as any of the foregoing may hereafter be amended, any rule or
regulation issued pursuant thereto, and any other present or future law, ordinance, rule,
regulation, permit or permit condition, order or directive addressing environmental, health or
3
safety issues of or by the federal government, or any state or other political subdivision thereof,
or any agency, court or body of the federal government, or any state or other political subdivision
thereof, exercising executive, legislative, judicial, regulatory or administrative functions.
"Escrow Agent" shall mean ____________________
"FF&E Reserve Accounts" shall mean all funds reserved and set aside, if any, for
expenditure for furniture, fixtures or equipment or similar or related expenditures, including,
without limitation, any such sums as may be held or required by the Manager, Franchisor or
Lender.
"FIRPTA Certificate" shall mean the affidavit of Borrower under Section 1445 of the
Code, as amended, in substantially the form attached hereto as Exhibit F.
"Franchise Agreement" shall mean the existing franchise agreement for the Hotel
between Franchisor and Borrower.
"Franchisor" shall mean ________________
"Governmental Authority" shall mean any federal, state, county, municipal or other
government or any governmental or quasi-governmental agency, department, commission,
board, bureau, office or instrumentality, foreign or domestic, or any ofthem.
"Guaranties" shall mean, collectively, that certain Environmental Indemnity Agreement
, 200_ made by Borrower, that certain Guaranty Agreement dated as of
dated as of
_ _ _ _ _., 200_ made by Guarantors.
"Guarantors" shall mean, collectively, _________- - - - - - "Hazardous Substance" shall mean (a) any petroleum or petroleum products, radioactive
materials, asbestos in any form that is or could become friable, urea formaldehyde foam
insulation, transformers or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined
as or included in the definitions of "hazardous substances," "hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," or words of similar import, under any
applicable Environmental Laws.
"Hotel" shall have the definition ascribed to such term in the Recitations.
"Improvements" shall have the definition ascribed to such term in the Recitations.
"Including" shall mean "including, without limitation," irrespective of whether or not
words of similar import are utilized in a particular context.
"Intangible Personal Property" shall mean, Borrower's right, title and interest in and to
all intangible personal property owned or possessed by Borrower or in the reasonable control of
Borrower (for purposes of this definition only, the reasonable control of Borrower shall be
deemed to include the reasonable control of Manager as well) and used in connection with the
4
ownership or operation of the Project, including, without limitation: (1) Authorizations;
(2) utility and development rights and privileges, general intangibles; (3) business records;
(4) plans and specifications pertaining to the Real Property and the Personal Property; (5) any
award for taking by condemnation or any damage to the Land by reason of a change of grade or
location of or access to any street or highway; (6) the guest ledger and all accounts receivable
attributable to the Project; (7) bookings and Advance Bookings; (8) cash on hand held or used by
the Manager (or in accounts in the Borrower's name for Manager's use); (9) Deposits; (10) any
", or any derivative thereof, including all rights, trademarks,
rights to the names "
trademark registrations, trademark applications, copyrights, copyright registrations and copyright
applications using or including such names; (11) proceeds of insurance maintained by or on
behalf of Borrower relating to damage or insured casualty occurring prior to the Closing Date;
(12) all sums segregated in all Tax and Insurance Reserve Accounts, FF&E Reserve Accounts,
Capital Reserve Accounts and any and all other reserves, escrows, operating accounts, lockbox
accounts, cash management accounts and deposits for the Project maintained by Manager (or in
the name of the Borrower by Manager), Franchisor or Lender, if any; (13) accounts receivable
(including any discounts thereon as provided herein) held by or on behalf of Borrower and
related to the Project and other uncollected amounts; and (14) Warranties and Guaranties and
other claims against third parties relating to the Project, subject to Borrower's right to retain and
pursue any such claims (either individually or jointly with Lender, if both parties have an interest
therein) to the extent that they relate to revenues, costs, expenses or liabilities for the period prior
to the Closing.
"Inventory" shall mean all inventories of goods which are located at, or held for use at,
the Project or ordered for future use at the Project as of the Closing, including, without
limitation, food and beverage (alcoholic and non-alcoholic) in opened or unopened cases, or
ordered for future use, and all in use or reserve stock of china, glassware and silverware, pillows,
hairdryers, ironing boards, hangers, irons, linens, uniforms, engineering, maintenance, cleaning
and housekeeping supplies, matches and ashtrays, soap and other toiletries, stationery, menus,
directories and other printed materials, towels, paper goods, soaps, and all other similar supplies
and materials.
"Land" shall mean those certain parcels of real estate lying and being in _ _ _ __
County,
, and more particularly described on Exhibit A hereof, together with all rights,
titles, benefits, easements, privileges, remainders, tenements, hereditaments, interests, reversions
and appurtenances thereunto belonging or in any way appertaining, and all of the estate, right,
title, interest, claim or demand whatsoever of Borrower therein, in and to adjacent strips and
gores, if any, between the Land and abutting properties, and in and to adjacent streets, highways,
roads, alleys or rights-of-way, and the beds thereof, either at law or in equity, in possession or
expectancy, now or hereafter acquired, together with all oil, gas and other minerals situated in,
under or upon the Land (to the extent that Borrower has right, title, interest, claim or demand to
such oil, gas and other minerals).
"Leased Property" shall mean all leased items of Tangible Personal Property, including,
items subject to any capital lease, operating lease, financing lease, or any similar agreement.
"Leased Property Agreements" shall mean the lease agreements pertaining to the Leased
Property.
Deed in weu of Foreclosure Settlement Agreement
5
"Leases" shall mean any and all leases, either oral or written, or any letting of, or any
agreement for the use and occupancy of, any part of the Real Property, including any
amendments thereto, subleases thereunder, or assignments thereof.
"Lender" shall have the definition ascribed to such term in the introductory paragraph
and shall include all successors and assigns of the original Lender named in said introductory
paragraph.
"Lender Released Parties" shall mean the Lender and Prospective Purchaser, each of their
respective officers, directors, members, partners, employees, agents and attorneys of the
foregoing.
"Loan Documents" shall mean all document and instruments executed by Borrower
and/or Guarantors in connection with the Mortgage Loan including, without limitation: (i) the
Note, (ii) the Mortgage, Security Agreement, Fixture Filing, Financing Statement and
Assignment of Leases and Rents, (iii) the Guaranties, and (iv) all other documents evidencing
and/or securing the Mortgage Loan.
"Management Agreement" shall mean the eXlstmg management agreement between
Lender and Manager for the management and operation of the Hotel.
"Manager" shall mean _ _ _ _ _ _ _ _, the manager of the Hotel.
"Monetary Title Encumbrances" shall mean any title encumbrances affecting the Project
which are comprised of delinquent taxes, mechanic's liens, or mortgages, deeds of trust, security
agreements, or other liens or charges in a fixed sum (or capable of computation as a fixed sum)
securing indebtedness or obligations.
"Mortgage Loan" shall mean the loan made by Lender to Borrower evidenced by the
Loan Documents.
"Note" shall mean the Promissory Note dated
, 200_, in the original principal
Dollars ($
) executed by Borrower in favor of Lender.
amount of
"Occupancy Agreements" shall mean all leases, concession or occupancy agreements in
effect with respect to the Real Property and/or Project under which any tenants (other than
customary nightly reservations) or concessionaires occupy space upon the Real Property.
"Operating Agreements" shall mean all service, supply, maintenance, construction,
capital improvement and other similar contracts in effect with respect to the Project (other than
the Franchise Agreement, the Occupancy Agreements, Leased Property Agreements, and
Management Agreement) related to construction, operation, or maintenance of the Project.
"Ordinary Course of Business" means the ordinary course of business consistent with
Borrower's past custom and practice for the Project, taking into account the facts and
circumstances in existence from time to time.
"Permitted Exceptions" shall have the meaning set forth in Section 2.1 below.
6
"Person" shall mean an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a Governmental Authority.
"Personal Property" shall mean collectively the Tangible Personal Property and the
Intangible Personal Property.
"Project" shall have the definition ascribed to such term in the Recitations.
"Property" shall mean the Real Property, the Personal Property and the other portions of
the Project to be transferred from the Borrower to the Lender pursuant to the terms herein. For
purposes of clarity, it is understood that the term "Property" is intended to encompass all of
Borrower's rights in and to the Project, irrespective of when the same accrued.
["Prospective Purchaser" means ________, a _ _ _ _ _ _ limited liability
company and its successors and assigns.]
"Real Property" shall mean the Land and the Improvements situated thereon (including
the Hotel).
"Representatives" shall have the meaning ascribed to such term in Section 8.5 hereof.
"Tangible Personal Property" shall mean the items of tangible personal property
consisting of all furniture, fixtures, equipment, machinery, Inventory and other tangible personal
property of every kind and nature (including cash-on-hand and petty cash funds), whether
located at, or stored or used away from, the Project but used in connection with the Project solely
for the Project, and owned or leased by Borrower, including, without limitation, Borrower's
interest as lessee with respect to any such leased Tangible Personal Property.
"Tax and Insurance Reserve Accounts" shall mean all funds reserved and set aside, if
any, for expenditure for real estate taxes, assessments, insurance premiums, insurance proceeds
and other escrowed or reserved amounts, including, without limitation, any such sums as may be
held or required by the Manager, Franchisor or Lender.
"Warranties and Guaranties" shall mean (i) any subsisting and assignable warranties and
guaranties relating to the Improvements or the Personal Property or any part thereof, and (ii) to
the extent any such warranties and guaranties are not assignable, then, the right to cause
Borrower to use commercially reasonable efforts to enforce such warranties and guaranties for
the benefit of Lender.
For purposes of this Agreement, each reference to any contract, agreement or other instrument
shall mean such instrument as the same may be supplemented and amended.
ARTICLE II
CONVEYANCE OF PROPERTY IN LIEU OF FORECLOSURE
2.1 Conveyance of Property to Lender. Borrower shall convey to Lender absolutely
and free of any right of redemption, rights of reinstatement, rights under homestead exemption
7
laws or other rights or interest of the Borrower, or anyone claiming through or under any
Borrower Released Party, the Property free and clear of any liens or encumbrances with the
exception of the title matters set forth on Exhibit H attached hereto ("Permitted Exceptions"),
in accordance with the and subject to the terms and conditions set forth in this Agreement.
2.2 Deed-in-Lieu. Borrower hereby acknowledges and agrees that the conveyance of
the Property is being made in lieu of a foreclosure upon the Property by Lender in Lender's
capacity as the Lender. No cash consideration or other payment shall be due or owing from
Lender to Borrower on account of any conveyance or other matter contemplated under this
Agreement.
2.3 [Concurrent Loan Sale. Borrower acknowledges that Lender is concurrently
negotiating to sell the Mortgage Loan to Prospective Purchaser. Borrower hereby agrees to
cooperate reasonably, but at no cost or expense to Borrower, in connection with (a) Prospective
Purchaser's survey, inspection and review of Real Estate and Personal Property and the
operation of the Hotel, and (b) any designation by Lender of Prospective Purchaser as Lender's
designee or assignee for purposes of the closing documents contemplated under this
Agreement. Borrower hereby further agrees that Lender shall have the right to terminate this
Agreement, at any time prior to Closing, if Prospective Purchaser terminates negotiations to
purchase the Mortgage Loan or if said purchase has not closed for any other reason. Upon any
termination of this Agreement, the parties shall have all of their respective rights, duties,
liabilities and obligations with respect to the Mortgage Loan as though they had never entered
into this Agreement.]
ARTICLEllI
"AS IS" CONVEYANCE
LENDER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS CONTEMPLATED
HEREUNDER, BORROWER IS MAKING NO REPRESENTATIONS AND WARRANTIES
IN CONNECTION WITH THE SALE OF THE PROPERTY TO LENDER AND THAT THE
PROPERTY IS SOLD "AS IS" "WHERE IS" AND "WITH ALL FAULTS" AND NEITHER
BORROWER, NOR ANY AGENT OR REPRESENTATIVE OF BORROWER, HAS MADE,
NOR IS BORROWER LIABLE FOR OR BOUND IN ANY MANNER BY ANY EXPRESS
WARRANTIES,
GUARANTEES,
PROMISES,
STATEMENTS,
OR
IMPLIED
INDUCEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE
HOTEL OR ANY PART THEREOF, THE PHYSICAL CONDITION, ENVIRONMENTAL
CONDITION, INCOME, EXPENSES OR OPERATION THEREOF, THE USES WHICH CAN
BE MADE OF THE SAME OR ANY OTHER MATTER OR THING WITH RESPECT
THERETO; EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE
CLOSING DOCUMENTS CONTEMPLATED HEREUNDER. WITHOUT LIMITING THE
FOREGOING, LENDER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS
CONTEMPLATED HEREUNDER, BORROWER IS NOT LIABLE FOR OR BOUND BY
(AND LENDER HAS NOT RELIED UPON) ANY ORAL OR WRITTEN STATEMENTS,
REPRESENTATIONS, OR FINANCIAL STATEMENTS PERTAINING TO THE
OPERATION OF THE HOTEL, OR ANY OTHER INFORMATION RESPECTING THE
8
HOTEL FURNISHED BY BORROWER OR ANY EMPLOYEE, AGENT, CONSULTANT
OR OTHER PERSON REPRESENTING OR PURPORTEDLY REPRESENTING
BORROWER. LENDER ACKNOWLEDGES THAT, TO THE EXTENT REQUIRED TO BE
OPERATIVE, THE DISCLAIMERS OF WARRANTIES CONTAINED IN THIS
SECTION ARE "CONSPICUOUS" DISCLAIMERS FOR PURPOSES OF ANY
APPLICABLE LAW, RULE, REGULATION OR ORDER. THE PROVISIONS OF THIS
SECTION SHALL SURVIVE THE CLOSING.
ARTICLE IV
REPRESENTATION AND WARRANTIES
4.1 Borrower's Representations and Warranties.
warrants to Lender the following as of the Effective Date:
4.1.1
Borrower hereby represents and
Recitations. The recitations to this Agreement are true and correct.
4.1.2
Status and Authority of Borrower. Borrower is a limited liability
company duly organized and validly existing and in good standing under the laws of the State of
_ _ _ _ _ . Borrower has full right, title, authority, and capacity to execute and perform this
Agreement and to consummate all of the transactions contemplated herein, and the member of
Borrower who executes and delivers this Agreement and all documents to be delivered to Lender
hereunder are and shall be duly authorized to do so. This Agreement is fully binding on and
enforceable against Borrower.
4.1.3
No Prohibitions. Borrower is not prohibited from (i) executing or
delivering this Agreement, (ii) complying with the terms of this Agreement, or
(iii) consummating the transactions contemplated by this Agreement by any contract or other
agreement, by any applicable governmental requirement, agreement, instrument, restriction, or
by any judgment, order, or decree of any governmental authority having jurisdiction over
Borrower or Borrower's properties. All consents and approvals which are required in connection
with such conveyances, assignments, execution, delivery and performance have been duly
obtained and given and are in full force and effect.
4.1.4
No Litigation. There is no litigation pending, nor to the knowledge of
Borrower threatened, that could affect Borrower's ability to consummate the transactions
contemplated by this Agreement, other than as pertain to any defaults under the Mortgage Loan.
Borrower has not received and does not know of any notice or demand with respect to any claim,
liability or cause of action arising out of any facts or circumstances connected with the Project,
which is not fully covered by insurance policies in force.
4.1.5
Borrower Not a Foreign Person. Borrower is not a Foreign Person
within the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1954, as
amended, and any applicable regulations thereunder.
4.1.6
No Bankruptcy or Insolvency Proceedings. There are no attachments,
executions, assignments for the benefit of creditors, receiverships, conservatorships, or voluntary
or involuntary proceedings in bankruptcy or pursuant to any other debtor relief laws
9
contemplated or filed by Borrower and Borrower has received no notice of any of the same
pending or threatened against Borrower.
4.1.7
Title. Borrower has and shall convey to Lender by Borrower's
execution and delivery of the Deed good and indefeasible fee simple title to the Property, free
and clear of all conditions, exceptions, encumbrances, or reservations, except the Permitted
Exceptions. Borrower has and shall convey to Lender good and indefeasible title to all other
property comprising the Project, free and clear of all conditions, exceptions, encumbrances and
reservations. Without limiting the generality of the foregoing, all Tangible Personal Property is
owned by Borrower and is not the subject of any Leased Property Agreement, except that Leased
Property, if any, set forth on Schedule 4.1.6 attached hereto.
4.1.8
No Undertakings. No person, fum or entity, other than Lender, has
any right to purchase or otherwise acquire or possess the Property or any part thereof. Neither
Borrower nor any Borrower Released Party has, without the approval or consent of Lender or
Advisor, entered into any lease or other agreement, or any supplement, amendment or
termination of any lease or other agreement, that would be binding upon Lender or a subsequent
owner of the Property after Closing, or that would be binding upon, or create any lien rights in,
the Property after Closing.
4.1.9
No Notices. Except as shall have been delivered to Lender prior to the
Contract Date, neither Borrower nor any Borrower Released Party has received any written
notice of any material outstanding violation of any Applicable Law, lease or other agreement
concerning the Project.
4.1.10
No Outstanding Tax Liabilities. There are no outstanding or potential
tax liabilities of Borrower or any other Borrower Released Party which would be binding upon
Lender or a subsequent owner of the Property after Closing, or that would be binding upon, or
create any lien rights in, the Property after Closing.
4.1.11
Deliveries. The information and documents to be furnished to Lender
pursuant to Section 6.1 hereof are true, correct, accurate and complete in all material respects.
Without limiting the generality of the foregoing, (a) true, correct and complete copies of the
Management Agreement, Franchise Agreement, Leases, Leased Property Agreements,
Occupancy Agreements, and Operating Agreements have been submitted by Borrower to Lender
pursuant to Section 6.1 hereof; (b) no oral or written amendments of or modifications to the
Occupancy Agreements, Operating Agreements or Loan Documents have been made except for
any written amendments or modifications which have been delivered or submitted to Lender
pursuant to Section 6.1 hereof; (c) neither Borrower nor (to Borrower's best knowledge) any
other party is in breach of or default under any of the Loan Documents or the Management
Agreement, Franchise Agreement, Leases, Leased Property Agreements, Occupancy Agreements
or Operating Agreements in any material respect; (e) the Mortgage Loan is fully funded and
Lender is not in breach of or default under any of the Loan Documents; and (f) other than the
Occupancy Agreements, Operating Agreements, and Loan Documents, there are no contracts or
10
agreements relating to the ownership or operation of the Project or which shall be binding upon
the Project following Closing.
4.1.12
Leases. There are no Leases binding on the Property after Closing
other than those Leases expressly described on Schedule 4.1.11 attached hereto, if any.
4.1.13
Leased Property Agreements.
There are no Leased Property
Agreements binding on the Property after Closing other than those Leased Property Agreements
expressiy described on Schedule 4.1.12 attached hereto, if any.
4.1.14
Occupancy Agreements.
There are no Occupancy Agreements
biuding on the Property after Closing other than those Occupancy Agreements expressly
described on Schedule 4.1.13 attached hereto, if any.
4.1.15
Operating Agreements. There are no Operating Agreements binding
on the Property after Closing other than those Operating Agreements expressly described on
Schedule 4.1.14 attached hereto, if any.
4.1.16
Fees. There are no outstanding franchise fees, management fees,
leasing commissions or brokerage fees with respect to the Property or other sums payable or
reimbursable to any broker or the property manger of the Property or under sums payable or
reimbursable under any other agreement relating to the Property; and (b) no expenses have been
incurred in connection with the ownership or operation of the Hotel which are payable
subsequent to the Closing Date except in the Ordinary Course of Business.
4.1.17
Hazardous Substances. To the best of Borrower's knowledge, the Real
Estate does not contain any Hazardous Substance. Borrower has not conducted or authorized the
generation, transportation, storage, treatment, or disposal at the Real Estate, of any Hazardous
Substance. Borrower is not aware of any pending or threatened litigation or proceedings before
any administrative agency in which any person or entity alleges the presence, release, threat of
release, or placement on or in the Real Estate of any Hazardous Substances. Borrower has not
received any notice of and has no actual or constructive knowledge that any governmental
authority or any employee or agent thereof is investigating whether there is, or has determined
that there has been (i) a presence, release, threat of release, or placement on or in the Real Estate
of any Hazardous Substance, or (ii) any generation, transportation, storage, treatment or disposal
at the Real Estate of any Hazardous Substance.
Each of the representations set forth in this Section 4.1 will be deemed to have been remade by
the Borrower as of the Closing Date, with the same force and effect as if first made on and as of
such date and will survive the Closing and the filing of the Deed of record. Borrower hereby
indemnifies and holds Lender and the other Lender Released Parties harmless from any loss,
cost, claim expense or liability which Lender or any other Lender Released Party may suffer or
incur as a result of the breach or failure of any of the above representations and warranties.
4.2 Lender's Representations and Warranties. Lender hereby represents and warrants
to. Borrower the following as of the Contract Date:
11
4.2.1
Status and Authority of Borrower. Lender is a corporation duly
organized and validly existing and in good standing under the laws of the State of _ _ __
Lender has full right, title, authority, and capacity to execute and perform this Agreement and to
consummate all of the transactions contemplated herein, and the member of Lender who
executes and delivers this Agreement and all documents to be delivered to Borrower hereunder
are and shall be duly authorized to do so. This Agreement is fully binding on and enforceable
against Lender.
No Prohibitions. Lender is not prohibited from (i) executing or
4.2.2
delivering this Agreement, (ii) complying with the terms of this Agreement, or
(iii) consummating the transactions contemplated by this Agreement by any contract or other
agreement, by any applicable governmental requirement, agreement, instrument, restriction, or
by any judgment, order, or decree of any governmental authority having jurisdiction over Lender
or Lender's properties.
4.2.3
No Litigation. There is no litigation pending, nor to the knowledge of
Lender threatened, that could affect Lender's ability to consummate the transactions
contemplated by this Agreement, other than as pertain to any defaults under the Mortgage Loan.
4.2.4
Lender Not a Foreign Person. Lender is not a Foreign Person within
the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1954, as amended, and
any applicable regulations thereunder.
4.2.5
No Bankruptcy or Insolvency Proceedings. There are no attachments,
executions, assignments for the benefit of creditors, receiverships, conservatorships, or voluntary
or involuntary proceedings in bankruptcy or pursuant to any other debtor relief laws
contemplated or filed by Lender and Lender has received no notice of any of the same pending
or threatened against Lender.
Each of the representations set forth in this Section 4.2 will be deemed to have been remade by
Lender as of the Closing Date, with the same force and effect as if first made on and as of such
date and will survive the Closing and the filing of the Deed of record.
ARTICLE V
CONDITIONS PRECEDENT
5.1 As to Lender's Obligations. Lender shall not be required to close the transaction
provided for herein unless and until each and everyone of the following conditions has been
satisfied or waived by Lender in writing:
(a)
Owner's Policy.
Lender has received a binding and irrevocable
commitment for a current ALTA form owner's title insurance policy
issued by the Title Company, in an amount satisfactory to Lender,
showing Lender or its designee to be the owner of the Real Estate, subject
only to the Permitted Exceptions, and with such endorsements as may be
reasonably requested by Lender. The cost of such commitment (and the
title policy to be issued pursuant thereto) shall be paid by Lender;
12
(b)
Survey. Lender has received a plat of survey of the Real Estate, prepared
and certified to Lender and the Title Company, in accordance with the
standard detail requirements for Class A Land Title Surveys currently
promulgated by the American Congress on Surveying and Mapping and
the American Title Association, which survey discloses that there are no:
(i) encroachments onto the Land from any adjacent property, (ii)
encroachments by or from the Real Estate onto any adjacent property, (iii)
violations of or encroachments on any recorded building lines, restrictions
or easements affecting the Real Estate, (iv) exceptions to title other than
the Permitted Exceptions or (v) other matters to which Lender objects.
The cost of such survey shall be paid by Lender.
(c)
Searches. Lender has obtained searches of the records of the Recorder of
Deeds of
County,
, the Secretary of State of _ _
and the U.S. District Court for the
District of
and the
jurisdictions in which Borrower resides or has its principal place of
business, confirming the absence of any security interests, judgments, tax
liens and bankruptcy proceedings affecting Borrower's interest in the
Property (except the Permitted Exceptions). The cost of such searches
shall be paid by Lender.
(d)
Environmental Assessment. Lender has obtained a current environmental
survey of the Property reasonably satisfactory to Lender. The cost of such
assessment shall be paid by Lender.
(e)
Representations and Warranties. All of the representations and warranties
of Borrower contained in Section 4.1 hereof are true and correct.
(f)
Borrower's Deliveries. Borrower shall have delivered to or for the benefit
of Lender, on or before the Closing Date, all of the documents required of
Borrower pursuant to Sections 7.2 and 7.4 hereof.
(g)
Covenants of Borrower. Borrower shall have performed in all material
respects all of its covenants and other obligations under this Agreement.
(h)
Modification of Management Agreement. Lender and Manager shall have
entered into a modification of the Management Agreement.
(i)
Modification of Franchise Agreement. Lender and Manager shall have
entered into a modification of the Franchise AgreemeI)t.
(j)
Hotel Manager Recognition Letter. Lender (or, if applicable, any
alternative designee of Lender) shall have received from Hotel Manager
written confmnation (in form and substance reasonably satisfactory to
Lender) that from and after Closing all funds held in the Operating
Account and accounts receivable transferred under this Agreement shall
belong to Lender (or if applicable, any alternative designee of Lender) and
Hotel Manager will recognize Lender or Lender's Designee as the
13
successor owner of the Property upon its acquisition of ownership of the
Property.
(k)
License Agreement. Lender (or, if applicable, any alternative designee of
Lender) shall have entered into a license agreement with the owner of the
" for use in connection with the hotel and
name!mark "
conference center, in form and substance acceptable to Lender.
(1)
Liquor Licenses!Authorizations. Lender shall have determined that
Lender (or, if applicable, any alternative designee of Lender) or its
manager of the Property shall hold or otherwise have the right to use in the
ordinary course of business all liquor licenses and other authorizations
currently utilized in connection with the operation of the Property.
(m)
No Material Adverse Change. There shall have been no material adverse
change in the condition of the Project.
(n)
[Sale of Mortgage Loan. Lender and Prospective Purchaser shall have
consummated Prospective Purchaser's acquisition of the Mortgage Loan.]
Each of the conditions contained in this Section are intended for the benefit of Lender
and may be waived in whole or in part, in writing, by Lender and shall be deemed to have been
waived automatically if Lender closes under this Agreement. Lender shall have the remedies set
forth in Section 9.1 hereof, which Section contains remedies of Lender, if any of the following
conditions are not satisfied on account of any default or other breach by Borrower.
5.2 As to Borrower's Obligations. Borrower shall not be required to close the
transaction provided for herein unless and until each and everyone of the following conditions
has been satisfied or waived by Borrower in writing:
(a)
Lender's Deliveries. Lender shall have delivered or caused to be delivered
to or for the benefit of Borrower, on or before the Closing Date, all of the
documents and payments required of Lender pursuant to Sections 7.3 and
7.4 hereof.
(b)
Covenants of Lender. Lender shall have performed in all material respects
all of its covenants and other obligations under this Agreement.
Each of the conditions contained in this Section are intended for the benefit of Borrower
and may be waived in whole or in part, in writing, by Borrower or shall be deemed to have been
waived automatically upon Closing of the sale to Lender.
ARTICLE VI
COVENANTS OF BORROWER
6.1 Initial Deliveries. Within five (5) days after the Effective Date, Borrower shall
deliver to Lender, or otherwise make available to Lender in a form and substance reasonably
acceptable to Lender, the following:
14
(a)
A complete inventory of all Personal Property which is to be conveyed
pursuant to the Bill of Sale, identifying with as much specificity as
possible all items of Tangible Personal Property and Intangibles, including
the present locations of Tangible Personal Property and written evidence
of Intangible Personal Property. The inventory shall indicate the Personal
Property which has been fully paid for, the Personal Property on which a
balance is owed to the vendor thereof, the amounts owed thereon, and the
name, address and phone number of the party to whom such amounts are
owed;
(b)
Originals of the Management Agreement, Franchise Agreement, Leases,
Leased Property Agreements, Occupancy Agreements, Operating
Agreements, Loan Documents and all other contracts and agreements
relating to the ownership or operation of the Project, including any and all
supplements and amendments to any of the foregoing;
(c)
A detailed written description of all Advanced Bookings;
(d)
A detailed written description of all Deposits;
(e)
Evidence of the payment of real estate taxes levied against the Real
Property that are due and payable; and
(1)
A detailed description of any and all violation notices, notices of default,
notices of litigation or other claims, notices of non-renewal and other
notices received or given by or on behalf of Borrower relating to the
ownership, maintenance, repair, insurance or use of the Property.
6.2 Updated Deliveries. Not later than five (5) days prior to the Closing Date,
Borrower shall'deliver to Lender, or otherwise make available to Lender in a form and
substance reasonably acceptable to Lender, the following:
(a)
Update of the materials described in Section 6.1 above, covering the
period from and after the date such materials were prepared; and
(b)
Consents from all third parties, governmental or otherwise, that are
necessary for the transactions contemplated under this Agreement.
6.3 Inspection. Lender, [prospective Purchaser] and [their respective] [its] agents,
employees and contractors may, at any time prior to and between the Effective Date and
Closing:
(a)
Inspect, audit and transcribe the books and records, agreements, insurance
policies and all other documents and correspondence related to the Project
which are in the possession or control of Borrower; and
(b)
Inspect the Real Estate and Personal Property.
15
Borrower shall reasonably cooperate in connection with all such inspections.
6.4 Negative Covenants. Between the Effective Date and the Closing, Borrower shall
not:
(a)
Enter into any leases, contracts or agreements that would impose any
obligation to liability with respect to the Project after Closing, without first
obtaining the written consent of Lender; or
(b)
Amend, modify, waive or terminate any agreement or waive any rights
under any agreement that would impose any obligation to liability with
respect to the Project after Closing, without first obtaining the written
consent of Lender; or
(c)
Conveyor remove from the Improvements, or from any other location
where now located, any of the Personal Property otherwise remove or
convey (or agree to remove or convey) any component of the Project; or
(d)
Transfer or withdraw any moneys from any escrow, reserve or similar
account relating to the Property without the prior written consent of
Lender; or
(e)
Make any principal payment on the Mortgage Loan; or
(f)
Default in the performance of any of Borrower's obligations under the
Loan Documents, except that (for purposes of this subsection) Borrower
shall not be obligated to pay any installment of interest due and owing
under the Loan Documents if and to the extent that revenues from the
Project are not sufficient to pay the same and all expenses of operating the
Project incurred in the Ordinary Course of Business.
6.5 Affirmative Covenants. Between the Effective Date and the Closing, Borrower
shall:
(a)
Operate the Project in the Ordinary Course of Business; and
(b)
ARTICLE VII
CLOSING
7.1 Closing. The Closing shall occur on the Closing Date. As more particularly
described below, at the Closing the parties hereto will (i) execute or cause to be executed, or
instruct the Escrow Agent to release, all of the documents required to be delivered in
connection with the transactions contemplated hereby (the "Closing Documents"), (ii) deliver
or cause to be delivered the same to Escrow Agent, and (iii) take or cause to be taken all other
action required to be taken in respect of the transactions contemplated hereby. The Closing will
occur at the offices of the Escrow Agent, or at such other place as Lender and Borrower may
16
mutually agree, through a customary New York-style closing. Possession of the Property shall
be delivered to Lender at the Closing. Lender reserves the right to designate a designee for
purposes of the Closing Documents prior to Closing.
7.2 Borrower's Deliveries. At or prior to the Closing, Borrower shall deliver to
Escrow Agent all of the following instruments, each of which shall have been duly executed
and, where applicable, acknowledged and/or sworn, on behalf of Borrower and shall be dated to
be effective as of the Closing Date:
(a)
The Deed;
(b)
The Bill of Sale;
(c)
The Assignment and Assumption Agreement;
(d)
The Assignment of Occupancy Agreements;
(e)
The FIRPTA Certificate;
(f)
The Covenant Not to Sue.
(g)
A certificate or registration of title for all vans and any other owned
vehicles or other Personal Property included in the Property which
requires such certification or registration, duly executed by Borrower,
coriveying such vehicle or such other Personal Property to Lender;
(h)
An ALTA extended coverage statement and gap undertaking;
(i)
Written opinion letter addressed to Lender [and its Designee] from
Borrower's counsel opining on the due authorization and execution of this
Agreement and the Closing Documents by Borrower and Guarantors, their
validity and enforceability against Borrower and Guarantors, and that the
mortgage and related security interests are valid and properly perfected
under applicable state law.
G)
Any other document or instrument specifically required by this Agreement
to be delivered by Borrower on or before the Closing Date, or which shall
assist with the consummation of the transactions contemplated hereby.
7.3 Lender's Deliveries. At or prior to the Closing, Lender shall deliver or cause to be
delivered to Escrow Agent the following, duly executed and, where applicable, acknowledged
and/or sworn on behalf of Lender, or duly executed, and, where applicable, acknowledged
and/or sworn in to, by the applicable third party and dated as ofthe Closing Date:
(a)
The Assignment and Assumption Agreement;
(b)
The Assignment of Occupancy Agreements;
17
(c)
The Covenant Not to Sue;
(d)
Any other documents or instruments specifically required by this
Agreement to be delivered by Lender on or before the Closing Date.
7.4 Mutual Deliveries. At the Closing, Lender and Borrower shall mutually execute
and deliver or cause to be delivered:
(a)
A closing statement reflecting any closing costs and adjustments required
hereunder.
(b)
Such other and further documents, papers and instruments as may be
reasonably required by the parties hereto or their respective counselor the
Escrow Agent which are not inconsistent with this Agreement or the other
Closing Documents.
To the extent the delivery of any ofthe items in Sections 7.2, 7.3 or 7.4 of this Agreement
are conditions precedent to the obligation of a party pursuant to Sections 5.1 or 5.2 of this
Agreement, and the condition relating to any such item is not satisfied as of Closing, but the
party for whose benefit such unsatisfied condition is made elects, nonetheless, to proceed in
writing to Closing, the delivery of the item applicable to the unsatisfied condition shall not be
required pursuant to the provisions of Sections 7.2, 7.3 or 7.4 of this Agreement.
7.5 Closing Costs. Each party hereto shall pay its own legal fees and expenses and
other costs and expenses incurred by it in connection with the transaction contemplated
hereunder, except that Lender shall pay the following costs related to the transactions
contemplated herein, including without limitation: (i) all recording and filing fees for the Deed
and any release or assignment of the Loan DocumeI)ts; (ii) any transfer or other similar taxes
and surtaxes due with respect to the transfer of title that may be imposed by the State of
_ _ _ _ _ , County of
or Village of
(it being understood that the
parties believe that no such taxes or surtaxes are applicable to the transaction contemplated
under this Agreement); and (iii) the cost for title insurance, endorsements and surveys, and any
other costs as may be required by Lender. The provisions of this Section 7.5 shall survive the
Closing and any termination of this Agreement.
7.6
Insurance and Utilities. The present insurance coverage and public utility service
on the Property shall be terminated as of the Closing Date and there shall be no proration of
insurance premiums or public utility bills.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Fire or Other Casualty. If, prior to Closing, the Project is damaged by fire or other
casualty, then Lender shall have the right, at its option, to terminate this Agreement upon
written notice thereof delivered to Borrower prior to Closing. Otherwise, the Closing shall take
place in accordance with this Agreement and Borrower shall assign to Lender at the Closing all
of Borrower's interest in any insurance proceeds that may be payable to Borrower on account
18
of any such fire or other casualty, Borrower will have no obligation to pay any portion of any
deductibles or coinsurance payments under any policies related to such insurance proceeds.
8.2 Condemnation. If, prior to the Closing, there shall occur a taking by condemnation
of any part of or rights appurtenant to the Project, Lender shall have the right, at its option, to
terminate this Agreement upon written notice thereof delivered to Borrower prior to Closing.
Otherwise, the Closing shall take place in accordance with this Agreement and Borrower shall
assign to Lender at the Closing all of Borrower's interest in any condemnation award with
respect to the Project which may be payable to Borrower on account of any such condemnation.
8.3 Broker. There is no real estate broker involved in this transaction. Lender warrants
and represents to Borrower that Lender has not dealt with any real estate broker in connection
with this transaction, and Lender shall indemnify Borrower and hold Borrower harmless from
and against any claims, suits, demands or liabilities of any kind or nature whatsoever arising on
account of the claim of any person, firm or corporation to a real estate brokerage commission or
a finder's fee as a result of having dealt with Lender. Borrower warrants and represents to
Lender that Borrower has not dealt with any real estate broker in connection with this
transaction, and Borrower shall indemnify Lender and hold Lender harmless from and against
any claims, suits, demands or liabilities of any kind or nature whatsoever arising on account of
the claim of any person, firm or corporation to a real estate brokerage commission or a finder's
fee as a result of having dealt with Borrower. The provisions of this Section 8.3 shall survive
the Closing and any termination of this Agreement.
8.4 Bulk Sale and Tax Clearance Certificates. Borrower and Lender believe that (i) the
transaction contemplated hereunder is 'not subject to any statutory bulk sale or similar
requirements and (ii) such transaction does not require any sale and occupancy or similar tax
clearance certificates in connection with Closing (collectively, "Tax Clearances").
Accordingly, the parties do not intend to file any applications or similar materials seeking Tax
Clearances relative to the transaction contemplated hereunder. However, if any governmental
or quasi-governmental body or person ever seeks to impose any liability against Lender or any
Lender Released Party on account of any actual or alleged failure to obtain any Tax Clearances,
Borrower shall indemnify and hold Lender and the other Lender Released Parties harmless
from any loss, cost, claim expense or liability which Lender or any other Lender Released Party
may suffer or incur as a result on account of any tax or other liability of Borrower. The
provisions of this Section 8.4 shall survive the Closing.
8.5 Confidentiality. Lender, Borrower and Guarantors hereby covenant and agree
that, unless consented to in writing by the other party, no press release or other public
disclosure concerning this transaction shall be made, and each party agrees to use best efforts to
prevent public disclosure of this transaction, other than (a) to directors and officers of the
parties, and employees, agents and affiliates of the parties who are involved in the ordinary
course of business with this transaction, and to any proposed purchasers, investors or lenders
with respect to the Project, all of which shall be instructed to comply with the non-disclosure
provisions hereof; (b) in response to lawful process or subpoena or other valid or enforceable
order of a court of competent jurisdiction; (c) in any filings with governmental and regulatory
authorities required by reason of the transactions provided for herein; and (d) by Lender to any
existing or any other third party reasonably believed necessary by Lender in connection with its
19
due diligence of the Property and evaluation of this transaction. No press release or other
public disclosure before or after Closing shall contain Lender's name without Lender's prior
written consent. Borrower and Guarantors covenant not to discuss or disclose the terms and
conditions of this transaction with any other borrower of Lender. The provisions of this
Section 8.5 shall survive the Closing.
8.6 Release. Effective as of the Closing, Borrower and Guarantors, for and on behalf
of each of themselves and the Borrower Released Parties, hereby unconditionally and
irrevocably remises, releases, waives and forever discharges Lender, the other Lender Released
Parties and each of the respective affiliates, successors and assigns of the foregoing from and
against any all actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, claims, and demands whatsoever, in law or equity,
which the Borrower, .Guarantors and the Borrower Released Parties and their heirs, executors,
administrators, receivers, successors and assigns ever had, now have or hereafter can, shall or
may have, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning
of the world to the day of the date of this RELEASE in any way connected with the Project, the
Mortgage Loan and the Loan Documents. Furthermore, Borrower and Guarantors agree that
they will not commence any action to sue for any claim, injury or cause of action, of any kind,
arising out of any prior, current or future action of the Seller Released Parties or any action by
or through Seller Released Parties. Nothing contained in this Section is intended to release,
waive or modify (a) any collateral or other security for the Mortgage Loan or (b) any of the
parties' respective duties, obligations or liabilities under the Agreement or the Closing
Documents; all of which survive the making of this instrument. The provisions of this Section
8.6 shall survive Closing.
8.7 Disclaimers regarding Potential Sale of Mortgage Loan. Borrower and Guarantors
understand and agree that (a) [neither Prospective Purchaser nor] Lender is [not] under any
obligation to purchase or sell the Mortgage Loan, [and] (b) [neither Prospective Purchaser nor]
Lender is [not] the agent of the other[, and (c) unless and until Prospective Purchaser shall have
consummated the purchase of the Mortgage Loan, Prospective Purchaser is not authorized to
enter into any agreement on behalf of Lender or to make any modification, amendment, waiver
or other change on behalf of Lender]. Borrower and Guarantors hereby agree not to make any
claim that is contrary to, or inconsistent with, the foregoing understandings and agreements.
[Lender shall give Borrower prompt notice if and when Prospective Purchaser (or its designee)
acquires ownership of the Mortgage Loan from Lender.]
8.8 Management and Franchise Agreements. Borrower and Guarantors acknowledge
that Lender [and/or Prospective Purchaser] may negotiate new management with Manager (a
"New Management Agreement") and/or a new franchise agreement with Franchisor (a "New
Franchise Agreement") to be effective (if applicable) after Closing. In the event that any such
New Management Agreement is entered into prior to Closing, then Borrower and Guarantors
would cooperate with the termination of the existing Management Agreement and the
Assignment and Assumption would no longer include the existing Management Agreement. In
the event that any such New Franchise Agreement is entered into prior to Closing, then
Borrower and Guarantors would cooperate with the termination of the existing Franchise
20
Agreement and the Assignment and Assumption would no longer include the existing Franchise
Agreement.
ARTICLE IX
DEFAULT; TERMINATION RIGHTS
9.1 Default by BorrowerlFailure of Conditions Precedent. If any condition set forth
herein for the benefit of Lender cannot or will not be satisfied prior to Closing, and if Borrower
fails to satisfy that condition within ten (10) business days after written notice thereof from
Lender (or such other time period as may be explicitly provided for herein), (which ten (10)
business day or other such time periods shall, if necessary, automatically extend the Closing
Date to the expiration date of such ten (10) business day or other such time period), Lender, as
its sole and exclusive remedy shall elect either (a) to terminate this Agreement in which event
the parties hereto shall be released from all further obligations hereunder except those which
expressly survive a termination of this Agreement, or (b) to waive its right to terminate, and
instead, to proceed to Closing. Notwithstanding the preceding sentence, if Closing does not
occur on account of Borrower's failure to perform any of its obligations under this Agreement
and such default is not timely cured during the aforedescribed period, and if all other conditions
precedent to Lender's and Borrower's obligations hereunder have been waived or satisfied, then
Lender's sole remedy for such default shall be either (i) to terminate this Agreement and to
retain its right to enforce the other provisions of this Agreement which expressly survive a
termination of this Agreement and to pursue a claim for damages directly resulting from such
default, or (ii) to pursue a suit for specific performance of Borrower's obligations under this
Agreement.
9.2 Default by LenderlFailure of Conditions Precedent. If any condition set forth
herein for the benefit of Borrower cannot or will not be satisfied prior to Closing, and if Lender
fails to satisfy that condition within ten (10) business days after notice thereof from Borrower
(or such other time period as may be explicitly provided for herein), (which ten (10) business
day or other such time periods shall, if necessary, automatically extend the Closing Date to the
expiration date of such ten (10) business day or other such time period), Borrower, as its sole
and exclusive remedy, shall elect either (a) to terminate this Agreement in which event the
parties hereto shall be released from all further obligations under this Agreement except those
which expressly survive a termination of this Agreement, or (b) to waive its right to terminate,
and instead, to proceed to Closing.
9.3 Costs and Attorneys' Fees. In the event of any litigation or dispute between the
parties arising out of or in any way connected with this Agreement, resulting in any litigation,
then the prevailing party in such litigation shall be entitled to recover its costs of prosecuting
and/or defending same, including, without limitation, reasonable attorneys' fees at trial and all
appellate levels.
9.4 Conditions Subsequent. Consummation of the transactions contemplated by this
Agreement will be void and will be of no force or effect and the Borrower and Guarantors will
be obligated to the extent required by the Loan Documents to repay the Loan if anyone or more
of the matters described at sub-paragraphs (a) through (c) of this Section 9.4 occurs. The
reinstatement of the obligations of the Borrower to pay the Loan to the extent obligated will not
21
operate to affect or alter the release given by the Borrower to the Lender pursuant to this
Agreement. The conditions subsequent are as follows:
(a)
Litigation. If Borrower, or any person claiming by or through the
Borrower commences, joins in, assists, cooperates in or participates as an adverse party or as an
adverse witness in any suit or other proceeding against the Lender relating to the Loan, the Loan
Documents or the Property. The Lender agrees that in the event Borrower is involuntarily
compelled to be a party to a suit or other proceeding against the Lender instituted by a party
other than Borrower or any party related to Borrower and relating to the aforementioned, and
provided Borrower and any party related to Borrower do not join in, assist, cooperate or
participate in any such suit or proceeding except to the extent such party is legally compelled to
do so, the provisions of this Section shall not be deemed to have come into effect; or
A voidance. If the conveyance of the Property to Lender is ever rendered
void or rescinded by operation of law or by order of any State or Federal Court of competent
jurisdiction by reason of an order arising out of any claim or proceeding initiated or commenced,
against or in favor of, on behalf of, or in concert with, directly or indirectly, the Borrower or any
person claiming by or through Borrower or any of its respective partners, agents, employees,
representatives, officers, directors, shareholders, subsidiaries, affiliates, heirs, personal
representatives, successors or assigns; or
(b)
(c)
Release. If the release set forth in Section 8.6 of this Agreement is ever
rendered void, is rescinded or adjudicated unenforceable by operation of law or by order of any
State or Federal Court of competent jurisdiction by reason of an order arising out of any claim or
proceeding initiated or commenced in favor of, on behalf of or in concert with, directly or
indirectly, Borrower or any person claiming by or through Borrower, or its agents, employees,
representatives, officers, directors, shareholders, subsidiaries, affiliates, heirs, personal
representatives, successors or assigns.
9.4 Subsequent Oligations. With respect to any transfer or payments made by
Borrower to Lender pursuant to this Agreement or any other agreement with Lender in
existence prior to, on or after the date of this Agreement, which are for any reason subsequently
declared to be fraudulent, preferential or otherwise void, voidable or recoverable (within the
meaning of any state or federal law relating to creditors rights, collectively, "Voidable
Transfers"), in whole or in part for any reason, and Lender is required to repay, disgorge or
restore the amount of any such Voidable Transfers, then, as to the amount repaid or restored
pursuant to any such Voidable Transfers, the liability of Borrower shall automatically be
revived, reinstated and restored in such amount or amounts (together with all costs, expenses
and attorneys' fees of the Lender related thereto), and shall exist as though such Voidable
Transfers had never been made to the Lender and any security therefor shall be reinstated.
Nothing set forth herein is an admission that such Voidable Transfers have occurred or will
occur.
The provisions of this ARTICLE IX shall survive the Closing or any termination of this
Agreement.
22
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Completeness: Modification. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby and supersedes
all prior discussions, understandings, agreements and negotiations between the parties hereto.
This Agreement may be modified only by a written instrument duly executed by the parties
hereto.
10.2 Assignments. Neither party may assign its rights hereunder without the prior
consent of the other party, which consent may, at such other party's discretion, be withheld,
provided, however, Lender may assign its rights hereunder to [Prospective Purchaser or] any
entity under common control with Lender.
10.3 Successors and Assigns. This Agreement shall bind and inure to the benefit of the
parties hereto and their permitted respective successors and assigns.
10.4 Days. If any action is required to be performed, or if any notice, consent or other
communication is given, on a day that is a Saturday or Sunday or a legal holiday in the
jurisdiction in which the action is required to be performed or in which is located the intended
recipient of such notice, consent or other communication, such performance shall be deemed to
be required, and such notice, consent or other communication shall be deemed to be given, on
the first business day following such Saturday, Sunday or legal holiday. Unless otherwise
specified herein, all references herein to a "day" or "days" shall refer to calendar days and not
business days.
10.5 Governing Law. This Agreement and all documents referred to herein shall be
governed by and construed and interpreted in accordance with the laws of the state in which the
Project is located without regard to its principles of conflicts of law.
10.6 Countemarts. To facilitate execution, this Agreement may be executed in as many
counterparts as may be required. It shall not be necessary that the signature on behalf of both
parties hereto appear on each counterpart hereof. All counterparts hereof shall collectively
constitute a single agreement. Telecopied signatures shall have the same valid and binding
effect as original signatures.
.
10.7 Severability. If any term, covenant or condition of this Agreement, or the
application thereof to any person or circumstance, shall to any extent be invalid or
unenforceable, the remainder of this Agreement, or the application of such term, covenant or
condition to other persons or circumstances, shall not be affected thereby, and each term,
covenant or condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
10.8 Costs. Regardless of whether Closing occurs hereunder, and except as otherwise
expressly provided herein, each party hereto shall be responsible for its own costs in connection
with this Agreement and the transactions contemplated hereby, including, without limitation,
fees of attorneys, engineers and accountants. The provisions of this Section 10.8 shall survive
termination of this Agreement.
23
10.9 Notices. All notices, requests, demands and other communications hereunder shall
be in writing and shall be delivered by hand, transmitted by facsimile transmission, sent prepaid
for next-day delivery by Federal Express (or a comparable overnight delivery service) or sent
by the United States mail, certified, postage prepaid, return receipt requested, at the addresses
Any notice, request, demand or other
and with such copies as designated below.
communication delivered or sent in the manner aforesaid may be given by the party required to
give such notice, etc., or its attorney, and shall be deemed given or made (as the case may be)
when actually delivered to or refused by the intended recipient.
If to Borrower:
Facsimile: __________
Email: _ _ _ _ _ _ _ _ __
and:
Email: _ _ _ _ _ _ _ _ __
If to Lender:
Email: _ _ _ _ _ _ _ _ __
and:
Email: _ _ _ _ _ _ _ _ __
or to such other address as the intended recipient may have specified in a notice to the other
party. Any party hereto may change its address or designate different or other persons or
entities to receive copies by notifying the other party in a manner described in this Section.
10.10 Absolute Conveyance.
Borrower acknowledges and agrees that (a) the
conveyance to Lender of the Property, according to the terms of this Agreement is an absolute
conveyance of all of Borrower's right, title and interest in and to the Property in fact as well as
form and is not intended as a mortgage, trust conveyance, deed of trust or security instrument of
any kind; and (b) the consideration for such conveyance is exactly as recited herein and
Borrower has no further interest or claims of any kind (including but not limited to homestead
rights and rights of reinstatement or redemption) in or to the Property or any other part of the
Project, or to the proceeds and profits which may be derived thereof, whether sold for more or
less than the outstanding indebtedness due under the Loan Documents.
24
10.11 No Merger. The parties hereto acknowledge and agree that this Agreement and
the Closing Documents shall not cancel or release the Mortgage Loan (although the Covenant
Not to Sue does by its terms affect the Lender's right to enforce the Loan Documents as against
Borrower and Guarantors personally) and that all of the Loan Documents which evidence or
secure such indebtedness shall remain in full force and effect (subject to the terms of this
Agreement) after the transactions contemplated by this Agreement have been consummated.
The parties hereto further acknowledge and agree that the interest of Lender or Lender's
designees in the Property under the conveyances provided for in this Agreement shall not merge
with the interest of Lender in the Property under the Loan Documents. It is the express
intention of each of the parties hereto (and all of the conveyances provided for in this
Agreement shall so recite) that such interest of Lender or Lender's designees in the Property
shall not merge, but shall be and remain at all times separate and distinct, notwithstanding any
union of said interest in Lender at any time by purchase, termination or otherwise, and that the
liens and security interests of Lender in the Property created by the Loan Documents shall be
and remain at all times valid and continuous liens and security interests in the Property.
BORROWER AND LENDER HEREBY
10.12 Waiver of Jurv Trial.
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS AGREEMENT, THE CLOSING DOCUMENTS, THE LOAN DOCUMENTS OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE BORROWER OR LENDER WITH
RESPECT THERETO. THIS PROVISION SETS FORTH THE MUTUAL DESIRE OF
BORROWER AND LENDER TO AVOID DELAYS IN THE RESOLUTION OF
DISPUTES INVOLVING THIS AGREEMENT. BORROWER ACKNOWLEDGES
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO
ENTER INTO THIS AGREEMENT.
10.13 Invalidation of Closing Documents. If, in any insolvency, bankruptcy or
reorganization proceedings or other proceedings similar to the foregoing which may be instituted
in any state or federal court or other tribunal, by or against Borrower, the Deed or any other
Closing Document, or any other documents or instruments to be executed and delivered by
Borrower pursuant to the terms of this Agreement, are challenged and sought to be canceled,
nullified or set aside, and if any such documents or instruments are canceled, nullified or set aside
by a final nonappealable decision of a state or federal court, then at the option of Lender either (i)
all Closing Documents and all other documents and instruments executed and delivered pursuant
to the terms of this Agreement, including any release, shall be void and of no further force and
effect and in such event, Lender shall have any and all rights and remedies available to it under
the Loan Documents or under this Agreement; or (ii) Lender may invalidate any release as to
those entities that have become involved in bankruptcy, insolvency or reorganization proceedings
and allow this Agreement to remain in full force and effect in all other respects.
10.14 Incorporation by Reference. All of the exhibits and schedules attached hereto are
by this reference incorporated herein and made a part hereof.
25
10.15 Further Assurances. Borrower and Lender each covenant and agree to sign,
execute and deliver, or cause to be signed, executed and delivered, and to do or make, or cause
to be done or made, upon the written request of the other party, any and all notices, filings,
agreements, instruments, papers, deeds, acts or things, supplemental, confirmatory or otherwise,
as may be reasonably required by either party hereto for the purpose of or in connection with
consummating the transactions described herein provided that compliance with this
Section 10.12 shall not increase the liability of the complying party.
10.16 No Partnership. This Agreement does not and shall not be construed to create a
partnership, joint venture or any other relationship between the parties hereto except the
relationship of Borrower and Lender specifically established hereby.
10.17 Time of Essence. Time is of the essence with respect to every provision hereof.
10.18 Signatory Exculpation: Limitation of Liability.
(a)
The signatory(ies) for Lender and Borrower is/are executing this
Agreement in his/their capacity as representative of such party and not
individually and, therefore, shall have no personal or individual liability of
any kind in connection with this Agreement and the transactions
contemplated by it.
(b)
No constituent member or partner in or agent of Lender, nor any advisor,
trustee, director, officer, employee, beneficiary, shareholder, member,
partner, participant, representative or agent of any corporation or trust that
is or becomes a constituent partner or member in Lender shall have any
personal liability, directly or indirectly, under or in connection with this
Agreement or any agreement made or entered into under or pursuant to the
provisions of this Agreement, or any amendment or amendments to any of
the foregoing made at any time or times, heretofore or hereafter, and
Borrower and its successors and assigns and, without limitation, all other
persons and entities, shall look solely to Lender's assets for the payment
of any claim or for any performance, and Borrower, on behalf of itself and
its successors and assigns, hereby waives any and all such personal
liability.
10.19 Rules of Construction. The following rules shall apply to the construction and
interpretation of this Agreement, unless otherwise indicated by the context:
(a)
Singular words shall connote the plural number as well as the singular and
vice versa, and the masculine shall include the feminine and the neuter.
(b)
All references herein to particular articles, sections, subsections, clauses or
exhibits are references to articles, sections, subsections, clauses or exhibits
of this Agreement. .
26
(c)
The table of contents and headings contained herein are solely for
convenience of reference and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect.
(d)
Each party hereto and its counsel have reviewed and revised (or requested
. revisions of) this Agreement and have participated in the preparation of
this Agreement, and therefore any usual rules of construction requiring
that ambiguities are to be resolved against a particular party shall not be
applicable in the construction and interpretation of this Agreement or any
exhibits hereto.
.
10.20 No Recording. Neither this Agreement nor any memorandum hereof, or any other
instrument intended to give notice hereof (or which actually gives notice hereof) shall be
recorded.
10.21 Email or Facsimile Signatures. The execution of this Agreement and all notices
given hereunder and all amendments hereto, may be effected by emailed or facsimile
signatures, all of which shall be treated as originals; provided, however, that the party receiving
a document with such an emailed or facsimile signature may, by notice to the other, require the
prompt delivery of an original signature to evidence and confirm the delivery of the emailed or
facsimile signature.
10.22 Effective Date. The "Effective Date" shall mean the first date on which Lender
and Borrower shall have executed this Agreement.
10.23 Survival. The provisions of this Article X shall survive Closing. Unless
otherwise expressly provided in this Agreement, all of the covenants of the parties contained in
this Agreement shall not survive the Closing and shall merge into the Closing Documents.
Upon Closing, any breach or default of any such covenants that do not expressly survive the
Closing, whether known or unknown, shall be deemed waived by the Closing.
[REMAINDER OF PAGE LEFT BLANK. SIGNATURE PAGES FOLLOW.]
27
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
executed in their names by their respective duly authorized representatives.
BORROWER:
_____________________________________ ,a
_________ limited partnership
By: _ _ _ _ _ _ _ _ _ _ _ _ __
Name: _______________________________
Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___
LENDER:
_ _ _ _ _ LIFE INSURANCE COMPANY
By:. _ _ _ _ _ _ _ _ _ _ ___
Name: ______________________
Title:. _ _ _ _ _ _ _ _ _ _ ___
Date: _ _ _ _ _ _ _ _ ___
[continued on next pagel
28
JOINDER
The undersigned Guarantors hereby join in the execution of this Agreement for the
purpose of making those acknowledgments, releases and agreements of Guarantors expressly set
forth in this Agreement and of guarantying Borrower's performance of its obligations and
liabilities under this Agreement.
GUARANTORS:
29
Exhibits and Schedules
A-Land
B - Form of Deed
C - Form of Bill of Sale
D - Form of Assignment and Assumption Agreement
E - Form of Assignment of Occupancy Agreements
F - Form of FIRPTA Certificate
G - Covenant Not to Sue
H - Permitted Exceptions
Schedule 4.1.6
Schedule 4.1.11
Schedule 4.1.12
Schedule 4.1.13
Schedule 4.1.14
Schedule 4.1.15
30
EXHIBIT A
LAND
EXHIBIT A-I
EXHIBITB
FORM OF DEED
This instrument was prepared by and upon
recording should be returned to:
(For Recorder's Use Onl )
DEED
_ _ _ _ _ _ _ _ _ _" a
limited partnership ("Grantor"), for and in
consideration of the sum of Ten and NollOO Dollars ($10.00) cash and other good and valuable
consideration to it paid by
a
_ _ _ _ _ _ ("Grantee"), has GRANTED, BARGAINED, SOLD and CONVEYED and
by these presents does GRANT, BARGAIN, SELL AND CONVEY unto Grantee all of
Grantor's right, title and interest in and to the tract of land (the "Land") in _ _ _ __
County,
more fully described on Exhibit A hereto, together with all
improvements thereon and all easements, rights-of-way, rights and appurtenances appertaining
thereto (the "Property").
TO HAVE AND TO HOLD the Property unto Grantee, its successors and assigns forever.
Address of Grantee:
WITNESS THE EXECUTION HEREOF effective as of _ _ _ _ _ _, 20_.
GRANTOR:
__________________ ,a
_ _ _ _ limited partnership
By: _ _ _ _ _ _ _ _ _ _ _ _ _ __
Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
STATEOF _ _ _ _ _)
SS
)
COUNTY OF _ _ _ _-1)
SS
This instrument was acknowledged before me on
20_, by
_________ , a managing director of _ _ _ _ _ _ as the act and deed of said
entity.
Name:
Notary Public in and for the State of _ __
My commission expires: _ _ _ _ _ _ __
(Seal of Notary)
EXHIBITB -2
Exhibit A to Deed
LEGAL DESCRIPTION
See Attached
EXHffiITB-3
EXHffiITC
BILL OF SALE
For Ten and NollOO Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, _____________
a
limited partnership ("Borrower") hereby conveys to
("Lender") the "Personal Property" as described in that certain Deed in Lieu of Foreclosure
Settlement Agreement dated
, 20_ by and between Borrower and Lender (the
"Agreement") and all other "Property" (as defined in the Agreement) (other than the Real
Property).
TO HAVE AND TO HOLD its right, title and interest in the Personal Property, together
with any rights and appurtenances thereto, unto Lender, its successors and assigns, subject to all
terms and provisions hereof.
Borrower hereby warrants to Lender that Borrower has ownership of and good title to the
Personal Property, that Borrower has the right to transfer the Personal Property, that there are no
liens, encumbrances, charges, or security interests on or against any of the Personal Property
other than the Permitted Exceptions (as defined in the Agreement), that it shall defend the title
and possession hereby transferred against all claims other than the Permitted Exceptions, and that
each item comprising a part of the Personal Property is located at the Property or in the
possession or control of Lender. Except as otherwise expressly set forth herein, Borrower makes
no representations or warranties with respect to the Personal Property and the Personal Property
is transferred to Lender "as is," "where is" with all faults.
IN WITNESS WHEREOF, Borrower had executed this Bill of Sale effective as of
_ _ _ _ _ _ _ _ , 20_.
BORROWER:
___________________,a
_____limited partnership
By: _ _ _ _ _ _ _ _ _ _ _ _ __
Name:. _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Title:. _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Dllie:. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
~
EXHffiITC -1
EXHIBITD
ASSIGNMENT AND ASSUMPTION AGREEMENT
, a
receipt and sufficiency of which are hereby acknowledged,
limited partnership ("Borrower"), hereby assigns and delegates to
_ _ _ _ _ _ _ _ _ _ _ ("Lender") all of Borrower's right, title and interest, in and to the
following (collectively, the "Assigned Agreements"):
(i)
[insert description of Franchise Agreement, if applicable];
(ii)
[insert description of Management Agreement, if applicable];
(iii)
all Operating Agreements (as defined in that certain Deed-in-Lieu of Foreclosure
Settlement Agreement dated
, 20_ by and between
Borrower and Lender as "Lender" (the "Agreement") with respect to the
Property (as defined in the Agreement), including, without limitation, those listed
on Exhibit A attached hereto; and
(iv)
all Leased Property Agreements (as defined in the Agreement) including, without
limitation, those described on Exhibit A attached hereto.
Borrower shall remain liable for all liabilities and obligations of Borrower having accrued
under the Assigned Agreements prior to the assignment effectuated hereby.
If any litigation between Borrower and Lender arises out of the obligations of the parties
under this Assignment and Assumption Agreement or concerning the meaning or interpretation
of any provision contained herein, the losing party shall pay the prevailing party's costs and
expenses of such litigation including, without limitation, reasonable attorneys' fees.
This Assignment and Assumption Agreement may be executed and delivered in any
number of counterparts, each of which so executed and delivered shall be deemed to be an
original and all of which shall constitute one and the same instrument. Telecopied signatures
shall have the same valid and binding effect as original signatures.
IN WITNESS WHEREOF, Borrower and Lender have executed this Assignment as of
_ _ _ _ _ _ _ , 2011.
BORROWER:
_____________~~~----~-------,a
_ _ _ _ _ _ _ limited partnership
EXHIBITD-l
By: _ _ _ _ _ _ _ _ _ _ _ _ __
Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
LENDER:
EXHIBITD-2
Exhibit A to Assignment and Assumption Agreement
ASSIGNED AGREEMENTS
[TO BE ATTACHED]
EXHIBITD- 3
EXHIBITE
FORM OF ASSIGNMENT OF OCCUPANCY AGREEMENTS
ASSIGNMENT OF OCCUPANCY AGREEMENTS
of
which
are
hereby
acknowledged,
receipt
and
sufficiency
_ _ _ _ _ _ _ _ _ _ _ _ _ _, a
limited partnership ("Borrower")
hereby assigns to
("Lender") all of Borrower's right, title and
interest, in and to the Occupancy Agreements, as defined in that certain Deed in Lieu of
Foreclosure Settlement Agreement dated
, 20_ by and between Borrower
and Lender (the "Agreement"), including, without limitation, those listed on Exhibit A attached
hereto.
If any litigation between Borrower and Lender arises out of the obligations of the parties
under this Assignment of Occupancy Agreements or conceming the meaning or interpretation of
any provision contained herein, the losing party shall pay the prevailing party's costs and
expenses of such litigation including, without limitation, reasonable attorneys' fees .
.This Assignment of Occupancy Agreements may be executed and delivered in any
number of counterparts, each of which so executed and delivered shall be deemed to be an
original and all of which shall constitute one and the same instrument. Telecopied signatures
may be attached hereto and shall have the same valid and binding effect as original signatures.
IN WITNESS WHEREOF, Borrower and Lender have executed this Assignment of Occupancy
, 2011.
Agreements as of
[signatures on the following page]
EXHIBIT E-l
BORROWER:
__________________________________,a
_________ limited partnership·
By: _ _ _ _ _ _ _ _ _ _ _ _ __
Name: _________________
Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _-,---_ __
LENDER:
[TBA]
EXHIBITE-2
Exhibit A to Assignment of Occupancy Agreements
Occupancy Agreements
EXHIBITE- 3
EXHIBITF
FORM OF FIRPTA CERTIFICATE
CERTIFICATE OF NON-FOREIGN STATUS
TO:
FROM: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _, a _________ limited partnership
("Borrower")
Section 1445 of the Code provides that a Lender of a U.S. real property interest must withhold
tax if the Borrower is a foreign person. To inform the Lender that withholding of tax is not
required upon the disposition of a U.S. real property interest by Borrower, the undersigned
hereby certifies the following on behalf of Borrower:
(a)
Borrower is not a foreign corporation, foreign partnership, foreign trust, foreign
estate or foreign person (as those terms are defined in the Code and related regulations);
(b)
Borrower's U.S. employer identification number is __________
(c)
Borrower's office address is: _________
and
Borrower understands that this certification may be disclosed to the Internal Revenue
Service by Lender and that any false statement contained herein could be punished by fine,
imprisonment, or both.
Under penalties of perjury, I declare that I have examined this certification, and it is true,
correct, and complete; and I further declare that I have authority to sign this document on behalf
of Borrower.
.BORROWER:
__________________ ,a
_ _ _ _ _ limited partnership
By: __________________
Narne: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
EXHIBITF-4
EXHIBITG
COVENANT NOT TO SUE
This Covenant Not to Sue is made this __ day of
, 20_, by and among
_ _ _ _ _ _ _~INSURANCE COMPANY, a
corporation (together with its
successors and assigns, "Lender"),
,a
limited partnership
("Borrower") and
and
(collectively, "Guarantors",
and together with Borrower, the "Obligated Parties").
RECITALS
Lender and Borrower have entered into a Deed in Lieu of Foreclosure Settlement
A.
Agreement dated
, 20_ ("Settlement Agreement").
Pursuant to the Settlement Agreement, the defaults of the Obligated Parties under
B.
the Loan Documents are to be resolved by, among other things, the execution and delivery of this
Covenant Not to Sue.
NOW THEREFORE, in consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
and for the purposes stated in the preceding paragraph, Lender, Borrower and Guarantors hereby
agree as follows:
1.
Terms used in this Covenant Not to Sue and not specifically defined herein shall
have the meaning given such terms in the Settlement Agreement.
2.
Lender, for itself and its successors and assigns, hereby covenants and agrees that it
shall not sue, commence, assert, bring or file in any court or other tribunal, in any jurisdiction, any
suit, action, litigation, complaint, counterclaim, cross-claim, cross-complaint, third-party complaint
or other pleading (with the exception of mandatory counter or cross-claims) setting forth any claim
or cause of action as described below, or otherwise seeking affirmative relief against any of the
Obligated Parties or their respective past, present or future partners, or the past, present or future
directors, officers, employees, attorneys, agents or representatives, if any, of any of their partners
or any or all executors, administrators, successors, heirs, predecessors, successors or assigns of any
kind of the foregoing (collectively, the "Borrower Related Parties") for any claims or causes of
action of any kind or nature whatsoever, known or unknown, which Lender has, has had or may
have against any or all of the Borrower Related Parties, in any way arising from or connected with
the Mortgage Loan or the Loan Documents; provided, however, that this Covenant Not to Sue
shall not apply to any claims or causes of action based on (a) fraud, (b) a material breach of any of
the covenants, agreements, warranties, representations or obligations of Borrower under the
Settlement Agreement or any of the Closing Documents executed pursuant to the Settlement
Agreement (including, without limitation, any violation of Section 10.13 of the Settlement
Agreement), (c) obligations of the Obligated Parties under that certain Environmental Indemnity
for the benefit of Lender dated
, 20_, (d) any foreclosure action brought by Lender
under the Loan Documents for the sole purpose of obtaining lien free title to the Property, where
no monetary claims are asserted against the Borrower Related Parties, or (e) any liability imposed
on Lender on any Lender Related Parties (hereinafter defmed) resulting from the failure of any of
EXHIBIT G- 1
the Borrower Related Parties to pay any federal, state or local taxes.
3.
Lender, for and on behalf of itself and its successors and assigns, represents that it
has not sold, assigned or transferred to any person any claims or causes of action of any kind or
nature whatsoever, known or unknown, which Lender has, has had or may have against any of the
Borrower Related Parties, in any way arising from or connected with the Loan Documents, [except
with respect to an assignment of the Loan Documents to
J. Lender has
been represented by legal counsel in connection with this Covenant Not to Sue, the Settlement
Agreement and the Closing Documents, and has entered into the same voluntarily and without any
coercion or duress by the Obligated Parties.
4.
Each of the Obligated Parties, for and on behalf of itself and its successors and
assigns, hereby covenants and agrees that it shall not sue, commence, assert, bring or file in any
court or other tribunal, in any jurisdiction, any suit, action, litigation, complaint, counterclaim,
cross-claim, cross-complaint, third-party complaint or other pleading setting forth any claim or
cause of action as described below, or otherwise seeking affirmative relief, against Lender,
Lender's investment advisor
, Lender's servicer
, or any or all of
each of their past, present or future directors, officers, employees, attorneys, agents or
representatives, or any or all executors, administrators, successors, heirs, predecessors, successors
or assigns of any of the foregoing, including, without limitation,
and
their respective successors and assigns (collectively, the "Lender Related Parties"), for any
claims or causes of action of any kind or nature whatsoever, known or unknown, which Borrower,
any Guarantor or any other Borrower Related Party has, has had, or may have against any or all of
the Lender Related Parties, in any way arising from or connected with the Mortgage Loan or the
Loan Documents; provided, however, that this Covenant Not to Sue shall not apply to any claims
or causes of action based on a material breach of any of the covenants, agreements, warranties,
representations or obligations of Lender under the Settlement Agreement or any of the Closing
Documents executed pursuant to the Settlement Agreement.
5.
Each of the Obligated Parties, for and on behalf of itself, and its respective
successors and assigns, represents that it has not sold, assigned or transferred to any person any
claims or causes of action of any kind whatsoever, known or unknown, which Borrower or any
Guarantor has, has had, or may have against any of the Lender Related Parties, in any way arising
from or connected with the Loan Documents. Each of the Obligated Parties has been represented
by legal counsel in connection with this Covenant Not to Sue, the Settlement Agreement and the
Closing Documents, and has entered into the same voluntarily and without any coercion or duress
by Lender or any Lender Related Parties.
6.
Notwithstanding anything contained in this Covenant Not To Sue to the contrary, if,
in any insolvency, bankruptcy or reorganization proceedings or other proceedings similar to the
foregoing which may be instituted in any state or federal court or other tribunal, by or against
Borrower or any other Borrower Related Party, the Deed described in the Settlement Agreement or
any other Closing Document, or any other documents or instruments to be executed and delivered
by Borrower, or any Borrower Related Party pursuant to the terms of the Settlement Agreement,
are challenged and sought to be canceled, nullified or set aside, and if any such documents or
instruments are canceled, nullified or set aside by any such court or tribunal, then at Lender's
option the covenants and representations made by Lender in paragraphs 2 and 3 of this Covenant
EXHIBITG-2
Not to Sue, shall be void and of no further force and effect and in such event, Lender shall have
any and all rights and remedies available to it under the Loan Documents.
7.
This Covenant Not to Sue may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall be deemed to constitute one
instrument. Signatures hereon transmitted by fax, e-mail or other electronic means may be treated
as original signatures.
This Covenant Not to Sue has been executed on the day and year fust written above.
LENDER:
_ _ _ _ _ INSURANCE COMPANY
By: _ _ _ _ _ _ _ _ _ _ _ _ __
Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
BORROWER:
_ _ _ _~---------,a
____ limited partnership
By: _ _ _ _ _ _ _ _ _ _ _ _ __
Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Title: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
GUARANTORS:
EXHIBITG-3
EXHIBITH
PERMITTED EXCEPTIONS
EXHIBITH-l
SCHEDULE 4.1.6
SCHEDULE 4.1.6 - 1
SCHEDULE 4.1.11
SCHEDULE 4.1.11 - 1
SCHEDULE 4.1.12
SCHEDULE 4.1.12 - 1
...
SCHEDULE 4.1.13
SCHEDULE 4.1.13 - 1
SCHEDULE 4.1.14
SCHEDULE 4.1.14 - 1
SCHEDULE 4.1.15
SCHEDULE 4.1.15 - 1

Deed In Lieu of Foreclosure Transactions

Transcription

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