Common use of Description of Exception Clause in Contracts

Description of Exception. Staybridge Suites Houston — There are outstanding unsecured partnership Notes by the related mortgagor to indirect partners of the related Mortgagor to reimburse such partners for prior advances to the related Mortgagor. The approximate outstanding balance (in the aggregate) is $1,508,056, and such partners executed subordination and standstill agreements with Seller. Highland Road Village — The Limited Partnership Agreement (“LPA”) of Mortgagor is unclear as to whether it was formed solely for the purpose of owning and operating the Mortgaged Property. However, in the Loan Agreement, Mortgagor has made representations that this is the case. Also, the LPA does not directly prohibit the Mortgagor from engaging in any business unrelated to the Mortgaged Property. However, in the Loan Agreement, Mortgagor agrees to a negative covenant consistent with this prohibition, and the Officer’s Affidavit (regarding Recycled Entity) confirms that Mortgagor has never engaged in any business except the ownership and operation of the Mortgaged Property. In order to further mitigate the effect of the deficiencies in the LPA, additional protections were built into the Loan Agreement as well as the organizational documents of each of the two (2) General Partners (each a “GP,” together, the “GPs”) (who together control the Mortgagor). Specifically, the following provisions were incorporated into the Loan Agreement: (i) Mortgagor and both GPs must comply with full SPE provisions, (ii) the organizational documents of Mortgagor and of each GP cannot be amended without the consent of Lender; (iii) Mortgagor cannot replace either GP without the consent of Lender; (iv) each GP is required to have an Independent Director/Manager, who must consent to any bankruptcy petition of Mortgagor or such GP and any amendment of the organizational documents of Mortgagor or such GP, and (v) any violation of any of the foregoing shall trigger full recourse liability. The following provisions were incorporated into the organizational documents of both GPs: (a) both GPs must comply with full SPE provisions, (b) organizational documents of the GPs may not be amended without the consent of Lender, (c) each GP must have an Independent Director/Manager whose consent is required in connection with any bankruptcy petition of such GP or Mortgagor or amendment of such GP’s or Mortgagor’s organizational documents, and (d) the GPs may not permit Mortgagor to take any action in contravention of the SPE provisions applicable to Mortgagor set forth in the Loan Agreement.