MDH » Topics » REQUIREMENTS AND CONDITIONS FOR APPROVAL OF DISBURSEMENT OF FUNDS ON DEPOSIT IN THE FF&E PLEDGED ACCOUNT

This excerpt taken from the MDH 8-K filed Jul 28, 2005.

REQUIREMENTS AND CONDITIONS FOR APPROVAL OF DISBURSEMENT OF FUNDS ON DEPOSIT IN THE FF&E PLEDGED ACCOUNT

 

Section 4A.1 Requirements and Conditions. The obligation of Trustee to approve any request for disbursement of funds on deposit in the FF&E Pledged Account is subject to Borrower’s satisfaction of the following requirements and conditions:

 

Section 4A.2 Disbursement Requests. Approval of disbursements from the FF&E Pledged Account shall be made only upon the receipt by Trustee, at least ten (10) Business Days prior to the date funding is being requested, of a requisition therefor executed by an Authorized Borrower Representative and approved by Trustee, and upon satisfaction of the conditions precedent set forth in this Article 4A, and in accordance with the following procedures:

 

Section 4A.3 Requisition. Borrower may requisition funds on deposit in the FF&E Pledged Account not more frequently than once per calendar month during the period from the date of Completion through the Maturity Date by completing, executing and delivering simultaneously to Trustee the following documents, forms for which are attached hereto as Exhibit C (which may be modified from time to time by Trustee) and made a part hereof by this reference:

 

(i) a form of requisition from Borrower to Trustee requesting the amount of the particular disbursement;

 

(ii) a completed form of disbursement request summary certified to Trustee;

 

(iii) copies of invoices and other documents to support the amount of FF&E contained in the request for disbursement; and

 

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(iv) if applicable, a letter authorizing transfer of the requisitioned funds from the FF&E Pledged Account to the bank account from which Borrower shall disburse such funds.

 

Trustee shall not be obligated to authorize disbursements from the FF&E Pledged Account (i) except in accordance with the Approved Annual Budget and/or (ii) to reimburse Borrower for the costs of routine maintenance to the Property or for costs which are to be reimbursed from funds on deposit in the PIP Pledged Account.

 

Section 4A.4 Property Matters. Borrower shall include with each requisition a certificate of Borrower certifying to Trustee:

 

(i) that all outstanding claims for the FF&E contained in such requisition have been paid or shall be paid upon receipt of the funds requested to be disbursed from the FF&E Pledged Account;

 

(ii) that there are no liens outstanding against the Property except for the lien of the Indenture, other liens permitted hereunder or under the terms of the Indenture, inchoate liens for property taxes not yet due, and liens being contested in compliance with the provisions of this Agreement and/or the Indenture;

 

(iii) that (i) Franchisor has received all information with respect to such FF&E required to be provided to Franchisor under the Franchise Agreement, and (ii) any approval required to be given by Franchisor in connection with such FF&E has been received by Borrower; and

 

(iv) that all FF&E acquired and installed at the Property which is contained in such requisition for disbursement of funds from the FF&E Pledged Account has been installed in a workmanlike manner substantially in accordance with applicable Laws; and

 

(v) that copies of all bills or statements for expenses for which the disbursement of funds from the FF&E Pledged Account is requested are attached to such request for the disbursement of such funds, and that no such bills or statements are dated more than ninety (90) days prior to the date of the requisition.

 

Section 4A.5 Partial Approval. If any portion of a requisition for a disbursement of funds from the FF&E Pledged Account is not approved by Trustee for any reason, but the remainder of such requisition is approved, then Trustee shall fund the approved portion of such requisition, in accordance with the terms and subject to the conditions of this Article 4A.

 

Section 4A.6 No Determination of Insufficiency of Funds. Trustee shall not have made a determination, in its sole judgment, that (i) the amount of the requested disbursement of funds from the FF&E Pledged Account is greater than the funds on deposit in the FF&E Pledged Account and/or (ii) the amount of remaining funds on deposit in the FF&E Pledged Account are insufficient to fund FF&E requirements set forth in the Approved Annual Budget. In either such event, no disbursement of funds

 

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from the FF&E Pledged Account shall be disbursed until additional funds have been deposited by Borrower into the FF&E Pledged Account as required by Section 4A.6 below.

 

Section 4A.7 Conditions to Disbursements from FF&E Pledged Account. The obligation of Trustee to approve any request for disbursement of funds from the FF&E Pledged Account shall be subject to satisfaction of the following requirements and conditions:

 

(a) Borrower shall have submitted a complete and fully executed requisition, duly approved and certified as provided in Section 4A.1 hereof, at least ten (10) Business Days prior to the requested date of disbursement of funds from the FF&E Pledged Account;

 

(b) If required by Trustee, Trustee shall have received an endorsement to the Title Policy, indicating that there has been no change in the status of title of the Property and containing no exceptions not theretofore approved by Trustee;

 

(c) No Event of Default, nor any event or state of facts which with notice or passage of time or both would constitute an Event of Default, shall then exist;

 

(d) The representations and warranties made in this Agreement and the other Loan Documents shall be true, correct, and complete on and as of the date of the advance with the same effect as if made on such date;

 

(e) Trustee shall have received evidence, satisfactory to Trustee in its sole discretion, that (i) Franchisor has received all information with respect to the FF&E required to be provided to Franchisor under the Franchise Agreement, and (ii) any approval required to be given by Franchisor in connection with such FF&E has been received by Borrower; and

 

(f) The date of the requisition is after the date of Completion.

 

Section 4A.8 Major Contracts. In addition to all other conditions set forth in this Article 4A, Trustee shall not be obligated to approve disbursement of funds from the FF&E Pledged Account for FF&E under any Major Contract which has not previously been approved by Trustee, which approval may be conditioned upon Trustee’s receipt of a satisfactory (in Trustee’s reasonable discretion) “agreement to complete” for the benefit of the Trustee executed by such Major Contractor.

 

Section 4A.9 Insufficiency of Funds in FF&E Pledged Account. If at any time during the term of this Agreement, Trustee determines in its reasonable judgment that the funds on deposit in the FF&E Pledged Account are insufficient for the FF&E set forth in the Approved Annual Budget, Borrower shall, within five (5) Business Days after receipt of written notice thereof (including a statement of the basis for such insufficiency) from Trustee, deposit into the FF&E Pledged Account such sums of money in cash as may be required to eliminate such insufficiency.

 

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Section 4A.10 Authorized FF&E Disbursements. Borrower hereby irrevocably authorizes Trustee, at the option of Trustee, to direct the Depository Bank to make disbursements from funds on deposit in the FF&E Pledged Account directly to the Title Company or to any contractor, subcontractor or material supplier furnishing labor, services or materials in or to the Property for any amounts due them in connection the FF&E which is the subject of such disbursement, unless Borrower provides Trustee five (5) Business Days prior written notice of the existence of a dispute as to the proper amount due such Person and bonds off any filed claim of lien arising in connection therewith. No further authorization from Borrower shall be necessary for Trustee to authorize such direct disbursements, and all such authorized disbursements shall satisfy pro tanto the obligation of Trustee hereunder. The foregoing authorization shall not constitute an obligation of Trustee to authorize any such direct disbursements.

 

Section 4A.11 Disbursements Do Not Constitute Waiver. No waiver by Trustee of any condition to a particular approval of disbursement of funds from the FF&E Pledged Account shall constitute a waiver of any of the conditions to any other approval of disbursement of funds from the FF&E Pledged Account, or any other rights Trustee may have hereunder.

 

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